THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Pan Asia Mining Limited (the "Company"), you should at once hand this circular together with the enclosed form of proxy to the purchaser or transferee or to the bank, licensed securities dealer, registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or 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.

This circular is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the Shares or other securities in the Company.

PAN ASIA MINING LIMITED 宴亞礦業有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8173)

(1) INCREASE IN AUTHORISED SHARE CAPITAL;
(2) PROPOSED RIGHTS ISSUE ON THE BASIS OF THREE RIGHTS SHARES FOR EVERY TEN SHARES HELD ON THE RECORD DATE;
(3) PROPOSED BONUS ISSUE OF TWO BONUS SHARES FOR EVERY THREE RIGHTS SHARES TAKEN UP UNDER THE RIGHTS ISSUE;
(4) CONNECTED TRANSACTIONS INVOLVING THE RESTRUCTURING OF CONVERTIBLE BONDS AND ISSUE OF NEW CONVERTIBLE BONDS;
(5) UPDATE ON ENFORCEMENT OF CHARGE OVER THE SHARES AND CONVERTIBLE BONDS HELD BY SUBSTANTIAL SHAREHOLDER AND CONNECTED TRANSACTIONS INVOLVING SETTLEMENT AGREEMENT WITH MAGIC STONE;
(6) APPOINTMENT OF INDEPENDENT FINANCIAL ADVISER; AND
(7) NOTICE OF EXTRAORDINARY GENERAL MEETING

Independent Financial Adviser to

the Independent Board Committee and the Independent Shareholders

長江證券融資(香港)有限公司

CHANGJIANG CORPORATE FINANCE (HK) LIMITED

A letter from the Board is set out on pages 15 to 57 of this circular. A letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on pages 58 and 59 of this circular. A letter of advice from Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders is set out on pages 60 to 100 of this circular.

To qualify for the Rights Issue, the Shareholder must be registered as a member of the Company on the Record Date, which is currently expected to be Friday, 16 January 2015. In order to be registered as a member of the Company on the Record Date, the Shareholder must lodge any transfers of Shares (together with the relevant share certificate(s)) with the Share Registrar by 4:30 p.m. on Wednesday, 14 January 2015. The last day of dealings in Shares on a cum-rights basis is therefore expected to be Monday, 12 January, 2015. The Shares will be dealt with on an ex-rights basis from Tuesday, 13 January 2015.

A notice convening the EGM to be held at the Company's principal place of business in Hong Kong at 11:00 a.m. on Friday, 9 January 2015 is set out on pages EGM-1 to EGM-4 of this circular. If a Shareholder is not able to attend the EGM in person, such Shareholder is requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon together with any power of attorney or other authority (if any) under which it is signed or a certified copy of such power of attorney to the office of the Share Registrar at Level 22, Hopewell Centre, 183 Queen's Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the EGM. Completion and return of the form of proxy will not preclude a Shareholder from attending and voting in person at the EGM should the Shareholder so desire. The Share Registrar is Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen's Road East, Hong Kong.

It should be noted that the Underwriters may, upon giving notice in writing to the Company, terminate the Underwriting Agreement at any time prior to the Latest Time for Termination, upon the occurrence of certain events, including force majeure events. These events are set out in the section headed "Termination of the Underwriting Agreement" on pages 13 and 14 of this circular.

The Shares are expected to be dealt in on an ex-rights basis from Tuesday, 13 January, 2015. Dealings in the Rights Shares in the nil-paid form will take place from 9:00 a.m. on Wednesday, 21 January 2015 to 4:00 p.m. on Wednesday, 28 January 2015. If the conditions of the Rights Issue are not fulfilled on or before 4:30 p.m. on Wednesday, 4 February 2015 (or such later time and/or date as the Company and the Underwriters may determine), or the Underwriting Agreement is terminated by the Underwriters, the Rights Issue will not proceed. Any persons contemplating buying or selling Shares from the date of the Announcement up to the date on which all the conditions of the Rights Issue are fulfilled, and any dealings in the Rights Shares in their nil-paid form between 9:00 a.m. on Wednesday, 21 January 2015 to 4:00 p.m. on Wednesday, 28 January 2015, (both days inclusive), bear the risk that the Rights Issue may not become unconditional or may not proceed. Any Shareholders or other persons contemplating dealing in the Shares or nil-paid Rights Shares are recommended to consult their own professional advisers.

19 December 2014

CHARACTERISTICS OF GEM

GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM.

— i —

CONTENTS

Page

Definitions 1
Summary of the Rights Issue and Bonus Issue 9
Expected Timetable 11
Termination of the Underwriting Agreement 13
Letter from the Board 15
Letter from the Independent Board Committee 58
Letter from the Independent Financial Adviser 60
Appendix I — Financial Information of the Group I-1
Appendix II — Unaudited Pro Forma Financial Information of the Group II-1
Appendix III — General Information III-1
Notice of the EGM EGM-1

— ii —

DEFINITIONS

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

"Acceptance Date"
the latest date on which the Rights Shares are accepted and paid, which is expected to be Monday, 2 February 2015 (or such other date as the Underwriters and the Company may agree from time to time);

"Adjusted Subscription Price"
has the meaning ascribed to it in the section headed "Rights Issue with Bonus Issue — Subscription Price";

"Announcement"
the announcement of the Company dated 23 November 2014 relating to, among other things, the Share Capital Increase, Rights Issue, Bonus Issue, the Underwriting, the Bond Restructuring and the Settlement Agreement;

"associate(s)"
has the meaning ascribed thereto under the GEM Listing Rules;

"Board"
the board of Directors;

"Bond Restructuring"
the proposed restructuring of the terms of the Convertible Bonds in accordance with the terms of the Bond Restructuring Agreement comprising (i) the amendment to the terms of the Convertible Bonds to grant the Company a right to redeem all the outstanding Convertible Bonds at a redemption price of US$140,000,000 (equivalent to approximately HK$1,092,000,000), (ii) the redemption of such amended Convertible bonds pursuant to such redemption right; and (iii) the issue of the New Bonds in satisfaction and cancellation of the Redemption Amount payable by the Company following such redemption;

"Bond Restructuring Agreement"
the conditional debt restructuring agreement dated 22 September 2014 (as amended by a supplemental agreement on 21 November 2014) entered into between the Company and Kesterion, in respect of the Bond Restructuring;

"Bondholder(s)"
holder(s) of the New Bonds;

"Bonus Issue"
the proposed issue of Bonus Shares on the basis of two Bonus Shares for every three Rights Shares taken up under the Rights Issue;

— 1 —

DEFINITIONS

“Bonus Share(s)”
New Shares to be allotted and issued pursuant to the Bonus Issue, being not less than 201,836,816 Bonus Shares (assuming no outstanding Share Options are exercised, no further issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) and no more than 218,639,376 Bonus Shares (assuming all the outstanding Share Options are exercised and no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date);

“Business Day(s)”
any day (excluding Saturdays, Sundays and a day on which a tropical cyclone warning signal No. 8 or above or a black rainstorm warning signal is hoisted in Hong Kong at any time between 9:00 a.m. and 4:00 p.m.) on which banks generally are open for business in Hong Kong;

“CCASS”
the Central Clearing and Settlement System established and operated by HKSCC;

“China Shipbuilding”
China Shipbuilding Industrial Complete Equipment and Logistics Company Limited (中船工業成套物流有限公司), a company established in the PRC, which is a wholly owned subsidiary of China State Shipbuilding Corporation (中國船舶工業集團有限公司). China State Shipbuilding Corporation is a state-owned enterprise in the PRC;

“CL Securities”
Cheong Lee Securities Limited, a company incorporated in Hong Kong with limited liability;

“Companies (WUMP) Ordinance”
Companies (Winding Up and Miscellaneous Provisions) Ordinance, Chapter 32 of the Laws of Hong Kong;

“Company”
Pan Asia Mining Limited, a company incorporated in Cayman Islands with limited liability, the shares of which are listed on the Growth Enterprise Market of the Stock Exchange;

“Completion Date”
completion of the Bond Restructuring Agreement in accordance with the terms and conditions of the Bond Restructuring Agreement;

“connected person(s)”
has the meaning ascribed thereto under the GEM Listing Rules;

“Conversion Price”
the price at which new Shares will be issued upon the conversion of the New Bonds which will initially be HK$0.50 per Conversion Share and will be subject to adjustment in the manner provided for in the terms and conditions of the New Bonds;

— 2 —

DEFINITIONS

"Conversion Shares" new Shares falling to be issued and allotted upon exercise of the conversion rights attaching to the New Bonds;

"Convertible Bonds" the ten-year unsecured, non-interest bearing convertible bonds issued to Kesterion by the Company on 18 December 2008, the outstanding principal amount of which is US$201,474,359 (equivalent to approximately HK$1,571,500,000) as at the Latest Practicable Date;

"Director(s)" director(s) of the Company;

"EGM" an extraordinary general meeting of the Company to be convened at 11:00 a.m. on Friday, 9 January 2015 to approve, among other things, the Share Capital Increase, the Rights Issue, the Bonus Issue, the Underwriting, the Bond Restructuring, the Settlement Agreement and the Specific Mandate;

"GEM" Growth Enterprise Market;

"GEM Listing Rules" the Rules Governing the Listing of Securities on the Growth Enterprise Market of the Stock Exchange;

"Group" the Company and its subsidiaries;

"HK$" Hong Kong dollar, the lawful currency of Hong Kong;

"HKSCC" Hong Kong Securities Clearing Company Limited;

"Hong Kong" the Hong Kong Special Administrative Region of the PRC;

"Independent Board Committee" an independent board committee of the Company comprising the independent non-executive Directors which has been established to advise the Independent Shareholders on the Rights Issue, the Bonus Issue, the Bond Restructuring and the Settlement Agreement;

"Independent Financial Adviser" Changjiang Corporate Finance (HK) Limited, the independent financial adviser appointed to advise the Independent Board Committee and the Independent Shareholders on the Rights Issue, the Bonus Issue, the Bond Restructuring and the Settlement Agreement;

— 3 —

DEFINITIONS

Independent Shareholders"
Shareholders other than Kesterion, Ms. Eva Wong, their associates and any Shareholders who are involved or interested in the transactions regarding the Rights Issue, the Bonus Issue, the Underwriting, the Bond Restructuring, Settlement Agreement, the Kesterion Charge and/or the Specific Mandate;

Independent Third Party(ies)"
person(s) who, to the best of the Director's knowledge, information and belief having made all reasonable enquiry, is a third party independent of the Company and its connected person(s);

"Kesterion"
Kesterion Investments Limited, a company incorporated in the British Virgin Islands, which is wholly and beneficially owned by Ms. Eva Wong and a substantial shareholder of the Company;

"Kesterion Charge"
a security over 252,153,400 Shares and the Convertible Bonds held by Kesterion created in favour of China Shipbuilding pursuant to the security document dated 13 March 2013 and a supplemental and amendment deed dated 11 October 2013 entered into between Kesterion and China Shipbuilding. Such security was assigned to Magic Stone;

"Last Trading Day"
22 September 2014, being the date of the Underwriting Agreement;

"Latest Practicable Date"
17 December 2014, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained in this circular;

"Listing Committee"
has the meaning ascribed thereto under the GEM Listing Rules;

"Magic Stone"
Magic Stone Fund (China), a company incorporated in Cayman Islands with limited liability;

"New Bonds"
the five-year 2.0% convertible bonds in principal amount of US$140 million to be issued by the Company and to be created and constituted pursuant to the Bond Restructuring;

"Non-Qualifying Shareholder(s)"
those Overseas Shareholders whom the Directors, based on legal opinions provided by the Company's legal advisers, consider it necessary or expedient not to offer the Rights Shares to such Shareholders on account either of legal restrictions under the laws of the relevant place or the requirements of the relevant regulatory body or stock exchange in that place;

— 4 —

DEFINITIONS

“NPR”	nil-paid Rights Shares;
“Overseas Shareholder(s)”	Shareholder(s) whose name(s) appear(s) on the register of members of the Company at the close of business on the Record Date and whose address(es) as shown on such register is (are) outside Hong Kong;
“PAL(s)”	the renounceable provisional allotment letter(s) proposed to be issued to the Qualifying Shareholders in connection with the Rights Issue;
“Posting Date”	Monday, 19 January 2015 or such other date as the Underwriters may agree in writing with the Company, as the date of despatch of the Prospectus Documents to the Qualifying Shareholders or the Prospectus for information only (as the case may be) to the Non-Qualifying Shareholders;
“PRC”	the People’s Republic of China which, for the purpose of this circular, excludes Hong Kong, Taiwan and the Macau Special Administrative Region of the People’s Republic of China;
“Previous Announcements”	announcements of the Company dated 13 March 2013, 11 October 2013 and 29 July 2014;
“Prospectus”	the prospectus to be despatched to the Shareholders containing details of the Rights Issue and the Bonus Issue;
“Prospectus Documents”	the Prospectus and the PAL;
“Qualifying Shareholders”	Shareholders, other than the Non-Qualifying Shareholders;
“Receivers”	two (2) receivers appointed by China Shipbuilding to exercise all the powers of a receiver given by the terms of the Kesterion Charge;
“Record Date”	Friday, 16 January 2015 (or such other date as the Underwriters may agree in writing with the Company), as the date by reference to which entitlements to the Rights Issue are expected to be determined;
“Redemption Amount”	the redemption amount to be satisfied and cancelled for the purpose of the redemption of the amended Convertible Bonds;
“Redemption Right”	the rights to redeem the amended Convertible Bonds under the Bond Restructuring Agreement;

— 5 —

DEFINITIONS

“Rights Issue”
the proposed issue by way of rights on the basis of three Rights Shares for every ten Shares in issue and held on the Record Date at the Subscription Price on the terms and subject to the conditions set out in the Underwriting Agreement and the Prospectus Documents;

“Rights Share(s)”
new Shares to be issued and allotted under the Rights Issue, being not less than 302,755,224 Rights Shares (assuming no outstanding Share Options are exercised, no further issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) and no more than 327,959,064 Shares (assuming all the outstanding Share Options are exercised and no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date);

“RMB”
Renminbi, the lawful currency of the PRC;

“SFC”
the Securities and Futures Commission of Hong Kong;

“SFO”
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong);

“Settlement Agreement”
the settlement agreement dated 21 November 2014 entered into between the Company, certain of its subsidiaries and Magic Stone. Please refer to the section headed “Update on enforcement of charge over the Shares and Convertible Bonds held by substantial shareholder and connected transactions involving Settlement Agreement with Magic Stone”;

“Share(s)”
ordinary share(s) of HK$0.50 each in the share capital of the Company;

“Share Capital Increase”
the increase in the authorised share capital of the Company from HK$1,000,000,000.00 divided into 2,000,000,000 Shares to HK$2,500,000,000.00 divided into 5,000,000,000 Shares by the creation of 3,000,000,000 new Shares to be proposed at the EGM;

“Share Options”
outstanding share options granted under the Share Option Scheme 2002 and Share Option Scheme 2012;

“Share Option Scheme 2002”
the share option scheme of the Company adopted on 25 April 2002;

“Share Option Scheme 2012”
the share option scheme of the Company adopted on 30 July 2012;

“Share Option Schemes”
the Share Option Scheme 2002 and the Share Option Scheme 2012;

— 6 —

DEFINITIONS

“Share Registrar”	the branch share registrar of the Company in Hong Kong, being Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong;
“Shareholder(s)”	holder(s) of Shares;
“Specific Mandate”	the specific mandate to be sought from the Independent Shareholders at the EGM to authorise the Directors to issue the Conversion Shares;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“Subscription Price”	HK$0.50 per Rights Share;
“subsidiary”	has the meaning ascribed thereto under the GEM Listing Rules;
“substantial shareholder”	has the meaning ascribed thereto under the GEM Listing Rules;
“Takeovers Code”	the Hong Kong Code on Takeovers and Mergers;
“Trade Contracts”	a trade contract dated 13 March 2013 and two trade contracts dated 6 May 2013 entered into by certain subsidiaries of the Group. The trade contract dated 13 March 2013 was for the trading of fuel oil with China Shipbuilding and all amounts under the contract were denominated in US$. The two trade contracts dated 6 May 2013 were for the trading of coal with China Shipbuilding. One of which was denominated in US$ and the other one was denominated in RMB. The rights & interests of debts under such trade contracts were assigned to Magic Stone on 7 November 2014;
“Underwriters”	Kesterion and CL Securities;
“Underwriting”	the underwriting by the Underwriters in respect of the Rights Issue;
“Underwriting Agreement”	the underwriting agreement dated 22 September 2014 (as amended by a supplemental agreement on 21 November 2014) entered into between the Company and the Underwriters in relation to the underwriting arrangement in respect of the Rights Issue;
“Underwritten Shares”	all the Rights Shares (other than the Rights Shares to be subscribed by Kesterion pursuant to its irrevocable undertaking);

— 7 —

DEFINITIONS

“Untaken Shares”	Rights Shares not taken up at or before 4:30 p.m. on the date of acceptance of, and payment for, the Rights Shares;
“US$”	United States dollar, the lawful currency of The United States; and
“%” or “per cent.”	per cent.

For the purpose of illustration only, the amounts denominated in US$ in this circular are translated into HK$ at the rate of US$1 = HK$7.8. Such translation should not be construed as a representation that the currency could actually be converted into HK$ at that rate or at all.

— 8 —

SUMMARY OF THE RIGHTS ISSUE AND BONUS ISSUE

The following information is derived from, and should be read in conjunction with, the full text of this circular:

Basis of the Rights Issue : three Rights Shares for every ten Shares held on the Record Date

Basis of the Bonus Issue : two Bonus Shares for every three Rights Shares taken up under the Rights Issue

Number of Shares in issue as at the Latest Practicable Date : 1,009,184,080 Shares

Number of Rights Shares : not less than 302,755,224 Rights Shares (assuming no outstanding Share Options are exercised, no further issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) and no more than 327,959,064 Rights Shares (assuming all the outstanding Share Options are exercised and no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) pursuant to the Rights Issue (Notes)

Aggregate nominal value of Rights Shares to be issued under the Rights issue : not less than HK$151,377,612 (assuming no outstanding Share Options are exercised, no further issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) and no more than HK$163,979,532 (assuming all the outstanding Share Options are exercised and no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) pursuant to the Rights Issue (Notes)

Number of Bonus Shares : not less than 201,836,816 Bonus Shares (assuming no outstanding Share Options are exercised, no further issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) and no more than 218,639,376 Bonus Shares (assuming all the outstanding Share Options are exercised and no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) pursuant to the Bonus Issue (Notes)

Aggregate nominal value of Bonus Shares to be issued under the Bonus Issue : not less than HK$100,918,408 (assuming no outstanding Share Options are exercised, no further issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) and no more than HK$109,319,688 (assuming all the outstanding Share Options are exercised and no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) pursuant to the Bonus Issue (Notes)

Subscription Price : HK$0.50 per Rights Share with nominal value of HK$0.50 each

— 9 —

SUMMARY OF THE RIGHTS ISSUE AND BONUS ISSUE

Notes:

(1) As at the Latest Practicable Date, the Company has 84,012,800 outstanding Share Options, representing 262,800 outstanding share options with the exercise price of HK$3.58 per Share granted under the Share Option Scheme 2002 and 83,750,000 outstanding share options with the exercise price of HK$0.50 per Share granted under the Share Option Scheme 2012. As at the Latest Practicable Date, each of the exercise prices of the options granted under the Share Option Scheme 2002 and the Share Option Scheme 2012 were approximately 1,449.78% and 116.45% higher than the average of the closing prices as quoted on the Stock Exchange for the last five trading days up to and including the Latest Practicable Date, respectively. In this regard, it is unlikely that the holders of those Share Options will exercise those options. Assuming no further grant of Share Options under the Share Option Scheme 2012 by the Company and full exercise of the subscription rights attaching to the Share Options granted on and before the Record Date, an additional 25,203,840 Rights Shares and 16,802,560 Bonus Shares will be issued.

As at the Latest Practicable Date, there were outstanding Convertible Bonds in the aggregate principal amount of US$201,474,359 (equivalent to approximately HK$1,571,500,000). As announced by the Company on 29 July 2014, the Receivers were appointed by China Shipbuilding over such Convertible Bonds held by Kesterion. The Company has been informed that China Shipbuilding has assigned its rights under the Kesterion Charge to Magic Stone. Please see further information concerning the status of the Kesterion Charge in the section headed "Update on enforcement of charge over the Shares and Convertible Bonds held by substantial shareholder and connected transactions involving Settlement Agreement with Magic Stone" in this circular.

(2) In the circumstances, Kesterion has irrevocably undertaken to the Company and the Underwriters, to the extent permitted, not to convert any of the Convertible Bonds into Shares from the date of the Underwriting Agreement and up to (a) the completion of the Rights Issue and the Bonus Issue, or (b) the termination of the Bond Restructuring Agreement, whichever is earlier. Further, pursuant to the Settlement Agreement, Magic Stone shall not and shall cause the Receivers not to exercise the conversion rights attaching to the Convertible Bonds under the Kesterion Charge and shall not take further enforcement steps in relation to the Kesterion Charge (including the exercise of any voting rights relating thereto) pending the implementation of the Settlement Agreement. For further details, please refer to the section headed "Update on enforcement of charge over the Shares and Convertible Bonds held by substantial shareholder and connected transactions involving Settlement Agreement with Magic Stone".

Save for the Share Options and the Convertible Bonds, as at the Latest Practicable Date, the Company has no outstanding convertible securities, options or warrants in issue which confer any right to subscribe for, convert or exchange into Shares.

Assuming the Share Options are not exercised and the Convertible Bonds are not converted and there will not be any further issue of new Shares or repurchase of Shares on or before the Record Date, 302,755,224 nil-paid Rights Shares and 201,836,816 Bonus Shares proposed to be provisionally allotted together with 2,184,000,000 Conversion Shares represent approximately $266.41\%$ of the Company's issued share capital as at the Latest Practicable Date and approximately $72.71\%$ of the Company's issued share capital as enlarged by the issue of the Rights Shares, the Bonus Shares and the Conversion Shares.

— 10 —

EXPECTED TIMETABLE

The expected timetable for the Rights Issue is set out below:

Event	Date^{(Note 1)}
Despatch of Circular about, inter alia, Rights Issue and the Bonus Issue	Monday, 22 December 2014
Latest time for returning and lodging proxy forms for EGM	11:00 a.m. on Wednesday, 7 January 2015
Latest time for lodging transfers of Shares to qualify for attendance and voting at the EGM	4:30 p.m. on Thursday, 8 January 2015
Register of members closes for determining the right to attend the EGM.	Friday, 9 January 2015
EGM	11:00 a.m. on Friday, 9 January 2015
Announcement of poll results of EGM	Friday, 9 January 2015
Last day of dealings in the Shares on cum-rights basis	Monday, 12 January 2015
Ex-date (the first day of dealings in the Shares on ex-rights basis)	Tuesday, 13 January 2015
Latest time for lodging transfers of Shares to qualify for the Rights Issue	4:30 p.m. on Wednesday, 14 January 2015
Register of members closes (both dates inclusive)	Thursday, 15 January 2015 to Friday, 16 January 2015
Record Date	Friday, 16 January 2015
Despatch of Prospectus Documents	Monday, 19 January 2015
First day of dealings in NPR	9:00 a.m. on Wednesday, 21 January 2015
Latest time for splitting of PAL	4:30 p.m. on Friday, 23 January 2015
Last day of dealings in NPR	4:00 p.m. on Wednesday, 28 January 2015
Latest time for acceptance and payment of Right Shares	4:30 p.m. on Monday, 2 February 2015

— 11 —

EXPECTED TIMETABLE

Latest time for the termination of the Underwriting Agreement 4:30 p.m. on Wednesday, 4 February 2015
Announcement of allotment results ... Tuesday, 10 February 2015
Despatch of certificates for fully-paid Rights Shares and the Bonus Shares ... Wednesday, 11 February 2015
Last day of trading of Shares in board lot of 5,000 Shares in the original counter ... Wednesday, 11 February 2015
Expected date of dealings in fully-paid Rights Shares and the Bonus Shares ... 9:00 a.m. on Thursday, 12 February 2015
Effective date of change of board lot size ... 9:00 a.m. on Thursday, 12 February 2015
First day for the designated broker to stand in the market to provide matching services for odd lots of Shares ... 9:00 a.m. on Thursday, 12 February 2015
The last day for the designated broker to provide matching services for odd lots of Shares ... 4:00 p.m. on Friday, 6 March 2015

Notes:

All times in this circular refer to Hong Kong time.
The Company will make further announcement if there is any change to the above timetable. Dates or deadlines specified in this circular for events in the above timetable for (or otherwise in relation to) the Rights Issue are indicative only and may be extended or varied by the Company. Any changes to the anticipated timetable for the Rights Issue, if required, will be published or notified to the Shareholders and the Stock Exchange as and when appropriate.

— 12 —

TERMINATION OF THE UNDERWRITING AGREEMENT

EFFECT OF BAD WEATHER ON THE LATEST TIME FOR ACCEPTANCE OF AND PAYMENT FOR THE RIGHTS SHARES

The latest time for acceptance of and payment for the Rights Shares will not take place if there is:

(i) a tropical cyclone warning signal no. 8 or above; or
(ii) a "black" rainstorm warning, in force in Hong Kong at any local time:

(A) before 12:00 noon and no longer in force after 12:00 noon on the Latest Acceptance Date. Instead the latest time for acceptance of and payment for the Rights Shares will be extended to 5:00 p.m. on the same Business Day; or
(B) between 12:00 noon and 4:00 p.m. on the Latest Acceptance Date. In such event, the latest time for acceptance of and payment for the Rights Shares will be rescheduled to 4:00 p.m. on the following Business Day which does not have either of those warnings in force at any time between 9:00 a.m. and 4:00 p.m..

If the latest time for acceptance of and payment for the Rights Shares does not take place on the currently scheduled date for the Latest Acceptance Date, the dates mentioned in the section headed "Expected Timetable" in this circular may be affected. The Company will notify the Shareholders by way of an announcement of any change to the expected timetable as soon as practicable.

The Underwriters may terminate the Underwriting Agreement by notice in writing to the Company, served prior to the Latest Time for Termination, 4:30 p.m. (Hong Kong time) on Wednesday, 4 February 2015, or such other time as may be agreed between the Underwriter and the Company if:

(i) in the reasonable opinion of the Underwriters, the success of the Rights Issue would be materially and adversely affected by:

(a) the introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may in the sole and absolute opinion of the Underwriters materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or is materially adverse in the context of the Rights Issue;
(b) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date hereof) of a political, military, financial, economic or other nature (whether or not ejusdem generis with any of the foregoing), or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the reasonable opinion of the

— 13 —

TERMINATION OF THE UNDERWRITING AGREEMENT

Underwriters materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or materially and adversely prejudice the success of the Rights Issue or otherwise makes it inexpedient or inadvisable to proceed with the Rights Issue;

(ii) any material breach of any of the representations, warranties or undertakings under the Underwriting Agreement comes to the knowledge of the Underwriters;

(iii) any adverse change in market conditions in Hong Kong or the PRC (including without limitation, any change in fiscal or monetary policy, or foreign exchange or currency markets, suspension or material restriction or trading in securities) occurs which in the sole and absolute opinion of the Underwriters is likely to materially or adversely affect the success of the Rights Issue or otherwise makes it inexpedient or inadvisable to proceed with the Rights Issue;

(iv) there is any change in the circumstances of the Company or any member of the Group which in the sole and absolute opinion of the Underwriters will adversely affect the prospects of the Company, including without limiting the generality of the foregoing the presentation of a petition or the passing of a resolution for the liquidation or winding up or similar event occurring in respect of any of member of the Group or the destruction of any material asset of the Group;

(v) any event of force majeure including, without limiting the generality thereof, any act of God, war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike or lock-out;

(vi) any other material adverse change in relation to the business or the financial or trading position or prospects of the Group as a whole whether or not ejusdem generis with any of the foregoing; or

(vii) any matter which, had it arisen or been discovered immediately before the date of the Prospectus and not having been disclosed in the Prospectus, would have constituted, in the reasonable opinion of the Underwriter, a material omission in the context of the Rights Issue.

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LETTER FROM THE BOARD

PAN ASIA MINING LIMITED 宴亞礦業有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8173)

Executive Directors:
Mr. Koh Tat Lee, Michael (Chairman)
Mr. Cheung Hung Man

Non-executive Director:
Mr. Liang Tong Wei

Independent non-executive Directors:
Mr. Chu Hung Lin, Victor
Mr. Tong Wan Sze
Mr. Fung Kwok Leung

Registered office:
P.O. Box 309
Ugland House
South Church Street
George Town
Grand Cayman
Cayman Islands
British West Indies

Head office and principal place of business in Hong Kong
Units 3404-6, 34/F
AIA Tower
183 Electric Road
North Point
Hong Kong
19 December 2014

To the Shareholders and, for information only, the holders of the Share Options

Dear Sir or Madam,

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LETTER FROM THE BOARD

INTRODUCTION

Reference is made to the Announcement in relation to, among other things, the Share Capital Increase, the Rights Issue, the Bonus Issue, the Underwriting and the Bond Restructuring.

On 23 November 2014, the Board announced that in order to accommodate future issues of Shares which shall include, the Rights Shares, Bonus Shares and the Conversion Shares, as well as to provide the Company with greater flexibility to raise funds by allotting and issuing Shares in the future, the Board proposed to increase the authorised share capital of the Company from HK$1,000,000,000.00 to HK$2,500,000,000.00 by the creation of an additional 3,000,000,000 unissued Shares of a par value of HK$0.50 each. The Share Capital Increase is subject to the approval of the Shareholders by way of an ordinary resolution at the EGM.

The Company further proposed to raise approximately HK$151.4 million to HK$164.0 million before expenses by issuing not less than 302,755,224 new Shares (assuming no outstanding Share Options are exercised, no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) and not more than 327,959,064 new Shares (assuming all the outstanding Share Options are exercised and no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) to the Qualifying Shareholders by way of the Rights Issue at a price of HK$0.50 per Rights Share on the basis of three Rights Shares for every ten Shares held on the Record Date. The Company further proposed to allot and issue Shares on the basis of two Bonus Shares for every three Rights Shares taken up under the Rights Issue.

As Kesterion, one of the Underwriters, is a connected person of the Company, the entering into of the Underwriting Agreement by the Company constitutes a connected transaction for the Company under the GEM Listing Rules. As the Company has not made arrangements for the Qualifying Shareholders to apply for Rights Shares in excess of their entitlements under the Rights Issue in accordance with Rule 10.31(1), and that up to approximately 19.79% of the Untaken Shares will be underwritten by Kesterion (assuming all the outstanding Share Options are exercised and no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date), Independent Shareholders' approval will be required pursuant to Rule 10.31(2) of the GEM Listing Rules in respect of such arrangement under the Rights Issue and Kesterion, Ms. Eva Wong, their associates and those who are involved in or interested in the Rights Issue, the Bonus Issue, the Underwriting, the Bond Restructuring, the Settlement Agreement, the Kesterion Charge and/or and the Specific Mandate will abstain from voting. The payment of the underwriting commission by the Company to Kesterion constitutes a connected transaction of the Company. As the total amount of underwriting commission payable by the Company is within the de minimis threshold for connected transaction under Chapter 20 of the GEM Listing Rules, the payment of commission to Kesterion pursuant to the Underwriting Agreement is exempt from Shareholders' approval, annual review and all disclosure requirements under Chapter 20 of the GEM Listing Rules.

On 22 September 2014, in consideration of Kesterion agreeing to act as an Underwriter in respect of the Rights Issue, the Company and Kesterion entered into the Bond Restructuring Agreement, pursuant to which it is conditionally agreed that (i) the terms of Convertible Bonds will be amended to grant the Company a right to redeem all the outstanding Convertible Bonds at a redemption price

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LETTER FROM THE BOARD

of US$140,000,000 (equivalent to approximately HK$1,092,000,000), (ii) the Company will exercise such Redemption Right and (iii) in satisfaction and cancellation of the Redemption Amount payable under the amended Convertible Bonds following such redemption, the Company will issue the New Bonds to Kesterion.

As disclosed in the Previous Announcements, Kesterion previously created the Kesterion Charge over 252,153,400 Shares and the US$201,474,359 (equivalent to approximately HK$1,571,500,000) principal amount of the Convertible Bonds held by Kesterion in favour of China Shipbuilding as a continuing security to guarantee the due and punctual performance and observance of certain goods delivery and payment obligations and liabilities by the contracted subsidiaries of the Company under the Trade Contracts. Certain obligations required by the Trade Contracts were not performed according to contractual terms. In view of the overdue payment and compensation liabilities payable by the Company to China Shipbuilding and for the purpose of safeguarding the interests in connection with the Trade Contracts, China Shipbuilding appointed the Receivers to exercise all the powers of a receiver given by the terms of the Kesterion Charge. The Kesterion Charge and such payables under the Trade Contracts were assigned to Magic Stone on 7 November 2014. With a view to settling the various overdue liabilities plus interest charges in aggregate net amount of approximately HK$236 million payable by the Group to Magic Stone on or before 28 February 2015, on 21 November 2014, the Company and certain of its subsidiaries entered into the Settlement Agreement with Magic Stone and Kesterion, pursuant to which the Group has conditionally agreed to settle the various overdue payables under the Trade Contracts partly by cash and partly by way of the issue and allotment of 80,000,000 new Shares each fully paid at an issue price of HK$0.50 per Share to Magic Stone. As Magic Stone is entitled to exercise the voting rights of the Shares subject to the Kesterion Charge, it is a substantial shareholder of the Company for purposes of the GEM Listing Rules and therefore a connected person of the Company under the GEM Listing Rules. Accordingly, the entering into of the Settlement Agreement and the transactions contemplated thereunder (including the issue of the 80,000,000 new Shares) constitute a connected transaction for the Company and given that the applicable percentage ratios in respect of that exceed 5% and HK$10,000,000, it is subject to the approval of the Independent Shareholders at the EGM. Magic Stone will abstain from voting on the ordinary resolution approving the Settlement Agreement and the transactions contemplated thereunder. To enhance the financial flexibility of the Group to raise funds in future using its general mandate, the Company will seek a specific mandate at the EGM to authorise the Directors to allot and issue the new 80,000,000 Shares.

The purpose of the Settlement Agreement is to ascertain and settle various overdue payables of the Group in an aggregate amount of approximately HK$236 million under the Trade Contracts in a basket agreement. Such financial assistance received by the Group from Kesterion through the Kesterion Charge was not secured by the assets of the Group. Accordingly, the Kesterion Charge and its consequential release pursuant to the terms of the Kesterion Charge and the Settlement Agreement are fully exempt from Shareholders' approval, annual review and all disclosure requirements under Chapter 20 of the GEM Listing Rules.

Ms. Eva Wong, and her spouse Mr. Koh Tat Lee, Michael are interested in Kesterion and therefore are materially interested in the Rights Issue, the Bonus Issue, the Underwriting, the Bond Restructuring, the Settlement Agreement and the Specific Mandate. Each of them are required to abstain, and have abstained, from voting on the board resolutions in respect of the Bond Restructuring, the Specific Mandate and the transactions under the Settlement Agreement.

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LETTER FROM THE BOARD

The purpose of this circular is to provide you with, among other things, (i) further details of the Share Capital Increase, the Rights Issue, the Bonus Issue, the Underwriting, the Bond Restructuring, the Settlement Agreement and the Specific Mandate; (ii) a letter of recommendation from the Independent Board Committee to the Independent Shareholders; (iii) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Rights Issue, the Bonus Issue, the Bond Restructuring, the Settlement Agreement; and (iv) a notice of EGM.

PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL

In order to accommodate future issues of Shares which shall include, the Rights Shares, Bonus Shares and the Conversion Shares, as well as to provide the Company with greater flexibility to raise funds by allotting and issuing Shares in the future, the Board proposes to increase the authorised share capital of the Company from HK$1,000,000,000.00 to HK$2,500,000,000.00 by the creation of an additional 3,000,000,000 unissued Shares of a par value of HK$0.50.

The Share Capital Increase is conditional upon the passing of an ordinary resolution at the EGM.

RIGHTS ISSUE WITH BONUS ISSUE

Issue statistics

Basis of the Rights Issue : three Rights Shares for every ten Shares held on the Record Date

Basis of the Bonus Issue : two Bonus Shares for every three Rights Shares taken up under the Rights Issue

Number of Shares in issue as at the Latest Practicable Date : 1,009,184,080 Shares

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LETTER FROM THE BOARD

Number of Bonus Shares
: not less than 201,836,816 Bonus Shares (assuming no outstanding Share Options are exercised, no further issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) and no more than 218,639,376 Bonus Shares (assuming all the outstanding Share Options are exercised and no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) pursuant to the Bonus Issue(Notes)

Aggregate nominal value of Bonus Shares to be issued under the Bonus Issue
: not less than HK$100,918,408 (assuming no outstanding Share Options are exercised, no further issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) and no more than HK$109,319,688 (assuming all the outstanding Share Options are exercised and no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) pursuant to the Bonus Issue(Notes)

Subscription Price
: HK$0.50 per Rights Share with nominal value of HK$0.50 each

Notes:

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LETTER FROM THE BOARD

Save for the Share Options and the Convertible Bonds, as at the Latest Practicable Date, the Company had no outstanding convertible securities, options or warrants in issue which confer any right to subscribe for, convert or exchange into Shares.

Assuming the Share Options are not exercised and the Convertible Bonds are not converted and there will not be any further issue of new Shares or repurchase of Shares on or before the Record Date, 302,755,224 nil-paid Rights Shares and 201,836,816 Bonus Shares proposed to be provisionally allotted together with 2,184,000,000 Conversion Shares represent 266.41% of the Company's issued share capital as at the Latest Practicable Date and approximately 72.71% of the Company's issued share capital as enlarged by the issue of the Rights Shares, the Bonus Shares and the Conversion Shares.

Bonus Issue

Subject to the satisfaction of the conditions of the Rights Issue, the Bonus Shares will be issued to the registered holders of the fully-paid Rights Shares on the basis of two Bonus Shares for every three Rights Shares taken up under the Rights Issue.

On the basis of 302,755,224 Rights Shares to be issued under the Rights Issue, 201,836,816 Bonus Shares will be issued (assuming no outstanding Share Options are exercised, no further issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date).

Qualifying Shareholders

The Company will send the Prospectus Documents to Qualifying Shareholders only. To qualify for the Rights Issue, a Shareholder must:

be registered as a member of the Company at the close of business on the Record Date; and
be a Qualifying Shareholder.

In order to be registered as members of the Company at the close of business on the Record Date, owners of Shares must lodge any transfers of Shares (together with the relevant share certificates) with the Company's Share Registrar in Hong Kong, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen's Road East, Hong Kong for registration no later than 4:30 p.m. on Wednesday, 14 January 2015.

Closure of register of members

The register of members of the Company will be closed on Friday, 9 January 2015 for determining the right to attend the EGM.

To determine the eligibility for the Rights Issue and Bonus Issue, the register of members of the Company will be closed from Thursday, 15 January 2015 to Friday, 16 January 2015, both days inclusive. No transfer of Shares will be registered during this period.

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LETTER FROM THE BOARD

Rights of Overseas Shareholders

The Prospectus Documents are not intended to be registered under the applicable securities legislation of any jurisdiction other than Hong Kong. As at the Latest Practicable Date, there was one Overseas Shareholder with its address registered in the British Virgin Islands. No Overseas Shareholders will be excluded from participating in the Rights Issue and the Bonus Issue.

In compliance with the necessary requirements of the GEM Listing Rules, the Company will make enquiries regarding the feasibility of extending the Rights Issue to the Overseas Shareholders (if any). If, based on legal opinions, the Directors consider that it is necessary or expedient not to offer the Rights Shares to the Overseas Shareholders on account either of the legal restrictions under the laws of the relevant place or the requirements of the relevant regulatory body or stock exchange in that place, the Rights Issue will not be available to such Overseas Shareholders. Further information in this connection will be set out in the Prospectus Documents containing, among other things, details of the Rights Issue, to be dispatched to the Qualifying Shareholders as soon as practicable. The Company will send copies of the Prospectus to the Non-Qualifying Shareholders for their information only, but will not send any PAL to them.

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

Subscription Price

The Subscription Price for the Rights Shares is HK$0.50 per Rights Share, payable in full upon acceptance of the relevant provisional allotment of Rights Shares or when a transferee of nil-paid Rights Shares applies for the Rights Shares.

The Subscription Price represents:

(a) a premium of approximately 47.06% over the closing price of HK$0.34 per Share as quoted on the Stock Exchange on the Last Trading Day;

(b) a premium of approximately 47.06% over the average closing price of approximately HK$0.34 per Share for the five consecutive trading days ended on the Last Trading Day;

(c) a premium of approximately 51.52% over the theoretical ex-rights price of approximately HK$0.33 per Share based on the closing price of HK$0.34 per Share as quoted on the Stock Exchange on the Last Trading Day;

(d) a premium of approximately 122.22% over the closing price of HK$0.225 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and

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LETTER FROM THE BOARD

(e) a premium of approximately 46.67% over the theoretical ex-rights price of approximately HK$0.33 per Share after the Rights Issue (after taking into consideration of the Bonus Issue), based on the closing price of HK$0.225 per Share as quoted on the Latest Practicable Date.

Average subscription price for each of the 3 Rights Shares and the 2 Bonus Shares to be issued is HK$0.3 per Share (the "Adjusted Subscription Price").

The Adjusted Subscription Price represents:

(a) a discount of approximately 11.76% to the closing price of HK$0.34 per Share as quoted on the Stock Exchange on the Last Trading Day;

(b) a discount of approximately 11.76% to the average closing price of approximately HK$0.34 per Share for the five consecutive trading days ended on the Last Trading Day;

(c) a discount of approximately 9.09% to the theoretical ex-rights price of approximately HK$0.33 per Share based on the closing price of HK$0.34 per Share as quoted on the Stock Exchange on the Last Trading Day;

(d) a premium of approximately 33.33% over the closing price of HK$0.225 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and

The Subscription Price was determined after arm's length negotiations between the Company and the Underwriters with reference to (a) the market price of the Shares prior to the Last Trading Day; and; (b) net Adjusted Subscription Price. The estimated net subscription price per Rights Share is expected to be approximately HK$0.49.

The Directors (including the independent non-executive Directors who have considered the advice of the Independent Financial Adviser) consider the terms of the Rights Issue and the Bonus Issue, including the Adjusted Subscription Price which has been set as a discount to the recent closing prices of the Shares with an objective to encourage existing Shareholders to take up their entitlements so as to participate in the potential growth of the Company, to be fair and reasonable and in the best interests of the Company and the Shareholders as a whole.

Basis of provisional allotment

The basis of the provisional allotment shall be three Rights Shares for every ten Shares in issue and held on Record Date, being 302,755,224 Rights Shares (assuming no outstanding Share Options are exercised, no further issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) or 327,959,064 Rights Shares (assuming all the outstanding Share Options are

LETTER FROM THE BOARD

exercised and no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date), at a price of HK$0.50 per Rights Share. Application for all or any part of a Qualifying Shareholder's provisional allotment should be made by completing the PAL and lodging the same with a remittance for the Rights Shares being applied for.

Fractions of Rights Shares and Bonus Shares

The Company will not provisionally allot and will not accept application for any fractions of the Rights Shares. On the basis of provisional allotment of three Rights Shares for every ten Shares held by the Qualifying Shareholders on the Record Date, no fractional entitlements to the Rights Shares will arise under the Rights Issue. No fractional entitlements to the Bonus Issue will arise under the Bonus Issue.

Status of the Rights Shares and Bonus Shares

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

No application for excess Rights Shares

The Qualifying Shareholders will not be entitled to subscribe for any Rights Shares in excess of their respective entitlements. Considering that the Rights Issue will give the Qualifying Shareholders an equal and fair opportunity to maintain their respective pro rata shareholding interests in the Company, the Company considers that if application for excess Rights Shares is arranged, the Company would require to put in additional effort and costs (estimated to be HK$80,000 to HK$100,000) to administer the excess Rights Shares application procedures. Such additional effort and costs include drafting, printing and posting of excess application forms. Besides, there will be a period for trading of nil-paid Rights Shares on the Stock Exchange. Shareholders who are interested in obtaining the Rights Shares, in addition to Rights Shares to be provisionally allotted to them, could purchase nil-paid Rights Shares from other Shareholders who do not, and will not, subscribe for their Rights Shares which they are entitled to. Accordingly, after arm's length negotiation with the Underwriters, the Board has decided that no excess Rights Shares will be offered to the Qualifying Shareholders and any Untaken Shares will be underwritten by the Underwriters. As the related administration costs would be lowered, the Directors consider that the absence of application for excess Rights Shares is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Share certificates for the Rights Issue and the Bonus Issue

Subject to the fulfillment of the conditions of the Rights Issue, certificates for all fully-paid Rights Shares and the Bonus Shares are expected to be posted to those entitled thereto by ordinary post at their own risk on or before Wednesday, 11 February 2015.

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LETTER FROM THE BOARD

Application for listing

The Company will apply to the Stock Exchange for the listing of and permission to deal in, (i) the Rights Shares in both their nil-paid and fully-paid forms to be issued and allotted pursuant to the Rights Issue; and (ii) the Bonus Shares to be issued and allotted pursuant to the Bonus Issue. The nil-paid Rights Shares and Bonus Shares will have the same board lot size as the Shares, i.e. 5,000 Shares in one board lot.

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

Dealings in the Rights Shares in both their nil-paid and fully-paid forms and the Bonus Shares, which are registered in the register of members of the Company in Hong Kong will be subject to the payment of stamp duty and other applicable fees and charges in Hong Kong.

Irrevocable Undertaking from Kesterion

Kesterion has irrevocably undertaken to the Company and CL Securities, subject to fulfillment of the conditions of the Rights Issue and the Bonus Issue and the Underwriting Agreement not having been terminated in accordance with its terms:

(i) to subscribe or procure the subscription of 81,767,520 Rights Shares which will constitute the provisional allotment of Rights Shares in respect of the Shares beneficially owned by Kesterion pursuant to the terms of the Rights Issue;

(ii) that the Shares referred to in paragraph (i) above will remain registered in the name of Kesterion at the close of business on the Record Date as they are on the date of the undertaking;

(iii) to procure that the acceptances in full in respect of 81,767,520 Rights Shares provisionally allotted to Kesterion and/or its nominees shall be lodged with the Share Registrar or the Company, with payment in full therefor in cash (whether by cheque, bank cashier's order or such other form as the Company may approve), by no later than 4:00 p.m. on the Acceptance Date or such later date as the Company may agree;

(iv) that Kesterion shall not, and shall procure that (so far as reasonably possible) companies controlled by Kesterion do not, dispose of or transfer any Shares, or any interests therein from the date of the Underwriting Agreement up to and including two Business Days after the Acceptance Date; and

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LETTER FROM THE BOARD

(v) that Kesterion will not convert any of the Convertible Bonds into the Shares from the date of the Underwriting Agreement and up to (a) the completion of the Rights Issue and the Bonus Issue, or (b) the termination of the Bond Restructuring Agreement, whichever is earlier.

In the event that Kesterion should fail to comply with the undertakings given above, Kesterion irrevocably authorises the Company in its discretion to treat the undertaking as (i) Kesterion's acceptance of such of the Rights Shares provisionally allotted to Kesterion on the terms of the Prospectus Documents (save as regards the time for acceptance and payment), to allot and issue the same in the name of Kesterion and to procure the registration of the same in the name of Kesterion; and/or (ii) cancellation of the request for exercising the conversion rights attaching to all of the Convertible Bonds.

As at the Latest Practicable Date, save for the irrevocable undertaking by Kesterion and the notice from Ms. Eva Wong, the Board has not received any information from any other substantial shareholder to take up the Shares to be provisionally allotted to them under the Rights Issue.

THE UNDERWRITING AGREEMENT

Date
: 22 September 2014 (as amended by a supplemental agreement dated 21 November 2014)

Underwriters
: (i) Kesterion, an investment holding company and does not underwrite issues of securities in its ordinary course of business, and (ii) CL Securities

Total number of Rights Shares being underwritten by the Underwriters
: All Underwritten Shares, being not less than 220,987,704 Rights Shares (assuming no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) and not more than 246,191,544 Rights Shares (assuming all the outstanding Share Options are exercised and no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date), subject to the terms and conditions of the Underwriting Agreement. The Rights Issue is fully undertaken severally by the Underwriters in the following manner:

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LETTER FROM THE BOARD

(i) Kesterion: firstly, out of all the Untaken Shares, Kesterion shall take up to 26,106,156 Untaken Shares (in the case where no new Shares being issued or repurchased by the Company and no Convertible Bonds are converted on or before the Record Date) and not more than 48,714,000 Untaken Shares (in the case where no new Shares being issued and no Convertible Bonds being converted other than those falling to be issued upon full exercise of the Share Options and no Shares being repurchased by the Company on or before the Record Date)

(ii) CL Securities: if there is any balance of the Untaken Shares after deducting the Kesterion portion disclosed above, such remaining balance of Untaken Shares shall be taken up by CL Securities, being not more than 194,881,548 Untaken Shares (in the case where no new Shares being issued or repurchased by the Company and no Convertible Bonds being converted on or before the Record Date) and not more than 197,477,544 Untaken Shares (in the case where no new Shares being issued, no Share Option being exercised and no Convertible Bonds being converted other than those falling to be issued upon full exercise of the Share Options and no Shares being repurchased by the Company on or before the Record Date)

Commission : 3.0% of the aggregate Subscription Price of the respective portion of the respective maximum Rights Shares underwritten by each Underwriter.

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LETTER FROM THE BOARD

Fees and expenses

: The Company shall pay all costs, charges and expenses (if any) documented in writing and properly incurred by the Company of or incidental to the Rights Issue and the arrangements hereby contemplated including financial advisory and documentation fees, printing and translation charges, the fees of the Company's auditors, solicitors and registrars, and the fees payable to the Stock Exchange, but excluding sub-underwriting fees and expenses relating to sub-underwriting (if any).

The Underwriting Agreement will not result in Kesterion taking more than 29.9% of the Shares.

Other than acting as co-underwriter with Kesterion (a connected person) pursuant to the Underwriting Agreement, to the best of the Directors' knowledge, information and belief, CL Securities and its ultimate beneficial owners are independent of the Company and its connected persons. As at the Latest Practicable Date, the Board received the information on Ms. Eva Wong's intention to take up 81,360 Rights Shares to be provisionally allotted to her. In the unlikely event that Ms. Eva Wong has not subscribed those 81,360 Rights Shares, Kestertion, a company wholly owned by Ms. Eva Wong, and/or CL Securities shall take up those Untaken Shares with the commission fee of approximately HK$1,220.40 pursuant to the Underwriting Agreement. Such arrangement could eventually result in up to 3% discount on Ms. Eva Wong's entitlement in 81,360 Rights Shares.

The Board (including the independent non-executive Directors who have considered the advice of the Independent Financial Adviser) considers the terms of the Underwriting Agreement including the commission rate (and the insignificant resultant discounts on Ms. Eva Wong's entitlement in 81,360 Rights Shares subject to the Underwriting) accord with the market practice and are fair and reasonable so far as the Company and the Shareholders are concerned.

Conditions of the Rights Issue

The Rights Issue is conditional on (i) the satisfaction (or, as applicable, waiver) of the conditions of the Underwriting Agreement referred to in this section; (ii) the satisfaction (or, as applicable, waiver) of the conditions of the Bond Restructuring Agreement; and (iii) the Underwriting Agreement and the Bond Restructuring Agreement not being terminated in accordance with its terms. The obligations of the Underwriters under the Underwriting Agreement are conditional on:

(i) the passing at a duly convened general meeting of the Shareholders held on or before the Posting Date of the necessary resolutions of the Independent Shareholders approving the Rights Issue, the Bonus Issue, the Bond Restructuring and the transactions contemplated under the Underwriting Agreement;

(ii) the delivery to the Stock Exchange and registration by the Registrar of Companies in Hong Kong respectively on or prior to the Posting Date of one copy of each of the Prospectus Documents each duly certified by two Directors or their duly authorised agents in compliance with section 342C of the Companies (WUMP) Ordinance (and all other documents required to be attached thereto), and otherwise complying with the requirements of the Companies (WUMP) Ordinance and the GEM Listing Rules;

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LETTER FROM THE BOARD

(iii) the posting on the Posting Date of copies of the Prospectus Documents to the Qualifying Shareholders and the posting of copies of the Prospectus marked “For information only” together with a letter in agreed form to the Non-Qualifying Shareholders explaining the circumstances in which they are not permitted to participate in the Rights Issue on or before the Posting Date;

(iv) compliance with and performance of all the undertakings and obligations of the Company under the Underwriting Agreement in all material respects;

(v) compliance with and performance of all the undertakings and obligations of Kesterion under its irrevocable undertaking in all material respects;

(vi) the Listing Committee of the Stock Exchange agreeing to grant listings of, and permission to deal in, the Rights Shares in their nil-paid and fully-paid forms either unconditionally or subject to such conditions which the Company accepts and the satisfaction of such conditions (if any) by no later than the Posting Date and the Listing Committee of the Stock Exchange not having withdrawn or revoked such listings and permission on or before the Acceptance Date; and

(vii) the Bond Restructuring Agreement becoming unconditional in accordance with the terms thereof (other than the condition (c) relating to the Bond Restructuring Agreement as set out in the section headed “Connected transactions involving the restructuring of Convertible Bonds and issue of New Bonds — Conditions Precedent”).

None of the conditions in paragraphs (i), (ii), (iii) and (vi) above can be waived by the Underwriters and the Company. In the event that the conditions above have not been satisfied (or waived in respect of conditions in paragraphs (iv) and (v) by the Underwriters) in accordance with the terms of the Underwriting Agreement by the Acceptance Date (or in each case, such later date as the Underwriters and the Company may agree), all liabilities of the parties to the Underwriting Agreement shall cease and terminate and neither party shall have any claim against the other save that the Company shall indemnify the Underwriters for all reasonable costs, fees and other out-of-pocket expenses (other than the underwriting commission mentioned above) that have been properly incurred and documented in writing by the Underwriters in connection with the underwriting of the Underwritten Shares.

As at the Latest Practicable Date, all the conditions precedent above have not been satisfied. Unless the Rights Issue and the Bond Restructuring having been terminated, it is expected that other than paragraph (vii), all conditions precedent above would have been satisfied immediately prior to the commencement of the trading of the nil-paid Rights Shares. To the knowledge of the Directors, the Directors have no reason to believe that the condition in paragraph (vii) above would not be satisfied as at the Completion Date. If the conditions precedent are not satisfied in accordance with the Underwriting Agreement, the Rights Issue and the Bond Restructuring will not proceed and the Company will seek to raise capital via other financing channels.

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LETTER FROM THE BOARD

Termination of the Underwriting Agreement

The Underwriters may by notice in writing to the Company given served at any time prior to 4:30 p.m. on the second Business Day after the Acceptance Date as the Company and the Underwriters may agree, terminate the Underwriting Agreement if any of the following grounds of termination happens:

(i) in the reasonable opinion of the Underwriters, the success of the Rights Issue would be materially and adversely affected by:

(b) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date of the Underwriting Agreement) of a political, military, financial, economic, currency or other nature (whether or not sui generis with any of the foregoing), or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the reasonable opinion of the Underwriters materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or materially and adversely prejudice the success of the Rights Issue or otherwise makes it inexpedient or inadvisable to proceed with the Rights Issue;

(ii) any material breach of any of the representations, warranties or undertakings under the Underwriting Agreement comes to the knowledge of the Underwriters;

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LETTER FROM THE BOARD

Upon the giving of notice by the Underwriters, all obligations of the Underwriters under the Underwriting Agreement shall cease and determine and no party shall have any claim against any other party in respect of any matter or thing arising out of or in connection with the Underwriting Agreement provided that the Company shall remain liable to pay to the Underwriters such fees as may then be agreed by the parties to the Underwriting Agreement.

CONNECTED TRANSACTION

The payment of the underwriting commission by the Company to Kesterion constitutes a connected transaction of the Company. As the total amount of underwriting commission payable by the Company is within the de minimis threshold for connected transaction under Chapter 20 of the GEM Listing Rules, the payment of commission to Kesterion pursuant to the Underwriting Agreement is exempt from Shareholders' approval, annual review and all disclosure requirements under Chapter 20 of the GEM Listing Rules.

REASONS FOR THE RIGHTS ISSUE AND USE OF PROCEEDS

The Company is an investment holding company. The Group is principally engaged in exploration and exploitation of mineral resources and trading of metals, natural resources and trading and distribution of beverage.

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LETTER FROM THE BOARD

The estimated net proceeds of the Rights Issue will be approximately HK$146.9 million (assuming no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) to approximately HK$159.1 million (assuming all the outstanding Share Options are exercised and no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date). The Company intends to apply approximately HK$132.6 million of the net proceeds from the Rights Issue to finance part of its payment obligations under the Settlement Agreement (see the section headed "Update on enforcement of charge over the Shares and Convertible Bonds held by substantial shareholder and connected transactions involving Settlement Agreement with Magic Stone" below) and the remaining portion of the net proceeds will be used for general working capital purposes.

The Board considers that it is prudent to finance the Group's long-term growth by long-term financing, preferably in the form of equity which will not increase the Group's finance costs. The Rights Issue and the Bonus Issue will give the Qualifying Shareholders the opportunity to maintain their respective pro-rata shareholding interests in the Company and to continue to participate in the future development of the Group. Accordingly, the Board considers that fund raising through the Rights Issue is in the interests of the Company and the Shareholders as a whole.

FUND RAISING EXERCISES OF THE COMPANY

The Company did not conduct any other fund raising exercise in the past 12 months immediately preceding the Latest Practicable Date.

CONNECTED TRANSACTIONS INVOLVING THE RESTRUCTURING OF CONVERTIBLE BONDS AND THE PROPOSED ISSUE OF NEW BONDS

The Bond Restructuring Agreement

Date : 22 September 2014 (as amended by a supplemental agreement dated 21 November 2014)

Parties : (i) the Company
(ii) Kesterion, a company wholly owned by Ms. Eva Wong, the spouse of Mr. Koh Tat Lee, Michael the chairman of the Board

Principal terms of the Bond Restructuring Agreement

In consideration of Kesterion agreeing to act as an Underwriter in respect of the Rights Issue, the Company conditionally agreed with Kesterion to restructure the terms of the Convertible Bonds as follows (collectively, the "Bond Restructuring") and subject to and in accordance with the terms of the Bond Restructuring Agreement:

(a) the terms and conditions of the Convertible Bonds shall be amended to provide that the Company as issuer of such bonds shall have the right by notice in writing to redeem the Convertible Bonds (the "Redemption Right") at any time at a redemption price of

LETTER FROM THE BOARD

US$140,000,000 (equivalent to approximately HK$1,092,000,000) (the “Redemption Amount”) and as further set out in accordance with the terms of the amendment deed. The Redemption Right shall be exercisable by the Company at any time on or prior to 15 April 2015; and

(b) following the amendment to the Convertible Bonds referred to in paragraph (a) above becoming effective, the Company shall contemporaneously exercise the Redemption Right to redeem the amended Convertible Bonds and in satisfaction and cancellation of the Redemption Amount, the Company shall issue the New Bonds at 100% of their principal amount to Kesterion.

For further information on the conditions governing and the procedures for conversion, exchange or subscription of the Convertible Bonds, please refer to the circular of the Company dated 21 November 2008.

Conditions Precedent

Completion of the Bond Restructuring shall be subject to and conditional upon:

(a) the passing of a resolution by the Independent Shareholders at an extraordinary general meeting approving the Share Capital Increase, the Bond Restructuring Agreement and the transactions contemplated thereunder;

(b) the Listing Committee of the Stock Exchange having granted the listing approval in respect of, and permission to deal in, the Conversion Shares;

(c) the Rights Issue and the Bonus Issue being completed (and Underwriting Agreement being entered into between the parties thereto and the Underwriting Agreement becoming unconditional in accordance with the terms thereof);

(d) Magic Stone, Kesterion and the Company entering into a settlement and release agreement and Magic Stone indicating its consent to the implementation of the Bond Restructuring, each on terms reasonably satisfactory to Kesterion;

(e) representations and warranties given by the Company having remained true and accurate, and not misleading in all material respects, as at the date of the Bond Restructuring Agreement and the Completion Date; and

(f) representations and warranties given by Kesterion having remained true and accurate, and not misleading in all material respects, as at the date of Bond Restructuring Agreement and the Completion Date.

The Bond Restructuring and the Rights Issue are inter-conditional and it is expected that the Bond Restructuring and the Rights Issue will be completed at the same time. As per the Settlement Agreement, Magic Stone has agreed to the restructuring of the Convertible Bonds (including the amendment to the terms thereof, redemption of the amended Convertible Bonds and issue of the New

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LETTER FROM THE BOARD

Bonds). Further, pursuant to the Settlement Agreement, Magic Stone shall not and shall cause the Receivers not to exercise the conversion rights attaching to the Convertible Bonds under the Kesterion Charge and shall not take further steps to enforce the Kesterion Charge pending the implementation of the Settlement Agreement. For further details, please refer to the section headed "Update on enforcement of charge over the Shares and Convertible Bonds held by substantial shareholder and connected transactions involving Settlement Agreement with Magic Stone".

None of the conditions in paragraphs (a) and (b) above can be waived by Kesterion and the Company. If any of the conditions precedent is not satisfied or (in the case of the condition in paragraphs (c), (d), (e) and (f) only), waived by Kesterion and the Company, respectively in accordance with the Bond Restructuring Agreement on or before 15 April 2015, the Bond Restructuring Agreement shall automatically terminate without liability to any party, provided certain obligations under the Bond Restructuring Agreement shall continue in force following the termination of the Bond Restructuring Agreement. The termination of the Bond Restructuring Agreement shall be without prejudice to the rights of any party against the other parties for breach of the Bond Restructuring Agreement accrued prior to such termination. As at the Latest Practicable Date, other than paragraph (d), all the conditions precedent above have not been satisfied. Unless the Rights Issue and the Bond Restructuring having been terminated, it is expected that other than condition in paragraphs (c), (e) and (f), all conditions precedent above would have been satisfied immediately prior to the commencement of the trading of the nil-paid Rights Shares. If the conditions precedent are not satisfied in accordance with the Bond Restructuring Agreement, the Rights Issue and the Bond Restructuring will not proceed. To the knowledge of the Directors, the Directors have no reason to believe that the condition in paragraphs (e) and (f) above would not be satisfied as at the Completion Date. Each of the Company and Kesterion is prepared to waive the condition in paragraphs (e) and (f), where necessary.

Completion

Subject to the fulfillment of the conditions precedent, completion of the Bond Restructuring Agreement will take place on the second business day after the latter of (i) the last of the conditions set out in paragraph (a) or (b) above shall have been fulfilled or (ii) the date of the redemption notice issued pursuant to the Bond Restructuring Agreement, or such other date as the Company and Kesterion may agree.

Termination

If the conditions precedent above are not fulfilled or waived in accordance with the Bond Restructuring Agreement on or before 15 April 2015 (or such later date as the Company and Kesterion may agree) or if completion of the Bond Restructuring Agreement does not take place by 15 April 2015 (or such later date as the Company and Kesterion may agree), the Bond Restructuring Agreement shall be terminated automatically.

If Kesterion becomes aware at any time prior to completion of the Bond Restructuring Agreement that any of the representations and warranties provided by the Company in the Bond Restructuring Agreement is not true in any material respect, Kesterion may terminate the Bond Restructuring Agreement by notice to the Company.

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LETTER FROM THE BOARD

Principal Terms of the New Bonds and the Convertible Bonds

	Principal Terms of the New Bonds	Principal Terms of the Convertible Bonds
Issuer	: the Company	the Company
Subscriber	: Kesterion	Kesterion
Principal amount	: approximately US$140,000,000 (equivalent to approximately HK$1,092,000,000).	US$201,474,359 (equivalent to approximately HK$1,571,500,000) as at the Latest Practicable Date
Form and denomination	: The New Bonds will be issued in registered form and in the denomination of US$100,000 each and in integral multiples of US$100,000 thereof.	The Convertible Bonds was issued in registered form and in the denomination of US$100,000 each and in integral multiples of US$100,000 thereof.
Maturity date	: 5 years from the issue date (which is expected to be sometime in 2020)	18 December 2018
Coupon	: 2.0% per annum payable in arrear semi-annually from the issue date.	The Convertible Bonds shall accrue no interest.
Security	: The New Bonds will be unsecured.	The Convertible Bonds were unsecured.
Conversion Price	: HK$0.50 per Conversion Share (subject to adjustment as mentioned below).	The Convertible Bonds shall be converted at the original conversion price of HK$0.70 (subject to adjustment as mentioned below) per conversion share. After a share consolidation and rights issue completed in early 2011 the conversion price was adjusted to HK$22.79.

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LETTER FROM THE BOARD

Conversion

Bondholders have the right to convert their New Bonds into Conversion Shares at any time during the period from the date of issue of such New Bonds up to the maturity date of the New Bonds, in amounts of not less than a whole multiple of US$100,000, save that if at any time the outstanding principal amount of the New Bonds held by a Bondholder is less than US$100,000, or if a Bondholder intends to exercise the conversion rights attaching to the entire principal amount of all the New Bonds held by him, the Bondholder may convert the whole (but not part only) of such outstanding principal amount of the New Bonds.

Upon full conversion of the New Bonds into Conversion Shares (assuming no further issue of new Shares on or before the Record Date), a total of 2,184,000,000 Conversion Shares will be issued by the Company.

Bondholders have the right to convert their Convertible Bonds into conversion shares at any time during the period from the date of issue of such Convertible Bonds up to the maturity date of the Convertible Bonds, in amounts of not less than a whole multiple of US$100,000, save that if at any time the outstanding principal amount of the Convertible Bond held by a bondholder is less than US$100,000, or if a bondholder intends to exercise the conversion rights attaching to the entire principal amount of all the Convertible Bonds held by him, the Bondholder may convert the whole (but not part only) of such outstanding principal amount of the Convertible Bonds.

Upon full conversion of the Convertible Bonds into conversion shares, a total of 68,955,682 Shares will be issued by the Company.

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LETTER FROM THE BOARD

No conversion right may be exercised by a Bondholder, to the extent that, following such exercise, a Bondholder and parties acting in concert with it, taken together, will directly or indirectly, control or be interested in 29.90% or more of the entire issued Shares (or in such lower percentage as may from time to time be specified in the Takeovers Code as being the level for triggering a mandatory general offer). Each Bondholder shall exercise the conversion rights attaching to the New Bonds only if the allotment and issue of the Conversion Shares to such Bondholder pursuant to an exercise of the conversion right will not cause the Company to be in breach of the minimum public float requirement stipulated under Rule 11.23 of the GEM Listing Rules.

Each bondholder shall exercise the conversion rights attaching to the Convertible Bonds only if the allotment and issue of the Conversion Shares to such bondholder pursuant to an exercise of the conversion right will not cause the Company to be in breach of the minimum public float requirement stipulated under Rule 11.23 of the GEM Listing Rules.

No conversion right may be exercised by a bondholder, to the extent that, following such exercise, a bondholder and parties acting in concert with it, taken together, will directly or indirectly, control or be interested in 29% or more of the entire issued Shares (or in such lower percentage as may from time to time be specified in the Takeovers Code as being the level for triggering a mandatory general offer).

The Conversion Shares will be issued pursuant to a specific mandate to be granted to the Directors by the Shareholders at the EGM.

A Convertible Bond may be transferred to any person in whole multiples of US$100,000 (or such lesser amount as may represent the entire principal amount thereof.)

Transferability

The New Bonds may be transferred to any person in whole multiples of US$100,000 (or such lesser amount as may represent the entire principal amount thereof).

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LETTER FROM THE BOARD

Redemption and purchase

: The Company shall have the right, at its options, to redeem any portion (must be in whole multiples of US$100,000) of or the entire outstanding principal amount of all of the New Bonds held by such Bondholder any time before the Maturity Date by giving the Bondholder a notice in writing at the 110% of the principal amount of the New Bonds. The date of redemption in respect of such outstanding amount shall be the date falling ten business days of the date of such notice. Upon serving the redemption notice the Bondholder shall not convert such portion of the New Bonds into Conversion Shares.

The Company shall redeem any New Bonds which remains outstanding on the maturity date of the New Bonds at its principal amount.

The Company shall redeem any Convertible Bond which remains outstanding on the maturity date of the Convertible Bonds at its principal amount.

Cancellation

: Immediately upon redemption by the Company or purchase by the Company or any of its subsidiaries, the New Bonds so redeemed or purchased shall be cancelled. The New Bonds so cancelled shall not be re-issued or re-sold.

Immediately upon redemption by the Company or purchase by the Company or any of its subsidiaries, the Convertible Bonds so redeemed or purchased shall be cancelled. Any Convertible Bond so cancelled shall not be re-issued or re-sold.

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LETTER FROM THE BOARD

Adjustment to Conversion Price

: The Conversion Price is subject to adjustments upon:

(a) occurrence of subdivision, reclassification or consolidation of Shares;

(b) issue (other than in lieu of a cash dividend) of any Shares credited as fully paid by way of capitalisation of profits or reserves;

(c) any Capital Distribution (except where, and to the extent that, the Conversion Price falls to be adjusted under sub-paragraph (b) above) to Bondholders (in their capacity as such) of Shares (whether on a reduction of capital or otherwise) or shall grant to such holders rights to acquire for cash assets of the Company or any of its subsidiaries; and

The conversion price is subject to adjustments upon the occurrence of, among other matters, subdivision or consolidation of Shares, capitalisation issues, rights issues and grant to Shareholders of options, warrants or other rights to subscribe for or purchase any Shares (depending on the subscription or purchase prices), which adjustments shall be certified by an approved merchant banker or the auditors of the Company.

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LETTER FROM THE BOARD

(d) the Company after the issue date of the New Bonds, offering to holders of Shares new Shares for subscription by way of rights, or shall grant to holders of Shares any options, warrants or other rights to subscribe for or purchase any Shares. For summary of the calculation for the Conversion Price, please refer to the section headed "connected transactions involving the restructuring of Convertible Bonds and the proposed issue of New Bonds — Adjustment to the Conversion Price" below.

Voting rights and ranking

: Unless and until the Bondholders acquire the Conversion Shares upon conversion of the New Bonds, they will have no rights with respect to those Shares, including any voting rights or rights to receive any regular dividends or other distributions with respect to those Shares. Upon the issue and allotment, the Conversion Shares shall rank in all respects pari passu with all Shares in issue as at the date of allotment and issue.

Bondholders shall not be entitled to attend or vote at any general meeting of the Company. Upon issue and allotment, conversion shares shall rank in all respects pari passu with all Shares in issue as at the date of allotment and issue.

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LETTER FROM THE BOARD

Adjustment to the Conversion Price

Subject as paragraph 3 below, the Conversion Price shall from time to time be adjusted in accordance with the following relevant provisions:

(a) If and whenever the Shares by reason of any consolidation, sub-division or reclassification become of a different nominal amount, the Conversion Price in force immediately prior thereto shall be adjusted by multiplying it by the following fraction:

$$
\frac{A}{B}
$$

where:

A = the revised nominal amount; and

B = the former nominal amount.

Each such adjustment shall be effective from the close of business in Hong Kong on the date on which the consolidation or sub-division becomes effective.

(b) If and whenever the Company shall issue (other than in lieu of a cash dividend) any Shares credited as fully paid by way of capitalisation of profits or reserves (including any share premium account or, if any, capital redemption reserve fund), the Conversion Price in force immediately prior to such issue shall be adjusted by multiplying it by the following fraction:

$$
\frac{C}{C + D}
$$

where:

C = the aggregate nominal amount of the issued Shares immediately before such issue; and

D = the aggregate nominal amount of the Shares issued in such capitalisation.

Each such adjustment shall be effective (if appropriate retroactively) from the commencement of the day next following the record date for such issue.

(c) If and whenever the Company shall make any Capital Distribution (as defined in Paragraph 2 below) (except where, and to the extent that, the Conversion Price falls to be adjusted under sub-paragraph (b) above) to Bondholders (in their capacity as such) of Shares (whether on a reduction of capital or otherwise) or shall grant to such holders rights to

LETTER FROM THE BOARD

acquire for cash assets of the Company or any of its subsidiaries, the Conversion Price in force immediately prior to such distribution or grant shall be adjusted by multiplying it by the following fraction:

$$
\frac{\mathrm{E} - \mathrm{F}}{\mathrm{E}}
$$

where:

E = the market price (as defined in Paragraph 2 below) on the date on which the Capital Distribution or, as the case may be, the grant is publicly announced or (failing any such announcement) next preceding the date of the Capital Distribution or, as the case may be, of the grant; and

F = the fair market value on the day of such announcement or (as the case may require) the next preceding day, as determined in good faith by an approved merchant bank or auditors of the Company for the time being, of the portion of the Capital Distribution or of such rights which is attributable to one Share;

Provided that:

(i) if in the opinion of the relevant approved merchant bank or auditors of the Company (as the case may be), the use of the fair market value as aforesaid produces a result which is significantly inequitable, it may instead determine, and in such event the above formula shall be construed as if F meant the amount of the said market price which should properly be attributed to the value of the Capital Distribution or rights; and

(ii) the provisions of the sub-paragraph (c) shall not apply in relation to the issue of Shares paid out of profits or reserves and issued in lieu of a cash dividend.

Each such adjustment shall be effective (if appropriate retroactively) from the commencement of the day next following the record date for the Capital Distribution or grant.

(d) If and whenever the Company shall after the issue date of the New Bonds, offer to holders of Shares new Shares for subscription by way of rights, or shall grant to holders of Shares any options, warrants or other rights to subscribe for or purchase any Shares, the

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LETTER FROM THE BOARD

Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before the date of the announcement of such offer or grant by the following fraction:

$$
\frac {G + \frac {H \times I}{J}}{G + H}
$$

where:

G = the number of Shares in issue immediately before the date of such announcement;

H = the aggregate number of Shares so offered for subscription;

I = the amount (if any) payable for the rights, options or warrants or other rights to subscribe for each new Share, plus the subscription price payable for each new Share; and

J = the closing price per Share on the last trading day on which the Shares are traded on cum-rights basis.

Such adjustment shall become effective (if appropriate retroactively) from the commencement of the day next following the record date for the offer on the condition that the subject matters thereunder have not been terminated in accordance with their terms.

For the purposes of this sub-section:

"announcement" shall include the release of an announcement to the press or the delivery or transmission by telephone, telex, electronic means or otherwise of an announcement to the Stock Exchange and "date of announcement" shall mean the trading day of the Stock Exchange on which the announcement is first so released to the press or first appears on the website of the Stock Exchange at "www.hkex.com.hk";

"Capital Distribution" shall (without prejudice to the generality of that phrase) include distributions in cash or specie. Any dividend charged or provided for in the accounts for any financial period shall (whenever paid and however described) be deemed to be a Capital Distribution provided that any such dividend shall not automatically be so deemed if it is paid out of the aggregate of the net profits (less losses) attributable to the holders of Shares for all financial periods after 31 March 2015 as shown in the audited consolidated profit and loss account of the Company and its subsidiaries for each financial period ended 31 March;

"issue" shall include allot;

"market price" mean on or of any day the market price falls to be ascertained means the arithmetic means of the closing price per Share for each of the last five trading days ending on such trading day immediately preceding such day;

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LETTER FROM THE BOARD

"reserves" includes unappropriated profits; and

"rights" includes rights in whatsoever form issued.

The provisions of paragraph 1 above shall not apply to:

(a) an issue of fully paid Shares upon the exercise of any conversion rights attached to securities convertible into Shares or upon exercise of any rights (including any conversion of this Bond) to acquire Shares;

(b) an issue of Shares or other securities of the Company or any subsidiary of the Company wholly or partly convertible into, or rights to acquire, Shares to eligible participants pursuant to any share option scheme duly approved by the Company;

(c) an issue of fully-paid Shares by way of capitalisation of all or part of any subscription right reserve, or any similar reserve which has been or may be established pursuant to the terms of any securities wholly or partly convertible into, or rights to acquire, Shares; or

(d) an issue of Shares pursuant to a scrip dividend scheme duly approved by the Company in accordance with its constitutional documents.

Fair value of the Convertible Bonds and New Bonds

The fair value of the Convertible Bonds and the New Bonds was valued by Greater China Appraisal Limited, an independent valuer on 21 November 2014, being the last trading day prior to the Announcement. Greater China Appraisal Limited adopted the effective interest method and the Black-Scholes model with trinomial tree method and certain assumptions, such as effective interest rate, expected volatility, risk-free rate and expected dividend yield, based on its professional judgments after due and careful consideration. The major inputs into the Black-Scholes model with trinomial tree method were as follows:

As at 21 November 2014
(last trading day prior to the
Announcement)
Convertible Bonds New Bonds

Effective interest rate (Note 1)	10.31%	11.06%
Expected volatility (Note 1)	45.73%	45.96%
Risk-free rate (Note 1)	1.33%	1.65%
Expected dividend yield	0%	0%

Note 1: According to Greater China Appraisal Limited, the inputs for effective interest rate, expected volatility and risk-free rate for the Convertible Bonds and the New Bonds were different taken into account the different remaining lives of the Convertible Bonds of approximately 4 years and the New Bonds of 5 years, assuming the New Bonds were issued on 21 November 2014.

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LETTER FROM THE BOARD

According to the valuation report prepared by Greater China Appraisal Limited, the liability components and the derivative components of the fair value of the Convertible Bonds and the New Bonds as at 21 November 2014 are set out below:

| | As at 21 November 2014
(last trading day prior to the Announcement) | |
| --- | --- | --- |
| | Convertible Bonds
(US$) | New Bonds
(US$) |
| Fair value | 135,048,957
(equivalent to approximately HK$1,053.38 million) | 122,960,251
(equivalent to approximately HK$959.09 million) |
| of which: | | |
| Liability component | 135,048,933
(equivalent to approximately HK$1,053.38 million) | 93,445,224
(equivalent to approximately HK$728.87 million) |
| Derivative component | 24
(equivalent to approximately HK$187.2) | 29,515,027
(equivalent to approximately HK$230.22 million) |

Reasons for entering into the Bond Restructuring Agreement

The Group is principally engaged in exploration and exploitation of mining resources and trading of metals, natural resources and trading and distribution of beverage. Kesterion is an investment holding company.

In the event that the Bond Restructuring does not take place, the Company would be required to repay an amount of approximately US$201,474,359 (equivalent to approximately HK$1,571,500,000) to the holder of the Convertible Bonds upon maturity on 18 December 2018. In the event that Bond Restructuring takes place, (a) the principal amount and accrued interests of the New Bonds throughout the whole period up to maturity of the New Bonds would amount to US$154,000,000 (equivalent to approximately HK$1,201,200,000), which is approximately US$47,474,359 (equivalent to approximately HK$370,300,000) less than the repayment of the Convertible Bonds upon its maturity; and (b) the issue of New Bonds will have the effect that the maturity date will be extended to 5 years from the issue of the New Bonds. Further, the downward adjustments of the conversion price from would encourage conversion of the New Bonds and, as such, the capital base of the Group will be strengthened and the shareholding of other Shareholders would then be further diluted taking into account the additional issue of 2,115,044,318 conversion shares if the Bondholder chooses to convert the New Bonds rather than the Convertible Bonds, and the outstanding bond principal amounts would be reduced. In view of foregoing, the Directors (including the independent non-executive Directors who have considered the advice of the Independent Financial Adviser) consider that the terms and conditions of the Bond Restructuring Agreement and the transactions contemplated thereunder (including the redemption of the amended Convertible Bonds and the proposed issue of the New Bonds) are fair and reasonable and in the interests of the Company and its Shareholders as a whole.

LETTER FROM THE BOARD

Application for Listing

The Convertible Bonds will not be listed on the Stock Exchange or any other stock exchange. An application will be made to the Stock Exchange for the listing of, and permission to deal in, the Conversion Shares.

Specific Mandate for the issue of Conversion Shares

At the annual general meeting of the Company held on 23 July, 2014, an ordinary resolution was passed to grant a general and unconditional mandate to the Directors to allot, issue and deal with additional Shares up to a limit of 20% of the aggregate nominal amount of the issued share capital of the Company as at 23 July, 2014, which amounted to 201,836,816 Shares.

To enhance the financial flexibility of the Group to raise funds in future using its general mandate, the Directors therefore propose to seek the approval of the Shareholders to grant the Specific Mandate at the EGM to cover the allotment and issue of the Conversion Shares upon exercise of the conversion rights. The Bond Restructuring and the allotment and issue of the Conversion Shares upon exercise of the conversion rights are also subject to approval of the Shareholders at the EGM.

Listing Rules Implications

Under the GEM Listing Rules, Kesterion, being a substantial shareholder of the Company, is a connected person of the Company. Accordingly, the Bond Restructuring contemplated under the Bond Restructuring Agreement constitute connected transactions of the Company under Chapter 20 of the GEM Listing Rules and are subject to the approval of the Independent Shareholders at the EGM by way of poll.

UPDATE ON ENFORCEMENT OF CHARGE OVER THE SHARES AND CONVERTIBLE BONDS HELD BY SUBSTANTIAL SHAREHOLDER AND CONNECTED TRANSACTIONS INVOLVING SETTLEMENT AGREEMENT WITH MAGIC STONE

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LETTER FROM THE BOARD

The Company has since been informed that China Shipbuilding has assigned its rights with respect to the Kesterion Charge and the payables under the Trade Contracts to Magic Stone on 7 November 2014. To the best knowledge of the Directors, such assignment was carried out pursuant to commercial decisions made by or commercial agreement between China Shipbuilding and Magic Stone. The Company has reached settlement with Magic Stone on the terms of repayment on 21 November 2014.

Based on information available to the Company, Magic Stone and its ultimate beneficial owners (being Mr. Yang Dongjun and Mr. Bin Jing) are independent of China Shipbuilding, the Company and its connected persons. Magic Stone does not hold any interests in the securities of the Company, save for the interests in the Kesterion Charge and the 80,000,000 new Shares to be issued under the Settlement Agreement as disclosed below.

With a view to settling the various overdue liabilities including interest charges in aggregate net amount of approximately HK$236 million payable by the Group to Magic Stone on or before 28 February 2015, the Company and certain of its subsidiaries entered into the Settlement Agreement with Magic Stone and Kesterion in respect of the complete and full settlement of the claims, liabilities and obligations arising from the Trade Contracts. Pursuant to which, amongst others, the Group has conditionally agreed to settle the liabilities under the Trade Contracts by way of the following arrangements:

(a) the Group shall pay Magic Stone RMB51.88 million (equivalent to approximately HK$64.85 million) in cash before 28 February 2015;

(b) the Group shall pay Magic Stone US$17 million (equivalent to approximately HK$132.6 million) in cash before 28 February 2015; and

(c) the Company shall issue and allot 80,000,000 new Shares each fully paid at an issue price of HK$0.50 per Share to Magic Stone after the completion of the Rights Issue and before 28 February 2015.

The Settlement Agreement is subject to the condition precedent that all applicable laws and regulations in Hong Kong (including the GEM Listing Rules) are complied with. The Rights Issue is conditional upon the Bond Restructuring Agreement becoming unconditional in accordance with the terms thereof (and the entering into the Settlement Agreement is one of the conditions precedent under the Bond Restructuring Agreement).

The payment obligations in respect of paragraph (a) above will be financed by the Group's internal resources and the payment obligations in respect of paragraph (b) will be financed by part of the net proceeds of the Rights Issue.

Pursuant to the Settlement Agreement, Magic Stone (a) has undertaken that Magic Stone shall not and shall cause the Receivers not to exercise the voting rights attaching to 252,153,400 Shares and the conversion rights attaching to the Convertible Bonds under the Kesterion Charge and shall not take

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LETTER FROM THE BOARD

any further enforcement action in relation to the Kesterion Charge (including the exercise of any voting rights) pending the implementation of the Settlement Agreement; and (b) has consented to the restructuring of the Convertible Bonds (including the amendment to the terms thereof, redemption of the amended Convertible Bonds and issue of the New Bonds).

As Magic Stone is entitled to exercise the voting rights of the Shares subject to the Kesterion Charge, it is a substantial shareholder of the Company for purposes of the GEM Listing Rules and therefore a connected person of the Company under the GEM Listing Rules. Accordingly, the entering into of the Settlement Agreement and the transactions contemplated thereunder (including the issue of the 80,000,000 new Shares) constitute a connected transaction for the Company and given that the applicable percentage ratios in respect of that exceed 5% and HK$10,000,000, it is subject to the approval of the Independent Shareholders at the EGM. Magic Stone will abstain from voting on the ordinary resolution approving the Settlement Agreement and the transactions contemplated thereunder. To enhance the financial flexibility of the Group to raise funds in future using its general mandate, the Company will seek a specific mandate at the EGM to authorise the Directors to allot and issue the new 80,000,000 Shares.

The purpose of the Settlement Agreement is to ascertain and settle various overdue payables of the Group under the Trade Contracts in a basket agreement. As disclosed in the Previous Announcements, the financial assistance received by the Group from Kesterion through the Kesterion Charge was not secured by the assets of the Group. Accordingly, the Kesterion Charge and its consequential release pursuant to the terms of the Kesterion Charge and the Settlement Agreement are fully exempt from Shareholders' approval, annual review and all disclosure requirements under Chapter 20 of the GEM Listing Rules.

Based on the above, the Directors (including the independent non-executive directors who have considered the advice of the Independent Financial Adviser) consider that the Settlement Agreement is fair and reasonable and on normal commercial terms, and the entering into of the Settlement Agreement is in the interests of the Company and the Shareholders as a whole.

Application for listing

The Company will apply to the Stock Exchange for the listing of and permission to deal in, New Shares to be issued and allotted pursuant to the Settlement Agreement.

Information on the Company and Magic Stone

The Group is principally engaged in exploration and exploitation of mining resources and trading of metals, natural resources and trading and distribution of beverage.

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LETTER FROM THE BOARD

Magic Stone is an investment holding company incorporated in the Cayman Islands and is owned as to 80.25% by Mr. Yang Dongjun and 19.75% by Mr. Jing Bin. Other than the Settlement Agreement entered into with Magic Stone following the debts assignments by China Shipbuilding to Magic Stone on 7 November 2014, the Group has no business relationship with Magic Stone and its ultimate shareholders.

Issue Price

The issue price of HK$0.50 for the 80,000,000 new Shares represents:

(a) a premium of approximately 47.06% over the closing price of HK$0.34 per Share as quoted on the Stock Exchange on 21 November 2014, being the date of the Settlement Agreement;

(b) a premium of approximately 47.06% over the average closing price of HK$0.34 per Share as quoted on the Stock Exchange for the last five consecutive trading days immediately prior to the date of the Settlement Agreement;

(c) a premium of approximately 122.22% to the closing price of HK$0.225 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and

(d) a premium of approximately 46.67% over the theoretical ex-rights price of approximately HK$0.33 per Share after the Rights Issue (after taking into consideration of the Bonus Issue), based on the closing price of HK$0.225 per Share as quoted on the Latest Practicable Date.

The issue price was arrived at after arm's length negotiation between the Company and Magic Stone with reference to the trading prices of the Shares on the date of the Settlement Agreement and the average closing price of the last five consecutive trading days immediately prior to the date of the Settlement Agreement. The Directors consider that the terms and conditions of the Settlement Agreement (including the issue price of the 80,000,000 new Shares) are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE BOARD

SHAREHOLDING OF THE COMPANY

The table below sets out the Company's shareholding structure as at the Latest Practicable Date, upon completion of the Rights Issue and Bonus Issue, the conversion of the New Bonds and the issue of the 80,000,000 new Shares pursuant to the Settlement Agreement under the scenarios as further detailed below (see also "Notes" below):

Scenario 1

Assuming no outstanding Share Option is exercised, no Qualifying Shareholders (other than Kesterion) takes up any of the Rights Shares and the Underwriters take up the Rights Shares to the maximum extent.

	As at the Latest Practicable Date		Immediately after completion of the Rights Issue and the Bonus Issue		Immediately after completion of the Rights Issue and the Bonus Issue and the issue of 80,000,000 new Shares		Immediately after completion of the Rights Issue and the Bonus Issue and the issue of 80,000,000 new Shares and conversion of New Bonds subject to 29.90% restriction		Immediately after completion of the Rights Issue and the Bonus Issue and the issue of 80,000,000 new Shares and full conversion of New Bonds without 29.90% restriction(Note 7)
	Number of shares	Approximate %	Number of shares	Approximate %	Number of shares	Approximate %	Number of shares	Approximate %	Number of shares	Approximate %
Kesterion, Ms. Eva Wong and parties acting in concert
Kesterion (See Notes (1) and (3))	272,558,400	27.01%	452,347,860	29.88%	452,347,860	28.38%	486,547,860	29.89%	2,636,347,860	69.79%
Ms. Eva Wong (See Notes (1) and (2))	271,200	0.03%	271,200	0.02%	271,200	0.02%	271,200	0.01%	271,200	0.01%
Sub-total	272,829,600	27.04%	452,619,060	29.90%	452,619,060	28.40%	486,819,060	29.90%	2,636,619,060	69.80%
Mr. Cheung Hung Man
Mr. Cheung Hung	93,235,000	9.24%	93,235,000	6.16%	93,235,000	5.85%	93,235,000	5.73%	93,235,000	2.46%
Mss	100,000,000	9.91%	100,000,000	6.61%	100,000,000	6.27%	100,000,000	6.14%	100,000,000	2.64%
CL Securities	—	—	324,802,580	21.46%	324,802,580	20.38%	324,802,580	19.95%	324,802,580	8.60%
Magic Stone	—	—	—	—	80,000,000	5.02%	80,000,000	4.91%	80,000,000	2.12%
Public	543,119,480	53.81%	543,119,480	35.87%	543,119,480	34.08%	543,119,480	33.37%	543,119,480	14.38%
Total	1,009,184,080	100.00%	1,513,776,120	100.00%	1,593,776,120	100.00%	1,627,976,120	100.00%	3,777,776,120	100.00%

LETTER FROM THE BOARD

Scenario 2

Assuming no outstanding Share Option is exercised and all Qualifying Shareholders takes up their respective allotment of Rights Shares in full.

	As at the Latest Practicable Date		Immediately after completion of the Rights Issue and the Bonus Issue		Immediately after completion of the Rights Issue and the Bonus Issue and the issue of 80,000,000 new Shares		Immediately after completion of the Rights Issue and the Bonus Issue and the issue of 80,000,000 new Shares and conversion of New Bonds subject to 29.90% restriction		Immediately after completion of the Rights Issue and the Bonus Issue and the issue of 80,000,000 new Shares and full conversion of New Bonds without 29.90% restriction (None ?)
	Number of shares	Approximate %	Number of shares	Approximate %	Number of shares	Approximate %	Number of shares	Approximate %	Number of shares	Approximate %
Kesterion, Ms. Eva Wong and parties acting in concert
Kesterion (See Notes (1) and (3))	272,558,400	27.01%	408,837,600	27.01%	408,837,600	25.65%	504,837,600	29.88%	2,592,837,600	68.63%
Ms. Eva Wong (See Notes (1) and (2))	271,200	0.03%	406,800	0.03%	406,800	0.03%	406,800	0.02%	406,800	0.01%
Sub-total	272,829,600	27.04%	409,244,400	27.04%	409,244,400	25.68%	505,244,400	29.90%	2,593,244,400	68.64%
Mr. Cheung Hung Man
Mr. Cheung Hung Man	93,235,000	9.24%	139,852,500	9.24%	139,852,500	8.77%	139,852,500	8.28%	139,852,500	3.70%
Mr. Liang Tong Wei	100,000,000	9.91%	150,000,000	9.91%	150,000,000	9.41%	150,000,000	8.88%	150,000,000	3.97%
CL Securities	—	—	—	—	—	—	—	—	—	—
Magic Stone	—	—	—	—	80,000,000	5.02%	80,000,000	4.73%	80,000,000	2.12%
Public	543,119,480	53.81%	814,679,220	53.81%	814,679,220	51.12%	814,679,220	48.21%	814,679,220	21.57%
Total	1,009,184,080	100.00%	1,513,776,120	100.00%	1,593,776,120	100.00%	1,689,776,120	100.00%	3,777,776,120	100.00%

LETTER FROM THE BOARD

Scenario 3

Assuming all outstanding Share Options are exercised and no Qualifying Shareholders (other than Kesterion) takes up any of the Rights Shares and the Underwriters take up the Rights Shares to the maximum extent$^{(see note 6)}$.

	As at the Latest Practicable Date		Immediately after completion of the Rights Issue and the Bonus Issue		Immediately after completion of the Rights Issue and the Bonus Issue		Immediately after completion of the Rights Issue and the Bonus Issue and the issue of 80,000,000 new Shares and conversion of New Bonds subject to 29.90% restriction		Immediately after completion of the Rights Issue and the Bonus Issue and the issue of 80,000,000 new Shares and full conversion of New Bonds without 29.90% restriction
	Number of shares	Approximate %	Number of shares	Approximate %	Number of shares	Approximate %	Number of shares	Approximate %	Number of shares	Approximate %
Kesterion, Ms. Eva Wong and parties acting in concert
Kesterion (See Notes (1) and (3))	272,558,400	24.93%	490,027,600	29.88%	490,027,600	28.49%	524,027,600	29.88%	2,674,027,600	68.50%
Ms. Eva Wong (See Notes (1) and (2))	271,200	0.02%	271,200	0.02%	271,200	0.02%	271,200	0.02%	271,200	0.01%
Sub-total	272,829,600	24.95%	490,298,800	29.90%	490,298,800	28.51%	524,298,800	29.90%	2,674,298,800	68.51%
Mr. Cheung Hung Man
Mr. Liang Tong Wei	93,235,000	8.53%	93,235,000	5.69%	93,235,000	5.42%	93,235,000	5.32%	93,235,000	2.39%
CL Securities	—	—	329,129,240	20.07%	329,129,240	19.14%	329,129,240	18.77%	329,129,240	8.43%
Magic Stone	—	—	—	—	80,000,000	4.56%	80,000,000	4.65%	80,000,000	2.05%
Share Option holders	84,012,800	7.69%	84,012,800	5.12%	84,012,800	4.89%	84,012,800	4.79%	84,012,800	2.15%
Public	543,119,480	49.68%	543,119,480	33.12%	543,119,480	31.58%	543,119,480	30.96%	543,119,480	13.91%
Total	1,093,196,880	100.00%	1,639,795,320	100.00%	1,719,795,320	100.00%	1,753,795,320	100.00%	3,903,795,320	100.00%

LETTER FROM THE BOARD

Scenario 4

Assuming all outstanding Share Options are exercised and all Qualifying Shareholders take up their respective allotment of Rights Shares in full(Note 6).

	As at the Latest Practicable Date		Immediately after completion of the Rights Issue and the Bonus Issue		Immediately after completion of the Rights Issue and the Bonus Issue and the issue of 80,000,000 new Shares		Immediately after completion of the Rights Issue and the Bonus Issue and the issue of 80,000,000 new Shares and conversion of New Bonds subject to 29.90% restriction		Immediately after completion of the Rights Issue and the Bonus Issue and the issue of 80,000,000 new Shares and full conversion of New Bonds without 29.90% restriction(Note 7)
	Number of shares	Approximate %	Number of shares	Approximate %	Number of shares	Approximate %	Number of shares	Approximate %	Number of shares	Approximate %
Kesterion, Ms. Eva Wong and parties acting in concert
Kesterion (See Notes (1) and (3))	272,558,400	24.93%	408,837,600	24.93%	408,837,600	23.78%	558,637,600	29.88%	2,592,837,600	66.42%
Ms. Eva Wong (See Notes (1) and (2))	271,200	0.02%	406,800	0.02%	406,800	0.02%	406,800	0.02%	406,800	0.01%
Sub-total	272,829,600	24.95%	409,244,400	24.95%	409,244,400	23.80%	559,044,400	29.90%	2,593,244,400	66.43%
Mr. Cheung Hung Man
Mr. Liang Tong Wei	93,235,000	8.53%	139,852,500	8.53%	139,852,500	8.13%	139,852,500	7.48%	139,852,500	3.58%
	100,000,000	9.15%	150,000,000	9.15%	150,000,000	8.72%	150,000,000	8.02%	150,000,000	3.84%
CL Securities
Magic Stone	—	—	—	—	—	—	—	—	—	—
Share Option holders	84,012,800	7.69%	126,019,200	7.69%	126,019,200	7.33%	126,019,200	6.74%	126,019,200	3.23%
Public	543,119,480	49.68%	814,679,220	49.68%	814,679,220	47.37%	814,679,220	43.58%	814,679,220	20.87%
Total	1,093,196,880	100.00%	1,639,795,320	100.00%	1,719,795,320	100.00%	1,869,595,320	100.00%	3,903,795,320	100.00%

Notes:

(1) The entire issued share capital of Kesterion is beneficially owned by Ms. Eva Wong, the spouse of Mr. Koh Tat Lee, Michael.

(2) Ms. Eva Wong is interested in 271,200 Shares beneficially held by herself and 272,558,400 Shares held by Kesterion. Mr. Koh Tat Lee, Michael is the husband of Ms. Eva Wong. By virtue of SFO, Mr. Koh Tat Lee, Michael is deemed to be interested in the Ms. Eva Wong's interests in the Shares. Save for such deemed interests, Mr. Koh Tat Lee, Michael does not hold any interests in the securities of the Company as at the Latest Practicable Date.

(3) 252,153,400 Shares out of 272,558,400 Shares held by Kesterion are subject to the Kesterion Charge which was created in favour of China Shipbuilding. The Company has been informed that the rights under the Kesterion Charge has been assigned by China Shipbuilding to Magic Stone on 7 November 2014. Under the terms of the Kesterion Charge, Magic Stone is entitled to exercise the voting rights of the 252,153,400 Shares subject to the Kesterion Charge. Save for the interests in Shares arising under the Kesterion Charge and the 80,000,000 new Shares to be issued under the Settlement Agreement, Magic Stone does not hold any interests in the securities of the Company. For further details, please refer to the section headed "Update on enforcement of charge over the Shares and Convertible Bonds held by substantial shareholder and connected transactions involving Settlement Agreement with Magic Stone".

LETTER FROM THE BOARD

(4) Subject to the fulfillment of the conditions precedent to the Bond Restructuring Agreement, the Convertible Bonds will be amended and redeemed by the Company on the Completion Date. Accordingly, the illustration of the potential changes to shareholding as a result of the Convertible Bonds has not been illustrated.

(5) Save as disclosed above, the Company has no other substantial shareholder and no Director is interested in any Shares or securities of the Company.

(6) As at the Latest Practicable Date, the Company has 84,012,800 outstanding Share Options, representing 262,800 outstanding share options with the exercise price of HK$3.58 per Share granted under the Share Option Scheme 2002 and 83,750,000 outstanding share options with the exercise price of HK$0.50 per Share granted under the Share Option Scheme 2012. As at the Latest Practicable Date, each of the exercise prices of the options granted under the Share Option Scheme 2002 and the Share Option Scheme 2012 were approximately 1,449.78% and 116.45% higher than the average of the closing prices as quoted on the Stock Exchange for the last five trading days up to and including the Latest Practicable Date, respectively. In this regard, it is unlikely that the holders of those Share Options will exercise those options. Assuming no further grant of Share Options under the Share Option Scheme 2012 by the Company and full exercise of the subscription rights attaching to the Share Options granted on and before the Record Date, an additional 25,203,840 Rights Shares and 16,802,560 Bonus Shares will be issued.

(7) For illustration purposes only, the table sets out the effect on the shareholding structures without 29.90% shareholding restriction under the Convertible Bonds.

WARNING OF THE RISKS OF DEALING IN SHARES AND RIGHTS SHARES

The Rights Issue and the Bond Restructuring are inter-conditional. The Rights Issue is also conditional, inter alia, upon the fulfillment of the conditions set out under the sections headed "Underwriting Agreement — Conditions of the Rights Issue and the Bonus Issue" and "Connected transactions involving the restructuring of Convertible Bonds and issue of New Convertible Bonds — Conditions Precedent" of this circular. Accordingly, the Rights Issue and the Bonus Issue may or may not proceed. Any Shareholders or other persons contemplating selling or purchasing Shares and/or nil-paid Rights Shares up to the date when the conditions of the Rights Issue are fulfilled will bear the risk that the Rights Issue could not become unconditional and may not proceed. Shareholders and the public are reminded to exercise caution when dealing in the securities of the Company.

LETTER FROM THE BOARD

RISK FACTORS

In compliance with the GEM Listing Rules, the Company sets out below the risk factors of the Group for the Shareholders' attention. The Directors believe that there are certain risks involved in the operations of the Group which includes, but does not limit to, the following:

Business and market risk relating to the Group

(a) Risks relating to the Group and its business

Exploration and exploitation business

A subsidiary of the Group has been applying for conversion of part of the area of the existing Exploration Permits ("EP") into Mineral Production Sharing Agreement ("MPSA", a type of mining permit to exploit the iron ore mineral from the designated area) in the Philippines. As at the date of this circular, the MPSA has not been granted. If the MPSA is not granted upon expiry of the EP by December 2016, the current MPSA application may lapse and the subsidiary may be required to re-start the application of EP and then the application for conversion into MPSA.

The EPs are situated in The Philippines. Any amendment or addition to existing laws and regulations may affect future profitability of the operation after obtaining the MPSA. Besides, during the last 2 years market price of iron ore has been decreasing and there is a risk that the market price will continue to decrease. The low market price will reduce rate of return of the exploitation operation.

Coal trading business

The Group operates primarily in Indonesia and China. Any amendment or addition to existing laws and regulations of any of these 2 countries or any reduction of demand in China may affect future profitability of the operation. Besides, international coal price has been softened a lot from its peak. Any further decrease in international market price will further reduce profit margin of the business.

The Group has been actively seeking to secure appropriate coal supplies at reasonable cost. Before that is achieved there is a risk that the Group may not be able to operate the trading business at sufficient profit margin continuously under a low market price environment.

Beverage trading business

The Group has commenced beverage trading business for more than 2 years. The Group has been conducting the businesses in a very cautious manner. Tea and juice drinks are traded from Korea manufacturer to United States and bottled drinking spring water is traded from Canadian manufacturer to China. Any amendment or addition to existing laws and regulations of these 4 countries may affect future profitability of the operation.

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LETTER FROM THE BOARD

Beverage business volume is subject to seasonal fluctuations. Besides, market competition in both China and US are very keen. There is a risk that the Group's distributors in China and US may not be able to differentiate and protect their price, market segment and brand against mass market competition.

Metal trading business

The business is being carried out primarily in Singapore. Any amendment or addition to existing laws and regulations of the country may affect future profitability of the operation. Besides, international metal price has been fluctuating all the time. Any unfavourable movement will reduce profitability of the operation.

(b) Risks relating to politics, economics and regulations

The business operations of the Group are primarily based in Hong Kong, the PRC, Singapore and Philippines. Accordingly, the Group's operating results, financial position and prospects could be adversely affected by economic, political and legal developments in those territories. Any changes in the political and economic policies/environments of the those territories (including, but not limited to, government policies, political instability, expropriation, laws, labour activism, war, civil unrest, terrorism, and changes in interest rates, foreign exchange rates, taxation, environmental regulations and import and export duties and restrictions) may adversely affect the Group's business and results of operations as well as its ability to sustain its expansion strategies and thus future growth.

The price and trading volume of the shares of the Company are determined by demand and supply by investors for the shares of the Company in the public market price and may be highly volatile. Factors such as variations in the Group's revenue, earnings and cash flows, changes in or challenges to its business, announcements of new investments, acquisitions or disposals, the depth and liquidity of the market for the Shares, investors' perceptions of the Group and general political, economic, social and market conditions both globally and in the PRC or Hong Kong could cause the market price of the Shares to change substantially.

(d) Risk relating to the Rights Issue

Under the Underwriting Agreement, the Underwriters are entitled to terminate their obligations by giving notice in writing to the Company upon the occurrence of any of the events stated in the section headed "Termination of the Underwriting Agreement" in this circular on or before the Latest Time for Termination. Should the Rights Issue proceed as intended, the interest of the existing Shareholders in the Company will be diluted if they do not or cannot, as the case may be, subscribe for the Rights Shares which they are entitled to.

Additional risks and uncertainties not presently known to the Directors, or not expressed or implied above, or the Directors currently deem immaterial, may also adversely affect the Group's business, operating results and financial condition in a material aspect.

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LETTER FROM THE BOARD

PROPOSED CHANGE IN BOARD LOT SIZE

The Shares are currently traded in board lots of 5,000 Shares each. The Board proposes to change the board lot size for trading in the Shares on the Stock Exchange from 5,000 Shares to 10,000 Shares in accordance with the expected timetable, irrespective of whether the Rights Issue is completed or not.

ARRANGEMENT ON ODD LOT TRADING

In order to facilitate the trading of odd lots (if any), the Company will arrange odd lot matching services during 9:00 a.m. on Thursday, 12 February 2015 to 4:00 p.m. on Friday, 6 March 2015 (both dates inclusive). Shareholders should note that matching of the sale and purchase of odd lots of the Shares is on a best effort basis and successful matching of the sale and purchase of such odd lots is not guaranteed.

SHARE CERTIFICATES

All existing share certificates in board lot of 5,000 Shares will remain good evidence of the legal title to the Shares and continue to be valid for delivery, transfer, trading and settlement purposes. No new share certificates for existing Shareholders will be issued as a result of the change in the board lot size, and therefore no arrangement for free exchange of existing share certificates in board lot size 5,000 Shares to new share certificate in board lot size of 10,000 Shares is necessary.

EGM

There is set out on pages EGM-1 to EGM-4 of this circular a notice convening the EGM to be held at 11:00 a.m. on Friday, 9 January 2015 by poll to approve, among other things, the Share Capital Increase, the Rights Issue, the Bonus Issue, the Underwriting, the Bond Restructuring, the Settlement Agreement and the Specific Mandate.

At the EGM, Shareholders who have a material interest in the Rights Issue, the Bonus Issue, the Underwriting, the Bond Restructuring, the Settlement Agreement, the Kesterion Charge and/or the Specific Mandate will abstain from voting on the resolution to be proposed at the EGM to approve the Rights Issue, the Bonus Issue, the Underwriting, the Bond Restructuring, the Settlement Agreement and the Specific Mandate. The respective shareholdings of the above Shareholders are set out in the section headed "Shareholding of the Company" in this circular.

A form of proxy for use at the EGM is enclosed. If you are not able to attend the EGM in person, you are requested to complete and return the form of proxy in accordance with the instructions printed thereon together with any power of attorney or other authority (if any) under which it is signed or a certified copy of such power of attorney to the office of the Share Registrar at Level 22, Hopewell Centre, 183 Queen's Road East, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the EGM. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM should you so wish.

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LETTER FROM THE BOARD

POLL PROCEDURE

The votes to be taken at the EGM will be taken by a poll, the results of which will be announced after the EGM.

RECOMMENDATION

Your attention is drawn to the letter of recommendation from the Independent Board Committee to the Independent Shareholders which set out on pages 58 and 59 of this circular and the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders which set out on pages 60 to 100 of this circular in relation to the Rights Issue, the Bonus Issue, the Bond Restructuring and the Settlement Agreement.

The Directors (including the independent non-executive Directors) consider that the Rights Issue, the Bonus Issue, the Bond Restructuring and the Settlement Agreement are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors (including the independent non-executive Directors) recommend the Independent Shareholders to vote in favour of the resolutions to be proposed at the EGM to approve the Share Capital Increase, the Rights Issue, the Bonus Issue, the Underwriting, the Bond Restructuring, the Settlement Agreement and the Specific Mandate. You are advised to read the letter from the Independent Board Committee and the letter from the Independent Financial Adviser mentioned above before deciding how to vote on the resolutions to be proposed at the EGM.

ADDITIONAL INFORMATION

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

Yours faithfully,

For and on behalf of

Pan Asia Mining Limited

Mr. Koh Tat Lee, Michael

Chairman

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

PAn Asia Mining Limited

寰亞礦業有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8173)

19 December 2014

To the Independent Shareholders

Dear Sir or Madam,

AND

(7) NOTICE OF EXTRAORDINARY GENERAL MEETING

We refer to the "Letter from the Board" set out in the circular dated 19 December 2014 (the "Circular") of which this letter forms part. Capitalised terms defined in the Circular shall have the same meanings when used herein unless the context otherwise requires.

We have been appointed as the Independent Board Committee to consider the Rights Issue, the Bonus Issue, the Bond Restructuring and the transactions contemplated under the Settlement Agreement and to advise the Independent Shareholders as to the fairness and reasonableness thereof and to recommend whether or not the Independent Shareholders should vote for the resolution to be proposed at the EGM to approve the Rights Issue, the Bonus Issue, the Bond Restructuring and the transactions contemplated under the Settlement Agreement. Changjiang Corporate Finance (HK) Limited has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the Rights Issue, the Bonus Issue, the Bond Restructuring and the transactions contemplated under the Settlement Agreement.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

We wish to draw your attention to the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders which contains its advice to us in relation to the Rights Issue, the Bonus Issue, the Bond Restructuring and the Settlement Agreement as set out in the Circular. We also draw your attention to the Letter from the Board.

Having taken into account principal factors and reasons considered by and the opinion of the Independent Financial Adviser as stated in its letter of advice, we are of the view that the terms of the Rights Issue, the Bonus Issue, the Bond Restructuring and the transactions contemplated under the Settlement Agreement are fair and reasonable, on normal commercial terms and in the interests of the Company and the Shareholders as a whole. We therefore recommend the Independent Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the Rights Issue, the Bonus Issue, the Bond Restructuring and the transactions contemplated under the Settlement Agreement.

Yours faithfully,

The Independent Board Committee of Pan Asia Mining Limited

Independent non-executive Directors

Mr. Chu Hung Lin, Victor

Mr. Tong Wan Sze

Mr. Fung Kwok Leung

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, prepared for the purpose of inclusion in this circular.

長江證券融資(香港)有限公司

CHANGJIANG CORPORATE FINANCE (HK) LIMITED

Suite 1908, 19/F
Cosco Tower
183 Queen's Road Central
Hong Kong

19 December 2014

To the Independent Board Committee and the Independent Shareholders of Pan Asia Mining Limited

Dear Sirs,

(1) PROPOSED RIGHTS ISSUE ON THE BASIS OF THREE RIGHTS SHARES FOR EVERY TEN SHARES HELD ON THE RECORD DATE
(2) PROPOSED BONUS ISSUE OF TWO BONUS SHARES FOR EVERY THREE RIGHTS SHARES TAKEN UP UNDER THE RIGHTS ISSUE
(3) CONNECTED TRANSACTIONS INVOLVING THE RESTRUCTURING OF CONVERTIBLE BONDS AND ISSUE OF NEW CONVERTIBLE BONDS

AND

(4) UPDATE ON ENFORCEMENT OF CHARGE OVER THE SHARES AND CONVERTIBLE BONDS HELD BY SUBSTANTIAL SHAREHOLDER AND CONNECTED TRANSACTIONS INVOLVING SETTLEMENT AGREEMENT WITH MAGIC STONE

I. INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Rights Issue (with the Bonus Issue), the Bond Restructuring and the Settlement Agreement, details of which are set out in the letter from the Board (the "Letter from the Board") contained in the circular dated 19 December 2014 issued by the Company to the Shareholders (the "Circular"), of which this letter forms part. Unless otherwise stated, terms defined in the Circular have the same meanings in this letter.

On 23 November 2014, the Company announced that, among other things, the Rights Issue (with the Bonus Issue), the Bond Restructuring and the Settlement Agreement.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

With respect to the Rights Issue (with the Bonus Issue), the Company proposed to raise not less than approximately HK$151.4 million and not more than approximately HK$164.0 million before expenses by way of issue of (i) not less than 302,755,224 Rights Shares (assuming no outstanding Share Options are exercised, no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) and not more than 327,959,064 Rights Shares (assuming all the outstanding Share Options are exercised and no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) to be issued pursuant to the Rights Issue on the basis of three (3) Rights Shares for every ten (10) Shares held on the Record Date at the Subscription Price of HK$0.50 per Rights Share; and (ii) not less than 201,836,816 Bonus Shares (assuming no outstanding Share Options are exercised, no further issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) and no more than 218,639,376 Bonus Shares (assuming all the outstanding Share Options are exercised and no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) to be issued pursuant to the Bonus Issue on the basis of two (2) Bonus Shares for every three (3) Rights Shares taken up under the Rights Issue.

As at the Latest Practicable Date, Kesterion was holding in aggregate of 272,588,400 Shares, representing approximately 27.01% of the entire issued share capital of the Company. Kesterion is wholly and beneficially owned by Ms. Eva Wong, the spouse of Mr. Koh Tat Lee, Michael the chairman of the Board. Kesterion has irrevocably undertaken that, among others, (i) to subscribe or procure the subscription of the 81,776,520 Rights Shares which will constitute the provisional allotment of Rights Shares in respect of the Shares beneficially owned by Kesterion pursuant to the terms of the Rights Issue; and (ii) Kesterion shall not convert any of the Convertible Bonds into Shares from the date of the Underwriting Agreement and up to (a) the completion of the Rights Issue and the Bonus Issue; or (b) the termination of the Bond Restructuring Agreement, whichever is earlier.

The Rights Issue is fully underwritten by the Underwriters on the terms and subject to the conditions set out in the Underwriting Agreement. Pursuant to the Underwriting Agreement, the Underwriters have conditionally agreed to underwrite the following basis: (i) firstly, out of all the Untaken Shares, Kesterion shall take up to 26,106,156 Untaken Shares (in the case where no new Shares being issued or repurchased by the Company and no Convertible Bonds are converted on or before the Record Date) and not more than 48,714,000 Untaken Shares (in the case where no new Shares being issued and no Convertible Bonds being converted other than those falling to be issued upon full exercise of the Share Options and no Shares being repurchased by the Company on or before the Record Date); and (ii) if there is any balance of the Untaken Shares after deducting the Kesterion portion disclosed above, such remaining balance of Untaken Shares shall be taken up by CL Securities, being not more than 194,881,548 Untaken Shares (in the case where no new Shares being issued or repurchased by the Company and no Convertible Bonds being converted on or before the Record Date) and not more than 197,477,544 Untaken Shares (in the case where no new Shares being issued and no Convertible Bonds being converted other than those falling to be issued upon full exercise of the Share Options and no Shares being repurchased by the Company on or before the Record Date).

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

With respect to the Bond Restructuring, in consideration of Kesterion agreeing to act as an Underwriter in respect of the Rights Issue, the Company and Kesterion entered into the Bond Restructuring Agreement on 22 September 2014, pursuant to which it is conditionally agreed that (i) the terms of Convertible Bonds will be amended to grant the Company a right to redeem all the outstanding Convertible Bonds at a redemption price of US$140,000,000 (equivalent to approximately HK$1,092,000,000), (ii) the Company will exercise such Redemption Right and (iii) in satisfaction and cancellation of the Redemption Amount payable under the amended Convertible Bonds following such redemption, the Company will issue the New Bonds to Kesterion.

Under the GEM Listing Rules, Kesterion, being a substantial shareholder of the Company, is a connected person of the Company. Accordingly, the transactions contemplated under the Bond Restructuring Agreement constitute connected transactions of the Company under Chapter 20 of the GEM Listing Rules and are subject to the approval of the Independent Shareholders at the EGM by way of poll.

With respect to the Settlement Agreement, as disclosed in the Previous Announcements, Kesterion previously created the Kesterion Charge over 252,153,400 Shares and the US$201,474,359 (equivalent to approximately HK$1,571,500,000) principal amount of the Convertible Bonds held by Kesterion in favour of China Shipbuilding as a continuing security to guarantee the due and punctual performance and observance of certain goods delivery and payment obligations and liabilities by the contracted subsidiaries of the Company under the Trade Contracts, certain obligations required by the Trade Contracts were not performed according to the contractual terms. In view of the overdue liabilities payable by the Company to China Shipbuilding and for the purpose of safeguarding the interests in connection with the Trade Contracts, China Shipbuilding appointed the Receivers to exercise all the powers of a receiver given by the terms of the Kesterion Charge. The Kesterion Charge and such payables under the Trade Contracts were assigned to Magic Stone on 7 November 2014. With a view to settling the various overdue liabilities plus interest charges in aggregate net amount of approximately HK$236.39 million payable by the Group to Magic Stone on or before 28 February 2015, on 21 November 2014, the Company and certain of its subsidiaries entered into the Settlement Agreement with Magic Stone and Kesterion, pursuant to which the Group has conditionally agreed to settle the various overdue payables under the Trade Contracts partly by cash and partly by way of the issue and allotment of 80,000,000 new Shares each fully paid at an issue price of HK$0.50 per Share to Magic Stone. As Magic Stone is entitled to exercise the voting rights of the Shares subject to the Kesterion Charge, it is a substantial shareholder of the Company for the purposes of the GEM Listing

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Rules and therefore a connected person of the Company under the GEM Listing Rules. Accordingly, the entering into of the Settlement Agreement and the transactions contemplated thereunder (including the issue of the 80,000,000 new Shares) constitute a connected transaction for the Company and given that the applicable percentage ratios in respect of that exceed 5% and HK$10,000,000, it is subject to the approval of the Independent Shareholders at the EGM. Magic Stone will abstain from voting on the ordinary resolution approving the Settlement Agreement and the transactions contemplated thereunder. To enhance the financial flexibility of the Group to raise funds using its general mandate, the Company will seek a specific mandate at the EGM to authorize the Directors to allot and issue the new 80,000,000 Shares.

II. THE INDEPENDENT BOARD COMMITTEE

The Board currently consists of five Directors, namely Mr. Koh Tat Lee, Michael and Mr. Cheung Hung Man as executive Directors; Mr. Liang Tong Wei as non-executive Director; and Mr. Chu Hung Lin, Victor, Mr. Tong Wan Sze and Mr. Fung Kwok Leung as independent non-executive Directors.

The Independent Board Committee comprising all the independent non-executive Directors has been constituted to consider on (i) the terms of the Rights Issue (with the Bonus Issue); (ii) the Bond Restructuring Agreement; and (iii) the Settlement Agreement, and to advise and make recommendations to the Independent Shareholders as to how to vote at the EGM on the resolutions in relation thereto. Mr. Chu Hung Lin, Victor, Mr. Tong Wan Sze and Mr. Fung Kwok Leung have been appointed by the Board to serve as members of the Independent Board Committee. Changjiang Corporate Finance (HK) Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders on the fairness and reasonableness of (i) the terms of the Rights Issue (with the Bonus Issue); (ii) the Bond Restructuring Agreement; and (iii) the Settlement Agreement.

III. BASIS OF OUR OPINION

As the Independent Financial Adviser, we have taken all reasonable steps to satisfy and comply with the requirements under Rule 17.92 of the GEM Listing Rules and Rule 2 of the Takeovers Code. In formulating our opinion, we have relied solely on the statements, information, opinions and representations contained or referred to in the Circular and the information and representations provided to us by the Company and/or its management staff (the "Management") and/or the Directors. We have reviewed, among other things: (i) the independent valuation report dated 21 November 2014 (the "Valuation Report") prepared by Greater China Appraisal Limited (the "Independent Valuer"); (ii) the Underwriting Agreement; (iii) the Bond Restructuring Agreement; (iv) the Trade Contracts; (v) the Settlement Agreement; (vi) the 2013 annual report of the Company for the year ended 31 March 2013 ("AR 2013"), (vii) the 2014 annual report of the Company for the year ended 31 March 2014 ("AR 2014"); (viii) the interim report of the Company for the six months ended 30 September 2014 ("IR 2014"). We have assumed that all statements, information, opinions and representations contained or referred to in the Circular and all information and representations which have been provided by the Company and/or the Management and/or the Directors, for which it is/they are solely and wholly responsible, were true and accurate at the time when they were made and continue to be so at the date thereof. We have no reason to believe that any information or representations relied on by us in forming our opinion is untrue, inaccurate or misleading, nor are we aware of any material facts the omission

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

of which would render the information provided and the representations made to us untrue, inaccurate or misleading. We have assumed that all the opinions and representations for matters relating to the Company made or provided by the Directors and/or the Management contained in the Circular have been reasonably made after due and careful enquiry. We consider that we have reviewed sufficient information to enable us to form a reasonable basis for our opinion. We have not, however, conducted any independent verification of the information provided, nor have we carried out any form of in-depth investigation into the business and affairs of the Company.

IV. PRINCIPAL FACTORS AND REASONS CONSIDERED

A. The Rights Issue (with the Bonus Issue)

In arriving at our opinion and recommendation to the Independent Board Committee and the Independent Shareholders in relation to the Rights Issue (with the Bonus Issue), we have considered the following principal factors and reasons set out below:

1. Financial information of the Group

(i) For the six months ended 30 September 2014

As set out in IR 2014, the Group recorded turnover of approximately HK$20.94 million, representing a decrease of approximately 85.81% as compared HK$147.55 million for the six months ended 30 September 2013. The significant decrease in turnover was mainly attributable to the decrease in turnover from coal business which amounted to approximately HK$0.78 million (2013: approximately HK$145.93 million). In addition, turnover from trading of metals and the new beverage business increased to approximately HK$20.16 million (2013: approximately HK$1.61 million).

The Group incurred a gross loss of approximately HK$0.08 million for the six months ended 30 September 2014 as compared to a gross profit of approximately HK$1.00 million for the six months ended 30 September 2013.

The Group recorded a loss for the period for approximately HK$98.89 million for the six months ended 30 September 2014, representing a further increase in loss of approximately 35.58% from that for the six months ended 30 September 2013 of approximately HK$72.94 million, of which approximately HK$62.02 million (2013: approximately HK$52.69 million) was attributable to non-cash imputed interest charged to the outstanding convertible bonds.

(ii) For the year ended 31 March 2014

As set out in AR 2014, the Group recorded turnover of approximately HK$408.78 million, representing an increase of approximately 48.92% from that for the financial year ended 31 March 2013 for approximately HK$274.49 million. Such increase was due to higher turnover of coal and marine fuel businesses. Turnover for the coal business increased by approximately 40.13% from approximately HK$167.17 million in 2013 to approximately HK$234.26 million in 2014. Turnover for the marine fuel business increased by approximately 50.19% from approximately HK$93.53 million in 2013 to approximately HK$140.47 million. The Group's gross profit increased from approximately

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

HK$1.86 million for the year ended 31 March 2013 to approximately HK$2.46 million for the year ended 31 March 2014, with the overall gross profit margin remaining relatively stable at approximately 0.68% and approximately 0.60% for the year ended 31 March 2013 and 31 March 2014, respectively.

The Group recorded a loss for the year for approximately HK$176.00 million for the year ended 31 March 2014, representing a further increase in loss of approximately 37.53% from that for the year ended 31 March 2013 of approximately HK$127.97 million. The decrease in loss was mainly attributable to (i) the increase in turnover generated from coal and marine fuel businesses; and (ii) the increase in administrative expenses from hiring personnel expenses.

As set out in AR 2014, the Group has current assets of approximately HK$312.14 million as at 31 March 2014 in which bank balances and cash contributed approximately HK$42.06 million and the Group's current liabilities as at 31 March 2014 were approximately HK$386.61 million.

(iii) For the year ended 31 March 2013

As set out in AR 2013, the Group recorded turnover of approximately HK$274.49 million, representing a decrease of approximately 17.15% from that for the financial year ended 31 March 2012 for approximately HK$331.30 million. The decrease in turnover was due to (i) lower turnover of marine fuel business of approximately HK$93.53 million for the financial year ended 31 March 2013 as compared to approximately HK$299.66 million for the financial year ended 31 March 2012; (ii) business re-modelling by temporarily suspended the operation of marine fuel business since August 2012.

The Group's gross profit decreased from approximately HK$2.38 million for the year ended 31 March 2012 to approximately HK$1.86 million for the year ended 31 March 2013, with gross profit margin of approximately 0.72% and approximately 0.68%, respectively.

The Group recorded a loss for the year for approximately HK$127.97 million for the year ended 31 March 2013 as compared to approximately HK$7,458.90 million, representing a significant decrease in loss of approximately 98.28%. Such decrease was mainly attributable to the one-off impairment loss of approximately HK$7,342.42 million.

As set out in AR 2013, the Group has current assets of approximately HK$265.15 million as at 31 March 2013 in which bank balances and cash contributed approximately HK$175.88 million and the Group's current liabilities as at 31 March 2014 were approximately HK$210.38 million.

Reasons for the Rights Issue (with the Bonus Issue) and intended use of proceeds

As referred to in the Letter from the Board, in view of the financing needs for the Group's future business development, the Board has from time to time considered and discussed with financial

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

institutions regarding various fund raising methods available to the Group. Among different fund raising methods, the Directors have been focused on evaluating the possibilities of carrying out fund raising through rights issue and open offer as they are relatively larger in scale as compared to placing of new Shares under a general mandate. After comparison with the other fund raising methods available to the Group (for details, please refer to the section headed "3. Other fund raising alternatives" below), the Board decided to conduct the Rights Issue (with the Bonus Issue).

As set out in the Letter from the Board, the estimated net proceeds of the Rights Issue will be approximately HK$146.9 million (assuming no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) to approximately HK$159.1 million (assuming all the outstanding Share Options are exercised and no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date). In the event that the minimum net proceeds of approximately HK$146.9 million is raised, the Board intends to apply such proceeds as to (i) HK$132.6 million to satisfy part of the payment obligations under the Settlement Agreement; and (ii) the remaining HK$14.3 million for general working capital purposes.

In the event that the maximum net proceeds of approximately HK$159.1 million is raised, the Board intends to apply such proceeds as to (i) HK$132.6 million to satisfy part of the payment obligations under the Settlement Agreement; and (ii) the remaining HK$26.5 million for general working capital purposes.

3. Other fund raising alternatives

As advised by the Company, the Board has considered other fund raising alternatives before resolving the Rights Issue (with Bonus Issue, including but not limited to debt financing, placing and open offer. In view that debt financing would result in additional interest burden and higher gearing ratio of the Group; placing may necessarily dilute the shareholding in the Company of the existing shareholder; and although both open offer and rights issue would allow Shareholders to maintain their proportionate shareholder interests in the Company, a right issue would allow those Shareholders who do not want to participate in the fund raising of the Company to dispose of the rights shares entitlements in the market in nil-form, the Board considers raising funds by way of the Rights Issue (with Bonus Issue) is in the interests of the Company and Shareholders as a whole.

Having considered that (i) the Company may not be able to obtain favourable terms of debt financing and bank borrowings given the consecutive loss-makings by the Company; (ii) debt financing and bank borrowing would result in additional interest burden to the Group; (iii) as compared to a rights issue, any placing of new Shares without first offering the existing Shareholders the opportunity to participate in the Company's equity raising exercise would result in dilution of shareholding of and per Share value to the existing Shareholders; (iv) Rights Issue (with Bonus Issue) will enable the Shareholders to maintain their proportionate interests in the Company should they wish to; and (v) the Rights Issue enables the Qualifying Shareholders who decides not to participate in the Rights Issue an alternative to trade in the nil-paid rights in the market for economic benefits, we concur with the Directors that the Rights Issue (with Bonus Issue) represents the most commercial viable options considered by the Company to satisfy the funding needs of the Group and fund raising by way of Rights Issue is fair and reasonable and in the interest of the Company and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. Principal terms of the Rights Issue and the Bonus Issue

Basis of the Rights Issue and the Bonus Issue

The Company proposed to allot and issue (i) not less than 302,755,224 Rights Shares (assuming no outstanding Share Options are exercised, no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) and no more than 327,959,064 Rights Shares (assuming all the outstanding Share Options are exercised and no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) to be issued to the Rights Issue on the basis of three (3) Rights Shares for every ten (10) Shares held on the Record Date; and (ii) not less than 201,836,816 Bonus Shares (assuming no further issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) and no more than 218,639,376 Bonus Shares (assuming all the outstanding Share Options are exercised and no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date) to be issued pursuant to the Bonus Issue on the basis of two (2) Bonus Shares for every three (3) Rights Shares taken up under the Rights Issue.

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

As at the Latest Practicable Date, save for the Share Options and the Convertible Bonds, the Company has no outstanding convertible securities, options or warrants in issue which confer any right to subscribe for, convert or exchange into Shares.

Kesterion has irrevocably undertaken that, among others, (i) to subscribe or procure the subscription of the 81,767,520 Rights Shares which will constitute the provisional allotment of Rights Shares in respect of the Shares beneficially owned by Kesterion pursuant to the terms of the Rights Issue; and (ii) Kesterion shall not convert any of the Convertible Bonds into Shares from the date of the Underwriting Agreement and up to (a) the completion of the Rights Issue and the Bonus Issue; or (b) the termination of the Bond Restructuring Agreement, whichever is earlier.

The Rights Issue is fully underwritten by the Underwriters and the Underwriters will subscribe or procure subscribers for the Untaken Shares on the following basis:

(i) firstly, out of all the Untaken Shares, Kesterion shall take up to 26,106,156 Untaken Shares (in the case where no new Shares being issued or repurchased by the Company and no Convertible Bonds are converted on or before the Record Date) and not more than 48,714,000 Untaken Shares (in the case where no new Shares being issued and no Convertible Bonds being converted other than those falling to be issued upon full exercise of the Share Options and no Shares being repurchased by the Company on or before the Record Date); and

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(ii) if there is any balance of the Untaken Shares after deducting the Kesterion portion disclosed above, such remaining balance of Untaken Shares shall be taken up by CL Securities, being not more than 194,881,548 Untaken Shares (in the case where no new Shares being issued or repurchased by the Company and no Convertible Bonds being converted on or before the Record Date) and not more than 197,477,544 Untaken Shares (in the case where no new Shares being issued and no Convertible Bonds being converted other than those falling to be issued upon full exercise of the Share Options and no Shares being repurchased by the Company on or before the Record Date).

Other than acting as co-underwriter with Kesterion (a connected person) pursuant to the Underwriting Agreement, to the best of the Directors' knowledge, information and belief, CL Securities and its ultimate beneficial owners are Independent Third Parties. As at the Latest Practicable Date, the Board received the information on Ms. Eva Wong's intention to take up 81,360 Rights Shares to be provisionally allotted to her. In the unlikely event that Ms. Eva Wong has not subscribed those 81,360 Rights Shares, Kestertion, a company wholly owned by Ms. Eva Wong, and/or CL Securities shall take up those Untaken Shares with the commission fee of approximately HK$1,220.4 pursuant to the Underwriting Agreement. Such arrangement could eventually result in up to 3% discount on Ms. Eva Wong's entitlement in 81,360 Rights Shares.

Basis of determining the Subscription Price and the Bonus Issue

The Subscription Price of HK$0.50 per Rights Shares is payable in full when a Qualifying Shareholder accepts his/her/its provisional allotment under the Rights Issue or when a transferee of nil-paid Rights Shares subscribes for the Rights shares.

The Subscription Price represents:

(i) a premium of approximately 47.06% over the closing price of HK$0.34 per Share as quoted on the Stock Exchange on the Last Trading Day;

(ii) a premium of approximately 47.06% over the average closing price of approximately HK$0.34 per Share for the five consecutive trading days ended on the Last Trading Day;

(iii) a premium of approximately 51.52% over the theoretical ex-rights price of approximately HK$0.33 per Share based on the closing price of HK$0.34 per Share as quoted on the Stock Exchange on the Last Trading Day;

(iv) a premium of approximately 122.22% over the closing price of HK$0.225 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and

(v) a premium of approximately 46.67% over the theoretical ex-rights price of approximately HK$0.33 per Share after the Rights Issue (after taking into consideration of the Bonus Issue), based on the closing price of HK$0.225 per Share as quoted on the Latest Practicable Date.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Bonus Issue will reduce the average price per Rights Share taken up and therefore is in effect lowering the effective subscription Price and further increasing the discount of the Subscription Price to the prevailing market price of the Share. Since every two (2) Bonus Shares will be issued upon the subscription of three (3) Rights Shares, for illustrative purpose, the average price for each Share to be allotted and issued under the Rights Issue and the Bonus issue will be HK$0.30 (the “Adjusted Subscription Price”), which represents:

(i) a discount of approximately 11.76% to the closing price of HK$0.34 per Share as quoted on the Stock Exchange on the Last Trading Day;

(ii) a discount of approximately 11.76% to the average closing price of approximately HK$0.34 per Share for the five consecutive trading days ended on the Last Trading Day;

(iii) a discount of approximately 9.09% to the theoretical ex-rights price of approximately HK$0.33 per Share based on the closing price of HK$0.34 per Share as quoted on the Stock Exchange on the Last Trading Day;

(iv) a premium of approximately 33.33% over the closing price of HK$0.225 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and

The Subscription Price was arrived at after arm’s length negotiations between the Company and the Underwriters with reference to the market price of the Shares prior to the Last Trading Day and the net Adjusted Subscription Price. The Directors consider that the discount of the Subscription Price would encourage Shareholders to participate in the Rights Issue and accordingly maintain their shareholdings in the Company and participate in the future growth of the Group. The Directors and the independent non-executive Directors consider that the terms of the Rights Issue (including the rate of commission) to be fair and reasonable and in the best interests of the Group and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Analysis on the Subscription Price/ Adjusted Subscription Price

In order to access the fairness and reasonableness of the Subscription Price/Adjusted Subscription Price, we set out the following informative analysis for illustrative purposes:

(i) Review on Share prices

The highest and lowest closing prices and the average daily closing price of the Shares as quoted on the Stock Exchange in each month during the period commencing from 23 September 2013, being 12-month period prior to the date of the Underwriting Agreement (i.e. 22 September 2014), up to and including the Latest Practicable Date (the "Review Period") are shown as follows:

	Highest closing price (HK$)	Lowest closing price (HK$)	Average daily closing price (HK$)	No. of trading days in each month
Month 2013
September	0.510	0.430	0.485	6
October	0.500	0.410	0.468	21
November	0.430	0.340	0.395	21
December	0.415	0.365	0.393	20
2014
January	0.370	0.315	0.342	21
February	0.460	0.310	0.366	19
March	0.530	0.420	0.468	21
April	0.495	0.390	0.427	20
May	0.520	0.460	0.480	20
June	0.420	0.370	0.402	20
July (Note 1)	0.415	0.360	0.385	21
August	0.380	0.300	0.357	21
September (Note 2)	0.340	0.300	0.321	15
October (Note 3)	—	—	—	0
November (Note 4)	0.270	0.235	0.254	5
December (up to and including the Latest Practicable Date)	0.249	0.225	0.234	13

Source: the Stock Exchange website (www.hkex.com.hk)

Notes:

Trading in the Shares was suspended on 29 July 2014.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Trading in the Shares was suspended from 23 September 2014 to 30 September 2014.
Trading in the Shares was suspended from 3 October 2014 to 31 October 2014.
Trading in the Shares was suspended from 3 November 2014 to 21 November 2014.

During the Review Period, the monthly average daily closing price of the Shares ranged from HK$0.234 to HK$0.485 per Share. The lowest and highest closing prices of the Shares as quoted on the Stock Exchange were HK$0.225 per Share on 17 December 2014 and HK$0.530 per Share on 5 March 2014, respectively. We note that the Adjusted Subscription Price is higher than the lowest closing prices of the Shares during the Review Period, representing a premium of approximately 33.33%, and is lower than the highest closing prices of the Shares during the Review Period, representing a discount of approximately 43.40%. We also note that the closing price of the Shares shows a general declining trend during the Review Period.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(ii) Review on trading liquidity of the Shares

The trading liquidity of the Shares during the Review Period is as below:

	Total trading volume	Average daily trading volume	Average daily trading volume to total number of issued Shares as at the Latest Practicable Date (Note 5)	No. of trading days in each month
	Shares	Shares	%
Month
2013
September	16,952,600	2,825,433	0.280	6
October	56,301,600	2,681,029	0.266	21
November	36,165,200	1,722,152	0.171	21
December	22,051,800	1,102,590	0.109	20
2014
January	29,132,400	1,387,257	0.137	21
February	43,220,500	2,274,763	0.225	19
March	31,166,600	1,484,124	0.147	21
April	26,393,800	1,319,690	0.131	20
May	33,374,070	1,668,704	0.165	20
June	21,265,300	1,063,265	0.105	20
July (Note 1)	18,457,000	878,905	0.087	21
August	20,620,600	981,933	0.097	21
September (Note 2)	32,399,000	2,159,933	0.214	15
October (Note 3)	—	—	—	0
November (Note 4)	22,499,600	4,499,920	0.446	5
December (up to and including the Latest Practicable Date)	75,497,600	5,807,508	0.575	13

Source: the Stock Exchange website (www.hkex.com.hk)

Notes:

Trading in the Shares was suspended on 29 July 2014.
Trading in the Shares was suspended from 23 September 2014 to 30 September 2014.
Trading in the Shares was suspended from 3 October 2014 to 31 October 2014.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Trading in the Shares was suspended from 3 November 2014 to 21 November 2014.
Based on 1,009,184,080 Shares in issue as at the Latest Practicable Date.

The above table demonstrates that the average daily trading volume of the Shares per month during the Review Period, with a range of approximately 0.087% to 0.575% of the total number of issued shares. We note that trading in the Shares during the Review Period is thin and since the Shares were generally illiquid in the open market, we concur with the Directors that it would be difficult to attract Qualifying Shareholders to reinvest in the Company through the Rights Issue (with the Bonus Issue) if the Adjusted Subscription Price was not set at a discount to the historical closing prices of the Shares. With this being the case, we are of the view that the discount to the Share price as represented by the Adjusted Subscription Price is justifiable.

(iii) Comparison with other rights issue transactions

As part of our analysis, we identified those rights issue transactions (the "Comparables") from 23 March 2014 up to date of Underwriting Agreement (i.e. 22 September 2014), being the six-month period prior to and including the date of Underwriting Agreement, by companies listed on Main Board and the GEM Board of the Stock Exchange. To the best of our knowledge, we found 30 companies which met the said criteria. The Comparables is an exhaustive list of companies selected based on our said criteria. Since the terms of a rights issue transaction are usually determined with reference to the prevailing market condition and sentiments, we consider that the selected timeframe is appropriate and the Comparables are fair and representative samples. Nevertheless, Shareholders should note that the businesses, operations and prospects of the Comparables are not exactly the same as the Company and thus the Comparables are only used to provide a general reference for the common market practice in recent rights issue transactions by the Main Board and GEM Board listed companies in Hong Kong.

Furthermore, as disclosed in the Letter from the Board, two Bonus Shares will be allotted for every three Rights Share taken up by the Qualifying Shareholders. Therefore, for a Qualifying Shareholder paying the Subscription Price to subscribe for three Rights Share, he/she/it will be allotted three Rights Share and two Bonus Shares, which means that the actual cost a Qualifying Shareholder has to pay for the Share (i.e. Adjusted Subscription Price) is lower than the Subscription Price. As such, we are of the view that it is more appropriate to compare the last trading day discount (which is calculated based on the Adjusted Subscription Price) to the last trading day market range for accessing the fairness and reasonableness of the Subscription Price.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We set out our findings in the table below:

Date of announcement	Company name (stock code)	Basis of entitlement	Maximum dilution on the public shareholders	Premium/ (Discount) of the subscription price to closing price per share on the last trading day prior to/on the date of the announcement in relation to the respective rights issue (%)	Premium/ (Discount) of the subscription price to the theoretical ex-rights price per share based on the closing price per share on the last prior to/on the date of the announcement in relation to the respective rights issue (%)	Underwriting commission
9 April 2014	CMMB Vision Holdings Limited (471)	2 for 1 (Note 1)	75.00	(56.10)	24.20	2.50
9 April 2014	Fosun International Limited (656)	39 for 500	7.20	0	0	0.00
11 April 2014	China Primary Resources Holdings Limited (8117)	1 for 2	33.30	(56.70)	(46.60)	0.00
11 April 2014	Merdeka Mobile Group Limited (8163)	4 for 1	80.00	(75.20)	(38.50)	3.50
22 April 2014	Haitong International Securities Group Limited (665)	1 for 2	33.30	(11.20)	(7.80)	0.00
2 May 2014	National Arts Entertainment and Culture Group Limited (8228)	6 for 1	85.70	(70.20)	(25.10)	2.50
11 May 2014	Uni-President China Holdings Limited (220)	1 for 5	16.70	(29.60)	(26.00)	1.20
22 May 2014	eForce Holdings Limited (943)	16 for 1	94.10	(80.40)	(19.40)	3.00
13 June 2014	HKT Trust and HKT Limited (6823)	18 for 100	15.30	(20.70)	(18.10)	2.20
19 June 2014	Vision Fame International Holding Limited (1315)	1 for 1	50.00	(20.00)	(11.10)	1.00
3 July 2014	Applied Development Holdings Limited (519)	1 for 2	33.30	(67.30)	(57.90)	2.50
11 July 2014	Sau San Tong Holdings Limited (8200)	3 for 1	75.00	(77.30)	(50.00)	2.50
11 July 2014	Opes Asia Development Limited (810)	4 for 1	80.00	(67.20)	(29.10)	2.50
13 July 2014	China Gamma Group Limited (164)	1 for 2	33.30	(59.80)	(49.70)	1.00

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Date of announcement	Company name (stock code)	Basis of entitlement	Maximum dilution on the public shareholders	Premium/ (Discount) of the subscription price to closing price per share on the last trading day prior to/on the date of the announcement in relation to the respective rights issue (%)	Premium/ (Discount) of the subscription price to the theoretical ex-rights price per share based on the closing price per share on the last prior to/on the date of the announcement in relation to the respective rights issue (%)	Underwriting commission
8 August 2014	SMI Culture Group Holdings Limited (2366)	8 for 1	88.90	(83.30)	(35.70)	4.50
11 August 2014	South East Group Limited (726)	8 for 1	88.90	(71.40)	(21.70)	2.50
12 August 2014	China New Economy Fund Limited (80)	1 for 2	33.30	(36.40)	(27.60)	2.50
17 August 2014	China Renji Medical Group Limited (648)	1 for 2	33.30	(52.60)	(42.60)	4.00
18 August 2014	China Yunnan Tin Minerals Group Co. Limited (263)	9 for 1	90.00	(65.20)	(14.60)	3.00
18 August 2014	Guotai Junan International Holdings Limited (1788)	1 for 5	16.70	(9.60)	(8.20)	0.00
20 August 2014	Rui Kang Pharmaceutical Group Investments Limited (8037)	1 for 2	33.30	(19.60)	(14.00)	2.50
25 August 2014	Venturepharm Laboratories Limited (8225)	3 for 2	60.00	(71.40)	(50.00)	0.00
27 August 2014	Realord Group Holdings Limited (1196)	1 for 4	20.00	(13.00)	(10.70)	2.00
27 August 2014	Country Garden Holdings Co. Limited (2007)	1 for 15	6.20	(30.90)	(29.60)	1.80
2 September 2014	Midas International Holdings Limited (1172)	1 for 2	33.30	(46.80)	(37.10)	2.50
3 September 2014	Bright Smart Securities & Commodities Group Limited (1428)	1 for 2	33.40	(27.50)	(20.00)	2.50
3 September 2014	Yuexiu Property Co. Limited (123)	33 for 100	24.80	(25.20)	(20.40)	2.00
5 September 2014	Easyknit Enterprises Holdings Limited (616)	8 for 1	88.90	(80.80)	(32.00)	1.00

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Date of announcement	Company name (stock code)	Basis of entitlement	Maximum dilution on the public shareholders	Premium/ (Discount) of the subscription price to closing price per share on the last trading day prior to/on the date of the announcement in relation to the respective rights issue (%)	Premium/ (Discount) of the subscription price to the theoretical ex-rights price per share based on the closing price per share on the last prior to/on the date of the announcement in relation to the respective rights issue (%)	Underwriting commission
18 September 2014	First Credit Finance Group Limited (8215)	3 for 1	75.00	(78.00)	(47.00)	2.50
22 September 2014	Agile Property Holdings Limited (3383)	1 for 5	16.70	(31.15)	(27.40)	1.75
	Mean		48.50	(47.82)	(26.46)	1.98
	Median		33.32	(54.35)	(26.70)	2.50
	Maximum		94.10	0.00	24.20	4.50
	Minimum		6.20	(83.30)	(57.90)	0.00
23 September 2014	The Company	3 for 10 (Note 2)	33.33	(11.76)	(9.09)	3.00

Source: the Stock Exchange website (www.hkex.com.hk)

Notes:

The rights issue was on the basis of two rights shares for every one existing share and one bonus share for every two rights shares.
The rights issue was on the basis of three rights shares for every ten existing share and two bonus share for every three rights shares.

We note that the discount to the respective closing price per share on the last trading day represented by the Comparables ranged from approximately 83.30% to 0.00%, with an average discount of approximately 47.82%. The Adjusted Subscription Price represented a discount of approximately 11.76% to the adjusted closing price per Adjusted Share on the Last Trading Day, which falls within the range.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We also note that the discount to the theoretical ex-rights price per share represented by the Comparables ranged from approximately 57.90% to a premium of approximately 24.20%, with an average discount of approximately 26.46%. The Adjusted Subscription Price represented a discount of approximately 9.09% to the theoretical ex-rights price per Adjusted Share, which also falls within the range of the Comparables.

Underwriting Commission

As confirmed by the Directors, the underwriting commission was determined after arm's length negotiations between the Company and the Underwriters, with reference to, among other things, the scale of the Rights Issue, the market rate, current financial status and operation results of the Group. Pursuant to the Underwriting Agreement, the Company will pay 3.00% of the aggregate Subscription Price of the respective portion of the respective maximum Rights Shares underwritten by each Underwriter. The Board considered that the underwriting commission of 3.00% is fair and reasonable and in the interests of the Company and the Shareholders as a whole. Based on our review as set out in the sub-section headed "(iii) Comparison with other rights issue transactions" above, we note that the underwriting commission of 3.00% falls within the range from nil to 4.50% and is close to the median of the underwriting commissions of the Comparables. Given the same, and in particularly, the 3.00% underwriting commission accords with the market rate, we consider that the underwriting commission of the Underwriting Agreement is fair and reasonable so far as the Independent Shareholders are concerned.

No excess application arrangement

As stated in the Letter from the Board, the Qualifying Shareholders will not be entitled to subscribe for any Rights Shares in excess of their respective entitlements. Considering that the Rights Issue will give the Qualifying Shareholders an equal and fair opportunity to maintain their respective pro rata shareholding interests in the Company, the Company considers that if application for excess Rights Shares is arranged, the Company would require to put in additional effort and costs (estimated to be HK$80,000 to HK$100,000) to administer the excess Rights Shares application procedures. Such additional effort and costs include drafting, printing and posting of excess application forms. Besides, there will be a period for trading of nil-paid Rights Shares on the Stock Exchange. Shareholders who are interested in obtaining the Rights Shares, in addition to Rights Shares to be provisionally allotted to them, could purchase nil-paid Rights Shares from other Shareholders who do not, and will not, subscribe for their Rights Shares which they are entitled to. Accordingly, after arm's length negotiation with the Underwriters, the Board has decided that no excess Rights Shares will be offered to the Qualifying Shareholders and any Untaken Shares will be underwritten by the Underwriters.

We consider that the absence of the excess application arrangement may not be desirable from the point of view of those Qualifying Shareholders who wish to take up additional Rights Shares in excess of their assured entitlements. However, we consider that the aforesaid should be balanced against the fact that (i) the terms of the Rights Issue are structured with an intention to encourage all the Qualifying Shareholders to take up their respective assured allotment of the Rights Shares as the Adjusted Subscription Price is set at a considerable discount to the prevailing market price of the Shares which provides reasonable incentives to all the Qualifying Shareholders to participate in the Rights Issue; (ii) the Qualifying Shareholders have the first right to decide whether to accept the Rights Issue; (iii) the nil excess application would lower the related administrative costs of the Rights Issue to the Company; (iv) the absence of excess application arrangement for the Rights Issue is subject to approval by the Independent Shareholders at the EGM; and (v) Qualifying Shareholders who

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

wish to increase their shareholdings in the Company through the Rights Issue may, subject to the availability, acquire additional nil-paid Rights Shares in the market. As such, it is reasonable to expect that the majority of the Qualifying Shareholders who are positive about the prospects of the Company will apply for the Rights Shares and the Rights Shares available for excess application will be minimal. The absence of excess application arrangement therefore, may not be considered material to the Qualifying Shareholders.

In view of the above, although it is beneficial to have excess application for the Qualifying Shareholders who wish to take up additional Rights Shares, we consider that the Rights Issue (with Bonus Issue) has already enabled the Qualifying Shareholders to maintain their proportionate interests in the Company should they wish by applying the Rights Shares according to their shareholding of the Company, which we consider to be fair and reasonable. Therefore, the absence of the excess application arrangement is acceptable.

5. Potential dilution effect

As the Rights issue is offer to all Qualifying Shareholders on the same basis, Qualifying Shareholders will be able to maintain their proportional interests in the Company if they take up their allotments under the Rights Issue in full. As set out in the section headed "Shareholding structure of the Company" in the Letter from the Board, assuming that no Qualifying Shareholder take up his/her/its entitlements under the Rights Issue, the shareholdings of the existing public Shareholders will be (i) decreased from approximately 53.82% as at the Latest Practicable Date (assuming no outstanding Share Option is exercised, no Qualifying Shareholders (other than Kesterion) takes up any of the Rights Shares and the Underwriters take up the Rights Shares to maximum extent) to approximately 35.88% immediately after completion of the Rights Issue and Bonus Issue; (ii) remained unchanged of approximately 53.82% as at the Latest Practicable Date (assuming no outstanding Share Option is exercised and all Qualifying Shareholders takes up their respective allotment of Rights Shares in full) and immediately after completion of the Rights Issue and the Bonus Issue; (iii) decreased from approximately 57.37% as at the Latest Practicable Date (assuming all outstanding Share Options are exercised and no Qualifying Shareholders (other than Kesterion) takes up any of the Rights Shares and the Underwriters take up the Rights Shares to maximum extent) to approximately 38.24% immediately after completion of the Rights Issue and Bonus Issue; and (iv) remained unchanged of approximately 57.37% as at the Latest Practicable Date (assuming all outstanding Share Options are exercised and all Qualifying Shareholders takes up their respective allotment of Rights Shares in full) and immediately after completion of the Rights Issue and the Bonus Issue.

The Rights Issue, as same as in all other rights issues, the dilution on the shareholding of those Qualifying Shareholders who do not take up in full their assured entitlement under the rights issue is inevitable. However, it should be noted that such Shareholders will have the opportunity to realize the nil-paid rights to subscribe for the Rights Shares in the market during the dealing of the nil-paid Rights Shares on the Stock Exchange, subject to the then prevailing market conditions. Given the decreasing trend of the highest and lowest closing prices and the average daily closing price of the Shares as mentioned in the sub-section headed "(i) Review on Share prices" and the liquidity of the trading volume of the Company as mentioned in the sub-section headed "(ii) Review on trading liquidity of the Shares", Shareholders may or may not easily sell their nil-paid Rights Shares in the market. However, it is a common practice of nil-paid rights lower than the market price of that corresponding security, we thus are of the view that the past trading volume of the Shares does not

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

represent the liquidity of nil-paid Rights Shares, which has no co-relation to each other. The dilution magnitude of any rights issues depends mainly on the extent of the basis of entitlement under such exercise, where the higher the offering ratio of rights shares to existing shares is, the greater the dilution on the existing shareholding would be.

We note that the maximum dilution effect on the shareholdings of the existing public Shareholders of the Rights Issue and the Bonus Issue amounted to approximately 19.13%, however, we consider such scenario of maximum dilution is unlikely to occur given the Independent Shareholders should have voted in favour of the Rights Issue (with Bonus Issue) at the EGM and it is a misalignment between the voting behavior of the Independent Shareholders and their subscription for the Rights Issue if no Qualifying Shareholder (other than Kesterion and the CL Securities) would take up their provisional entitlements under the Rights Issue. In addition, having taken into account (i) the Rights Issue would provide the fund for the Group to pursue its business development plan; (ii) the Rights Issue would strengthen the capital base of the Group; (iii) the Rights Issue is on the basis that all Qualifying Shareholders have been offered the same opportunity to maintain their proportional interests in the Company and allows the Qualifying Shareholders to participate in the growth of the Company; (iv) the inherent dilutive nature of the Rights Issue in general if the existing Shareholder did not take up his/her/its entitlements under the Rights Issue; and (v) the discount of the Adjusted Subscription Price was necessary to encourage the Qualifying Shareholders to participate the Rights Issue (with Bonus Issue), we consider the possible dilution effect of the Rights Issue (with Bonus Issue) on the Independent Shareholders to be acceptable.

6. Financial effects of the Rights Issue and the Bonus Issue

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

(a) Net tangible asset

According to the unaudited pro forma financial information of the Group (the "Pro Forma Financial Information") as set out in Appendix II to the Circular, the unaudited consolidated net tangible liabilities of the Group attributable to the owners of the Company was approximately HK$799.19 million as at 30 September 2014. Under the scenario that the minimum net proceeds of approximately HK$146.86 million is raised from the Rights Issue (with the Bonus Issue) and assuming no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date ("Minimum Scenario"), the unaudited pro forma adjusted consolidated net tangible liabilities of the Group attributable to owners of the Company would decrease to HK$652.32 million as if the Rights Issue had been completed on 30 September 2014.

Under the scenario that the maximum net proceeds of approximately HK$159.09 million is raised from the Rights Issue (with the Bonus Issue) and assuming all the outstanding Share Options are exercised and no other issue of new Shares and no conversion of the Convertible Bonds on or before the Record Date ("Maximum Scenario"), the unaudited pro forma adjusted consolidated net tangible liabilities of the Group attributable to owners of the Company would decrease to HK$640.10 million as if the Rights Issue had been completed on 30 September 2014.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(b) Gearing

The gearing level of the Group (calculated based on net debt to total capital) was approximately 238.96% as at 30 September 2014. The net cash position would be strengthened with the cash raised through the Rights Issue (with the Bonus Issue) while the total capital of the Group would be enlarged upon completion of the Rights Issue (with the Bonus Issue). Consequently, under the Minimum Scenario and the Maximum Scenario, the gearing positions of the Group would be decreased to approximately 166.06% and approximately 161.95% respectively as at 30 September 2014 immediately after the Rights Issue (with the Bonus Issue).

With reference to the IR 2014, the cash and bank balances of the Group were approximately HK$7.72 million as at 30 September 2014. Upon completion of the Rights Issue, the cash and bank balances of the Group will be increased as a result of the net proceeds from the Rights Issue. Accordingly, the working capital and liquidity position of the Group will be improved as a result of the Rights Issue.

In light of the above, we consider the Rights Issue is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

RECOMMENDATION ON THE RIGHTS ISSUE (WITH THE BONUS ISSUE)

Taking into account the factors and reasons as mentioned under the section headed "Principal factors and reasons considered" above, which including:

(i) financial information of the Group including the current cash position and indebtedness;

(ii) the use of proceeds from the Rights Issue is consistent with the business plan of the Group;

(iii) the fund raising size of the Rights Issue is necessary for the Company to pursue its existing development plan;

(iv) the Rights Issue is the most viable fund raising method as compared to the debt financing and the placing of new Shares;

(v) the discount of the Subscription Price to the market is necessary to encourage the Qualifying Shareholders to participate the Rights Issue due to past share price performance of the Company;

(vi) the Bonus Issue is in effect lowering the Adjusted Subscription Price and further increasing the discount of the Subscription Price to the prevailing market price of the Shares;

(vii) the Rights Issue is on the basis that all Qualifying Shareholders have been offered the same opportunity to maintain their proportional interests in the Company; and

(viii) the underwriting commission of the Rights Issue is fair and reasonable;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

we consider that, despite the inherent dilution effect to the Qualifying Shareholders who did not participate in the Rights Issue, the Bonus Issue and the Underwriting Agreement are fair and reasonable so far as the Independent Shareholders are concerned and the Rights Issue, the Bonus Issue and the entering of the Underwriting Agreement are in the interests of the Company and the Independent Shareholders as a whole. Accordingly, we recommend the Independent Board Committee to advise to the Independent Shareholders to vote in favour of the ordinary resolutions to approve the Rights Issue, the Bonus Issue and the Underwriting Agreement to be proposed at the EGM and we recommend the Independent Shareholders to vote in favour of the ordinary resolutions in this regard at the EGM.

B. CONNECTED TRANSACTIONS INVOLVING THE RESTRUCTURING OF CONVERTIBLE BONDS AND THE PROPOSED ISSUE OF NEW BONDS

1. Background and reasons for the Bond Restructuring

The Company first issued a 10-year unsecured, non-interests bearing Convertible Bonds in an aggregate principal amount of US$655,128,205 (equivalent to approximately HK$5,110 million based on a fixed exchange rate of HK$7.8 to US$1) to Kesterion as part of settlement of the consideration for the acquisition of the entire issued share capital of First Pine Enterprises Limited, a company owned as to 100% by the Kesterion, details of which were set out in the announcement of the Company dated 19 May 2008. As at the Latest Practicable Date, the outstanding principal amount of the Convertible Bonds is US$201,474,259 (equivalent to approximately HK$1,571,500,000). In consideration of Kesterion agreeing to act as an Underwriter in respect of the Rights Issue and reduction of total outstanding bond principal amounts owing to Kesterion, the Company has agreed with Kesterion to restructure the terms of the Convertible Bonds.

We have looked into the latest financial position of the Group based on IR 2014 and we found that the Group had an unaudited net current liabilities position of approximately HK$81.37 million as at 30 September 2014. We also note that the Group has been in a loss position for the past few years. As advised by the Directors, with the view to relieve the financial burden and improving the financial position of the Group, the Company has been discussing and negotiating with the Bondholders on the Bond Restructuring Agreement and such Bond Restructuring Agreement was entered into to this end. In addition, the downward adjustments of the conversion price would encourage conversion of the New Bonds and, as such, the capital base of the Group will be strengthened if the Bondholders choose to convert the New Bonds. Based on the down-turning financial results of the Group during the past few years, we believe that the Group may not be able to fulfill the repayment obligation of the Convertible Bonds upon maturity.

The Directors represent to us that the Company has considered the possibilities of further fund raising activities including placing, rights issues and open offer for the repayment of Convertible Bonds. As advised by the Directors, placing of shares may not be in substantial amount in one exercise and depends largely on the stock market condition. Pre-emptive fund raising processes, e.g. rights issue or open offer, will take much longer time and transaction costs. Sometimes, it may involve capital restructuring, e.g. increase in authorized share capital. Taking into account of the loss making position and thin market capitalization, it may be difficult to raise fund from pre-emptive fund raising exercise to fully repay the Convertible Bonds. As such, the Bond Restructuring Agreement provides

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

a fast and minimum cost means to the Company. Taking into account of the aforesaid, the Directors advised that it would be the Board's strategic decision to negotiate with the Bondholders to restructure the Convertible Bonds as early as possible so as to eliminate the possibility of any force repayment or litigating action against the Group when the Convertible Bonds falls due. Accordingly, we are of the opinion that to negotiate with the Bondholders and to enter into the Bond Restructuring is fair and reasonable and in the interest of the Company and Shareholders as a whole, in view of the extension of the maturity time and the reduction of total outstanding bond principal amounts owing to Kesterion. We would opine on the terms of the Convertible Bonds and New Bonds in the following paragraphs.

2. Fair value of the Convertible Bonds and New Bonds

Pursuant to the Bond Restructuring Agreement, the parties conditionally agreed that (i) a principal amount of US$201,474,359 (equivalent to approximately HK$1,571,500,000) outstanding under the Convertible Bonds held by Kesterion shall redeem by the Company at any time on or prior to 15 April 2015 at a redemption price of US$140,000,000 (equivalent to approximately HK$1,092,000,000) ("Redemption Amount"); and (ii) immediately upon the amendment to the Convertible Bonds referred to in paragraph (i) above becoming effective, the Company shall exercise its redemption rights to redeem the amended Convertible Bonds and in satisfaction and cancellation of the Redemption Amount, the Company shall issue the New Bonds at 100% of their principal amount to Kesterion.

To assess the basis in determining the fair value of the Convertible Bonds and the New Bonds, we have reviewed the Valuation Report, discussed with the Independent Valuer and the management of the Company. We have discussed with the Independent Valuer and noted that they have considered the effective interest method in valuing the fair value of the liability components of the Convertible Bonds and the New Bonds, and the Black-Scholes model with trinomial tree method in valuing the fair value of the derivative components of the Convertible Bonds and the New Bonds. The fair value of the Convertible Bonds and the New Bonds was valued by the Independent Valuer on 21 November 2014, being the last trading day prior to the Announcement. The Independent Valuer adopted the effective interest method and the Black-Scholes model with trinomial tree method and certain assumptions, such as effective interest rate, expected volatility, risk-free rate and expected dividend yield, based on the professional judgment of the Independent Valuer after due and careful consideration. The major inputs into the Black-Scholes model with trinomial tree method were as follows:

As at 21 November 2014
(last trading day prior to the
Announcement)
Convertible Bonds New Bonds

Effective interest rate (Note 1)	10.31%	11.06%
Expected volatility (Note 1)	45.73%	45.96%
Risk-free rate (Note 1)	1.33%	1.65%
Expected dividend yield	0%	0%

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Note 1: According to the Independent Valuer, the inputs for effective interest rate, expected volatility and risk-free rate for the Convertible Bonds and the New Bonds were different taken into account the different remaining lives of the Convertible Bonds of approximately 4 years and the New Bonds of 5 years, assuming the New Bonds were issued on 21 November 2014, being the date of the Valuation Report.

We have (i) interviewed the Independent Valuer including as to their expertise and any current or prior relationships with the Company, other parties to the transactions and connected persons of either the Company or another party to the transactions; (ii) reviewed the terms of engagement (having particular regard to the scope of work, whether the scope of work is appropriate to the opinion required to be given and any limitations on the scope of work which might adversely impact on the degree of assurance given by the Valuation Report, opinion or statement); and (iii) noticed that the Company has made formal representations to the Independent Valuer in accordance with our knowledge.

The Independent Valuer advised that the effective interest method and the Black-Scholes model with trinomial tree method are commonly adopted and well recognized methodology in valuing convertible bonds. In addition, we have also discussed with the Independent Valuer regarding the major assumptions made in valuing the Convertible Bonds. We understand that the major assumptions made in valuing the Convertible Bonds and the New Bonds were based on reference to comparable companies with similar business, namely the industry in relation to (i) the production of iron ore and (ii) the trading of coal. As such, we are of the view that the major assumptions made in valuing the Convertible Bonds and the New Bonds are reasonable. Given the valuation approach is commonly adopted and well recognized methodology in valuing convertible bonds, the major assumptions made in connection with the valuation approach are reasonable; we are of the view that the basis in determining the fair value of the Convertible Bonds and the New Bonds is fair and reasonable so far as the Company and the Shareholders as a whole are concerned.

According to the Valuation Report, the liability components and the derivative components of the fair value of the Convertible Bonds and the New Bonds as at 21 November 2014 are set out below:

As at 21 November 2014
(last trading day prior to the Announcement)

	Convertible Bonds (US$)	New Bonds (US$)
Fair value	135,048,957
(equivalent to approximately HK$1,053.38 million)	122,960,251
(equivalent to approximately HK$959.09 million)
of which:
Liability component	135,048,933
(equivalent to approximately HK$1,053.38 million)	93,445,224
(equivalent to approximately HK$728.87 million)
Derivative component	24
(equivalent to approximately HK$187.2)	29,515,027
(equivalent to approximately HK$230.22 million)

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The fair value of the New Bonds as at 21 November 2014 of approximately US$122.96 million (equivalent to approximately HK$959.09 million) represents a discount of approximately 8.95% to the fair value of the Convertible Bonds as at 21 November 2014 of approximately US$135.05 million (equivalent to approximately HK$1,053.38 million). The liability component of the New Bonds as at 21 November 2014 represents a discount of US$41.60 million (approximately HK$324.51 million) to the liability component of the Convertible Bonds as at 21 November 2014. Such discount is sufficient to offset the premium of approximately US$29.52 million (equivalent to approximately HK$230.22 million) of the derivative component of the New Bonds as at 21 November 2014 over the derivative component of the Convertible Bonds as at 21 November 2014. Fair value represents the present value of the Convertible Bonds and the New Bonds taken into account the coupon rate, the year to maturity, and the estimates of future events over their lifetime. As such, we are of the view that effectively replacing the Convertible Bonds with the New Bonds relieves the financial burden and improves the financial position of the Group in the long run.

3. Terms of the Convertible Bonds and New Bonds

We have compared the terms of the Convertible Bonds and the New Bonds and we note that the New Bonds carry the same terms of the Convertible Bonds save and except for the followings:

	Convertible Bonds	New Bonds
Principal amount :	US$201,474,359 (equivalent to approximately HK$1,571,500,000) (Note)	US$140,000,000 (equivalent to approximately HK$1,092,000,000)
Interest rate :	Interest free	2% per annum payable in arrear semi-annually from the issue date
Maturity date :	18 December 2018	5 years from the issue date
Conversion price :	HK$22.79 per conversion share (subject to adjustments)	HK$0.50 per Conversion Share (subject to adjustments)

Note: Such figure represents the outstanding principal amount of the Convertible Bonds as at the Latest Practicable Date.

The principal amount and the accrued interests of the New Bonds upon maturity would amount to US$154,000,000 (equivalent to approximately HK$1,201,200,000), which represents a discount of approximately 23.56% to the outstanding principal amount of US$201,474,359 (equivalent to approximately HK$1,571,500,000) under the Convertible Bonds. The amount of US$47,474,359 represents the amount being saved by the Company for effectively replacing the outstanding principal amount of Convertible Bonds with the principal amount and the accrued interests of the New Bonds upon maturity. In addition, the Bond Restructuring has the general effect of extending the maturity date of the Convertible Bonds by one year (i.e. 5 years from the issue date) instead of 18 December 2018 and the conversion price shall also adjust downwards from HK$22.79 per consideration share to HK$0.50 per Conversion Share.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We have reviewed the major terms in relation to the New Bonds and are not aware of any terms uncommon to market practice. We are also advised by the Directors that the terms of New Bonds were arrived after arm's length negotiations and were determined with reference to the prevailing market prices. In our view, the amended terms pursuant to the Bond Restructuring Agreement allow the Company to restructure the debt under the Convertible Bonds with the payment of interest at a rate of 2% per annum without any security for a further term of 1 year which will enable the Company to apply its working capital for its business development and operations and the downward adjustments of the conversion price would encourage conversion of the New Bonds through the number of Shares to be obtained by the Bondholders will be increased. In particular, though there is almost a further term of 4 years from the original maturity date of the Convertible Bonds, (i) the issue of New Bonds will lessen the cash flow pressure on the Company by extending the maturity date of a substantial amount that would otherwise be owed to Bondholders on 18 December 2018 and encourage conversion of the New Bonds into Conversion Shares (with the conversion price at HK$0.50 per Conversion Share); and (ii) the amended terms will allow the Company to have greater flexibility in its working capital management for its business development and operations; (iii) any interest and premium payable by the Company on the New Bonds would at least be comparable to the overall funding costs that the Company would incur in respect of funding from other independent financial institutions which are not connected to the Company; and (iv) the magnitude of coupon rate was determined with reference to arm's length negotiation between the relevant parties, but not more than the prevailing lending rate in the market. The Company has considered other financing methods including obtaining debt financing from financial institutions without security and it is noted that the prevailing lending rate in the market for unsecured loans is above 2% per annum. In conclusion, we opine that the terms of the terms of the Convertible Bonds and New Bonds are fair and reasonable and in the interests of the Shareholders as a whole.

Conversion Price

The Conversion Price of HK$0.50 represents:

(i) a premium of approximately 47.06% over the closing price of HK$0.34 per Share as quoted on the Stock Exchange on the Last Trading Day;

(ii) a premium of approximately 47.06% over the average closing price of approximately HK$0.34 per Share as quoted on the Stock Exchange for the 5 consecutive trading days up to and including the Last Trading Day;

(iii) a premium of approximately 51.52% over the average closing price of approximately HK$0.33 per Share as quoted on the Stock Exchange for the 10 consecutive trading days up to and including the Last Trading Day;

(iv) a premium of approximately 47.06% over the average closing price of approximately HK$0.34 per Share as quoted on the Stock Exchange for the 30 consecutive trading days up to and including the Last Trading Day;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(v) a premium of approximately 51.52% over the unaudited consolidated net asset value per Share of approximately HK$0.33 as at 30 September 2014 (based on a total of 1,009,184,080 Shares as at the Latest Practicable Date and the Group's unaudited consolidated net asset of approximately HK$334,571,000 as at 30 September 2014; and

(vi) a premium of approximately 122.22% over the closing price of approximately HK$0.225 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

In assessing the fairness and reasonableness of the Conversion Price, we have reviewed and performed comparison of the Conversion Price to historical closing prices of the Shares over the twelve months period prior to and including 22 September 2014, being the original date of the Bond Restructuring Agreement (the "Bond Restructuring Review Period"). The following chart depicts the daily closing prices of the Shares during the Bond Restructuring Review Period:

Source: the Stock Exchange website (www.hkex.com.hk)

As illustrated above, during the Bond Restructuring Review Period, the closing prices of the Shares recorded lowest closing price of HK$0.300 on 28 August 2014, 5 September 2014 and 8 September 2014 and highest closing price of HK$0.530 on 5 March 2014. The Conversion Price of HK$0.50 per Conversion Share represents a premium of approximately 66.67% over and a discount of approximately 5.66% to such lowest closing price and highest closing price respectively. The average of the closing prices of the Shares during the Bond Restructuring Review Period was approximately HK$0.400. The Conversion Price represents a premium of approximately 25.00% over such average closing price. The Conversion Price of HK$0.50 per Conversion Share is above the closing prices of the Shares recorded for 231 trading days, representing 93.90% of total trading days during the Bond Restructuring Review Period.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Comparison with other comparable companies

In order to assess the fairness and reasonableness of the terms of the Convertible Bond, to the best of our knowledge, we have looked into recent issues of convertible bond by companies listed on the Main Board and Growth Enterprise Market of the Stock Exchange of Hong Kong (the "Comparable Bond Issues Companies") which have made announcements for acquisition by issuing convertible debt securities from 23 March 2014 up to and including 22 September 2014, being the original date of entering into the Bond Restructuring Agreement (the "Comparable Period"), for reference. We are of the view that our analysis with the Comparable Period being about six months prior to and including the date of the Bond Restructuring Agreement would provide us with the recent relevant information on the market conditions and sentiments, which plays an important role in the determination of the Conversion Price in general.

Although the scale of operations, financial positions, and future prospects of the Comparable Bond Issues Companies may vary, having taken into account that (i) the stock market sentiments may vary from time to time, and the terms of the Comparable Bond Issues Companies which were issued six months prior to the Bond Restructuring Agreement were determined under similar market conditions and sentiments as the Convertible Bond and thus may reflect the recent trend of the terms of convertible notes/bonds in the market; and (ii) the convertible notes/bonds of the Comparable Bond Issues Companies were issued to both connected persons and independent third parties to the Comparable Bond Issues Companies, we consider that the list of Comparable Bond Issues Companies is an exhaustive list and are of the opinion that the Comparable Bond Issues Companies are fair, sufficient and representative samples for our analysis purpose.

Date of announcement	Company name (stock code)	Principal amount (HK$)	Coupon rate per annum (%)	Connected transaction (Y/N)	Premium/ (Discount) of the conversion price to closing price per share on the last trading day prior to the release of the announcement	Redemption on maturity %
1 April 2014	Crosby Capital Limited (8088)	175,000,000	5.00	Y	3	12.68
2 April 2014	China Household Holdings Limited (692)	230,000,000	3.00	N	3	0.00
8 April 2014	China HealthCare Holdings Limited (673)	225,000,000	0.00	N	3	(44.44)
30 April 2014	China Rongsheng Heavy Industries Group Holdings Limited (1101)	1,000,000,000	7.00	N	2.50	(20.15)
5 May 2014	China Rongsheng Heavy Industries Group Holdings Limited (1101)	1,000,000,000	7.00	N	2.50	(20.15)
5 May 2014	Blue Sky Power Holdings Limited (formerly known as China Print Power Group Limited) (6828)	498,432,000	0.00	N	3	(12.92)

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Date of announcement	Company name (stock code)	Principal amount (HK$)	Coupon rate per annum (%)	Connected transaction (Y/N)	Maturity (years)	Premium/ (Discount) of the conversion price to closing price per share on the last trading day prior to the release of the announcement %	Redemption on maturity %
14 May 2014	China Ocean Shipbuilding Industry Group Limited (651)	1,000,000,000	7.50	N	3	(33.33)	100
23 May 2014	CMMB Vision Holdings Limited (471)	US$38,000,000 (equivalent to approximately HK$296,400,000)	0.00	Y	6	15.38	100
23 May 2014	Hao Wen Holdings Limited (8019)	200,000,000	1.00	N	2	(21.88)	100
3 June 2014	China HealthCare Holdings Limited (673)	195,000,000	0.00	N	3	(40.00)	100
13 June 2014	North Asia Strategic Holdings Limited (8080)	60,000,000	0.00	N	3	0.00	100
24 June 2014	China Environmental Investment Holdings Limited (260)	272,000,000	1.00	Y	2	25.00	100
27 June 2014	WLS Holdings Limited (8021)	30,000,000	10.00	N	1	25.00	100
8 July 2014	China Star Entertainment Limited (326)	405,000,000	0.00	Y	10	(28.00)	100
17 July 2014	China Agrotech Holdings Limited (1073)	109,000,000	18.00	N	5	6.80	100
30 July 2014	ICube Technology Holdings Limited (139)	133,200,000	5.00	N	4	(38.78)	100
14 August 2014	Ko Yo Chemical (Group) Limited (827)	832,000,000	7.00	N	10	(41.82)	100
25 August 2014	Venturepharm Laboratories Limited (8225)	US$1,000,000 (equivalent to approximately HK$7,800,000)	0.00	N	2	(71.42)	100
19 September 2014	Legend Strategy International Holdings Group Company Limited (1355)	80,000,000	8.00	N	1	3.90	100
19 September 2014	Mongolia Energy Corporation Limited (276)	3,470,117,547	3.00	N	5	1.32	1.8
	Maximum	3,470,117,547	18.00		10.00	56.90	42.40
	Minimum	7,800,000	0.00		1.00	(71.40)	(72.20)
	Average	459,500,000	4.30		3.60	(9.30)	(7.60)
23 September 2014	The Company	1,092,000,000	2.00	Y	5.00	47.06	47.06

Source: the Stock Exchange website (www.hkex.com.hk)

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As shown in the above table, the premium/discount represented by the conversion prices of the respective Comparable Bond Issues Companies over/to their respective closing prices of the shares on the last trading day prior to the release of the relevant announcement(s) (“CB Last Trading Day(s)”) ranged from a discount of approximately 71.42% to a premium of approximately 56.90% (the “LTD Range”), with an average discount of approximately 9.30%.

Upon comparison, we note that (i) the coupon rate of the New Bonds is less than half of the average coupon rate of the Comparable Bond Issues Companies of 4.30%; (ii) imputed interest for the New Bonds is payable only until the New Bonds are repaid or redeemed by the Company; (iii) the Conversion Price representing a premium to the closing price per Share on the Last Trading Day, which is higher than the average discount of approximately 9.30% and falls within the LTD Range; and (iv) the Group has certain secured interest-bearing borrowings which carry an average interest rate on bank loans of 6.60% per annum for the year ended 31 March 2014. The issue of New Bonds therefore allows the Company to obtain additional funding with less finance cost which is considered favourable to the Company. Having considered the above, we consider that the Conversion Price offered to Kesterion to be fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole.

Effect upon full conversion of the New Bonds into Conversion Shares (assuming no further issue of new Shares on or before the Record Date) and immediately after completion of Rights Issue and the Bonus Issue and full conversion of New Bonds subject to 29.90% restriction

As stated in the Letter from the Board, upon full conversion of the New Bonds into Conversion Shares (assuming no further issue of new Shares on or before the Record Date), a total of 2,184,000,000 Conversion Shares shall be allotted and issued at the Conversion Price, representing (i) approximately 216.41% of the existing issued share capital of the Company as at Latest Practicable Date; and (ii) approximately 59.06% of the issued ordinary share capital of the Company as enlarged by the allotment and issue of the Rights Shares, Bonus Shares and Conversion Shares. No conversion right may be exercised by a Bondholder, to the extent that, following such exercise, a Bondholder and parties acting in concert with it, taken together, will directly or indirectly, control or interested in 29.90% or more of the entire issued Shares (or in such lower percentage as may be from time to time be specified in the Takeovers Code as being the level for triggering a mandatory general offer).

Assuming there is no change in the issued share capital of, and the shareholding in, the Company from the Latest Practicable Date up to the date of full conversion of New Bonds (subject to 29.90% restriction), the table below depicts the shareholding structure of the Company (i) as at the Latest

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Practicable Date; and (ii) immediately after completion of the Rights Issue and the Bonus Issue and conversion of New Bonds into Conversion Shares at the Conversion Price at HK$0.50 subject to 29.90% restriction under below scenarios 1 to 4.

Immediately after completion of Rights Issue and the Bonus Issue and full conversion of New Bonds subject to 29.90% restriction

	As at the Latest Practicable Date		Scenario 1 - Assuming no outstanding Share Option is exercised, no Qualifying Shareholders (other than Kesterion) takes up any of the Rights Shares and the Underwriters take up the Rights Shares to the maximum extent		Scenario 2 - Assuming no outstanding Share Option is exercised and all Qualifying Shareholders takes up their respective allotment of Rights Shares in full		Scenario 3 - Assuming all outstanding Share Options are exercised and no Qualifying Shareholders (other than Kesterion) takes up any of the Rights Shares and the Underwriters take up the Rights Shares to the maximum extent		Scenario 4 - Assuming all outstanding Share Options are exercised and all Qualifying Shareholders take up their respective allotment of Rights Shares in full
	Number of shares	%	Number of shares	%	Number of shares	%	Number of shares	%	Number of shares	%
Kesterion	272,558,400	27.01	452,347,860	29.88	470,713,006	29.87	490,027,600	29.88	524,464,419	29.88
Ms. Eva Wong	271,200	0.03	271,200	0.02	406,800	0.03	271,200	0.02	406,800	0.02
Sub-total	272,829,600	27.04	452,619,060	29.90	471,119,806	29.90	490,298,800	29.90	524,871,219	29.90
Mr. Cheung Hung Man	93,235,000	9.24	93,235,000	6.16	139,852,500	8.88	93,235,000	5.69	139,852,500	7.97
Mr. Liang Tong Wei	100,000,000	9.91	100,000,000	6.61	150,000,000	9.52	100,000,000	6.10	150,000,000	8.54
CL Securities	—	—	324,802,580	21.46	—	—	329,129,240	20.07	—	—
Magic Stone	—	—	—	—	—	—	—	—	—	—
Share Options holders	—	—	—	—	—	—	—	—	—	—
Public	543,119,480	53.82	543,119,480	35.88	814,679,220	51.70	627,132,280	38.24	940,698,420	53.59
Total	1,009,184,080	100.00	1,513,776,120	100.00	1,575,651,526	100.00	1,639,795,320	100.00	1,755,422,139	100.00

Based on the illustration above, immediately after completion of Rights Issue and the Bonus Issue and assuming there is no change in the issued share capital of, and the shareholding in, the Company from the Latest Practicable Date up to the date of full conversion of New Bonds subject to 29.90% restriction, we note that (i) under scenario 1 the shareholding of the existing Independent Shareholders in the Company will be diluted from approximately 53.82% to approximately 35.88%; (ii) under scenario 2 the shareholding of the existing Independent Shareholders in the Company will be diluted from approximately 53.82% to approximately 51.70%; (iii) under scenario 3 the shareholding of the existing Independent Shareholders in the Company will be diluted from approximately 53.82% to approximately 38.24%; and (iv) under scenario 4 the shareholding of the existing Independent Shareholders in the Company will be diluted from approximately 53.82% to approximately 53.59%. However, such dilution effect is solely for illustrative purpose and pursuant to the terms of the New Bonds, no conversion right may be exercised by a Bondholder, to the extent that, following such exercise, a Bondholder and parties acting in concert with it, taken together, will directly or indirectly, control or interested in 29.90% or more of the entire issued Shares (or in such lower percentage as may be from time to time be specified in the Takeovers Code as being the level for triggering a mandatory general offer). Each Bondholder shall exercise the conversion rights attaching to the New Bonds only if the allotment and issue of the Conversion Shares to such Bondholder pursuant to an exercise of the conversion right will not cause the Company to be in breach of the minimum public float requirement stipulated under Rule 11.23 of the GEM Listing Rules. Taking into account the potential benefits as stated under the section headed "Recommendation on the

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Bond Restructuring" in this letter and the fact that the shareholdings of all Shareholders will be diluted proportionally to their respective shareholdings, we consider such potential dilution to the shareholdings of the Independent Shareholders to be acceptable.

6. Financial effects of the Bond Restructuring

(a) Net asset value

According to IR 2014, the Group's unaudited consolidated net asset was approximately HK$334.57 million. Upon issuance of New Bonds, there will be (i) an increase in total assets arising from the receipt of the net proceeds from the issuance of Rights Shares; and (ii) a decrease in total liabilities and thus there will be an increase on the net asset value of the Group. Accordingly, under the Minimum Scenario and the Maximum Scenario, the Group's unaudited consolidated net asset would be increased to approximately HK$542.93 million and approximately HK$555.15 million respectively as at 30 September 2014.

(b) Gearing ratio

According to IR 2014, the gearing level of the Group (calculated based on net debt to total capital) was approximately 238.96% as at 30 September 2014. Upon completion of the Rights Issue (with the Bonus Issue) and the Bond Restructuring, the gearing level of the Group (calculated based on net debt to total capital) under the Minimum Scenario and the Maximum Scenario would be decreased to approximately 135.93% and approximately 132.94% respectively as at 30 September 2014.

(c) Earnings

The Group recorded a loss for the year for approximately HK$176.00 million for the year ended 31 March 2014. As the New Bonds have 2% per annum interest, it would incur cash interest payment and non-cash imputed interest charge by the Group of approximately HK$472.33 million in total for the 5-year period up to maturity date as compared to approximately HK$781.14 million imputed interest charge for the period up to maturity date of the existing bonds (i.e.18 December 2018) if there is Bond Restructuring. Any imputed interest expenses of the New Bonds will be charged to the income statement as required by Hong Kong accounting standards and will be of non-cash nature.

RECOMMENDATION ON THE BOND RESTRUCTURING

Having considered the principal factors discussed above and, in particular:

(i) the discount of approximately 8.95% of the fair value of the New Bonds as at 21 November 2014 to the fair value of the Convertible Bonds as at 21 November 2014 relieves the financial burden and improves the financial position of the Group in the long run;

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(ii) the amended terms pursuant to the Bond Restructuring Agreement allow the Company to restructure the debt under the Convertible Bonds with the payment of interest at a rate of 2% per annum without any security for a further term of approximately 1 year which will enable the Company to apply its working capital for its business development and operations and the downward adjustments of the conversion price would encourage conversion of the New Bonds through the number of Shares to be obtained by the Bondholders will be increased;

(iii) the issue of New Bonds will lessen the cash flow pressure on the Company by extending the maturity date by approximately one year of a substantial amount that would otherwise be owed to Bondholders on 18 December 2018 and encourage conversion of the New Bonds into Conversion Shares (with the conversion price at HK$0.50 per Conversion Share);

(iv) the amended terms will allow the Company to have greater flexibility in its working capital management for its business development and operations;

(v) any interest payable by the Company on the New Bonds is not more than the overall funding costs that the Company would incur in respect of funding from other independent financial institutions which are not connected to the Company;

(vi) the interest rate of the New Bonds is less than half of the average interest rate of the Comparable Bond Issues Companies of 4.30%; and the imputed interest charge for the New Bonds is payable only until the New Bonds are repaid or redeemed by the Company;

(vii) despite the issue size of the New Bonds under the Bond Restructuring Agreement falls in the higher range of the Comparable Bond Issues Companies, the discount of the Conversion Price to the closing prices of the Shares falls within the said range of the Comparable Bond Issues Companies and is therefore not exceptional in the market; and

(viii) the Group has certain secured bank loans which carry an average effective borrowing rate of 6.60% per annum for the year ended 31 March 2014. The issue of New Bonds therefore allows the Company to obtain additional funding with less finance cost which is considered favourable to the Company;

we consider that the terms of the Bond Restructuring Agreement (including the issue of New Bonds and the grant of specific mandate for the issue of Consideration Shares upon exercise of the conversion rights attaching to the New Bonds) are fair and reasonable and on normal commercial terms, and the entering into Bond Restructuring Agreement is in the interest of the Company and the Shareholders as a whole. Accordingly, we advise the Independent Board Committee to advise to the Independent Shareholders to vote in favour of the ordinary resolutions to approve the Bond Restructuring Agreement (including the issue of New Bonds and the grant of specific mandate for the issue of Consideration Shares upon exercise of the conversion rights attaching to the New Bonds) and we recommend the Independent Shareholders to vote in favour of the ordinary resolutions in this regard at the EGM.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

C. THE SETTLEMENT AGREEMENT

1. Reasons for, and benefits of, entering into the Settlement Agreement

On 23 November 2014, the Board announced that, on 21 November 2014, the Company, together with certain of its subsidiaries entered into the Settlement Agreement with the Magic Stone and Kesterion following the assignment of rights with respect to the Kesterion Charge and payables under the Trade Contracts from China Shipbuilding to Magic Stone on 7 November 2014. Pursuant to the Settlement Agreement, the Group has conditionally agreed to settle the overdue liabilities, including interest charges in aggregate net amount of approximately HK$236.39 million (“Total Payable”), in which (a) RMB51.88 million (equivalent to approximately HK$64.85 million) shall be payable in cash to Magic Stone before 28 February 2015; (b) US$17 million (equivalent to approximately HK$132.6 million) shall be payable in cash to Magic Stone before 28 February 2015; and (c) 80,000,000 new Shares at HK$0.50 per Share (“Settlement Shares”) shall be issued in full and final satisfaction of the Group’s payment obligations in respect to the Total Payable on the terms and subject to the conditions set out in the Settlement Agreement.

As detailed in the Letter from the Board, Kesterion previously created the Kesterion Charge over 252,153,400 Shares and the US$201,474,359 (equivalent to approximately HK$1,571,500,000) principal amount of the Convertible Bonds held by Kesterion in favour of China Shipbuilding as a continuing security to guarantee the due and punctual performance and observance of certain contractual obligations and liabilities by certain subsidiaries of the Company under the Trade Contracts in relation to the trading of fuel oil and trading of the coal. In view of the overdue payables by the Company to China Shipbuilding and safeguarding the interests in connection with the Trade Contracts, China Shipbuilding had previously appointed two (2) Receivers to exercise all the powers of a receiver given by the terms of the Kesterion Charge. For details, please refer to the announcement of the Company dated 13 March 2013, 11 October 2013 and 29 July 2014.

On 7 November 2014, the Company was informed that China Shipbuilding has assigned its rights with respect to the Kesterion Charge and the payables under the Trade Contracts to Magic Stone. In view of the current financial position of the Group, the Company held discussion with Magic Stone for the repayment details. The Company and Magic Stone mutually agreed to enter into the Settlement Agreement. The payment obligations in respect of paragraph (a) above will be financed by the Group’s internal resources and the payment obligations in respect of paragraph (b) will be financed by part of the net proceeds of the Rights Issue.

According to the IR 2014, unaudited current assets and current liabilities of the Group as at 30 September 2014 were approximately HK$288.67 million and HK$370.04 million respectively, as compared to that of approximately HK$303.93 million and approximately HK$322.33 million respectively as at 30 September 2013. The current ratio, calculated as to current assets divided by current liabilities, reduced to 0.78 time as at 30 September 2014, down from that of 0.94 time a year ago. Referring to the IR 2014, gearing ratio of the Group, calculated as to total non-current liabilities divided by total equity of the Group was 182.54% and 109.47% as at 30 September 2014 and 30 September 2013, respectively. If the Total Payable is included as liabilities of the Group in the calculation of the gearing ratio, the ratio would then be 0.79 times as opposed to 0.08 times as at 30 September 2014. In addition, the Group’s cash and bank balances as at 30 September 2014 shrank to

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

approximately HK$7.72 million from approximately HK$83.6 million of the prior six months. Having considered the above, it is noted that external financing, including but not limited to bank loans and other credit facilities might be needed to cater for the payment obligations in respect of paragraph (a) above. Based on our discussion with the management of the Company, we were given to understand that the improved financial position of the Group as a result of the capitalization of part of the Total Payable would offer the Group financial flexibility in obtaining debt financing, the terms of which might depend on the financial position of the Group.

As referred to in the paragraphs under the section headed "4. Financial impacts of the Settlement Agreement", it is expected that the gearing ratio of the Group (if the Total Payable are included as liabilities of the Group in the calculation) would be reduced and such improvement in the gearing level would help strengthen the financial position of the Group. We are of the view that the capitalization of a substantial part of the Total Payable by the issue of the Settlement Shares would reduce the outstanding amount of the Total Payable due to Magic Stone and improve the financial position of the Group, including its gearing ratio.

2. Principal terms of the Settlement Agreement

The Group is indebted to Magic Stone various overdue liabilities, including interest charges in aggregate net amount, up to the latest repayment date of 28 February 2015, of approximately HK$236.39 million, which is unsecured, interest bearing and payable on demand and has remain unpaid. Pursuant to the Settlement Agreement, the Group has conditionally agreed to settle the liabilities under the Trade Contracts in the following manner ("Settlement Agreement Payment Terms"):

(a) the Group shall pay Magic Stone RMB51.88 million (equivalent to approximately HK$64.85 million) in cash before 28 February 2015;

(b) the Group shall pay Magic Stone US$17 million (equivalent to approximately HK$132.6 million) in cash before 28 February 2015; and

(c) the Company shall issue and allot 80,000,000 new Shares each fully paid at an issue price of HK$0.50 per Share to Magic Stone after the completion of the Rights Issue and before 28 February 2015.

Based on the 1,009,184,080 Shares in issue as at the Latest Practicable Date, the 80,000,000 Settlement Shares represent approximately 7.93% of the existing issued share capital of the Company and approximately 7.34% of the issued share capital of the Company as enlarged by the issue of the Settlement Shares, assuming there will be no other changes to the total issued share capital of the Company from the Latest Practicable Date up to the completion date (i.e. 28 February 2015).

The Settlement Shares will be issued at HK$0.50 per Settlement Share (the "Issue Price"), which is determined based on arm's length negotiations between the Company and Magic Stone with reference to the trading prices of the Shares on the date of the Settlement Agreement and the average closing price of the last five consecutive trading days immediately prior to the date of the Settlement Agreement. The Issue Price represents:

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(i) a premium of approximately 47.06% over the closing price of HK$0.34 per Share as quoted on the Stock Exchange on 21 November 2014, being the date of the Settlement Agreement;

(ii) a premium of approximately 47.06% over the average closing price of HK$0.34 per Share as quoted on the Stock Exchange for the last five consecutive trading days immediately prior to the date of the Settlement Agreement;

(iii) a premium of approximately 51.52% over the average closing price of HK$0.33 per Share as quoted on the Stock Exchange for the last ten consecutive trading days immediately prior to the date of the Settlement Agreement;

(iv) a premium of approximately 51.52% over the unaudited consolidated net asset value per Share of approximately HK$0.33 as at 30 September 2014 (based on a total of 1,009,184,080 Shares as at the Latest Practicable Date and the Group's unaudited consolidated net asset value of approximately HK$334,571,000 as at 30 September 2014; and

(v) a premium of approximately 122.22% over the closing price of HK$0.225 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

Share price performance

As illustrated from the table under the sub-section headed "Review on Share prices" in the section headed "A. 4. Principal terms of the Rights Issue and the Bonus Issue" in this circular, during the Review Period, which is the same as the period commencing from 23 September 2013, being 12-month period prior to the date of the Settlement Agreement, up to and including the Latest Practicable Date (the "Settlement Review Period"), the monthly average daily closing price of the Shares ranged from HK$0.234 to HK$0.485 per Share. The lowest and highest closing prices of the Shares as quoted on the Stock Exchange were HK$0.225 per Share on 17 December 2014 and HK$0.530 per Share on 5 March 2014, respectively. We note that the Adjusted Subscription Price is higher than the lowest closing prices of the Shares during the Review Period, representing a premium of approximately 33.33%, and is lower than the highest closing prices of the Shares during the Review Period, representing a discount of approximately 43.40%. We also note that the closing price of the Shares shows a general declining trend during the Settlement Review Period.

The Issue Price represents (i) a discount of approximately 5.66% to the highest closing price of the Share; (ii) a premium of approximately 27.23% over the average closing price of the Share; and (iii) a premium of approximately 122.22% over the lowest closing price of the Share during the Settlement Review Period.

Historical trading volume of the Shares

As illustrated from the table under the sub-section headed "Review on trading liquidity of the Shares" in the section headed "A. 4. Principal terms of the Rights Issue and the Bonus Issue" in this letter, the table demonstrates that the average daily trading volume of the Shares per month during the Review Period, which is the same as the period commencing from 23 September 2013, being 12-month

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

period prior to the date of the Settlement Agreement, up to and including the Latest Practicable Date (the "Settlement Review Period"), with a range of approximately 0.087% to 0.575% of the total number of issued shares. We note that the liquidity of the Shares was thin during the Settlement Review Period

Comparison with other placing and share subscription exercises

We note that the transaction under the Settlement Agreement is in effect a subscription of the Settlement Shares by Magic Stone in consideration to set-off against the liabilities in the amount of HK$40,000,000 due to Magic Stone, we are of the view that fund raising activities by way of new share placing and share subscription are similar in nature to issue the Settlement Shares by the Company. In order to access the fairness and reasonableness of the terms of the Issue Price, we have reviewed the relevant new share placing and share subscription exercises under specific mandate announced by companies listed on the Stock Exchange in the past three months immediately preceding the date of the Settlement Agreement which represents a reasonable and meaningful period to reflect the recent market condition and sentiment for conducting such fund raising activity (the "Placing Comparables"). We have, to our best effort, identified and made references to, so far as we are aware, 22 Placing Comparables which is exhaustive and the subscribers/placees of which consist of connected person (as defined in the Listing Rules) and/or independent third party, both of which we consider appropriate in our analysis since their respective issue price/subscription price is determined after arm's length negotiation between the relevant parties. Independent Shareholders should note that the Placing Comparables are not identical to the Company in terms of principal business, operations and financial position. Nevertheless, we consider that the Placing Comparables could provide a general reference for the recent common market practice of companies listed on the Stock Exchange in placing and share subscription exercises under specific mandate and similar market conditions. Details of our analyses are set out in the following table:

Company name (Stock code)	Date of announcement	Premium over/ (discount to) the closing price on the last trading day (%)	Premium over/ (discount to) the 5-day average closing price (%)	No. of shares issued	No. of shares issued over the issued share capital as at the date of announcement %	Whether subscriber/ placee is a connected person (Yes/No) (Y/N)
Jun Yang Solar Power Investments Limited (397)	25 August 2014	(12.67)	(15.87)	1,090	37.42	N
China Financial International Investments Limited (721)	4 September 2014	(66.67)	(65.40)	12,340	264.77	N
Hopefluent Group Holdings Limited (733)	12 September 2014	14.07	15.83	133	25.40	Y
Perception Digital Holdings Limited (1822)	15 September 2014	(50.00)	(45.80)	1,000	32.45	Y
Bestway International Holdings Limited (718)	25 September 2014	(27.27)	(25.33)	825	78.88	Y

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Company name (Stock code)	Date of announcement	Premium over/ (discount to) the closing price on the last trading day (%)	Premium over/ (discount to) the 5-day average closing price (%)	No. of shares issued	No. of shares issued over the issued share capital as at the date of announcement %	Whether subscriber/ placee is a connected person (Yes/No) (Y/N)
Bestway International Holdings Limited (718)	25 September 2014	(27.27)	(25.33)	150	14.34	Y
National Agricultural Holdings Limited (1236)	26 September 2014	3.81	2.38	244	18.36	N
China Mobile Games and Cultural Investment Limited (8081)	9 October 2014	(5.85)	(6.86)	646	25.87	Y
Changfeng Axle (China) Company Limited (1039)	10 October 2014	(29.03)	(23.26)	733	91.59	Y
China Mobile Games and Cultural Investment Limited (8081)	10 October 2014	(5.85)	(6.86)	355	14.21	Y
Enterprise Development Holdings Limited (1808)	21 October 2014	(10.71)	(14.68)	350	19.88	N
King Stone Energy Group Limited (663)	21 October 2014	2.50	3.30	330	11.00	Y
Nanjing Sample Technology Company Limited (1708)	21 October 2014	(5.81)	(6.19)	93	41.38	Y
Sage International Group Limited (8082)	24 October 2014	(59.18)	(56.80)	70	39.41	N
Oriental Unicorn Agricultural Group Limited (8120)	28 October 2014	80.41	78.94	83	6.38	N
Yashili International Holdings Ltd (1230)	31 October 2014	16.72	29.72	1,186	33.33	Y
Town Health International Medical Group Limited (3886)	31 October 2014	(18.33)	(19.93)	459	9.92	Y
Crown International Corporation Limited (727)	7 November 2014	(24.73)	(21.70)	440	20.37	N
China Bio-Med Regeneration Technology Limited (8158)	10 November 2014	(9.09)	(9.75)	6,000	50.37	Y
AGTech Holdings Limited (8279)	17 November 2014	29.80	28.20	169	3.80	N
Louis XIII Holdings Limited (577)	20 November 2014	(23.50)	(25.20)	520	115.70	N
National Agricultural Holdings Limited (1236)	21 November 2014	13.20	12.90	183	12.58	Y
	Maximum	80.41	78.94	12,340	264.77
	Minimum	(66.67)	(65.40)	70	3.80
	Mean	(9.90)	(12.22)	397	25.63
The Company	23 November 2014	47.06	47.06	80	7.93	Y

Source: the Stock Exchange website (www.hkex.com.hk)

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As shown in above table, the issue price per placing/ subscription share issued under the respective Placing Comparables to the respective share closing price on the last trading day ranges from a discount from 66.67% to a premium of 80.41%, with a mean of approximately 9.90% discount. It is noted that a premium of approximately 47.06% represented by the Issue Price of the Settlement Shares to the closing price of the Share on the last trading day falls within the range of that of the Placing Comparables.

In addition, the issue price per placing/ subscription share issued under the respective Placing Comparables to the respective average share closing price on the last 5 trading days ranges from a discount of approximately 65.40% to a premium of approximately 78.94%, with a mean of approximately 12.22% discount. It is noted that a premium of approximately 47.06% represented by the Issue Price of the Settlement Shares to the average closing price of the Share on the last 5 trading days falls within the range of that of the Placing Comparables.

Taking into account that (i) the Issue Price represents a premium over the average closing price of the Shares during the Settlement Review Period; and (ii) the premium over the closing price of the Shares on the last trading day and the average closing price of the Shares on the last 5 trading days as represented by the Issue Price falls within the range of that of the Placing Comparables as discussed above; (iii) thin liquidity of the Shares; (iv) the reasons for, and benefits of, entering into the Settlement Agreement as described under the paragraph headed "C.3.Reasons for, and benefits of, entering into the Settlement Agreement" above; (v) the loss-making position of the Group as discussed under the section headed "A.1. Financial information of the Group" above, we are of the view that the Issue Price is fair and reasonable and is in the interests of the Company and the Shareholders as a whole.

3. Effects on shareholding structure of the Company

As set out in the section headed "Shareholding structure of the Company" in the Letter from the Board, assuming that no Qualifying Shareholder take up his/her/its entitlements under the Rights Issue, the shareholdings of the existing Shareholders will be (i) decreased from approximately 53.82% as at the Latest Practicable Date (assuming no outstanding Share Option is exercised, no Qualifying Shareholders (other than Kesterion) takes up any of the Rights Shares and the Underwriters take up the Rights Shares to maximum extent) to approximately 34.08% immediately after completion of the Rights Issue and Bonus Issue and the issue of 80,000,000 new Shares and further decreased to approximately 33.36% and approximately 14.38%, respectively immediately after completion of the Rights Issue and the issue of 80,000,000 new Shares and conversion of New Bonds subject to 29.90% restriction and without the 29.90% restriction; (ii) decreased from approximately 53.82% as at the Latest Practicable Date (assuming no outstanding Share Option is exercised and all Qualifying Shareholders takes up their respective allotment of Rights Shares in full) to approximately 51.12% immediately after completion of the Rights Issue and Bonus Issue and the issue of 80,000,000 new Shares and further decreased to approximately 48.21% and approximately 21.57%, respectively immediately after completion of the Rights Issue and the issue of 80,000,000 new Shares and conversion of New Bonds subject to 29.90% restriction and without the 29.90% restriction; (iii) decreased from approximately 57.37% as at the Latest Practicable Date (assuming all outstanding Share Options are exercised and no Qualifying Shareholders (other than Kesterion) takes up any of the Rights Shares and the Underwriters take up the Rights Shares to maximum extent) to approximately

— 98 —

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

36.47% immediately after completion of the Rights Issue and Bonus Issue and the issue of 80,000,000 new Shares and further decreased to approximately 35.76% and approximately 16.06% respectively immediately after completion of the Rights Issue and the issue of 80,000,000 new Shares and conversion of New Bonds subject to 29.90% restriction and without the 29.90% restriction; and (iv) decreased from approximately 57.37% as at the Latest Practicable Date (assuming all outstanding Share Options are exercised and all Qualifying Shareholders takes up their respective allotment of Rights Shares in full) to approximately 54.70% immediately after completion of the Rights Issue and Bonus Issue and the issue of 80,000,000 new Shares and further decreased to approximately 50.32% and approximately 24.10% respectively immediately after completion of the Rights Issue and the issue of 80,000,000 new Shares and conversion of New Bonds subject to 29.90% restriction and without the 29.90% restriction.

4. Financial impacts of the Settlement Agreement

(a) Net asset value

Comparing the fair value of the Settlement Agreement Payment Terms against the Total Payable, the gain arisen for the Group ("Gain on Settlement") amounts to approximately HK$12.54 million.

According to the IR 2014, the Group's unaudited consolidated net asset value was approximately HK$334.57 million as at 30 September 2014. Upon completion of the Rights Issue (with the Bonus Issue), the Bond Restructuring and the Settlement Agreement, the Group's unaudited consolidated net asset value under the Minimum Scenario and the Maximum Scenario would be increased to approximately HK$555.45 million and approximately HK$567.68 million respectively as at 30 September 2014 mainly due to the Gain on Settlement of approximately HK$12.54 million.

(b) Gearing ratio

According to IR 2014, the gearing level of the Group (calculated based on net debt to total capital) was approximately 238.96% as at 30 September 2014. Upon completion of the Rights Issue (with the Bonus Issue), the Bond Restructuring and the Settlement Agreement, the gearing level of the Group (calculated based on net debt to total capital) under the Minimum Scenario and the Maximum Scenario would be decreased to approximately 132.86% and approximately 130.00% as at 30 September 2014.

(c) Earnings

Including interest charges in aggregate net amount up to the latest repayment date of 28 February 2015, approximately HK$236.39 million represents the Total Payable the Group payable to Magic Stone. The Settlement Agreement allows the Group to settle the Total Payable with approximately HK$223.85 million, with the Gain on Settlement of approximately HK$12.54 million.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

RECOMMENDATIONS

Having considered the principal factors and reasons referred to in the above, we are of the view that the respective terms of (i) the Rights Issue (with the Bonus Issue); (ii) the Bond Restructuring Agreement; and (iii) the Settlement Agreement are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the resolutions to approve the Rights Issue (with the Bonus Issue); the Bond Restructuring Agreement and the Settlement Agreement at the EGM and we recommend the Independent Shareholders to vote in favour of the resolutions in this regard.

Yours faithfully,

For and on behalf of

Changjiang Corporate Finance (HK) Limited

Ivan Chan
Managing Director

Irene Poon
Vice President

— 100 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. SUMMARY OF FINANCIAL INFORMATION OF THE GROUP

The audited financial information of the Group for each of the three years ended 31 March 2012, 2013 and 2014, and the unaudited financial information of the Group for the six months ended 30 September 2014 are disclosed in the annual reports of the Company for the years ended 31 March 2012, 2013 and 2014 dated 22 June 2012 (pages 23-88), 21 June 2013 (pages 28-90) and 20 June 2014 (pages 29-112) respectively, and the interim report of the Company for the six months ended 30 September 2014 dated 14 November 2014 (pages 4-26), which are published on both the website of the Stock Exchange (www.hkexnews.hk) and the Company (www.pamining.com).

2. INDEBTEDNESS

At the close of business on 30 November 2014, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining information contained in this indebtedness statement, the Group had the following indebtedness:

Secured borrowings

As at 30 November 2014, the Group had outstanding secured borrowings of approximately HK$26,928,000, which comprised bank loans of approximately HK$17,269,000, bank overdrafts of approximately HK$8,660,000 and finance lease obligation of approximately HK$999,000.

The bank loans and bank overdrafts of approximately HK$4,554,000 and HK$8,660,000 respectively are secured by our leasehold building with carrying amount of approximately HK$42,080,000. The bank loans of HK$12,715,000 are secured by our investment properties with carrying amount of approximately HK$18,585,000. The finance lease obligation was secured by the motor vehicles with carrying amount of approximately HK$1,877,000.

Unsecured borrowing

As at 30 November 2014, the Group had an outstanding unsecured loan from an independent third party of approximately HK$384,000.

Unsecured Convertible Bonds

As at 30 November 2014, the Group had Convertible Bonds with outstanding principal amounts of approximately USD201,474,000 (equivalent to approximately HK$1,571,500,000). The Convertible Bonds are convertible, at any time between the issue date and maturity date, and at option of the holders, into ordinary shares of the Company at an original conversion price of HK$0.70 per conversion share, subject to anti- dilution adjustments and certain events such as share consolidation, share subdivision, capitalisation issue, capital distribution, rights issue and other equity or equity derivative issued. As at the date of this circular, the Convertible Bonds are unsecured, non-interest bearing and have no redemption option before the maturity date on 18 December 2018. After a share consolidation and rights issue completed in early 2011 the Conversion Price was adjusted to HK$22.79.

— I-1 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Save as aforesaid and apart from intra-group liabilities and normal trade and other payables in the ordinary course of the business, as at the close of business on 30 November 2014, the Group did not have other outstanding mortgages, charges, debentures or other loan capital, bank overdrafts or loans, other similar indebtedness, finance lease or hire purchase commitments, liabilities under acceptance or acceptance credits, guarantees or other material contingent liabilities.

3. WORKING CAPITAL

The Directors are of the opinion that, after taking into account the financial resources presently available to the Group (but not including bank facilities available from banks or other financial institutions) and the estimated net proceeds from the Rights Issue, in the absence of unforeseen circumstances, the Group has sufficient working capital for its present requirements that is for at least the next twelve months following the date of this circular.

4. MATERIAL ADVERSE CHANGE

As at the Latest Practical Date, the Directors confirm that there is no material adverse changes in the financial or trading position of the Group since 31 March 2014, being the date to which the latest published audited consolidated financial information of the Group were made up.

5. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

During the second quarter international thermal coal price continued its downward trend. Market coal price decreased more than 40% since the Group commenced the first coal trading almost 3 years ago. The whole industry is under cold front and it has been squeezing out market players. During the half year the Group did not enter into new coal contracts and has been actively looking for stable source of coal supplies at reasonable cost.

Metal trading business generated stable revenue during the half year despite the local market momentum in Singapore was sluggish. To enhance growth the business unit has been actively seeking for international sources and new customers to expand its business scope.

Beverage business growth has been picking up as planned. The Group's PRC team has finished preparing the imported bottled spring water to enter the market. Prominent sales increase is anticipated in the second half of this fiscal year.

As indicated by the 2015 Interim Report of the Company, the Group's turnover for six months ended 30 September 2014 amounted to approximately HK$20,944,000 (2013: approximately HK$147,546,000) decreased by approximately HK$126,602,000 as compared to the same period in 2013. The significant decrease in turnover was mainly attributed to the decrease in turnover from coal business which amounted to approximately HK$782,000 (2013: approximately HK$145,932,000). On the other hand, turnover from trading of metals and the new beverage business increased to approximately HK$20,162,000 (2013: approximately HK$1,614,000). Bunker fuel business is still suspended undergoing business re-modelling. During the six months ended 30 September 2014, the Group incurred a gross loss of approximately HK$81,000 (2013: gross profit of approximately HK$998,000). Other operating loss, net amounted to approximately HK$3,703,000 (2013: other

— I-2 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

operating income, net approximately HK$950,000). Loss for the six months ended 30 September 2014 increased to approximately HK$98,889,000 (2013: approximately HK$72,943,000) of which approximately HK$62,024,000 (2013: approximately HK$52,694,000) was attributable to the non-cash imputed interest charged to the outstanding convertible bonds.

After cautious progress, trading of tea drinks and aloe juice drinks to USA demonstrated a stable but promising growth. The Group's customer in USA has engaged a number of major chain stores and is preparing to substantially increase import from the Company's PRC subsidiary which sources the drinks from Korean manufacturers. Besides, given the continuous health concerns on getting adequate drinking water in major cities of China, the Company believes its premium-branded bottled natural spring water imported from Canada will have a good start and growth in the top-tier consumer market.

— I-3 —

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION

OF THE GROUP

A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP ATTRIBUTABLE TO OWNERS OF THE COMPANY

Introduction

The unaudited pro forma statement of adjusted consolidated net tangible assets of the Group attributable to owners of the Company has been prepared by the directors of the Company in accordance with paragraph 31 of Chapter 7 of the GEM Listing Rules to illustrate the effect of the Rights Issue and Bonus Issue on the unaudited consolidated net tangible assets of the Group as if the Rights Issue and Bonus Issue had taken place on 30 September 2014.

The unaudited pro forma statement of adjusted consolidated net tangible assets of the Group has been prepared for illustrative purposes only, based on the judgments and assumptions of the directors of the Company, and because of its hypothetical nature, it may not reflect the true picture of the consolidated net tangible assets of the Group attributable to owners of the Company immediately after completion of the Rights Issue and Bonus Issue.

The following unaudited pro forma statement of adjusted consolidated net tangible assets of the Group is based on the consolidated net tangible assets of the Group as at 30 September 2014, adjusted as described below:

Unaudited Pro Forma Statement of Adjusted Consolidated Net Tangible Assets of the Group

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION

OF THE GROUP

| | Unaudited consolidated net tangible liabilities of the Group attributable to owners of the Company as at 30 September 2014
HK$ '000
(Note 1) | Estimated net proceeds from the Rights Issue
HK$ '000
(Note 2) | Unaudited pro forma adjusted consolidated net tangible liabilities of the Group attributable to owners of the Company as at 30 September 2014
HK$ '000 |
| --- | --- | --- | --- |
| Unaudited consolidated net tangible liabilities of the Group attributable to owners of the Company per Share before completion of the Rights Issue and Bonus Issue as at 30 September 2014 (Note 3) | | | (HK$0.79) |
| Unaudited pro forma adjusted consolidated net tangible liabilities of the Group attributable to owners of the Company per Share immediately after the Rights Issue and Bonus Issue as at 30 September 2014 (based on the minimum number of Rights Shares and Bonus Shares to be issued) (Note 4) | | | (HK$0.43) |
| Unaudited pro forma adjusted consolidated net tangible liabilities of the Group attributable to owners of the Company per Share immediately after the Rights Issue and Bonus Issue as at 30 September 2014 (based on the maximum number of Rights Shares and Bonus Shares to be issued) (Note 5) | | | (HK$0.39) |

Notes:

The unaudited consolidated net tangible liabilities of the Group attributable to the owners of the Company as at 30 September 2014 represented the unaudited consolidated net liabilities of the Group attributable to the owners of the Company as at 30 September 2014 less carrying amount of the intangible assets attributable to the owners of the Group amounted to HK$745,478,000 as extracted from the published interim report of the Group for the six months ended 30 September 2014.

— II-2 —

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

The estimated net proceeds of the minimum number of Rights Shares of approximately HK$146,863,000 are calculated based on 302,755,224 Rights Shares to be issued at the subscription price of HK$0.50 per Rights Share and after deduction of the estimated expenses of approximately HK$4,515,000 that are directly attributable to the Rights Issue. The estimated net proceeds of the maximum number of Rights Shares of approximately HK$159,087,000 are calculated based on 327,959,064 Rights Shares to be issued at the subscription price of HK$0.50 per Rights Share and after deduction of estimated expenses of approximately HK$4,893,000 that are directly attributable to the Rights Issue.
The unaudited consolidated net tangible liabilities of the Group attributable to the owners of the Company per Share is calculated based on 1,009,184,080 Shares in issue as at 30 September 2014.
The unaudited pro forma adjusted consolidated net tangible liabilities of the Group attributable to owners of the Company per Share immediately after completion of the Rights Issue and Bonus Issue (based on the minimum number of Rights Shares to be issued and including the issue of the Bonus Shares) is calculated based on 1,513,776,120 Shares which comprise 1,009,184,080 Shares in issue as at 30 September 2014, 302,755,224 Rights Shares and 201,836,816 Bonus Shares expected to be issued on the completions of the Rights Issue and Bonus Issue.
The unaudited pro forma adjusted consolidated net tangible liabilities of the Group attributable to owners of the Company per Share immediately after completion of the Rights Issue and Bonus Issue (based on the maximum number of Rights Shares to be issued and including the issue of the Bonus Shares) is calculated based on 1,639,795,320 Shares which comprise 1,009,184,080 Shares in issue as at 30 September 2014, 84,012,800 new shares expected to be issued upon the exercise of all outstanding Share Options as at 30 September 2014, 327,959,064 Rights Shares and 218,639,376 Bonus Shares expected to be issued on the completions of the Rights Issue and Bonus Issue.
No adjustments have been made to reflect any trading results or other transactions of the Group entered into subsequent to 30 September 2014.

— II-3 —

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION

OF THE GROUP

B. ACCOUNTANT'S REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

The following is the text of a report received from the reporting accountant of the Company. RSM Nelson Wheeler, Certified Public Accountants, Hong Kong, prepared in respect of the unaudited pro forma financial information of the Group solely for the purpose of inclusion in this circular.

RSM

Audit·Tax·Advisory

29th Floor

Caroline Centre

Lee Gardens Two

28 Yun Ping Road

Hong Kong

19 December 2014

To the Board of Directors of Pan Asia Mining Limited

We have completed our assurance engagement to report on the compilation of Pro Forma Financial Information of Pan Asia Mining Limited (the "Company") and its subsidiaries (collectively referred to as the "Group") by directors of the Company for illustrative purpose only. The pro forma financial information consists of the unaudited pro forma statement of adjusted consolidated net tangible liabilities of attributable to the owners of the Company as set out on pages II-1 to II-3 under the heading of "Unaudited Pro Forma Statement of Adjusted Consolidated Net Tangible Assets of the Group" (the "Unaudited Pro Forma Financial Information") in Section A of Appendix II to the Company's circular. The applicable criteria on the basis of which the directors have compiled the pro forma financial information are described on pages II-1 to II-3 of the circular.

The Unaudited Pro Forma Financial Information has been prepared by the directors of the Company to illustrate the impact of the proposed rights issue and bonus issue on the Group's net tangible liabilities as at 30 September 2014 as if the transaction had been taken place on 30 September 2014. As part of this process, information about the Group's net tangible liabilities has been extracted by the directors from the Group's condensed consolidated financial statements as included in the interim report for the six months ended 30 September 2014, on which an interim 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 31 of Chapter 7 of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the "GEM 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").

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION

OF THE GROUP

Reporting Accountant's Responsibilities

Our responsibility is to express an opinion, as required by paragraph 31(7) of Chapter 7 of the GEM 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 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 comply with ethical requirements and plan and perform procedures to obtain reasonable assurance about whether the directors have compiled the Pro Forma Financial Information in accordance with paragraph 31 of Chapter 7 of the GEM 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 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 the Prospectus is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the Group as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the event or transaction as at 30 September 2014 would have been as presented.

A reasonable assurance engagement to report on whether the 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 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 Group, the event or transaction in respect of which the Pro Forma Financial Information has been compiled, and other relevant engagement circumstances.

— II-5 —

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION

OF THE GROUP

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

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

We make no comments regarding the reasonableness of the amount of net proceeds from the Rights Issue and Bonus Issue, the application of those net proceeds, or whether such use will actually take place as described under "Reasons for the Rights Issue and Bonus Issue and Use of Proceeds" set out on page 30 of the circular.

Opinion

In our opinion:

(a) the Unaudited Pro Forma Financial Information has been properly compiled on the basis stated;

(b) such basis is consistent with the accounting policies of the Group; and

(c) the adjustments are appropriate for the purposes of the Pro Forma Financial Information as disclosed pursuant to paragraph 31(1) of Chapter 7 of the GEM Listing Rules.

Yours faithfully,

RSM Nelson Wheeler

Certified Public Accountants

Hong Kong

— II-6 —

APPENDIX III

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules and the Takeovers Code for the purposes of giving information with regard to the Group.

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

2. SHARE CAPITAL AND SHARE OPTIONS

(a) Share capital

The authorised and issued share capital of the Company as at the Latest Practicable Date were, and immediately following completion of the Rights Issue (assuming no outstanding Share Options are exercised and no Convertible Bonds are converted on or before the Record Date) will be, as follows:

Nominal Value
HK$

Authorised share capital:

2,000,000,000 Shares... 1,000,000,000

Issued and fully paid share capital:

1,009,184,080 Shares in issue... 504,592,040
302,755,224 Rights Shares to be issued and allotted pursuant to the Rights Issue ... 151,377,612
201,836,816 Rights Shares to be issued and allotted pursuant to the Rights Issue ... 100,918,408
1,513,776,120 total Shares in issue immediately following the completion of the Rights Issue and Bonus Issue... 756,888,060
2,184,000,000 Conversion Shares to be issued and allotted pursuant to the Bond Restructuring ... 1,092,000,000
3,697,776,120 total Shares in issue immediately following the completion of the Rights Issue, Bonus Issue and Bond Restructuring ... 1,848,888,060
80,000,000 Conversion Shares to be issued and allotted pursuant to the Settlement Agreement ... 40,000,000
3,777,776,120 total Shares in issue immediately following the completion of the Rights Issue, Bonus Issue and Bond Restructuring and the transactions contemplated under the Settlement Agreement... 1,888,888,060

— III-1 —

APPENDIX III

GENERAL INFORMATION

Notes:

(2) As at the Latest Practicable Date, there were outstanding Convertible Bonds in the aggregate principal amount of US$201,474,359 (equivalent to approximately HK$1,571,500,000). As announced by the Company on 29 July 2014, the Receivers were appointed by China Shipbuilding over such Convertible Bonds held by Kesterion. The Company has been informed that China Shipbuilding has assigned its rights under the Kesterion Charge to Magic Stone. Please see further information concerning the status of the Kesterion Charge in the section headed "Update on enforcement of charge over the Shares and Convertible Bonds held by substantial shareholder and connected transactions involving Settlement Agreement with Magic Stone" in this circular.

The Rights Shares, and the Bonus Shares, when allotted and fully paid, will rank pari passu in all respects, including capital, dividends and voting rights with the Shares then in issue. Holders of fully-paid Rights Shares will be entitled to receive all future dividends and distributions which are declared, made or paid after the date of allotment of the Rights Shares in their fully-paid form.

(b) Share Option Schemes

Share Option Scheme 2002 and Share Option Scheme 2012 were adopted on 25 April 2002 and 30 July 2012, respectively.

Category and name of the grantees	Options to subscribe for Shares	Date of grant	Exercise period	Exercise price
Consultants	262,800	6 March 2007	6 March 2007 to 5 March 2017	3.58
Consultants	80,150,000	21 August 2012	21 August 2012 to 20 August 2015	0.50
Employees of the Group	3,600,000	21 August 2012	21 August 2012 to 20 August 2015	0.50
Total	84,012,800

Note: Consideration for the grant of the Share Options is HK$1.00 payable by the grantees upon acceptance of the Share Options.

APPENDIX III

GENERAL INFORMATION

No Share Option has been exercised since the end of the last financial year (i.e. 31 March 2014). Save as disclosed, the Company did not have any other outstanding options, warrants or convertible securities which confer the rights to subscribe for the Shares, or rights affecting the Shares, and no capital of any member of the Group is under option, or agreed conditionally or unconditionally to be put under option as at the Latest Practicable Date.

As the Latest Practicable Date, save for the Rights Shares, the Bonus Shares, the Conversion Shares and the new Shares to be issued under the Settlement Agreement, there were no other equity or debt securities of the Company which are listed or dealt in any other stock exchange or which the listing or permission to deal is being or is proposed to be sought in any other stock exchange.

3. DISCLOSURE OF INTERESTS OF DIRECTORS

As at the Latest Practicable Date, the interests or short positions of the Directors and the chief executive of the Company in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) as 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 as recorded in the register required to be kept pursuant to section 352 of the SFO; or as otherwise notified to the Company and the Stock Exchange pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by the Directors, were as follows:

Interest and short positions in shares, underlying shares and debenture of the Company

Name of Directors	Capacity/Nature of interest	Number of Shares and/or underlying Shares held	Approximate percentage of the Company’s issued share capital
Mr. Koh Tat Lee, Michael	Interest of spouse (Note 1)	341,785,282 (Note 1)	33.87%
	Interest of spouse (Note 1)	321,109,082 (S) (Note 5)	31.82%
Mr. Cheung Hung Man	Beneficial owner (Note 2)	93,235,000 (L)	9.24%
Mr. Liang Tong Wei	Beneficial owner	100,000,000 (L)	9.91%

(L) — Long position; (S) — Short position

APPENDIX III

GENERAL INFORMATION

Notes:

(1) The entire issued share capital of Kesterion is beneficially owned by Ms. Eva Wong, the spouse of Mr. Koh Tat Lee, Michael.

(2) Ms. Eva Wong is interested in 271,200 Shares beneficially held by herself and 272,558,400 Shares held by Kesterion. Mr. Koh Tat Lee, Michael is the husband of Ms. Eva Wong. By virtue of SFO, Mr. Koh Tat Lee, Michael is deemed to be interested in the Ms. Eva Wong’s interests in the Shares. Save for such deemed interests, Mr. Koh Tat Lee, Michael does not hold any interests in the securities of the Company as at the Latest Practicable Date.

(3) 252,153,400 Shares out of 272,558,400 Shares held by Kesterion are subject to the Kesterion Charge which was created in favour of China Shipbuilding. The Company has been informed that the rights under the Kesterion Charge has been assigned by China Shipbuilding to Magic Stone on 7 November 2014. Under the terms of the Kesterion Charge, Magic Stone is entitled to exercise the voting rights of the 252,153,400 Shares subject to the Kesterion Charge. Save for the interests in Shares arising under the Kesterion Charge and the 80,000,000 new Shares to be issued under the Settlement Agreement, Magic Stone does not hold any interests in the securities of the Company. For further details, please refer to the section headed “Update on enforcement of charge over the Shares and Convertible Bonds held by substantial shareholder and connected transactions involving Settlement Agreement with Magic Stone”.

Save as disclosed, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had any other interests and short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required 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 have taken or deemed to have taken under such provisions of the SFO), or as recorded in the register required to be kept under section 352 of the SFO, or which were required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules, to be notified to the Company and the Stock Exchange.

4. DISCLOSURE OF INTERESTS BY SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as is known to any director or chief executive of the Company, the following persons (other than directors or chief executive of the Company) had interest or short positions in the shares, underlying shares or debentures of the Company which would fall to be disclosed to the Company under the provisions Divisions 2 and 3 of Part XV of the SFO and required to be entered into the register maintained by the Company pursuant to section 336 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.

— III-4 —

APPENDIX III

GENERAL INFORMATION

Interest and short positions of substantial shareholders in the shares and underlying shares of the Company:

(a) Interests and short position in the Shares

Name of shareholder	Capacity/Nature of interest	No. of Shares and/or underlying Shares held	Approximate Percentage of the shareholding
Kesterion	Beneficial owner	341,514,082 (L)	33.84%
	Beneficial owner	321,109,082 (S)
(Note 1)	31.82%
Ms. Eva Wong	Interest of controlled corporation	341,514,082 (L)
(Note 2)	33.84%
	Interest of controlled corporation	321,109,082 (S)
(Note 2)	31.82%
	Beneficial owner	271,200 (L)	0.03%
President Securities Corporation	Interest in controlled corporation	108,325,000 (L)
(Note 4)	10.73%
President Securities (BVI) Limited	Interest in controlled corporation	108,325,000 (L)
(Note 4)	10.73%
President Securities (Hong Kong) Limited	Other	108,325,000 (L)
(Note 4)	10.73%
Yang Dongjun	Interest in controlled corporation	401,109,082 (L)
(Note 3)	39.75%
Jing Bin	Interest in controlled corporation	401,109,082 (L)
(Note 3)	39.75%
Magic Stone	Security Interest	401,109,082 (L)
(Note 1)	39.75%

(L) — Long position; (S) — Short position

Notes:

(1) The Convertible Bonds and 252,153,400 Shares out of 272,558,400 Shares held by Kesterion are subject to the Kesterion Charge which was created in favour of China Shipbuilding. The Company has been informed that the rights under the Kesterion Charge has been assigned by China Shipbuilding to Magic Stone on 7 November 2014. Save for the interests in Shares arising under the Kesterion Charge and the 80,000,000 new Shares to be issued under the Settlement Agreement, Magic Stone does not hold any interests in the securities of the Company.

APPENDIX III

GENERAL INFORMATION

(2) The entire issued share capital of Kesterion is beneficially owned by Ms. Eva Wong, the spouse of Mr. Koh Tat Lee, Michael.

(3) Magic Stone is an investment holding company incorporated in the Cayman Islands and is owned as to 80.25% by Mr. Yang Dongjun and 19.750% by Mr. Jing Bin.

(4) As at the Latest Practicable Date, to the best knowledge of the Directors, President Securities (Hong Kong) Limited is owned as to 5.19% and 94.81% by President Securities Corporation and President Securities (BVI) Limited. President Securities (BVI) Limited is wholly owned by President Securities Corporation.

Save as disclosed, as at the Latest Practicable Date, so far as is known to the Directors, there was no other person who had an interest or short position in the shares, underlying shares and debentures of the Company which would fall to be disclosed to the Company under the provisions of Division 2 and 3 of Part XV of the SFO, or, 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 members of the Group.

5. DIRECTORS' SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered or proposed to enter into a service contract with any member of the Group which is not terminable by the employer within one year without payment of compensation (other than statutory compensation).

6. DIRECTORS' INTERESTS IN ASSETS

As at the Latest Practicable Date, so far as the Directors are aware, none of the Directors had any interest in any assets which have been, since 31 March 2014 (being the date to which the latest published audited consolidated financial statements of the Group were made up), up to the Latest Practicable Date, 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.

7. DIRECTORS' INTERESTS IN CONTRACT OR ARRANGEMENT OF SIGNIFICANCE

No contracts of significance in relation to the Group's business to which the Company, its subsidiaries, or its holding company was a party and in which a Director had material interest, whether directly or indirectly, subsisted as at the date of this circular.

— III-6 —

APPENDIX III

GENERAL INFORMATION

8. PARTICULARS OF THE DIRECTORS AND SENIOR MANAGEMENT

(a) Name and address

Name	Business Address
Executive Directors
Mr. Koh Tat Lee, Michael (Chairman)	Units 3404-6, 34/F, AIA Tower
183 Electric Road, North Point
Hong Kong
Mr. Cheung Hung Man	Units 3404-6, 34/F, AIA Tower
183 Electric Road, North Point
Hong Kong
Non-executive Director
Mr. Liang Tong Wai	Units 3404-6, 34/F, AIA Tower
183 Electric Road, North Point
Hong Kong
Independent non-executive Directors
Mr. Chu Hung Lin, Victor	Units 3404-6, 34/F, AIA Tower
183 Electric Road, North Point
Hong Kong
Mr. Tong Wan Sze	Units 3404-6, 34/F, AIA Tower
183 Electric Road, North Point
Hong Kong
Mr. Fung Kwok Leung	Units 3404-6, 34/F, AIA Tower
183 Electric Road, North Point
Hong Kong
Senior Management
Mr. Chan Ming Cho, Joe	Units 3404-6, 34/F, AIA Tower
183 Electric Road, North Point
Hong Kong

— III-7 —

APPENDIX III

GENERAL INFORMATION

(b) Below are the biographical details of the Directors together with their functions and relevant management expertise:

Executive Directors

Mr. Koh Tat Lee, Michael (“Mr. Koh”), aged 48, is the chairman of the Company since 30 November 2011 and the chairman of nomination committee since 31 March 2012. Mr. Koh is also the chairman of Black Sand Enterprises Limited and is a director in all subsidiaries and associated companies of the Company, except a subsidiary at Indonesia and PRC. He holds a Master degree of Electrical Engineering and a Master degree of Industrial Engineering from Columbia University in the United States. Mr. Koh possesses more than 10 years of experience in the telecommunications industry and project management. He has worked at Bell South and AT & T in the United States and was promoted to technical director before he left AT & T. Mr. Koh was the vice president of First Pacific Company Limited (stock code: 0142). During his tenure at First Pacific Company Limited from year 1994 to 1997, Mr. Koh founded a private company called Tuntex Telecom in Taiwan and assumed the post of president for the period from year 1995 to 1997. Mr. Koh was an executive director of M Dream Inworld Limited (stock code: 8100) and the chairman of China Railway Logistics Limited (stock code: 8089, formerly known as Proactive Technology Holdings Limited) before joining the Group.

Mr. Cheung Hung Man (“Mr. Cheung”), aged 48, is an executive director and chief executive officer of the Company since 27 July 2012. Mr. Cheung is also the director of PT Yaozhong Resources, Brighton Asia Pacific Investment Holdings Limited and Xiamen Yaozhong Asia-Pacific Trading Company Limited, the indirectly wholly-owned subsidiaries of the Company. Mr. Cheung is primarily responsible for the coal trading business of the Group. Since 2009, Mr. Cheung has been the president and chief executive officer of PT Yaozhong Resources and Xiamen Yaozhong Asia-Pacific Trading Company Limited. In 2011, Mr. Cheung co-founded Shinegood Culture Museum and is currently a chairman of Shinegood Media Co., Ltd. Mr. Cheung is also a guest professor of Art College, Xiamen University. Before that, Mr. Cheung received a bachelor’s degree in architecture from Quanzhou Huaqiao University in 1990. In 1993, he became the deputy managing director of Wuyi Decoration Design Engineering Co., Ltd under Wuyi Group (Hong Kong) and was promoted to managing director in 2005. From 1993 to 2000, Mr. Cheung had completed over 100 engineering design projects and was awarded the title of China Senior Interior Designer in 2000.

Non-executive Director

Mr. Liang Tong Wai (“Mr. Liang”), aged 47, is a non-executive Director of the Company since 30 November 2011. Mr. Liang holds a bachelor degree of Industrial and Business Administration and Management from Foshan Radio and Television University (佛山市廣播電視大學) in the PRC. Mr. Liang possesses about 25 years of experiences in the business administration and management. He has worked at 佛山市奇槎色料廠 and 佛山市宏陶陶瓷集團有限公司 in the PRC and was promoted to sales general manager before he left 佛山市宏陶陶瓷集團有限公司. Mr. Liang has been the chairman and general manager of 佛山市三水宏源陶瓷企業有限公司 since 2004.

— III-8 —

APPENDIX III

GENERAL INFORMATION

Independent non-executive Directors

Mr. Chu Hung Lin, Victor ("Mr. Chu"), aged 47, is an independent non-executive Director and a member of each of the audit committee and remuneration committee of the Company since 1 June 2009 and a member of the nomination committee since 31 March 2012. Mr. Chu has designated as the chairman of the remuneration committee with effect from 30 October 2014. Mr. Chu has a diversified experience in the industries of film production, land development, private pre-IPO investment and food and catering. During the period from January 2001 to June 2003, he was the deputy chairman and executive director of Climax International Company Limited, shares of which are listed on the main board of The Stock Exchange of Hong Kong Limited (stock code: 439). Since 2003, he has been actively involved in food and beverage business and has been a shareholder and director of certain private companies. Mr. Chu is responsible for the business development, space allocation and design, product development, marketing and strategic planning of such companies.

Mr. Tong Wan Sze ("Mr. Tong"), aged 46, is an independent non-executive Director and the chairman of the audit committee of the Company since 29 December 2010. Mr. Tong has over 20 years experience in overseeing financial management, merger and acquisition, investor relations and company secretarial matters. Before joining the Company, Mr. Tong was the Chief Financial Officer, Financial Controller and Company Secretary at several companies listed on the Main Board of The Stock Exchange of Hong Kong Limited and previously he was an auditor at Deloitte Touche Tohmatsu. He is a Fellow of the Association of Chartered Certified Accountants, an Associate of the Hong Kong Institute of Certified Public Accountants and a Certified Tax Advisor in Hong Kong. Mr. Tong has obtained a Master degree in Business Administration from the University of Strathclyde in the United Kingdom.

Mr. Fung Kwok Leung ("Mr. Fung"), aged 48, is an independent non-executive Director and a member of each of the audit committee, remuneration committee and the nomination committee of the Company since 30 October 2014. Mr. Fung is a practicing Certified Public Accountant, a fellow member of each of the Hong Kong Institute of Certified Public Accountants and Association of Chartered Certified Accountants and a Certified Tax Adviser of The Taxation Institute of Hong Kong. He holds an Honour Degree in Accountancy from the Hong Kong Polytechnic University. Mr. Fung worked for two of the "Big-Four" international accounting firms and several multinational entities and listed companies. He has over 20 years of extensive experience in accounting, auditing, taxation, merger and acquisitions, corporate finance, rescue and advisory. As at the Latest Practicable Date, he also serves as a non-executive director of Uni-Bio Science Group Limited (Stock Code: 690) ("Uni-Bio") and is the company secretary of China Innovationpay Group Limited (Stock code: 8083), whose shares are listed on the Growth Enterprise Market of the Stock Exchange. Mr. Fung is one of the founders of JH CPA Alliance Limited ("JH CPA"), which was founded on 23 January 2009. In October 2013, he was appointed as a Standing Committee Member of The Returned Overseas Chinese Association, Nanshan, Shenzhen, People's Republic of China. In January 2014, he was further appointed as a Committee Member of The Chinese People's Political Consultative Conference, Nanshan, Shenzhen Committee.

— III-9 —

APPENDIX III

GENERAL INFORMATION

Senior Management

Mr. Chan Ming Cho, Joe (“Mr. Chan”), aged 50, is the chief financial officer and company secretary of the Company, the director of a wholly-owned subsidiary Brighton Asia Pacific Investment Holdings Limited and the finance director of BSEL. He has worked for SmarTone Mobile Communications Limited (stock code: 0315) for 9 years and was the finance general manager before joining the Company. Before that he was the financial controller of Shenzhen Merchant Link Limited (the PRC telecom investment joint venture of First Pacific Company (stock code: 0142) and China Merchant Holdings), the project finance manager of Pacific Link Communications Limited (subsequently merged with CSL) and an auditor in Arthur Andersen & Co. (subsequently merged with PricewaterhouseCoopers). Mr. Chan possesses over 20 years of financial management, planning, control and auditing experiences. He earned his master degree in business administration from University of South Australia and he is a member of The Institute of Chartered Accountants in England & Wales, and a fellow member of both Hong Kong Institute of Certified Public Accountants and The Association of Chartered Certified Accountants.

(c) Audit Committee

The audit committee of the Company currently comprises three members of independent non-executive Directors, namely Mr. Chu Hung Lin, Victor, Mr. Tong Wan Sze and Mr. Fung Kwok Leung. The chairman of the audit committee is Mr. Tong Wan Sze. Please refer to the section headed “The particulars of the Directors and senior management - Qualification and positions held” in this circular for their biographical details.

The written terms of reference of the audit committee sets out the duties of the audit committee which includes reviewing and supervising the financial reporting and internal controls procedures of the Group and to review and approve the Company’s annual reports and accounts, interim report and quarterly reports to the Board.

9. CORPORATE INFORMATION

| Registered Office | P.O. Box 309
Ugland House, South Church Street
George Town, Grand Cayman
Cayman Islands
British West Indies |
| --- | --- |
| Principal place of business in Hong Kong | Units 3404-6, 34/F
AIA Tower
183 Electric Road
North Point
Hong Kong |
| Company secretary | Mr. Chan Ming Cho, Joe
FCCA, FCPA, ICAEW |

— III-10 —

APPENDIX III
GENERAL INFORMATION

Authorised representative
Mr. Chan Ming Cho, Joe
Units 3404-6, 34/F., AIA Tower
183 Electric Road
North Point
Hong Kong

Branch share registrar and transfer office in Hong Kong
Tricor Tengis Limited
Level 22, Hopewell Centre
183 Queen’s Road East
Hong Kong

Legal advisers to the Company in relation to the Rights Issue, the Bonus Issue
As to Hong Kong law
Sidley Austin
Level 39
Two International Finance Centre
8 Finance Street
Central
Hong Kong

As to Cayman Islands law
Maple and Calder
53rd Floor, The Center
99 Queen’s Road Central
Hong Kong

Independent financial adviser to the Independent Board Committee
Changjiang Corporate Finance (HK) Limited
Suite 1908,
19/F Cosco Tower
183 Queen’s Road Central
Hong Kong

Auditor and reporting accountant
RSM Nelson Wheeler
Certified Public Accountants
29th Floor, Caroline Centre
Lee Gardens Two
28 Yun Ping Road
Hong Kong

Principal bankers
Bank of China (Hong Kong) Limited
1 Garden Road
Central
Hong Kong

The Hongkong and Shanghai Banking Corporation Limited
1 Queen’s Road Central
Hong Kong

— III-11 —

APPENDIX III

GENERAL INFORMATION

10. EXPERTS

The following are the qualifications of the experts who have given an opinion or advice, which is contained in this circular:

Name	Qualification
Changjiang Corporate Finance (HK) Limited	A corporation licensed to carry on Type 6 (advising on corporate finance) regulated activity under the SFO
Greater China Appraisal Limited	Independent Valuer
RSM Nelson Wheeler	Certified Public Accountants

As at the Latest Practicable Date, none of Changjiang Corporate Finance (HK) Limited, RSM Nelson Wheeler and Greater China Appraisal Limited:

(i) had any interest, either direct or indirect, in any assets which have been, since 31 March 2014, the date to which the latest published audited consolidated financial statements of the Company were made up, acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group; and

(ii) had any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

Each of Changjiang Corporate Finance (HK) Limited, RSM Nelson Wheeler and Greater China Appraisal Limited has given and has not withdrawn its respective written consent to the issue of this circular with the inclusion of its respective letter and/or report and/or reference to its respective name, in the form and context in which it appears.

11. LITIGATION

None of the member of the Group was engaged in any litigation or arbitration of material importance and there is no litigation or claim of material importance known to the Directors to be pending or threatened by or against any member of the Group as at the Latest Practicable Date.

12. COMPETING INTERESTS

To the best knowledge of the Directors, as at the Latest Practicable Date, none of the Directors or the substantial shareholders, nor their respective associates had any interests in a business, which competes or is likely to compete either directly or indirectly with the business of the Group which would be required to be disclosed under the GEM Listing Rules.

— III-12 —

APPENDIX III

GENERAL INFORMATION

13. MATERIAL CONTRACTS

During the two years immediately preceding the date of this circular, the following contracts, not being contracts entered into in the ordinary course of business carried on or intended to be carried on by the Company or any of its subsidiaries, have been entered into by the Group and are or may be material:

(a) a sale and purchase agreement dated 27 March 2013 (as amended by a supplemental agreement dated 10 May 2013) entered into among the Company, Black Sand Enterprises Limited, Brighton Asia Pacific Investment Limited and Mr. Cheung Hung Man, pursuant to which Black Sand Enterprises Limited shall purchase from Brighton Asia Pacific Investment Limited the entire issued share capital of Brighton Asia Pacific Investment Holdings Limited at the consideration of HK$50,050,000 (subject to adjustment);

(b) the Bond Restructuring Agreement;

(d) the Underwriting Agreement.

14. EXPENSES

The expenses in connection with the Rights Issue, including financial, legal and other professional advisory fees, underwriting commission, printing and translation expenses are estimated to be approximately HK$4.51 to 4.89 million and will be payable by the Company.

15. GENERAL

(a) The Company’s registrar and transfer office in Hong Kong is Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

(b) The English text of this document shall prevail over the Chinese text for the purposes of interpretation.

(c) Mr. Eng Wee Meng passed away on 4 September 2014 and ceased to be the executive Director, the authorised representative and the compliance officer of the Company on the same day. The Board will appoint the compliance officer as soon as practicable.

— III-13 —

APPENDIX III

GENERAL INFORMATION

16. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the principal place of business of the Company in Hong Kong at Units 3404-6, 34/F, AIA Tower, 183 Electric Road, North Point, Hong Kong during normal business hours from 9:00 a.m. to 6:00 p.m. from the date of this circular up to and including the date of the EGM:

(a) the memorandum and articles of association of the Company;

(b) the letter from the Board, the text of which is set out on pages 15 to 57 of this circular;

(d) the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 60 to 100 of this circular;

(e) the report from RSM Nelson Wheeler in respect of the unaudited pro forma financial information of the Group in Appendix II of this circular;

(f) the written consents of the experts referred to under the section headed "Experts" in this appendix;

(g) the material contracts referred to under the section headed "Material Contracts" in this appendix;

(h) the annual reports of the Company for the three years ended 31 March 2012, 2013 and 2014;

(i) the interim report of the Company for the six months ended 30 September 2014;

(j) the letter prepared by Greater China Appraisal Limited in relation to the valuation of the Convertible Bonds and the New Bonds; and

(k) this circular.

— III-14 —

NOTICE OF THE EGM

PAN ASIA MINING LIMITED 宴亞礦業有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8173)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT an extraordinary general meeting ("Meeting") of Pan Asia Mining Limited ("Company") will be held at Units 3404-6, 34/F., AIA Tower, 183 Electric Road, North Point, Hong Kong on Friday, 9 January 2015 at 11:00 a.m. by poll, for the purposes of considering and, if thought fit, passing the following resolutions which will be proposed as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

1. "THAT:

(a) the authorised share capital of the Company be and is hereby increased from HK$1,000,000,000 to HK$2,500,000,000 (the "Share Capital Increase") by the creation of an additional 3,000,000,000 ordinary shares of par value of HK$0.5 each in the capital of the Company and such shares shall rank pari passu with all existing shares of the Company; and

(b) any one director of the Company (the "Director") be and is hereby authorised for and on behalf of the Company to execute all such documents and instruments and to do all such acts or things deemed by him to be incidental to, ancillary to or in connection with the matters contemplated in and to give effect to the Share Capital Increase."

2. "THAT:

(a) the Rights Issue and the Bonus Issue (as defined in the circular dated 19 December 2014 of the Company (the "Circular")) be and is hereby approved; and

(b) any one or more Directors (as defined in the Circular) be and is/are hereby authorised to do all such acts and things, to sign and execute all such further documents and to take such steps as he/she/they may in his/her/their absolute discretion consider necessary, appropriate, desirable or expedient to carry out or to give effect to or in connection with the Rights Issue or any transactions contemplated thereunder."

— EGM-1 —

NOTICE OF THE EGM

3. "THAT:

(a) the conditional bond restructuring agreement (the “Bond Restructuring Agreement”) (a copy of which has been produced to the Meeting marked “A” and signed by the chairman of the EGM for the purpose of identification) dated 22 September 2014 (as amended by a supplemental agreement on 21 November 2014) and entered into among the Company and Kesterion Investments Limited (“Kesterion”) pursuant to which it is conditionally agreed that (i) the terms of Convertible Bonds (as defined in the Circular) will be amended to grant the Company a right to redeem all the outstanding Convertible Bonds at a redemption price of US$140,000,000 (equivalent to approximately HK$1,092,000,000), (ii) the Company will exercise such Redemption Right (as defined in the Circular) and (iii) in satisfaction and cancellation of the Redemption Amount (as defined in the Circular) payable under the amended Convertible Bonds following such redemption, the Company will issue the New Bonds (as defined in the circular) to Kesterion and the performance of all the transactions contemplated thereunder and all other matters of and incidental thereto or in connection therewith be and are hereby generally and unconditionally approved, ratified and confirmed;

(b) any one or more of the Directors be and is/are hereby authorised to do all such acts and things and execute all such other or further documents which he/they consider necessary, desirable or expedient for the purpose of, or in connection with, the implementation of and giving effect to the terms of, or the transactions contemplated by, the Bond Restructuring Agreement and all documents in connection therewith and to agree to such variation, amendments or waiver or matters relating thereto as are, in the opinion of the Directors, in the interest of the Company and its shareholders as a whole;

(c) the New Bonds to be issued pursuant to the Bond Restructuring Agreement and the transactions contemplated thereunder be and are hereby approved; and

(d) any one or more of the Directors be and is/are hereby authorised to allot and issue such number of Shares as may fall to be allotted and issued;

(i) on and subject to the terms and conditions of the Bond Restructuring Agreement; and

(ii) upon exercise of the conversion rights attached to the New Bonds on and subject to the terms and conditions of the Bond Restructuring Agreement and the conditions of the New Bonds."

4. "THAT:

(a) the settlement agreement (the “Settlement Agreement”) (a copy of which has been produced to the Meeting marked “B” and signed by the chairman of the Meeting for the purpose of identification) dated 21 November 2014 and entered into among the Company and Magic Stone Fund (China) (“Magic Stone”) pursuant to which, amongst others, the Group has conditionally agreed to settle the liabilities under the Trade Contracts (as defined in the circular) by way of the following arrangements: (i) the Group shall pay Magic Stone

— EGM-2 —

NOTICE OF THE EGM

RMB51.88 million (equivalent to approximately HK$64.85 million) in cash before 28 February 2015; (ii) the Group shall pay Magic Stone US$17 million (equivalent to approximately HK$132.6 million) in cash before 28 February 2015; and (iii) the Company shall issue and allot 80,000,000 new Shares each fully paid at an issue price of HK$0.50 per Share to Magic Stone after the completion of the Rights Issue and before 28 February 2015 and the performance of all the transactions contemplated thereunder and all other matters of and incidental thereto or in connection therewith be and are hereby generally and unconditionally approved, ratified and confirmed; and

(b) any one or more of the Directors be and is/are hereby authorised to do all such acts and things and execute all such other or further documents which he/they consider necessary, desirable or expedient for the purpose of, or in connection with, the implementation of and giving effect to the terms of, or the transactions contemplated by, the Settlement Agreement and all documents in connection therewith and to agree to such variation, amendments or waiver or matters relating thereto as are, in the opinion of the Directors, in the interest of the Company and its shareholders as a whole.”

By Order of the Board
Pan Asia Mining Limited
Mr. Koh Tat Lee, Michael
Chairman

Hong Kong, 19 December 2014

Principal place of business in Hong Kong:
Units 3404-6, 34/F.
AIA Tower
183 Electric Road
North Point
Hong Kong

Notes:

The register of members of the Company will be closed on Friday, 9 January 2015 and no transfer of share(s) will be effected. In order to determine the entitlement to attend and vote at the Meeting, all transfer of share(s), accompanied by the relevant share certificate(s) with the properly completed transfer form(s) either overleaf or separately, must be lodged with the branch share registrar and transfer office of the Company in Hong Kong, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen's Road East, Hong Kong for registration not later than 4:30 p.m. on Thursday, 8 January 2015.
Any member entitled to attend and vote at the meeting convened by the above notice is entitled to appoint one, or if such member is a holder of more than one Share, more proxies to attend and vote in his/her stead. Where a member appoints more than one proxy, the instrument of proxy shall state which proxy is entitled to vote on a poll. A proxy need not be a member of the Company. In addition, a proxy or proxies representing either a member of the Company who is an individual or a member of the Company which is a corporation shall be entitled to exercise the same powers on behalf of the member of the Company which he or they represent as such member of the Company could exercise. If more than one proxy is appointed, the appointment shall specify the number of Shares in respect of which each such proxy is appointed.

— EGM-3 —

NOTICE OF THE EGM

In order to be valid, the form of proxy must be deposited at the Company's branch share registrar in Hong Kong, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen's Road East, Hong Kong together with a power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power of attorney as soon as possible and in any event not less than 48 hours before the time appointed for the holding of such meeting or any adjournment thereof.
The form of proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person authorised to sign the same. In the case of a form of proxy purporting to be signed on behalf of a corporation by an officer thereof it shall be assumed, unless the contrary appears, that such officer was duly authorised to sign such form of proxy on behalf of the corporation without further evidence of the fact.
Completion and return of a form of proxy will not preclude a member from attending in person and voting at the above meeting or any adjournment thereof, should he so wish, and in such event, the form of proxy shall be deemed to be revoked.
A form of proxy for use at the meeting is enclosed.
In case of joint holders of a share of the Company, any one of such holders may vote at the meeting either personally or by proxy in respect of such share as if he was solely entitled thereto. However, if more than one such joint holders are present at the meeting personally or by proxy, then one of such holders whose name stands first in the register of member of the Company shall alone be entitled to vote in respect of that share.

As at the date of this notice, the Board comprises two executive Directors, Mr. Koh Tat Lee, Michael and Mr. Cheung Hung Man, a non-executive Director, Mr. Liang Tong Wei, and three independent non-executive Directors, Mr. Chu Hung Lin, Victor, Mr. Tong Wan Sze and Mr. Fung Kwok Leung.

— EGM-4 —

AI assistant

Hephaestus Holdings Limited — Proxy Solicitation & Information Statement 2014

51310_rns_2014-12-21_0bdc1dd2-5149-4bb2-af0c-eb4e4aaf10e3.pdf

PAN ASIA MINING LIMITED 宴亞礦業有限公司

長江證券融資(香港)有限公司

EFFECT OF BAD WEATHER ON THE LATEST TIME FOR ACCEPTANCE OF AND PAYMENT FOR THE RIGHTS SHARES

PAN ASIA MINING LIMITED 宴亞礦業有限公司

INTRODUCTION

PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL

RIGHTS ISSUE WITH BONUS ISSUE

Issue statistics

Bonus Issue

Qualifying Shareholders

Closure of register of members

Rights of Overseas Shareholders

Subscription Price

Basis of provisional allotment

Fractions of Rights Shares and Bonus Shares

Status of the Rights Shares and Bonus Shares

No application for excess Rights Shares

Share certificates for the Rights Issue and the Bonus Issue

Application for listing

Irrevocable Undertaking from Kesterion

Termination of the Underwriting Agreement

CONNECTED TRANSACTION

REASONS FOR THE RIGHTS ISSUE AND USE OF PROCEEDS

FUND RAISING EXERCISES OF THE COMPANY

CONNECTED TRANSACTIONS INVOLVING THE RESTRUCTURING OF CONVERTIBLE BONDS AND THE PROPOSED ISSUE OF NEW BONDS

The Bond Restructuring Agreement

Principal terms of the Bond Restructuring Agreement

Conditions Precedent

Completion

Termination

Principal Terms of the New Bonds and the Convertible Bonds

Conversion

Transferability

Adjustment to Conversion Price

Adjustment to the Conversion Price

Fair value of the Convertible Bonds and New Bonds

Reasons for entering into the Bond Restructuring Agreement

Application for Listing

Specific Mandate for the issue of Conversion Shares

Listing Rules Implications

UPDATE ON ENFORCEMENT OF CHARGE OVER THE SHARES AND CONVERTIBLE BONDS HELD BY SUBSTANTIAL SHAREHOLDER AND CONNECTED TRANSACTIONS INVOLVING SETTLEMENT AGREEMENT WITH MAGIC STONE

Application for listing

Information on the Company and Magic Stone

Issue Price

SHAREHOLDING OF THE COMPANY

Scenario 1

Scenario 2

Scenario 3

Scenario 4

Notes:

WARNING OF THE RISKS OF DEALING IN SHARES AND RIGHTS SHARES

RISK FACTORS

Business and market risk relating to the Group

(a) Risks relating to the Group and its business

Exploration and exploitation business

Coal trading business

Beverage trading business

PROPOSED CHANGE IN BOARD LOT SIZE

ARRANGEMENT ON ODD LOT TRADING

SHARE CERTIFICATES

EGM

POLL PROCEDURE

RECOMMENDATION

ADDITIONAL INFORMATION

PAn Asia Mining Limited

寰亞礦業有限公司

長江證券融資(香港)有限公司

I. INTRODUCTION

II. THE INDEPENDENT BOARD COMMITTEE

III. BASIS OF OUR OPINION

IV. PRINCIPAL FACTORS AND REASONS CONSIDERED

A. The Rights Issue (with the Bonus Issue)

1. Financial information of the Group

(i) For the six months ended 30 September 2014

(ii) For the year ended 31 March 2014

3. Other fund raising alternatives

4. Principal terms of the Rights Issue and the Bonus Issue

Hephaestus Holdings Limited Proxy Solicitation & Information Statement 2014