Greenheart Group Limited - Proxy Solicitation & Information Statement 2014

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Skyfame Realty (Holdings) Limited , you should at once hand this circular to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or the transferee.

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.

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(incorporated in Bermuda with limited liability) (Stock Code: 00059)

VERY SUBSTANTIAL DISPOSAL IN RELATION TO DISPOSAL OF INTEREST IN A SUBSIDIARY AND NOTICE OF SGM

Financial adviser

Crosby Securities Limited

A letter from the board of directors of Skyfame Realty (Holdings) Limited is set out on pages 1 to 11 of this circular.

A notice convening the special general meeting of Skyfame Realty (Holdings) Limited to be held at Empire Room 1, 1st Floor, Empire Hotel Hong Kong • Wanchai, 33 Hennessy Road, Wanchai, Hong Kong at 3:45 p.m. on Tuesday, 10 June 2014 is set out on pages SGM-1 to SGM-2 of this circular. Whether or not you intend to attend such meeting, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar of the Company in Hong Kong, Tricor Abacus Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding such meeting. Completion and return of the form of proxy will not preclude you from attending and voting at the meeting or any adjourned meeting (as the case may be) if you so wish.

* for identification purposes only

23 May 2014

	Pages
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Appendix I – Financial information of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
Appendix II – Financial information of the Target Company. . . . . . . . . . . . . . . . . . . . . . . . II-1
Appendix III – Unaudited pro forma financial information of
the Remaining Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-1
Appendix IV – Valuation report on the Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV-1
Appendix V – General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-1
Notice of the SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SGM-1

DEFINITIONS

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

“Board”	the board of the Directors
“Company”	Skyfame Realty (Holdings) Limited (stock code: 00059), a
	company incorporated in Bermuda with limited liability, the
	issued Shares of which are listed on the Stock Exchange
“Director(s)”	director(s) of the Company from time to time
“Disposal”	the sale of 55.00% of the interest in the Target Company by
	Guangzhou Yu Jun (as vendor) to Guizhou Kaichuang (as
	purchaser) pursuant to the Disposal Agreement
“Disposal Agreement”	the conditional agreement dated 23 April 2014 entered into
	between the Vendors and the Purchasers in relation to the sale and
	purchase of the Disposal Shares
“Disposal Shares”	the entire issued share capital of the Target Company
“GFA”	gross floor area
“Group”	the Company and its subsidiaries
“Guangzhou Haocheng”	廣州市灝城裝飾有限公司(Guangzhou Haocheng Decoration
	Company Limited*), a third party independent of and not
	connected with the Company and its connected persons (as
	defined in the Listing Rules)
“Guangzhou Yu Jun”	廣州譽浚咨詢服務有限公司(Guangzhou Yu Jun Consulting
	Service Company Limited*), a foreign invested enterprise
	incorporated in the PRC and indirectly wholly owned by the
	Company as at the Latest Practicable Date
“Guizhou Xiehui”	貴州協輝房地產開發有限公司(Guizhou Xiehui Property
	Development Company Limited*), a company incorporated in the
	PRC and one vendor under the Disposal Agreement
“Guizhou Zhongjia”	貴州眾佳和力房地產信息咨詢有限公司(Guizhou Zhongjia
	Heli Property Information Consultancy Company Limited*),
	a company incorporated in the PRC and one vendor under the
	Disposal Agreement
“Guizhou Kaichuang”	貴州凱創貿易有限公司(Guizhou Kaichuang Trading Company
	Limited*), a company incorporated in the PRC and one purchaser
	under the Disposal Agreement

DEFINITIONS

“Guizhou Baichuan” 貴州百川實業有限公司 (Guizhou Baichuan Industrial Company Limtied*), a company incorporated in the PRC and one purchaser under the Disposal Agreement
“GZYJ Shareholder’s Loan” the portion of the Shareholder’s Loans with an amount of approximately RMB93.0 million advanced by Guangzhou Yu Jun to the Target Company as at 23 April 2014
“Hong Kong” the Hong Kong Special Administrative Region of the PRC “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“Latest Practicable Date” 20 May 2014, being the latest practicable date prior to printing this circular for the purpose of ascertaining certain information contained in this circular
“Loan” the loan advanced by Guangzhou Haocheng to the Target Company with a principal of RMB17.0 million together with accrued interests
“PRC” the People’s Republic of China (excluding, for the purpose of this circular, Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan)
“Properties” unsold and pre-sold residential units, unsold commercial units and car parking spaces of Phase I and II (Block Nos. 3 to 9) and properties under constructions of Phase III (Block Nos. 1 to 2 and 10 to 12) of Tianyu City located at Xiaoguan Maochong of Yunyan District, Guiyang City, Guizhou Province, the PRC (中國貴州省貴陽市雲岩區小關貓沖) with a site area of approximately 156,208 sq.m., of which 136,447 sq.m. is the granted area designated for commercial and residential use and the remaining portion with an area of 19,761 sq.m. is designated for the use as public roads
“Purchaser(s)” Guizhou Kaichuang and Guizhou Baichuan, being the purchaser(s) of the Disposal Shares pursuant to the Disposal Agreement
“Remaining Group” the Group immediately after completion of the Disposal Agreement
“SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“SGM” the special general meeting of the Company to be convened at Empire Room 1, 1st Floor, Empire Hotel Hong Kong • Wanchai, 33 Hennessy Road, Wanchai, Kong Kong at 3:45 p.m. on Tuesday, 10 June 2014, to seek the approval of the Shareholders in respect of the Disposal Agreement and the transactions contemplated thereunder

DEFINITIONS

“Share(s)”	ordinary share(s) of HK$0.01 each in the share capital of the
	Company
“Shareholder(s)”	holder(s) of the Share(s)
“Shareholder’s Loans”	shareholder’s loans advanced by the Vendors to the Target
	Company with an aggregate amount of approximately RMB167.1
	million as at 23 April 2014, comprising of (a) the GZYJ
	Shareholder’s Loan of approximately RMB93.0 million; and (b)
	the shareholder’s loan advanced by Guizhou Xiehui and Guizhou
	Zhongjia with an aggregate amount of approximately RMB74.1
	million
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Target Company” or	貴州譽浚房地產開發有限公司(Guizhou Yu Jun Real Estate
“Guizhou Yu Jun”	Development Company Limited*) which was incorporated in the
	PRC on 17 January 2008
“Vendor(s)”	Guangzhou Yu Jun, Guizhou Xiehui, Guizhou Zhongjia, being
	the vendor(s) of the Disposal Shares pursuant to the Disposal
	Agreement
“sq.m.”	square meter
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“RMB”	Renminbi Yuan, the lawful currency of PRC
“&”	and
“%”	per cents.

* for identification purposes only

iii

LETTER FROM THE BOARD

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(incorporated in Bermuda with limited liability) (Stock Code: 00059)

Executive Directors: YU Pan (Chairman and Chief Executive Officer) WEN Xiaobing (Deputy Chief Executive Officer) WONG Lok

Non-executive Director: ZHONG Guoxing

Independent Non-executive Directors: CHOY Shu Kwan CHENG Wing Keung, Raymond CHUNG Lai Fong

Registered Office:

Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Head office and principal place of Business in the PRC: 32nd to 33rd Floors of HNA Tower 8 Linhe Zhong Road, Tianhe District Guangzhou, Guangdong Province the PRC

Principal place of business in Hong Kong: 2502B, Tower 1, Admiralty Centre 18 Harcourt Road Hong Kong

23 May 2014

To the Shareholders,

Dear Sirs or Madams

VERY SUBSTANTIAL DISPOSAL IN RELATION TO DISPOSAL OF INTEREST IN A SUBSIDIARY

INTRODUCTION

In the announcement of the Company dated 29 April 2014, the Board announced that on 23 April 2014 (after trading hours), Guangzhou Yu Jun (an indirect wholly-owned subsidiary of the Company), Guizhou Xiehui and Guizhou Zhongjia (as vendors) and Guizhou Kaichuang and Guizhou Baichuan (as purchasers) entered into the Disposal Agreement, pursuant to which the Purchasers conditionally agreed to acquire and the Vendors conditionally agreed to dispose of the Disposal Shares, which represent the entire issued share capital of the Target Company, at an aggregate consideration of RMB50 million.

As at the Latest Practicable Date, the Target Company was owned as to 55.00%, 20.25% and 24.75% by Guangzhou Yu Jun, Guizhou Xiehui and Guizhou Zhongjia respectively. Pursuant to the Disposal Agreement, Guangzhou Yu Jun has conditionally agreed to transfer its 55% interest in the Target

LETTER FROM THE BOARD

Company to Guizhou Kaichuang at the GZYJ Consideration (as defined below) of RMB27.5 million. Upon completion of the Disposal, the Company will not have any interests in the Target Company and the Target Company will cease to be a subsidiary of the Company.

The purpose of this circular is to provide you with further information of the Disposal and other information in compliance with the requirements of the Listing Rules and to give you notice of the SGM at which an ordinary resolution will be proposed to seek your approval of the Disposal Agreement.

THE DISPOSAL AGREEMENT

Date:

23 April 2014 (after trading hours)

Parties:

Vendors : (i) Guangzhou Yu Jun, which is an indirect wholly-owned subsidiary of the Company and the beneficial owner of 55.00% of the entire issued share capital of the Target Company as at the Latest Practicable Date;
(ii) Guizhou Xiehui, which is the beneficial owner of 20.25% of the entire issued share capital of the Target Company as at the Latest Practicable Date; and
(iii) Guizhou Zhongjia, which is the beneficial owner of 24.75% of the entire issued share capital of the Target Company as at the Latest Practicable Date

Purchasers : (i) Guizhou Kaichuang; and

(ii) Guizhou Baichuan

Guizhou Xiehui is a PRC incorporated company and principally engaged in property development and sales. Guizhou Zhongjia is a PRC incorporated company and principally engaged in provision of consultation services in property, investment and construction and property agency services. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, save for their respective interest in the Target Company, Guizhou Xiehui and Guizhou Zhongjia are third parties independent of and not connected with the Company and its connected persons (as defined in the Listing Rules).

Guizhou Kaichuang is a PRC incorporated company and principally engaged in sales of construction and renovation materials, fire equipment and import and export agency. Guizhou Baichuan is a PRC incorporated company and principally engaged in sales of construction materials, home appliances and electrical products. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the Purchasers are third parties independent of and not connected with the Company and its connected persons (as defined in the Listing Rules).

LETTER FROM THE BOARD

Assets to be disposed of

Subject to the terms and conditions of the Disposal Agreement, the Purchasers conditionally agreed to acquire, and the Vendors conditionally agreed to dispose of, the Disposal Shares, which represent the entire issued share capital of the Target Company.

In particular, Guangzhou Yu Jun shall transfer 55.00% of the Disposal Shares to Guizhou Kaichuang, and Guizhou Xiehui and Guizhou Zhongjia shall transfer 20.25% and 24.75%, respectively, of the Disposal Shares to Guizhou Baichuan.

Consideration

The aggregate consideration for the disposal of the Disposal Shares was RMB50.0 million, among which RMB27.5 million (the “ GZYJ Consideration ”) shall be payable to Guangzhou Yu Jun for its transfer of the 55% of the Disposal Shares to Guizhou Kaichuang.

The GZYJ Consideration shall be paid in cash in the following manners:

(i) an amount of RMB2.75 million shall be payable as deposit (the “ Deposit ”) within seven days commencing from the execution of the Disposal Agreement, which shall be applied to set-off part of the GZYJ Consideration on the Completion Date (as defined below); and
(ii) the remaining balance shall be payable on the date on which the repayment of the Shareholder’s Loans and the Loan and the distribution of the dividend (as set out in the section headed “Distribution of dividend” below) are made.

The GZYJ Consideration of RMB27.5 million was determined after arm’s length negotiations between Guangzhou Yu Jun and Guizhou Kaichuang with reference to the registered capital of the Target Company as at the date of the Disposal Agreement and after taking into account the historical financial performance of the Target Company and the Company’s expectation on the outlook of the property market in Guiyang, the PRC, in near future.

The aggregate proceeds to be received by Guangzhou Yu Jun upon completion of the Disposal Agreement (taking into account the dividend to be received as disclosed in the section headed “Distribution of dividend” below) is approximately RMB67.5 million comprising (a) the GZYJ Consideration of RMB27.5 million; and (b) a dividend of RMB40.0 million (as mentioned in the section headed “Distribution of dividend” below). Such aggregate proceeds represent a discount of approximately 20.4% to the sum of the adjusted net assets value (the “ Adjusted NAV ”) of the Target Company attributable to the Group of approximately RMB84.8 million. The Adjusted NAV attributable to the Group was determined based on the unaudited net assets value of the Target Company attributable to the Group of approximately RMB47.7 million as at 31 December 2013 adjusted by the appreciation in the value of the Properties of the Target Company attributable to the Group which in turn was estimated based on 55% of the increment of the fair value of the Properties as at 30 April 2014 of RMB748.0 million as valued by an independent property valuer as compared with the book value of the Properties of approximately RMB658.2 million as at 30 April 2014 and 55% of the estimated corporate income tax liability of approximately RMB22.5 million arising from such appreciation in property value.

LETTER FROM THE BOARD

The Directors are of the view that the consideration is fair and reasonable despite the discount to the Adjusted NAV taking into account: (i) the valuation of the Properties as assessed by the independent property valuer is computed based on the assumption that each unit of the Properties is sold to individual buyers separately. However, the Disposal represents the sale of all the units of the Properties in one lot. Bulk sale of properties often involves a discount to the selling price for individual units when they are sold separately; (ii) the unit price of the residential units in phase 3 of the Properties implied in the valuation of the independent valuer is higher than the actual average selling price of residential units in phase 3 of the Properties sold by the Target Company. If the actual average selling price of the residential units in phase 3 of the Properties was applied to the valuation, the discount of the consideration as compared to the Adjusted NAV of the Target Company would be lower by approximately RMB7.3 million (or 7.5%) based on the Company’s best estimation; and (iii) the factors set out in section headed “Reasons for and benefits of the Disposal” below.

Distribution of dividend

As at the date of the Disposal Agreement, the Target Company had unaudited retained earnings of approximately RMB72.7 million, which shall be distributed to the Vendors in proportion to their respective shareholding in the Target Company prior to completion of the Disposal Agreement. Guangzhou Yu Jun is entitled a dividend of approximately RMB40.0 million payable by the Target Company for its 55% shareholding in the Target Company.

Conditions precedent

The Purchasers are required to obtain the pre-completion financing (the “ Pre-financing ”) of no less than RMB300 million for purpose of (i) repayment of the Shareholder’s Loans; (ii) repayment of the Loan; and (iii) the distribution of dividend as set out above within 60 days from the date on which the following issues are satisfied:

(i) the Disposal Agreement having been duly executed by the Vendors and the Purchasers;
(ii) the payment of the Deposit;
(iii) the obtaining of the pre-sale permits in respect of towers 11 and 12 of the Guiyang Project (as defined below); and
(iv) the satisfaction by Guangzhou Yu Jun and the Company with the regulatory requirements under the relevant laws of Hong Kong and the Listing Rules (please refer to the section headed “Implications of the Listing Rules” below for details) with respect to the Disposal Agreement and the transactions contemplated thereunder.

Guangzhou Yu Jun is entitled to terminate the Disposal Agreement and forfeit the Deposit if the Pre-financing is not obtained in the manner as prescribed in the Disposal Agreement.

Furthermore, the Disposal Agreement shall become unconditional upon, among others, the following issues are satisfied (or waived unanimously by the Vendors):

(i) the Disposal Agreement and an agreement, in standard form, for lodgment to the relevant local counterparties of State Administration of Industry and Commerce of the PRC having been duly executed by the Vendors and the Purchasers and becoming effective;

LETTER FROM THE BOARD

(ii) the obtaining of the above mentioned Pre-financing;
(iii) the repayment of the Shareholder’s Loans and the Loan and the distribution of the dividend as stated in the section headed “Distribution of dividend” above;
(iv) the payment of the aggregate consideration for the disposal of the Disposal Shares of RMB50.0 million; and
(v) where applicable, the Purchasers having obtained all necessary approval relating to the Disposal Agreement and the transactions contemplated thereunder and/or any written consents from third parties having been obtained for the same.

Completion

Completion shall take place on the date (the “ Completion Date ”) on which the relevant PRC authority issues a new business licence to the Target Company showing that the Purchasers are holders of the Disposal Shares.

FINANCIAL EFFECTS OF THE DISPOSAL AND USE OF PROCEEDS

As at the Latest Practicable Date, the Target Company is a 55% owned subsidiary of the Company. Upon completion of the Disposal, the Company will not hold any interests in the Target Company and the Target Company will cease to be a subsidiary of the Company.

For illustrative purpose, the Group is expected to incur a loss of approximately RMB6.2 million, which is calculated based on the sum of the GZYJ Consideration of RMB27.5 million, the repayment of the GZYJ Shareholder’s Loan of approximately RMB93.0 million and the dividend of approximately RMB40.0 million to be received by Guangzhou Yu Jun from the Target Company, deducted by (i) the Target Company’s unaudited net assets attributable to the Group of approximately RMB47.7 million as at 31 December 2013; (ii) the finance costs capitalised at the corporate level as project development cost of the Properties of the Target Company of approximately RMB25.0 million (after netting of site expenses incurred by Guangzhou Yu Jun and reimbursed by the Target Company of approximately RMB1.2 million up to 31 December 2013); (iii) the GZYJ Shareholder’s Loan of approximately RMB93.0 million as at 23 April 2014; and (iv) an estimated transaction cost of approximately RMB1.0 million for the Disposal. The exact amount of loss to be incurred by the Group as a result of the Disposal will be determined based on the financial position of the Company and the Target Company as at the Completion Date (as defined above). The unaudited pro forma financial statements of the Remaining Group and the related financial impacts is set out in Appendix III in this circular.

The net proceeds from the Disposal (after deducting the transaction expenses related to the Disposal of approximately RMB1.0 million) are estimated to be approximately RMB66.5 million (taking into account the dividend to be received as disclosed above), which the Company intends to apply as general working capital of the Remaining Group.

LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE DISPOSAL

The Group is principally engaged in property development and property investment.

The Target Company is principally engaged in the property development project, namely Tianyu City (“天譽城”), in Guiyang (the “ Guiyang Project ”). The first two phases of the Guiyang Project were completed and substantially sold. The remaining third phase of such project is under construction and is expected to be completed progressively in 2014 and 2015. Therefore, it takes time to generate cash flow from the remaining third phase.

In considering the Disposal, the Directors have taken into account the following factors:

(i) the performance of the Guiyang Project in the past few years was below expectation, which is represented by the factors including (a) the actual selling prices of the properties of the Guiyang Project have been lower than the target selling price set by the Company since the commencement of the Guiyang Project. At the commencement of the Guiyang Project in 2008, the management set the target selling price of approximately RMB5,000 per sq.m. with reference to the then prevailing average market price of approximately RMB5,345 sq.m.. However, the actual selling price of first two phases of the Guiyang Project contracted by the Target Company in the past years was on an average of approximately RMB4,375 per sq.m. only. The Directors consider that it was mainly due to the excessive supply in the property market of Guiyang; and (b) the accumulated loss incurred by the Group on the Guiyang Project amounted to approximately RMB6.7 million since the incorporation of the Target Company, taking into account the interest of approximately RMB26.9 million capitalised at the corporate level;
(ii) the Disposal enables the Company to receive gross aggregate proceeds of approximately RMB67.5 million in cash and the repayment of the GZYJ Shareholder’s Loan of approximately RMB93.0 million at an earlier stage as compared to a normal timeline required when investments in a property development project are returned to shareholders only after 2 to 3 years upon completion of the project. The proceeds received from the contracted sales of the residential units in phase 3 of the Guiyang Project of approximately RMB430 million have been received by the Target Company in full and are restricted to be applied to payment of the construction costs of the related properties until completion of construction. The remaining two towers of the third phase are under construction and the pre-sale of residential units thereunder will begin in the second quarter of 2014 after obtaining the pre-sale permits. However, shareholders of the Target Company can only realise its return of investment, which will be in form of dividend, shareholders’ loan repayment and distribution of capital, after completion of the construction and delivery of properties to customers when the revenue is recognized, which is currently expected to be in late 2014 and 2015. Accordingly, the expected timing to realize returns by the Group from the Guiyang Project would be after 2016. Furthermore, the Company also considers Disposal would help the Company save the finance costs by the cash immediately realized from the Disposal upon completion of the transaction. As disclosed in the annual report of the Company for the year ended 31 December 2013 (“ 2013 Annual Report ”), the Group’s finance costs had a blended annualized interest rate of approximately 12.7%;

LETTER FROM THE BOARD

(iii) the outlook of the property market in Guiyang is believed by the Directors to be lackluster given the excess in supply in the locality as a result of the unprecedented high volume of properties under development leading to low selling prices and margins and therefore it is considered commercially beneficial to reallocate financial resources of the Group to other regions. As disclosed in an article (the “ Article ”) of Tai Kung Po, website dated 1 December 2012, the inventory of residential and commercial units of Guiyang amounted to 34.9 million sq.m. while the population was under 5 million as of September of 2012. Based on the rate of consumption in the first half of 2012, it would take at least four years to consume such inventory. This is mainly attributable to the over-reliance of Guiyang’s economic development in the property development sector, according to the Article. It is also mentioned in the Article that a bubble was created in Guiyang’s property market; and
(iv) the return of the Guiyang Project is expected to be lower than that of the other property development projects of the Group in Guangzhou and Nanning and thus the Disposal would allow the Group to focus its resources on those projects which are of larger size and greater prospect.

INFORMATION ON THE TARGET COMPANY

The Guiyang Project consists of high-end residential apartments of a total GFA of approximately 460,000 sq.m. for residential apartments and approximately 132,000 sq.m. for commercial complex, community facilities and car parking spaces. Properties in the first and second phases of the development in GFA of approximately 253,000 sq.m. were completed of which nearly all residential units of GFA of approximately 250,000 sq.m. were sold and delivered to customers and the remaining commercial units of GFA of approximately 6,300 sq.m. and car parking spaces of approximately 67,000 sq.m. are currently held for sales. The final third phase of the project, consisting of five residential buildings, commercial units and car park spaces of GFA of approximately 244,000 sq.m., are under construction. The properties under construction are expected to be completed progressively in 2014 and 2015, of which a GFA totaling of approximately 92,000 sq.m. of three towers of the third phase has been sold out with contracted sales (the “ Contracted Sales ”) of approximately RMB430 million as at the end of March 2014. The proceeds from the Contracted Sales of approximately RMB430 million have been received by the Target Company in full and are restricted to be applied to payment of the construction costs of the related properties until completion. The Contracted Sales will be recognized as revenue of the Target Company in late 2014 and 2015 when the construction of the properties is completed and the properties are delivered to the customers. The remaining two residential towers of the third phase of GFA of approximately 106,000 sq.m., commercial units of GFA of approximately 6,600 sq.m. and car parking space of GFA of approximately 36,000 sq.m. are under construction. The pre-sale of residential units of salable area of approximately 106,000 sq.m. will begin in the second quarter of 2014 after obtaining the pre-sale permits.

LETTER FROM THE BOARD

The unaudited net (loss)/profit before and after taxation and extraordinary items of the Target Company for each of the two years ended 31 December 2012 and 31 December 2013 and the unaudited net assets value of the Target Company as at the indicated end of the reporting periods as disclosed in the 2013 Annual Report are set out below:

	Year ended	31 December
	2012	2013
	RMB	RMB
	(million)	(million)
(Loss)/profit before taxation and extraordinary items	(84.1)	145.0
(Net loss)/net profit after taxation and extraordinary items	(85.1)	121.5
	As at 31	December
	2012	2013
	RMB	RMB
	(million)	(million)
(Net liabilities)/net assets	(34.8)	86.8

According to the unaudited financial statements of the Target Company, as at 31 December 2013, the Target Company’s major assets comprised the Properties, which in turn comprised of properties under development of approximately RMB484.6 million and properties held for sale of approximately RMB172.5 million, and cash and cash equivalents of approximately RMB94.3 million. The major liabilities of the Target Company as at 31 December 2013 comprised trade and other payables of approximately RMB124.6 million, properties pre-sale deposits of approximately RMB426.2 million and amounts due to Guangzhou Yu Jun of approximately RMB109.5 million.

INFORMATION ON THE REMAINING GROUP

Upon completion of the Disposal, the Remaining Group will be undergoing four real estate development projects in the PRC as set out below. The Remaining Group also holds two investment properties in Guangzhou and Hong Kong for regular leasing income. Currently, the Company has no intention to downsize the Remaining Group. The projects of the Remaining Group are either currently in pre-sale or will commence pre-sales in 2014. The Directors expect that increasing profits will be generated from those projects in the forthcoming years and therefore consider that the loss arising from the Disposal will not have material adverse effect to the Remaining Group’s profit and loss and its financial position.

I. Zhoutouzui Project

The project is held by a sino-foreign cooperative joint venture enterprise which is jointly controlled by the Company and a third party, 廣州港集團有限公司 (Guangzhou Port Group Co., Limited*), an original user of the land who is entitled to share 28% in GFA of the completed properties pursuant to a joint venture agreement entered into in 2001 which stipulates that the Remaining Group has to finance all construction costs of the entire development.

LETTER FROM THE BOARD

The site, opposite to the renounced White Swan Hotel, offers a full waterfront view of the Pearl River. The development on the site of 43,609 sq.m. consists of 7 towers of residential apartments, offices, service apartments and a commercial complex in a total GFA of approximately 320,000 sq m., and underground car parking facilities in a total GFA of approximately 102,000 sq.m.. Up to the end of March 2014, the first floor of A1 tower, the underground second floor of A2/A3/A4 towers, and the third floor of A5/A6/A7 towers of the project were under construction. The showrooms and display areas of A3/A6/A7 towers are expected to open in October 2014 and be ready for pre-sale.

II. Yongzhou Project

Under the framework agreement entered into with the City Government of Yongzhou, Hunan province in 2011, two subsidiaries of the Company are contracted to develop the project located in Yongzhou, offering a total site area of 1,000 mu on which a GFA of about 1.6 million sq.m. is to be developed into residential, commercial complexes and street-front shops. As a condition to the grant of development rights, the project company is also obliged to manage the remodelling works of some scenic spots in Dongshan District of Yongzhou.

The first phase of the project, named as “Tianyu-huafu” (“天譽‧華府”), features a residential development of villas, apartments and retail shops with a total GFA of 212,000 sq.m. on a 106 mu site and is in full progress of construction. All properties on the site are on pre-sale and GFA of 79,325 sq.m. have been contracted up to the end of March 2014, generating a total contracted sales of approximately RMB250 million at an overall average selling price of RMB3,200 per sq.m..

Alongside with the development of Tianyu-huafu project, as part of the Group’s efforts in contributing to preserve the heritages in Yongzhou, a large historic temple in an area of over 20,000 sq.m. that was originated in Ming Dynasty is being rebuilt by the Remaining Group which is expected to be completed in the second quarter of 2014.

III. Tianhe Project

The equity interest in the project was sold to a third party in late 2010 at a gross consideration of RMB1.09 billion before deduction of finance and other costs that are to be borne by the Group which are yet to be ascertained. Taking into account the exchange of the overdue debt of RMB130.1 million with the ownership rights of the office premises at the 32nd and 33rd floors of HNA Tower, Tianhe District, Guangzhou in December 2013, payments for the consideration totalling RMB995.3 million have been received from the purchaser. According to the transaction agreement, construction costs are to be borne by the purchaser whilst the Remaining Group resumes the role of a project manager and is responsible for the due completion of the properties at agreed timeline and construction costs.

As the Remaining Group is obliged to bear overruns in construction costs and indemnify the timely completion of the construction of the properties, the criteria for recognition of revenue set out in the Hong Kong accounting standard has not been met and hence the revenue arising from the disposal has been deferred and not yet recognised until when construction is close to completion and substantial part of the associated costs can be ascertained reliably.

LETTER FROM THE BOARD

The project, consisting of a GFA of approximately 113,000 sq.m. of two twin towers, will be developed into a hotel, serviced apartments and offices situated Tianhe District, a commercial business hub of the central city of Guangzhou. Up to the end of March 2014, the towers have been built up to 41 storeys though the progress had been adversely affected by the purchaser’s delays in payments of construction costs owed to contractors. The management of the Company perceives that the responsibility of the delay is on the purchaser whilst the Remaining Group has properly carried out its obligations and hence no claim from the purchaser is foreseen. Given the current progress of the construction and the fact that financing for construction has been recently obtained by the purchaser from a commercial bank and the construction costs are expected to be duly settled and the roof construction of the buildings are expected to be completed in June 2014, the Directors expect that the whole construction can be completed in the third quarter of 2015 as the Remaining Group’s latest work schedule when the sale transaction will be fully recorded in the accounts of the Remaining Group. With the current assessment of the costs to be borne by the Remaining Group according to the agreement in relation to the disposal, an estimated gain of RMB222.2 million will be recognised upon completion of the project.

IV. Nanning Project

In January 2014, the Remaining Group was successful in two tenders for two pieces of land in Wuxiang New District (五象新區), a new zone in Nanning, Guangxi province. The project, named as “Nanning Tianyu Garden” (“南寧天譽花園”), will be developed into a residential development with a GFA of approximately 1,177,000 sq.m., consisting of GFA of approximately 888,000 sq.m. for residential and ancillary commercial and other facilities and GFA of approximately 289,000 sq.m. for compensated housing and commercial properties for resettlement of the original occupants. Construction has been commenced and the management expects that the first phase of the project will be launched for pre-sale in the second half of the year 2014.

IMPLICATIONS OF THE LISTING RULES

As one or more of the applicable percentage ratios under Rule 14.07 of the Listing Rules in respect of the Disposal Agreement is over 75%, the Disposal constitutes a very substantial disposal for the Company and is therefore subject to the reporting, announcement and the Shareholders’ approval requirements under Chapter 14 of the Listing Rules.

THE SGM

Set out on pages SGM-1 to SGM-2 of this circular is a notice convening the SGM at which an ordinary resolution will be proposed and, if thought fit, passed to approve the Disposal Agreement and the transactions contemplated thereunder by way of poll.

Any Shareholder with a material interest in the Disposal and his associates will abstain from voting on resolution approving the Disposal Agreement and the transactions contemplated thereunder. As at the Latest Practicable Date, to the best knowledge of the Directors having made reasonable enquiries, no Shareholders are required to abstain from voting. All Shareholders will be entitled to vote on the resolution approving the Disposal Agreement and the transactions contemplated thereunder at the SGM.

LETTER FROM THE BOARD

A form of proxy for use by the Shareholders at the SGM is enclosed. Shareholders are advised to read the notice and to complete the accompanying form of proxy for use at the SGM in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar in Hong Kong, Tricor Abacus Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event, not less than 48 hours before the time appointed for holding the SGM or any adjourned meeting (as the case may be). Completion and return of the form of proxy will not preclude Shareholders from attending and voting in person at the SGM if they so wish.

RECOMMENDATION

The Board considers that the entering into the Disposal Agreement is in the interests of the Company and the Shareholders as a whole and the terms of the Disposal Agreement are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends that the Shareholders should vote in favour of the ordinary resolution which will be proposed at the SGM to approve the Disposal Agreement and the transactions contemplated thereunder.

ADDITIONAL INFORMATION

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

Yours faithfully,

For and on behalf of the Board Skyfame Realty (Holdings) Limited YU Pan

Chairman

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL SUMMARY

The audited financial information of the Group for each of the three years ended 31 December 2011, 31 December 2012 and 31 December 2013 can be found in the annual reports of the Company for the years ended 31 December 2011, 31 December 2012, 31 December 2013 respectively.

The above-mentioned financial information has been published on both website of the Stock Exchange (www.hkex.com.hk) and the website of the Company (www.sfr59.com). The auditors of the Company have not issued any qualified opinion on the Group’s financial statements for the financial years ended 31 December 2011, 31 December 2012 and 31 December 2013.

2. INDEBTEDNESS STATEMENT

As at the close of business on 31 March 2014, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had outstanding bank and other borrowings of approximately RMB1,800.1 million which comprised:

(i) secured bank loans of approximately RMB535.2 million (including RMB2.0 million secured by part of the ownership titles of properties under development and properties held for sale of the target company, Guizhou Yu Jun, and the mortgage was released upon full repayment of the loan by Guizhou Yu Jun in April 2014) secured by mortgages of ownership titles of properties under development, properties held for sale and investment properties. In addition, the Company provides a corporate guarantee to secure for obligations in respect of bank loans totaling approximately RMB68.9 million to secure for the repayment of the bank loans. Bank loan of RMB339.3 million is also secured by personal guarantee provided by Mr. YU Pan and his spouse;
(ii) a trust loan of RMB500.0 million secured by mortgages of ownership titles of the investment property units in Tianyu Garden Phase II and the office premises at HNA Tower. The loan facility is also secured by corporate guarantees provided by the Company, certain subsidiaries and a company controlled by Mr. YU Pan and personal guarantee given by Mr. YU Pan;
(iii) secured loan due in 2014 and secured bonds due in 2015 in an aggregate principal amount of HK$596.0 million (equivalent to approximately RMB472.6 million) respectively borrowed from and issued to a financial institution which are secured charges over the entire issued share capital of Guangzhou Zhoutouzui Development Limited in favour of the lender and bondholder. The secured loan was granted with the issue of warrants by the Company with guaranteed return conferring rights to the lender to subscribe for Shares in aggregate up to a principal amount of HK$29.8 million (equivalent to approximately RMB23.6 million);
(iv) unsecured bonds in total principal value of HK$50 million (equivalent to approximately RMB39.6 million) issued to a number of bondholders with maturity term of two years due in 2016;
(v) unsecured loans due to a third party in the principal amount of approximately RMB180.2 million; and

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(vi) unsecured amounts due to non-controlling shareholders of Guizhou Yu Jun, namely Guizhou Xiehui and Guizhou Zhongjia of totaling approximately RMB72.5 million.

In addition, as at 31 March 2014, the Group had commitments contracted but not provided for in respect of the property development costs of approximately RMB1,303.7 million and acquisition of land use rights of approximately RMB598.7 million, and commitments authorised but not contracted for in respect of property development costs of approximately RMB1,815,4 million and acquisition of land use rights of approximately RMB931.6 million.

The Group provided guarantees to the extent of approximately RMB775.2 million as at 31 March 2014 in respect of banking facilities granted by certain banks relating to the mortgage loans arranged for certain purchasers of the Group’s properties. Pursuant to the terms of the guarantees, upon default in mortgage payments by these purchasers, the Group is responsible for repaying the outstanding mortgage principals together with accrued interest and penalty owed by the defaulted purchasers to the banks, and in such circumstances, the Group is entitled to take over the legal title and possession of the related properties. Such guarantees shall terminate upon issuance of the relevant property ownership certificates to the purchasers.

Save as aforesaid and apart from intra-group liabilities and normal trade and other payables in the ordinary course of business, the Group did not have any debt securities issued and outstanding or agreed to be issued, outstanding bank borrowings, bank overdrafts, liabilities under acceptances, acceptance credits, mortgages, charges, other indebtedness in the nature of borrowing, finance lease or hire purchase commitments, guarantees or material contingent liabilities as at 31 March 2014.

3. WORKING CAPITAL

The Directors are of the opinion that, taking into account the Group’s available financial resources, including the existing credit facilities and internal resources, and the Disposal can be completed as currently envisaged, the Group will have sufficient working capital for its present requirements and for at least twelve months from the date of this circular in the absence of unforeseeable circumstances.

4. 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 2013, being the date to which the latest audited financial statements of the Group were made up, up to and including the Latest Practicable Date.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. FINANCIAL AND TRADING PROSPECTS OF THE REMAINING GROUP

After the completion of the Disposal, the Remaining Group will be undergoing the four projects, two in Guangzhou, one in Nanning and one in Yongzhou with details in the section headed “Information on the Remaining Group” as set out in the Letter from the Board of this circular. Whilst the land premium for Nanning Project is being paid up on schedule according to the tender conditions, all other projects are self-financed by bank loans and sale proceeds received from the pre-sales of Zhoutouzui Project, Nanning Project and Yongzhou Project that will be commenced in 2014. Completion of the projects is due to happen throughout the years from 2014 to 2017. In light of the progress in the development of these projects and assuming that there are no unforeseeable adverse changes in the business environment affecting the development timelines and market demand in the property market in any material aspect, the cash generated from the operations of the Remaining Group will sufficiently serve to fulfill its obligations to its lenders and bondholders. The net cash position of the Remaining Group in the foreseeable years will be in positive upward trend that enables its acquisition of additional land and projects for future expansion.

6. MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

FOR THE YEAR ENDED 31 DECEMBER 2013

Business Review and Outlook

Business review

For the year, the Remaining Group’s income from the leasing of properties was generated from the leasing of the commercial podium of Tianyu Garden Phase II in Guangzhou and AXA Centre in Wanchai, Hong Kong, contributed a net-of-tax revenue of RMB18.4 million, representing a decrease from the previous year. The decrease in leasing income was caused by the temporary vacancy in Tianyu Garden Phase II led by the moving out of a key tenant upon the expiry of the lease during the year, despite the leasing of the newly acquired office premises at the AXA Centre in Wanchai, Hong Kong.

Gross margin in leasing income for the year was 84.6%, remaining relatively stable as compared with the previous year.

With respect to operating expenses, sales and marketing expenses amounted to HK$8.4 million as the Remaining Group incurred costs in advertising and promotions and agent commission when the pre-sale of the first phase of Yongzhou Project continued in the current year. Overall administrative and other operating expenses amounted to RMB59.3 million, included as staff costs, being the biggest expense item, and have been stabilized as a result of the management’s strategy to streamline the staff force but at the same time offer competitive compensation packages to staff with suitable profiles.

During the year, the Remaining Group enjoyed a net exchange gain of RMB8.0 million as a result of the appreciations of RMB against HK dollar and US dollar in which some corporate loans are denominated, whilst a net exchange loss of RMB2.3 million was incurred in previous year as RMB went in a reverse direction against the two currencies in that year.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Alongside with the Remaining Group’s increased borrowings to finance the construction of projects and the obtaining of corporate debts at higher finance costs, finance costs incurred during the year rose to RMB67.5 million. Due to the fact that the financing is mostly used for the development of all projects, nearly most of the finance costs incurred were capitalised as development costs. Out of the total finance costs, RMB0.8 million was charged against the profit for the year and the remaining RMB66.7 million was capitalised. Finance income of RMB27.7 million grew as a result of the interest income of RMB18.4 million received during the year from the purchaser of the equity interests in Tianhe Project for default in settlement of the overdue installment of consideration receivable for the disposal.

Non-operating items included the changes in fair values of investment properties of RMB36.1 million and gain of RMB4.2 million recognised on early redemption of an unsecured promissory note of a principal value of HK$96 million. The gain was offset by the net increase of RMB4.0 million in the fair values of the derivative financial liabilities embedded in the warrants issued by the Company to the lender of a secured loan of HK$298 million (equivalent to approximately RMB236.3 million) in 2012 for a guaranteed return of HK$29.8 million (equivalent to approximately RMB23.6 million) and the rights attached to the exchangeable bonds issued by the Company to a financial institution in a face value of HK$298 million (equivalent to approximately RMB236.3 million) in 2013 to empower the bondholders the rights to exchange the bonds for the equity interests in Guangzhou Zhoutouzui Development Limited (“ GZ Zhoutouzui ”), the rights to put the shares to the Company and the Company’s right to buy back the shares.

The Company had a post-tax profit of RMB22.9 million for the year attributable to the shareholders of the Company.

Properties under development and land reserves

Adding to the land for the development of the Nanning Tianyu Garden which was acquired in January 2014, the Remaining Group is undergoing four real estate development projects in mainland China during the year. Up to 24 March 2014, being the date of the 2013 Annual Report, the Remaining Group’s projects on hand renders a land reserve for property development of a total GFA of approximately 1.9 million sq.m., all of which are now under construction.

Zhoutouzui Project

* for identification purposes only

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The site, opposite to the renounced White Swan Hotel, offers a full waterfront view of the Pearl River. The development on the site of 43,609 sq.m. consists of 7 towers of residential apartments, offices, service apartments and a commercial complex in a total GFA of approximately 320,000 sq m., and underground car parking facilities in a total GFA of approximately 102,000 sq.m. Up to the end of February 2014, construction is in full progress and three towers are built up to second floor as of the end of February 2014 and the others at the basement floors. Given the satisfactory progress of the construction, the management expects that pre-sales of some towers can be started in the second half of the year in 2014.

Yongzhou Project

Under the framework agreement entered into with the City Government of Yongzhou, Hunan province in 2011, two subsidiaries of the Remaining Group are contracted to develop the Yongzhou Project, offering a total site area of 1,000 mu on which a GFA of about 1.6 million sq.m. is to be developed into residential, commercial complexes and street-front shops. As a condition to the grant of development rights, the project company is also obliged to manage the remodelling works of some scenic spots in Donshan District of Yongzhou. The entire project covers a development period of 6 years.

The first phase of the Project, named as “Tianyu-huafu” (“天譽‧華府”), features a residential development of villas, apartments and retail shops with a total GFA of 212,000 sq.m. on a 106 mu site and is in full progress of construction. All properties on the site are on pre-sale and GFA of 70,814 sq.m. have been contracted up to the end of February 2014, generating a total contracted sales of approximately RMB224 million at an overall average selling price of RMB3,200 per sq.m..

Alongside with the development of Tianyu-huafu Project, as part of the Remaining Group’s efforts in contributing to preserve the heritages in Yongzhou, a large historic temple in an area of over 20,000 sq.m. that was originated in Ming Dynasty was being rebuilt by the Remaining Group which is expected to be completed in the second quarter of 2014.

Tianhe Project

The equity interest in the project was sold to a third party in late 2010 at a gross consideration of RMB1.09 billion before deduction of finance and other costs that are to be borne by the Remaining Group which are yet to be ascertained. Taking into account the exchange of the overdue debt of RMB130.1 million with the ownership rights of the office premises at the 32nd and 33rd floors of HNA Tower, Tianhe District, Guangzhou in December 2013, payments for the consideration totalling RMB995.3 million have been received from the purchaser. According to the transaction agreement, construction costs are to be borne by the purchaser whilst the Remaining Group resumes the role of a project manager and is responsible for the due completion of the properties at agreed timeline and construction costs.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

As the Remaining Group is obliged to bear overruns in construction costs and indemnify the timely completion of the construction of the properties, the criteria for recognition of revenue set out in the Hong Kong accounting standard has not been met but the revenue arising from the disposal be deferred and not yet recognised until when construction is close to completion and substantial part of the associated costs can be ascertained reliably.

The project, consisting of a GFA of approximately 113,000 sq.m. of two twin towers, will be developed into a hotel, serviced apartments and offices situated Tianhe District, a commercial business hub of the central city of Guangzhou. Up to the end of February 2014, the towers have been built up to 37 storeys though the progress had been adversely affected by the purchaser’s delays in payments of construction costs owed to contractors. The management perceives that the responsibility of the delay is on the purchaser whilst the Remaining Group has properly carried out its obligations and hence no claim from the purchaser is foreseen. Given the current progress of the construction and the fact that financing for construction has been recently obtained by the purchaser from a commercial bank and the construction costs are expected to be duly settled, the Directors expect that the construction can be completed in the third quarter of 2015 as the Remaining Group’s latest work schedule when the sale transaction will be fully recorded in the accounts of the Remaining Group. With our current assessment of the costs to be borne by the Remaining Group according to the agreement in relation to the disposal, an estimated gain of RMB222.2 million will be recognised upon completion of the project.

Nanning Project

In January 2014, the Remaining Group was successful in two tenders for two pieces of land in Wuxiang New District (五象新區), a new zone in Nanning, Guangxi province. The project, recently named as “Nanning Tianyu Garden” (“南寧天譽花園”), will be developed into a residential development with a GFA of approximately 1,177,000 sq.m., consisting of GFA of approximately 888,000 sq.m. for residential and ancillary commercial and other facilities and GFA of approximately 289,000 sq.m. for compensated housing and commercial properties for resettlement of the original occupants. Construction has been commenced and the management expects that the first phase of the project will be launched for pre-sale in the second half of the year 2014.

Investment properties

The Remaining Group also holds two investment properties for regular leasing income with details as follows:

A 20,000 sq.m. commercial podium at Tianyu Garden Phase II in Tianhe District, Guangzhou with an open market value at RMB530.0 million as at 31 December 2013. On 24 March 2014, the date of the 2013 Annual Report, the property is 63.4% occupied and tenanted with renowned corporations. The occupancy rate of the property during the year has been affected by the vacancy of floor areas when the US consulate, a key tenant of the premise, moved out upon the expiry of the lease.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

A total of 14,500 sq.ft. office premise at the whole floor at AXA Centre in Wanchai, Hong Kong was acquired by the Remaining Group in April 2013. The property is currently vacant pending the soliciting new tenants after the past tenant moved out upon maturity of the tenancy in December 2013. The property is revalued at an open market value of HK$230.0 million (approximately RMB180.8 million) as at 31 December 2013.

Outlook

The outlook of the economic growth of China and many emerging markets turned gloomy when the domestic output of China slowed down and the investment sentiment in the emerging markets went low amid the outflow of capital. However, property market on the mainland continued to outperform as evidenced by the record-high property selling prices and auction prices of lands in 2013. On the other hand, the central bank, being aggrieved by the galloping volume of off-balance sheet lending, has tightened capital to commercial banks, making lending on the mainland more difficult. To counter the uncertainty in the finance market on which the financing for acquisition of projects is relied, the Remaining Group is striving to maintain a solid financial position that enables the Remaining Group to obtain sufficient finance for the acquisition of projects so as to enlarge the land reserves of the Remaining Group and keep the business sustainable. On 24 March 2014, being the date of the 2013 Annual Report, the Remaining Group has financing facilities granted from commercial banks and a trust loan in aggregate of RMB1,719.3 million (of which borrowings of RMB440.6 have been drawn down) and financing in a total of HK$596 million obtained from a secured loan extended to the Company in 2012 by a financial institution and an issue of secured bonds by the Company to the same group in 2013. In addition, pre-sales of the Yongzhou Project have been providing sufficient working capital to finance the ongoing construction costs of the Yongzhou Project, making the completion of the project beyond doubts.

The management plans to sustain a continuing growth in sales and earnings to the Company’s shareholders and is therefore aggressive to replenish land for future development in the years to come but remains prudent to look for projects with relatively low acquisition costs and attractive earning potential. The project in Nanning demonstrates another good start-off in our expansion plan in southern China.

Liquidity and Financial Resources

Capital structure and liquidity

During the year under review, the Company has issued secured bonds in a principal value of HK$298 million (equivalent to approximately RMB236.3 million) to a financial institution. The bonds, together with an existing loan with a principal amount of HK$298 million extended by the same group of entities in a financial institution, is secured by the entire issued shares of GZ Zhoutouzui, the immediate holding company of the project company holding the Zhoutouzui Project. Besides, the secured bonds are embedded with derivative financial liabilities comprising a right to the bondholders to exchange for some issued shares of GZ Zhoutouzui and a subsequent right to put the shares to the Company for redemption and the Company a right to call. The proceeds of the issue were used for general working capital of the Remaining Group and repayment of a money market loan of US$18.6 million and outstanding balance of a promissory note issued

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

for the acquisition of the office premise at AXA Centre in Wanchai in the year. To finance the development of projects (other than Tianhe Project) being undergone by the Remaining Group and the acquisition of AXA Centre, additional bank loans in a total of RMB413.9 million were drawn down during the year, net of repayments of bank loans and other borrowings totaling RMB196.6 million. At the year-end, the Remaining Group was indebted to commercial banks for two term loans of an outstanding total of RMB368.5 million for the financing of the construction costs of the Remaining Group’s projects, a term loan and revolving loan totaling RMB72.1 million due to a commercial bank for the financing of the acquisition of AXA Centre and general working capital of the Company, the secured loan and bonds with outstanding indebtedness totaling RMB452.8 million, and derivative financial liabilities embedded with the secured loan extended by a lender and bonds issued to a bondholder presented at fair values totaling RMB27.8 million. These indebtedness of the Remaining Group was aggregated to RMB921.2 million as at 31 December 2013. The gearing ratio (calculated as total indebtedness net of cash and cash equivalents (the “ Net Debt ”) divided by the equity attributable to shareholders of the Company plus Net Debt) was 22.6% at the year-end date. The increase in the gearing ratio reflects the rise in the Remaining Group’s indebtedness to cope with the expansion in the development business. Nonetheless, the management believes that the indebtedness level is still at a comfortably low level which the Remaining Group can meet with as when the relevant debts mature.

In the year, all development projects were in construction stage, building up development costs in properties under development to RMB1,754.0 million. Current assets were aggregated to RMB2,545.6 million as at the year-end date. Apart from the properties under development or held for sale, current assets comprised trade deposits paid to contractors and other deposits and receivable of RMB405.0 million, and bank balances totaling RMB382.2 million.

Total current liabilities at the year-end amounted to RMB657.9 million. The current liabilities comprised pre-sale deposits of RMB145.1 million, the outstanding amount of RMB228.8 million for the secured loan in 2012 and the current portion of bank borrowings of RMB72.1 million, the current portion of the derivative financial liabilities totaling RMB24.0 million, and miscellaneous items in trade payables, accruals, and income tax payable with an aggregate amount of RMB187.9 million.

The current ratio showed further improvement which was 3.9 times as at 31 December 2013.

Borrowings and pledge of assets

The land and construction in progress in Yongzhou Project and Zhoutouzui Project, the office premise at the AXA Centre are mortgaged to commercial banks to secure for financing facilities granted to the subsidiaries engaged in the development projects and investment property holding. The secured loan and exchangeable bonds in the aggregated outstanding principal value of HK$596 million were also secured by a share charge over the entire issued shares of GZ Zhoutouzui. In addition, the property units in Tianyu Garden Phase II and the office premises at HNA Tower were mortgaged to a financial institution for a trust loan facility of RMB500.0 million granted to a subsidiary. As at 31 December 2013, bank loans in an aggregate amount of RMB440.6 million are outstanding whilst the trust loan facility was not yet drawn down.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Foreign Currency Management

The Remaining Group is principally engaged in property development activities which are all conducted in the PRC and denominated in RMB, the functional currency of the Company’s principal subsidiaries. At the same time, certain financing, investment holding and administrative activities of the Remaining Group are denominated in HK dollars.

During the year, RMB has been in mild appreciations against HK and US dollars. Foreign exchange gains were realised when transactions relating to the Hong Kong dollar denominated bonds and the leasing activities of the investment property in Hong Kong were transacted in Hong Kong dollars. Exchange differences arise on consolidation of assets and liabilities of some subsidiaries operated in Hong Kong which carry their books in HK dollars, resulting to an exchange gain of RMB0.3 million as at 31 December 2013 that is added to the exchange reserve, forming part of the equity of the Company. The Directors perceive that RMB will, in a longer run, still generally move in upward movements against HK dollars and foresee the Remaining Group has no significant adverse foreign currency exposure in the future. In the event of a depreciation of RMB against these foreign currencies, given the comparatively low levels of indebtedness and activities in which the HK dollars are denominated, such fluctuations will not have material unfavourable effect on the financial position of the Remaining Group. For these reasons, the Remaining Group does not hedge against its foreign currency risk. However, the management will closely monitor the currency exposures from time to time for any permanent or significant changes in the exchange rates in RMB against the HK dollars that may lead to adverse impact on the Remaining Group’s results and financial position.

Contingent Liabilities

The Remaining Group provides guarantees to the extent of RMB46.5 million as at 31 December 2013 in respect of mortgage facilities granted by certain banks relating to the mortgage loans arranged for the purchasers of the Remaining Group’s properties. Pursuant to the terms of the guarantees, upon default in mortgage payments by these purchasers, the Remaining Group is responsible for repaying the outstanding mortgage principals together with accrued interest and penalty owed by the defaulted purchasers to the banks and the Remaining Group is entitled to take possession of the related properties. Such guarantees will terminate upon the delivery of properties and issuance of the relevant property ownership certificates to the property purchasers.

Employees

To keep pace with the growth of the Remaining Group, the Remaining Group is recruiting suitable staff in capable caliber from time to time. As at 31 December 2013, other than the Executive Directors, the Remaining Group employed 232 full-time staff working in site offices for property development and back offices in Hong Kong and Guangzhou for supporting services and central management. Employees are remunerated according to qualifications and experience, job nature and performance. They are incentivized by bonuses benchmarked on performance targets. Remuneration packages are aligned with job markets in the business territories where the staff is located.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

FOR THE YEAR ENDED 31 DECEMBER 2012

Business Review and Outlook

Business review

For the year, the the Remaining Group maintains a relatively steady income of RMB20.7 million for the year from the leasing of the commercial floors at the Tianyu Garden Phase 2.

The gross margin for the year is 74.6%. Overall operating expenses for the year (comprising sales and marketing expenses, administrative and other expenses) amounted to RMB73.1 million. The increase was mainly reflected in the increased staff costs, as a result of the rise in headcount and pay levels.

Revaluation of investment properties of the Remaining Group leads to a gain in fair value change of RMB18.0 million for the year. The Remaining Group has to bear higher finance costs as compared with the previous year which are aggregated to a total of RMB57.1 million for the year, of which RMB47.0 million were capitalised as development costs of projects under construction, resulting in net finance costs of RMB10.1 million being charged against the operating profit for the year. The Remaining Group recorded a post-tax loss for the year was RMB35.6 million and loss attributable to shareholders of the Company amounted to RMB32.0 million.

At the end of the year, the Remaining Group has a land and property portfolio for development in the size of an aggregate GFA of approximately 700,000 sq.m., all under development. The property development in existing projects and projects in the pipeline are detailed as follows:

Properties held for or under development

Zhoutouzui Project

The project is held by a sino-foreign cooperative enterprise which is jointly controlled by the Company and two independent third parties, namely 廣州越秀企業（集團）公司 (Guangzhou Yuexiu Enterprise (Group) Company Limited), which has withdrawn from the joint arrangement, and 廣州港集團有限公司 (Guangzhou Port Group Co., Limited), an original user of the land entitled to share 28% in GFA of the completed properties pursuant to a cooperative agreement entered into in 2001 that stipulates that the Remaining Group has to finance all construction costs of the entire development.

The development on the site of 43,609 sq.m. consists of 7 towers of residential apartments, offices, service apartments, underground car parking facilities and a commercial complex in a total GFA of approximately 320,000 sq.m.. The site, opposite to the renounced White Swan Hotel, offers a full waterfront view of the Pearl River. The project company has obtained the land use right certificate for the site and construction permit for Phase 1 in respect of a total GFA of 97,000 sq.m. where foundation works are in progress. It is expected that construction permits for the remaining approximately GFA of 223,000 sq.m. will be received in the second quarter of 2013.

I-10

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Yongzhou Project

In late 2011, the Company entered into an agreement with the City Government of Yongzhou, Hunan province empowering certain subsidiaries, in which the Remaining Group holds 70% equity stake interest, to develop a composite property development project in Yongzhou. The entire project, offers a total site area of 1,000 mu on which a GFA of about 1.6 million sq.m., is planned to be developed into residential, commercial complex and retail shops. As a condition to the development, the project company is obligated to manage the remodelling works of certain scenic spots in the city surrounding the development sites.

The first phase of the development, named as Tianyu-huafu (“天譽‧華府”), is built on a land of 106 mu in the city for the development of residential properties consisting of villas, apartments and retail shops in a total GFA of approximately 212,000 sq.m.. Construction was commenced in the second quarter of the year and marketed in the third quarter. Up to the year end, contracted sales amounting to RMB50.0 million, representing 65% of the GFA available for presale, were achieved at an average selling price of approximately RMB3,220 per sq.m.. Remaining properties in the first phase are planned to be launched to the market throughout 2013 when the relevant pre-sale permits have been obtained.

Tianhe Project

The equity interest in the project was sold to a third party in late 2010 at a gross consideration of RMB1.09 billion before taking into account finance and other development costs that are to be borne by the Remaining Group that are yet to be ascertained. Construction costs of the project are to be borne by the purchaser whilst the Remaining Group resumes the role of a project manager. Payments totalling RMB845.0 million have been received from the purchaser so far. The agreement of the transaction also stipulates that the Remaining Group is to take up the responsibility in overruns of construction costs and indemnify the timely completion of the construction of the properties within the agreed timeline that is caused by factors under the control of the Remaining Group. Under these circumstances, the criteria for recognition of revenue arising from the disposal transaction set out in HKFRS has not been met despite the completion of the transaction in 2010. The associated costs cannot be ascertained at the moment and the revenue arising from the disposal has not been recognised and has been deferred to a time when substantial part of the associated costs can be ascertained reliably.

The construction of the Project was started in 2011 and the foundation works have been completed and two towers, consisting of a total GFA of approximately 113,000 sq.m. for a hotel, serviced apartments and offices, are being built on the site. The construction progress has been delayed beyond the originally agreed timeline due to the purchaser’s failure to make due payments of contractors’ costs. Nonetheless, the management perceives that the Remaining Group is honouring and has duly performed its obligations according to the conditions stipulated in the agreement that may otherwise subject to claims by the purchaser in the event of default. The Directors foresee no overruns in construction costs and finance costs in material aspects to which the Remaining Group is exposed and expect that construction will be completed in 2015, taking into account the current progress of the construction and assuming the purchaser making due payments from the date of this report, when the sale transaction can be recorded and gain from disposal recognised.

I-11

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Nanning Project

In late 2012, the Remaining Group entered into a framework agreement with the city government of Wuxiang New District (五象新區) in Nanning, Guangxi province in relation to a residential development with a GFA of approximately 1,134,000 sq.m., consisting of GFA of approximately 825,000 sq.m. of residential and ancillary commercial and other facilities for sale, and GFA of approximately 277,000 sq.m. of compensated housing and commercial units for the resettlement of the original occupants of the land. The land auction process is on the way.

Properties held for leasing

A 20,000 sq.m. commercial podium at Tianyu Garden Phase 2 in Tianhe District, Guangzhou. The property was 82% occupied at 15 March 2013, tenanted with renowned corporations and a US consulate.

Outlook

In 2012, the global economy has been very volatile when continuously exposed to the European sovereign debt crisis that affected adversely the market sentiment. Coupled with the continuing stringent austerity measures taken by the central government of the PRC imposed on the real estate developers, it has been a difficult time in the year to get necessary financing for developers in general despite that the Remaining Group is not really badly affected due to its low gearing position and it successfully completed an issue of rights shares raising funds of net proceeds of approximately HK$364 million (equivalent to RMB297 million) and a term loan at corporate level of HK$298 million (equivalent to RMB242 million). These fund raising exercises result to an improved equity base of the Company and provide funds for the acquisition of new projects. In addition, operating subsidiaries have obtained bank facilities to the extent of RMB1,216.0 million to help the construction of two ongoing projects.

Starting from the last quarter of 2012 when the PRC economy starts to resume its economic growth, the US economy shows signs of recovery whilst the threats of the deteriorating economic performance of the euro zone are fading out, the market sentiment has been improving. Coupled with the solid demand for properties in the PRC real estate market as indicated by the rises in both selling prices and sale volume of properties late in the year, we believe that the worst scenario will not materialise but a brighter business outlook is well expected. Thanks to the improving liquidity in the capital market, we believe that new fund raising for project acquisition will be easier in the coming year. Nonetheless, whilst keeping on enlarging the Remaining Group’s land reserve to ensure a steady growth in its business in the future years, the directors are posing a prudent but active approach in seeking suitable and affordable projects with earning potentials.

I-12

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Liquidity and Financial Resources

Capital structure and liquidity

As at 31 December 2012, the Remaining Group was indebted to PRC commercial banks for working capital loan and construction loans totalling RMB97.0 million secured by land and property mortgages, one money market loan of US$18.6 million (equivalent to RMB117 million) secured by short-term bank deposits totaling RMB126.0 million, a secured loan with guaranteed return in the principal value of HK$298.0 million (equivalent to RMB241.6 million) and at fair value of RMB214.0 million together with warrants and guarantee issued to the lender at retrospective fair values of RMB6.1 million and RMB11.9 million, other unsecured borrowing due to a third party of RMB14.4 million and warrants at fair value of RMB1.2 million issued to an exbondholder. The indebtedness, inclusive of the money market loan that is secured back-to-back by bank deposits, summed up to RMB461.4 million.

Assuming the Disposal is completed as at 31 December 2012 and the proceeds received as cash, the Remaining Group will have a negative net debt position of RMB259.4 million (represented by total indebtedness of RMB461.4 million comprising bank and other borrowings, money market loan, secured loan and warrants, net of cash and bank balances and bank deposits securing for the money market loan) as at 31 December 2012.

Total current assets amounted to RMB2,288.8 million as at 31 December 2012. Current assets comprise properties held under development in Zhoutouzui and Yongzhou of RMB1,311.8 million, consideration receivable for the disposal of Tianhe Project of RMB116.7 million, cash on hand and bank balances of RMB594.8 million, restricted bank balances of RMB126.0 million used to secure for the money market, and deposits made to contractor of Zhoutouzui project and other deposits totalling RMB139.5 million.

Total current liabilities amounted to RMB377.4 million as at 31 December 2012 comprising mainly pre-sale deposits of RMB23.2 million, money market loan, an unsecured loan due to a third party and the current portion of the working capital loan due to commercial banks totalling RMB138.3 million and miscellaneous items consisting of trade and other payables, derivative financial liabilities and income tax payable totalling RMB215.7 million.

The current ratio at the current year-end showed 6.1 times.

I-13

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Borrowings and pledge of assets

As at 31 December 2012, to secure for banking facilities granted to operating subsidiaries to finance for working capital and construction costs by a commercial bank in mainland China, mortgages of property interests in Tianyu Garden Phase II, works in progress and land of the projects under development were created in favour of the lending bank. To secure the back-to-back guarantee given by a local bank in mainland China created in favour of a Hong Kong-based bank for a money market loan facility of US$18.6 million, bank deposits of approximately RMB126.0 million were placed in the bank accounts in mainland China as a security. The secured loan with guaranteed return in the principal value of HK$298.0 million made during the year was secured by a share charge over the entire issued shares of GZ Zhoutouzui, the holding company of 廣州市譽城房地產開發有限公司 (Guangzhou Yucheng Real Estate Development Company Limited).

Foreign Currency Management

The Remaining Group is principally engaged in property development activities which are all conducted in the PRC and denominated in RMB, the functional currency of the Company’s principal subsidiaries. At the same time, certain financing activities of the Remaining Group are denominated in other currencies, such as the money market loan, the loan with guaranteed return and secured bond that are denominated in US or Hong Kong dollars.

Movements of RMB against HK and US dollars are in small steps during the year. The Remaining Group incurred a small foreign exchange loss of RMB0.02 million arises on consolidation of the assets and liabilities of the Hong Kong subsidiaries that was charged against the foreign exchange reserve amounting to a balance of RMB0.4 million as at 31 December 2012 that is added to the equity of the Company. The directors perceive that RMB will continuously move in upward trend against the US and HK dollars and foresee the Remaining Group has no significant adverse foreign currency exposure in the future throughout the maturity periods of the related loans and bonds. In the event of a depreciation of RMB against these foreign currencies, given the low levels of loans, such fluctuations will not have material unfavourable effect on the financial position of the Remaining Group. For these reasons, the Remaining Group does not hedge against its foreign currency risk. However, the management will monitor the currency exposures from time to time for any permanent or significant changes in the exchange rates in RMB against the HK and US dollars that may lead to adverse impact on the Remaining Group’s results and financial position.

Contingent Liabilities

The Remaining Group had no material contingent liabilities as at 31 December 2012.

I-14

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Employees

To keep pace with the growth of the Remaining Group when more projects are under development, the Remaining Group is recruiting suitable staff in capable caliber from time to time. As at 31 December 2012, the Remaining Group employed 202 staff (excluding Executive Directors of the Company) in various positions in property development on the sites where projects are developed and in the offices in Guangzhou and Hong Kong. Employees are remunerated according to qualifications and experience, job nature and performance. Remuneration packages offered to employees are competitive and aligned with the job markets in the business territories stationed by the staff.

FOR THE YEAR ENDED 31 DECEMBER 2011

Business Review and Outlook

Business review

For the year, the Remaining Group’s total turnover was RMB18.2 million from the leasing of the commercial floors at the Tianyu Garden Phase II.

The gross margin for the year is 76.4%. Overall operating expenses (selling and marketing expenses, administrative and other expenses) for the year increased to RMB104.4 million as reflected by the increased staff costs, a major overhead content, as a result of the rise in headcount and pay levels, and non-recurring payments of mainly commission of RMB38 million to agent for the sale of the stake interest in 廣州寰城實業發展有限公司 (Guangzhou Huan Cheng Real Estate Development Co. Ltd.) (“ Huan Cheng ”).

The post-tax loss for the year was RMB51.7 million, having included a gain on revaluation of investment properties of RMB15.0 million and finance cost of RMB8.7 million.

Properties development

Yongzhou Project

To expand the Remaining Group’s land bank for future development, the Company entered into an agreement with the City Government of Yongzhou, Hunan province empowering certain subsidiaries in which the Remaining Group holds a 70% equity stake interest to develop a composite property development project in Yongzhou. The project, offers a total site area of 1,000 mu on which a GFA of about 1.6 million sq.m., will be developed into residential, commercial complex and retail shops. The first phase of the development will be built on a land of 106 mu which land title was obtained in late 2011 for the development of residential properties consisting of villas, apartments and retail shops in a total GFA of 212,000 sq.m.. As a condition to the development, the project company is obligated to manage the remodelling works of certain scenic spots in the city surrounding the development sites.

I-15

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

In addition to the new Yongzhou Project, the Remaining Group also holds development rights in one development project and a sold project for which obligations in construction of the project are yet to complete. The status of these projects is as follows:

Zhoutouzui Project

The project is held by a sino-foreign cooperative joint venture enterprise which is jointly controlled by the Remaining Group and two other independent third parties, namely 廣州越秀企業（集團）公司 (Guangzhou Yuexiu Enterprise (Group) Company Limited) (which interest was withdrawn in 2012) and 廣州港集團有限公司 (Guangzhou Port Group Co., Limited), the former being the original land use right holder with no vested interest in the project and the latter being an original user of the land who is entitled to share 28% in GFA of the completed properties pursuant to a joint venture agreement entered into in 2001 which stipulates that the Remaining Group has to finance all construction costs of the entire development.

The development on the site of 43,609 sq.m. consists of 7 towers of residential apartments, offices, hotel, service apartments, underground car parking facilities and a commercial complex in a total GFA of approximately 320,000 sq.m.. The site, opposite to the renounced White Swan Hotel, offers a full waterfront view of the Pearl River. The project company has obtained the land use right certificate for the site and construction permit for phase one of a GFA of 97,000 sq.m. where preliminary construction works have commenced.

Tianhe Project

The equity interest in the project company, Huan Cheng, was sold to a third party in late 2010 at a gross consideration of RMB1.09 billion before deduction of finance and other costs which are yet to be ascertained. Payments totalling RMB858.1 million have been received from the purchaser so far. As the Remaining Group is obliged to bear overruns of construction costs and indemnify the timely completion of the construction of the properties within the agreed timeline, the criteria for recognition of revenue set out in HKFRSs have not been met. The revenue cannot be ascertained at the moment and is not recognised in the current year and deferred to a time when substantial part of such revenue can be ascertained reliably. The construction of the Project started in 2011 and the foundation works are close to completion.

The Remaining Group also holds an investment property with details as follows:

Investment property

A 20,000 sq.m. commercial podium at Tianyu Garden Phase II in Tianhe District, Guangzhou. The property was 86% occupied at 23 March 2012, tenanted with renowned corporations and a US consulate.

I-16

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Outlook

In the past year, the European sovereign debt crisis and the stringent austerity measures taken by the central government of the PRC imposed on the real estate developers has left the field players tightened financial resources and a depressed demand for mainland properties. Nonetheless, thanks to the reduced leverage, the Remaining Group has been able to contest the threats by obtaining additional financing to help in the development of its projects. With the comparative advantage of low leverage, the Remaining Group is in a better position to sustain a stable growth in its business.

In the recent months, the global markets are becoming stable while the debt crisis in Greece has been temporarily settled. We are in solid belief that the market outlook will become clearer when the central government will adopt a more lenient approach in its control measures towards developers. Having said, however, the Directors will not overlook the market risks and remain prudent in its business strategies, but at the same time, will continue to seek suitable and affordable opportunities to sustain a steady growth in the Remaining Group’s future business. Apart from the newly acquired Yongzhou Project, during the year under review, the Remaining Group won a bid for the right to develop a project in a new town in Nanning, Guangxi province for a residential development with an estimated GFA of approximately 1,000,000 sq.m.. Binding agreement will be entered into subject to successful negotiations with the district government of Nanning about the detailed terms of the development later in the year 2012. The investment, if crystalised, will further enhance the cash flow and earnings of the Remaining Group in the coming few years.

Liquidity and Financial Resources

Capital structure and liquidity

As at 31 December 2011, the Remaining Group is indebted to a commercial bank for working capital and construction costs totaling RMB73.5 million, two money market loans totaling US$67.7 million (equivalent to RMB425.4 million) secured by two short-term bank deposits totaling RMB487.6 million, secured bonds in the principal value of HK$200.0 million (equivalent to RMB151.6 million) with warrants (carrying amount of RMB4.4 million) issued to the holder of the bonds and other unsecured borrowing due to a third party of RMB80.0 million.

The total indebtedness excludes deferred income of RMB977.4 million which is represented by the estimated net consideration received and receivable from the disposal of Tianhe Project for which the related revenue will be recognised at the time when the revenue relating to the performance of the obligations of the Remaining Group can be ascertained.

Assuming the Disposal is completed as at 31 December 2011 and the proceeds received in cash, the Remaining Group will have a negative net debt position of RMB189.9 million (represented by total indebtedness of RMB734.9 million comprising bank and other borrowings, money market loans, bonds, net of cash and bank balances and bank deposits securing for the money market loans) as at 31 December 2011.

I-17

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

During the year, construction works of all projects have commenced and hence related development costs incurred in these projects were reclassified as current assets. Current assets totaled RMB2,273.6 million as at 31 December 2011. Apart from the properties under development amounting to RMB1,116.0 million, the current assets at the current year-end date comprise mainly consideration receivable arising from the disposal of Huan Cheng of RMB111.8 million, restricted and pledged deposits of RMB487.6 million are restricted deposits of used to secure for the money market loan facilities, deposits made to the contractor of Zhoutouzui project and other deposits totaling RMB115.9 million.

Total current liabilities amounted to RMB651.5 million. The current liabilities at the current year-end date comprise, other than the indebtedness of secured money market loans, the current portion of loans for working capital and construction costs financing due to commercial banks and unsecured loan due to a third party as mentioned above, miscellaneous items in trade payables, other payables and accruals totaling RMB34.0 million and income tax payable of RMB100.6 million.

As the effect on the surge in current assets, the current ratio shows 3.5 times at the current year-end.

Borrowings and pledge of assets

As at 31 December 2011, to secure for banking facilities granted to operating subsidiaries to finance for working capital and construction costs by a commercial bank in mainland China, mortgages of property interests in Tianyu Garden Phase II were created in favour of a lending bank. To secure the back-to-back guarantees given by two local banks in mainland China to a Hong Kong-based bank for money market loan facilities of US$67.7 million, bank deposits of approximately RMB487.6 million were placed in bank accounts in mainland China. The bonds in the principal value of HK$200 million issued during the year were secured by the 963,776,271 shares of the Company, constituting 65.2% of the total issued shares of the Company held indirectly by Mr. YU Pan, the controlling shareholder of the Company, and a personal guarantee of Mr. YU.

Foreign Currency Management

The Remaining Group is principally engaged in property development activities which are all conducted in the PRC and denominated in RMB, the functional currency of the Company’s principal subsidiaries. At the same time, certain financing activities of the Remaining Group are denominated in other currencies, such as the money market loans and the guaranteed bonds which are in US dollars and Hong Kong dollars respectively.

I-18

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Due to the steady appreciation of RMB against HK and US dollars during the year, a foreign exchange gain arises on consolidation of the assets and liabilities of the Hong Kong subsidiaries, resulting an exchange reserve of RMB0.3 million as at 31 December 2011 that is added to the equity of the Company. Since the US and HK dollars are pegged whilst RMB moves in gradual and upward trend against the US and HK dollars, the Remaining Group foresees no significant possible foreign currency adverse exposure in the foreseeable future but appreciations in the exchange rates of RMB against HK and US dollars. Such fluctuations will not have unfavourable effect on the financial position of the Remaining Group. For these reasons, the Remaining Group does not hedge against its foreign currency risk. However, any permanent or significant changes in the exchange rates in RMB for HK and US dollars and in the peg system of US dollars with HK dollars may have possible impact on the Remaining Group’s results and financial position.

Contingent Liabilities

The Remaining Group had no material contingent liabilities as at 31 December 2011.

Employees

To keep pace with the growth of the Remaining Group after the acquisitions of projects, the Remaining Group recruits suitable staff in capable caliber. As at 31 December 2011, other than the Executive Directors, the Remaining Group employed 147 staff for property development and central management. Employees are remunerated according to qualifications and experience, job nature and performance. Remuneration packages are aligned with job markets in the business territories.

I-19

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

SUMMARY OF UNAUDITED FINANCIAL INFORMATION

Set out below are the unaudited statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the target company, Guizhou Yu Jun, for the three years ended 31 December 2011, 2012 and 2013 (“ Relevant Periods ”), and statements of financial position of Guizhou Yu Jun as at 31 December 2011, 2012 and 2013, as extracted from the financial information of Guizhou Yu Jun, and certain explanatory notes (the “ Unaudited Financial Information ”). The Unaudited Financial Information has been presented on the basis set out in Note 2 and prepared in accordance with the accounting policies adopted by the Company as shown in its annual report for the year ended 31 December 2013 and paragraph 68(2)(a)(i) of Chapter 14 of the Listing Rules. The Unaudited Financial Information is prepared by the Directors solely for the purpose of inclusion in this Circular in connection with the Disposal. The Company’s reporting accountant, BDO Limited, was engaged to review the financial information of the Guizhou Yu Jun set out in Appendix II in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” and with reference to Practice Note 750 “Review of Financial Information under the Hong Kong Listing Rules for a Very Substantial Disposal” issued by the Hong Kong Institute of Certified Public Accountants. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable the reporting accountant to obtain assurance that the reporting accountant would become aware of all significant matters that might be identified in an audit. Accordingly, the reporting accountant does not express an audit opinion. The reporting accountant has issued an unmodified review report.

(a) The statements of profit or loss and other comprehensive income of Guizhou Yu Jun for the Relevant Periods are as follows:

Revenue Cost of sales and services Gross profit Other income Sales and marketing expenses Administrative expenses (Write-down)/reversal of write-down of properties held for sale Finance income (Loss)/profit before income tax expense Income tax expense (Loss)/profit and total comprehensive income for the year	Year ended 31 December 2011 2012 2013 RMB’000 RMB’000 RMB’000 14,733 33,101 657,295 (12,894) (24,599) (517,386) 1,839 8,502 139,909 223 321 806 (10,472) (8,891) (10,760) (10,001) (7,070) (9,130) – (77,375) 23,572 702 408 638 (17,709) (84,105) 145,035 (1,716) (1,040) (23,500) (19,425) (85,145) 121,535

II-1

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

(b) The statements of financial position of Guizhou Yu Jun as at 31 December 2011, 2012 and 2013 are as follows:

Non-current assets Property, plant and equipment Current assets Properties under development Properties held for sale Prepaid tax Trade and other receivables Restricted and pledged deposits Cash and cash equivalents Current liabilities Trade and other payables Properties pre-sale deposits Bank and other borrowings – current portion Amounts due to immediate holding company Loans from non-controlling shareholders Net current assets/(liabilities) Total assets less current liabilities Non-current liabilities Bank and other borrowings – non-current portion Net assets/(liabilities) Capital and reserves Share capital Reserves Total equity/(deficit)	As 2011 RMB’000 437 777,018 106,717 17,560 42,599 68,628 49,477 1,061,999 91,722 476,955 55,000 219,973 168,420 1,012,070 49,929 50,366 – 50,366 50,000 366 50,366	at 31 December 2012 2013 RMB’000 RMB’000 313 206 366,486 484,637 640,007 172,537 26,391 18,073 64,302 48,955 126,320 53,233 54,368 94,315 1,277,874 871,750 136,664 124,638 783,205 426,240 – – 219,497 109,519 163,600 84,803 1,302,966 745,200 (25,092) 126,550 (24,779) 126,756 10,000 40,000 (34,779) 86,756 50,000 50,000 (84,779) 36,756 (34,779) 86,756	at 31 December 2012 2013 RMB’000 RMB’000 313 206 366,486 484,637 640,007 172,537 26,391 18,073 64,302 48,955 126,320 53,233 54,368 94,315 1,277,874 871,750 136,664 124,638 783,205 426,240 – – 219,497 109,519 163,600 84,803 1,302,966 745,200 (25,092) 126,550 (24,779) 126,756 10,000 40,000 (34,779) 86,756 50,000 50,000 (84,779) 36,756 (34,779) 86,756
			484,637 172,537 18,073 48,955 53,233 94,315
			871,750
			124,638 426,240 – 109,519 84,803
			745,200
			126,550
			126,756 40,000
			86,756

			50,000 36,756
			86,756

II-2

APPENDIX II

FINANCIAL INFORMATION OF THE TARGET COMPANY

Year ended 31 December 2011 At 1 January 2011 Loss and total comprehensive income for the year At 31 December 2011 Year ended 31 December 2012 At 1 January 2012 Loss and total comprehensive income for the year At 31 December 2012 Year ended 31 December 2013 At 1 January 2013 Profit and total comprehensive income for the year At 31 December 2013	Attributable to equity holders of Guizhou Yu Jun Retained profits/ Share Capital (accumulated capital reserves losses) Total RMB’000 RMB’000 RMB’000 RMB’000 50,000 13,366 6,425 69,791 – – (19,425) (19,425) 50,000 13,366 (13,000) 50,366 50,000 13,366 (13,000) 50,366 – – (85,145) (85,145) 50,000 13,366 (98,145) (34,779) 50,000 13,366 (98,145) (34,779) – – 121,535 121,535 50,000 13,366 23,390 86,756	Attributable to equity holders of Guizhou Yu Jun Retained profits/ Share Capital (accumulated capital reserves losses) Total RMB’000 RMB’000 RMB’000 RMB’000 50,000 13,366 6,425 69,791 – – (19,425) (19,425) 50,000 13,366 (13,000) 50,366 50,000 13,366 (13,000) 50,366 – – (85,145) (85,145) 50,000 13,366 (98,145) (34,779) 50,000 13,366 (98,145) (34,779) – – 121,535 121,535 50,000 13,366 23,390 86,756
	Share capital RMB’000 50,000 – 50,000 50,000 – 50,000 50,000 – 50,000	Retained profits/ Capital (accumulated reserves losses) RMB’000 RMB’000 13,366 6,425 – (19,425) 13,366 (13,000) 13,366 (13,000) – (85,145) 13,366 (98,145) 13,366 (98,145) – 121,535 13,366 23,390

II-3

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

(d) The statements of cash flows of Guizhou Yu Jun for the Relevant Periods are as follows:

Operating activities
(Loss)/profit before income tax expense
Adjustments for:
Finance income
Depreciation of property, plant and equipment
Loss on disposal of property, plant and equipment
Write-down/(reversal of write-down) of properties
held for sale
Operating (loss)/profit before working capital
changes
Increase in properties under development
Decrease in properties held for sale
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Increase/(decrease) in properties pre-sale deposits
Cash generated from operations
Income tax paid
Other borrowing costs paid
Interest paid
Net cash from operating activities
Investing activities
Interest received
Purchase of property, plant and equipment
(Increase)/decrease in restricted and pledged deposits
Net cash (used in)/from investing activities
Financing activities
New bank borrowings
Repayment of bank borrowings
Repayment of loan from immediate holding company
Repayment of loans from non-controlling shareholders
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
– Cash at bank and in hand

Year ended 31 December
2011
2012
2013
RMB’000
RMB’000
RMB’000
(17,709)
(84,105)
145,035
(702)
(408)
(638)
156
146
86
–
–
2
–
77,375
(23,572)
(18,255)
(6,992)
120,913
(180,269)
(218,556)
(138,795)
12,347
23,697
516,041
(31,496)
(21,703)
17,902
7,587
45,022
(12,105)
417,761
306,250
(356,965)
207,675
127,718
146,991
(16,156)
(9,872)
(15,182)
–
–
(4,053)
(5,931)
(860)
(2,759)
185,588
116,986
124,997
702
408
638
(73)
(60)
–
(16,224)
(57,692)
73,087
(15,595)
(57,344)
73,725
–
10,000
30,000
(70,700)
(55,000)
–
(26,875)
(476)
(109,978)
(27,380)
(9,275)
(78,797)
(124,955)
(54,751)
(158,775)
45,038
4,891
39,947
4,439
49,477
54,368
49,477
54,368
94,315

II-4

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

NOTES TO THE UNAUDITED FINANCIAL INFORMATION For the three years ended 31 December 2013

1. General information

Guizhou Yu Jun, an indirectly 55% equity interest of subsidiary of the Company, was incorporated in the PRC with limited liability on 17 January 2008. The principal activity of Guizhou Yu Jun is property development.

On 23 April 2014, Guangzhou Yu Jun (an indirect wholly-owned subsidiary of the Company), Guizhou Xiehui and Guizhou Zhongjia (as vendors) and the Purchasers (as purchasers) entered into the Disposal Agreement, pursuant to which the Purchasers conditionally agreed to acquire and the Vendors conditionally agreed to dispose of the Disposal Shares, which represent the entire issued share capital of the Target Company, at an aggregate consideration of RMB50 million. As at the Latest Practicable Date, Guizhou Yu Jun was owned as to 55.00%, 20.25% and 24.75% by Guangzhou Yu Jun, Guizhou Xiehui and Guizhou Zhongjia respectively. Pursuant to the Disposal Agreement, Guangzhou Yu Jun has conditionally agreed to transfer its 55% interest in Guizhou Yu Jun to Guizhou Kaichuang at the consideration of RMB27.5 million. Upon completion of the Disposal, the Company will not have any interests in Guizhou Yu Jun and Guizhou Yu Jun will cease to be a subsidiary of the Company.

2. Basis of preparation of the unaudited financial information

The Unaudited Financial Information of Guizhou Yu Jun for the three years ended 31 December 2013 has been prepared in accordance with paragraph 68(2)(a)(i) of Chapter 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, and solely for the purpose of inclusion in the circular to be issued by the Company in connection with the disposal of the 55% interest of issued share capital of Guizhou Yu Jun.

The Unaudited Financial Information has been prepared in accordance with the relevant accounting policies of the Company adopted in the preparation of its condensed consolidated financial statements for the year ended 31 December 2013, which conform with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants. The Unaudited Financial Information does not contain sufficient information to constitute a complete set of consolidated financial statements as defined in Hong Kong Accounting Standard 1 “Presentation of Financial Statements” nor a set of condensed consolidated financial statements as defined in Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants.

II-5

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

A. THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF THE REMAINING GROUP

Basis of preparation and introduction

“The unaudited pro forma financial information (the “ Unaudited Pro Forma Financial Information ”) presented below is prepared in accordance with paragraph 29 of Chapter 4 of the Listing Rules to illustrate unaudited pro forma consolidated statement of the financial position of the Remaining Group as if the Disposal had been completed on 31 December 2013; and unaudited pro forma consolidated statement of profit or loss and other comprehensive income and cash flow of the Remaining Group for the year ended 31 December 2013 as if the Disposal had been completed on 1 January 2013. This Unaudited Pro Forma Financial Information has been prepared for illustrative purposes only and because of its hypothetical nature, it may not purport to represent the true picture of the financial position of the Remaining Group as at 31 December 2013 or at any future date had the Disposal been completed on 31 December 2013 or the results and cash flows of the Remaining Group for the year ended 31 December 2013 or for any future period had the Disposal been completed on 1 January 2013.

The Unaudited Pro Forma Financial Information is prepared based on the audited consolidated statement of the financial position of the Group as at 31 December 2013, the audited consolidated statement of profit or loss and other comprehensive income and the audited consolidated statement of cash flows of the Group for the year ended 31 December 2013 extracted from the audited consolidated financial statements of the Group for the year ended 31 December 2013 as set out in the 2013 Annual Report and the Unaudited Financial Information of Guizhou Yu Jun after giving effect to the pro forma adjustments described in the notes and is prepared in accordance with Rules 4.29 and 14.68(2)(a)(ii) of the Listing Rules.

III-1

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

(a) Unaudited pro forma consolidated statement of financial position of the Remaining Group

The Group as at 31 December 2013 RMB’000 (Note 1) Non-current assets Property, plant and equipment 159,450 Investment properties 710,826 Properties under Tianhe Project 768,130 Goodwill 13,554 Derivative financial asset 2,076 Consideration receivable 105,000 1,759,036 Current assets Properties under development 2,262,709 Properties held for sale 173,395 Trade and other receivables 453,931 Restricted and pledged deposits 57,660 Cash and cash equivalents 300,516 3,248,211 Current liabilities Trade and other payables 228,740 Properties pre-sale deposits 571,377 Bank and other borrowings – current portion 300,885 Derivative financial liabilities – current portion 23,963 Loan from immediate holding company, Guangzhou Yu Jun – Loans from non-controlling shareholders of a subsidiary 84,803 Income tax payable 65,801 1,275,569	Pro forma adjustments relating to the Disposal RMB’000 RMB’000 (Note 2) (Note 3) (206) – – – – – – – – – – – (206) – (508,730) – (173,395) – (48,955) – (53,233) – (94,315) 27,500 (1,000) 40,002 92,989 16,500 (878,628) 175,991 (124,668) – (426,240) – – – – – (109,489) 109,489 (84,803) – 18,073 – (727,127) 109,489	Unaudited pro forma Remaining Group RMB’000 159,244 710,826 768,130 13,554 2,076 105,000
		1,758,830
		1,753,979 – 404,976 4,427 382,192
		2,545,574
		104,072 145,137 300,885 23,963 – – 83,874
		657,931

III-2

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

The Group as at 31 December 2013 RMB’000 (Note 1) Net current assets 1,972,642 Total assets less current liabilities 3,731,678 Non-current liabilities Bank and other borrowings – non-current portion 632,542 Derivative financial liabilities – non-current portion 3,829 Consideration from disposal of Tianhe Project 990,360 Deferred tax liabilities 179,298 1,806,029 Net assets 1,925,649 Capital and reserves Share capital 21,068 Reserves 1,828,913 Equity attributable to owners of the Company 1,849,981 Non-controlling interests 75,668 Total equity 1,925,649	Pro forma adjustments relating to the Disposal RMB’000 RMB’000 (Note 2) (Note 3) (151,501) 66,502 (151,707) 66,502 (40,000) – – – – – – – (40,000) – (111,707) 66,502 – – – (6,165) – (6,165) (39,040) – (39,040) (6,165)	Unaudited pro forma Remaining Group RMB’000 1,887,643
		3,646,473
		592,542 3,829 990,360 179,298
		1,766,029
		1,880,444

		21,068 1,822,748
		1,843,816 36,628
		1,880,444

III-3

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

(b) Unaudited pro forma consolidated statement of profit or loss and other comprehensive income of the Remaining Group

The Group for the year ended 31 December 2013 RMB’000 (Note 4) Revenue 675,706 Cost of sales and services (545,994) Gross profit 129,712 Other income and gains, net 9,667 Sales and marketing expenses (19,143) Administrative and other expenses (66,497) Fair value changes in investment properties 36,102 Profit on disposal of a subsidiary, net of tax – Reversal of write-down of properties held for sale 23,572 Impairment loss on goodwill (313) Gain on early redemption of promissory notes 4,152 Fair value changes in derivative financial asset/liabilities (3,957) Finance costs (758) Finance income 28,374 Profit before income tax 140,911 Income tax expense (28,238) PROFIT FOR THE YEAR 112,673	Pro forma adjustments relating to the Disposal RMB’000 RMB’000 RMB’000 (Note 5) (Note 6 & 7) (Note 8) (657,295) – – 517,386 25,774 – (139,909) 25,774 – (806) 1,895 – 10,760 – – 9,130 (1,895) – – – – – – 45,981 (23,572) – – – – – – – – – – – – – – (638) – – (145,035) 25,774 45,981 23,500 – – (121,535) 25,774 45,981	Unaudited pro forma Remaining Group RMB’000 18,411 (2,834) 15,577 10,756 (8,383) (59,262) 36,102 45,981 – (313) 4,152 (3,957) (758) 27,736 67,631 (4,738) 62,893

III-4

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

The Group for the year ended 31 December 2013 RMB’000 (Note 4) Other comprehensive income, items that may be reclassified subsequently to profit or loss: Exchange differences arising on foreign operations 284 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 112,957 Profit for the year attributable to: – Owners of the Company 63,989 – Non-controlling interests 48,684 112,673 Total comprehensive income for the year attributable to: – Owners of the Company 64,273 – Non-controlling interests 48,684 112,957	Pro forma adjustments relating to the Disposal RMB’000 RMB’000 RMB’000 (Note 5) (Note 6 & 7) (Note 8) – – – (121,535) 25,774 45,981 (66,844) 25,774 45,981 (54,691) – – (66,844) 25,774 45,981 (54,691) – –	Unaudited pro forma Remaining Group RMB’000 284 63,177 68,900 (6,007) 62,893 69,184 (6,007) 63,177

III-5

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

(c) Unaudited pro forma consolidated statement of cash flows of the Remaining Group

The Group
for the
year ended
31 December
2013
RMB’000
(Note 4)
Operating activities
Profit before income tax
140,911
Adjustments for:
Finance costs
758
Finance income
(28,374)
Equity-settled share-based
payment expenses
1,275
Depreciation of property,
plant and equipment
1,871
Amortisation of leasehold land
246
Exchange gain, net
(7,492)
Fair value changes in financial
derivative asset/liabilities
3,957
Gain on early redemption of
promissory notes
(4,152)
Impairment losses on trade
and other receivables
14
Bad debts recovered
(55)
Profit on disposal of a subsidiary,
net of tax
–
Loss on disposal of property,
plant and equipment
22
Fair value changes in investment
properties
(36,102)
Reversal of write-down of
properties held for sale
(23,572)
Impairment loss on goodwill
313

Unaudited
pro forma
Pro forma adjustments
Remaining
relating to the Disposal
Group
RMB’000
RMB’000
RMB’000
RMB’000
(Note 5) (Note 6 & 7) (Note 8 & 9)
(145,035)
25,774
45,981
67,631
–
–
–
758
638
–
–
(27,736)
–
–
–
1,275
(86)
–
–
1,785
–
–
–
246
–
–
–
(7,492)
–
–
–
3,957
–
–
–
(4,152)
–
–
–
14
–
–
–
(55)
–
–
(45,981)
(45,981)
(2)
–
–
20
–
–
–
(36,102)
23,572
–
–
–
–
–
–
313

III-6

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

The Group for the year ended 31 December 2013 RMB’000 (Note 4) Operating profit/(loss) before working capital changes 49,620 Increase in properties under Tianhe Project (3,066) Increase in properties under development (591,803) Decrease in properties held for sale 541,815 Increase in consideration receivable (6,366) Increase in trade and other receivables (227,475) Increase in trade and other payables 56,341 (Decrease)/increase in properties pre-sale deposits (234,978) Cash used in operations (415,912) Income tax paid (20,285) Other borrowing costs paid (32,564) Interest paid (45,450) Net cash used in operating activities (514,211) Investing activities Interest received 7,959 Net cash inflow arising from the acquisition of a subsidiary 4,170 Net cash inflow arising from the disposal of a subsidiary – Acquisition of investment property (86,288) Purchase of property, plant and equipment (6,412) Proceeds from disposal of property, plant and equipment 59 Decrease in restricted and pledged deposits 194,660 Net cash from investing activities 114,148	Pro forma adjustments relating to the Disposal RMB’000 RMB’000 RMB’000 (Note 5) (Note 6 & 7) (Note 8 & 9) (120,913) 25,774 – – – – 138,795 – – (516,041) (25,774) – – – – (17,902) – – 12,105 – – 356,965 – – (146,991) – – 15,182 – – 4,053 – – 2,759 – – (124,997) – – (638) – – – – – – – 231,601 – – – – – – – – – (73,087) – – (73,725) – 231,601	Unaudited pro forma Remaining Group RMB’000 (45,519) (3,066) (453,008) – (6,366) (245,377) 68,446 121,987 (562,903) (5,103) (28,511) (42,691) (639,208) 7,321 4,170 231,601 (86,288) (6,412) 59 121,573 272,024

III-7

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

The Group for the year ended 31 December 2013 RMB’000 (Note 4) Financing activities New bank and other borrowings 664,539 Repayment of bank and other borrowings (257,576) Repayment of shareholder’s loan from Guangzhou Yu Jun by Guizhou Yu Jun – Repayment of loans from non-controlling shareholders of a subsidiary (78,797) Capital contributions from non-controlling shareholders of subsidiaries 8,500 Net cash from financing activities 336,666 Net (decrease)/increase in cash and cash equivalents (63,397) Effect of foreign exchange rate changes 710 Cash and cash equivalents at beginning of year 363,203 Cash and cash equivalents at end of year 300,516	Pro forma adjustments relating to the Disposal RMB’000 RMB’000 RMB’000 (Note 5) (Note 6 & 7) (Note 8 & 9) (30,000) – – – – – 109,978 – (109,978) 78,797 – – – – – 158,775 – (109,978) (39,947) – 121,623 – – – – – – (39,947) – 121,623	Unaudited pro forma Remaining Group RMB’000 634,539 (257,576) – – 8,500 385,463 18,279 710 363,203 382,192

III-8

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Notes:

(1) Figures are extracted from the audited consolidated statement of financial position of the Group as at 31 December 2013 as contained in the 2013 Annual Report.
(2) The adjustments reflect the de-consolidation of the assets and liabilities of Guizhou Yu Jun as at 31 December 2013, as shown in the financial information of Guizhou Yu Jun in Appendix II to this circular, after taking into account certain consolidation adjustments as stated below and assuming that the Disposal had taken place on 31 December 2013:

Property, plant and equipment Properties under development Properties held for sale Prepaid tax Trade and other receivables Restricted and pledged deposits Cash and cash equivalents Trade and other payables Properties pre-sale deposits Loans from non-controlling shareholders Bank and other borrowings Net assets before inter-group current accounts Loan from Guangzhou Yu Jun Non-controlling interests Net assets attributable to the Group	Per book of Guizhou Yu Jun RMB’000 206 484,637 172,537 18,073 48,955 53,233 94,315 871,956 (124,638) (426,240) (84,803) (40,000) (675,681) 196,275 (109,519) 86,756 (39,040) 47,716	Consolidation adjustments Capitalised Elimination finance costs of intra-group incurred by transactions the Group RMB’000 RMB’000 – – (1,209) 25,302 – 858 – – – – – – – – (1,209) 26,160 (30) – – – – – – – (30) – (1,239) 26,160 30 – (1,209) 26,160 – – (1,209) 26,160	Consolidated balances attributable to the Group RMB’000 206 508,730 173,395 18,073 48,955 53,233 94,315 896,907 (124,668) (426,240) (84,803) (40,000) (675,711) 221,196 (109,489) 111,707 (39,040) 72,667
		Elimination of intra-group transactions RMB’000 – (1,209) – – – – – (1,209) (30) – – – (30) (1,239) 30 (1,209) – (1,209)

The consolidation adjustments represent finance costs capitalised as the development costs of properties under development and unsold completed properties an aggregate amount of approximately RMB26.2 million incurred by the Group at corporate level and elimination of the site expenses of approximately RMB1.2 million charged by Guangzhou Yu Jun to Guizhou Yu Jun up to 31 December 2013.

III-9

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

(3) The adjustments reflect the effects of the Disposal which include the repayment of shareholder’s loan from Guangzhou Yu Jun by Guizhou Yu Jun of approximately RMB93.0 (being approximately RMB109.5 as at 31 December 2013 of which RMB16.5 million was repaid in February 2014) and receipt of dividend of approximately RMB40.0 million which are conditions precedent under the Disposal Agreement and the Purchasers have to obtain the pre-completion financing of no less than RMB300.0 million to pay to aforesaid amounts. The Disposal will result to an estimated loss of approximately RMB6.2 million, assuming that the Disposal had taken place on 31 December 2013. The estimated loss is arrived at after taking into account the following factors:
Consideration of RMB27.5 million received from the disposal of 55% equity interest in Guizhou Yu Jun; and
The costs of disposal of approximately RMB33.7 million include: (i) the net asset value of Guizhou Yu Jun of approximately RMB111.7 million, having adjusted by the finance costs incurred by the Group at corporate level and capitalised as the development costs of the properties under development and held for sale and site expenses charged by Guangzhou Yu Jun against Guizhou Yu Jun, minus interest in the net asset value of Guizhou Yu Jun shared by the non-controlling shareholders of approximately RMB39.0 million as at 31 December 2013, resulting to net assets attributable to the Group of approximately RMB72.7 million, (ii) dividend payment of approximately RMB40.0 million by Guizhou Yu Jun to Guangzhou Yu Jun, and (iii) transaction costs of approximately RMB1.0 million for the Disposal.
(4) Figures are extracted from the audited consolidated statements of profit or loss and other comprehensive income and cash flow of the Group for the year ended 31 December 2013 as contained in the 2013 Annual Report.
(5) The adjustments reflect the de-consolidation of the results and cash flows of Guizhou Yu Jun for the year ended 31 December 2013, as shown in the financial information of Guizhou Yu Jun in Appendix II to this circular, assuming the Disposal had taken place on 1 January 2013, and the exclusion of the sharing of the Group’s and non-controlling shareholders’ interests in the operating results of Guizhou Yu Jun in the consolidated statement of profit or loss and other comprehensive income.
(6) The adjustments reflect the exclusion of finance costs capitalised as costs of properties held for sale of approximately RMB25.8 million that were charged to cost of sales when Guizhou Yu Jun recognised sales upon the completed properties in Guiyang Project were handed over to customers up to 31 December 2013.
(7) The adjustments reflect the exclusion of intra-group charges for the site expenses of approximately RMB1.9 million by Guangzhou Yu Jun to Guizhou Yu Jun for the year ended 31 December 2013.
(8) The adjustments reflect the effects of the Disposal which include the repayment of shareholder’s loan from Guangzhou Yu Jun by Guizhou Yu Jun of approximately RMB219.5 as at 1 January 2013 and receipt of dividend of approximately RMB40.0 million. The Disposal will result to an estimated gain of approximately RMB46.0 million, assuming that the Disposal had taken place on 1 January 2013. The estimated gain is arrived at after taking into account the following factors:
Consideration of RMB27.5 million received from the disposal of 55% equity interest in Guizhou Yu Jun; and
The costs of negative assets disposed amounting to approximately RMB18.5 million as at 1 January 2013, assuming to be the same as the amounts as at 31 December 2012, represent: (i) the net asset value of Guizhou Yu Jun of approximately RMB4.9 million, having adjusted by the finance costs incurred by the Group at corporate level and capitalised as the development costs of the properties under development and held for sale and site expenses charged by Guangzhou Yu Jun against Guizhou Yu Jun, minus interest in the net asset value of Guizhou Yu Jun shared by the non-controlling shareholders of approximately RMB15.6 million as at 31 December 2012, resulting to net assets attributable to the Group of approximately RMB20.5 million, (ii) dividend payment of approximately RMB40.0 million by Guizhou Yu Jun to Guangzhou Yu Jun, and (iii) transaction costs of approximately RMB1.0 million for the Disposal.

III-10

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

The assets and liabilities of Guizhou Yu Jun as at 31 December 2012, as shown in the financial information of Guizhou Yu Jun in Appendix II to this circular, after taking into account certain consolidation adjustments as stated below and assuming that the Disposal had taken place on 1 January 2013:

Property, plant and equipment Properties under development Properties held for sale Prepaid tax Trade and other receivables Restricted and pledged deposits Cash and cash equivalents Trade and other payables Properties pre-sale deposits Loans from non-controlling shareholders Bank and other borrowings Net assets before inter-group current accounts Loan from Guangzhou Yu Jun Non-controlling interests Net (deficit)/assets attributable to the Group	Per book of Guizhou Yu Jun RMB’000 313 366,486 640,007 26,391 64,302 126,320 54,368 1,278,187 (136,664) (783,205) (163,600) (10,000) (1,093,469) 184,718 (219,497) (34,779) 15,651 (19,128)	Consolidation	adjustments Capitalised finance costs incurred by the Group RMB’000 – 14,225 26,633 – – – – 40,858 – – – – – 40,858 – 40,858 – 40,858	Consolidated balances attributable to the Group RMB’000 313 379,502 666,640 26,391 64,302 126,320 54,368 1,317,836 (136,664) (783,205) (163,600) (10,000) (1,093,469) 224,367 (219,497) 4,870 15,651 20,521
		Elimination of intra-group transactions RMB’000 – (1,209) – – – – – (1,209) – – – – – (1,209) – (1,209) – (1,209)

The consolidation adjustments represent finance costs capitalised as the development costs of properties under development and unsold completed properties in an aggregate amount of approximately RMB40.9 million incurred by the Group at corporate level and elimination of the site expenses of approximately RMB1.2 million charged by Guangzhou Yu Jun to Guizhou Yu Jun up to 31 December 2012.

(9) Net cash inflow arising from the disposal of a subsidiary is reconciled below:

Cash and cash equivalents of disposal entity as at 1 January 2013 Proceeds from disposal, net of transaction costs Dividend received from a subsidiary Repayment of shareholders’ loans – Repayments for the year 2013 – Repayments on completion	RMB’000 109,978 109,489	RMB’000 (54,368) 26,500 (27,868) 40,002 219,467 231,601

(10) The above adjustments are not expected to have a continuing effect on the unaudited pro forma consolidated statement of profit or loss and other comprehensive income of the Remaining Group and the unaudited pro forma consolidated statement of cash flows of the Remaining Group.

III-11

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

B. REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

The following is the text of a report received from BDO Limited, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this Circular.

INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION INCLUDED IN A CIRCULAR

TO THE DIRECTORS OF SKYFAME REALTY (HOLDINGS) LIMITED

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of Skyfame Realty (Holdings) Limited (the “ Company ”) and its subsidiaries (collectively the “ Group ”) excluding 貴州譽浚房地產開發有限公司 (Guizhou Yu Jun Real Estate Development Company Limited) (the “ Target Company ”) (collectively the “ Remaining Group ”) by the directors for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma consolidated statement of financial position as at 31 December 2013, the unaudited pro forma consolidated statement of profit or loss and other comprehensive income for the year ended 31 December 2013, the unaudited pro forma consolidated statement of cash flows for the year ended 31 December 2013, and related notes (the “ Unaudited Pro Forma Financial Information ”) as set out on pages III-1 to III-11 of the Company’s circular dated 23 May 2014, in connection with the proposed disposal of the Target Company (the “ Transaction* ”) by the Company. The applicable criteria on the basis of which the directors have compiled the Unaudited Pro Forma Financial Information are described on pages III-9 to III-11.

The Unaudited Pro Forma Financial Information has been compiled by the directors to illustrate the impact of the Transaction on the Group’s financial position as at 31 December 2013 and the Group’s financial performance and cash flows for the year ended 31 December 2013 as if the Transaction had taken place at 31 December 2013 and at 1 January 2013 respectively. As part of this process, information about the Group’s financial position, financial performance and cash flows has been extracted by the directors from the Group’s financial statements for the year ended 31 December 2013, on which an audit report has been published.

Directors’ Responsibility for the Unaudited Pro Forma Financial Information

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

* for identification purposes only

III-12

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

Reporting Accountant’s Responsibilities

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

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

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

The purpose of Unaudited Pro Forma Financial Information included in a circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the entity as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the Transaction at 31 December 2013 and at 1 January 2013 would have been as presented.

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

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

The procedures selected depend on the reporting accountant’s judgment, having regard to the reporting accountant’s understanding of the nature of the company, the event or transaction in respect of which the Unaudited Pro Forma Financial Information has been compiled, and other relevant engagement circumstances. The engagement also involves evaluating the overall presentation of the Unaudited Pro Forma Financial Information.

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

III-13

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

Opinion

In our opinion:

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

BDO Limited

Certified Public Accountants Hong Kong, 23 May 2014

III-14

APPENDIX IV

VALUATION REPORT ON THE PROPERTIES

The following is the text of a letter, summary of valuations and valuation certificates prepared for the purpose of incorporation in this circular received from DTZ Debenham Tie Leung Limited, an independent property valuer, in connection with its opinion of market values of the Properties held by the Group in the PRC as at 30 April 2014.

==> picture [128 x 39] intentionally omitted <==

16/F Jardine House 1 Connaught Place Central Hong Kong

23 May 2014

The Directors Skyfame Realty (Holdings) Limited Unit 2502B Tower 1, Admiralty Centre 18 Harcourt Road Hong Kong

Dear Sirs,

Instructions, Purpose & Valuation date

In accordance with the instruction of Skyfame Realty (Holdings) Limited (天譽置業（控股）有限公司) (the “ Company ”) for us to carry out the valuation of the market value of the properties (“ Properties ”) held by Skyfame Realty (Holdings) Limited (天譽置業（控股）有限公司) and its subsidiaries (together the “ Group ”) in the People’s Republic of China (the “ PRC ”), we confirm that we have carried out inspection, made relevant enquiries and obtained such further information as we considered necessary for the purpose of providing you with our opinion of the market values of the Properties in existing state as at 30 April 2014 (the “ valuation date ”).

Definition of Market Value

Our valuation of each of the Properties represents its market value which in accordance with the HKIS Valuation Standards 2012 Edition published by the Hong Kong Institute of Surveyors is defined as “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion”.

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VALUATION REPORT ON THE PROPERTIES

APPENDIX IV

Valuation Basis and Assumption

Our valuations of the Properties exclude an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangement, special considerations or concessions granted by anyone associated with the sale, or any element of special value.

In the course of our valuation of the Properties held by the Group in the PRC, we have assumed that transferable land use rights in respect of the Properties for its specific term at nominal annual land use fee have been granted and that any premium payable has already been fully paid. We have relied on the information and advice given by the Group and the PRC legal opinion of the Company’s legal adviser, Guangdong Guardian Law Firm (廣東國鼎律師事務所), regarding the title to the Properties and the interests in the Properties. In valuing the Properties, we have assumed that the owners have enforceable title to the Properties and have free and uninterrupted rights to use, occupy or assign the Properties for the whole of the unexpired terms as granted.

No allowance has been made in our valuations for any charges, pledges or amounts owing on the Properties nor any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is valued on the basis that the Properties are free from encumbrances, restrictions and outgoings of any onerous nature which could affect their values.

Method of Valuation

In valuing the Property in Group I, which is held by the Group for sale in the PRC, we have adopted the Direct Comparison Approach by making reference to comparable sales evidence as available in the relevant market.

In valuing the Property in Group II, which are held by the Group for development in the PRC, we have valued it on the basis that it will be developed and completed in accordance with the Group’s latest development proposal provided to us. We have adopted the Direct Comparison Approach by making reference to comparable sales evidence as available in the relevant market and we have also taken into account the pre-sold area and consideration, estimated total and expended construction costs.

In valuing the Properties, we have complied with the requirements set out in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and The HKIS Valuation Standards 2012 Edition published by the Hong Kong Institutes of Surveyors.

Source of Information

We have relied to a very considerable extent on the information given by the Group and the opinion of the PRC legal adviser as to PRC laws. We have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, identification of Properties, completion dates of building, construction cost, particulars of occupancy, development scheme, tenancy information, site and floor areas and all other relevant matters.

Dimension, measurements and areas included in this valuation report are based on the information provided to us and are therefore only approximation. We have no reason to doubt the truth and accuracy of the information provided to us by the Group which is material to the valuation. We were also advised that no material facts have been omitted from the information supplied.

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VALUATION REPORT ON THE PROPERTIES

APPENDIX IV

We would point out that the copies of documents provided to us are mainly compiled in Chinese characters and the transliteration into English represents our understanding of the contents. We would therefore advise the Company to make reference to the original Chinese edition of the documents and consult your legal adviser regarding the legality and interpretation of these documents.

Title Investigation

We have been provided by the Group with copies or extracts of documents. However, we have not searched the original documents to verify ownership or to ascertain any amendments. All documents have been used for reference only and all dimensions, measurements and areas are approximate.

Site Inspection

Our DTZ PRC Offices valuer, Edison Xie has inspected the exterior and, wherever possible, the interior of the properties in May 2014. However, no structural survey has been made, but in the course of our inspection, we did not note any serious defects. We are not, however, able to report that the properties are free of rot, infestation or any other structural defects. No tests were carried out to any of the services. However, we have not carried out any soil investigations to determine the suitability of the soil conditions and the services etc. for any future development. Our valuation is prepared on the assumption that its aspects are satisfactory and that no extraordinary expenses or delays will be incurred during the construction period.

Unless otherwise stated, we have not been able to carry out detailed on-site measurements to verify the site and floor areas of the properties and we have assumed that the areas shown on the copies of documents handed to us are correct.

Currency

Unless otherwise stated, all sums stated in our valuations are in Renminbi, the official currency of the PRC.

We attach herewith a summary of valuations and valuation certificates.

Yours faithfully,

for and on behalf of

DTZ Debenham Tie Leung Limited

Philip C Y Tsang

Registered Professional Surveyor (General Practice) Registered China Real Estate Appraiser MSc, MRICS, MHKIS

Director

Note: Mr. Philip C Y Tsang is a Registered Professional Surveyor who has over 21 years’ experience in the valuation of properties in the PRC.

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VALUATION REPORT ON THE PROPERTIES

APPENDIX IV

SUMMARY OF VALUATIONS

					Market Value in
					existing state as at
	Market Value in			The Group’s	30 April 2014
	existing state		as at	attributable	attributable to
Property		30 April	2014	interest	the Group
			RMB	%	RMB
Group	I – Property held by the Group for sale in the PRC
1.	Phase I and II (Block	214,000,000		55%	117,700,000
	Nos. 3 to 9)
	of Tianyu City,
	Xiaoguan Maochong,
	Yunyan District,
	Guiyang City,
	Guizhou Province
	the PRC
	sub-total of Group I in RMB:	214,000,000			117,700,000
Group	II – Property held by the Group for development in	the PRC
2.	Phase III (Block Nos. 1 to 2	534,000,000		55%	293,700,000
	and 10 to 12)
	of Tianyu City,
	Xiaoguan Maochong,
	Yunyan District,
	Guiyang City,
	Guizhou Province
	the PRC
	sub-total of Group II in RMB:	534,000,000			293,700,000
	Grand total:	748,000,000			411,400,000

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VALUATION REPORT ON THE PROPERTIES

APPENDIX IV

VALUATION CERTIFICATE

Group I – Property held by the Group for sale in the PRC

Nos. Property

Description and tenure

Particulars of occupancy

Market Value in existing state as at 30 April 2014

Phase I and II (Block Nos. 3 to 9) of Tianyu City, Xiaoguan Maochong, Yunyan District, Guiyang City, Guizhou Province the PRC

Tianyu City (“天譽城”) consists of high-end residential apartments of a total gross floor area of approximately 460,000 sq.m. for residential apartments and 132,000 sq.m. for commercial complex, community facilities and car parking spaces.

As at the valuation date, RMB214,000,000 Phase I and II were physically completed. (55% interest attributable to The unsold residential units the Group: in Phase I and II were vacant, RMB117,700,000) whilst the unsold retail units and car parking spaces were leased.

Tianyu City is erected on a parcel of land with a total site area of 136,477 sq.m. by three phases. The first two phases of Tianyu City were completed in between 2010 and 2012 and substantially sold. The remaining third phase of Tianyu City is under construction.

According to the information provided by the Group, the Property comprises the unsold residential units with a total gross floor area of 1,084.13 sq.m. and pre-sold residential units with a total gross floor area of 1,683.08 sq.m. in the first two phases.

Tianyu City is located at Xiaoguan Maochong, Yunyan District of Guiyang. Developments nearby are mainly residential and commercial development. According to the Group, the Property is used for residential and commercial use; there is no environmental issues and litigation dispute; there is no plan for renovation, to dispose of or change the use of the Property.

The land use rights of the Property have been granted for a term of 40 years for commercial use and 70 years for residential use due to expire on 14 February 2049 and 14 February 2079 respectively.

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VALUATION REPORT ON THE PROPERTIES

APPENDIX IV

Notes:

(1) According to Grant Contract of Land Use Rights No. [2008]04 dated 17 January 2008, the details are summarized below:

Grantor : Guiyang State-owned Land Resource Bureau Grantee : Guizhou Xiehui Property Development Company Limited (貴州協輝房地產開發有限公司) Guangzhou Yu Jun Consulting Service Company Limited (廣州譽浚諮詢服務有限公司) Location : Xiaoguan Maochong, Yunyan District, Guiyang Site Area : 136,447 sq.m. Land Premium : RMB41,000,000 Land Use : Commercial and residential Land Use Term : 40 years for commercial use and 70 years for residential use Plot Ratio : 3.5 Coverage Rate : 25% Additional Consideration : Grantee has to complete the negotiation before 17 January 2008 (signature date of the Grant Contract of Land Use Rights) for removing and resettling of the original buildings.

(2) According to Removal and Resettlement Compensation Contract entered into between Guiyang Yunyan Village Sport Club Co., Ltd. (貴陽雲岩鄉村體育俱樂部有限公司) (Party A) and Guizhou Xiehui Property Development Company Limited (貴州協輝房地產開發有限公司) and Guangzhou Yu Jun Consulting Service Company Limited (廣州譽浚諮詢服務有限公司) (Party B) dated 11 January 2008, Party B has been paid a compensation to Party A with a total amount of RMB495,000,000.
(3) According to Pre-registration Certificate of State-owned Land Use Rights No. [2009]002 dated 14 January 2009, the details are summarized below:

Grantee : Guizhou Yu Jun Real Estate Development Company Limited (貴州譽浚房地產開發有限公司) Location : No. G(07)38, Xiaoguan Maochong, Yunyan District Site Area : 60,156 sq.m. Use : Commercial and residential Land Use Term : 14 February 2009 to 14 February 2049 for commercial use; and 14 February 2009 to 14 February 2079 for residential use

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VALUATION REPORT ON THE PROPERTIES

APPENDIX IV

(4) According to Planning Permit for Construction Land No. 520000200801053 ([2008]009) dated 21 April 2008, the details are summarized below:

Grantee : Guizhou Yu Jun Real Estate Development Company Limited (貴州譽浚房地產開發有限公司) Project Name : Commercial and residential Location : Xiaoguan Maochong, Yunyan District Land Use : Commercial and residential Site Area : 156,208 sq.m. (including roads) Construction Scale : 477,564.50 sq.m.

(5) According to 3 Planning Permits for Construction Works, 346,150.16 sq.m. is in compliance with the local regulation and details as follows:

Nos.	Date of issue	Construction name	Construction scale
			(sq.m.)
520000200910121	16 February 2009	Block Nos. 3, 4 and 9 of Phase I	133,018.37
2009 (006)		of Tianyu City
520000201023082	1 April 2010	Block Nos. 5, 6, 7, primary school and	158,478.36
2010 (009)		kindergarten of Tianyu City
520000201023128	17 March 2010	Block No. 8 of Tianyu City	54,653.43
2010 (006)
Total			346,150.16

(6) According to 5 Commencement Permits of Construction Works, the construction work with 346,150.16 sq.m. was permitted to be commenced and details as follows:

Nos.	Date of issue	Construction name	Construction scale
			(sq.m.)
520101200902170101	25 March 2011	Block Nos. 3 and 4 of Tianyu City (Phase I)	86,583.64
520101200902170201	17 March 2011	Block No. 9 of Tianyu City (Phase I)	46,434.73
520101201007270101	20 September 2010	Block Nos. 5, primary school and	68,675.56
		kindergarten of Tianyu City
520101201007300101	23 March 2009	Block No. 6 and 7 of Tianyu City	89,802.80
520101201004190801	21 June 2010	Block No. 8 of Tianyu City	54,653.43
Total			346,150.16

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APPENDIX IV

VALUATION REPORT ON THE PROPERTIES

(7) According to 6 Pre-sale Permits, 295,409.44 sq.m. was permitted to be pre-sold with details as follows:

		Permitted pre-sale
Nos.	Construction name	gross floor area
		(sq.m.)
2009-022	Block Nos. 3 and 4 of Tianyu City (Phase I)	84,312.75
2009-026	Block No. 9 of Tianyu City (Phase I)	48,531.52
2010-166	Block No. 6 Tianyu City	56,787.49
2010-133	Block No. 7 Tianyu City	28,971.95
2010-098	Block No. 8 Tianyu City	50,952.75
2011-009	Block No. 5 Tianyu City	25,852.98
Total		295,409.44

(8) As advised by the Group, Phase I and Phase II of the Property were physically completed in between June 2010 and September 2012. According to 7 Selling Approval Letters for Stock Commodity House with details as follows:

Nos. Issue date Location 2011-0437 29 December 2011 Block No. 3 of Tianyu City, Xiaoguan Maochong, Yunyan District 2011-0436 29 December 2011 Block No. 4 of Tianyu City, Xiaoguan Maochong, Yunyan District 2011-0438 29 December 2011 Block No. 9 of Tianyu City, Xiaoguan Maochong, Yunyan District 2014-0081 18 April 2014 Block No. 6 of Tianyu City, Xiaoguan Maochong, Yunyan District 2014-0082 18 April 2014 Block No. 7 of Tianyu City, Xiaoguan Maochong, Yunyan District 2014-0083 18 April 2014 Block No. 8 of Tianyu City, Xiaoguan Maochong, Yunyan District 2014-0084 22 April 2014 Block No. 5 of Tianyu City, Xiaoguan Maochong, Yunyan District Total	Number of units 231 242 448 530 318 404 226 2,399	Number of car parks – – – – – – 280 280	Gross floor area (sq.m.) 21,748.90 57,289.67 49,122.22 55,500.71 29,288.25 51,210.09 42,678.81
			306,838.65

(9) According to the information provided by the Group, 1,683.08 sq.m. of residential portion has been pre-sold at a total consideration of RMB8,417,620 as at valuation date. In the course of our valuation, we have taken into account the said presold consideration.
(10) According to Business Licence No. 5201031270556(1-1) dated 27 December 2011, Guizhou Yu Jun Real Estate Development Company Limited (貴州譽浚房地產開發有限公司) was established on 17 January 2008 as a limited company with a registered capital of RMB50,000,000 for an operation period from 17 January 2008 to 4 January 2038.

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VALUATION REPORT ON THE PROPERTIES

APPENDIX IV

(11) According to the PRC legal opinion:
(i) Guizhou Yu Jun Real Estate Development Company Limited (貴州譽浚房地產開發有限公司) has obtained business licence in compliance with the PRC law;
(ii) Guizhou Yu Jun Real Estate Development Company Limited (貴州譽浚房地產開發有限公司) has obtained the land use rights with the site area of 136,447 sq.m. Guizhou Yu Jun Real Estate Development Company Limited (貴州譽浚房地產開發有限公司) is one of the legal land use rights owner and protected by the PRC law; and
(iii) Guizhou Yu Jun Real Estate Development Company Limited (貴州譽浚房地產開發有限公司) has obtained Selling Approval Letters for Stock Commodity House for Block Nos. 3 to 9, Guizhou Yu Jun Real Estate Development Company Limited (貴州譽浚房地產開發有限公司) can sell the Property.
(12) The status of the title and grant of major approvals and licence in accordance with the information provided by the Group and the opinion of the PRC legal adviser:

Pre-registration Certificate of State-owned Land Use Rights	Yes
Certificate of State-owned Land Use Rights	No
Grant Contract of Land Use Rights	Yes
Removal and Resettlement Compensation Contract	Yes
Planning Permit for Construction Land	Yes
Planning Permit for Construction Works	Yes
Commencement Permit of Construction Works	Yes
Pre-sale Permit	Yes
Selling Approval Letters for Stock Commodity House	Yes
Business Licence	Yes

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VALUATION REPORT ON THE PROPERTIES

APPENDIX IV

VALUATION CERTIFICATE

Group II – Property held by the Group for development in the PRC

No. Property

Phase III (Block Nos. 1 to 2 and 10 to 12) of Tianyu City, Xiaoguan Maochong, Yunyan District, Guiyang City, Guizhou Province the PRC

Description and tenure

Market Value in existing state as at Particulars of occupancy 30 April 2014 As at the valuation date, the RMB534,000,000 Property was under construction.

(55% interest attributable to the Group: RMB293,700,000)

Tianyu City is erected on a parcel of land with a site area of 136,447 sq.m. by three phases. The first two phases of Tianyu City were completed in between 2010 and 2012 and substantially sold. The remaining third phase of Tianyu City is under construction.

According to the information provided by the Group, the Property refer to the remaining third phase of Tianyu City, consisting of five residential buildings, commercial units and car park spaces with a gross floor area of approximately 244,000 sq.m. The Property under construction is expected to be completed progressively in 2014 and 2015.

The land use rights of the Property have been granted for a term of 40 years for commercial use and 70 years for residential use due to expire on 18 June 2049 and 18 June 2079 respectively.

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VALUATION REPORT ON THE PROPERTIES

APPENDIX IV

Notes:

(1) According to Grant Contract of Land Use Rights No. [2008]04 dated 17 January 2008, the details are summarized below:

(2) According to Removal and Resettlement Compensation Contract entered into between Guiyang Yunyan Village Sport Club Co., Ltd. (貴陽雲岩鄉村體育俱樂部有限公司) (Party A) and Guizhou Xiehui Property Development Company Limited (貴州協輝房地產開發有限公司) and Guangzhou Yu Jun Consulting Service Company Limited (廣州譽浚諮詢服務有限公司) (Party B) dated 11 January 2008, Party B has been paid a compensation to Party A with a total amount of RMB495,000,000.
(3) According to Pre-registration Certificate of State-owned Land Use Rights No. [2009]032 dated 25 May 2009, the details are summarized below:

Grantee : Guizhou Yu Jun Real Estate Development Company Limited (貴州譽浚房地產開發有限公司) Location : Xiaoguan Maochong, Yunyan District Site Area : 76,291 sq.m. Use : Commercial and residential Land Use Term : 18 June 2009 to 18 June 2049 for commercial use; and 18 June 2009 to 18 June 2079 for residential use

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VALUATION REPORT ON THE PROPERTIES

APPENDIX IV

(4) According to Planning Permit for Construction Land No.520000200801053 ([2008]009) dated 21 April 2008, the details are summarized below:

(5) According to 2 Planning Permits for Construction Works, 244,319.04 sq.m. is in compliance with the local regulation and details as follows:

Nos.	Date of issue	Construction name	Construction scale
			(sq.m.)
520000201112793	9 October 2011	Block Nos. 1, 2 and 10 of Phase III	124,423.32
2011 (042)		of Tianyu City
520000201300087	13 January 2014	Block Nos. 11 and 12 of Phase III	119,895.72
2014 (002)		of Tianyu City
Total			244,319.04

(6) According to 3 Commencement Permits of Construction Works, the construction work with 244,319.04 sq.m. was permitted to be commenced and details as follows:

Nos.	Date of issue	Construction name	Construction scale
			(sq.m.)
520101201110250401	20 January 2012	Block Nos. 1 and 2 of Tianyu City	91,784.94
520101201206260301	6 November 2012	Block No. 10 of Tianyu City	32,638.38
520101201401201201	11 March 2014	Block Nos. 11 and 12 of Tianyu City	119,895.72
Total			244,319.04

(7) According to 2 Pre-sale Permits, 98,643.35 sq.m. was permitted to be pre-sold with details as follows:

		Permitted pre-sale
Nos.	Construction name	gross floor area
		(sq.m.)
2012-026	Block Nos. 1 and 2 of Tianyu City	69,993.74
2013-027	Block No. 10 Tianyu City	28,649.61
Total		98,643.35

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VALUATION REPORT ON THE PROPERTIES

APPENDIX IV

(8) As advised by the Group, the total expended construction cost for the Property as at valuation date was approximately RMB248,000,000 whilst the outstanding construction cost for completion of the Property as at the valuation date would be approximately RMB257,000,000. We have taken into account such amounts in our valuation.
(9) According to the information provided by the Group, 91,945.65 sq.m. of residential portion has been pre-sold at a total consideration of RMB426,407,862 as at valuation date. In the course of our valuation, we have taken into account the said pre-sold consideration.
(10) The estimated market value as if completed of the proposed development as at 30 April 2014 was approximately RMB1,072,000,000.
(11) According to Business Licence No. 5201031270556(1-1) dated 27 December 2011, Guizhou Yu Jun Real Estate Development Company Limited (貴州譽浚房地產開發有限公司) was established on 17 January 2008 as a limited company with a registered capital of RMB50,000,000 for an operation period from 17 January 2008 to 4 January 2038.
(12) According to the PRC legal opinion:
(i) Guizhou Yu Jun Real Estate Development Company Limited (貴州譽浚房地產開發有限公司) has obtained business licence in compliance with the PRC law;
(ii) Guizhou Yu Jun Real Estate Development Company Limited (貴州譽浚房地產開發有限公司) has obtained the land use rights with the site area of 136,447 sq.m. Guizhou Yu Jun Real Estate Development Company Limited (貴州譽浚房地產開發有限公司) is one of the legal land use rights owner and protected by the PRC law;
(iii) Guizhou Yu Jun Real Estate Development Company Limited (貴州譽浚房地產開發有限公司) has obtained Pre-sale Permit for Block No. 10 of the Property, thus pre-sale is permitted;

As the Pre-sale Permit for Block Nos. 1 and 2 has expired and most of the residential units has been pre-sold, the unsold portion cannot be pre-sold or sold until a renew Pre-sale Permit has been obtained or a Selling Approval Letters for Stock Commodity House has been obtained after completion; and

Guizhou Yu Jun Real Estate Development Company Limited (貴州譽浚房地產開發有限公司) should obtain the relevant Pre-Sale Permit before pre-sale of Block Nos. 11 and 12 of the Property.

(13) The status of the title and grant of major approvals and licence in accordance with the information provided by the Group and the opinion of the PRC legal adviser:

Pre-registration Certificate of State-owned Land Use Rights	Yes
Certificate of State-owned Land Use Rights	No
Grant Contract of Land Use Rights	Yes
Removal and Resettlement Compensation Contract	Yes
Planning Permit for Construction Land	Yes
Planning Permit for Construction Works	Yes
Commencement Permit of Construction Works	Yes
Pre-sale Permit	Yes (Part)
Business Licence	Yes

IV-13

GENERAL INFORMATION

APPENDIX V

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

Directors and chief executive

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive of the Company 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), 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 or short positions which they were taken or deemed to have under such provisions of the SFO); or (b) which were required to be entered in the register maintained by the Company pursuant to Section 352 of the SFO; or (c) as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies as set out in appendix 10 to the Listing Rules, were as follows:

(i) Interests in the Shares or underlying Shares

					Approximate
	Company /		Number of Shares or		shareholding
	Associated		underlying Shares		percentage
Name of Director	corporation	Capacity	(note 1)		(note 2)
Mr. YU Pan	Company	Interest of controlled	1,587,168,407	(long)	71.61%
		corporation and/or	52,176,635	(short)	2.35%
		beneficial owner

Notes:

These Shares comprised (i) 141,504,000 existing Shares; and (ii) 1,445,664,407 existing Shares held directly by Grand Cosmos Holdings Limited (“ Grand Cosmos ”). The entire issued share capital of Grand Cosmos was held by Sharp Bright International Limited (“ Sharp Bright ”), the entire issued share capital of which was held by Mr. YU Pan. The 1,587,168,407 Shares were charged in favour of Magic Sky Enterprises Holdings Inc. (“ Magic Sky ”) by way of a share charge dated 10 October 2013. In addition, Grand Cosmos has issued warrants to Magic Sky to purchase Shares from Grand Cosmos in aggregate of HK$30,000,000 at a purchase price of HK$0.57497 for 52,176,635 Shares.
For the purposes of this section, the shareholding percentage in the Company was calculated on the basis of 2,216,531,175 Shares in issue as at the Latest Practicable Date.

V-1

GENERAL INFORMATION

APPENDIX V

(ii) Interests in underlying Shares arising from share options

As at the Latest Practicable Date, the following Directors had interests as beneficial owners in options to subscribe for Shares granted under the share option scheme adopted by the Company on 4 August 2005 (the “ 2005 Scheme ”):

	Exercise		Number of	Approximate
	price (adjusted)		underlying	shareholding
	(HK$)		Shares	percentage
Name of Director	(note 1)	Exercise period	(note 1)	(note 2)
Mr. WEN Xiaobing	1.2565	13 March 2007 to	5,213,097	0.24%
		31 July 2015
	0.6714	11 August 2012 to	5,213,097	0.24%
		10 August 2021
Mr. CHOY Shu Kwan	1.2565	13 March 2007 to	625,571	0.03%
		31 July 2015
Mr. CHENG Wing	1.2565	13 March 2007 to	625,571	0.03%
Keung, Raymond		31 July 2015
Ms. CHUNG Lai Fong	1.2565	13 March 2007 to	625,571	0.03%
		31 July 2015

Notes:

As a result of the issue of 738,843,725 Shares by way of rights on the basis of one rights Share for every two Shares in issue and held on 31 May 2012 (the “ Rights Issue ”) and in compliance with Rule 17.03(13) of the Listing Rules, the exercise price and the number of Shares to be issued under the outstanding Share Options were adjusted under the terms of 2005 Scheme with effect from 28 June 2012 when the Rights Issue was completed.
For the purpose of this section, the percentage of shareholding in the Company was calculated on the basis of 2,216,531,175 Shares in issue as at the Latest Practicable Date.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests or short positions in the Shares, underlying Shares and/ or debentures (as the case may be) of the Company and/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 or short positions which they were taken or deemed to have under such provisions of the SFO); or (b) which were required to be entered in the register maintained by the Company pursuant to Section 352 of the SFO; or (c) as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies as set out in appendix 10 to the Listing Rules.

V-2

GENERAL INFORMATION

APPENDIX V

Substantial Shareholders

So far as is known to the Directors, as at the Latest Practicable Date, each of the following persons (not being Directors or chief executive of the Company), had an interest and/or short position in the Shares or underlying Shares (as the case may be) which would fall to be disclosed to the Company and the Stock Exchange under Divisions 2 and 3 of Part XV of the SFO, or was otherwise interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group:

Interests in the Shares or underlying Shares

		Number of		Approximate
Name of		Shares and		shareholding
Shareholder	Capacity	underlying Shares		percentage
				(note 3)
Sharp Bright	Interest of	1,445,664,407	(long)	65.22%
	controlled corporation	52,176,635	(short)	1.93%
		(note 1)
Grand Cosmos	Beneficial owner	1,445,664,407	(long)	65.22%
		52,176,635	(short)	1.93%
		(note 1)
China Orient	Interest of controlled	1,680,636,437	(long)	75.82%
Asset Management	corporation	(note 2)
Corporation
(“COAMC”)
Magic Sky	Beneficial owner and/or	1,639,345,042	(long)	73.95%
	person having a security	(note 2)
	interest in shares

Notes:

The 1,445,664,407 existing Shares were held directly by Grand Cosmos and Grand Cosmos has issued warrants to Magic Sky to purchase Shares from Grand Cosmos in aggregate of HK$30,000,000 at a purchase price of HK$0.57497 for 52,176,635 Shares. As the entire issued share capital of Grand Cosmos was held by Sharp Bright, Sharp Bright was deemed to be interested in the Shares in which Grand Cosmos was interested by virtue of the SFO. As the entire issued share capital of Sharp Bright was held by Mr. YU Pan, Mr. YU Pan was deemed to be interested in the Shares in which Sharp Bright was interested by virtue of SFO. The 1,445,664,407 Shares held by Grand Cosmos together with 141,504,000 Shares held by Mr. YU Pan were charged in favour of Magic Sky by way of a share charge dated 10 October 2013.
These Shares comprised (i) 1,587,168,407 Shares charged in favour of Magic Sky by Grand Cosmos; (ii) 52,176,635 underlying Shares which would be transferred upon exercise of purchase rights attaching to the warrants issued by Grand Cosmos to Magic Sky at a purchase price of HK$0.57497 and (iii) 41,291,395 warrants issued by the Company to China Orient Asset Management (International) Holding Limited (“ COAMIHL ”) at a subscription price of HK$0.727. COAMIHL is held equally by Dong Yin Development (Holdings) Limited (“ Dong Yin ”) and Wise Leader Assets Limited (“ Wise Leader ”). Magic Sky is a wholly owned subsidiary of Taiping Orient Funds SPC (“ Taiping OFSPC ”), which is in turn a wholly owned subsidiary of Taiping Orient Fund Management Limited (“ Taiping OFML ”), which is a wholly-owned subsidiary of Success Link Enterprises Holdings Inc. (“ Success Link ”), which is a whollyowned subsidiary of Wise Leader, which is a wholly owned subsidiary of Dong Yin, which is a wholly owned subsidiary of COAMC. Accordingly, COAMC was deemed to be interested in the Shares in which Dong Yin, Wise Leader, Success Link, Taiping OFML, Taiping OFSPC, COAMIHL and Magic Sky were interested by virtue of the SFO.
For the purpose of this section, the shareholdings percentage in the Company was calculated on the basis of 2,216,531,175 Shares in issue as at the Latest Practicable Date.

V-3

GENERAL INFORMATION

APPENDIX V

Save as disclosed above and so far as is known to the Directors, as at the Latest Practicable Date, no other person (other than the Directors and chief executives) had an interest or short position in the Shares and/or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under Divisions 2 and 3 of Part XV of the SFO, or who was directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group.

3. DIRECTORS’ INTERESTS IN COMPETING BUSINESS

As at the Latest Practicable Date, Mr. YU Pan, the chairman of the Company, is also a director and substantial shareholder of a company listed on the Shenzhen Stock Exchange, namely 綠景控股股份有限公司 (Lvjing Holding Co., Ltd.*) which is engaged in the project and mine resources investment; property development; gardening project and landscape engineering in the PRC. Save as the aforesaid, none of the Directors and his/her respective associates had any interests in any business, which competes or is likely to compete, either directly or indirectly, with the Company’s business (as would be required to be disclosed under Rule 8.10 of the Listing Rules).

Mr. YU Pan has undertaken to the Company that for so long as he remains as a Director or a controlling Shareholder, all enquiries and actual or potential business opportunities received by him (and/ or his associates) in relation to property development, project management and property investment in the PRC (the “ Business Opportunities ”) shall be referred by Mr. YU Pan to the Company on a timely basis and the Business Opportunities must be first offered or made available to the Group.

4. DIRECTORS’ INTERESTS IN THE GROUP’S ASSETS OR CONTRACT OR ARRANGEMENTS SIGNIFICANT TO THE GROUP

As at the Latest Practicable Date, none of the Directors had any interest in any assets which have been, since 31 December 2013 (being the date to which the latest published audited financial statements of the Group were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

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

5. DIRECTORS’ INTERESTS IN SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or was proposing to enter into any service contracts with the Company or any member of the Group (excluding contracts expiring or being terminated by the Group within one year without payment of any compensation (other than statutory compensation)).

* For identification purposes only

V-4

GENERAL INFORMATION

APPENDIX V

6. LITIGATION

So far as the Directors are aware, neither the Company nor any of its subsidiaries was engaged in any litigation or arbitration of material importance and no litigation or arbitration of material importance was pending or threatened against the Company or any of its subsidiaries as at the Latest Practicable Date.

7. 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 2013 (being the date to which the latest published audited consolidated financial statements of the Group were made up).

8. MATERIAL CONTRACTS

The following material contracts, not being contracts entered into in the ordinary course of business of the Group, have been entered into by members of the Group within two years immediately preceding the Latest Practicable Date and are or may be material:

(a) the supplemental agreement dated 3 November 2012 entered into between the Company, 海航酒店控股集團有限公司 (HNA Hotel Holdings Group Company Limited) (“ HNA Hotel ”), Yaubond Limited, 廣州市城建天譽房地產開發有限公司 (Guangzhou Cheng JianTianyu Real Estate Development Company Limited, a fellow subsidiary of HNA Hotel and as “ Transferor ”) and Guangzhou Yu Jun (as “ Transferee ”) for the transfer of properties (32nd and 33rd floors of HNA Tower at Tianhe District, Guangzhou, Guangdong Province, the PRC) by the Transferor to the Transferee on or before 30 April 2013 at a total consideration of approximately RMB148,530,000 which shall be satisfied by cash of approximately RMB18,392,000 payable by the Group and the due portion of the debt owed by HNA Hotel to the Group of approximately RMB130,138,000 in relation to purchase of the entire equity interest of 廣州寰城實業發展有限公司 (Guangzhou Huan Cheng Real Estate Development Company Limited*, a former subsidiary of the Company), and in the event of delay in the transfer of properties, such consideration would be offset by the default interests charged against HNA Hotel;
(b) the investment agreement dated 6 November 2012 (the “ Investment Agreement ”) entered into between the Company as borrower and China Orient Asset Management (International) Holding Limited (“ China Orient ”) as lender, in relation to the grant of a term loan facility of HK$298,000,000 secured by the share charge as detailed in item (d) below and the issue of warrants of the Company as detailed in item (c) below;
(c) the warrants instrument dated 16 November 2012 executed by the Company in favour of China Orient entitling the holder of warrants to subscribe for Shares up to an aggregate amount of HK$29,800,000 at an initial subscription price of HK$0.7217 per Share for a subscription period from 22 November 2012 to 21 November 2014;

* For identification purposes only

V-5

APPENDIX V

GENERAL INFORMATION

(d) the share charge dated 16 November 2012 made between Fortunate Start Investments Limited as charger and China Orient as chargee whereby the entire issued shares of GZ Zhoutouzhui were charged in favour of China Orient to secure the due performance of the Company under the Investment Agreement;
(e) the sale and purchase agreement dated 19 December 2012 entered into between Waymax Investments Limited (“ Waymax ”, a wholly owned subsidiary of the Company) and Everleap Limited (“ Everleap ”) in relation to the acquisition of the 14th floor and car parking spaces nos. 307 & 308 of AXA Centre located in Wanchai, Hong Kong (the “ AXA Property ”) at a consideration of HK$215,000,000;
(f) an extension letter dated 11 January 2013 entered into between Waymax and Everleap to extend the completion date of the sale and purchase of the AXA Property as referred to in item (e) above to any date on or before 22 February 2013 and another extension letter dated 22 February 2013 entered into between the same parties to further extend the completion date to any date on or before 31 December 2013;
(g) the supplemental agreement dated 13 March 2013 entered into between Waymax and Everleap to pay further deposit of HK$2,000,000 by Waymax to Everleap as part payment of consideration for the acquisition of the AXA Property as referred to in item (e) above;
(h) the second supplemental agreement dated 26 March 2013 entered into between Waymax and Everleap pursuant to which both parties agreed that part of the consideration of HK$101,500,000 for the acquisition of the AXA Property as referred to in item (e) above should be paid by way of the issue of a promissory note by the Company;
(i) the promissory note dated 5 April 2013 executed by the Company in favour of Everleap pursuant to which the Company agreed to pay the noteholder the sum of HK$96,000,000 on or before 2 October 2014;
(j) the supplemental agreement dated 29 July 2013 entered into between the Company and Ultimate Advice Investments Limited, a transferee of the promissory note as referred to in item (i) above, in relation to the early repayment of the promissory note in three intervals, the latest one on or before 29 October 2013, resulting in a reduction of the amount payable to HK$76,800,000;
(k) the subscription agreement dated 21 August 2013 (the “ Subscription Agreement ”) entered into between the Company and Express Target Capital Investments Ltd. (“ Express Target ”) in respect of, among others, the issuance of the exchangeable bonds in the principal amount of HK$298,000,000 (the “ Bonds ”) by the Company to Express Target;
(l) the instrument dated 18 October 2013 executed by the Company in favour of Express Target entitling the holder of the Bonds to exchange for shares of GZ Zhoutouzui at a price set out in the Subscription Agreement;

V-6

GENERAL INFORMATION

APPENDIX V

(m) the secondary share charge dated 18 October 2013 executed by Fortunate Start Investments Limited in favour of Express Target over the entire issued and outstanding shares of GZ Zhoutouzui; and
(n) the Disposal Agreement.

9. CONSENTS

Each of BDO Limited (“ BDO ”) and DTZ Debenham Tie Leung Limited (“ DTZ Debenham ”) has given and has not withdrawn their respective written consents to the inclusion of their respective report in this circular with references to their name in form and context in which they respectively appear.

10. QUALIFICATION OF EXPERTS

The followings are the qualification of the experts who have given opinion or advice, contained in this circular:

Name	Qualifications
BDO	Certified Public Accountants
DTZ Debenham	Independent valuer

As at the Latest Practicable Date, each of BDO and DTZ Debenham did not have any holding, directly or indirectly, of any securities in any member of the Group or any right or option (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for any securities of any member of the Group.

As at the Latest Practicable Date, each of BDO and DTZ Debenham did not have any direct or indirect interests in any assets which since 31 December 2013 (being the date to which the latest published audited consolidated financial statements of the Group were made up) have been acquired or disposed of by, or leased to, or which are proposed to be acquired or disposed of by, or leased to, any member of the Group.

11. GENERAL

(a) The registered office of the Company is at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.
(b) The head office and principal place of business of the Company in the PRC is 32nd to 33rd Floors of HNA Tower, 8 Linhe Zhong Road, Tianhe District, Guangzhou, Guangdong Province, the PRC.
(c) The principal place of business of the Company in Hong Kong is at 2502B, Tower 1, Admiralty Centre, 18 Harcourt Road, Hong Kong.

V-7

GENERAL INFORMATION

APPENDIX V

(d) The company secretary of the Company is Ms. CHEUNG Lin Shun. who is a fellow member of the Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants.
(e) The Hong Kong branch share registrar and transfer office of the Company is Tricor Abacus Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(f) In the event of any inconsistency, the English language text of this circular shall prevail over the Chinese language text.

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at the office of the Company at 2502B, Tower 1, Admiralty Centre, 18 Harcourt Road, Hong Kong, for a period of 14 days from the date of this circular:

(a) this circular;
(b) the Disposal Agreement;
(c) the memorandum of association and articles of association of the Company;
(d) the published audited consolidated financial statements of the Company for each of the two financial years ended 31 December 2012 and 31 December 2013;
(e) the consent letters of BDO and DTZ Debenham as referred to in the section headed “Consents” in this appendix;
(f) BDO’s report on review of the unaudited financial information of Guizhou Yu Jun for the three years ended 31 December 2011, 2012 and 2013;
(g) the report from BDO on the unaudited pro forma financial information of the Remaining Group, the text of which is set out in Appendix III to this circular;
(h) the letter and valuation certificate prepared by DTZ Debenham in respect of the Properties, the text of which is set out in Appendix IV to this circular; and
(i) the material contracts as referred to in the section headed “Material contracts” in this appendix.

V-8

NOTICE OF THE SGM

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==> picture [262 x 36] intentionally omitted <==

(incorporated in Bermuda with limited liability) (Stock Code: 00059)

NOTICE IS HEREBY GIVEN that a special general meeting of the shareholders of Skyfame Realty (Holdings) Limited (the “ Company ”) will be held at Empire Room 1, 1st Floor, Empire Hotel Hong Kong, Wanchai, 33 Hennessy Road, Wanchai, Hong Kong at 3:45 p.m. on Tuesday, 10 June 2014 for the purpose of considering and, if thought fit, passing (with or without modifications) the following resolution as an ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT :

(i) the agreement dated 23 April 2014 (the “ Disposal Agreement ”, a copy of which has been produced to the meeting and marked “A” and signed by the chairman of the meeting for the purpose of identification) entered into between 廣州譽浚諮詢服務有限公司 (Guangzhou Yu Jun Consulting Service Company Limited), an indirectly wholly owned subsidiary of the Company; 貴州協輝房地產開發有限公司 (Guizhou Xiehui Property Development Company Limited); 貴州眾佳和力房地產信息諮詢有限公司 (Guizhou Zhongjia Heli Property Information Consultancy Company Limited) (collectively referred to as the “ Vendors ”), as vendors and 貴州凱創貿易有限公司 (Guizhou Kaichuang Trading Company Limited) and 貴州百川實業有限公司 (Guizhou Baichuan Industrial Company Limited), as purchasers in relation to the disposal by the Vendors of the entire issued share capital of 貴州譽浚房地產開發有限公司 (Guizhou Yu Jun Real Estate Guizhou Development Company Limited), a subsidiary in which 55% of the equity is held indirectly by the Company, for an aggregate consideration of RMB50,000,000 and the transactions contemplated thereunder be and are hereby generally and unconditionally approved in all respects; and
(ii) the directors of the Company (the “ Directors ”) be and are hereby authorized to do all things and acts and sign all documents which they consider necessary, desirable or expedient in connection with or/to implement and/or give effect to the Disposal Agreement and the transactions contemplated thereunder and to agree to such variation, amendment or waiver as are, in the opinion of the Directors, in the interest of the Company.”

By order of the Board Skyfame Realty (Holdings) Limited CHEUNG Lin Shun

Company Secretary

Hong Kong, 23 May 2014

* For identification purposes only

SGM-1

NOTICE OF THE SGM

Notes:

Any member of the Company entitled to attend and vote at the meeting by the above notice shall be entitled to appoint another person as his/her proxy to attend and vote instead of such member. A proxy needs not be a member of the Company.
The instrument appointing a proxy shall be in writing under the hand of the appointor or of his/her attorney duly authorized in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person authorized to sign the same.
The instrument appointing a proxy and (if required by the Board) the power of attorney or other authority (if any) under which it is signed, or a certified copy of such power or authority must be delivered to the office of Tricor Abacus Limited, the Company’s branch share registrar in Hong Kong at Level 22, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong or by way of notice to or in any document accompanying the notice convening the meeting not less than fortyeight (48) hours before the time appointed for holding the meeting or adjourned meeting at which the person named in the instrument proposed to vote and in default, the instrument of proxy shall not be treated as valid.
Delivery of an instrument appointing a proxy shall not preclude a member of the Company from attending and voting in person at the meeting convened and in such event, the instrument appointing a proxy shall be deemed to be revoked.
In the case of joint holders of any share, if more than one of such joint holders be present at any meeting, the vote of the senior who tenders a vote, whether in person, or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register in respect of the joint holding.
As at the date of this notice, the board of directors of the Company comprises Mr. YU Pan, Mr. WEN Xiaobing and Mr. WONG Lok as executive directors; Mr. ZHONG Guoxing as non-executive director and Mr. CHOY Shu Kwan, Mr. CHENG Wing Keung, Raymond and Ms. CHUNG Lai Fong as independent non-executive directors.

SGM-2

AI assistant

Greenheart Group Limited — Proxy Solicitation & Information Statement 2014

48939_rns_2014-05-22_36a6b370-2797-48e7-afd5-3535b6e265c9.pdf

VERY SUBSTANTIAL DISPOSAL IN RELATION TO DISPOSAL OF INTEREST IN A SUBSIDIARY AND NOTICE OF SGM

Financial adviser

Crosby Securities Limited

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

VERY SUBSTANTIAL DISPOSAL IN RELATION TO DISPOSAL OF INTEREST IN A SUBSIDIARY

INTRODUCTION

LETTER FROM THE BOARD

THE DISPOSAL AGREEMENT

Date:

Parties:

LETTER FROM THE BOARD

Assets to be disposed of

Consideration

LETTER FROM THE BOARD

Distribution of dividend

Conditions precedent

LETTER FROM THE BOARD

Completion

FINANCIAL EFFECTS OF THE DISPOSAL AND USE OF PROCEEDS

LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE DISPOSAL

LETTER FROM THE BOARD

INFORMATION ON THE TARGET COMPANY

LETTER FROM THE BOARD

INFORMATION ON THE REMAINING GROUP

I. Zhoutouzui Project

LETTER FROM THE BOARD

II. Yongzhou Project

III. Tianhe Project

LETTER FROM THE BOARD

IV. Nanning Project

IMPLICATIONS OF THE LISTING RULES

THE SGM

LETTER FROM THE BOARD

RECOMMENDATION

ADDITIONAL INFORMATION

Yours faithfully,

1. FINANCIAL SUMMARY

2. INDEBTEDNESS STATEMENT

3. WORKING CAPITAL

4. MATERIAL ADVERSE CHANGE

5. FINANCIAL AND TRADING PROSPECTS OF THE REMAINING GROUP

6. MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

FOR THE YEAR ENDED 31 DECEMBER 2013

Business Review and Outlook

Business review

APPENDIX I

Properties under development and land reserves

Zhoutouzui Project

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Yongzhou Project

Tianhe Project

APPENDIX I

Nanning Project

Investment properties

APPENDIX I

Outlook

Liquidity and Financial Resources

Capital structure and liquidity

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Borrowings and pledge of assets

Foreign Currency Management

Contingent Liabilities

Employees

FOR THE YEAR ENDED 31 DECEMBER 2012

Business Review and Outlook

Business review

Properties held for or under development

Zhoutouzui Project

APPENDIX I

Yongzhou Project

Tianhe Project

Greenheart Group Limited Proxy Solicitation & Information Statement 2014