Fujian Holdings Limited

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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(Incorporated in Hong Kong with limited liability)

(Stock Code: 00181)

DISCLOSEABLE AND CONNECTED TRANSACTION CAPITAL INCREASE IN THE 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 14 of this circular. A letter from the Independent Board Committee is set out on page 15 of this circular. A letter from Gram Capital is set out on pages 16 to 25 of this circular. A notice convening the EGM to be held at Boardroom, 1st Floor, South Pacific Hotel, 23 Morrison Hill Road, Wanchai, Hong Kong, on Thursday, 23 March 2017 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.

8 March 2017

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Letter from Gram Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Appendix — General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
Notice of the EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	EGM-1

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
‘‘Capital Increase Agreement’’	the capital increase agreement dated 6 January 2017 entered
	into between the Company and FHIG
‘‘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 under the Listing Rules
‘‘Director(s)’’	the director(s) of the Company
‘‘EGM’’	the extraordinary general meeting of the Company to be
	convened and held by the Company for the Independent
	Shareholders to consider and, if appropriate, approve the
	Capital Increase Agreement and the transactions contemplated
	thereunder
‘‘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

– 1 –

DEFINITIONS

‘‘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
‘‘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
‘‘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 Capital Increase Agreement, comprising all the independent non-executive Directors who are independent of the Capital Increase Agreement
‘‘Independent Financial Adviser’’ or ‘‘Gram Capital’’
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 relation to the Capital Increase Agreement
‘‘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) a company incorporated under the laws of the PRC with limited liability and a direct non-wholly owned subsidiary of the Company as at the Latest Practicable Date

– 2 –

DEFINITIONS

‘‘Latest Practicable Date’’	3 March 2017, being the latest practicable date prior to the	3 March 2017, 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 of Hong Kong Limited
‘‘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
‘‘Pinoge’’	Pinoge Company Limited, a company established in Hong
	Kong with limited liability and a wholly-owned subsidiary of
	FTDC
‘‘PRC’’	the People’s Republic of China (for the purposes	of this
	circular, excluding Hong Kong, the Macau	Special
	Administrative Region of the PRC and Taiwan)
‘‘PRC GAAP’’	generally accepted accounting principles in the PRC
‘‘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)
‘‘Share(s)’’	ordinary share(s) in the capital of the Company
‘‘Shareholder(s)’’	the holders of the Shares
‘‘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

8 March 2017

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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 CAPITAL INCREASE IN THE JOINT VENTURE

INTRODUCTION

Reference is made to the announcement of the Company dated 6 January 2017 in relation to the Capital Increase Agreement. The purpose of this circular is to provide you with, among other things, (i) further details of the Capital Increase Agreement; (ii) the recommendation from the Independent Board Committee; (iii) the advice from Gram Capital to the Independent Board Committee and the Independent Shareholders; and (iv) the notice of the EGM.

– 4 –

LETTER FROM THE BOARD

The principal terms and conditions of the Capital Increase Agreement are set out below:

THE CAPITAL INCREASE AGREEMENT

Date: 6 January 2017

Parties: (i) The Company (ii) FHIG

Increase in capital and subscription:

The Company and FHIG agreed that the registered capital of the Joint Venture shall be increased from RMB80 million to RMB170 million.

The Company and FHIG shall contribute RMB27.2 million and RMB62.8 million to the increase in capital of the Joint Venture, respectively. Upon the completion of the subscription, the total capital contributions of the Company and FHIG to the Joint Venture would be increased to RMB68 million and RMB102 million, representing 40% and 60% of the registered capital of the Joint Venture, respectively.

The capital contributions shall be paid within two years of the date of the relevant business registration regarding the increase in capital. The relevant business registration required is the business registration for the change in shareholding of the Company and FHIG in the Joint Venture to be completed with the Market Supervision Administrative Bureau of Fuzhou (福州市市場監督管理局).

After approval from the shareholders’ meeting of the Company is obtained in relation to the Capital Increase Agreement, the Company will proceed to make filings with the Market Supervision Administrative Bureau of Fuzhou (福州市市場監督管理局) and the Administrative Committee of Fuzhou Area of China (Fujian) Pilot Free Trade Zone (中國(福建)自由貿易試驗區福州片區管理委員會) and apply for business registration with the Market Supervision Administrative Bureau of Fuzhou (福州市市場監督管理局). The business registration is estimated to be completed within around 10 to 15 days after obtaining approval from the shareholders’ meeting of the Company in relation to the Capital Increase Agreement.

The Joint Venture is able to continue with its operations even if the relevant business registration for the change of shareholding has not been obtained.

– 5 –

LETTER FROM THE BOARD

Although the deadline for settlement of capital contribution under the Capital Increase Agreement is stipulated to be two years after business registration (which is a common practice for agreements of such nature in the PRC), FHIG and the Company intend to settle the capital increase pursuant to the Capital Increase Agreement (being RMB90 million in aggregate) within one month after obtaining approval from the shareholders’ meeting of the Company in relation to the Capital Increase Agreement.

Conditions precedent:

The Company and FHIG agree that the increase in capital shall only be undertaken after satisfaction of the following conditions precedent:

(i) the board of directors of the Joint Venture unanimously passing the resolution approving the Capital Increase Agreement and the transactions thereunder;
(ii) the competent decision-making departments of the Company and FHIG having approved the Capital Increase Agreement and the transactions thereunder and having obtained relevant documents of approval; and
(iii) the Capital Increase Agreement and the transactions thereunder having been approved by the shareholders’ meeting and the independent non-executive Directors as required under the Listing Rules.
Board composition and chairman:
The rights of shareholders of the Joint Venture in relation to composition of the board of directors of the Joint Venture shall be adjusted after the completion of the capital increase, such that three directors shall be nominated by FHIG, and two directors shall be nominated by the Company. The chairman of the board of directors of the Joint Venture shall be nominated by FHIG.

– 6 –

LETTER FROM THE BOARD

Others:

The Company and FHIG agree that the Capital Increase Agreement shall be a supplemental agreement to the Investment Agreement. Where there is any discrepancy between the Investment Agreement and the Capital Increase Agreement, the Capital Increase Agreement shall prevail. Except for the amendments under the Capital Increase Agreement, all the terms of the Investment Agreement remain unchanged.

INFORMATION ON THE JOINT VENTURE

The Joint Venture is a joint venture company established on 25 October 2016 under the laws of the PRC with limited liability with a registered capital of RMB80 million as at the Latest Practicable Date, of which the Company and FHIG had agreed to contribute RMB40.8 million and RMB39.2 million, respectively, pursuant to the Investment Agreement. As at the Latest Practicable Date, the Company and FHIG held 51% and 49% of the equity interest in the Joint Venture, respectively. Upon the completion of the transactions under the Capital Increase Agreement, the Company and FHIG will hold 40% and 60% of the equity interest in the Joint Venture, respectively, and the Joint Venture will cease to be a subsidiary of the Company and become an associate of the Company.

The business scope of the Joint Venture is mainly tourism related leasing service within the Fujian Province, the PRC, including but not limited to the leasing of caravan compartments and cable cars and vessel finance leasing business. Further details on the establishment of the Joint Venture are disclosed in the announcement of the Company dated 23 August 2016 and the circular of the Company dated 4 October 2016.

As at the Latest Practicable Date, an aggregate amount of RMB80 million, representing all of the capital contribution stipulated under the Investment Agreement, had been settled and contributed to the Joint Venture by FHIG and the Company. RMB50 million of such capital had been utilised by the Joint Venture to facilitate the sale and leaseback arrangement in respect of a platform engineering vessel, details of which are set out in the announcement of the Company dated 29 December 2016.

Based on the intention of the parties, all of the additional funding to the Joint Venture (after deducting minor amounts to be retained as working capital) are proposed to be utilised to further expand the sale and leaseback business of the Joint Venture. At present, the Joint Venture does not have sufficient net assets for the expected funding of the above operations. Therefore, the Capital Increase Agreement was entered in respect of the increase in capital in the Joint Venture.

The parties propose to utilize the capital contribution under the Capital Increase Agreement to expand the sale and leaseback business of the Joint Venture. FHIG and the Company intend that the Joint Venture will utilize the remaining capital contribution amounting to an aggregate of RMB120 million (comprising capital contribution under the Capital Increase Agreement of RMB90 million and the unutilized capital contribution under the Investment Agreement of RMB30 million) for the

– 7 –

LETTER FROM THE BOARD

purchase of equipment and other assets from customers in the sale and leaseback business as to approximately RMB114.5 million by around April 2017 and the remaining amount of approximately RMB5.5 million for working capital purposes.

It is expected that major clients for the expansion of the sale and leaseback services of the Joint Venture would include state-owned enterprises in the Fujian Province under the administration of FJSOASAC which are involved in the manufacturing and travel-related businesses. The raising of additional capital at present is justified because it is expected to allow the Joint Venture to enjoy additional tax benefits and is in accordance with future business development of the Joint Venture.

As at the Latest Practicable Date, the Joint Venture was in negotiations with prospective customers in respect of the following proposed sale and leaseback projects with an aggregate expected capital amount of approximately RMB114.5 million:

				Expected
				annual	Expected
			Expected	rate of return	timing of
	Prospective		capital amount	(% of capital	capital
Type of asset	customer	Stage of negotiations	(approximate)	amount)	utilisation
Automobiles	Company A	Due diligence completed	RMB 8.0 million	6%	March 2017
LED screens	Company B	Due diligence completed	RMB 1.5 million	7%	March 2017
Vessel	Company C	The Joint Venture	RMB 30.0 million	7%	April 2017
		is preparing for due
		diligence
A building	Company D	Undergoing negotiations	RMB 25.0 million	6–7%	April 2017
located in
Fujian
Vessels	Company E	Undergoing negotiations	RMB 50.0 million	7%	April 2017

It is expected that the remaining amount of approximately RMB5.5 million would be used as working capital of the Joint Venture.

Based on the unaudited financial statements of the Joint Venture prepared in accordance with PRC GAAP, the total assets and net assets of the Joint Venture as at 31 December 2016 were approximately RMB85.71 million and RMB80.48 million, respectively, and the net profit before and after taxation of the Joint Venture for the year ended 31 December 2016 were approximately RMB0.53 million and RMB0.4 million, respectively.

INFORMATION ON THE PARTIES TO THE CAPITAL INCREASE 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 activities of the Group are investment holding, hotel operations and property investment.

– 8 –

LETTER FROM THE BOARD

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 businesses of tourism, investment holding and property investment.

DIRECTORS’ CONFIRMATION

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 Capital Increase Agreement. Save as disclosed above, none of the Directors had material interests in the Capital Increase Agreement and was required to abstain from voting on the relevant resolution of the Board.

FINANCIAL IMPACT OF THE CAPITAL INCREASE IN THE JOINT VENTURE

Upon completion of the transactions underlying the Capital Increase Agreement, the Joint Venture will cease to be a subsidiary of the Company, resulting in the deconsolidation of the assets and liabilities of the Joint Venture from the Group’s consolidated accounts. The amounts of capital contribution provided by the Group to the Joint Venture will be recognized as investment in associate under the equity method, and the carrying amount will be increased or decreased to recognize the Group’s share of the profit or loss of the Joint Venture after the completion of the Capital Increase Agreement. The Group’s share of the Joint Venture’s profit or loss will be recognized in the Group’s profit or loss. The Group is expected to record a loss of approximately RMB0.24 million as a result of the deconsolidation of the Joint Venture from the accounts of the Company after the completion of the transactions underlying the Capital Increase Agreement, which is calculated based on the difference between the original capital contribution of the Company to the Joint Venture under the Investment Agreement of RMB80 million and the unaudited net asset value of the Joint Venture as at 31 December 2016 of approximately RMB80.48 million. The actual gain or loss to be recorded by the Company may be subject to changes based on the net asset value of the Joint Venture on the date of completion of the transactions under the Capital Increase Agreement. After considering the expected income from the sale and leaseback business of the Joint Venture, the Company considers that the loss of approximately RMB0.24 million is immaterial. The Company expects the loss to be covered by future income from the Joint Venture. It is expected that there will be no material change in the net assets (excluding minority interests) of the Group as a result of the transactions underlying the Capital Increase Agreement.

REASONS FOR AND BENEFITS OF THE CAPITAL INCREASE AGREEMENT

Given that relatively large amounts of capital are required in the finance leasing business, the Board believes that the proposed increase of capital of the Joint Venture to RMB170 million pursuant to the Capital Increase Agreement can further expand and develop the finance leasing business of the Joint Venture, which would diversify the income streams of the Group and increase the profitability of the Group. Given that the Joint Venture will continue to engage in the finance

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LETTER FROM THE BOARD

leasing business, the Company expects that it can share the results of the Joint Venture (as an associate of the Company) in the future, and hence, its income stream can be diversified and would not be limited to hotel operations and property investment.

With the original capital contribution under the Investment Agreement, the Joint Venture was not entitled to the differentiated taxation policy and other PRC tax benefits for finance leasing and sale and leaseback businesses described in this circular. However, it was entitled to the financial benefits from the China (Fujian) Pilot Free Trade Zone, including settlement incentive (as the registered capital of the Joint Venture amounted to RMB80 million, the Joint Venture was eligible to receive a subsidy of up to RMB1 million) and business incentive (representing 0.5% of the acquisition amount of equipment), as disclosed in the circular of the Company dated 4 October 2016. The increase of paid-up capital of the Joint Venture to RMB170 million would allow the Joint Venture to take advantage of certain PRC tax benefits for finance leasing and sale and leaseback businesses, which would allow immediate reimbursement after levy (即徵即退) of the part of the actual tax burden (實際稅負) of value-added taxation over 3%, such that the overall actual value-added taxation would be not more than 3%. In addition, when the paid-up capital of the Joint Venture reaches RMB170 million, the Joint Venture is entitled to differentiated taxation policy, under which the interests paid on borrowings can be deducted from the total consideration and additional fees received when determining the tax base. The Company first became aware of the differentiated taxation policy when the Notice of Full Commencement of Pilot Program of Levying Value-Added Tax in lieu of Business Tax 《( 關於全面推開營業稅改徵增值稅試點的通知》) was issued on 23 March 2016.

Subsequent to the establishment of the Joint Venture and in around December 2016, in view of the many business opportunities in the sale and leaseback business, FHIG and the Company proposed to expand into and develop the sale and leaseback business of the Joint Venture. This prompted FHIG and the Company to consider increasing the capital of the Joint Venture to take advantage of the tax benefits.

By way of illustration, assuming that the revenue of the Joint Venture from its sale and leaseback business is RMB9 million and value-added taxation rate is 6%:

(i) With a registered capital and paid-up capital of RMB80 million, the Joint Venture would not be able to benefit from the differentiated taxation policy or immediate reimbursement after levy (即徵即退) tax benefit policy pursuant to applicable PRC laws. The relevant value-added taxation would be calculated as follows: (RMB9 million/(1+6%)*6%). This would result in value-added taxation of approximately RMB509,400, which would amount to approximately 5.66% of the revenue of the Joint Venture from its sale and leaseback business.
(ii) If the registered capital and paid-up capital reaches RMB170 million, the Joint Venture would be able to benefit from the differentiated taxation policy and immediate reimbursement after levy (即徵即退) tax benefit policy pursuant to applicable PRC laws. If no principal amount had been received for the project for the relevant period, the value-added taxation payable by the Joint Venture based on tax benefits would be

– 10 –

LETTER FROM THE BOARD

calculated as follows: (RMB9 million/（1+6%）*3%). This would result in value-added taxation of approximately RMB254,700, which would not exceed 3% of the revenue of the Joint Venture from its sale and leaseback business.

The Joint Venture would only be entitled to the aforementioned tax benefits if its paid-up capital is increased to RMB170 million, i.e. upon settlement of the capital contribution under the Capital Increase Agreement. The capital increase to RMB170 million is in the best interest of the Company and its shareholders because it is expected to broaden the income stream of the Company and allow the Joint Venture to enjoy tax benefits.

As at the Latest Practicable Date and save as contemplated under the Capital Increase Agreement, the Company did not have any plans to increase or decrease its shareholding in the Joint Venture. The Company intends to hold its shareholding in the Joint Venture for long-term investment purpose.

The Company has considered contributing additional capital to the Joint Venture to maintain control over the Joint Venture. However, in view of the amount of capital contribution required by the Joint Venture, the Company decided not to contribute such additional capital to maintain control over the Joint Venture, in order to maintain flexibility in relation to its financial resources and to reserve sufficient capital to settle its working capital requirements and other requirements such as the payment of stamp duty in relation to its transfer of property in Hong Kong as disclosed in the circular of the Company dated 25 July 2016. This would also ensure that the Company will not experience any problem with liquidity or financial resources in the foreseeable future. Further, from a risk management perspective, the Company considers that contributing additional capital to the Joint Venture to the extent that control would be maintained, in view of the amount of capital increase required by the Joint Venture, would involve excessive concentration of the Company’s resources in one area of business.

While the Company had cash balance of approximately HK$116 million as at 30 June 2016, the Company has since incurred stamp duty of approximately HK$12 million and other expenses of approximately HK$2 million in relation to its transfer of property in Hong Kong as disclosed in the circular of the Company dated 25 July 2016. Further, the establishment of the Joint Venture had required capital contribution by the Company of around HK$46 million.

If the Company were to contribute additional capital to the Joint Venture such that control over the Joint Venture is maintained, around HK$52 million of additional capital contribution would be required. This would leave the Company with only around HK$4 million to address any unexpected situation in the future, which the Company considers too risky and unacceptable from a risk management perspective.

The Company also took into account the fact that almost all of the capital invested into the Joint Venture would be utilized on the business of sale and leaseback on or before April 2017 according to current plans in relation to the future development of the Joint Venture, and the Company would not expect returns from the Joint Venture in the short term.

– 11 –

LETTER FROM THE BOARD

As disclosed above, if the Company were to contribute additional capital to the Joint Venture such that control over the Joint Venture is maintained, around HK$52 million of additional capital contribution would be required. This would leave the Company with only around HK$4 million of cash balance. The Company considers that this would constitute a failure to maintain adequate cash reserves for its working capital requirements and failure to maintain flexibility in relation to its financial resources.

The Directors are of the view that the current arrangement would allow the Company to develop its finance leasing business through the Joint Venture without placing an excessive amount of capital of the Company in one area of business, allowing the Company to maintain flexibility in relation to its financial resources. Based on the foregoing, the Directors consider that the transactions under the Capital Increase Agreement would be in the best interest of the Company and the Shareholders as a whole despite the loss of control by the Company in the Joint Venture.

The capital contribution to be made by the Group under the Capital Increase Agreement will be funded from the internal resources of the Group.

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 Capital Increase Agreement constitute connected transactions of the Company.

As one or more of the applicable percentage ratios in respect of the transactions contemplated under the Capital Increase Agreement, on an aggregated basis with the transactions under the Investment Agreement which were entered into within a 12-month period, exceed 5% but are less than 25%, the transactions contemplated under the Capital Increase 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 0.70% 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 Capital Increase Agreement (which are different from those of the Independent Shareholders), will abstain from voting at the EGM on 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 Capital Increase Agreement which requires such Shareholder to abstain from voting on the proposed resolution to approve the Capital Increase Agreement at the EGM.

– 12 –

LETTER FROM THE BOARD

THE EGM

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

An Independent Board Committee comprising all the independent non-executive Directors has been established to consider the terms of the Capital Increase 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 Capital Increase Agreement and the transactions contemplated thereunder. Gram Capital 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 Capital Increase Agreement as set out on page 5 of this circular. Your attention is also drawn to the letter from Gram Capital to the Independent Board Committee and the Independent Shareholders in respect of the same matters, which is set out on pages 16 to 25 of this circular.

The Independent Board Committee, having taken into account the advice of Gram Capital, consider that the terms of the Capital Increase Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and although the entering into of the Capital Increase Agreement is not conducted in the ordinary and usual course of business of the Group, it is in the interests of the Company and the Shareholders as 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 Capital Increase Agreement and the transactions contemplated thereunder.

Accordingly, the Board (including the independent non-executive Directors) consider that the terms of the Capital Increase Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and although the entering into of the Capital Increase Agreement is not conducted in the ordinary and usual course of business of the Group, it is in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favour of the ordinary resolution at the EGM to approve the Capital Increase Agreement and the transactions contemplated thereunder.

– 13 –

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

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

By order of the Board of Fujian Holdings Limited Wang Xiaowu Chairman

– 14 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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

FUJIAN HOLDINGS LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 00181)

8 March 2017

To the Independent Shareholders

Dear Sirs,

DISCLOSEABLE AND CONNECTED TRANSACTION

CAPITAL INCREASE IN THE JOINT VENTURE

We refer to the circular dated 8 March 2017 (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 Capital Increase 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 Capital Increase Agreement and the transactions contemplated thereunder are in the interests of the Company and the Shareholders as a whole. Gram Capital 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 on pages 4 to 14 of the Circular and the letter from Gram Capital as set out on pages 16 to 25 of the Circular which contain, among other things, their advice and recommendations to us regarding the Capital Increase Agreement and the principal factors and reasons taken into consideration for their advice and recommendations.

Having taken into account the advice and recommendations from Gram Capital and the principal factors and reasons taken into consideration by them in arriving at their opinion, we consider that the terms of the Capital Increase Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and although the entering into of the Capital Increase Agreement is not conducted in the ordinary and usual course of business of the Group, it is in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution at the EGM to approve the Capital Increase Agreement and the transactions contemplated thereunder.

Yours faithfully,

Mr. Lam Kwong Siu

Mr. Leung Hok Lim Mr. Ng Man Kung Independent non-executive Directors

– 15 –

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 Capital Increase Agreement for the purpose of inclusion in this circular.

Room 1209, 12/F. Nan Fung Tower 88 Connaught Road Central/ 173 Des Voeux Road Central Hong Kong

8 March 2017

To: The independent board committee and the independent shareholders of Fujian Holdings Limited

Dear Sirs,

DISCLOSEABLE AND CONNECTED TRANSACTION CAPITAL INCREASE IN THE JOINT VENTURE

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 Capital Increase Agreement, details of which are set out in the letter from the Board (the ‘‘Board Letter’’) contained in the circular dated 8 March 2017 issued by the Company to the Shareholders (the ‘‘Circular’’), of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

On 6 January 2017, the Company and FHIG entered into the Capital Increase Agreement pursuant to which the Company and FHIG agreed to subscribe for new capital in the Joint Venture (a non-wholly owned subsidiary of the Company) of RMB27.2 million and RMB62.8 million respectively (RMB90 million in total) (the ‘‘Capital Increase’’).

Upon the completion of the Capital Increase, the Company and FHIG will hold 40% and 60% of the equity interest in the Joint Venture respectively and the Joint Venture will cease to be a subsidiary of the Company and become an associate of the Company.

– 16 –

LETTER FROM GRAM CAPITAL

With reference to the Board Letter, the transactions contemplated under the Capital Increase Agreement constitute discloseable and connected transaction of the Company and are subject to reporting, announcement and independent shareholders’ approval requirements under Chapter 14 and Chapter 14A of the Listing Rules.

The Independent Board Committee comprising Mr. Lam Kwong Siu, Mr. Leung Hok Lim and Mr. Ng Man Kung (all being independent non-executive Directors) has been established to advise the Independent Shareholders on (i) whether the terms of the Capital Increase Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; (ii) whether the transactions contemplated under the Capital Increase Agreement are in the interests of the Company and the Shareholders as a whole and are conducted in the ordinary and usual course of business of the Group; and (iii) how the Independent Shareholders should vote in respect of the resolution to approve the Capital Increase Agreement and the transactions contemplated thereunder at the EGM. 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.

OUR INDEPENDENCE

As at the Latest Practicable Date, we were not aware of any relationships or interests between Gram Capital and the Company during the past two years immediately preceding the Latest Practicable Date, or any other parties that could be reasonably regarded as hindrance to Gram Capital’s independence to act as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders.

Besides, 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

– 17 –

LETTER FROM GRAM CAPITAL

transaction contemplated under the Capital Increase Agreement. 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 in-depth investigation into the business and affairs of the Company, FHIG, the Joint Venture or their respective subsidiaries or associates (as the case maybe), nor have we considered the taxation implication on the Group or the Shareholders as a result of the transactions contemplated under the Capital Increase Agreement. 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.

Lastly, where information in this letter has been extracted from published or otherwise publicly available sources, it is the responsibility of Gram Capital to ensure that such information has been correctly extracted from the relevant sources while we are not obligated to conduct any independent in-depth investigation into the accuracy and completeness of those information.

PRINCIPAL FACTORS AND REASONS CONSIDERED

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

Background of and reasons for entering into of the Capital Increase Agreement

Business overview of the Group

With reference to the Board Letter, the principal business activities of the Group are investment holding, hotel operations and property investment.

– 18 –

LETTER FROM GRAM CAPITAL

Set out below is a summary of the consolidated financial information on the Group for the two years ended 31 December 2015 and the six months ended 30 June 2016 as extracted from the Company’s annual report for the year ended 31 December 2015 (the ‘‘2015 Annual Report’’) and interim report for the six months ended 30 June 2016 (the ‘‘2016 Interim Report’’):

	For the six	For the year	For the year
	months	ended	ended
	ended	31 December	31 December	Year on year
	30 June 2016	2015	2014	change
	HK$	HK$	HK$	%
	(unaudited)	(audited)	(audited)
Revenue	13,057,403	25,706,315	10,688,328	140.51
— The rental of
investment properties	678,917	1,385,934	1,339,332	3.48
— The operation of hotels	12,378,486	24,320,381	9,348,996	160.14
Loss for the period/year	(3,127,127)	(2,136,168)	(500,450)	326.85

We noted from the above table that the Group’s revenue has substantially increased by approximately 140.51% from approximately HK$10.69 million for the year ended 31 December 2014 (‘‘FY2014’’) to approximately HK$25.71 million for the year ended 31 December 2015 (‘‘FY2015’’). As confirmed by the Directors, the said increase in revenue was mainly due to the increase in business volume of star-rated hotel operation for FY2015. However, despite the substantial increase of the revenue of the Group, the loss for FY2015 increased to approximately HK$2.14 million. As advised by the Directors, the increase in loss was mainly due to (i) increase in cost and expenses; and (ii) reduction in other income and gain for FY2015 as compared to FY2014.

With reference to the 2016 Interim Report and as confirmed by the Directors, the Group will leverage its strengths and seek investment opportunities in tourist related and other business areas and to integrate the industry chains of hotel, tourism and other businesses. The Group will continue to improve the asset liquidity of the Company and further increase its overall asset return and enterprise value by converting and realigning its properties.

Information on parties to the Capital Increase Agreement

With reference to the Board Letter, 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 businesses of tourism, investment holding and property investment.

– 19 –

LETTER FROM GRAM CAPITAL

The business scope of the Joint Venture is mainly tourism related leasing service within the Fujian Province, the PRC, including but not limited to the leasing of caravan compartments and cable cars and vessel finance leasing business. Further details on the establishment of the Joint Venture are disclosed in the circular of the Company dated 4 October 2016 (the ‘‘2016 Circular’’).

With reference to the Board Letter, based on the unaudited financial statements of the Joint Venture prepared in accordance with PRC GAAP, the total assets and net assets of the Joint Venture as at 31 December 2016 were approximately RMB85.71 million and RMB80.48 million respectively; and the net profit before and after taxation of the Joint Venture for the period from 25 October 2016 (being the date of establishment) to 31 December 2016 were approximately RMB0.53 million and RMB0.4 million receptively.

Reasons for and benefits of the Capital Increase Agreement

With reference to the Board Letter, given that relatively large amounts of capital are required in the finance leasing business, the Board believes that the proposed increase of capital of the Joint Venture to RMB170 million pursuant to the Capital Increase Agreement can further expand and develop the finance leasing business of the Joint Venture, which would diversify the income streams of the Group and increase the profitability of the Group. Given that the Joint Venture will continue to engage in the finance leasing business, the Company expects that it can share the results of the Joint Venture (as an associate of the Company) in the future, and hence, its income stream can be diversified and would not be limited to hotel operations and property investment.

In addition, the increase of paid-up capital of the Joint Venture to RMB170 million would allow the Joint Venture to take advantage of certain PRC tax benefits for finance leasing and sale and leaseback businesses, and would allow immediate reimbursement after levy (即徵即退) of the part of the actual tax burden (實際稅負) of value-added taxation of over 3%, such that the overall actual value-added taxation would be not more than 3%. In addition, when the paid-up capital of the Joint Venture reaches RMB170 million, the Joint Venture is entitled to differentiated taxation policy, under which the interests paid on borrowings can be deducted from the total consideration and additional fees received when determining the tax base (the ‘‘Tax Benefits’’). Detailed illustration of the Tax Benefits are set out under the section headed ‘‘Reasons for and benefits of the Capital Increase Agreement’’ in the Board Letter.

For our due diligence purpose, we have discussed with and understood the Tax Benefits from the Directors. We also noticed that the Tax Benefits are in-line with the relevant regulations set out under《關於全面推開營業稅改徵增值稅試點的通知》(財稅[2016]36號) (Notice of full commencement of pilot program of levying value-added taxation in lieu of business tax*) as issued by the State Administration of Taxation of the PRC on 23 March 2016.

– 20 –

LETTER FROM GRAM CAPITAL

With reference to the 2016 Interim Report, the Directors believe that the establishment of the Joint Venture would allow the Group to take advantage of the economic benefits from the free trade zone in Fujian Province and to diversify the business of the Group to leasing of tourism related leasing service within the Fujian Province, PRC, including but not limited to caravan compartments and cable car, which would allow the Group to diversify its streams of income.

We have enquired with the Directors for the reasons of not contributing to the Capital Increase in proportion to the existing equity interest in the Joint Venture held by the Company and FHIG (i.e. 51% and 49% respectively) for maintaining its equity interest in the Joint Venture. As advised by the Directors, the amount of further capital contribution committed by the Company was determined with reference to latest financial resources available to the Group. Given that 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, the Company can still enjoy its investment return (if any) on a fair basis.

With reference to the Board Letter, the Company considered contributing additional capital to the Joint Venture to maintain control over the Joint Venture. However, in view of the amount of capital contribution required by the Joint Venture, the Company decided not to contribute such additional capital to maintain control over the Joint Venture, in order to maintain flexibility in relation to its financial resources and to reserve sufficient capital to settle its working capital requirements and other requirements. This would also ensure that the Company will not experience any problem with liquidity or financial resources in the foreseeable future. Furthermore, from a risk management perspective, the Company considered that contributing additional capital to the Joint Venture to the extent that control would be maintained, in view of the amount of capital increase required by the Joint Venture, would involve excessive concentration of the Company’s resources in one area of business.

The Company had a cash balance of approximately HK$116 million as at 30 June 2016. With reference to the Board Letter, the Company incurred stamp duty of approximately HK$12 million and other expenses of approximately HK$2 million in relation to its transfer of property in Hong Kong as disclosed in the circular of the Company dated 25 July 2016. Furthermore, the establishment of the Joint Venture required capital contribution by the Company of around HK$46 million. If the Company were to contribute additional capital to the Joint Venture such that control over the Joint Venture is maintained, an additional capital contribution of around HK$52 million would be required. This would leave the Company with only around HK$4 million to address any unexpected situation in the future, which the Company considers too risky and unacceptable from a risk management perspective.

Having obtained and sighted the cash position of the Group as at 31 December 2016, considered the above situation and that the Group only generated net cash inflow by operating activities of approximately HK$2.12 million for the year ended 31 December 2015 and approximately HK$0.73 million for the six months ended 30 June 2016, we consider the aforementioned view of the Company to be reasonable.

– 21 –

LETTER FROM GRAM CAPITAL

With reference to the Board Letter, as at the Latest Practicable Date, an aggregate amount of RMB80 million, representing all of the capital contribution stipulated under the Investment Agreement, had been settled and contributed to the Joint Venture by FHIG and the Company. RMB50 million of such capital had been utilised by the Joint Venture to facilitate the sale and leaseback arrangement in respect of a platform engineering vessel, details of which are set out in the announcement of the Company dated 29 December 2016. The parties propose to utilise the capital contribution under the Capital Increase Agreement to expand the sale and leaseback business of the Joint Venture. FHIG and the Company intend that the Joint Venture will utilise the remaining capital contribution amounting to an aggregate of RMB120 million (comprising capital contribution under the Capital Increase Agreement of RMB90 million and the unutilised capital contribution under the Investment Agreement of RMB30 million) for the purchase of equipment and other assets from customers in the sale and leaseback business as to approximately RMB114.5 million by around April 2017 and the remaining amount of approximately RMB5.5 million for working capital purpose.

With reference to the Board Letter, the Group is expected to record a loss of approximately RMB0.24 million as a result of the deconsolidation of the Joint Venture from the accounts of the Company after the completion of the transactions underlying the Capital Increase Agreement. Such loss is not substantial as compared to the net assets value of the Group of approximately HK$231.13 million as at 30 June 2016.

Having taking into account (i) the Tax Benefits as mentioned above; (ii) the Joint Venture would allow the Group to diversify its streams of income by sharing the results of the Joint Venture (as an associate of the Company); (iii) the proposed increase of capital of the Joint Venture can further expand and develop the finance leasing business of Joint Venture; and (iv) the positive results (although not substantial) of the Joint Venture shortly after its establishment as mentioned above, we concur with the Directors’ view that the transaction contemplated under the Capital Increase Agreement are in the interest of the Company and the Shareholders as a whole.

Principal terms of the Capital Increase Agreement

Date:

6 January 2017

Parties:

(i) The Company
(ii) FHIG

Increase in capital and subscription:

The Company and FHIG agreed that the registered capital of the Joint Venture shall be increased from RMB80 million to RMB170 million.

– 22 –

LETTER FROM GRAM CAPITAL

The Company and FHIG shall contribute RMB27.2 million and RMB62.8 million to the increase in capital of the Joint Venture respectively. Upon the completion of the subscription, the total capital contributions of the Company and FHIG to the Joint Venture will be increased to RMB68 million and RMB102 million, representing 40% and 60% of the registered capital of the Joint Venture respectively.

The capital contributions shall be paid within two years of the date of the relevant business registration regarding the increase in capital.

Based on our observation on 14 establishments of joint ventures in the PRC with precisely specified time requirement for capital contribution as announced by Hong Kong listed companies from 1 October 2016 to 6 January 2017 (being the date of the Capital Increase Agreement), we noticed that (i) their time limit for settlement of capital contributions ranged from ‘‘at the time of formation of the joint venture’’ to ‘‘10 years from the date of establishment of the joint venture’’; and (ii) out of the aforesaid 14 joint venture establishments in the PRC, (a) 4 of them require settlement of capital contribution within around one year from the joint venture agreement/joint venture establishment/obtaining joint venture business license; and (b) 3 of them require settlement of capital contribution within a period of time around/over two years from the joint venture agreement.

Having considered the above, we consider the settlement of capital contributions in two years’ time to be on normal commercial terms compared to market practice.

As advised by the Directors, the increased capital of the Joint Venture will be applied for further expansion and development of the finance leasing business of the Joint Venture within the Fujian Province, the PRC, including but not limited to the tourism related leasing service.

Board composition and chairman:

The rights of shareholders of the Joint Venture in relation to composition of the board of directors of the Joint Venture shall be adjusted after the completion of the capital increase such that three directors shall be nominated by FHIG, and two directors shall be nominated by the Company. The chairman of the board of directors of the Joint Venture shall be nominated by FHIG.

– 23 –

LETTER FROM GRAM CAPITAL

Others:

As disclosed in the 2016 Circular, all of 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.

Further details of the Capital Increase Agreement are set out under the section headed ‘‘The Capital Increase Agreement’’ in the Board Letter.

Having considered that

(i) the percentage equity interest of the Company and FHIG will be in proportion to their total capital contribution to the Joint Venture;
(ii) all of 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
(iii) the number of directors of the Joint Venture to be nominated by the Company and FHIG will be in proportion to the respective percentage of equity interest of the Company and FHIG in the Joint Venture,

we are of the view that the terms of the Capital Increase Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned.

Possible financial effects of the Capital Increase

It should be noted that the aforementioned analyses are for illustrative purpose only and does not purport to represent how the financial position of the Group will be upon completion of the Capital Increase Agreement.

– 24 –

LETTER FROM GRAM CAPITAL

RECOMMENDATION

Having taken into consideration the factors and reasons as stated above, we are of the opinion that (i) the terms of the Capital Increase Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) although the entering into of the Capital Increase Agreement is not conducted in the ordinary and usual course of business of the Group, 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 favour of the resolution to be proposed at the EGM to approve the Capital Increase Agreement and the transactions contemplated thereunder 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 Graham Lam Managing Director

Note: Mr. Graham Lam is a licensed person registered with the Securities and Futures Commission and a responsible officer of Gram Capital Limited to carry out Type 6 (advising on corporate finance) regulated activity under the SFO. He has over 20 years of experience in investment banking industry.

for identification purpose only

– 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 make any statement herein misleading.

SHARE CAPITAL

The issued share capital of the Company as at the Latest Practicable Date was as follows:

Number of Shares

1,145,546,000 Shares

The Shares have no nominal value.

DISCLOSURE OF DIRECTORS’ INTERESTS AND SHORT POSITIONS 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 Issuers contained in the Listing Rules were as follows:

Long and short positions in Shares

				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.

– I-1 –

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 Issuers.

(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

			Approximate
			percentage of total
		Number	number of Shares
Name of Shareholder	Capacity	of Shares	in issue
		(Note d)
FIHC (Notes a and c)	Interest of controlled	778,068,772 (L)	67.92%
	corporation
FHIG (Notes a and c)	Interest of controlled	778,068,772 (L)	67.92%
	corporation
FTDC (Notes a and c)	Interest of controlled	778,068,772 (L)	67.92%
	corporation
HC Technology	Beneficial owner	770,016,722 (L)	67.22%
(Notes a and c)
Sino Earn (Notes b and c)	Beneficial owner	72,553,382 (L)	6.33%
FHTI (Notes b and c)	Interest of controlled	72,553,382 (L)	6.33%
	corporation
FHIC (Notes b and c)	Interest of controlled	72,553,382 (L)	6.33%
	corporation
FHGC (Notes b and c)	Interest of controlled	72,553,382 (L)	6.33%
	corporation
FIDG (Notes b and c)	Interest of controlled	72,553,382 (L)	6.33%
	corporation

– I-2 –

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 0.70% 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 ARRANGEMENTS

As at the Latest Practicable Date,

(1) 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
(2) 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

Gram Capital Limited A licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity 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 8 March 2017 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 accompanying 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 15 of this circular;
(3) the letter from Gram Capital, the text of which is set out on pages 16 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 Capital Increase Agreement; and
(6) this circular.

– I-5 –

NOTICE OF THE EGM

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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 Boardroom, 1st Floor, South Pacific Hotel, 23 Morrison Hill Road, Wanchai, Hong Kong on Thursday, 23 March 2017 at 10:00 a.m. (or any adjournment thereof) to consider and, if thought fit, pass the following resolution as an ordinary resolution:

ORDINARY RESOLUTION

‘‘THAT:

(a) the capital increase agreement dated 6 January 2017 (the ‘‘Capital Increase Agreement’’) between the Company and Fujian Huamin Industrial Group Company Limited in relation to the capital increase in Fujian Huamin Leasing Company Limited and the transactions contemplated thereunder be and are 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 Capital Increase Agreement and the transactions contemplated thereunder.’’

By order of the Board of Fujian Holdings Limited Wang Xiaowu

Chairman

Hong Kong, 8 March 2017

– EGM-1 –

NOTICE OF THE EGM

Notes:

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.
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.
A form of proxy for the EGM is enclosed herewith.
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).
Shareholders or their proxies shall produce their identity documents when attending the EGM.
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.
Voting on the ordinary resolution at the EGM will be conducted by way of poll.

– EGM-2 –

AI assistant

Fujian Holdings Limited — Proxy Solicitation & Information Statement 2017

49013_rns_2017-03-08_c8e4f2e9-b48e-4636-a3b8-50632dd16a40.pdf

FUJIAN HOLDINGS LIMITED

DISCLOSEABLE AND CONNECTED TRANSACTION CAPITAL INCREASE IN THE JOINT VENTURE

CONTENTS

DEFINITIONS

FUJIAN HOLDINGS LIMITED

DISCLOSEABLE AND CONNECTED TRANSACTION CAPITAL INCREASE IN THE JOINT VENTURE

INTRODUCTION

THE CAPITAL INCREASE AGREEMENT

LETTER FROM THE BOARD

INFORMATION ON THE JOINT VENTURE

INFORMATION ON THE PARTIES TO THE CAPITAL INCREASE AGREEMENT

LETTER FROM THE BOARD

DIRECTORS’ CONFIRMATION

FINANCIAL IMPACT OF THE CAPITAL INCREASE IN THE JOINT VENTURE

REASONS FOR AND BENEFITS OF THE CAPITAL INCREASE AGREEMENT

LETTER FROM THE BOARD

IMPLICATIONS UNDER THE LISTING RULES

THE EGM

RECOMMENDATIONS

ADDITIONAL INFORMATION

FUJIAN HOLDINGS LIMITED

DISCLOSEABLE AND CONNECTED TRANSACTION

CAPITAL INCREASE IN THE JOINT VENTURE

Yours faithfully,

DISCLOSEABLE AND CONNECTED TRANSACTION CAPITAL INCREASE IN THE JOINT VENTURE

INTRODUCTION

OUR INDEPENDENCE

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

Background of and reasons for entering into of the Capital Increase Agreement

Business overview of the Group

Information on parties to the Capital Increase Agreement

Reasons for and benefits of the Capital Increase Agreement

LETTER FROM GRAM CAPITAL

Principal terms of the Capital Increase Agreement

Date:

Parties:

Increase in capital and subscription:

Board composition and chairman:

Others:

Possible financial effects of the Capital Increase

RECOMMENDATION

RESPONSIBILITY STATEMENT

SHARE CAPITAL

Number of Shares

DISCLOSURE OF DIRECTORS’ INTERESTS AND SHORT POSITIONS IN THE COMPANY

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

Long and short positions in Shares

(b) Substantial shareholders and other persons

Long and short positions in Shares

Substantial shareholders

DIRECTORS’ INTEREST IN CONTRACTS AND/OR ARRANGEMENTS

SERVICE CONTRACTS

MATERIAL ADVERSE CHANGE

EXPERT AND CONSENT

DIRECTORS’ INTEREST IN COMPETING BUSINESS

GENERAL

DOCUMENTS AVAILABLE FOR INSPECTION

FUJIAN HOLDINGS LIMITED

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

ORDINARY RESOLUTION

‘‘THAT:

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Fujian Holdings Limited Proxy Solicitation & Information Statement 2017