THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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

This circular appears for information purposes only and is not intended to and does not constitute, or form part of, any offer to purchase or subscribe for or an invitation to purchase or subscribe for any securities of LSG, LSD, eSun or Lai Fung or the solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issuance or transfer of securities of LSG, LSD, eSun or Lai Fung in any jurisdiction in contravention of applicable law or regulation.

==> picture [217 x 105] intentionally omitted <==

(1) POSSIBLE VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION

(2) CONDITIONAL VOLUNTARY GENERAL CASH OFFER BY HSBC ON BEHALF OF THE OFFEROR, A WHOLLY-OWNED SUBSIDIARY OF LSD, TO ACQUIRE ALL OF THE ISSUED SHARES OF eSUN (OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY LSD, THE OFFEROR OR THEIR RESPECTIVE SUBSIDIARIES) AND TO CANCEL ALL THE OUTSTANDING SHARE OPTIONS OF eSUN

(3) POSSIBLE UNCONDITIONAL MANDATORY GENERAL CASH OFFER BY HSBC ON BEHALF OF THE OFFEROR, A WHOLLY-OWNED SUBSIDIARY OF LSD, TO ACQUIRE ALL OF THE ISSUED SHARES OF LAI FUNG (OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY LSD, THE OFFEROR, eSUN OR THEIR RESPECTIVE SUBSIDIARIES) AND TO CANCEL ALL THE OUTSTANDING SHARE OPTIONS OF LAI FUNG

(4) NOTICE OF GENERAL MEETING

Financial Adviser to LSD and the Offeror

==> picture [109 x 8] intentionally omitted <==

----- Start of picture text -----

Independent Financial Adviser
----- End of picture text -----

==> picture [42 x 29] intentionally omitted <==

Capitalised terms used in the lower portion of this cover page shall have the respective meanings as those defined in the section headed “Definitions” in this circular.

A letter from the board of directors of Lai Sun Development Company Limited (“ Company ”) is set out on pages 11 to 43 of this circular. The notice convening the general meeting of the Company (“ General Meeting ”) to be held at Harbour View Rooms I & II, 3rd Floor, The Excelsior, Hong Kong, 281 Gloucester Road, Causeway Bay, Hong Kong on Wednesday, 8 August 2018 at 12:00 noon (or, if later, immediately following the conclusion of the relevant general meeting of LSG) is set out on pages GM-1 to GM-2 of this circular.

Shareholders of the Company are advised to read the notice of the General Meeting and if you are not able to attend the General Meeting or any adjournment thereof (as the case may be) in person but wish to exercise your right as a shareholder of the Company, please complete, sign and return the form of proxy in accordance with the instructions printed thereon and deposit the same with the Company’s share registrar, Tricor Tengis Limited, 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 holding the General Meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the General Meeting or any adjournment thereof should you so wish.

Hong Kong, 23 July 2018

Page	number
DEFINITIONS....................................................................................................................	1
LETTER FROM THE BOARD........................................................................................	11
LETTER FROM THE LSD INDEPENDENT BOARD COMMITTEE.......................	44
LETTER FROM RED SUN...............................................................................................	45
Appendix I — Financial Information of the Group..................................................	I-1
Appendix II — Financial Information of the eSun Group.........................................	II-1
Appendix III — Financial Information of the Lai Fung Group.................................	III-1
Appendix IV — Management Discussion and Analysis of the Group........................	IV-1
Appendix V — Management Discussion and Analysis of the eSun Group..............	V-1
Appendix VI — Management Discussion and Analysis of the Lai Fung Group.......	VI-1
Appendix VII — Unaudited Pro Forma Financial Information
of the Enlarged Group....................................................................	VII-1
Appendix VIII — Valuation on the Property Interests of the eSun Group..................	VIII-1
Appendix IX — General Information...........................................................................	IX-1
NOTICE OF GENERAL MEETING...............................................................................	GM-1

ACCOMPANYING DOCUMENT: FORM OF PROXY

This circular in both English and Chinese is available in printed form and published on the respective websites of the Company at “http://www.laisun.com” and Hong Kong Exchanges and Clearing Limited at “http://www.hkexnews.hk”. The English version will prevail in case of any inconsistency between the English and the Chinese versions of this circular.

– i –

DEFINITIONS

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

“Announcement Date”
means 27 May 2018, being the date of the Joint Announcement;
“associate” has the meaning ascribed to it under the Takeovers Code;
“Board” means the board of Directors;
“close associates” has the meaning ascribed to it under the Listing Rules;
“Companies Act” means the Companies Act 1981 of Bermuda;
“Companies Ordinance” means the Companies Ordinance (Chapter 622 of the Laws of Hong Kong);
“Conditions” means the conditions to the eSun Share Offer, as set out under section 7 “Conditions to the eSun Offers” of the Letter from the Board in this circular;
“CT Resolution” means the ordinary resolution to be proposed at the General Meeting to approve the making of the Share Offers to the Yu Shareholders as a connected transaction;
“Directors” means the directors of LSD;
“disclosures of interests”
means disclosures of interests pursuant to Part XV of the SFO and the disclosure of dealings pursuant to Rule 22 of the Takeovers Code;
“Disinterested eSun Shareholders”
means the holders of the Disinterested eSun Shares. For the avoidance of doubt, the Disinterested eSun Shareholders include (1) any member of the HSBC Group in respect of eSun Shares of its non-discretionary investment clients where such client (a) has control over whether to tender acceptances to the eSun Share Offer in respect of those eSun Shares, (b) if acceptances of the eSun Share Offer in respect of those eSun Shares are to be tendered, gives instructions to tender them, and (c) is not the Offeror, LSD or any of the other Offeror Concert Parties, (2) the Yu Shareholders and (3) SAIF Partners;
“Disinterested eSun Shares”
means the eSun Shares other than those owned by the Offeror or any of the Offeror Concert Parties;

– 1 –

DEFINITIONS

“Disinterested Lai Fung Shareholders”
means the holders of the Disinterested Lai Fung Shares. For the avoidance of doubt, the Disinterested Lai Fung Shareholders include (1) any member of the HSBC Group in respect of Lai Fung Shares of its non-discretionary investment clients where such client (a) has control over whether to tender acceptances to the Lai Fung Share Offer in respect of those Lai Fung Shares, (b) if acceptances of the Lai Fung Share Offer in respect of those Lai Fung Shares are to be tendered, gives instructions to tender them, and (c) is not the Offeror, LSD or any of the other Offeror Concert Parties and (2) the Yu Shareholders;
“Disinterested Lai Fung Shares”
means the Lai Fung Shares other than those owned by the Offeror or any of the Offeror Concert Parties;
“Dr. Peter Lam”
means Dr. Lam Kin Ngok, Peter, an Offeror Director, a deputy chairman and an executive director of LSG, the chairman and an executive director of LSD, the chairman and an executive director of MAGHL and the ultimate controlling shareholder of LSG, LSD and the Offeror;
“Enlarged Group” means the Company and its subsidiaries upon completion of the Offers, which will include the eSun Group;
“eSun”
means eSun Holdings Limited (豐德麗控股有限公司), a company incorporated in Bermuda with limited liability, the issued shares of which are listed and traded on the Main Board of the Stock Exchange (Stock Code: 571);
“eSun Composite Document”
means the composite offer and response document to be issued by or on behalf of the Offeror and eSun to the eSun Shareholders and the eSun Optionholders in accordance with the Takeovers Code in relation to the eSun Offers;
“eSun Group”
means eSun and its subsidiaries (including, for the avoidance of doubt, the Lai Fung Group);
“eSun Offer Shares”
means the eSun Shares which are subject to the eSun Share Offer;
“eSun Offers” means the eSun Share Offer and the eSun Option Offer;
“eSun Option Offer Price”
means in relation to any eSun Option, the price at which the eSun Option Offer will be made;

– 2 –

DEFINITIONS

“eSun Option Offer”
means the offer to be made by HSBC on behalf of the Offeror to the eSun Optionholders in compliance with Rule 13 of the Takeovers Code to cancel all the eSun Options;
“eSun Optionholders” means the holders of the eSun Options;
“eSun Options” means the share options, each relating to one eSun Share, granted and outstanding under the eSun Share Option Schemes from time to time, whether such options vested or not;
“eSun Share Offer Closing Date” means the date to be stated in the eSun Composite Document as the first offer closing date of the eSun Share Offer or any subsequent offer closing date in the event that the eSun Share Offer is extended or revised in accordance with the Takeovers Code;
“eSun Share Offer Price” means HK$1.30 per eSun Offer Share;
“eSun Share Offer” means the conditional voluntary general cash offer to be made by HSBC on behalf of the Offeror to acquire all of the issued eSun Shares (other than those already owned or agreed to be acquired by LSD, the Offeror or their respective subsidiaries);
“eSun Share Option Schemes” means the share option schemes adopted by eSun on 23 December 2005 and 11 December 2015, respectively;
“eSun Shareholders” means the holders of the eSun Shares;
“eSun Shares” means the shares in the capital of eSun;
“Executive” means the Executive Director of the Corporate Finance Division of the SFC or any delegate of the Executive Director;
“General Meeting” means the general meeting of the Company to be held to consider and, if thought fit, to approve (by way of separate resolutions) (a) the Offers as a very substantial acquisition and (b) the making of the Share Offers to the Yu Shareholders as a connected transaction;
“Group” means LSD and its subsidiaries;
“HK$” means Hong Kong dollars, the lawful currency of Hong Kong;

– 3 –

DEFINITIONS

“Hong Kong”
means the Hong Kong Special Administrative Region of the PRC;
“HSBC”
means The Hongkong and Shanghai Banking Corporation Limited, being the financial adviser to LSD and the Offeror in relation to the Offers, a registered institution under the SFO, registered to carry on Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities), Type 5 (advising on futures contracts), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the SFO and a licensed bank under the Banking Ordinance (Chapter 155 of the Laws of Hong Kong);
“HSBC Group” HSBC and persons controlling, controlled by or under the same control as HSBC;
“Independent LSD Shareholders” means the LSD Shareholders other than (a) the Yu Shareholders, Mr. FA Chew and Mr. Julius Lau, who, on the basis of their disclosures of interests in LSG, LSD, eSun and Lai Fung as at the Latest Practicable Date, will be required under the Listing Rules to abstain from voting on the VSA Resolution, and their respective close associates and (b) any other LSD Shareholder who has a material interest in such very substantial acquisition and will be required under the Listing Rules to abstain from voting on the VSA Resolution and his close associates. The Board is not aware of any LSD Shareholder falling within (b) of this definition. For the avoidance of doubt, the Independent LSD Shareholders include LSG, Dr. Peter Lam and Mr. Lester Lam;
“Independent LSG Shareholders”
means the LSG Shareholders other than (a) the Yu Shareholders and Mr. FA Chew, who, on the basis of their disclosures of interests in LSG, LSD, eSun and Lai Fung as at the Latest Practicable Date, will be required under the Listing Rules to abstain from voting on the VSA Resolution, and their respective close associates and (b) any other LSG Shareholders who will be required under the Listing Rules to abstain from voting on the VSA Resolution and his close associates. For the avoidance of doubt, the Independent LSG Shareholders include Dr. Peter Lam and Mr. Lester Lam;

– 4 –

DEFINITIONS

“Joint Announcement”
the announcement dated 27 May 2018 jointly issued by LSG, LSD, the Offeror, eSun and Lai Fung, in relation to the Offers;
“Lai Fung”
means Lai Fung Holdings Limited (麗豐控股有限公司), a company incorporated in the Cayman Islands with limited liability, the issued shares of which are listed and traded on the Main Board of the Stock Exchange (Stock Code: 1125);
“Lai Fung Composite Document” means the composite offer and response document to be issued by or on behalf of the Offeror and Lai Fung to the Lai Fung Shareholders and the Lai Fung Optionholders in accordance with the Takeovers Code in relation to the Lai Fung Offers;
“Lai Fung Group”
means Lai Fung and its subsidiaries;
“Lai Fung Offer Shares”
means the Lai Fung Shares which are subject to the Lai Fung Share Offer;
“Lai Fung Offers”
means the Lai Fung Share Offer and the Lai Fung Option Offer;
“Lai Fung Option Offer” means the possible offer to be made by HSBC on behalf of the Offeror to the Lai Fung Optionholders in compliance with Rule 13 of the Takeovers Code to cancel all the Lai Fung Options;
“Lai Fung Option Offer Price”
means, in relation to any Lai Fung Option, the price at which the Lai Fung Option Offer will be made;
“Lai Fung Optionholders”
means the holders of the Lai Fung Options;
“Lai Fung Options”
means the share options, each relating to one Lai Fung Share, granted and outstanding under the Lai Fung Share Option Schemes from time to time, whether such options vested or not;
“Lai Fung Share Offer” means the possible unconditional mandatory general cash offer to be made by HSBC on behalf of the Offeror to acquire all of the Lai Fung Shares (other than those already owned or agreed to be acquired by LSD, the Offeror, eSun or their respective subsidiaries);

– 5 –

DEFINITIONS

“Lai Fung Share Offer Closing means the date to be stated in the Lai Fung Composite Date” Document as the first offer closing date of the Lai Fung Share Offer or any subsequent offer closing date in the event that the Lai Fung Share Offer is extended or revised in accordance with the Takeovers Code;
“Lai Fung Share Offer Price” means HK$5.22 per Lai Fung Offer Share;
“Lai Fung Share Option Schemes” means the share option schemes adopted by Lai Fung on 21 August 2003 and 18 December 2012, respectively;
“Lai Fung Shareholders” means the holders of the Lai Fung Shares;
“Lai Fung Shares”
means the shares in the capital of Lai Fung;
“Last Trading Date” means 25 May 2018, being the last trading day prior to the publication of the Joint Announcement;
“Latest Practicable Date”
means 20 July 2018;
“Listing Rules”
means the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited;
“LR associate”
has the meaning ascribed to “associate” under Chapter 14A of the Listing Rules;
“LSD” or “the Company”
means Lai Sun Development Company Limited (麗新發展有限公司), a company incorporated in Hong Kong with limited liability under the Companies Ordinance, the issued shares of which are listed and traded on the Main Board of the Stock Exchange (Stock Code: 488);
“LSD Independent Board Committee”
means the independent board committee of LSD established by the Board pursuant to the Listing Rules to make a recommendation to the Non-Connected LSD Shareholders in respect of the making of the Share Offers to the Yu Shareholders as a connected transaction of LSD subject to the independent shareholders’ approval requirement under Chapter 14A of the Listing Rules. Such independent board committee comprises all the independent non-executive Directors;
“LSD Shareholders”

means the holders of the LSD Shares;

– 6 –

DEFINITIONS

“LSD Shares” means the shares in the capital of LSD;
“LSG” means Lai Sun Garment (International) Limited (麗新製衣國際有限公司), a company incorporated in Hong Kong with limited liability under the Companies Ordinance, the issued shares of which are listed and traded on the Main Board of the Stock Exchange (Stock Code: 191);
“LSG Shareholders” means the holders of the LSG Shares;
“LSG Shares” means the shares in the capital of LSG;
“Madam U” means Madam U Po Chu, an executive director of LSG and Lai Fung, a non-executive director of LSD and eSun and Dr. Peter Lam’s mother;
“MAGHL” means Media Asia Group Holdings Limited (寰亞傳媒集團有限公司), an exempted company incorporated in the Cayman Islands and continued in Bermuda with limited liability, the issued shares of which are listed and traded on the GEM of the Stock Exchange (Stock Code: 8075);
“MAGHL Group” means MAGHL and its subsidiaries;
“Mr. FA Chew” means Mr. Chew Fook Aun, an Offeror Director, a deputy chairman and an executive director of LSG, the deputy chairman and an executive director of LSD, an executive director of eSun and an executive director and the chairman of Lai Fung;
“Mr. Julius Lau” means Mr. Lau Shu Yan, Julius, an Offeror Director and the chief executive officer and an executive director of LSD;
“Mr. Lester Lam” means Mr. Lam Hau Yin, Lester, an Offeror Director, an executive director of LSG, an executive director of LSD, an executive director of eSun and the chief executive officer and an executive director of Lai Fung;

– 7 –

DEFINITIONS

“Non-Connected LSD
Shareholders”
means, in respect of the making of one or more of the Offers to any connected person of LSD which is a connected transaction of LSD subject to the independent shareholders’ approval requirement under Chapter 14A of the Listing Rules, the LSD Shareholders other than (a) such connected person and his LR associates and (b) any other LSD Shareholder who has a material interest in such connected transaction and will be required under the Listing Rules to abstain from voting on the resolution to be proposed at the general meeting of LSD to approve such connected transaction. On the basis of their disclosures of interests in LSG, LSD, eSun and Lai Fung as at the Latest Practicable Date, the making of the Share Offers to the Yu Shareholders is such connected transaction and the Yu Shareholders and their LR associates fall within (a) of this definition in respect of such connected transaction. The Board is not aware of any LSD Shareholder falling within (b) of this definition in respect of such connected transaction;
“Non-Connected LSG means, in respect of the making of one or more of the Offers to Shareholders” any connected person of LSG which is a connected transaction of LSG subject to the independent shareholders’ approval requirement under Chapter 14A of the Listing Rules, the LSG Shareholders other than (a) such connected person and his LR associates and (b) any other LSG Shareholder who has a material interest in such connected transaction and will be required under the Listing Rules to abstain from voting on the resolution to be proposed at the general meeting of LSG to approve such connected transaction. On the basis of their disclosures of interests in LSG, LSD, eSun and Lai Fung as at the Latest Practicable Date, the making of the Share Offers to the Yu Shareholders is such connected transaction and the Yu Shareholders and their LR associates fall within (a) of this definition in respect of such connected transaction;
“notice of compulsory acquisition”
means any notice of compulsory acquisition given pursuant to Section 102(1) or Section 103(1) of the Companies Act;
“Offeror”

means Transtrend Holdings Limited, a company incorporated in Hong Kong with limited liability, being a wholly-owned subsidiary of LSD;

“Offeror Board”

means the board of directors of the Offeror;

– 8 –

DEFINITIONS

“Offeror Concert Parties”	means the parties acting in concert with the Offeror, as
	determined in accordance with the Takeovers Code (except
	for members of the HSBC Group which are exempt principal
	traders and/or exempt fund managers in their capacity as
	such, in each case recognised by the Executive as such for the
	purposes of the Takeovers Code), including, for the avoidance
	of doubt, (a) LSD, being the sole shareholder of the Offeror, (b)
	LSG, being a holding company of LSD, and (c) Dr. Peter Lam,
	being their ultimate controlling shareholder;
“Offeror Directors”	means the directors of the Offeror;
“Offers”	means the eSun Offers and the Lai Fung Offers;
“percentage ratio”	has the meaning ascribed to it under the Listing Rules;
“PRC”	means the People’s Republic of China (for the purpose of
	this circular, excluding Hong Kong, the Macao Special
	Administrative Region and Taiwan);
“public”	has the meaning ascribed to it under the Listing Rules;
“Red Sun”	means Red Sun Capital Limited, a corporation licensed to
	carry out Type 1 (dealing in securities) and Type 6 (advising
	on corporate finance) regulated activities as defined under the
	SFO;
“SAIF Partners”	means SAIF Partners IV LP, which is indirectly controlled by
	Mr. Andrew Y. Yan, a non-executive director of eSun;
“SFC”	means the Securities and Futures Commission;
“SFO”	means the Securities and Futures Ordinance (Chapter 571 of
	the laws of Hong Kong);
“Share Offers”	means the eSun Share Offer and the Lai Fung Share Offer;
“Stock Exchange”	means The Stock Exchange of Hong Kong Limited;
“subsidiaries”	has the meaning ascribed to it under the Listing Rules;
“Takeovers Code”	means the Hong Kong Code on Takeovers and Mergers;
“Yu Shareholders”	means Mr. Yu Cheuk Yi and Ms. Yu Siu Yuk;

– 9 –

DEFINITIONS

“VSA Resolution” means the ordinary resolution to be proposed at the General Meeting to approve the Offers as a very substantial acquisition; and “%” means per cent.

– 10 –

LETTER FROM THE BOARD

23 July 2018

==> picture [217 x 104] intentionally omitted <==

Executive Directors:

Dr. Lam Kin Ngok, Peter (Chairman) Mr. Chew Fook Aun (Deputy Chairman) Mr. Lau Shu Yan, Julius (Chief Executive Officer) Mr. Lam Hau Yin, Lester

Registered Office: 11th Floor Lai Sun Commercial Centre 680 Cheung Shan Wan Road Kowloon Hong Kong

Non-executive Directors:

Dr. Lam Kin Ming Madam U Po Chu

Independent Non-executive Directors:

Mr. Ip Shu Kwan, Stephen Mr. Lam Bing Kwan Mr. Leung Shu Yin, William

To the LSD Shareholders

Dear Sir or Madam,

(1) POSSIBLE VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION

(4) NOTICE OF GENERAL MEETING

– 11 –

LETTER FROM THE BOARD

1. INTRODUCTION

Reference is made to the Joint Announcement. This circular contains, (i) further details of the Offers; (ii) a letter from Red Sun in relation to the Offers; (iii) certain financial information of the Group; (iv) certain financial information of the eSun Group; (v) certain financial information of the Lai Fung Group; (vi) notice of the General Meeting; and (vii) other information required under the Listing Rules.

PART (1): CONDITIONAL VOLUNTARY GENERAL CASH OFFER BY HSBC ON BEHALF OF THE OFFEROR, A WHOLLY-OWNED SUBSIDIARY OF LSD, TO ACQUIRE ALL OF THE ISSUED SHARES OF eSUN (OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY LSD, THE OFFEROR OR THEIR RESPECTIVE SUBSIDIARIES) AND TO CANCEL ALL THE OUTSTANDING SHARE OPTIONS OF eSUN

2. INTRODUCTION TO THE eSUN OFFERS

HSBC, on behalf of the Offeror, a wholly-owned subsidiary of LSD, firmly intends to make a conditional voluntary general cash offer (i) to acquire all the eSun Shares not already owned or agreed to be acquired by LSD, the Offeror or their respective subsidiaries and (ii) to cancel all the outstanding eSun Options. For the avoidance of doubt, the eSun Offer Shares include eSun Shares which are owned by the Offeror Concert Parties (other than those already owned or agreed to be acquired by LSD, the Offeror or their respective subsidiaries).

The primary purpose of the eSun Offers is to increase the Offeror’s shareholding in eSun in order to consolidate the financial results of the eSun Group. The Offeror intends to privatise eSun through the eSun Offers only if it acquires the power of compulsory acquisition under Section 102(1) (or Section 103(1)) of the Companies Act. The Offeror will acquire such power of compulsory acquisition only if the level of acceptances of the eSun Share Offer (or the Offeror’s holding of eSun Shares) reaches the prescribed thresholds under Section 102(1) (or Section 103(1)) of the Companies Act and the Offeror is allowed to do so under Rule 2.11 of the Takeovers Code. In the event that the Offeror does not effect the compulsory acquisition of the remaining eSun Offer Shares, whether by reason of the level of acceptances of the eSun Share Offer not reaching the prescribed thresholds under the Companies Act or the Takeovers Code or otherwise, the Offeror may take such steps as are necessary to ensure, or procure eSun to take such steps as are necessary to ensure, that eSun maintains an adequate public float so as to comply with the applicable requirements under the Listing Rules. Further details are set out in section 9 “Possible compulsory acquisition and withdrawal of listing of eSun Shares” below.

3. THE eSUN SHARE OFFER

The eSun Share Offer will be made by HSBC on behalf of the Offeror in compliance with the Takeovers Code on the basis set out below.

For each eSun Offer Share .................................................................................HK$1.30 in cash

– 12 –

LETTER FROM THE BOARD

The eSun Share Offer Price was determined after taking into account (i) the historical trading prices of eSun Shares as detailed in section 4 “The eSun Share Offer Price” below; (ii) eSun’s financial performance including the changes in the net asset value per eSun Share attributable to owners of eSun from HK$6.92 per eSun Share as at 31 July 2016 to HK$6.11 per eSun Share as at 31 July 2017 to HK$6.56 per eSun Share as at 31 January 2018; and (iii) the trading multiples of comparable companies which consisted of price-to-book ratios of comparable companies listed on the Stock Exchange, in each case based on their market capitalisation as at the Last Trading Date and their latest published consolidated net asset value attributable to shareholders.

4. THE eSUN SHARE OFFER PRICE

The eSun Share Offer Price of HK$1.30 per eSun Offer Share under the eSun Share Offer represents:

(a) a discount of approximately 3.7% to the closing price of HK$1.35 per eSun Share as quoted on the Stock Exchange on the Last Trading Date;
(b) a discount of approximately 5.1% to the average closing price of HK$1.37 per eSun Share, being the average closing price of eSun Shares as quoted on the Stock Exchange for the 5 trading days immediately prior to and including the Last Trading Date;
(c) a discount of approximately 3.7% to the average closing price of HK$1.35 per eSun Share, being the average closing price of eSun Shares as quoted on the Stock Exchange for the 10 trading days immediately prior to and including the Last Trading Date;
(d) a premium of approximately 3.2% over the average closing price of HK$1.26 per eSun Share, being the average closing price of eSun Shares as quoted on the Stock Exchange for the 30 trading days immediately prior to and including the Last Trading Date;
(e) a premium of approximately 0.8% over the average closing price of HK$1.29 per eSun Share, being the average closing price of eSun Shares as quoted on the Stock Exchange for the 60 trading days immediately prior to and including the Last Trading Date;
(f) a discount of approximately 2.3% to the average closing price of HK$1.33 per eSun Share, being the average closing price of eSun Shares as quoted on the Stock Exchange for the 180 trading days immediately prior to and including the Last Trading Date;
(g) a premium of approximately 4.0% over the closing price of HK$1.25 per eSun Share on the Latest Practicable Date;
(h) a discount of approximately 78.7% to the audited consolidated net asset value attributable to owners per eSun Share of approximately HK$6.11 as at 31 July 2017, based on the total number of issued eSun Shares as at 31 July 2017; and

– 13 –

LETTER FROM THE BOARD

(i) a discount of approximately 80.2% to the unaudited consolidated net asset value attributable to owners per eSun Share of approximately HK$6.56 as at 31 January 2018, based on the total number of issued eSun Shares as at 31 January 2018.

As shown in the audited consolidated statement of financial position as at 31 July 2017 and the unaudited consolidated statement of financial position as at 31 January 2018 of eSun, a significant portion of eSun’s assets consisted of property, plant and equipment, properties under development, investment properties and completed properties for sale. A valuation report on the property interests of the eSun Group is in Appendix VIII to this circular pursuant to Chapter 5 of the Listing Rules and will be contained in the eSun Composite Document pursuant to Rule 11 of the Takeovers Code. The value of those assets as stated in such consolidated statements of financial position or such property valuation report may or may not reflect their market value as at the date of this circular or the eSun Composite Document.

5. HIGHEST AND LOWEST CLOSING PRICES OF eSUN SHARES

During the six-month period ended the Last Trading Date, the highest closing price of eSun Shares as quoted on the Stock Exchange was HK$1.46 per eSun Share on 26 January 2018 and the lowest closing price of eSun Shares as quoted on the Stock Exchange was HK$1.18 per eSun Share on 10 May 2018, 4 May 2018, 3 May 2018, 27 April 2018, 26 April 2018 and 25 April 2018.

6. THE eSUN OPTION OFFER AND THE eSUN OPTION OFFER PRICE

As at the Latest Practicable Date, there were 32,850,665 eSun Options (all of which vested on their respective dates of grant), each giving the eSun Optionholder the right to subscribe for one new eSun Share. The exercise of such eSun Options in full would result in the issue of 32,850,665 new eSun Shares, representing approximately 2.20% of the issued share capital of eSun as at the Latest Practicable Date and approximately 2.15% of the issued share capital of eSun as enlarged by the issue of such new eSun Shares.

In accordance with Rule 13 of the Takeovers Code, the Offeror will make (or procure to be made on its behalf) an appropriate offer to all the eSun Optionholders for the cancellation of every eSun Option, whether vested or unvested, by way of the eSun Option Offer.

– 14 –

LETTER FROM THE BOARD

Under the eSun Option Offer, the Offeror will, in accordance with Rule 13 of the Takeovers Code, offer the eSun Optionholders the eSun Option Offer Price (which is the “see-through” price, being the eSun Share Offer Price minus the exercise price of the relevant eSun Option) in cash for the cancellation of each eSun Option they hold, whether vested or unvested, provided that if the exercise price of any eSun Option is equal to or greater than the eSun Share Offer Price (such that the “see-through” price is zero or negative), the eSun Option Offer Price will be a nominal amount of HK$0.01 for every 100 eSun Options (or, if lesser, any part thereof).

		Number of eSun Options
eSun Option	eSun Option Offer	(each carrying the right	Exercise period
exercise price	Price per eSun Share	to subscribe for	of the eSun
per eSun Share	(unless otherwise indicated)	one new eSun Share)	Options
(HK$)	(HK$)		(dd/mm/yyyy)
0.728	0.572	1,800,000	21/01/2015 to
			20/01/2025
0.920	0.380	6,216,060	05/06/2012 to
			04/06/2022
1.360	0.01 for every 100	400,000	19/01/2018 to
	eSun Options		18/01/2028
	(or, if lesser, any part
	thereof)
1.612	0.01 for every 100	24,434,605	18/01/2013 to
	eSun Options		17/01/2023
	(or, if lesser, any part
	thereof)

Further information on the eSun Option Offer will be set out in a letter to the eSun Optionholders, which will be despatched at or around the same time as the despatch of the eSun Composite Document.

– 15 –

LETTER FROM THE BOARD

If any eSun Option is exercised in accordance with the terms of the relevant eSun Share Option Scheme prior to the close of the eSun Share Offer, any eSun Shares issued as a result of such exercise will be subject to the eSun Share Offer.

Pursuant to the terms of the eSun Share Option Schemes, the eSun Optionholders will be entitled to exercise the eSun Options in full (to the extent not already exercised) at any time before the close of the eSun Share Offer and any eSun Option not so exercised will lapse (following which the holder of such eSun Option will not be able to accept the eSun Option Offer in respect of such eSun Option). However, in the case of any eSun Option granted under the share option scheme adopted by eSun on 11 December 2015 (being the 400,000 eSun Options with the exercise price of HK$1.360 per eSun Share), if, before the close of the eSun Share Offer, the Offeror becomes entitled to exercise rights of compulsory acquisition of the eSun Offer Shares and gives its notice of compulsory acquisition, such eSun Option will remain exercisable (provided that its option period has not yet expired) until one (1) month from the date of such notice and, to the extent that such eSun Option has not been so exercised, will lapse.

7. CONDITIONS TO THE eSUN OFFERS

The eSun Share Offer is subject to the fulfilment of the following Conditions:

(a) the approval:
(i) by the Independent LSD Shareholders of the Offers as a very substantial acquisition of LSD; and
(ii) by the Non-Connected LSD Shareholders of the making of one or more of the Offers to any connected person of LSD which is a connected transaction of LSD subject to the independent shareholders’ approval requirement under Chapter 14A of the Listing Rules,

in each case, in accordance with the Listing Rules;

(b) the approval:
(i) by the Independent LSG Shareholders of the Offers as a very substantial acquisition of LSG; and
(ii) by the Non-Connected LSG Shareholders of the making of one or more of the Offers to any connected person of LSG which is a connected transaction of LSG subject to the independent shareholders’ approval requirement under Chapter 14A of the Listing Rules,

in each case, in accordance with the Listing Rules;

– 16 –

LETTER FROM THE BOARD

(c) valid acceptances of the eSun Share Offer being received (and not, where permitted, withdrawn) by 4:00 p.m. on the eSun Share Offer Closing Date in respect of such number of eSun Shares which, together with eSun Shares already (directly or indirectly) held or agreed to be acquired by LSD, the Offeror or their respective subsidiaries, would result in the Offeror and LSD together with their respective subsidiaries holding in aggregate more than 50% of the voting rights in eSun;
(d) the eSun Shares remaining listed and traded on the Main Board of the Stock Exchange up to and including the eSun Share Offer Closing Date (save for any temporary suspension of trading of the eSun Shares pending any announcement in connection with the Offers) and no indication being received on or before the eSun Share Offer Closing Date from the SFC and/or the Stock Exchange to the effect that the listing of the eSun Shares on the Stock Exchange is or is likely to be withdrawn or suspended;
(e) the Lai Fung Shares remaining listed and traded on the Main Board of the Stock Exchange up to and including the Lai Fung Share Offer Closing Date (save for any temporary suspension of trading of the Lai Fung Shares pending any announcement in connection with the Offers) and no indication being received on or before the Lai Fung Share Offer Closing Date from the SFC and/or the Stock Exchange to the effect that the listing of the Lai Fung Shares on the Stock Exchange is or is likely to be withdrawn or suspended;
(f) no event having occurred which would make any of the Offers, the acquisition of any of the eSun Offer Shares or the cancellation of the eSun Options under the eSun Offers or the acquisition of any of the Lai Fung Offer Shares or the cancellation of the Lai Fung Options under the Lai Fung Offers void, unenforceable or illegal, would prohibit the implementation of any of the Offers or would impose any material conditions or obligations with respect to any of the Offers or their implementation in accordance with their respective terms;
(g) all necessary consents (including consents from the relevant lenders) in connection with the Offers and/or the possible withdrawal of the listing of the eSun Shares from the Stock Exchange which may be required under any existing contractual or other obligations of eSun being obtained and remaining in effect;
(h) no government, court or governmental, quasi-governmental, statutory or regulatory body or agency in Hong Kong, Bermuda, the Cayman Islands or any other jurisdiction having taken or instituted any action, proceeding, suit, investigation or enquiry (or enacted, made or proposed, and there not continuing to be outstanding, any statute, regulation, demand or order) that would make any of the Offers or their implementation in accordance with their respective terms void, unenforceable, illegal or impracticable (or which would impose any material conditions or obligations with respect to any of the Offers or their implementation in accordance with their respective terms);

– 17 –

LETTER FROM THE BOARD

(i) since the Announcement Date, there having been no material adverse change in the business, assets, financial or trading position or the prospects or conditions (whether operational, legal or otherwise) of the eSun Group or the Lai Fung Group to an extent which is material in the context of the eSun Group, or, as the case may be, the Lai Fung Group, taken as a whole; and
(j) there having, since the Announcement Date, not been instituted any, and there remaining no outstanding, litigation, arbitration proceedings, prosecution or other legal proceedings to which any member of the eSun Group or the Lai Fung Group is a party (whether as plaintiff, defendant or otherwise), and no such proceedings having, since the Announcement Date, been threatened in writing against any such member (and no investigation by any government, court or governmental, quasi-governmental, statutory or regulatory body or agency in Hong Kong, Bermuda, the Cayman Islands or any other jurisdiction against or in respect of any such member or the business carried on by any such member having, since the Announcement Date, been threatened in writing, announced or instituted or remaining outstanding against or in respect of any such member), in each case, which is material and adverse in the context of the eSun Group, or, as the case may be, the Lai Fung Group, taken as a whole or in the context of any of the Offers.

On the basis of the disclosures of interests in the LSG Shares, the LSD Shares, the eSun Shares and the Lai Fung Shares as at the Latest Practicable Date, only one connected transaction of LSD falls within paragraph (ii) of Condition (a). That connected transaction is the making of the Share Offers to the Yu Shareholders.

The Offeror reserves the right to waive, in whole or in part, all or any of the Conditions (other than Conditions (a), (b) and (c)). As at the Latest Practicable Date, the Offeror was not aware of any consent required under Condition (g) from any person who is not a lender.

As at the Latest Practicable Date, only Condition (g) had been fulfilled.

The eSun Option Offer will be subject to and conditional upon the eSun Share Offer becoming or being declared unconditional in all respects.

Pursuant to Note 2 to Rule 30.1 of the Takeovers Code, the Offeror should not invoke any of the Conditions so as to cause the eSun Offers to lapse unless the circumstances which give rise to the right to invoke such Condition are of material significance to the Offeror in the context of the eSun Offers.

Pursuant to Rule 15.3 of the Takeovers Code, where the eSun Offers become or are declared unconditional (whether as to acceptances or in all respects), they should remain open for acceptances for not less than 14 days thereafter.

WARNING: The eSun Offers are subject to the Conditions being fulfilled or waived. Accordingly, the eSun Offers may or may not become unconditional. Shareholders and holders of options and other securities of and potential investors in LSG, LSD, eSun and Lai Fung should therefore exercise caution when dealing in the securities of LSG, LSD, eSun and Lai Fung. Persons who are in doubt as to the action they should take should consult their stockbroker, bank manager, solicitor or other professional advisers.

– 18 –

LETTER FROM THE BOARD

8. VALUE OF THE eSUN OFFERS

As at the Latest Practicable Date, there were (i) 1,491,854,598 eSun Shares in issue, of which 551,040,186 eSun Shares were held by the Offeror, (ii) 940,814,412 eSun Offer Shares and (iii) 32,850,665 eSun Options (all of which vested on their respective dates of grant) entitling the eSun Optionholders to subscribe for an aggregate of 32,850,665 eSun Shares at an exercise price ranging from HK$0.728 to HK$1.612 per eSun Share.

On the assumption that the number of eSun Shares will not change (whether by way of any exercise of the eSun Options or otherwise) and the number of eSun Options will not change, the value of the eSun Share Offer is approximately HK$1,223.1 million and the total amount required to satisfy the cancellation of all eSun Options is approximately HK$3.4 million. On this basis, in aggregate, the eSun Offers are valued at approximately HK$1,226.5 million.

On the assumption that no further eSun Options will be granted and all of the eSun Options will be exercised before the close of the eSun Share Offer, eSun will have to issue 32,850,665 new eSun Shares, representing approximately 2.15% of the enlarged issued share capital of eSun, upon the exercise of the eSun Options. On this basis, there will be 973,665,077 eSun Offer Shares (including the new eSun Shares issued as a result of the exercise of the eSun Options) and the value of the eSun Share Offer will be approximately HK$1,265.8 million. In this case, no amount will be payable by the Offeror under the eSun Option Offer.

9. POSSIBLE COMPULSORY ACQUISITION AND WITHDRAWAL OF LISTING OF eSUN SHARES

Pursuant to Section 102(1) of the Companies Act, if the eSun Share Offer has, within four (4) months after the making of the eSun Share Offer (that is, the despatch of the eSun Composite Document), been approved (in this case, by way of accepting the eSun Share Offer) by the holders of not less than nine-tenths in value of the eSun Offer Shares, provided that such holders are not less than three-fourths in number of the holders of eSun Offer Shares, the Offeror may, at any time within two (2) months beginning with the date on which such approval is obtained, give notice of compulsory acquisition to any dissenting eSun Shareholder that it desires to acquire the eSun Shares held by such dissenting eSun Shareholder. If such notice of compulsory acquisition is given, the Offeror shall, unless the Supreme Court of Bermuda orders otherwise, be entitled and bound to acquire the eSun Shares held by the dissenting eSun Shareholders on the same terms as other eSun Shares are acquired under the eSun Share Offer. Any dissenting eSun Shareholder may apply to the Supreme Court of Bermuda to object to the proposed compulsory acquisition within one (1) month from the date on which the notice of compulsory acquisition is given.

For the avoidance of doubt, for the purposes of ascertaining whether the level of acceptances of the eSun Share Offer reaches the prescribed thresholds under Section 102(1) of the Companies Act described above, acceptances by the Offeror Concert Parties (other than LSD, the Offeror or their respective nominees or subsidiaries) will be included.

– 19 –

LETTER FROM THE BOARD

There is another right of compulsory acquisition under the Companies Act. Pursuant to Section 103(1) of the Companies Act, the holders of not less than 95% of the issued eSun Shares may give a notice of compulsory acquisition to the remaining eSun Shareholders of such holders’ intention to acquire their eSun Shares. When such notice of compulsory acquisition is given, such holders will be entitled and bound to acquire the eSun Shares from the remaining eSun Shareholders. If the Offeror acquires further eSun Shares (whether pursuant to the eSun Share Offer or otherwise) such that it holds not less than 95% of the issued eSun Shares, the Offeror will be entitled to give such notice of compulsory acquisition.

Pursuant to Rule 2.11 of the Takeovers Code, except with the consent of the Executive, where the Offeror seeks to acquire or privatise eSun by means of the eSun Share Offer and the use of compulsory acquisition rights, such rights may only be exercised if, in addition to satisfying any requirements imposed by the Companies Act, acceptances of the eSun Share Offer in respect of the Disinterested eSun Shares and purchases of the Disinterested eSun Shares made by the Offeror and the Offeror Concert Parties during the period of four (4) months after the posting of the eSun Composite Document total 90% of the Disinterested eSun Shares.

If the level of acceptances of the eSun Share Offer (or the Offeror’s holding of eSun Shares) reaches the prescribed thresholds under Section 102(1) (or Section 103(1)) of the Companies Act and the Offeror is allowed to do so under Rule 2.11 of the Takeovers Code, the Offeror will exercise the power of compulsory acquisition under Section 102(1) (or Section 103(1)) of the Companies Act.

Pursuant to Rule 15.6 of the Takeovers Code, since the Offeror will exercise, if it arises, the power of compulsory acquisition under the Companies Act to compulsorily acquire those eSun Shares not already acquired by LSD, the Offeror or their respective subsidiaries under the eSun Share Offer, the eSun Share Offer may not remain open for acceptance for more than four (4) months from the posting of the eSun Composite Document unless the Offeror has by that time become entitled to exercise such power of compulsory acquisition available to it under the Companies Act, in which event the Offeror must do so without delay.

If the level of acceptances of the eSun Share Offer (or the Offeror’s holding of eSun Shares) reaches the prescribed thresholds under Section 102(1) (or Section 103(1)) of the Companies Act and Rule 2.11 of the Takeovers Code permits a compulsory acquisition, and if the Offeror proceeds with the exercise of such compulsory acquisition rights and the privatisation of eSun, eSun will apply for the withdrawal of listing of the eSun Shares from the Stock Exchange pursuant to Rule 6.15 of the Listing Rules and a suspension of dealings in the eSun Shares from the close of the eSun Share Offer up to the withdrawal of listing of eSun Shares from the Stock Exchange.

In the event that the Offeror does not effect the compulsory acquisition of the remaining eSun Offer Shares, whether by reason of the level of acceptances of the eSun Share Offer not reaching the prescribed thresholds under the Companies Act or the Takeovers Code or otherwise, the Offeror may take such steps as are necessary to ensure, or procure eSun to take such steps as are necessary to ensure, that eSun maintains an adequate public float so as to comply with the applicable requirements under the Listing Rules.

– 20 –

LETTER FROM THE BOARD

The Stock Exchange has stated that if, upon the close of the eSun Share Offer, less than the minimum prescribed percentage applicable to eSun, being 25% of the issued eSun Shares, are held by the public, or if the Stock Exchange believes that:

a false market exists or may exist in the trading of the eSun Shares; or
that there are insufficient eSun Shares in public hands to maintain an orderly market,

then the Stock Exchange will consider exercising its discretion to suspend dealings in the eSun Shares. The Offeror Directors have jointly and severally undertaken to the Stock Exchange to take appropriate steps to ensure that sufficient public float exists in the eSun Shares after the close of the eSun Offers as long as eSun remains listed on the Stock Exchange.

10. SHAREHOLDING STRUCTURE OF eSUN

As at the Latest Practicable Date, the authorised share capital of eSun was HK$1,250,000,000 divided into 2,500,000,000 eSun Shares and the issued share capital of eSun was HK$745,927,299 divided into 1,491,854,598 eSun Shares. There are no other classes of shares of eSun in issue.

The following is a simplified structure chart summarising the shareholding relationship among LSG, LSD, the Offeror, eSun and Lai Fung as at the Latest Practicable Date:

==> picture [136 x 241] intentionally omitted <==

----- Start of picture text -----

LSG
56.10%
LSD
100%
The Offeror
36.94%
eSun
50.60%
Lai Fung
----- End of picture text -----

– 21 –

LETTER FROM THE BOARD

The table below sets out the shareholding structure of eSun (1) as at the Latest Practicable Date and (2) immediately after completion of the eSun Offers and the Offeror’s compulsory acquisition of the remaining eSun Offer Shares in the event that (a) the level of acceptances of the eSun Share Offer (or the Offeror’s holding of eSun Shares) reaches the prescribed thresholds under Section 102(1) (or Section 103(1)) of the Companies Act and Rule 2.11 of the Takeovers Code and (b) the Offeror exercises rights of compulsory acquisition (on the assumption that there will be no change in the shareholding structure of eSun (whether by way of any exercise of the eSun Options or otherwise) before such completion):

			Immediately	Immediately
			after completion of the eSun
			Offers and the Offeror’s
	As at the		compulsory acquisition of the
	Latest Practicable Date		remaining eSun Offer Shares
		As a		As a
		percentage of		percentage of
	No. of eSun	the issued share	No. of eSun	the issued share
	Shares	capital of eSun	Shares	capital of eSun
Offeror	551,040,186	36.94%	1,491,854,598	100%
Offeror Concert Parties,
whose eSun Shares
form part of the eSun
Offer Shares and do
not form part of the
Disinterested eSun
Shares:
— Dr. Peter Lam_(Note 1)_	2,794,443	0.19%	0	0%
— Mr. Lester Lam_(Note 2)_	2,794,443	0.19%	0	0%
— Mr. FA Chew_(Note 3)_	0	0%	0	0%
— HSBC_(Note 4)_	0	0%	0	0%
Aggregate number of
eSun Shares held by
the Offeror and the
Offeror Concert Parties	556,629,072	37.32%	1,491,854,598	100%
Holders of Disinterested
eSun Shares (Note 5)
— Yu Shareholders	149,080,000	9.99%	0	0%
— SAIF Partners	150,000,000	10.05%	0	0%
— Other holders of
Disinterested
eSun Shares	636,145,526	42.64%	0	0%
Total number of
eSun Shares	1,491,854,598	100%	1,491,854,598	100%
Total number of
eSun Offer Shares	940,814,412	63.06%	—	—

– 22 –

LETTER FROM THE BOARD

Notes:

Dr. Peter Lam, who is an Offeror Director, a deputy chairman and an executive director of LSG, the chairman and an executive director of LSD and the ultimate controlling shareholder of LSG, LSD and the Offeror, is acting in concert with the Offeror. As at the Latest Practicable Date, Dr. Peter Lam was interested in 2,794,443 eSun Shares and 1,243,212 eSun Options (other than through his interests in LSG and LSD).
Mr. Lester Lam, who is an Offeror Director and an executive director of LSG and LSD, is acting in concert with the Offeror. As at the Latest Practicable Date, Mr. Lester Lam was interested in 2,794,443 eSun Shares and 12,432,121 eSun Options (other than through his interests in LSG and LSD).
Mr. FA Chew, who is an Offeror Director, a deputy chairman and an executive director of LSG and the deputy chairman and an executive director of LSD, is acting in concert with the Offeror. As at the Latest Practicable Date, Mr. FA Chew was interested in 6,216,060 eSun Options (other than through his interests in LSG and LSD).
HSBC is the financial adviser to LSD and the Offeror in respect of the Offers. Accordingly, HSBC and relevant members of the HSBC Group which hold eSun Shares on an own account or discretionary managed basis are presumed to be acting in concert with the Offeror in relation to eSun in accordance with class 5 of the definition of “acting in concert” under the Takeovers Code (except in respect of eSun Shares held by exempt principal traders or exempt fund managers, in each case recognised by the Executive as such for the purpose of the Takeovers Code).
Based on the relevant eSun Shareholders’ disclosures of interests in eSun as at the Latest Practicable Date.

– 23 –

LETTER FROM THE BOARD

The table below sets out the shareholding structure of eSun (1) as at the Latest Practicable Date; (2) as at the Latest Practicable Date had all the eSun Options been exercised on or before the Latest Practicable Date; and (3) immediately after completion of the eSun Offers and the Offeror’s compulsory acquisition of the remaining eSun Offer Shares in the event that (a) the level of acceptances of the eSun Share Offer (or the Offeror’s holding of eSun Shares) reaches the prescribed thresholds under Section 102(1) (or Section 103(1)) of the Companies Act and Rule 2.11 of the Takeovers Code and (b) the Offeror exercises rights of compulsory acquisition (on the assumption that no further eSun Options will be granted after the Latest Practicable Date, that all of the eSun Options will be exercised after the Latest Practicable Date but before the close of the eSun Share Offer and that there will be no other change in the shareholding structure of eSun before such completion):

			As the	As the	Immediately	Immediately
			Latest Practicable Date had		after completion of the
			all the eSun Options been		eSun Offers and the Offeror’s
	As at the		exercised on or before		compulsory acquisition of the
	Latest Practicable Date		the Latest Practicable Date		remaining eSun Offer Shares
		As a		As a		As a
		percentage of		percentage of		percentage of
	No. of eSun	the issued share	No. of eSun	the issued share	No. of eSun	the issued share
	Shares	capital of eSun	Shares	capital of eSun	Shares	capital of eSun
Offeror	551,040,186	36.94%	551,040,186	36.14%	1,524,705,263	100%
Offeror Concert Parties,
whose eSun Shares form
part of the eSun Offer
Shares and do not form
part of the Disinterested
eSun Shares:
— Dr. Peter Lam_(Note 1)_	2,794,443	0.19%	4,037,655	0.26%	0	0%
— Mr. Lester Lam_(Note 2)_	2,794,443	0.19%	15,226,564	1.00%	0	0%
— Mr. FA Chew_(Note 3)_	0	0%	6,216,060	0.41%	0	0%
— HSBC_(Note 4)_	0	0%	0	0%	0	0%
Aggregate number of
eSun Shares held by the
Offeror and the Offeror
Concert Parties	556,629,072	37.32%	576,520,465	37.81%	1,524,705,263	100%
Holders of Disinterested
eSun Shares (Note 5)
— Yu Shareholders	149,080,000	9.99%	149,080,000	9.78%	0	0%
— SAIF Partners	150,000,000	10.05%	150,000,000	9.84%	0	0%
— Other holders of
Disinterested
eSun Shares	636,145,526	42.64%	649,104,798	42.57%	0	0%
Total number of eSun
Shares	1,491,854,598	100%	1,524,705,263	100%	1,524,705,263	100%
Total number of eSun
Offer Shares	940,814,412	63.06%	973,665,077	63.86%	—	—

– 24 –

LETTER FROM THE BOARD

Notes:

Dr. Peter Lam, who is an Offeror Director, a deputy chairman and an executive director of LSG, the chairman and an executive director of LSD and the ultimate controlling shareholder of LSG, LSD and the Offeror, is acting in concert with the Offeror. As at the Latest Practicable Date, Dr. Peter Lam was interested in 2,794,443 eSun Shares and 1,243,212 eSun Options (other than through his interests in LSG and LSD).
Mr. Lester Lam, who is an Offeror Director and an executive director of LSG and LSD, is acting in concert with the Offeror. As at the Latest Practicable Date, Mr. Lester Lam was interested in 2,794,443 eSun Shares and 12,432,121 eSun Options (other than through his interests in LSG and LSD).
Mr. FA Chew, who is an Offeror Director, a deputy chairman and an executive director of LSG and the deputy chairman and an executive director of LSD, is acting in concert with the Offeror. As at the Latest Practicable Date, Mr. FA Chew was interested in 6,216,060 eSun Options (other than through his interests in LSG and LSD).
HSBC is the financial adviser to LSD and the Offeror in respect of the Offers. Accordingly, HSBC and relevant members of the HSBC Group which hold eSun Shares on an own account or discretionary managed basis are presumed to be acting in concert with the Offeror in relation to eSun in accordance with class 5 of the definition of “acting in concert” under the Takeovers Code (except in respect of eSun Shares held by exempt principal traders or exempt fund managers, in each case recognised by the Executive as such for the purpose of the Takeovers Code).
Based on the relevant eSun Shareholders’ disclosures of interests in eSun as at the Latest Practicable Date.

PART (2): POSSIBLE UNCONDITIONAL MANDATORY GENERAL CASH OFFER BY HSBC ON BEHALF OF THE OFFEROR, A WHOLLY-OWNED SUBSIDIARY OF LSD, TO ACQUIRE ALL OF THE ISSUED SHARES OF LAI FUNG (OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY LSD, THE OFFEROR, eSUN OR THEIR RESPECTIVE SUBSIDIARIES) AND TO CANCEL ALL THE OUTSTANDING SHARE OPTIONS OF LAI FUNG

11. INTRODUCTION TO THE LAI FUNG SHARE OFFER

As at the Latest Practicable Date, the Offeror held 36.94% of the voting rights in eSun, which held 50.60% of the voting rights in Lai Fung. If the eSun Share Offer becomes or is declared unconditional in all respects, LSD, the Offeror and their respective subsidiaries will together hold more than 50% of the voting rights in eSun upon completion of the eSun Share Offer. Pursuant to the chain principle in Note 8 to Rule 26.1 of the Takeovers Code, the Offeror will then be required to make (or procure to be made on its behalf) an unconditional mandatory general cash offer to acquire all of the Lai Fung Shares not already owned or agreed to be acquired by LSD, the Offeror, eSun or their respective subsidiaries. For the avoidance of doubt, the Lai Fung Offer Shares include Lai Fung Shares which are owned by the Offeror Concert Parties (other than those already owned or agreed to be acquired by LSD, the Offeror, eSun or their respective subsidiaries).

– 25 –

LETTER FROM THE BOARD

12. THE LAI FUNG SHARE OFFER

If the eSun Share Offer becomes or is declared unconditional in all respects, pursuant to the chain principle in Note 8 to Rule 26.1 of the Takeovers Code, the Offeror will make (or procure to be made on its behalf) the Lai Fung Share Offer in compliance with the Takeovers Code on the basis set out below.

For each Lai Fung Offer Share ...........................................................................HK$5.22 in cash

The Lai Fung Share Offer Price of HK$5.22 for each Lai Fung Offer Share has been determined pursuant to the applicable rules and regulations under the Takeovers Code, after taking into consideration (i) the eSun Share Offer Price of HK$1.30; (ii) the unaudited consolidated total net asset values of eSun and Lai Fung as at 31 January 2018, being approximately HK$18,608.9 million and HK$16,387.4 million, respectively; (iii) the total number of eSun Shares and Lai Fung Shares as at the Announcement Date, being 1,491,854,598 and 327,044,134, respectively; and (iv) the fact that eSun holds 165,485,406 Lai Fung Shares (representing a 50.60% interest in Lai Fung) as at the Announcement Date.

13. THE LAI FUNG SHARE OFFER PRICE

The Lai Fung Share Offer Price of HK$5.22 per Lai Fung Offer Share under the Lai Fung Share Offer represents:

(a) a discount of approximately 58.2% to the closing price of HK$12.50 per Lai Fung Share as quoted on the Stock Exchange on the Last Trading Date;
(b) a discount of approximately 58.5% to the average closing price of HK$12.58 per Lai Fung Share, being the average closing price of Lai Fung Shares as quoted on the Stock Exchange for the 5 trading days immediately prior to and including the Last Trading Date;
(c) a discount of approximately 57.9% to the average closing price of HK$12.40 per Lai Fung Share, being the average closing price of Lai Fung Shares as quoted on the Stock Exchange for the 10 trading days immediately prior to and including the Last Trading Date;
(d) a discount of approximately 55.9% to the average closing price of HK$11.85 per Lai Fung Share, being the average closing price of Lai Fung Shares as quoted on the Stock Exchange for the 30 trading days immediately prior to and including the Last Trading Date;
(e) a discount of approximately 57.1% to the average closing price of HK$12.17 per Lai Fung Share, being the average closing price of Lai Fung Shares as quoted on the Stock Exchange for the 60 trading days immediately prior to and including the Last Trading Date;

– 26 –

LETTER FROM THE BOARD

(f) a discount of approximately 58.9% to the average closing price of HK$12.70 per Lai Fung Share, being the average closing price of Lai Fung Shares as quoted on the Stock Exchange for the 180 trading days immediately prior to and including the Last Trading Date;
(g) a discount of approximately 54.6% to the closing price of HK$11.50 per Lai Fung Share on the Latest Practicable Date;
(h) a discount of approximately 88.3% to the audited consolidated net asset value attributable to owners per Lai Fung Share of approximately HK$44.78 as at 31 July 2017, based on the total number of issued Lai Fung Shares as at 31 July 2017 (as adjusted for the share consolidation of Lai Fung Shares which took effect on 15 August 2017 (as disclosed in the announcements of Lai Fung dated 18 July 2017 and 14 August 2017)); and
(i) a discount of approximately 89.4% to the unaudited consolidated net asset value attributable to owners per Lai Fung Share of approximately HK$49.32 as at 31 January 2018, based on the total number of issued Lai Fung Shares as at 31 January 2018.

As shown in the audited consolidated statement of financial position as at 31 July 2017 and the unaudited consolidated statement of financial position as at 31 January 2018 of Lai Fung, a significant portion of Lai Fung’s assets consisted of property, plant and equipment, properties under development, investment properties and completed properties for sale. A valuation report on the property interests of the eSun Group (which includes the property interests of the Lai Fung Group) is in Appendix VIII to this circular pursuant to Chapter 5 of the Listing Rules and a valuation report on the property interests of the Lai Fung Group will be contained in the Lai Fung Composite Document pursuant to Rule 11 of the Takeovers Code. The value of these assets as stated in such consolidated statements of financial positions or such property valuation reports may or may not reflect their market value as at the date of this circular or the Lai Fung Composite Document.

14. HIGHEST AND LOWEST CLOSING PRICES OF LAI FUNG SHARES

During the six-month period ended the Last Trading Date, the highest closing price of Lai Fung Shares as quoted on the Stock Exchange was HK$13.68 per Lai Fung Share on 26 January 2018, and the lowest closing price of Lai Fung Shares as quoted on the Stock Exchange was HK$11.02 per Lai Fung Share on 24 April 2018 and 23 April 2018.

15. THE LAI FUNG OPTION OFFER AND THE LAI FUNG OPTION OFFER PRICE

As at the Latest Practicable Date, there were 10,234,117 Lai Fung Options (all of which vested on their respective dates of grant), each giving the Lai Fung Optionholder the right to subscribe for one new Lai Fung Share. The exercise of such Lai Fung Options in full would result in the issue of 10,234,117 new Lai Fung Shares, representing approximately 3.13% of the issued share capital of Lai Fung as at the Latest Practicable Date and approximately 3.03% of the issued share capital of Lai Fung as enlarged by the issue of such new Lai Fung Shares.

– 27 –

LETTER FROM THE BOARD

In accordance with Rule 13 of the Takeovers Code, when the Lai Fung Share Offer is made (if it is made at all), the Offeror will make (or procure to be made on its behalf) an appropriate offer to all the Lai Fung Optionholders for the cancellation of every Lai Fung Option, whether vested or unvested, by way of the Lai Fung Option Offer.

Under the Lai Fung Option Offer, the Offeror will, in accordance with Rule 13 of the Takeovers Code, offer the Lai Fung Optionholders the Lai Fung Option Offer Price (which is the “see-through” price, being the Lai Fung Share Offer Price minus the exercise price of the relevant Lai Fung Option) in cash for the cancellation of each Lai Fung Option they hold, whether vested or unvested, provided that if the exercise price of any Lai Fung Option is equal to or greater than the Lai Fung Share Offer Price (such that the “see-through” price is zero or negative), the Lai Fung Option Offer Price will be a nominal amount of HK$0.01 for every 100 Lai Fung Options (or, if lesser, any part thereof).

		Number of Lai Fung
Lai Fung Option	Lai Fung Option Offer	Options (each carrying the	Exercise period
exercise price per	Price per Lai Fung Share	right to subscribe for	of the Lai Fung
Lai Fung Share	(unless otherwise indicated)	one new Lai Fung Share)	Options
(HK$)	(HK$)		(dd/mm/yyyy)
6.650	0.01 for every 100	1,009,591	12/06/2012 to
	Lai Fung Options		11/06/2020
	(or, if lesser, any part thereof)
8.000	0.01 for every 100	180,000	16/01/2015 to
	Lai Fung Options		15/01/2025
	(or, if lesser, any part thereof)
9.500	0.01 for every 100	220,000	26/07/2013 to
	Lai Fung Options		25/07/2023
	(or, if lesser, any part thereof)
11.400	0.01 for every 100	8,374,526	18/01/2013 to
	Lai Fung Options		17/01/2023
	(or, if lesser, any part thereof)
13.520	0.01 for every 100	450,000	19/01/2018 to
	Lai Fung Options		18/01/2028
	(or, if lesser, any part thereof)

– 28 –

LETTER FROM THE BOARD

Further information on the Lai Fung Option Offer will be set out in a letter to the Lai Fung Optionholders, which will be despatched at or around the same time as the despatch of the Lai Fung Composite Document.

If any Lai Fung Option is exercised in accordance with the terms of the relevant Lai Fung Share Option Scheme prior to the close of the Lai Fung Share Offer, any Lai Fung Shares issued as a result of such exercise will be subject to the Lai Fung Share Offer.

Pursuant to the terms of the Lai Fung Share Option Scheme adopted by Lai Fung on 21 August 2003, if any of the Lai Fung Options under that scheme (being the 1,009,591 Lai Fung Options with the exercise price of HK$6.650 per Lai Fung Share) is not exercised within a period of 14 days after the eSun Share Offer becomes (or is declared) unconditional, it will lapse at the end of such period (following which the holder of such Lai Fung Option will not be able to accept the Lai Fung Option Offer in respect of such Lai Fung Option). It is proposed that the Lai Fung Share Option Scheme be amended to enable certain Lai Fung Options under that scheme not to lapse as a result of the eSun Share Offer. Such proposed amendment is subject to approval by the Lai Fung Shareholders and the eSun Shareholders. A circular (including notice of an extraordinary general meeting) to approve such proposed amendment to the Lai Fung Share Option Scheme is being despatched by each of eSun and Lai Fung at or around the same time as the despatch of this circular.

The other Lai Fung Options, which are under the Lai Fung Share Option Scheme adopted by Lai Fung on 18 December 2012, shall remain valid and exercisable during their respective option periods in accordance with the terms of that Lai Fung Share Option Scheme notwithstanding the Lai Fung Share Offer.

16. CONDITIONS TO THE LAI FUNG OFFERS

The Lai Fung Offers will only be triggered upon the eSun Share Offer becoming unconditional or being declared unconditional in all respects. Accordingly, the Lai Fung Offers are subject to the pre-condition of the eSun Share Offer becoming or being declared unconditional in all respects.

For the conditions to the eSun Offers, please refer to section 7 “Conditions to the eSun Offers” above.

WARNING: The Lai Fung Offers are subject to the pre-condition of the eSun Share Offer becoming or being declared unconditional in all respects. Accordingly, the Lai Fung Offers may or may not be made. Shareholders and holders of options and other securities of and potential investors in LSG, LSD, eSun and Lai Fung should therefore exercise caution when dealing in the securities of LSG, LSD, eSun and Lai Fung. Persons who are in doubt as to the action they should take should consult their stockbroker, bank manager, solicitor or other professional advisers.

– 29 –

LETTER FROM THE BOARD

17. VALUE OF THE LAI FUNG OFFERS

As at the Latest Practicable Date, there were (i) 327,044,134 Lai Fung Shares in issue, of which 165,485,406 Lai Fung Shares are held by eSun, (ii) 161,558,728 Lai Fung Offer Shares and (iii) 10,234,117 Lai Fung Options (all of which vested on their respective dates of grant) entitling the Lai Fung Optionholders to subscribe for an aggregate of 10,234,117 Lai Fung Shares at an exercise price ranging from HK$6.650 to HK$13.520 per Lai Fung Share.

On the assumption that the number of Lai Fung Shares will not change (whether by way of any exercise of the Lai Fung Options or otherwise) and the number of Lai Fung Options will not change, the value of the Lai Fung Share Offer is approximately HK$843.3 million and the total amount required to satisfy the cancellation of all Lai Fung Options is approximately HK$1,023.4. On this basis, in aggregate, the Lai Fung Offers are valued at approximately HK$843.3 million.

On the assumption that no further Lai Fung Options will be granted and all of the Lai Fung Options will be exercised before the close of the Lai Fung Share Offer, Lai Fung will have to issue 10,234,117 new Lai Fung Shares, representing approximately 3.03% of the enlarged issued share capital of Lai Fung, upon the exercise of the Lai Fung Options. On this basis, there will be 171,792,845 Lai Fung Offer Shares (including the new Lai Fung Shares issued as a result of the exercise of the Lai Fung Options) and the value of the Lai Fung Share Offer will be approximately HK$896.8 million. In this case, no amount will be payable by the Offeror under the Lai Fung Option Offer.

18. PUBLIC FLOAT OF LAI FUNG

There is a possibility that the public will hold less than 25% of the Lai Fung Shares upon closing of the Lai Fung Offers depending on the level of acceptances. In that case, the Offeror and Lai Fung intend to take appropriate steps to restore the public float in compliance with the Listing Rules.

Under the Listing Rules, if, upon completion of the Lai Fung Share Offer, less than 25% of the Lai Fung Shares are held by the public, or if the Stock Exchange believes that a false market exists or may exist in the trading of the Lai Fung Shares or there are insufficient Lai Fung Shares in public hands to maintain an orderly market, then the Stock Exchange will consider exercising its discretion to suspend dealings in the Lai Fung Shares. The Offeror and Lai Fung will undertake to the Stock Exchange to take appropriate steps to ensure that not less than 25% of the Lai Fung Shares will be held by the public.

19. MAINTAINING THE LISTING STATUS OF LAI FUNG

The Offeror intends to maintain the listing of the Lai Fung Shares on the Stock Exchange following closing of the Lai Fung Offers. The Offeror does not intend to exercise any rights to acquire any Lai Fung Shares in respect of which the Lai Fung Share Offer is not accepted.

– 30 –

LETTER FROM THE BOARD

20. SHAREHOLDING STRUCTURE OF LAI FUNG

As at the Latest Practicable Date, the authorised share capital of Lai Fung was HK$2,000,000,000 divided into 400,000,000 Lai Fung Shares and the issued share capital of Lai Fung was HK$1,635,220,670 divided into 327,044,134 Lai Fung Shares. There are no other classes of shares of Lai Fung in issue.

The table below sets out the shareholding structure of Lai Fung as at the Latest Practicable Date:

Date:
		As a
		percentage
		of the issued
	No. of Lai	share capital
	Fung Shares	of Lai Fung
Offeror	0	0%
eSun	165,485,406	50.60%
Other Offeror Concert Parties, whose Lai Fung Shares
form part of the Lai Fung Offer Shares and do not
form part of the Disinterested Lai Fung Shares:
— Dr. Peter Lam_(Note 1)_	0	0%
— Mr. Lester Lam_(Note 2)_	0	0%
— Mr. FA Chew_(Note 3)_	600,000	0.18%
— Mr. Julius Lau_(Note 4)_	235	0.00%
— HSBC_(Note 5)_	0	0%
Aggregate number of Lai Fung Shares held by
the Offeror and the Offeror Concert Parties	166,085,641	50.78%
Holders of Disinterested Lai Fung Shares
— Yu Shareholders_(Note 6)_	26,595,837	8.13%
— Other holders of Disinterested Lai Fung Shares	134,362,656	41.09%
Total number of Lai Fung Shares	327,044,134	100%
Total number of Lai Fung Offer Shares	161,558,728	49.40%

– 31 –

LETTER FROM THE BOARD

Notes:

Dr. Peter Lam, who is an Offeror Director, a deputy chairman and an executive director of LSG, the chairman and an executive director of LSD and the ultimate controlling shareholder of LSG, LSD and the Offeror, is acting in concert with the Offeror. As at the Latest Practicable Date, Dr. Peter Lam was not interested in any Lai Fung Shares and was interested in 321,918 Lai Fung Options (other than through his interests in LSG, LSD and eSun).
Mr. Lester Lam, who is an Offeror Director and an executive director of LSG and LSD, is acting in concert with the Offeror. As at the Latest Practicable Date, Mr. Lester Lam was not interested in any Lai Fung Shares and was interested in 3,219,182 Lai Fung Options (other than through his interests in LSG, LSD and eSun).
Mr. FA Chew, who is an Offeror Director, a deputy chairman and an executive director of LSG and the deputy chairman and an executive director of LSD, is acting in concert with the Offeror. As at the Latest Practicable Date, Mr. FA Chew was interested in 600,000 Lai Fung Shares and 1,009,591 Lai Fung Options (other than through his interests in LSG, LSD and eSun).
Mr. Julius Lau, who is an Offeror Director and the chief executive officer and an executive director of LSD, is acting in concert with the Offeror. As at the Latest Practicable Date, Mr. Julius Lau was interested in 235 Lai Fung Shares and 965,754 Lai Fung Options (other than through his interests in LSD).
HSBC is the financial adviser to LSD and the Offeror in respect of the Offers. Accordingly, HSBC and relevant members of the HSBC Group which hold Lai Fung Shares on an own account or discretionary managed basis are presumed to be acting in concert with the Offeror in relation to Lai Fung in accordance with class 5 of the definition of “acting in concert” under the Takeovers Code (except in respect of Lai Fung Shares held by exempt principal traders or exempt fund managers, in each case recognised by the Executive as such for the purpose of the Takeovers Code).
Based on the relevant Lai Fung Shareholders’ disclosures of interests in Lai Fung as at the Latest Practicable Date.

PART (3): MAXIMUM CONSIDERATION PAYABLE UNDER THE OFFERS

21. TOTAL CONSIDERATION UNDER THE OFFERS

Based on the assumptions set out in section 8 “Value of the eSun Offers” and section 17 “Value of the Lai Fung Offers” and taking into account the buyer’s ad valorem stamp duty payable by the Offeror (on the basis of the market value of the relevant shares being their respective closing prices on 24 May 2018), the maximum amount of cash required to implement the Offers would be approximately HK$2,166.0 million.

The Offeror intends to finance the cash required for the Offers from existing internal cash resources and/or external debt financing of the Group.

HSBC, being the financial adviser to LSD and the Offeror in respect of the Offers, is satisfied that sufficient financial resources are available to the Offeror to satisfy full acceptance of the Offers in accordance with their respective terms.

– 32 –

LETTER FROM THE BOARD

22. SETTLEMENT OF CONSIDERATION OF THE OFFERS

Settlement of the consideration in respect of an acceptance of the eSun Offers will be made as soon as possible and in any event within seven (7) business days (as defined in the Takeovers Code) of (i) the date of receipt of the complete and valid acceptance or (ii) the date on which the eSun Offers become or are declared unconditional in all respects, whichever is the later.

Settlement of the consideration in respect of an acceptance of the Lai Fung Offers will be made as soon as possible and in any event within seven (7) business days (as defined in the Takeovers Code) of the date of receipt of the complete and valid acceptance.

23. HONG KONG STAMP DUTY

Seller’s ad valorem stamp duty at a rate of 0.1% of the market value of the eSun Offer Shares or consideration payable by the Offeror in respect of the relevant acceptances of the eSun Share Offer, whichever is higher (rounded up to the nearest HK$1.00), will be deducted from the amount payable to the relevant eSun Shareholder on acceptance of the eSun Share Offer. The Offeror will bear its own portion of buyer’s ad valorem stamp duty at the rate of 0.1% of the market value of the eSun Offer Shares or consideration payable by the Offeror in respect of the relevant acceptances of the eSun Share Offer, whichever is higher (rounded up to the nearest HK$1.00) and will be responsible to account to the Stamp Office of Hong Kong for all the stamp duty payable for the sale and purchase of the eSun Shares which are validly tendered for acceptance under the eSun Share Offer.

Seller’s ad valorem stamp duty at a rate of 0.1% of the market value of the Lai Fung Offer Shares or consideration payable by the Offeror in respect of the relevant acceptances of the Lai Fung Share Offer, whichever is higher (rounded up to the nearest HK$1.00), will be deducted from the amount payable to the relevant Lai Fung Shareholder on acceptance of the Lai Fung Share Offer. The Offeror will bear its own portion of buyer’s ad valorem stamp duty at the rate of 0.1% of the market value of the Lai Fung Offer Shares or consideration payable by the Offeror in respect of the relevant acceptances of the Lai Fung Share Offer, whichever is higher (rounded up to the nearest HK$1.00) and will be responsible to account to the Stamp Office of Hong Kong for all the stamp duty payable for the sale and purchase of the Lai Fung Shares which are validly tendered for acceptance under the Lai Fung Share Offer.

No stamp duty is payable on the cancellation of any eSun Option or Lai Fung Option.

– 33 –

LETTER FROM THE BOARD

PART (4): LISTING RULES IMPLICATIONS

24. POSSIBLE VERY SUBSTANTIAL ACQUISITION OF LSD

As the highest applicable percentage ratio for LSD in respect of the Offers exceeds 100%, the Offers constitute a very substantial acquisition for LSD under Chapter 14 of the Listing Rules and are subject to approval by the Independent LSD Shareholders.

25. POSSIBLE DE MINIMIS CONNECTED TRANSACTIONS OF LSD

As at the Latest Practicable Date, Dr. Peter Lam, the chairman, an executive director and the ultimate controlling shareholder of LSD, and Mr. Lester Lam, an executive director of LSD and an LR associate of Dr. Peter Lam, were interested in certain eSun Shares, eSun Options and Lai Fung Options (other than through their respective interests in LSG and LSD). The maximum aggregate consideration for such interests under the Offers is approximately HK$43.5 million. The making of the Offers to Dr. Peter Lam and Mr. Lester Lam constitutes a connected transaction for LSD under Chapter 14A of the Listing Rules. As the highest applicable percentage ratio for LSD is more than 0.1% but less than 5%, the making of the Offers to Dr. Peter Lam and Mr. Lester Lam is a de minimis connected transaction subject to the reporting and announcement requirements but exempted from the independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

As at the Latest Practicable Date, Mr. FA Chew, the deputy chairman and an executive director of LSD, was interested in certain eSun Options, Lai Fung Shares and Lai Fung Options (other than through his interests in LSG and LSD). The maximum aggregate consideration for such interests under the Offers is approximately HK$16.5 million. The making of the Offers to Mr. FA Chew constitutes a connected transaction for LSD under Chapter 14A of the Listing Rules. As the highest applicable percentage ratio for LSD is more than 0.1% but less than 5%, the making of the Offers to Mr. FA Chew is a de minimis connected transaction subject to the reporting and announcement requirements but exempted from the independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

As at the Latest Practicable Date, Mr. Julius Lau, the chief executive officer and an executive director of LSD, was interested in certain Lai Fung Shares and Lai Fung Options (other than through his interests in LSD). The maximum aggregate consideration for such interests under the Lai Fung Offers is approximately HK$5.0 million. The making of the Lai Fung Offers to Mr. Julius Lau constitutes a connected transaction for LSD under Chapter 14A of the Listing Rules. As the highest applicable percentage ratio for LSD is more than 0.1% but less than 5%, the making of the Lai Fung Offers to Mr. Julius Lau is a de minimis connected transaction subject to the reporting and announcement requirements but exempted from the independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

– 34 –

LETTER FROM THE BOARD

Based on the information available to LSD as at the Latest Practicable Date, other persons who are directors of subsidiaries of LSD were interested in certain eSun Shares, eSun Options, Lai Fung Shares and/or Lai Fung Options. The making of the Offers to each such person constitutes a connected transaction for LSD under Chapter 14A of the Listing Rules. Based on the information available to LSD as at the Latest Practicable Date, the highest applicable percentage ratio in respect of each such connected transaction for LSD is less than 1%. On this basis, since each such person is a connected person at the subsidiary level of LSD, each such connected transaction is a de minimis connected transaction exempted from the reporting and announcement requirements and the independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

26. POSSIBLE CONNECTED TRANSACTION OF LSD WHICH IS NOT DE MINIMIS

On the basis of the Yu Shareholders’ disclosures of interests in eSun and Lai Fung as at the Latest Practicable Date, the Yu Shareholders, being substantial shareholders of LSD, were interested in 149,080,000 eSun Shares (representing 9.99% of the total issued eSun Shares) and 26,595,837 Lai Fung Shares (representing 8.13% of the total issued Lai Fung Shares) (other than through their interests in LSG and LSD). The aggregate consideration for such interests under the Share Offers is approximately HK$332.6 million. The making of the Share Offers to the Yu Shareholders constitutes a connected transaction for LSD under Chapter 14A of the Listing Rules. Based on the information available to LSD as at the Latest Practicable Date, the highest applicable percentage ratio in respect of such connected transaction for LSD is more than 5%. On this basis, the making of the Share Offers to the Yu Shareholders is subject to the reporting, announcement and Non-Connected LSD Shareholders’ approval requirements under Chapter 14A of the Listing Rules. So far as the Directors are aware, the Yu Shareholders are not related to any Director, chief executive of the Company or controlling shareholder of the Company.

27. NO OTHER POSSIBLE CONNECTED TRANSACTION OF LSD

To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, save for the connected persons of LSD mentioned above, the eSun Shareholders, the eSun Optionholders, the Lai Fung Shareholders and the Lai Fung Optionholders are third parties independent of LSD and its connected persons under the Listing Rules.

28. GENERAL MEETING

The General Meeting will be held to consider, and if thought fit, to approve (by way of separate resolutions) (a) the Offers as a very substantial acquisition and (b) the making of the Share Offers to the Yu Shareholders as a connected transaction.

– 35 –

LETTER FROM THE BOARD

As at the Latest Practicable Date, Dr. Peter Lam, being the ultimate controlling shareholder of LSG, was interested in 161,243,643 LSG Shares (representing approximately 41.87% of the issued share capital of LSG). Dr. Peter Lam was also interested in 429,232 LSD Shares (representing approximately 0.07% of the issued share capital of LSD), other than through his interest in LSG. As at the Latest Practicable Date, LSG, a holding company of LSD, was interested in 340,023,572 LSD Shares (representing approximately 56.10% of the issued share capital of LSD). As at the Latest Practicable Date, other than through his interests in LSG and LSD, Dr. Peter Lam was interested in 2,794,443 eSun Shares (representing approximately 0.19% of the issued share capital of eSun), 1,243,212 eSun Options (giving him the right to subscribe for approximately 0.08% of the enlarged share capital of eSun) and (other than through his interest in eSun) 321,918 Lai Fung Options (giving him the right to subscribe for approximately 0.10% of the enlarged share capital of Lai Fung). Such interests in eSun and Lai Fung are immaterial compared to Dr. Peter Lam’s interests in LSG and LSD and Dr. Peter Lam’s interest in the Offers is in alignment with the interest of the other LSD Shareholders. Accordingly, Dr. Peter Lam does not have a material interest in the Offers and will not be required to abstain from voting on the VSA Resolution and the CT Resolution. Dr. Peter Lam intends to exercise (or procure the exercise of) the voting rights attached to the LSD Shares in which he is interested (other than through LSG) in favour of both the VSA Resolution and the CT Resolution.

On the basis of the Yu Shareholders’ disclosures of interests in LSG and LSD, as at the Latest Practicable Date, the Yu Shareholders were interested in 110,838,516 LSG Shares (representing approximately 28.78% of the issued share capital of LSG) and (other than through their interest in LSG) 95,498,010 LSD Shares (representing approximately 15.76% of the issued share capital of LSD). On the basis of the Yu Shareholders’ disclosures of interests as at the Latest Practicable Date, other than through their interests in LSG and LSD, the Yu Shareholders were interested in 149,080,000 eSun Shares (representing approximately 9.99% of the issued share capital of eSun) and (other than through their interest in eSun) 26,595,837 Lai Fung Shares (representing approximately 8.13% of the issued share capital of Lai Fung). On the basis of the Yu Shareholders’ interests in LSG, LSD, eSun and Lai Fung referred to above, their interests in eSun and Lai Fung (excluding those held through their interests in LSG and LSD) are material. The Yu Shareholders are directly interested in the CT Resolution which is to approve the making of the Share Offers to them as a connected transaction. Based on the above, the Yu Shareholders have a material interest in the Offers and will be required to abstain from voting on the VSA Resolution and the CT Resolution.

As at the Latest Practicable Date, Mr. FA Chew was interested in 202,422 LSG Shares (representing approximately 0.05% of the issued share capital of LSG) and (other than through his interest in LSG) 400,000 LSD Shares (representing approximately 0.07% of the issued share capital of LSD). As at the Latest Practicable Date, other than through his interests in LSG and LSD, Mr. FA Chew was interested in 6,216,060 eSun Options (giving him the right to subscribe for approximately 0.41% of the enlarged share capital of eSun) and (other than through his interest in eSun) 600,000 Lai Fung Shares (representing approximately 0.18% of the issued share capital of Lai Fung) and 1,009,591 Lai Fung Options (giving him the right to subscribe for approximately 0.30% of the enlarged share capital of Lai Fung). On the basis of

– 36 –

LETTER FROM THE BOARD

Mr. FA Chew’s interests in LSG, LSD, eSun and Lai Fung referred to above, his interests in eSun and Lai Fung (excluding those held through his interests in LSG and LSD) are material. On this basis, Mr. FA Chew has a material interest in the Offers and will be required to abstain from voting on the VSA Resolution. For the avoidance of doubt, on the basis that Mr. FA Chew has no interest in the making of the Share Offers to the Yu Shareholders, he will not be required to abstain from voting on the CT Resolution.

As at the Latest Practicable Date, Mr. Julius Lau was interested in 263,500 LSD Shares (representing approximately 0.04% of the issued share capital of LSD). Other than through his interests in LSD, as at the Latest Practicable Date, Mr. Julius Lau was interested in 235 Lai Fung Shares (representing approximately 0.00007% of the issued share capital of Lai Fung) and 965,754 Lai Fung Options (giving him the right to subscribe for approximately 0.29% of the enlarged share capital of Lai Fung). On the basis of Mr. Julius Lau’s interests in LSD and Lai Fung referred to above, his interests in Lai Fung (excluding those held through his interests in LSD) are material. On this basis, Mr. Julius Lau has a material interest in the Offers and will be required to abstain from voting on the VSA Resolution. For the avoidance of doubt, on the basis that Mr. Julius Lau has no interest in the making of the Share Offers to the Yu Shareholders, he will not be required to abstain from voting on the CT Resolution.

29. DIRECTORS’ VIEWS AND RED SUN’S ADVICE

As disclosed in section 28 “General Meeting” above, the interests of each of Dr. Peter Lam and Mr. Lester Lam in eSun and Lai Fung (other than through their respective interests in LSG and LSD) are immaterial. Each of Dr. Peter Lam and Mr. Lester Lam has declared to the Board such interests in accordance with the articles of association of LSD and the Listing Rules and was not required to abstain (and did not abstain) from voting on the board resolutions of LSD approving the Offers.

Save for Mr. FA Chew and Mr. Julius Lau who were required to abstain from voting (and did abstain from voting) on the board resolutions of LSD approving the Offers because of their material interest in the Offers (disclosed in section 28 “General Meeting” above), the Directors are of the view that the terms of the Offers are on normal commercial terms and fair and reasonable to, and in the interests of, LSD and the LSD Shareholders as a whole.

Red Sun has been appointed as the independent financial adviser (a) to advise the Board and the Offeror Board on the Offers in accordance with Rule 2.4 of the Takeovers Code and (b) to make a recommendation to the LSD Independent Board Committee and the Non-Connected LSD Shareholders on the making of the Offers to any connected person of LSD as a connected transaction subject to the independent shareholders’ approval requirement under Chapter 14A of the Listing Rules in accordance with Rule 14A.45 of the Listing Rules. A letter from Red Sun containing its full advice and the LSD Independent Board Committee’s views is included in this circular.

– 37 –

LETTER FROM THE BOARD

PART (5): GENERAL

30. INFORMATION ON THE GROUP AND THE OFFEROR

LSD is a company incorporated in Hong Kong with limited liability. The Group is principally engaged in property investment, property development, investment in and operation of hotels and restaurants and investment holding.

The Offeror is a company incorporated in Hong Kong with limited liability and is a whollyowned subsidiary of LSD. The Offeror is engaged in investment holding.

As at the Latest Practicable Date, (i) LSG was interested in 56.10% of the issued share capital of LSD and (ii) Dr. Peter Lam was interested in 41.87% of the issued share capital of LSG.

31. INFORMATION ON THE eSUN GROUP

eSun is a company incorporated in Bermuda with limited liability. The principal activities of the eSun Group include the development, operation of and investment in media and entertainment, music production and distribution, the investment in and production and distribution of television programmes, films and video format products, cinema operation, property development for sale and property investment for rental purposes as well as the development and operation of and investment in cultural, leisure, entertainment and related facilities.

The unaudited consolidated net asset value attributable to owners of eSun as at 31 January 2018 was approximately HK$9,780.7 million.

The consolidated audited net profit before and after taxation and tax indemnity of eSun for the two financial years ended 31 July 2017 and 2016 are as follows:

	For the fnancial year	For the fnancial year
	ended	31 July
	2017	2016
	HK$’000	HK$’000
Net proft before tax and tax indemnity	1,106,540	718,532
Net proft after tax and tax indemnity	1,027,214	313,006

– 38 –

LETTER FROM THE BOARD

32. INFORMATION ON THE LAI FUNG GROUP

Lai Fung is a company incorporated in the Cayman Islands with limited liability. The Lai Fung Group is principally engaged in property development for sale and property investment for rental purposes, and development and operation of and investment in cultural, leisure, entertainment and related facilities.

The unaudited consolidated net asset value attributable to owners of Lai Fung as at 31 January 2018 was approximately HK$16,130.4 million.

The consolidated audited net profit before and after taxation and tax indemnity of Lai Fung for

the last two financial years ended 31 July 2017 and 2016 are as follows:

	For the fnancial year	For the fnancial year
	ended	31 July
	2017	2016
	HK$’000	HK$’000
Net proft before tax and tax indemnity	1,652,804	1,285,585
Net proft after tax and tax indemnity	1,590,584	897,422

33. REASONS FOR AND BENEFITS OF THE OFFERS

The following sets out the Offeror’s reasons for the Offers, the benefits of the Offers for the holders of the eSun Offer Shares and for eSun (as considered by the Offeror) and the benefits of the Offers for LSD:

For holders of the eSun Offer Shares

An opportunity to monetise eSun Shares without adversely affecting the market price

In light of the low liquidity of eSun Shares (an average of approximately 1.1 million shares or 0.07% of the total issued share capital of eSun per day during the one-year period ended on and including the Last Trading Date), it would be difficult for a significant number of the eSun Offer Shares to be sold in the market without adversely affecting the market price of eSun Shares. The eSun Share Offer affords the holders of eSun Offer Shares the opportunity to realise their investments in eSun without such difficulty.

– 39 –

LETTER FROM THE BOARD

For eSun

The making of the eSun Offers affirms LSD’s confidence in and commitment to the eSun Group

As disclosed above, if the Offeror is permitted to do so under the Companies Act and the Takeovers Code, the Offeror will exercise the power of compulsory acquisition under Section 102(1) or Section 103(1) of the Companies Act, following which eSun will be delisted and become a wholly-owned subsidiary of LSD. This would enable eSun to enjoy cost savings through dispensing with the costs associated with compliance with eSun’s obligations as a listed company and maintaining the listing of eSun and allow it to focus more of its resources on business operations.

For LSD

(a) An opportunity to increase shareholding in the eSun Group

LSD is confident in the long term prospects of the eSun Group’s business. The eSun Group leverages its experience in the entertainment market and optimises income from its film, TV, live entertainment, artiste management, music businesses and cinema operations through exploring strategic alliances and investment opportunities to enrich its business portfolio in the PRC. The eSun Group also owns 50.60% stake in the Lai Fung Group, which has been a long term participant with a regional focus in the PRC property market. Lai Fung’s rental portfolio, primarily in Shanghai and Guangzhou, delivered steady performance in rental income and the Lai Fung Group has a number of projects under development in Shanghai, Guangzhou, Zhongshan and Hengqin. LSD intends to increase its interests in the eSun Group on terms it considers to be in the long term interests of the LSD Shareholders. The eSun Share Offer Price represents a discount of approximately 80.2% to the unaudited consolidated net asset value attributable to owners per eSun Share of approximately HK$6.56 as at 31 January 2018, based on the total number of issued eSun Shares as at 31 January 2018. Save for certain directors who have abstained or have not yet expressed their views as disclosed in section 29 “Directors’ views and Red Sun’s advice” above, the Board considers the eSun Share Offer Price to be on normal commercial terms and fair and reasonable to, and in the interest of, the Company.

(b) Financial effect of the consolidation of the eSun Group on LSD

If the eSun Share Offer becomes unconditional, it will result in the consolidation of the financial results of eSun Group (which is currently accounted for in the financial statements of LSD as an associate) in the financial statements of LSD. Had the eSun Share Offer been completed on 1 August 2016 (being the commencement date of the most recently completed financial year of LSD), this would have resulted in a gain for LSD on a pro forma basis for the financial year ended 31 July 2017. For details of the financial effect of the completion of the eSun Share Offer on LSD, please refer to the unaudited pro forma financial information of the Enlarged Group in Appendix VII of this circular.

– 40 –

LETTER FROM THE BOARD

As disclosed above, in the event that eSun is delisted, eSun would be able to enjoy cost savings through dispensing with the costs associated with compliance with eSun’s obligations as a listed company and maintaining the listing of eSun. Such cost savings would also positively impact the financial statements of LSD.

(c) Streamlined corporate structure in the event that eSun is delisted

As disclosed above, if the Offeror is permitted to do so under the Companies Act and the Takeovers Code, the Offeror will exercise the power of compulsory acquisition under Section 102(1) or Section 103(1) of the Companies Act, following which eSun will be delisted and become a wholly-owned subsidiary of LSD. This would enable LSD and LSG to streamline their respective corporate structures further.

34. INTENTIONS OF LSD WITH REGARD TO THE eSUN GROUP

LSD intends to continue with the existing businesses of the eSun Group upon completion of the Offers. LSD intends to maintain eSun’s established and integrated media platform with an aim to provide competitive products and to enhance its market position through exploring strategic alliances and investment opportunities to enrich its business portfolio and broaden its income stream. LSD also intends to continue with Lai Fung’s regional focus and rental-led strategy and to focus on property projects in Shanghai, Guangzhou, Zhongshan and Hengqin. Subject to market conditions, LSD may potentially explore various opportunities to further develop the existing businesses of the eSun Group. LSD may also from time to time consider the need to fund such further development by debt and/or equity financing by the eSun Group, subject to the eSun Group’s business needs and prevailing market conditions.

LSD does not currently intend to introduce major changes to the business of eSun (including any redeployment of the fixed assets of eSun) save for those changes which LSD may from time to time implement following the review of its strategic options relating to the business, structure and/or direction of the eSun Group.

It is also the current intention of LSD that the employment of the existing employees of the eSun Group and the directorship of the existing directors of the eSun Group will be continued following completion of the Offers except for changes which may occur in the ordinary course of business.

35. FINANCIAL EFFECT OF THE OFFERS

Following completion of the eSun Offers, eSun will be accounted for as a subsidiary of LSD and the financial information of eSun will be consolidated into the consolidated financial statements of the Group.

As set out in Appendix VII “Unaudited Pro Forma Financial Information of the Enlarged Group” of this circular:

– 41 –

LETTER FROM THE BOARD

Scenario I-Assuming the eSun Offers are accepted in full and the Lai Fung Offers are not accepted, LSD will hold 100% of the total issued share capital of eSun and 50.6% of the total issued share capital of Lai Fung which is indirectly held through eSun immediately after completion of the Offers.

(i) The total assets of the Group as at 31 July 2017 would have been increased by approximately HK$30,576,809,000, from approximately HK$38,440,991,000 to approximately HK$69,017,800,000, assuming completion of the Offer had taken place on 31 July 2017;
(ii) The total liabilities of the Group as at 31 July 2017 would have been increased by approximately HK$15,535,870,000, from approximately HK$11,336,452,000 to approximately HK$26,872,322,000, assuming completion of the Offer had taken place on 31 July 2017; and
(iii) The profit attributable to owners of LSD for the year ended 31 July 2017 would have increased by approximately HK$5,411,660,000, from approximately HK$2,093,572,000 to approximately HK$7,505,232,000, assuming completion of the Offer had taken place on 1 August 2016.

Scenario II-Assuming the eSun Offers are accepted in full and the Lai Fung Offers are accepted up to 75% of the total issued share capital of Lai Fung, LSD will hold 100% of the total issued share capital of eSun and 75% of the total issued share capital of Lai Fung (24.4% held directly by the Offeror and 50.6% held indirectly through eSun). The directors assume that 25% of the issued share capital of Lai Fung will be held by the public immediately after completion of the Offers.

(i) The total assets of the Group as at 31 July 2017 would have been increased by approximately HK$30,106,843,000, from approximately HK$38,440,991,000 to approximately HK$68,547,834,000, assuming completion of the Offer had taken place on 31 July 2017;
(ii) The total liabilities of the Group as at 31 July 2017 would have been increased by approximately HK$15,535,870,000, from approximately HK$11,336,452,000 to approximately HK$26,872,322,000, assuming completion of the Offer had taken place on 31 July 2017; and
(iii) The profit attributable to owners of LSD for the year ended 31 July 2017 would have increased by approximately HK$9,032,869,000, from approximately HK$2,093,572,000 to approximately HK$11,126,441,000, assuming completion of the Offer had taken place on 1 August 2016.

– 42 –

LETTER FROM THE BOARD

36. RECOMMENDATION

The Directors, having considered the terms and conditions of the Offers (including the making of the Share Offers to the Yu Shareholders as a connected transaction of the Company), are of the opinion that the terms and conditions of the Offers are fair and reasonable to, and that the Offers (including the making of the Share Offers to the Yu Shareholders as a connected transaction of the Company) are on normal commercial terms or better to, and are in the interests of, LSD and the LSD Shareholders (including the Non-Connected LSD Shareholders) as a whole. Accordingly, the Board recommends the LSD Shareholders (including the NonConnected LSD Shareholders) to vote in favour of both the VSA Resolution and the CT Resolution at the General Meeting.

Yours faithfully, For and on behalf of the Board of Lai Sun Development Company Limited Lam Kin Ngok, Peter Chairman

– 43 –

LETTER FROM THE LSD INDEPENDENT BOARD COMMITTEE

==> picture [217 x 104] intentionally omitted <==

==> picture [59 x 11] intentionally omitted <==

To the Non-Connected LSD Shareholders

Dear Sir or Madam,

We refer to the circular of Lai Sun Development Company Limited (“ Company ”) dated 23 July 2018 (“ Circular ”), of which this letter forms part. Terms used herein have the same meanings as those defined in the Circular unless the context otherwise requires.

We have been appointed as the independent board committee to consider the making of the Share Offers to the Yu Shareholders as a connected transaction of the Company subject to the independent shareholders’ approval requirement under Chapter 14A of the Listing Rules (“ Yu Connected Transaction ”) and to advise you as to whether, in our opinion, the Yu Connected Transaction is conducted in the ordinary and usual course of business of the Group, on normal commercial terms or better so far as the Non-Connected LSD Shareholders are concerned, its terms are fair and reasonable to the Non-connected LSD shareholders, and whether the Company’s entry into the Yu Connected Transaction is in the interests of the Company and the Shareholders as a whole.

Red Sun Capital Limited has been appointed as the independent financial adviser to advise us and you regarding the Yu Connected Transaction. Details of its advice, together with the principal factors and reasons it has taken into consideration in giving its advice, are set out in its letter on pages 45 to 111 of the Circular. Your attention is also drawn to the letter from the Board set out in the Circular and the additional information set out in the appendices to the Circular.

Having considered the terms of the Yu Connected Transaction and the independent advice of Red Sun Capital Limited in relation thereto, we consider that the Yu Connected Transaction is not conducted in the ordinary and usual course of business of the Group due to the nature of the Share Offers, but is on normal commercial terms or better so far as the Non-Connected LSD Shareholders are concerned, its terms are fair and reasonable to the Non-connected LSD shareholders, and the Company’s entry into the Yu Connected Transaction is in the interests of the Company and the Shareholders as a whole. On this basis, we recommend the Non-Connected LSD Shareholders to vote in favour of the ordinary resolution to be proposed at the General Meeting to approve the Yu Connected Transaction.

Yours faithfully,

LSD Independent Board Committee

Ip Shu Kwan, Stephen

Lam Bing Kwan

Leung Shu Yin, William

– 44 –

LETTER FROM RED SUN

The following is the text of a letter of advice from Red Sun Capital Limited prepared for the purpose of inclusion in this circular, setting out its advice to the LSD Independent Board Committee and the Non-Connected LSD Shareholders in respect of the making of the Share Offers to the Yu Shareholders as a connected transaction of the Company.

==> picture [53 x 35] intentionally omitted <==

==> picture [180 x 37] intentionally omitted <==

==> picture [59 x 11] intentionally omitted <==

----- Start of picture text -----

23 July 2018
----- End of picture text -----

To: The LSD Independent Board Committee and the Non-Connected LSD Shareholders

Dear Sirs,

(1) POSSIBLE VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION

INTRODUCTION

We refer to our appointment as the independent financial adviser to the LSD Independent Board Committee and the Non-Connected LSD Shareholders with respect to the Offers, details of which are set out in the letter from the Board (the “ Letter from the Board ”) contained in the circular dated 23 July 2018 of LSD (the “ Circular ”), of which this letter forms part. Unless otherwise stated, terms defined in the Circular have the same meanings in this letter.

– 45 –

LETTER FROM RED SUN

The eSun Offers

As set out in the Circular, HSBC, on behalf of the Offeror, a wholly-owned subsidiary of LSD, firmly intends to make a conditional voluntary general cash offer (i) to acquire all the eSun Shares not already owned or agreed to be acquired by LSD, the Offeror or their respective subsidiaries; and (ii) to cancel all the outstanding eSun Options. For the avoidance of doubt, the eSun Offer Shares include eSun Shares which are owned by the Offeror Concert Parties (other than those already owned or agreed to be acquired by LSD, the Offeror or their respective subsidiaries).

The eSun Share Offer is subject to the fulfilment of the Conditions, including but not limited to, the approval by (i) the Independent LSD Shareholders of the Offers as a very substantial acquisition of LSD; and (ii) the Non-Connected LSD Shareholders of the making of one or more of the Offers to any connected person of LSD which is a connected transaction of LSD subject to the independent shareholders’ approval requirement under Chapter 14A of the Listing Rules.

In accordance with Rule 13 of the Takeovers Code, the Offeror will offer the eSun Optionholders the eSun Option Offer Price (which is the “see-through” price, being the eSun Share Offer Price minus the exercise price of the relevant eSun Option) in cash for the cancellation of each eSun Option they hold, whether vested or unvested, provided that if the exercise price of any eSun Option is equal to or greater than the eSun Share Offer Price (such that the “see-through” price is zero or negative), the eSun Option Offer Price will be a nominal amount of HK$0.01 for every 100 eSun Options (or, if lesser, any part thereof).

If the level of acceptances of the eSun Share Offer (or the Offeror’s holding of eSun Shares) reaches the prescribed thresholds under Section 102(1) (or Section 103(1)) of the Companies Act and the Offeror is allowed to do so under Rule 2.11 of the Takeovers Code, the Offeror will exercise the power of compulsory acquisition under Section 102(1) (or Section 103(1)) of the Companies Act.

– 46 –

LETTER FROM RED SUN

The Lai Fung Offers

Value of the Offers

Please refer to the paragraphs headed “5.1.3 Value of the eSun Offers” and “5.2.3 Value of the Lai Fung Offers” in this letter for the aggregate maximum value of the eSun Offers and the Lai Fung Offers. The LSD Management (defined hereafter) advised that the estimated transaction costs for the eSun Offers and the Lai Fung Offers amounted to approximately HK$41.3 million.

– 47 –

LETTER FROM RED SUN

THE LSD INDEPENDENT BOARD COMMITTEE

The Board has established the LSD Independent Board Committee, comprising all three independent non-executive Directors, namely Mr. Lam Bing Kwan, Mr. Leung Shu Yin, William and Mr. Ip Shu Kwan, Stephen, to make a recommendation to the Non-Connected LSD Shareholders as to whether the Yu Connected Transaction (as defined in the Letter from the LSD Independent Board Committee) is on normal commercial terms or better to so far as the Non-Connected LSD Shareholders are concerned, its terms are fair and reasonable to, and the Company’s entry into the Yu Connected Transaction is in the interests of the Company and the Shareholders as a whole. We have been appointed by the Board with the approval of the LSD Independent Board Committee as the Independent Financial Adviser in relation to the Offers, where our role is to provide the LSD Independent Board Committee and the Non-Connected LSD Shareholders with an independent opinion and recommendation as to whether the Yu Connected Transaction is on normal commercial terms or better to so far as the Non-Connected LSD Shareholders are concerned, its terms are fair and reasonable to, and the Company’s entry into of the Yu Connected Transaction is in the interests of the Company and the Shareholders as a whole.

As at the Latest Practicable Date, we were independent from and not connected with the Company, the Offeror, eSun, Lai Fung, their respective substantial shareholders and any party acting, or presumed to be acting, in concert with any of them, and accordingly, are qualified to give independent advice to the LSD Independent Board Committee and the Non-Connected LSD Shareholders. Save for our appointment as the Independent Financial Adviser, Red Sun did not act as an independent financial adviser to LSD under the Listing Rules in the past two years. Apart from the normal advisory fee payable to us in connection with our appointment as the Independent Financial Adviser, no arrangement exists whereby we shall receive any other fees or benefits from the Company or the Offeror or their respective substantial shareholders or any party acting, or presumed to be acting, in concert with any of them.

BASIS OF OUR OPINION

In formulating our advice and recommendation, we have relied solely on the statements, information, opinions, beliefs and representations for matters relating to the Group contained in the Circular and the information and representations provided to us by the Group and/or its senior management staff (the “ LSD Management ”) and/or the Directors. We have assumed that all such statements, information, opinions, beliefs and representations contained or referred to in the Circular or otherwise provided or made or given by the Group and/or the LSD Management and/or the Directors and for which it is/they are solely responsible were true, accurate and complete in all material respects at the time they were made and given and continue to be true, accurate and complete in all material respects as at the date of the Circular. We have assumed that all the opinions, beliefs and representations for matters relating to the Group made or provided by the LSD Management and/or the Directors contained in the Circular have been reasonably made after due and careful enquiry. We have also sought and obtained confirmation from LSD and/or the LSD Management and/or the Directors that no material facts have been omitted from the information provided and referred to in the Circular and the Company shall notify LSD Shareholders of any subsequent material changes as soon as possible.

– 48 –

LETTER FROM RED SUN

We consider that we have been provided with sufficient information and documents to enable us to reach an informed view and the LSD Management and the Directors have assured us that no material information has been withheld from us to allow us to reasonably rely on the information provided so as to provide a reasonable basis for our advice. We have no reason to doubt the truth, accuracy and completeness of the statements, information, opinions, beliefs and representations provided to us by the Group and/or the LSD Management and/or the Directors and their respective advisers or to believe that material information has been withheld or omitted from the information provided to us or referred to in the aforesaid documents. We have not, however, carried out any independent verification of the information provided, nor have we conducted any independent investigation into the business and affairs of LSD, the Offeror, eSun, Lai Fung, MAGHL, their respective shareholder(s) and subsidiaries or affiliates, and their respective histories, experience and track records, or the prospects of the markets in which they respectively operate.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion and recommendation regarding the Offers, we have taken into consideration the following principal factors:

1. Background information of the Offeror, the Group, the eSun Group, the Lai Fung Group and MAGHL

For illustration purposes, based on information as set out in the Letter from the Board and the LSD 2018 Interim Report (defined hereafter), we set out below a simplified corporate structure of the principal parties involved in the Offers as at the Latest Practicable Date:

==> picture [266 x 213] intentionally omitted <==

----- Start of picture text -----

LSG
56.10%
The Company
100.00%
The Offeror
36.94%
eSun
50.60% 67.56% (Note)
Lai Fung MAGHL
----- End of picture text -----

Note: Based on information set out in the disclosure of interests published on the website of the Stock Exchange.

– 49 –

LETTER FROM RED SUN

1.1 Background information of the Offeror

The Offeror, Transtrend Holdings Limited, was incorporated in Hong Kong with limited liability, being a wholly-owned subsidiary of LSD and the principal activity of the Offeror was investment holding. As at the Latest Practicable Date, the Offeror (not including Offeror Concert Parties, whose eSun Shares form part of the eSun Offer Shares and do not form part of the Disinterested eSun Shares) was interested in 551,040,186 shares in eSun, representing approximately 36.94% of the issued share capital of eSun.

1.2 Background information of the Group

LSD is a limited liability company incorporated in Hong Kong with its shares listed on the Main Board of the Stock Exchange. LSD’s ultimate holding company is LSG, a limited liability company incorporated in Hong Kong with its shares listed on the Main Board of the Stock Exchange. The Group’s principal activities include (i) property development; (ii) property investment; (iii) investment in and operation of hotels and restaurants; and (iv) investment holding.

Set out below is a summary of (i) the unaudited consolidated financial results extracted from LSD’s interim report for the six months ended 31 January 2018 (the “ LSD 2018 Interim Report ”); and (ii) the audited consolidated financial results extracted from LSD’s the annual report for the year ended 31 July 2017 (the “ LSD 2017 Annual Report ”).

– 50 –

LETTER FROM RED SUN

Revenue Sale of properties Rental income and building management fee Hotel, restaurant and other operations Total revenue Operating proft, share of profts/ losses of ventures and associates, and others_(Note)_ Changes in fair value of investment properties Proft before tax Income tax expenses Proft for the period/year Proft for the period/year attributable to owners of LSD	For the six months ended 31 January 2018 2017 (Unaudited) (Unaudited) (HK$’000) (HK$’000) — — 349,482 345,839 514,298 472,597 863,780 818,436 717,386 473,285 575,044 502,876 1,292,430 976,161 (41,176) (43,653) 1,251,254 932,508 1,223,639 913,135	For the year ended 31 July 2017 2016 (Audited) (Audited) (HK$’000) (HK$’000) 89,245 468,691 686,748 701,643 928,087 698,000 1,704,080 1,868,334 965,471 1,185,918 1,238,092 51,539 2,203,563 1,237,457 (76,450) (57,691) 2,127,113 1,179,766 2,093,572 1,148,390

Note: not inclusive of change in fair value of investment properties

– 51 –

LETTER FROM RED SUN

Financial results for the six months ended 31 January 2018

As set out in the LSD 2018 Interim Report, the Group recorded revenue of approximately HK$863.8 million and a profit attributable to owners of LSD of approximately HK$1,251.3 million for the six months ended 31 January 2018, as compared to the revenue of approximately HK$818.4 million and a profit attributable to owners of LSD of approximately HK$932.5 million for the six months ended 31 January 2017.

We noted from the LSD 2018 Interim Report that the increase in revenue was mainly attributable to the increase in recognised revenue from the hotel, restaurant and other operations during the six months ended 31 January 2018. As set out in the LSD 2018 Interim Report, the increase in revenue from the restaurant segment was primarily attributable to an increase in contributions from the newly opened restaurants, including Chiu Tang in Central, Hong Kong and Old Bazaar Kitchen in Wanchai, Hong Kong.

In addition to the aforesaid factors, fair value change of investment properties owned by the Group and held through joint ventures of the Group also contributed to the increase in the net profit attributable to owners of LSD for the six months ended 31 January 2018.

Financial results for years ended 31 July 2016 and 2017

As set out in the LSD 2017 Annual Report, the Group recorded (i) revenue of approximately HK$1,868.3 million and a profit attributable to owners of LSD of approximately HK$1,148.4 million for the year ended 31 July 2016; and (ii) revenue of approximately HK$1,704.1 million and a profit attributable to owners of LSD of approximately HK$2,093.6 million for the year ended 31 July 2017.

As set out in the LSD 2017 Annual Report, the decrease in revenue of the Group was primarily due to lower revenue recorded from sale of properties during the financial year ended 31 January 2017. The increase in net profit attributable to owners of LSD was largely attributable to the net effect of (i) lower operating profit due to lower property sales; (ii) fair value change of the investment properties held by the Group, its joint ventures and associates; (iii) loss on deemed disposal of the Group’s interest in eSun due to the placing of 248,642,433 new eSun Shares under its general mandate which was completed on 9 February 2017; (iv) reversal of the provision for tax indemnity pursuant to the tax indemnity deed in connection with the listing of Lai Fung on the Stock Exchange in 1997; and (v) discount on acquisition of additional 2% equity interest in eSun.

– 52 –

LETTER FROM RED SUN

Financial positions of the Group

Set out below is a summary of (i) the unaudited consolidated financial position extracted from the LSD 2018 Interim Report; and (ii) the audited consolidated financial positions extracted from the LSD 2017 Annual Report.

As at 31 January 2018 (Unaudited) (HK$’000) Non-current assets Property, plant and equipment 4,742,709 Prepaid land lease payments 19,359 Investment properties 17,233,922 Properties under development for sale 815,394 Goodwill 5,161 Interests in associates 3,807,340 Interests in joint ventures 7,925,439 Available-for-sale fnancial assets 1,785,379 Pledged bank balances and time deposits 62,404 Deposits paid and other receivables 338,128 Total non-current assets 36,735,235 Current assets Properties under development for sale 965,856 Completed properties for sale 252,121 Inventories 33,549 Debtors, deposits paid and other receivables 639,319 Pledged bank balances and time deposits 239,690 Cash and cash equivalents 2,025,409 Total current assets 4,155,944 Total assets 40,891,179	As at 31 July 2017 2016 (Audited) (Audited) (HK$’000) (HK$’000) 4,034,466 2,983,985 19,873 20,901 16,447,014 15,147,376 1,571,635 1,322,403 5,161 5,161 3,555,876 3,660,835 7,224,183 6,754,353 1,589,670 1,382,026 69,675 216,241 231,868 181,062 34,749,421 31,674,343 — — 252,121 321,509 31,327 25,899 530,416 177,008 213,640 — 2,664,066 2,354,682 3,691,570 2,879,098 38,440,991 34,553,441	As at 31 July 2017 2016 (Audited) (Audited) (HK$’000) (HK$’000) 4,034,466 2,983,985 19,873 20,901 16,447,014 15,147,376 1,571,635 1,322,403 5,161 5,161 3,555,876 3,660,835 7,224,183 6,754,353 1,589,670 1,382,026 69,675 216,241 231,868 181,062 34,749,421 31,674,343 — — 252,121 321,509 31,327 25,899 530,416 177,008 213,640 — 2,664,066 2,354,682 3,691,570 2,879,098 38,440,991 34,553,441
		31,674,343 — 321,509 25,899 177,008 — 2,354,682
		2,879,098
		34,553,441

– 53 –

LETTER FROM RED SUN

As at 31 January 2018 (Unaudited) (HK$’000) Non-current liabilities Bank borrowings 6,403,514 Guaranteed notes 3,105,184 Derivative fnancial instruments 5,728 Deferred tax 146,453 Provision for tax indemnity 93,000 Long term deposits received and other payables 591,141 Deferred rental 6,083 Total non-current liabilities 10,351,103 Current liabilities Creditors, deposits received and accruals 1,445,838 Tax payable 99,557 Guaranteed notes — Bank borrowings 172,486 Total current liabilities 1,717,881 Total liabilities 12,068,984 Capital and Reserves Share capital 4,076,816 Reserves 24,227,557 Equity attributable to owners of LSD 28,304,373 Non-controlling interest 517,822 Total equity 28,822,195	As at 31 July 2017 2016 (Audited) (Audited) (HK$’000) (HK$’000) 6,748,399 5,275,720 — 2,709,227 — — 141,291 127,891 93,000 729,387 886,435 90,063 7,448 9,724 7,876,573 8,942,012 452,005 460,588 119,062 132,282 2,731,230 — 157,582 126,709 3,459,879 719,579 11,336,452 9,661,591 4,064,736 4,050,252 22,535,054 20,307,483 26,599,790 24,357,735 504,749 534,115 27,104,539 24,891,850	As at 31 July 2017 2016 (Audited) (Audited) (HK$’000) (HK$’000) 6,748,399 5,275,720 — 2,709,227 — — 141,291 127,891 93,000 729,387 886,435 90,063 7,448 9,724 7,876,573 8,942,012 452,005 460,588 119,062 132,282 2,731,230 — 157,582 126,709 3,459,879 719,579 11,336,452 9,661,591 4,064,736 4,050,252 22,535,054 20,307,483 26,599,790 24,357,735 504,749 534,115 27,104,539 24,891,850
		8,942,012 460,588 132,282 — 126,709
		719,579
		9,661,591

		4,050,252 20,307,483
		24,357,735 534,115
		24,891,850

– 54 –

LETTER FROM RED SUN

As at 31 January 2018, the Group’s total assets amounted to approximately HK$40,891.2 million as compared to approximately HK$38,441.0 million and approximately HK$34,553.4 million as at 31 July 2017 and 31 July 2016, respectively.

The total assets of the Group as at 31 January 2018 mainly comprised (i) investment properties of approximately HK$17,233.9 million; (ii) interest in joint ventures of approximately HK$7,925.4 million; (iii) property, plant and equipment of approximately HK$4,742.7 million; (iv) interest in associates of approximately HK$3,807.3 million; (v) cash and cash equivalents of approximately HK$2,025.4 million; and (vi) availablefor-sale financial assets of approximately HK$1,785.4 million.

The total liabilities of the Group as at 31 January 2018 mainly comprised (i) bank borrowings of approximately HK$6,576.0 million; (ii) guaranteed notes of approximately HK$3,105.2 million; and (iii) creditors, deposits received and accruals of approximately HK$1,445.8 million.

1.3 Background information of the eSun Group

eSun is a limited liability company incorporated in Bermuda and its shares are listed on the Main Board of the Stock Exchange. The eSun Group’s principal activities include the development, operation of and investment in media and entertainment, music production and distribution, the investment in and production and distribution of television programmes, films and video format products, cinema operation, property development for sale and property investment for rental purposes as well as the development and operation of and investment in cultural, leisure, entertainment and related facilities.

As set out in the eSun 2018 Interim Report (defined below), both Lai Fung and MAGHL are non-wholly owned listed subsidiaries of eSun and their respective financial statements were consolidated into that of the eSun Group’s consolidated financial statements.

Set out below is a summary of (i) the unaudited consolidated financial results extracted from eSun’s interim report for the six months ended 31 January 2018 (the “ eSun 2018 Interim Report ”); and (ii) the audited consolidated financial results extracted from eSun’s annual report for the year ended 31 July 2017 (the “ eSun 2017 Annual Report ”).

– 55 –

LETTER FROM RED SUN

Revenue Sale of properties Property investment Media and entertainment Film production and distribution Cinema operation Others Total revenue Operating proft, share of profts/losses of ventures and associates, and others_(Note)_ Changes in fair value of investment properties Proft before tax and indemnity Income tax expenses Tax Indemnity Proft for the period/year (Loss)/proft for the period/year attributable to owners of eSun	For the six months ended 31 January 2018 2017 (Unaudited) (Unaudited) (HK$’000) (HK$’000) 129,883 133,192 376,483 342,758 237,090 239,234 199,157 220,209 189,509 189,544 52,759 39,515 1,184,881 1,164,452 (122,416) 157,456 349,748 172,663 227,332 330,119 (175,936) (210,980) — — 51,396 119,139 (14,295) 27,644	For the year ended 31 July 2017 2016 (Audited) (Audited) (HK$’000) (HK$’000) 624,592 1,414,160 696,257 623,674 448,371 537,100 418,476 343,645 418,623 364,907 71,069 85,789 2,677,388 3,369,275 274,422 196,489 832,118 522,043 1,106,540 718,532 (573,262) (405,526) 493,936 — 1,027,214 313,006 514,233 80,825

Note: not inclusive of change in fair value of investment properties

Financial results for the six months ended 31 January 2018

As set out in the eSun 2018 Interim Report, the eSun Group recorded revenue of approximately HK$1,184.9 million and a loss attributable to owners of eSun of approximately HK$14.3 million for the six months ended 31 January 2018, as compared to revenue of approximately HK$1,164.5 million and a profit attributable to owners of eSun of approximately HK$27.6 million for the six months ended 31 January 2017.

– 56 –

LETTER FROM RED SUN

For the six months ended 31 January 2018, revenue attributable to (i) property related segments (i.e. property development segment and property investment segment) amounted to approximately HK$506.4 million, representing approximately 42.7% of the total revenue; and (ii) media and entertainment segment, film production and distribution segment amounted to approximately HK$237.1 million and HK$199.2 million, representing approximately 20.0% and 16.8% of the total revenue, respectively. For the six months ended 31 January 2017, revenue attributable to (i) property related segments amounted to approximately HK$476.0 million, representing approximately 40.9% of the total revenue; and (ii) media and entertainment segment, film production and distribution segment amounted to approximately HK$239.2 million and HK$220.2 million, representing approximately 20.5% and 18.9% of the total revenue, respectively. The revenue of the eSun Group was remained relatively stable at approximately HK$1.2 billion for each of the six months ended 31 January 2017 and 2018, respectively.

We also noted from the eSun 2018 Interim Report that for the six months ended 31 January 2018, save for segment profit recorded from (i) property related segments of approximately HK$572.5 million; and (ii) media and entertainment segment of approximately HK$25.3 million, the other segments, namely film production and distribution, and cinema operation, together recorded segment losses of approximately HK$217.9 million. For the six months ended 31 January 2017, save for the cinema operation segment which recorded a segment loss of approximately HK$21.1 million, all other segments recorded a segment profit, including (i) approximately HK$348.8 million from the property related segments; (ii) approximately HK$19.9 million from the media and entertainment segment; and (iii) approximately HK$15.4 million from the film production and distribution segment.

As set out in the eSun 2018 Interim Report, the net loss attributable to owners of eSun for the six months ended 31 January 2018 was primarily due to the net effect of (i) consolidated loss from MAGHL mainly attributable to the unsatisfactory performance of the films released by the MAGHL Group during the six months ended 31 January 2018; (ii) lower profit contribution from a joint venture of Lai Fung as sale of the project has been substantially completed, despite a higher revaluation gain arising from revaluations of Lai Fung’s investment properties during the six months ended 31 January 2018; and (iii) the change in fair value of investment properties of the eSun Group of approximately HK$349.7 million.

Financial results for years ended 31 July 2016 and 2017

As set out in the eSun 2017 Annual Report, the eSun Group recorded (i) revenue of approximately HK$3,369.3 million and a profit attributable to owners of the eSun of approximately HK$80.8 million for the year ended 31 July 2016; and (ii) revenue of approximately HK$2,677.4 million and a profit attributable to owners of the eSun of approximately HK$514.2 million for the year ended 31 July 2017.

– 57 –

LETTER FROM RED SUN

For the year ended 31 July 2017, revenue attributable to (i) property related segments amounted to approximately HK$1,320.8 million, representing approximately 49.3% of the total revenue; and (ii) media and entertainment segment, film production and distribution segment, and cinema operation segment amounted to approximately HK$448.4 million, HK$418.5 million and HK$418.6 million, representing approximately 16.7%, 15.6% and 15.6% of the total revenue, respectively. For the year ended 31 July 2016, revenue attributable to (i) property related segments amounted to approximately HK$2,037.8 million, representing approximately 60.5% of the total revenue; and (ii) media and entertainment segment, film production and distribution segment, and cinema operation segment amounted to approximately HK$537.1 million, HK$343.6 million and HK$364.9 million, representing approximately 15.9%, 10.2% and 10.8% of the total revenue, respectively.

We noted that the decrease in revenue for the year ended 31 July 2017 as compared to the year ended 31 July 2016 was mainly attributable to less turnover from sale of properties of Lai Fung, a non-wholly owned subsidiary of eSun and its subsidiaries for the year ended 31 July 2017 as compared to the prior year.

It is also noted from the eSun 2017 Annual Report that for the year ended 31 July 2017, save for segment profit recorded from (i) property related segments of approximately HK$1,178.3 million; and (ii) media and entertainment segment of approximately HK$25.5 million, the other segments, namely film production and distribution, and cinema operation, together recorded segment losses of approximately HK$159.0 million. For the year ended 31 July 2016, save for segment profit recorded from (i) property related segments of approximately HK$1,140.5 million; and (ii) media and entertainment segment of approximately HK$16.5 million, the other segments, namely film production and distribution, and cinema operation, together recorded segment losses of approximately HK$72.5 million.

For the year ended 31 July 2017, net profit attributable to owners of eSun was approximately HK$514.2 million (2016: HK$80.8 million). The increase in net profit attributable to owners of eSun was attributable to the net effect of (i) lower operating profit before fair value changes due to lower recognised property sales from the Lai Fung Group; (ii) increased profit contribution from the property sales of Lai Fung’s joint venture projects; (iii) higher revaluation gain arising from the revaluation of the Lai Fung Group’s investment properties; (iv) tax indemnity amount received by Lai Fung from LSD pursuant to the tax indemnity deed in connection with the listing of Lai Fung on the Stock Exchange in 1997; and (v) gain on disposal of the eSun Group’s entire interest in 1,480,994 Series C preferred shares in Pony Media Holdings Inc. in March 2017.

– 58 –

LETTER FROM RED SUN

Financial positions of the eSun Group

Set out below is a summary of (i) the unaudited consolidated financial position extracted from the eSun 2018 Interim Report; and (ii) the audited consolidated financial positions extracted from the eSun 2017 Annual Report.

As at 31 January 2018 (Unaudited) (HK$’000) Non-current assets Property, plant and equipment 3,442,416 Properties under development 1,664,131 Investment properties 19,064,096 Film right 19,284 Film products 133,205 Music catalogs 9,314 Goodwill 82,440 Other intangible assets 10,152 Interests in joint ventures 1,619,335 Interests in associates 26,123 Available-for-sale investments 144,036 Deposit for acquisition of an investment property — Deposits, prepayments and other receivables 169,415 Deferred tax assets 5,829 Total non-current assets 26,389,776 Current assets Properties under development 329,056 Completed properties for sale 966,939 Films under production 453,361 Inventories 23,497 Debtors 270,873 Debtors, prepayments and other receivables 451,011 Prepaid tax 35,922 Pledged and restricted time deposits and bank balances 1,007,016 Cash and cash equivalents 4,703,363 8,241,038 Asset classifed as held for sale — Total current assets 8,241,038 Total assets 34,630,814	As at 31 July 2017 2016 (Audited) (Audited) (HK$’000) (HK$’000) 3,041,562 2,768,546 1,346,220 1,188,387 16,903,419 15,065,759 20,960 23,682 125,921 123,768 11,438 14,918 82,440 123,440 16,557 28,605 1,438,287 1,161,752 28,587 26,894 123,435 138,592 — 228,620 124,362 95,285 6,050 6,101 23,269,238 20,994,349 215,303 802,635 993,460 625,994 463,105 450,849 35,111 33,766 212,675 384,508 427,715 450,119 43,033 36,223 571,142 1,066,494 2,733,435 3,299,148 5,694,979 7,149,736 278,531 257,666 5,973,510 7,407,402 29,242,748 28,401,751	As at 31 July 2017 2016 (Audited) (Audited) (HK$’000) (HK$’000) 3,041,562 2,768,546 1,346,220 1,188,387 16,903,419 15,065,759 20,960 23,682 125,921 123,768 11,438 14,918 82,440 123,440 16,557 28,605 1,438,287 1,161,752 28,587 26,894 123,435 138,592 — 228,620 124,362 95,285 6,050 6,101 23,269,238 20,994,349 215,303 802,635 993,460 625,994 463,105 450,849 35,111 33,766 212,675 384,508 427,715 450,119 43,033 36,223 571,142 1,066,494 2,733,435 3,299,148 5,694,979 7,149,736 278,531 257,666 5,973,510 7,407,402 29,242,748 28,401,751
		20,994,349 802,635 625,994 450,849 33,766 384,508 450,119 36,223 1,066,494 3,299,148
		7,149,736 257,666
		7,407,402
		28,401,751

– 59 –

LETTER FROM RED SUN

As at 31 January 2018 (Unaudited) (HK$’000) Non-current liabilities Long-term deposits received 150,346 Interest-bearing bank loans, secured 3,197,199 Other borrowings 258,967 Guaranteed notes 2,712,910 Convertible notes — Fixed rate senior notes — Loans from a joint venture 691,804 Derivative fnancial instruments 1,921 Deferred tax liabilities 3,413,699 Total non-current liabilities 10,426,846 Current liabilities Creditors and accruals 2,013,135 Deposits received and deferred income 417,753 Tax payable 138,796 Interest-bearing bank loans, secured 362,967 Convertible notes 191,150 Fixed rate senior notes 2,219,658 Derivative fnancial instruments 46,378 Loans from a joint venture 205,196 Total current liabilities 5,595,033 Total liabilities 16,021,879 Capital and Reserves Issued capital 745,927 Reserves 9,034,785 Equity attributable to owners of eSun 9,780,712 Non-controlling interest 8,828,223 Total equity 18,608,935	As at 31 July 2017 2016 (Audited) (Audited) (HK$’000) (HK$’000) 138,875 124,389 2,906,097 3,089,201 252,618 247,510 — — — 166,170 — 2,092,741 649,779 222,430 — 210,068 3,104,284 2,808,906 7,051,653 8,961,415 1,551,782 1,328,410 362,831 765,052 128,554 420,214 261,392 311,548 182,346 — 2,080,366 — 208,223 — 192,731 350,328 4,968,225 3,175,552 12,019,878 12,136,967 745,927 621,606 8,372,273 7,977,652 9,118,200 8,599,258 8,104,670 7,665,526 17,222,870 16,264,784	As at 31 July 2017 2016 (Audited) (Audited) (HK$’000) (HK$’000) 138,875 124,389 2,906,097 3,089,201 252,618 247,510 — — — 166,170 — 2,092,741 649,779 222,430 — 210,068 3,104,284 2,808,906 7,051,653 8,961,415 1,551,782 1,328,410 362,831 765,052 128,554 420,214 261,392 311,548 182,346 — 2,080,366 — 208,223 — 192,731 350,328 4,968,225 3,175,552 12,019,878 12,136,967 745,927 621,606 8,372,273 7,977,652 9,118,200 8,599,258 8,104,670 7,665,526 17,222,870 16,264,784
		8,961,415 1,328,410 765,052 420,214 311,548 — — — 350,328
		3,175,552 12,136,967

		621,606 7,977,652
		8,599,258 7,665,526
		16,264,784

– 60 –

LETTER FROM RED SUN

As at 31 January 2018, the eSun Group’s total assets amounted to approximately HK$34,630.8 million as compared to approximately HK$29,242.7 million and approximately HK$28,401.8 million as at 31 July 2017 and 31 July 2016, respectively. Total assets of the eSun Group as at 31 January 2018 mainly comprised of (i) investment properties of approximately HK$19,064.1 million; (ii) cash and cash equivalents of approximately HK$4,703.4 million; (iii) property, plant and equipment of approximately HK$3,442.4 million; (iv) properties under development of approximately HK$1,664.1 million; (v) interest in joint ventures of approximately HK$1,619.3 million; and (vi) pledged and restricted time deposits and bank balances of approximately HK$1,007.0 million. Segment asset (excluding investments in joint ventures and associates) for (i) the property related segments amounted to approximately HK$25,196.4 million; and (ii) the film production and distribution segment, cinema operation segment, and media and entertainment segment amounted to approximately HK$1,185.0 million, HK$624.2 million and HK$387.1 million, respectively. Segment liabilities for (i) the property related segments amounted to approximately HK$1,545.4 million; and (ii) the film production and distribution segment, cinema operation segment, and media and entertainment segment amounted to approximately HK$471.9 million, HK$157.6 million and HK$179.9 million, respectively.

For further information on the assets of the eSun Group, please refer to the analysis as set out under the paragraph headed “6.4 Assets, valuation and net asset value of the eSun Group” in this letter.

Total liabilities of the eSun Group as at 31 January 2018 mainly comprised (i) secured interest-bearing bank loans of approximately HK$3,560.2 million; (ii) deferred tax liabilities of approximately HK$3,413.7 million; (iii) guaranteed notes of approximately HK$2,712.9 million; and (iv) fixed rate senior notes of approximately HK$2,219.7 million.

1.4 Background information of the Lai Fung Group

Lai Fung is a limited liability company incorporated in the Cayman Islands and its shares are listed on the Main Board of the Stock Exchange. The Lai Fung Group’s principal activities include (i) property development for sale; (ii) property investment for rental purposes; and (iii) development and operation of and investment in cultural, leisure, entertainment and related facilities.

Set out below is a summary of (i) the unaudited consolidated financial results extracted from the Lai Fung Group’s interim report for the six months ended 31 January 2018 (the “ Lai Fung 2018 Interim Report ”); and (ii) the audited consolidated financial results extracted from the Lai Fung Group’s the annual report for the year ended 31 July 2017 (the “ Lai Fung 2017 Annual Report ”).

– 61 –

LETTER FROM RED SUN

Revenue Sale of properties Rental income from investment properties and serviced apartments Total revenue Operating proft, share of profts/losses of joint ventures and associates, and others_(Note)_ Changes in fair value of investment properties Proft before tax and tax indemnity Income tax expenses Tax indemnity Proft for the period/year Proft for the period/year attributable to owners of Lai Fung	For the six months ended 31 January 2018 2017 (Unaudited) (Unaudited) (HK$’000) (HK$’000) 129,883 133,192 379,527 345,830 509,410 479,022 240,290 422,985 351,180 123,995 591,470 546,980 (191,238) (200,364) — — 400,232 346,616 358,911 336,424	For the year ended 31 July 2017 2016 (Audited) (Audited) (HK$’000) (HK$’000) 624,592 1,414,160 702,090 629,370 1,326,682 2,043,530 852,700 757,570 800,104 528,015 1,652,804 1,285,585 (556,156) (388,163) 493,936 — 1,590,584 897,422 1,477,452 873,527

Note: not inclusive of change in fair value of investment properties

– 62 –

LETTER FROM RED SUN

Financial results for the six months ended 31 January 2018

As set out in the Lai Fung 2018 Interim Report, the Lai Fung Group recorded revenue of approximately HK$509.4 million and a profit attributable to owners of Lai Fung of approximately HK$358.9 million for the six months ended 31 January 2018, as compared to revenue of approximately HK$479.0 million and a profit attributable to owners of Lai Fung of approximately HK$336.4 million for the six months ended 31 January 2017.

The Lai Fung Group recorded a slight increase in total revenue and net profit attributable to its owners for the six months ended 31 January 2018 compared to the six months ended 31 January 2017. The increase in revenue was mainly attributable to increase in rental income from investment properties and serviced apartments.

The increase in net profit attributable to owners of Lai Fung was due to the net effect of (i) increase in fair value of Lai Fung Group’s investment properties for the six months ended 31 January 2018 as compared to the six months ended 31 January 2017; and (ii) decreased profit contribution from the sales of Guangzhou Dolce Vita, the joint venture project with CapitaLand China Holdings Pte Ltd as compared to the same period last year, which has been substantially sold and is recognised as a component of “Share of profits of joint ventures” in Lai Fung’s income statement.

Financial results for years ended 31 July 2016 and 2017

As set out in the Lai Fung 2017 Annual Report, the Lai Fung Group recorded (i) revenue of approximately HK$2,043.5 million and profit attributable to owners of Lai Fung of approximately HK$897.4 million for the year ended 31 July 2016; and (ii) revenue of approximately HK$1,326.7 million and profit attributable to owners of Lai Fung of approximately HK$1,590.6 million for the year ended 31 July 2017.

The decrease in revenue for the year ended 31 July 2017 as compared to the year ended 31 July 2016 was primarily due to reduction in revenue derived from sale of properties related to certain PRC property development projects.

Despite the decrease in revenue, the Lai Fung Group recorded an increase in the net profit attributable to owners of Lai Fung due to the net effect of (i) lower operating profit due to the aforesaid reason; (ii) increase in share of profits of joint ventures; (iii) higher fair value increase arising from the investment properties; (iv) fair value gain arising from the cross currency swaps which were entered into in relation to Lai Fung’s RMB1.8 billion senior notes issued in 2013; and (v) tax indemnity amount received by the Lai Fung Group from LSD pursuant to the tax indemnity deed in connection with the listing of Lai Fung on the Stock Exchange in 1997.

– 63 –

LETTER FROM RED SUN

Financial positions of the Lai Fung Group

Set out below is a summary of (i) the unaudited consolidated financial position extracted from the Lai Fung 2018 Interim Report; and (ii) the audited consolidated financial positions extracted from the Lai Fung 2017 Annual Report.

As at 31 January 2018 (Unaudited) (HK$’000) Non-current assets Property, plant and equipment 2,101,172 Prepaid land lease payments 4,585 Investment properties 18,625,868 Properties under development 1,659,495 Interests in joint ventures 1,604,302 Interests in associates 805 Deposit for acquisition of an investment property — Total non-current assets 23,996,227 Current assets Properties under development 327,218 Completed properties for sale 879,178 Debtors, prepayments and other receivables 303,872 Prepaid tax 35,852 Pledged and restricted time deposits and bank balances 1,006,896 Cash and cash equivalents 4,033,149 6,586,165 Asset classifed as held for sale — Total current assets 6,586,165 Total assets 30,582,392	As at 31 July 2017 2016 (Audited) (Audited) (HK$’000) (HK$’000) 1,703,731 1,450,871 4,397 4,623 16,457,221 14,661,728 1,341,974 1,184,375 1,387,570 804,431 343 — — 228,620 20,895,236 18,334,648 213,818 791,844 904,811 503,187 256,671 367,068 42,844 32,575 571,022 1,066,374 2,057,346 2,546,240 4,046,512 5,307,288 278,531 257,666 4,325,043 5,564,954 25,220,279 23,899,602	As at 31 July 2017 2016 (Audited) (Audited) (HK$’000) (HK$’000) 1,703,731 1,450,871 4,397 4,623 16,457,221 14,661,728 1,341,974 1,184,375 1,387,570 804,431 343 — — 228,620 20,895,236 18,334,648 213,818 791,844 904,811 503,187 256,671 367,068 42,844 32,575 571,022 1,066,374 2,057,346 2,546,240 4,046,512 5,307,288 278,531 257,666 4,325,043 5,564,954 25,220,279 23,899,602
		18,334,648 791,844 503,187 367,068 32,575 1,066,374 2,546,240
		5,307,288 257,666
		5,564,954
		23,899,602

– 64 –

LETTER FROM RED SUN

As at 31 January 2018 (Unaudited) (HK$’000) Non-current liabilities Long-term deposits received 151,800 Interest-bearing bank loans, secured 3,120,002 Advances from a former substantial shareholder 57,645 Loans from a fellow subsidiary 229,075 Loans from a joint venture 691,804 Guaranteed notes 2,712,910 Fixed rate senior notes — Derivative fnancial instruments 1,921 Deferred tax liabilities 3,013,533 Total non-current liabilities 9,978,690 Current liabilities Creditors and accruals 1,378,153 Deposits received and deferred income 196,700 Interest-bearing bank loans, secured 43,271 Fixed rate senior notes 2,219,658 Derivative fnancial instruments 46,378 Loans from a joint venture 205,196 Tax payable 126,898 Total current liabilities 4,216,254 Total liabilities 14,194,944 Capital and Reserves Issued capital 1,635,221 Reserves 14,495,195 Equity attributable to owners of Lai Fung 16,130,416 Non-controlling interest 257,032 Total equity 16,387,448	As at 31 July 2017 2016 (Audited) (Audited) (HK$’000) (HK$’000) 140,240 124,389 2,814,062 2,747,970 54,143 54,675 218,279 221,714 649,779 222,430 — — — 2,092,741 — 210,068 2,704,032 2,406,920 6,580,535 8,080,907 957,047 797,512 245,024 596,367 82,031 287,548 2,080,366 — 208,223 — 192,731 350,328 104,958 399,326 3,870,380 2,431,081 10,450,915 10,511,988 1,628,509 1,619,770 12,955,602 11,694,997 14,584,111 13,314,767 185,253 72,847 14,769,364 13,387,614	As at 31 July 2017 2016 (Audited) (Audited) (HK$’000) (HK$’000) 140,240 124,389 2,814,062 2,747,970 54,143 54,675 218,279 221,714 649,779 222,430 — — — 2,092,741 — 210,068 2,704,032 2,406,920 6,580,535 8,080,907 957,047 797,512 245,024 596,367 82,031 287,548 2,080,366 — 208,223 — 192,731 350,328 104,958 399,326 3,870,380 2,431,081 10,450,915 10,511,988 1,628,509 1,619,770 12,955,602 11,694,997 14,584,111 13,314,767 185,253 72,847 14,769,364 13,387,614
		8,080,907 797,512 596,367 287,548 — — 350,328 399,326 2,431,081
		10,511,988

		1,619,770 11,694,997
		13,314,767 72,847
		13,387,614

– 65 –

LETTER FROM RED SUN

As at 31 January 2018, the Lai Fung Group’s total assets amounted to approximately HK$30,582.4 million as compared to approximately HK$25,220.3 million and approximately HK$23,899.6 million as at 31 July 2017 and 31 July 2016, respectively. Total assets of the Lai Fung Group as at 31 January 2018 mainly comprised (i) investment properties of approximately HK$18,625.9 million; (ii) cash and cash equivalents of approximately HK$4,033.1 million; (iii) property, plant and equipment of approximately HK$2,101.2 million; (iv) properties under development of approximately HK$1,986.7 million; (v) interest in joint ventures of approximately HK$1,604.3 million; and (vi) pledged and restricted time deposits and bank balances of approximately HK$1,006.9 million.

The total liabilities of the Lai Fung Group as at 31 January 2018 mainly comprised (i) secured interest-bearing bank loans of approximately HK$3,163.3 million; (ii) deferred tax liabilities of approximately HK$3,013.5 million; (iii) guaranteed notes of approximately HK$2,712.9 million; (iv) fixed rate senior notes of approximately HK$2,219.7 million; and (v) creditors and accruals of approximately HK$1,378.2 million.

1.5 Background information of the MAGHL Group

MAGHL, a company listed on the GEM of the Stock Exchange, is a subsidiary of eSun. If the eSun Offers become unconditional in all respects, the Offeror will acquire statutory control of MAGHL through its interest in eSun. As set out in the Joint Announcement, the Offeror will not be obliged under the chain principle in Note 8 to Rule 26.1 of the Takeovers Code to make a general offer for MAGHL as a result of the eSun Share Offer because: (i) the holding of eSun in MAGHL is not significant in relation to eSun, given that the relative value of the holding in MAGHL as compared to eSun is less than 60% in terms of assets and profits; and (ii) the purposes of the Offers from the perspective of LSG and LSD, which are set out in the paragraph headed “Reasons for and benefits of the Offers” in the Letter from the Board, are not to secure control of MAGHL. Accordingly, the eSun Share Offer will not result in any offer for MAGHL.

However, for the purpose of completeness, we have set out herein background information of the MAGHL Group on the basis that MAGHL is a non-wholly owned listed subsidiary of eSun as at the Latest Practicable Date.

The principal activities of the MAGHL Group include (i) film production and distribution; (ii) organisation, management and production of concerts and live performances; (iii) artiste management; (iv) production and distribution of television programs; (v) music production and publishing; (vi) licensing of media contents; and (vii) provision of consultancy services in planning and management of cultural, entertainment and live performance projects.

– 66 –

LETTER FROM RED SUN

As set out in the unaudited consolidated financial results extracted from the MAGHL Group’s interim report for the six months ended 31 January 2018 (the “ MAGHL 2018 Interim Report ”), the MAGHL Group recorded revenue of approximately HK$299.2 million and a loss attributable to owners of MAGHL of approximately HK$179.7 million for the six months ended 31 January 2018, as compared to revenue of approximately HK$320.8 million and a profit attributable to owners of MAGHL of approximately HK$9.1 million for the six months ended 31 January 2017.

We noted that the MAGHL Group recorded a decrease in revenue from the MAGHL Group’s film production and distribution business, but at the same time an increase in cost of sales. The aforesaid factors have contributed to the loss after tax of approximately HK$183.7 million for the six months ended 31 January 2018.

Set out below is a summary of (i) the unaudited consolidated financial position extracted from the MAGHL 2018 Interim Report; and (ii) the audited consolidated financial positions extracted from the annual report of MAGHL for the year ended 31 July 2017.

As at 31 January 2018 (Unaudited) (HK$’000) Non-current assets 175,014 Current assets 1,130,334 Total assets 1,305,348 Non-current liabilities — Current liabilities 861,642 Total liabilities 861,642 Equity attributable to owners of MAGHL 456,072 Non-controlling interest (12,366) Total equity 443,706	As at 31 July 2017 2016 (Audited) (Audited) (HK$’000) (HK$’000) 170,181 187,612 1,104,563 1,244,611 1,274,744 1,432,223 — 249,825 647,128 371,849 647,128 621,674 638,309 812,805 (10,693) (2,256) 627,616 810,549

As at 31 January 2018, the MAGHL Group’s total assets amounted to approximately HK$1,305.3 million as compared to approximately HK$1,274.7 million and approximately HK$1,432.2 million as at 31 July 2017 and 31 July 2016, respectively.

– 67 –

LETTER FROM RED SUN

As set out in the MAGHL 2018 Interim Report, (i) the total assets of the MAGHL Group as at 31 January 2018 mainly comprised (a) films and TV programs under production of approximately HK$453.4 million; (b) cash and cash equivalents of approximately HK$375.0 million; (c) prepayments, deposits and other receivables of approximately HK$198.8 million; and (d) trade receivables of approximately HK$103.2 million; and (ii) the total liabilities of the MAGHL Group as at 31 January 2018 mainly comprised (a) accruals and other payables of approximately HK$369.1 million; (b) convertible notes of approximately HK$287.4 million; and (c) deposits received of approximately HK$189.9 million.

2. Overview of macro-economy, Hong Kong and PRC commercial and residential property sectors, and the PRC entertainment and media sector

Having considered the principal businesses of the eSun Group, we have set out below the overview of macro-economy, Hong Kong and PRC commercial and residential property sectors as well as the PRC entertainment and media sector.

2.1 Overview of macro-economy

Given the various businesses engaged by the eSun Group and the Lai Fung Group would be affected by the status and development of the macro-economy, we set out herein a high-level overview of the macro-economy.

Both the United States of America (“ U.S. ”) and Hong Kong have experienced low interest rate environment in the recent years, but there have been interest rate hikes by the Federal Reserve in 2018 as well as ongoing speculation of further interest rate hikes by the Federal Reserve, which may affect global financial markets. Given Hong Kong’s currency is pegged to the U.S. dollar and its position as one of the leading international trading and financial centres, any such changes could have significant knock on effects to Hong Kong.

In addition, the global economy is facing uncertainties arising from increased trade protectionism, outcome of the ongoing trade negotiations between the U.S. and the PRC governments, the anticipated withdrawal of the United Kingdom from the European Union, and the geopolitical situation in the Korean peninsula. Some of which may continue to affect the macro-economy.

According to the report titled “Global Economic Prospects: The Turning of the Tide” published by the World Bank Group in June 2018, global growth is estimated to be approximately 3.1% in 2018 (2017: 3.1%) and it is expected to decelerate over the next two years attributable to global slack dissipates, moderating trade and investment, and tightening of financing conditions.

– 68 –

LETTER FROM RED SUN

2.2 Overview of Hong Kong property sector

In connection with commercial offices in Hong Kong, in particular Grade A offices in Central, the leasing market was underpinned by ongoing demand, including banking and professional services firms as well as PRC corporations. Supported by low rate of unemployment and the prevailing low interest rate environment, rental for commercial offices has largely maintained its upward trend since 2010 based on the rental indices for offices published by the Rating and Valuation Department.

In connection with residential properties in Hong Kong, based on information set out in the 2017 Policy Address published by the Hong Kong government in October 2017, the current shortage in housing supply and surging property prices have resulted from both external and internal factors. The Hong Kong government is determined to rectify the situation. In the past, various measures have been introduced with a view to curb the heated property market, including an increase in the stamp duty on property transactions for non first-time buyers to 15% of transaction value for all residential transactions for Hong Kong permanent residents and corporate buyers, which was followed by further measure introduced in April 2017 which addresses that in the event of a single transaction purchase of more than one residential property, 15% of the new residential stamp duty will be imposed on each property. However, given the limited residential land supply in Hong Kong, the high transaction prices from the land sale program maintained in the first half of 2018.

In addition, the Hong Kong government announced in June 2018 that a number of new housing initiatives, including, among others, the proposed introduction of special rates on vacant first-hand private residential units to encourage more timely supply of firsthand private flats and to make subsidised sale flats more affordable to lower and middleincome households.

2.3 Overview of the PRC property sector

As set out on the website of the National Bureau of Statistics of China (http://data.stats.gov.cn), year-on-year growth in gross domestic product for the PRC in 2017 was approximately 6.9% (2016: 6.7%). Pursuant to the Thirteenth Five Year Plan* (十三五規劃) set out by the PRC government, the annual gross domestic product growth target for the next five years from 2016 was approximately 6.5%.

– 69 –

LETTER FROM RED SUN

As stated in the Thirteenth Five Year Plan, the PRC government targets to, among others, (i) accelerate the agricultural population urbanisation (加快農業轉移人口市民化) by implementing three main strategies, namely further reform of the household registration system (深化戶籍制度改革), implementation of the residence permit system (實施居住證制度) and improvement on the system for promoting urbanisation of agricultural population (健全促進農業轉移人口市民化的機制); and (ii) optimise urbanisation layout (優化城鎮化佈局和形態) by implementing three main strategies, namely the acceleration of the construction and advancement of urban agglomeration (加快城市群建設發展), enhance the drive of activities by central cities (增強中心城市輻射帶動功能) and speeding up of the development of small and medium-sized cities and characteristical towns (加快發展中小城市和特色鎮). Furthermore, throughout 2017 and in the first quarter of 2018, the PRC government implemented various policy measures, at national and regional level, to promote long term sustainability of the PRC property market, which included but was not limited to (i) making adjustments to the benchmark interest rate by the People’s Bank of China; (ii) amending the minimum down payment for buyers of second homes; (iii) impose limitation on property purchases (限購令); and (iv) minimum holding period before resale. Accordingly, the PRC property market continues to be exposed to changes in PRC government policies at a national and regional level, as well as market volatility and to an extent affected by the overall economic development of the PRC.

Although, as mentioned above, there are certain risks associated with the PRC property sector, having considered (i) the target GDP growth rate set by the PRC government for five years from 2016 under the Thirteenth Five Year Plan; (ii) the PRC government’s intention to promote the long term sustainability of the PRC property market through, among others means, the implementation of various policies; (iii) the PRC properties held by eSun Group are mainly located in tier 1 cities, such as Guangzhou and Shanghai, further details of which are set out under paragraph headed “6.4.2 The eSun properties” in this letter below; and (iv) the continued ongoing development of these tier 1 cities, we are of the view that it is in the interest of the Company to make further investment in the PRC property sector by way of making the eSun Offers.

– 70 –

LETTER FROM RED SUN

2.4 Overview of the PRC entertainment and media sector

As the PRC economy continued to develop, the income of PRC families have increased and their preference and demand for entertainment have also evolved over time which is one of the key drivers for the continued development of the PRC entertainment and media industry. According to a report published by an international accountancy firm titled “China Entertainment and Media Outlook: 2016-2020” (the full report of which is available at https://www.pwccn.com/en/entertainment-media/em-china-outlooknov2016.pdf), the entertainment and media market in the PRC is estimated to exceed US$250 billion by 2020, representing an estimated compound annual growth rate of approximately 8.9% (2015-2020). The report has identified the following trends in the PRC entertainment and media market, including (i) young people are becoming the mainstream customers in the market; (ii) customisation of content based on local culture and style; (iii) bundling products and services offering end-to-end services are becoming popular; and (iv) the influence of digital contents and internet. As stated in the eSun 2018 Interim Report, the eSun Group endeavours to strengthen its integrated media platform with an aim to provide valuable and competitive products and to enhance its market position, and the eSun Group will continue to explore strategic alliances as well as investment opportunities to enrich its portfolio and broaden its income stream.

3. Reasons for and benefits of the eSun Offers

As disclosed in the Letter from the Board, the primary purpose of the eSun Offers is to increase the Offeror’s shareholding in eSun in order to consolidate the financial results of the eSun Group. The Offeror intends to privatise eSun through the eSun Offers only if it acquires the powers of compulsory acquisition under Section 102(1) (or Section 103(1)) of the Companies Act. The Offeror will acquire such powers of compulsory acquisition only if the level of acceptances of the eSun Share Offer (or the Offeror’s holding of eSun Shares) reaches the prescribed thresholds under Section 102(1) (or Section 103(1)) of the Companies Act and the Offeror is allowed to do so under Rule 2.11 of the Takeovers Code. In the event that the Offeror does not effect the compulsory acquisition of the remaining eSun Offer Shares, whether by reason of the level of acceptances of the eSun Share Offer not reaching the prescribed thresholds under the Companies Act or the Takeovers Code or otherwise, the Offeror may take such steps as are necessary to ensure, or procure eSun to take such steps as are necessary to ensure, that eSun maintains an adequate public float so as to comply with the applicable requirements under the Listing Rules. Further details are set out under paragraph headed “9. Possible compulsory acquisition and withdrawal of listing of eSun Shares” in the Letter from the Board.

– 71 –

LETTER FROM RED SUN

The principal reasons for the eSun Offers to the LSD Shareholders are as follows:

(i) An opportunity to increase shareholding in the eSun Group

LSD is confident in the long term prospects of the eSun Group’s business. The eSun Group leverages its experience in the PRC entertainment market and optimises income from its film, TV, live entertainment, artiste management, music businesses and cinema operations through exploring strategic alliances and investment opportunities to enrich its business portfolio. The eSun Group also owns 50.60% stake in the Lai Fung Group, which has been a long term participant with a regional focus in the PRC property market. Lai Fung’s rental portfolio, primarily in Shanghai and Guangzhou, delivered steady performance in rental income and the Lai Fung Group has a number of projects under development in Shanghai, Guangzhou, Zhongshan and Hengqin. LSD intends to increase its interests in the eSun Group on terms it considers to be in the long term interests of the LSD Shareholders. The eSun Share Offer Price represents a discount of approximately 80.2% to the unaudited consolidated net asset value attributable to owners per eSun Share of approximately HK$6.56 as at 31 January 2018, based on the total number of issued eSun Shares as at 31 January 2018.

(ii) Financial effect of consolidation of the eSun Group on LSD

If the eSun Share Offer becomes unconditional, it will result in the consolidation of the financial results of eSun Group (which is currently accounted for in the financial statements of LSD as an associate) in the financial statements of LSD. Had the eSun Share Offer been completed on 1 August 2016 (being the commencement date of the most recently completed financial year of LSG and LSD), this would have resulted in a gain for LSD on a pro forma basis for the financial year ended 31 July 2017. Further details of the financial effect of the completion of the eSun Share Offer on LSD, please refer to the unaudited pro forma financial information of the Enlarged Group in Appendix VII in this Circular.

(iii) Streamlined corporate structure in the event that eSun is delisted

As disclosed in the Letter from the Board, if the Offeror is permitted to do so under the Companies Act and the Takeovers Code, the Offeror will exercise the powers of compulsory acquisition under Section 102(1) or Section 103(1) of the Companies Act, following which eSun will be delisted and become a wholly-owned subsidiary of LSD. This would enable LSD to streamline its corporate structures further.

– 72 –

LETTER FROM RED SUN

4. Intentions of LSD with regard to the eSun Group

As disclosed in the Letter from the Board, LSD intends to continue with the existing businesses of the eSun Group upon completion of the Offers. LSD intends to maintain eSun’s established and integrated media platform with an aim to provide competitive products and to enhance its market position through exploring strategic alliances and investment opportunities to enrich its business portfolio and broaden its income stream. LSD also intends to continue with Lai Fung’s regional focus and rental-led strategy and to focus on property projects in Shanghai, Guangzhou, Zhongshan and Hengqin. Subject to market conditions, LSD may potentially explore various opportunities to further develop the existing businesses of the eSun Group. LSD may also from time to time consider the need to fund such further development by debt and/or equity financing by the eSun Group, subject to the eSun Group’s business needs and prevailing market conditions. It is also the current intention of LSD that the employment of the existing employees of the eSun Group and the directorship of the existing directors of the eSun Group will be continued following completion of the Offers except for changes which may occur in the ordinary course of business.

5. Principal terms of the Offers

5.1 The eSun Offers

5.1.1 The eSun Share Offer

The eSun Share Offer will be made by HSBC on behalf of the Offeror in compliance with the Takeovers Code on the basis set out below.

For each eSun Offer Share ............................................................HK$1.30 in cash

As set out in the Letter from the Board, the eSun Share Offer Price was determined after taking into account (i) the historical trading prices of eSun Shares as detailed in “4. The eSun Share Offer Price” in the Letter from the Board; (ii) eSun’s financial performance including the changes in the net asset value per eSun Share attributable to owners of eSun from HK$6.92 per eSun Share as at 31 July 2016 to HK$6.11 per eSun Share as at 31 July 2017 to HK$6.56 per eSun Share as at 31 January 2018; and (iii) the trading multiples of comparable companies which consisted of price-to-book ratios of comparable companies listed on the Stock Exchange, in each case based on their market capitalisation as at the Last Trading Date and their latest published consolidated net asset value attributable to shareholders.

– 73 –

LETTER FROM RED SUN

5.1.2 The eSun Option Offer

In accordance with Rule 13 of the Takeovers Code, when the eSun Share Offer is made, the Offeror will make (or procure to be made on its behalf) an appropriate offer to all the eSun Optionholders for the cancellation of every eSun Option, whether vested or unvested, by way of the eSun Option Offer.

For further details on the eSun Option Offer Price on the eSun Options, please refer to paragraph headed “6. The eSun Option Offer and the eSun Option Offer Price” in the Letter from the Board.

5.1.3 Value of the eSun Offers

Based on the Letter from the Board, as at the Latest Practicable Date, there were (i) 1,491,854,598 eSun Shares in issue, of which 551,040,186 eSun Shares were held by the Offeror; (ii) 940,814,412 eSun Offer Shares; and (iii) 32,850,665 eSun Options (all of which vested on their respective dates of grant), entitling the eSun Optionholders to subscribe for an aggregate of 32,850,665 new eSun Shares at an exercise price ranging from HK$0.728 to HK$1.612 per eSun Share.

On the assumption that the number of eSun Shares will not change (whether by way of any exercise of the eSun Options or otherwise) and the number of eSun Options will not change, the value of the eSun Share Offer is approximately HK$1,223.1 million and the total amount required to satisfy the cancellation of all eSun Options is approximately HK$3.4 million. In aggregate, the eSun Offers are valued at approximately HK$1,226.5 million.

– 74 –

LETTER FROM RED SUN

As at the Latest Practicable Date, the Offeror and Offeror Concert Parties held 556,629,072 eSun Shares in aggregate, representing approximately 37.32% of the total issued eSun Shares.

5.1.4 Conditions to the eSun Offers

As set out in the Circular, the eSun Share Offer is subject to the fulfilment of the following Conditions:

(a) the approval:
(i) by the Independent LSD Shareholders of the Offers as a very substantial acquisition of LSD; and
(ii) by the Non-Connected LSD Shareholders of the making of one or more of the Offers to any connected person of LSD which is a connected transaction of LSD subject to the independent shareholders’ approval requirement under Chapter 14A of the Listing Rules,

in each case, in accordance with the Listing Rules;

(b) the approval:
(i) by the Independent LSG Shareholders of the Offers as a very substantial acquisition of LSG; and
(ii) by the Non-Connected LSG Shareholders of the making of one or more of the Offers to any connected person of LSG which is a connected transaction of LSG subject to the independent shareholders’ approval requirement under Chapter 14A of the Listing Rules,

in each case, in accordance with the Listing Rules;

(c) valid acceptances of the eSun Share Offer being received (and not, where permitted, withdrawn) by 4:00 p.m. on the eSun Share Offer Closing Date in respect of such number of eSun Shares which, together with eSun Shares already (directly or indirectly) held or agreed to be acquired by LSD, the Offeror or their respective subsidiaries, would result in the Offeror and LSD together with their respective subsidiaries holding in aggregate more than 50% of the voting rights in eSun;

– 75 –

LETTER FROM RED SUN

(d) the eSun Shares remaining listed and traded on the Main Board of the Stock Exchange up to and including the eSun Share Offer Closing Date (save for any temporary suspension of trading of the eSun Shares pending any announcement in connection with the Offers) and no indication being received on or before the eSun Share Offer Closing Date from the SFC and/ or the Stock Exchange to the effect that the listing of the eSun Shares on the Stock Exchange is or is likely to be withdrawn or suspended;
(e) the Lai Fung Shares remaining listed and traded on the Main Board of the Stock Exchange up to and including the Lai Fung Share Offer Closing Date (save for any temporary suspension of trading of the Lai Fung Shares pending any announcement in connection with the Offers) and no indication being received on or before the Lai Fung Share Offer Closing Date from the SFC and/or the Stock Exchange to the effect that the listing of the Lai Fung Shares on the Stock Exchange is or is likely to be withdrawn or suspended;
(f) no event having occurred which would make any of the Offers, the acquisition of any of the eSun Offer Shares or the cancellation of the eSun Options under the eSun Offers or the acquisition of any of the Lai Fung Offer Shares or the cancellation of the Lai Fung Options under the Lai Fung Offers void, unenforceable or illegal, would prohibit the implementation of any of the Offers or would impose any material conditions or obligations with respect to any of the Offers or their implementation in accordance with their respective terms;
(g) all necessary consents (including consents from the relevant lenders) in connection with the Offers and/or the possible withdrawal of the listing of the eSun Shares from the Stock Exchange which may be required under any existing contractual or other obligations of eSun being obtained and remaining in effect;
(h) no government, court or governmental, quasi-governmental, statutory or regulatory body or agency in Hong Kong, Bermuda, the Cayman Islands or any other jurisdiction having taken or instituted any action, proceeding, suit, investigation or enquiry (or enacted, made or proposed, and there not continuing to be outstanding, any statute, regulation, demand or order) that would make any of the Offers or their implementation in accordance with their respective terms void, unenforceable, illegal or impracticable (or which would impose any material conditions or obligations with respect to any of the Offers or their implementation in accordance with their respective terms);

– 76 –

LETTER FROM RED SUN

(i) since the Announcement Date, there having been no material adverse change in the business, assets, financial or trading position or the prospects or conditions (whether operational, legal or otherwise) of the eSun Group or the Lai Fung Group to an extent which is material in the context of the eSun Group, or, as the case may be, the Lai Fung Group, taken as a whole; and
(j) there having, since the Announcement Date, not been instituted any, and there remaining no outstanding, litigation, arbitration proceedings, prosecution or other legal proceedings to which any member of the eSun Group or the Lai Fung Group is a party (whether as plaintiff, defendant or otherwise), and no such proceedings having, since the Announcement Date, been threatened in writing against any such member (and no investigation by any government, court or governmental, quasi-governmental, statutory or regulatory body or agency in Hong Kong, Bermuda, the Cayman Islands or any other jurisdiction against or in respect of any such member or the business carried on by any such member having, since the Announcement Date, been threatened in writing, announced or instituted or remaining outstanding against or in respect of any such member), in each case, which is material and adverse in the context of the eSun Group, or, as the case may be, the Lai Fung Group, taken as a whole or in the context of any of the Offers.

The Offeror reserves the right to waive, in whole or in part, all or any of the Conditions (other than Conditions (a), (b) and (c)). As at the Latest Practicable Date, the Offeror is not aware of any consent required under Condition (g) from any person who is not a lender.

The eSun Option Offer will be subject to and conditional upon the eSun Share Offer becoming or being declared unconditional in all respects.

Pursuant to Note 2 to Rule 30.1 of the Takeovers Code, the Offeror should not invoke any of the Conditions so as to cause the eSun Offers to lapse unless the circumstances which give rise to the right to invoke such Conditions are of material significance to the Offeror in the context of the eSun Offers.

– 77 –

LETTER FROM RED SUN

5.2 The Lai Fung Offers

5.2.1 The Lai Fung Share Offer

For each Lai Fung Offer Share ......................................................HK$5.22 in cash

As disclosed in the Letter from the Board, the Lai Fung Share Offer Price of HK$5.22 for each Lai Fung Offer Share has been determined pursuant to the applicable rules and regulations under the Takeovers Code, after taking into consideration (i) the eSun Share Offer Price of HK$1.30; (ii) the unaudited consolidated total net asset values of eSun and Lai Fung as at 31 January 2018, being approximately HK$18,608.9 million and HK$16,387.4 million, respectively; (iii) the total number of eSun Shares and Lai Fung Shares as at the Announcement Date, being 1,491,854,598 and 327,044,134, respectively; and (iv) the fact that eSun holds 165,485,406 Lai Fung Shares (representing a 50.60% interest in Lai Fung) as at the Announcement Date.

5.2.2 The Lai Fung Option Offer

As set out in the Letter from the Board, the Lai Fung Option Offer Price is at HK$0.01 for every 100 Lai Fung Options (or if lesser, any part thereof) for all the Lai Fung Options.

– 78 –

LETTER FROM RED SUN

5.2.3 Value of the Lai Fung Offers

Based on the Letter from the Board, as at the Latest Practicable Date, there were (i) 327,044,134 Lai Fung Shares in issue, of which 165,485,406 Lai Fung Shares are held by eSun; (ii) 161,558,728 Lai Fung Offer Shares; and (iii) 10,234,117 Lai Fung Options (all of which vested on their respective dates of grant), entitling the Lai Fung Optionholders to subscribe for an aggregate of 10,234,117 new Lai Fung Shares at an exercise price ranging from HK$6.650 to HK$13.520 per Lai Fung Share.

On the assumption that the number of Lai Fung Shares will not change (whether by way of any exercise of the Lai Fung Options or otherwise) and the number of Lai Fung Options will not change, the value of the Lai Fung Share Offer is approximately HK$843.3 million and the total amount required to satisfy the cancellation of all the outstanding Lai Fung Options is approximately HK$1,023.4. In aggregate, the Lai Fung Offers are valued at approximately HK$843.3 million.

5.2.4 Conditions to the Lai Fung Offers

For the conditions to the eSun Offers, please refer to “5.1.4 Conditions to the eSun Offers” above.

– 79 –

LETTER FROM RED SUN

6. Analysis on the eSun Share Offer Price

6.1 Comparison of the eSun Share Offer Price

The eSun Share Offer Price of HK$1.30 per eSun Offer Share under the eSun Share Offer represents:

(a) a discount of approximately 3.7% to the closing price of HK$1.35 per eSun Share as quoted on the Stock Exchange on the Last Trading Date;
(b) a discount of approximately 5.1% to the average closing price of HK$1.37 per eSun Share, being the average closing price of eSun Shares as quoted on the Stock Exchange for the 5 trading days immediately prior to and including the Last Trading Date;
(c) a discount of approximately 3.7% to the average closing price of HK$1.35 per eSun Share, being the average closing price of eSun Shares as quoted on the Stock Exchange for the 10 trading days immediately prior to and including the Last Trading Date;
(d) a premium of approximately 3.2% over the average closing price of HK$1.26 per eSun Share, being the average closing price of eSun Shares as quoted on the Stock Exchange for the 30 trading days immediately prior to and including the Last Trading Date;
(e) a premium of approximately 0.8% over the average closing price of HK$1.29 per eSun Share, being the average closing price of eSun Shares as quoted on the Stock Exchange for the 60 trading days immediately prior to and including the Last Trading Date;
(f) a discount of approximately 2.3% to the average closing price of HK$1.33 per eSun Share, being the average closing price of eSun Shares as quoted on the Stock Exchange for the 180 trading days immediately prior to and including the Last Trading Date;
(g) a premium of approximately 4.0% over the closing price of HK$1.25 per eSun Share on the Latest Practicable Date;
(h) a discount of approximately 78.7% to the audited consolidated net asset value attributable to owners per eSun Share of approximately HK$6.11 as at 31 July 2017, based on the total number of issued eSun Shares as at 31 July 2017; and
(i) a discount of approximately 80.2% to the unaudited consolidated net asset value attributable to owners per eSun Share of approximately HK$6.56 as at 31 January 2018, based on the total number of issued eSun Shares as at 31 January 2018.

– 80 –

LETTER FROM RED SUN

6.2 Historical price performance of the eSun Shares

We have reviewed and analysed the closing prices of the eSun Shares over the 12-month period immediately prior to the Last Trading Day commencing on 28 May 2017 (the “ First review Period ”) and from the date of the Joint Announcement up to and including the Latest Practicable Date (the “Second Review Period” together with the First Review Period, the “ Review Period ”) below:

Chart A: eSun Share price chart during the Review Period

==> picture [394 x 210] intentionally omitted <==

----- Start of picture text -----

1.8 15 March 2018
19 October 2017
Publication of profit warning
1.6
Publication of 2017 announcement
annual results
1.4 announcement
1.2
eSun Share Offer Price:
HK$1.3
1.0
15 September 2017
22 March 2018 27 May 2018
0.8 Publication of positive Publication of 2018 interim Publication of the Joint
profit alert announcement results announcement Announcement
0.6
Date
closing price of eSun Shares eSun Share Offer Price
HK$
----- End of picture text -----

Source: website of the Stock Exchange

During the First Review Period, the closing price of eSun Shares fluctuated between the range from HK$0.81 to HK$1.56. The average closing price of eSun Shares during the First Review Period was approximately HK$1.23.

– 81 –

LETTER FROM RED SUN

The closing price of eSun Shares as at the commencement of the First Review Period was at HK$0.82, which increased gradually to HK$1.44 on 18 September 2017 (being the trading day after the publication of the positive profit alert announcement), and further to HK$1.55 on 20 October 2017 (being the trading day after the publication of the 2017 annual results announcement of eSun dated 19 October 2017).

Between 20 October 2017 and 15 March 2018, the closing price of eSun Shares fluctuated between HK$1.19 (9 and 12 February 2018) and HK$1.55 (20 October 2017). Between 16 March 2018 (being the trading day after the publication of the profit warning announcement) and 27 May 2018, the closing price of eSun Shares fluctuated between HK$1.18 (3 and 4 May 2018) and HK$1.39 (21 and 23 May 2018).

Based on the information reviewed, the closing price per eSun Share of HK$1.35 remained the same on the last trading day immediately prior to the publication of the Joint Announcement and the first trading day after the publication of the Joint Announcement.

During the Second Review Period, the closing price per eSun Share ranged from HK$1.24 to HK$1.51. The average closing price of the eSun Shares during the Second Review Period was approximately HK$1.30. The closing price per eSun Share as at the Latest Practicable Date was HK$1.25.

The average closing price per eSun Share during the Second Review Period of approximately HK$1.30 is higher than that of the First Review Period of approximately HK$1.23, such increase may be attributable to the market reaction to the publication of the Joint Announcement.

– 82 –

LETTER FROM RED SUN

6.3 Historical liquidity of the eSun Shares

The following table sets out the number of trading days in each month, the monthly total trading volume, the average daily trading volume and the percentage of average daily trading volume to total number of eSun Shares in issue during the Review Period:

				Approximate
				percentage of
				average
				daily trading
				volume to
			Average	total number
	Number of	Total trading	daily trading	of eSun
trading days		volume	volume	Shares in issue
		(number of	(number of	(Note 1)
		eSun Shares)	eSun Shares)
2017
May_(Note 2)_	2	982,000	491,000	0.03%
June	22	35,694,590	1,622,481	0.11%
July	21	11,288,600	537,552	0.04%
August	22	73,513,700	3,341,532	0.22%
September	21	39,976,690	1,903,652	0.13%
October	20	29,036,400	1,451,820	0.10%
November	22	22,478,501	1,021,750	0.07%
December	19	11,759,000	618,895	0.04%
2018
January	22	20,544,000	933,818	0.06%
February	18	3,902,000	216,778	0.01%
March	21	7,198,750	342,798	0.02%
April	19	1,796,800	94,568	0.01%
May_(Note 3)_	17	12,638,000	743,412	0.05%
May_(Note 4)_	4	20,846,000	5,211,500	0.35%
June	20	10,896,400	544,820	0.04%
July_(Note 5)_	14	3,764,000	268,857	0.02%
Average for
— First Review Period	N/A	20,831,464	1,024,620	0.07%
— Second Review Period	N/A	11,835,467	2,008,392	0.13%

Source: the website of the Stock Exchange

Notes:

(1) Based on issued eSun Shares as disclosed in the monthly return of movements in securities of eSun. (2) Inclusive of 29 and 31 May 2017.
(3) Up to and including 27 May 2018, being the end of First Review Period.
(4) Commencing on 28 May 2018, being the first trading day of the Second Review Period.
(5) Up to and including the Latest Practicable Date.

– 83 –

LETTER FROM RED SUN

During the First Review Period, the average daily trading volume of the eSun Shares as a percentage of the total number of eSun Shares in issue ranged from approximately 0.01% (February 2018) to approximately 0.22% (August 2017) with an average of approximately 0.07%.

During the Second Review Period, the average daily trading volume of the eSun Shares as a percentage of the total number of eSun Shares in issue ranged from approximately 0.02% (July 2018, up to the Latest Practicable Date) to 0.35% (May 2018, since commencement of the Second Review Period) with an average of approximately 0.13%. During the Review Period, the average daily trading volume of eSun Shares as a percentage of the total number of eSun Shares in issue was approximately 0.07%.

The above statistics suggested that trading volume of the eSun Shares was relatively thin during the First Review Period and the Second Review Period, and the eSun Shares were generally illiquid in the open market. Given that the eSun Shares were generally illiquid in the open market during the Track Record Period, and as set out in the Letter from the Board, it is LSD’s intention to increase its shareholding in the eSun Group with a view to (i) consolidate the financial results of the eSun Group; and (ii) subject to the compulsory acquisition being triggered, delist the eSun Group, on this basis, LSD may encounter practical difficulties to acquire substantial number of the eSun Shares in the open market within a short period of time. As such, the making of the Offers to achieve the aforesaid intentions of LSD are therefore considered to be reasonable.

– 84 –

LETTER FROM RED SUN

6.4 Assets, valuation and net asset value of the eSun Group

6.4.1 Analysis on assets of eSun

As set out in the eSun 2018 Interim Report, the eSun Group’s total assets as at 31 January 2018 were approximately HK$34,630.8 million, a summary of which are set out below:

	As at	Approximate %
	31 January 2018	of total assets
	(unaudited)
	HK$’000
Properties related assets
— Investment properties	19,064,096	55.0%
— Property, plant and equipment	3,442,416	9.9%
— Properties under development	1,993,187	5.8%
— Completed properties for sale	966,939	2.8%
Sub-total	25,466,638	73.5%
Other non-properties related assets
— Non-current assets	2,219,133	6.4%
— Current assets	6,945,043	20.1%
Sub-total	9,164,176	26.5%
Total	34,630,814	100.0%

As at 31 January 2018, over 70.0% of the eSun Group’s assets were propertyrelated assets, while the remaining assets principally comprised of cash and cash equivalents, investments in joint ventures and pledged and restricted time deposits and bank balances.

– 85 –

LETTER FROM RED SUN

6.4.2 The eSun properties

The LSD Management advised that the eSun Group’s property related assets as at the Latest Practicable Date mainly comprised of (i) properties held for rental income in Guangzhou, Shanghai and Zhongshan, the PRC; (ii) hotel properties and serviced apartments in Shanghai and Zhongshan, the PRC; (iii) property under development in Guangzhou, Hengqin, Shanghai and Zhongshan, the PRC; and (iv) completed properties held for sales in Guangzhou, Shanghai and Zhongshan, the PRC (together, the “ eSun Properties ”). Set out below is a summary of the eSun Group’s major properties interests as at 31 May 2018 based on the valuation report as set out in Appendix VIII to the Circular (the “ eSun Valuation Report ”). For further details of the existing market value of the eSun Properties and market value of the eSun Properties in existing state attributable to the eSun Group, please refer to the eSun Valuation Report.

	Interest attributable to
Property	the eSun Group
Group I — Property interests held by the eSun Group in the PRC for investment
purpose
Hong Kong Plaza	50.6%
282 & 283 Huaihaizhong Road
Huangpu District, Shanghai, the PRC
Various serviced apartment units in North Tower	50.6%
Hong Kong Plaza
282 Huaihaizhong Road
Huangpu District, Shanghai, the PRC
B3 Hui Yi Garden	50.6%
No 18 of Alley 905, Huashan Road
Xuhui District, Shanghai, the PRC
Commercial portion of Regents Park	48.07%
88 Huichuan Road
Changning District, Shanghai, the PRC
Various portions of Shanghai May Flower Plaza	50.6%
the junction of Da Tong Road and Zhi Jiang Xi Road,
Sujiaxiang, Jing’an District, Shanghai, the PRC
May Flower Plaza	50.6%
68 Zhongshanwu Road
Yuexiu District, Guangzhou
Guangdong Province, the PRC

– 86 –

LETTER FROM RED SUN

	Interest attributable to
Property	the eSun Group
Commercial portion of West Point	50.6%
the junction of Zhongshan Qi Road and Guangfu Road
Liwan District, Guangzhou
Guangdong Province, the PRC
Various portions of Stage I of Palm Spring	50.6%
Caihong Planning Area
West District, Zhongshan
Guangdong Province, the PRC
Lai Fung Tower	50.6%
787 Dongfeng East Road
Yuexiu District, Guangzhou
Guangdong Province, the PRC
Group II — Property interests held by the eSun Group in	the PRC for sale purpose
Unsold portions of	50.6%
Stage I and II of Palm Spring
Caihong Planning Area
West District, Zhongshan
Guangdong Province, the PRC
Unsold car parking spaces	48.07%
Regents Park
88 Huichuan Road
Changning District, Shanghai
The PRC

– 87 –

LETTER FROM RED SUN

Property

Interest attributable to the eSun Group

Group III — Property interest held by the eSun Group in the PRC for owner occupation purpose

Commercial portion of 50.6% Eastern Place 787 Dongfeng East Road Yuexiu District, Guangzhou Guangdong Province, the PRC

Group IV — Property interests held under development by the eSun Group in the PRC

A commercial development	50.6%
located at Tian Mu Road West
and Da Tong Road
Jing’an District, Shanghai, the PRC
Hai Zhu Plaza	50.6%
Chang Di Main Road
Yuexiu District, Guangzhou
Guangdong Province, the PRC
Remaining stage of Palm Spring	50.6%
Caihong Planning Area
West District, Zhongshan
Guangdong Province
The PRC
Two parcels of land located at the eastern side of	60.48%
Yiwener Road southern side of Caihong Road
western side of Tianyu Road and northern side of
Hengqin Main Road
Hengqin New Area, Zhuhai Guangdong Province
The PRC
A parcel of land located at	50.6%
Wuliqiao Road 104 Jie Fang
Huangpu District, Shanghai
The PRC

– 88 –

LETTER FROM RED SUN

	Interest attributable to
Property	the eSun Group

Group V — Property interests held by the eSun Group in Hong Kong for owner occupation purpose

4th, 5th Floors and Roof, East Commercial Block,	100%
South Horizons, No 18A South Horizon Drive,
Ap Lei Chau, Hong Kong

Group VI — Property interest held by the eSun Group in Macao for owner occupation purpose

Unit B on 25th Floor of Tower 3, One Central Residences,	100%
Nos 28 - 248 Avenida de Sagres,
Nos 18 - 52 Praceta 24 de Junho,
No 945 - 973Y Avenida Dr. Sun Yat-Sen, Macao

6.4.3 Net asset value of the eSun Group

For the purpose of formulating our advice on the eSun Share Offer Price, we have compared the eSun Share Offer Price with the unaudited consolidated net asset value of the eSun Group as at 31 January 2018 (the “ eSun NAV ”) per eSun Share.

	HK$
Unaudited consolidated net asset value attributable to	9,780,712,000
owners of eSun as at 31 January 2018
attributable to owners of eSun_(Note 1)_
eSun NAV per eSun Share_(Note 2)_	6.56

Notes:

(1) The balance is extracted from the unaudited condensed consolidated statement of financial position as at 31 January 2018 as extracted from the eSun 2018 Interim Report.
(2) The eSun NAV per eSun Share is arrived at on the basis of 1,491,854,598 eSun Shares in issue as at the Latest Practicable Date.

– 89 –

LETTER FROM RED SUN

The LSD Management advised that there has been no material adverse change to the eSun NAV as at 31 January 2018 up to the Latest Practicable Date.

As per the table above, the eSun Share Offer Price of HK$1.30 per eSun Share represented a discount of approximately 80.2% to the eSun NAV per eSun Share of HK$6.56. On this basis, the implied price-to-book ratio (the “ P/B ratio ”) of the eSun Share Offer Price, calculated based on the eSun Share Offer Price divided by the eSun NAV per eSun Share, would be approximately 0.20 times (the “ eSun P/B ratio ”).

6.5 Comparison with general offer precedents and comparable companies

This section sets forth (i) the comparison of the eSun Share Offer Price against the trading prices and net asset value (the “ NAV ”) of general offer precedents; and (ii) the eSun Share Offer Price against the trading prices and price-to-book ratio of companies comparable to the eSun Group.

6.5.1 Comparison with general offer precedents

Based on information as set out under paragraph headed “6.4.1 Analysis on assets of eSun”, over 70% of the eSun Group’s total assets as at 31 January 2018 were properties related. Furthermore, as set out under paragraph headed “1.3 Background information of the eSun Group” in this letter, while segment profit recorded by eSun Group’s property related segments amounted to approximately HK$572.5 million for the six months ended 31 January 2018, segment results for the remaining segments of the eSun Group, namely the media and entertainment segment, the film production and distribution segment and the cinema operation segment recorded segment profit of approximately HK$25.3 million, segment loss of approximately HK$181.3 million and segment loss of approximately HK$36.6 million, for the six months ended 31 January 2018, respectively.

On the basis that (i) the eSun Group’s financial position and results were primarily driven by its property related businesses; and (ii) the primary purpose of the eSun Offers is to increase the Offeror’s shareholding in eSun in order to consolidate the financial results of the eSun Group, we have researched into general offer precedents of property companies listed on the Main Board of the Stock Exchange with property related assets comprising not less than 50% of their respective total assets based on the latest financial information as set out in the respective composite document, during the period commenced from 1 January 2017 up to and including the date of the Joint Announcement (the “ General Offer Precedents ”). We then performed analysis based on (i) the number of issued shares of the General Offer Precedents; (ii) the respective offer prices to the prevailing trading prices in relation to the General Offer Precedents; and (iii) the level of discount to/premium over consolidated net assets per share (as per the respective composite document of the General Offer Precedents) at which the subject offer was made. The results of our analysis are set out below:

– 90 –

LETTER FROM RED SUN

				Premium/(discount)
				of offer price	Premium/(discount)		Premium/
				over/to the closing	of offer price over/to		(discount)
				price on the last	the closing price on the last		of offer
				trading day prior to	30/90 trading days		price over/to
	Date of			announcement of the	prior to announcement		consolidated
Company	general offer	Principal	Offer price	general offer/Joint	of the general offer/		NAV per Share
(Stock Code)	announcement	activities	HK$	Announcement	Joint Announcement		(Note)
					30 trading	90 trading
					days	days
Henry Group	22-Dec-17	investment,	2.4232	10.65%	18.76%	30.77%	19.13%
Holdings Limited		development
(859)		and leasing
		of properties
Midas International	15-Dec-17	printing	0.392	1.82%	5.05%	16.98%	109.63%
Holdings Limited		business, property
(1172)		business, securities
		investment and
		trading business,
		and information
		technology business
Nine Express Limited (9)	22-Sep-17	property and flms-related	0.27	5.88%	(0.43%)	(8.66%)	(45.56%)
		businesses
Landing International	15-Jun-17	development of	0.075	(6.25%)	(25.99%)	7.37%	17.19%
Development Limited		resorts
(582)
Lifestyle Properties	19-Apr-17	property	5.18	4.65%	17.74%	37.13%	46.74%
Development		development
Limited (2183)		and property
		investment
Ceneric (Holdings)	11-Apr-17	property businesses	0.178	5.95%	18.01%	(2.86%)	111.90%
Limited (542)
		General Offer	Average	3.78%	5.52%	13.93%	45.11%
		Precedents
			Minimum	(6.25%)	(25.99%)	(8.66%)	(45.56%)
			Maximum	10.65%	18.76%	37.13%	111.90%
		eSun Share Offer		(3.70%)	3.20%	0.00%	(80.20%)
	Lai Fung Share Offer			(58.20%)	(55.90%)	(58.10%)	(89.40%)

Source: the website of the Stock Exchange, the respective announcement and composite document of the subject company

Note:

The premium/(discount) of offer price over to consolidated NAV per share of the each of the General Offer Precedents is based on the latest consolidated net asset value attributable to its equity holders as extracted from the relevant composite offer document of the General Offer Precedents.

– 91 –

LETTER FROM RED SUN

Based on the table above, (i) the premium/discount of offer price over/to the closing price of the relevant last trading day prior to the announcement of general offer in connection with the General Offer Precedents ranged from a discount of approximately 6.25% to a premium of approximately 10.65% and with an average premium of approximately 3.78% (the “ LTD Range ”); (ii) the premium/ discount of offer price over/to the average share price of last 30 trading days prior to announcement of general offer for the General Offer Precedents ranged from a discount of approximately 25.99% to a premium of approximately 18.76% and with an average premium of approximately 5.52% (the “ 30 TD Range ”); (iii) the premium/discount of offer over/to the average share price of last 90 trading days prior to announcement of general offer for the General Offer Precedents ranged from a discount of approximately 8.66% to a premium of approximately 37.13% and with an average premium of approximately 13.93% (the “ 90 TD Range ”); and (iv) the premium/discount of offer over/to the latest consolidated net asset value attributable to the equity holders per share of the relevant General Offer Precedents ranged from a discount of approximately 45.56% to a premium of approximately 111.90% and the average premium of approximately 45.11% (the “ NAV Range ”).

As set out in the table above, the eSun Share Offer Price represents (i) a discount of approximately 3.7% to the closing price of eSun Shares on the Last Trading Date, which is within the LTD Range and below the average LTD Range; (ii) a premium of approximately 3.2% over the average closing price of 30 trading days, which is within the 30 TD Range and below the average 30 TD Range; (iii) the average closing price of 90 trading days, which is within the 90 TD Range and below the average 90 TD Range; and (iv) the discount of the eSun Share Offer to consolidated NAV per eSun Share of approximately 80.2%, which is below the minimum of the NAV Range.

6.5.2 Comparison with market comparables

In addition to our analysis on the General Offer Precedents above, we also conducted market comparables analysis when assessing the fairness and reasonableness of the eSun Share Offer. Having taken into account the asset composition of the eSun Group, we have identified comparable companies listed on the Main Board of the Stock Exchange with significant portion of total assets being attributable to property related assets and significant revenue attributable to property related activities, including, property development and property investment.

– 92 –

LETTER FROM RED SUN

For asset-based companies such as property investment development companies listed in Hong Kong, P/B ratio analysis is a more commonly used approach for valuation. Earnings of property investment companies are likely to fluctuate substantially depending on the timing of the sales of the property projects as well as fair value movements of the investment properties during the relevant period, which may lead to possible distortions on the results of a price-to-earnings ratio analysis. Such is evidenced by the eSun Group’s consolidated financial results (i) for the six months ended 31 January 2018 with an unaudited profit after tax of approximately HK$51.4 million, which included increase in fair value of investment properties of approximately HK$349.7 million, representing more than six times the profit after tax for the period; and (ii) for the year ended 31 July 2017 with a profit after tax of approximately HK$1,027.2 million, which included increase in fair value of investment properties of approximately HK$832.1 million, representing approximately 81.0% of the profit after tax for the year. On this basis, our analysis was primarily focused on comparison of P/B ratios of the Comparable Companies (defined hereafter).

For the purpose of our comparable analysis, based on information available as at the Last Trading Date, we have identified companies as relevant comparables to eSun based on the following criteria: (i) listed on the Main Board of the Stock Exchange and engaging in businesses similar to those of the eSun Group, namely, property development and property investment (i.e. contributed to not less than 50% of revenue in aggregate during their respective latest financial year); (ii) revenue primarily generated in the PRC; (iii) property related assets constituted not less than 50% of total asset as at the latest published reporting period end; and (iv) with a market capitalisation of not less than HK$1.5 billion but not more than HK$2.5 billion as at the Last Trading Date, having considered the implied market capitalisation of eSun of approximately HK$1.9 billion based on the eSun Share Offer Price of HK$1.3 per eSun Share and 1,491,854,598 eSun Shares in issue and the implied market capitalisation of Lai Fung of approximately HK$1.7 billion based on the Lai Fung Share Offer Price of HK$5.22 per Lai Fung Share and 327,044,134 Lai Fung Shares in issue. Based on the aforementioned criteria, we have identified, a list of 12 comparable companies (the “ Comparable Companies ”) for comparison purposes. The table below sets out the P/B ratio of each of the Comparable Companies and the implied P/B ratio of eSun and Lai Fung based on the Share Offers, respectively.

– 93 –

LETTER FROM RED SUN

Company name			Market	P/B ratio
(stock code)	Principal Business	Share Price	capitalisation	(approximate)
	(Note 1)	(Note 2)	(Note 2)	(Note 3)
		HK$	HK$ billion
Dynamic Holdings	the investment,	7.750	1.75	0.88
Limited (29)	development,
	leasing and
	sales of properties
LT Commercial Real	the property business	4.600	1.56	3.78
Estate Limited (112)
ZH International	the security investment,	0.285	1.76	1.28
Holdings Limited (185)	property investment and
	management,
	as well as hotel businesses
Chinney Investments,	the development of property	3.500	1.93	0.37
Limited (216)
Richly Field China	the property businesses	0.076	1.77	N/A
Development Limited (313)				(Note 4)
Peking University Resources	the property businesses	0.370	2.37	0.97
(Holdings) Limited (618)
Vanke Property (Overseas)	the property investment	4.790	1.87	0.62
Limited (1036)	and management and
	property development
	business
Coastal Greenland	the property related business	0.360	1.51	0.32
Limited (1124)
Beijing Capital Grand	the development and	1.790	1.72	0.24
Limited (1329)	investment of properties
Hydoo International	the development and	0.610	2.45	0.38
Holding Limited (1396)	operation of trade centers
	and logistics centers

– 94 –

LETTER FROM RED SUN

Company name			Market	P/B ratio
(stock code)	Principal Business	Share Price	capitalisation	(approximate)
	(Note 1)	(Note 2)	(Note 2)	(Note 3)
		HK$	HK$ billion
Tian Shan Development	the development and	2.390	2.40	0.86
(Holding) Limited (2118)	sale of properties
	in the PRC
Xinming China Holdings	the property development	1.150	2.16	0.89
Limited (2699)
			Minimum	0.24
			Maximum	3.78
			Average	0.96
eSun (571)		1.300	1.94	0.20
		(Note 5)	(Note 6)	(Note 7)
Lai Fung (1125)		5.220	1.71	0.11
		(Note 8)	(Note 9)	(Note 10)

Source: the website of the Stock Exchange and the respective interim/annual report of the listed company

Notes:

(1) Extracted from the website of the Stock Exchange.
(2) The closing share price and market capitalisation of the Comparable Companies as at the Last Trading Date are based on information extracted from the website of Stock Exchange. The market capitalisation of the Comparable Companies is calculated based on their respective closing share prices and number of issued shares as at the Last Trading Date. The latest published consolidated net asset value attributable to equity holders are extracted from the respective latest annual/interim reports/announcements of the Comparable Companies.
(3) The P/B ratios of the Comparable Companies are calculated based on their market capitalisation as at the Last Trading Date and their latest published consolidated net asset value attributable to equity holders. For calculating P/B ratios, amounts expressed in RMB have been translated into HK$ at an exchange rate of RMB1.00 = HK$1.24, where applicable.
(4) Net liabilities attributable to owners of Richly Field China Development Limited is observed. For analysis purposes, its financial information is excluded in the calculation of the range of the Comparable Companies.
(5) The eSun Share Offer Price of HK$1.3 per eSun Offer Share is used for the purpose of this analysis.

– 95 –

LETTER FROM RED SUN

(6) For the purpose of determining the implied market capitalisation of the eSun Group, eSun Share Offer Price and the issued share capital of the eSun Group of 1,491,854,598 eSun Shares as at the Last Trading Date was used.
(7) The P/B ratio of the eSun Group is calculated based on the implied market capitalisation of the eSun Group pursuant to the eSun Share Offer Price of HK$1.3 per eSun Share divided by its latest published unaudited consolidated net asset value attributable to owners of eSun as at 31 January 2018.
(8) The Lai Fung Share Offer Price of HK$5.22 per Lai Fung Offer Share is used for the purpose of this analysis.
(9) We have taken the Lai Fung Share Offer Price and the issued share capital of the Lai Fung Group of 327,044,134 as at the Last Trading Date for the purpose of determining the theoretical market capitalisation of the Lai Fung Group.
(10) The P/B ratio of the Lai Fung Group is calculated based on the implied market capitalisation of the Lai Fung Group pursuant to the Lai Fung Share Offer Price of HK$5.22 per Lai Fung Share divided by its latest published unaudited consolidated net asset value attributable to owners of Lai Fung as at 31 January 2018.

As set out in the table above, the P/B ratio of the Comparable Companies ranged from approximately 0.24 times to 3.78 times and with an average of approximately 0.96 times. The implied P/B ratio of eSun under the eSun Share Offer is approximately 0.20 times, which is below the minimum of the P/B ratio of the Comparable Companies.

Given the Comparable Companies are selected based on their principal businesses, their respective revenue were also primarily generated in the PRC, their respective market capitalisation was at a similar level to the implied market capitalisation of eSun based on the eSun Share Offer Price, we are of the view that despite the Comparable Companies’ property portfolios are not identical to that of the eSun Group, the Comparable Companies are suitable for comparison purposes in assessing the fairness and reasonableness of the eSun Share Offer Price as a whole.

Based on the foregoing analysis on the General Offer Precedents and the Comparable Companies, including, among others, the implied P/B ratio of eSun under the eSun Share Offer is below the minimum of the P/B ratio of the Comparable Companies, we are of the view that the making of the eSun Share Offer at the eSun Share Offer Price is fair and reasonable to LSD and the LSD Shareholders as a whole.

– 96 –

LETTER FROM RED SUN

6.6 Analysis on eSun Option Offer Price

On behalf of the Offeror, HSBC is making the eSun Option Offer for the cancellation of every eSun Option in accordance with Rule 13 of the Takeovers Code. The eSun Option Offer is conditional upon the eSun Share Offer becoming or being declared unconditional in all respects. Under the eSun Option Offer, the Offeror is offering the eSun Optionholders the eSun Option Offer Price in cash for the cancellation of each eSun Option that they hold.

The eSun Option Offer Price represents the difference between the eSun Share Offer Price (i.e. HK$1.30 per eSun Offer Share) and the exercise price of the relevant eSun Option. Depending on the exercise price of each relevant eSun Option, the eSun Option Offer Price ranges from HK$0.01 for every 100 eSun Options (or, if lesser, any part thereof) to HK$0.572 per eSun Share. The consideration for the cancellation of each eSun Option is the see-through price based on the eSun Share Offer Price. On this basis, we consider the eSun Option Offer Price to be fair and reasonable.

Based on the Letter from the Board, as at the Latest Practicable Date, there were 32,850,665 eSun Options (all of which vested on their respective dates of grant), entitling the eSun Optionholders to subscribe for an aggregate of 32,850,665 eSun Shares at an exercise price ranging from HK$0.728 to HK$1.612 per eSun Share.

7. Analysis on the Lai Fung Offers

7.1 Comparison of the Lai Fung Share Offer Price

The Lai Fung Share Offer Price of HK$5.22 per Lai Fung Offer Share under the Lai Fung Share Offer represents:

(a) a discount of approximately 58.2% to the closing price of HK$12.50 per Lai Fung Share as quoted on the Stock Exchange on the Last Trading Date;
(b) a discount of approximately 58.5% to the average closing price of HK$12.58 per Lai Fung Share, being the average closing price of Lai Fung Shares as quoted on the Stock Exchange for the 5 trading days immediately prior to and including the Last Trading Date;
(c) a discount of approximately 57.9% to the average closing price of HK$12.40 per Lai Fung Share, being the average closing price of Lai Fung Shares as quoted on the Stock Exchange for the 10 trading days immediately prior to and including the Last Trading Date;

– 97 –

LETTER FROM RED SUN

(d) a discount of approximately 55.9% to the average closing price of HK$11.85 per Lai Fung Share, being the average closing price of Lai Fung Shares as quoted on the Stock Exchange for the 30 trading days immediately prior to and including the Last Trading Date;
(e) a discount of approximately 57.1% to the average closing price of HK$12.17 per Lai Fung Share, being the average closing price of Lai Fung Shares as quoted on the Stock Exchange for the 60 trading days immediately prior to and including the Last Trading Date;
(f) a discount of approximately 58.9% to the average closing price of HK$12.70 per Lai Fung Share, being the average closing price of Lai Fung Shares as quoted on the Stock Exchange for the 180 trading days immediately prior to and including the Last Trading Date;
(g) a discount of approximately 54.6% to the closing price of HK$11.50 per Lai Fung Share on the Latest Practicable Date;
(h) a discount of approximately 88.3% to the audited consolidated net asset value attributable to owners per Lai Fung Share of approximately HK$44.78 as at 31 July 2017, based on the total number of issued Lai Fung Shares as at 31 July 2017 (as adjusted for the share consolidation of Lai Fung Shares which took effect on 15 August 2017 (as disclosed in the announcements of Lai Fung dated 18 July 2017 and 14 August 2017)); and
(i) a discount of approximately 89.4% to the unaudited consolidated net asset value attributable to owners per Lai Fung Share of approximately HK$49.32 as at 31 January 2018, based on the total number of issued Lai Fung Shares as at 31 January 2018.

– 98 –

LETTER FROM RED SUN

7.2 Historical price performance of the Lai Fung Shares

We have reviewed and analysed the closing prices of the Lai Fung Shares over the First Review Period and Second Review Period below:

Chart B: Lai Fung Share price chart during the Review Period

==> picture [398 x 216] intentionally omitted <==

----- Start of picture text -----

16
28 July 2017
14 Publication of positive
profit alert announcement
12
10
19 October 2017 22 March 2018
28 May 2018
8 Publication of 2017 Publication of Publication of the
annual results announcement 2018 interim results announcement Joint Announcement
6
Lai Fung Share Offer Price: HK$5.22
4
Date
closing price of Lai Fung Shares Lai Fung Share Offer Price
HK$
----- End of picture text -----

Source: website of the Stock Exchange

During the First Review Period, the closing price of the Lai Fung Shares fluctuated between the range from HK$10.7 to HK$13.7. The average closing price of the Lai Fung Shares during the First Review Period was approximately HK$12.4.

– 99 –

LETTER FROM RED SUN

The closing price of the Lai Fung Shares at the commencement of the First Review Period was HK$10.9, which increased to HK$12.0 on the trading day immediately after publication of the positive profit alert announcement on 28 July 2017, and further increased to HK$13.3 on the trading day immediately after publication of the 2017 annual results announcement on 19 October 2017. From 1 November 2017 to 25 March 2018, the closing price of the Lai Fung Shares fluctuated between HK$11.0 (23, 24, 25, 26 April 2018 and 10 May 2018) and HK$13.7 (22, 23 and 26 January 2018). The closing price of the Lai Fung Shares was HK$12.5 on the trading day after the publication of the 2018 interim results announcement on 22 March 2018.

Based on the information reviewed, the closing price per Lai Fung Share remained at HK$12.5 on the last trading day immediately prior to the publication of the Joint Announcement and the first trading day after the publication of the Joint Announcement.

During the Second Review Period, the closing price per Lai Fung Share ranged from HK$10.8 to HK$13.1. The average closing price of the Lai Fung Shares during the Second Review Period was approximately HK$11.9. The closing price per Lai Fung Share as at the Latest Practicable Date was HK$11.50.

The average closing price per Lai Fung Share during the Second Review Period of approximately HK$11.9 is at a similar level to that of the First Review Period of approximately HK$12.4. As shown in Chart B above, the closing prices of the Lai Fung Shares during the First Review Period had always been notably below the Lai Fung Share Offer Price of HK$5.22 prior to the Joint Announcement.

– 100 –

LETTER FROM RED SUN

7.3 Historical liquidity of the Lai Fung Shares

The following table sets out the monthly total trading volume, the number of trading days in each month, the highest, lowest and average daily number of Lai Fung Shares traded in each month and the percentage of average daily trading volume of Lai Fung Shares as compared to the total number of Lai Fung Shares in issue during the Review Period:

				Approximately
				percentage of
				average
				daily trading
				volume to
			Average	total number
	Number of	Total trading	daily trading	of Lai Fung
trading days		volume	volume	Shares in issue
		(number of	(number of	(Note 1)
		Lai Fung	Lai Fung
		Shares)	Shares)
2017
May_(Note 2)_	2	33,840	16,920	0.01%
June	22	1,797,559	81,707	0.03%
July	21	1,858,183	88,485	0.03%
August	22	2,273,875	103,358	0.03%
September	21	965,414	45,972	0.01%
October	20	2,253,650	112,683	0.03%
November	22	1,035,481	47,067	0.01%
December	19	713,120	37,533	0.01%
2018
January	22	1,052,598	47,845	0.01%
February	18	871,671	48,426	0.01%
March	21	288,683	13,747	0.00%
April	19	274,460	14,445	0.00%
May_(Note 3)_	17	1,043,969	61,410	0.02%
May_(Note 4)_	4	707,415	176,854	0.05%
June	20	447,806	22,390	0.01%
July_(Note 5)_	14	675,165	48,226	0.01%
Average for
— First Review Period	N/A	1,112,500	55,354	0.02%
— Second Review Period	N/A	610,129	82,490	0.03%

Source: the website of the Stock Exchange

– 101 –

LETTER FROM RED SUN

Notes:

(1) Based on issued Lai Fung Shares as disclosed in the monthly return of movements in securities of Lai Fung.
(2) Inclusive of 29 and 31 May 2017.
(3) Up to and including 27 May 2018, being the end of First Review Period.
(4) Commencing on 28 May 2018, being the first trading day of the Second Review Period.
(5) Up to and including the Latest Practicable Date.

The above table demonstrates that during the First Review Period, the average daily trading volume of the Lai Fung Shares as a percentage of the total number of the Lai Fung Shares in issue ranged from less than 0.01% (March and April 2018) to 0.03% (June, July, August and October 2017) with an average of approximately 0.02%.

During the Second Review Period, the average daily trading volume of Lai Fung Shares as a percentage of the total number of Lai Fung Shares in issue ranged from approximately 0.01% (June and July 2018, up to Latest Practicable Date) to 0.05% (May 2018, since commencement of the Second Review Period) with an average of approximately 0.03%. During the Review Period, the average daily trading volume of Lai Fung Shares as a percentage of the total number of Lai Fung Shares in issue was approximately 0.02%.

The above statistics revealed that trading in Lai Fung Shares was relatively thin during the First Review Period and the Second Review Period, and Lai Fung Shares were generally illiquid in the open market.

– 102 –

LETTER FROM RED SUN

7.4 Assets, valuation and net asset value of the Lai Fung Group

7.4.1 Analysis on assets of Lai Fung

As set out in the Lai Fung 2018 Interim Report, Lai Fung Group’s total assets as at 31 January 2018 were approximately HK$30,582.4 million, a summary of which are set out below:

	As at	Approximate
	31 January 2018 % of total assets
	(unaudited)
	HK$’000
Properties related assets
— Investment properties	18,625,868	60.8%
— Property, plant and equipment	2,101,172	6.9%
— Properties under development	1,986,713	6.5%
— Completed properties for sale	879,178	2.9%
Sub-total	23,592,931	77.1%
Other non-properties related assets
— Non-current assets	1,609,692	5.3%
— Current assets	5,379,769	17.6%
Sub-total	6,989,461	22.9%
Total	30,582,392	100.0%

As at 31 January 2018, over 75.0% of the Lai Fung Group’s assets were propertyrelated assets, while the remaining assets principally comprised of cash and cash equivalents and pledged and restricted time deposits and bank balances.

7.4.2 The Lai Fung Properties

Based on the Lai Fung 2018 Interim Report, Lai Fung Group’s property related assets mainly comprised of (i) properties held for rental income in Shanghai, Guangzhou and Zhongshan, the PRC; (ii) hotel properties and serviced apartments in Shanghai and Zhongshan, the PRC; (iii) property under development in Guangzhou and Zhongshan, the PRC; and (iv) completed properties held for sales in Guangzhou, Hengqin, Shanghai and Zhongshan, the PRC (together the “ Lai Fung Properties ”). For further details on the Lai Fung Properties, please refer to the valuation report as set out in Appendix VIII to the Circular.

– 103 –

LETTER FROM RED SUN

7.4.3 Net asset value of the Lai Fung Group

For the purpose of formulating our advice on the Lai Fung Share Offer Price, we have compared the Lai Fung Share Offer Price with the unaudited consolidated net asset value of the Lai Fung Group as at 31 January 2018 (the “ Lai Fung NAV ”) per Lai Fung Share.

	HK$
Unaudited consolidated net asset value attributable to	16,130,416,000
owners of Lai Fung as at 31 January 2018
attributable to owners of Lai Fung_(Note 1)_
Lai Fung NAV per Lai Fung Share_(Note 2)_	49.32

Notes:

(1) The balance is extracted from the unaudited condensed consolidated statement of financial position as at 31 January 2018 as extracted from the Lai Fung 2018 Interim Report.
(2) The Lai Fung NAV per Lai Fung Share is arrived at on the basis of 327,044,134 Lai Fung Shares in issue as at the Latest Practicable Date.

The LSD Management advised that there has been no material adverse change to the Lai Fung NAV as at 31 January 2018 up to the Latest Practicable Date.

As per the table above, the Lai Fung Share Offer Price of HK$5.22 per Lai Fung Offer Share represents a discount of approximately 89.4% to the Lai Fung NAV per Lai Fung Share of HK$49.32. On this basis, the implied price-to-book ratio of the Lai Fung Share Offer Price, calculated based on the Lai Fung Share Offer Price divided by the Lai Fung NAV per Lai Fung Share, would be approximately 0.11 times (the “ Lai Fung P/B ratio ”).

7.5 Comparison with general offer precedents and Comparable Companies

This section sets forth (i) the comparison of the Lai Fung Share Offer Price against the trading prices and the NAV of general offer precedents; and (ii) the Lai Fung Share Offer Price against the trading prices and price-to-book ratio of Comparable Companies.

7.5.1 Comparison with general offer precedents

Based on information as set out under paragraph headed “7.4.1 Analysis on assets of Lai Fung”, over 75% of the Lai Fung Group’s total assets were properties related. On this basis, we have researched into recent general offer of property companies listed on the Main Board of the Stock Exchange. In view of both the eSun Group and Lai Fung Group are also asset-based property group, we have adopted the same comparable general offer precedents for the purpose of this analysis. Please refer to paragraph headed “6.5.1 Comparison with general offer precedents” in this letter for further details.

– 104 –

LETTER FROM RED SUN

As set out in the table under the paragraph headed “6.5.1 Comparison with general offer precedents” in this letter, the Lai Fung Share Offer Price represents (i) a discount of approximately 58.2% to the closing price of Lai Fung Shares on the Last Trading Date; (ii) a discount of approximately 55.9% to the average closing price of 30 trading days; (iii) a discount of approximately 58.1% to the average closing price of 90 trading days; and (iv) the discount of the Lai Fung Share Offer to consolidated NAV per Lai Fung Share of approximately 89.4%, which are all below the minimum of (i) the LTD Range; (ii) the 30 TD Range; (iii) the 90 TD Range; and (iv) the NAV Range, respectively.

7.5.2 Comparison with market comparables

In addition to our analysis on general offer precedents set out above, we have also conducted market comparable analysis. Based on information as set out under paragraph headed “7.4.1 Analysis on assets of Lai Fung”, over 75% of the Lai Fung Group’s total assets were properties related. On this basis, we have adopted the same market comparables for property companies on the Stock Exchange. Please refer to paragraph headed “6.5.2 Comparison with market comparables” in this letter for further details.

Based on the table as set out in the paragraph headed “6.5.2 Comparison with market comparables” in this letter, the P/B ratio of the Comparable Companies ranged from approximately 0.24 times to 3.78 times and with an average of approximately 0.96 times. The P/B ratio of Lai Fung under the Lai Fung Share Offer is approximately 0.11 times, which is below the minimum of the P/B ratio of the Comparable Companies.

Given the Comparable Companies are selected based on their principal businesses, their respective revenue were also primarily generated in the PRC, their respective market capitalisation was at a similar level to the implied market capitalisation of Lai Fung based on the Lai Fung Share Offer Price, we are of the view that despite the Comparable Companies’ property portfolios are not identical to that of the Lai Fung Group, the Comparable Companies are suitable for comparison purposes in assessing the fairness and reasonableness of the Lai Fung Share Offer Price as a whole.

Based on the foregoing analysis on the General Offer Precedents and Comparable Companies, we are of the view that the Lai Fung Share Offer Price is fair and reasonable to LSD and LSD Shareholders as a whole.

– 105 –

LETTER FROM RED SUN

7.6 Analysis on Lai Fung Option Offer Price

When the Lai Fung Share Offer is made (if it is made at all), the Offeror will, in accordance with Rule 13 of the Takeovers Code, offer the Lai Fung Optionholders the Lai Fung Option Offer Price (which is the “see-through” price, being the Lai Fung Share Offer Price minus the exercise price of the relevant Lai Fung Option) in cash for the cancellation of each Lai Fung Option they hold, whether vested or unvested, provided that if the exercise price of any Lai Fung Option is equal to or greater than the Lai Fung Share Offer Price (such that the “see-through” price is zero or negative), the Lai Fung Option Offer Price will be a nominal amount of HK$0.01 for every 100 Lai Fung Options (or, if lesser, any part thereof).

The Lai Fung Offers will only be triggered upon the eSun Share Offer becoming unconditional or being declared unconditional in all respects.

The Lai Fung Option Offer Price represents the difference between the Lai Fung Share Offer Price (i.e. HK$5.22 per Lai Fung Offer Share) and the exercise price of the relevant Lai Fung Option. As the exercises prices of all the Lai Fung Options were higher than the Lai Fung Share Offer Price, the Lai Fung Option Offer Price would be HK$0.01 for every 100 Lai Fung Options (or, if lesser, any part thereof). The consideration for the cancellation of each Lai Fung Option is the see-through price based on the Lai Fung Share Offer Price. On this basis, we consider the Lai Fung Option Offer Price to be fair and reasonable.

Based on the Letter from the Board, as at the Latest Practicable Date, there were 10,234,117 outstanding Lai Fung Options (all of which vested on their respective dates of grant), entitling the Lai Fung Optionholders to subscribe for an aggregate of 10,234,117 Lai Fung Shares at an exercise price ranging from HK$6.650 per Lai Fung Share to HK$13.520 per Lai Fung Share, representing approximately 3.13% of the issued share capital of Lai Fung as at the Latest Practicable Date and approximately 3.03% of the issued share capital of Lai Fung as enlarged by the issue of such new Lai Fung Shares.

– 106 –

LETTER FROM RED SUN

8. Possible financial effects of the eSun Offers and the Lai Fung Offers on the Group

The unaudited pro forma financial information of the Enlarged Group as set out in Appendix VII to the Circular illustrates the effects of the Offers on the Group based on a set of assumptions stated therein. The unaudited pro forma consolidated statement of profit or loss of the Enlarged Group provides an illustration of the impact of the Offers on the profit or loss of the Enlarged Group based on a set of assumptions stated therein. As set out in Appendix VII to the Circular, two different scenarios have been assumed, namely (i) the eSun Offers are accepted in full and the Lai Fung Offers are not accepted, LSD will hold 100% of the total issued share capital of eSun and approximately 50.6% of the total issued share capital of Lai Fung (the “ Scenario I ”); and (ii) the eSun Offers are accepted in full and the Lai Fung Offers are accepted up to 75% of the total issued share capital of Lai Fung (approximately 24.4% held directly by the Offeror and approximately 50.6% held indirectly through eSun with the remaining 25% of the issued share capital of Lai Fung assumed to be held by the public (the “ Scenario II ”).

8.1 Possible financial effects of the eSun Offers

(i) Earnings

Following the completion of the eSun Offers and assuming eSun becomes a subsidiary of LSD, the Group will consolidate the financial results of the eSun Group upon completion. The audited profit attributable to the owners of LSD and eSun for the financial year ended 31 July 2017 as extracted from their respective latest annual reports was approximately HK$2,093.6 million and approximately HK$514.2 million, respectively.

According to the unaudited pro forma financial information of the Enlarged Group as set in Appendix VII to the Circular, as if the eSun Offers had been completed on 31 July 2017, the pro forma profit of the Enlarged Group attributable to the owners of LSD would be approximately HK$7,505.2 million under Scenario I, and approximately HK$11,126.4 million under Scenario II.

(ii) Net asset value

Following the completion of the eSun Offers and assuming eSun becomes a subsidiary of LSD, the Group will consolidate the financial position, including the assets and liabilities, of the eSun Group upon completion. The audited consolidated net assets of the Group and the eSun Group as at 31 July 2017, as extracted from their respective annual reports, were approximately HK$27,104.5 million and approximately HK$17,222.9 million, respectively.

– 107 –

LETTER FROM RED SUN

Based on the unaudited pro forma financial information of the Enlarged Group as set out in Appendix VII to the Circular, assuming completion of the eSun Offers had taken place on 31 July 2017, the pro forma net assets of the Enlarged Group would be approximately HK$42,145.5 million under Scenario I and approximately HK$41,675.5 million under Scenario II.

The audited consolidated total assets and total liabilities of the Group as at 31 July 2017, as extracted from the LSD 2017 Annual Report, were approximately HK$38,441.0 million and HK$11,336.5 million, respectively. The liability to asset ratio of the Group was approximately 0.29 times, being the total liabilities divided by total assets.

The audited consolidated total assets and total liabilities of the eSun Group as at 31 July 2017, as extracted from the eSun 2017 Annual Report, were approximately HK$29,242.7 million and HK$12,019.9 million, respectively. The liability to asset ratio of the eSun Group was approximately 0.41 times.

Based on the unaudited pro forma financial information of the Enlarged Group as set out in Appendix VII to the Circular, assuming completion of the eSun Offers had taken place on 31 July 2017, (i) under Scenario I, the pro forma total assets and total liabilities of the Enlarged Group would have been increased to approximately HK$69,017.8 million and HK$26,872.3 million, respectively. The liability to asset ratio of the Enlarged Group would be approximately 0.39 times; and (ii) under Scenario II, the pro forma total assets and total liabilities of the Enlarged Group would have been increased to approximately HK$68,547.8 million and HK$26,872.3 million, respectively. The liability to asset ratio of the Enlarged Group would be approximately 0.39 times.

(iii) Working capital

The audited cash and cash equivalents of the Group and the eSun Group as at 31 July 2017, as extracted from their respective annual reports, were approximately HK$2,664.1 million and HK$2,733.4 million, respectively. Based on the unaudited pro forma financial information of the Enlarged Group as set out in Appendix VII to the Circular, assuming completion of the eSun Offers had taken place on 31 July 2017, the pro forma cash and cash equivalents of the Enlarged Group would have been increased to approximately HK$5,990.7 million under Scenario I and approximately HK$5,520.8 million under Scenario II.

– 108 –

LETTER FROM RED SUN

8.2 Possible financial effects of the Lai Fung Offers

(i) Earnings

Following the completion of the Lai Fung Offers and assuming Lai Fung becomes a subsidiary of LSD, the Group will consolidate the financial results of the Lai Fung Group upon completion. The audited profit attributable to the owners of Lai Fung for the financial year ended 31 July 2017 as extracted from the Lai Fung 2017 Annual Report was approximately HK$1,477.5 million.

According to the unaudited pro forma financial information of the Enlarged Group as set in Appendix VII to the Circular, as if the Lai Fung Offers had been completed on 31 July 2017, the pro forma profit of the Enlarged Group attributable to the owners of LSD would have been HK$7,505.2 million under Scenario I, and approximately HK$11,126.4 million under Scenario II.

(ii) Net asset value

Following the completion of the Lai Fung Offers and assuming Lai Fung becomes a subsidiary of LSD, the Group will consolidate the financial position, including the assets and liabilities, of the Lai Fung Group upon completion. The audited consolidated net assets of the Lai Fung Group as at 31 July 2017, as extracted from the Lai Fung 2017 Annual Report, were approximately HK$14,769.4 million. Based on the unaudited pro forma financial information of the Enlarged Group as set out in Appendix VII to the Circular, assuming completion of the Lai Fung Offers had taken place on 31 July 2017, the pro forma net assets of the Enlarged Group would have been increased to approximately HK$42,145.5 million under Scenario I and approximately HK$41,675.5 million under Scenario II.

The audited consolidated total assets and total liabilities of the Lai Fung Group as at 31 July 2017, as extracted from the Lai Fung 2017 Annual Report, were approximately HK$25,220.3 million and HK$10,450.9 million, respectively. The liability to asset ratio of the Lai Fung Group was approximately 0.41 times, being the total liabilities divided by total assets. Based on the unaudited pro forma financial information of the Enlarged Group as set out in Appendix VII to the Circular, assuming completion of the Lai Fung Offers had taken place on 31 July 2017, (i) under Scenario I, the pro forma total assets and total liabilities of the Enlarged Group would have been increased to approximately HK$69,017.8 million and HK$26,872.3 million, respectively. The liability to assets ratio of the Enlarged Group would be approximately 0.39 times; and (ii) under Scenario II, the pro forma total assets and total liabilities of the Enlarged Group would have been increased to approximately HK$68,547.8 million and HK$26,872.3 million, respectively. The liability to asset ratio of the Enlarged Group would be approximately 0.39 times.

– 109 –

LETTER FROM RED SUN

(iii) Working capital

The audited cash and cash equivalents of the Lai Fung Group as at 31 July 2017, as extracted from the Lai Fung 2018 Interim Report, were approximately HK$2,057.3 million. Based on the unaudited pro forma financial information of the Enlarged Group as set out in Appendix VII to the Circular, assuming completion of the Lai Fung Offers had taken place on 31 July 2017, the pro forma cash and cash equivalents of the Enlarged Group would have been increased to approximately HK$5,990.7 million under Scenario I and approximately HK$5,520.8 million under Scenario II.

It should be noted that the above financial effects are for illustrative purpose only and do not purport to represent the financial position of the Enlarged Group upon completion.

RECOMMENDATION

On the basis of the Yu Shareholders’ disclosures of interests in eSun and Lai Fung available as at the Latest Practicable Date, other than through their interest in LSG and LSD, the Yu Shareholders, being substantial shareholders of LSD, were interested in 149,080,000 eSun Shares (representing 9.99% of the total issued eSun Shares) and 26,595,837 Lai Fung Shares (representing 8.13% of the total issued Lai Fung Shares) (other than through their interests in LSG and LSD). The aggregate consideration for such interests under the Share Offers is approximately HK$332.6 million.

Having taken into account the above principal factors and reasons, in particular,

(i) pursuant to the Takeovers Code, and subject to the eSun Share Offer becoming unconditional, the Share Offers are available to all eSun Shareholders and Lai Fung Shareholders (other than the Offeror), which include the Yu Shareholders and other independent shareholders of eSun and Lai Fung, respectively, and that the terms of the Share Offers to the Yu Shareholders and the respective independent shareholders of eSun and Lai Fung are the same;
(ii) the factors as set out under paragraph headed “3. Reasons for and benefits of the eSun Offers”;
(iii) the analysis as set out under paragraphs headed “6.5.1 Comparison with general offer precedents” and “6.5.2 Comparison with market comparables” in connection with the eSun Share Offer;
(iv) the analysis as set out under paragraphs headed “7.5.1 Comparison with general offer precedents” and “7.5.2 Comparison with market comparables” in connection with the Lai Fung Share Offer; and
(v) the analysis as set out under paragraph headed “8. Possible financial effects of the eSun Offers and the Lai Fung Offers on the Group”,

– 110 –

LETTER FROM RED SUN

although the Yu Connected Transaction is not conducted in the ordinary and usual course of business of the Group due to the nature of the Share Offers, we consider that the Yu Connected Transaction is on normal commercial terms, its terms are fair and reasonable to, and LSD’s entering into of the Yu Connected Transaction is in the interests of LSD and the LSD Shareholders as a whole. We therefore advise the LSD Independent Board Committees to recommend, and we ourselves recommend, the Non-Connected LSD Shareholders to vote in favour of the ordinary resolution to be proposed at the General Meeting to approve the Yu Connected Transaction.

Yours faithfully For and on behalf of Red Sun Capital Limited Lewis Lai Managing Director

Mr. Lewis Lai is a licensed person registered with the SFC and a responsible officer of Red Sun Capital Limited to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO and has over 10 years of experience in the corporate finance industry.

* For identification purpose only

– 111 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

A. FINANCIAL INFORMATION OF THE GROUP

The financial information of the Group for the three financial years ended 31 July 2017 and the six months ended 31 January 2018 is disclosed in the following documents, which have been published on the respective websites of the Stock Exchange at http://www.hkexnews.hk and LSD at http://www.laisun.com:

(a) the annual report of LSD for the year ended 31 July 2015 published on 11 November 2015, from pages 65 to 152;
(b) the annual report of LSD for the year ended 31 July 2016 published on 16 November 2016, from pages 69 to 163;
(c) the annual report of LSD for the year ended 31 July 2017 published on 15 November 2017, from pages 85 to 183; and
(d) the interim report of LSD for the six months ended 31 January 2018 published on 19 April 2018, from pages 2 to 17.

B. INDEBTEDNESS

Indebtedness of the Enlarged Group

As at 30 June 2018, the Enlarged Group had total borrowings of approximately HK$19,714 million. Details of the total borrowings were summarised below:

Convertible notes — unsecured and unguaranteed Loan from a joint venture — unsecured and unguaranteed Guaranteed notes — unsecured Bank borrowings — secured Bank borrowings — unsecured but guaranteed Other borrowing, note payable and interest payable — unsecured and unguaranteed	HK$’million 67 663 5,843 12,492 390 259
	19,714

– I-1 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Charge of Assets

As at 30 June 2018, certain properties (including investment properties, property, plant and equipment, properties under development, serviced apartments and related properties and construction in progress) and certain bank balances were pledged to banks to secure bank loan facilities granted to the Enlarged Group. Equity interests in certain subsidiaries and a joint venture were also pledged to banks to secure certain bank loan facilities granted to the Enlarged Group.

Contingent Liabilities

As at 30 June 2018, the Enlarged Group also had the following contingent liabilities:

(i) Guarantees given to a bank in connection with the facilities granted to and utilised by a joint venture of HK$650 million.
(ii) The Enlarged Group had provided guarantees to certain banks in respect of mortgage loan facilities granted by such banks to certain end-buyers of property units developed by the Enlarged Group. Pursuant to the terms of the guarantees, upon default in mortgage payments by these end-buyers, the Enlarged Group will be responsible to repay the outstanding mortgage loan principals together with the accrued interest owed by the end-buyers in default. The Group’s obligation in relation to such guarantees has been gradually relinquished along with the settlement of the mortgage loans granted by the banks to the end-buyers. Such obligation will also be relinquished when the property ownership certificates for the relevant properties are issued and/or the end-buyers have fully repaid the mortgage loans. As at 30 June 2018, in respect of these guarantees, the contingent liabilities of the Group amounted to approximately HK$552 million.

Save as disclosed above and apart from intra-group liabilities and normal trade payables in the ordinary course of business of the Enlarged Group, as at 30 June 2018, the Enlarged Group did not have any debt securities issued and outstanding, and authorised or otherwise created but unissued, term loans, other borrowings or indebtedness in the nature of borrowings including bank overdrafts and liabilities under acceptance (other than normal trade bills), acceptance credits, hire purchase commitments, mortgages, charges or other material contingent liabilities or guarantees.

– I-2 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

C. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors confirmed that there had been no material adverse change in the financial or trading position or prospects of the Group since 31 July 2017, the date to which the latest published audited financial statements of the Group were made up.

D. WORKING CAPITAL

The Directors are of the opinion that, in the absence of any unforeseen circumstances and after taking into account the financial resources available to the Enlarged Group, including but not limited to internally generated funds, existing bank and other borrowings and available banking facilities, the working capital available to the Enlarged Group will be sufficient for its requirements for at least 12 months from the date of this circular.

E. FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

The Group

The Group is principally engaged in property investment, property development, investment in and operation of hotels and restaurants and investment holding. Since 31 July 2017, the Group as a whole performed steadily against a challenging environment. As at 31 January 2018, the Group’s rental portfolio comprised a gross floor area (“ GFA ”) of approximately 1.8 million square feet attributable to the Group, of which about 1.3 million square feet was located in Hong Kong. Despite the softened economic sentiment and weakened retail activity, the Group’s Hong Kong properties performed steadily at nearly full occupancy levels. All leases of 100, 106 and 107 Leadenhall Street in London will expire in 2023. A planning application for the redevelopment of the site comprising 100, 106 and 107 Leadenhall Street (“ Leadenhall Properties ”) was submitted to the City of London Corporation in February 2018. The City of London’s Planning and Transportation Committee has given a resolution to grant planning consent to the Group to redevelop the Leadenhall Properties, which would allow the Group to redevelop the Leadenhall Properties into a 56 storey tower with i) up to 102,000 square metres (1,097,919 square feet) gross external area of office space as well as new retail space at ground level; ii) a free and publicly accessible viewing gallery towards at levels 55 and 56 of the building which offers 360 degree views across London; and iii) new pedestrian routes between Leadenhall Street, Bury Street and St Mary Axe and new public spaces around the base of the building. The disposal of 36 Queen Street in London on 18 July 2018 represents a good opportunity for the Group to realise its investment. The Hong Kong Ocean Park Marriott Hotel (“ Ocean Hotel ”), to be operated by the Marriott group, is expected to provide a total of 471 rooms and approximately 365,974 square feet of attributable rental space to the existing rental portfolio of the Group upon completion. The sales of 93 Pau Chung Street, Alto Residences and Novi will be recognised in coming financial years. The Group intends to continue to participate in government tenders to grow the pipeline. The management believes it is paramount to prepare the Group for the challenges and opportunities ahead and will continue its prudent and flexible approach in growing the landbank and managing its financial position.

– I-3 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

eSun Group

As at the Latest Practicable Date, the Group held 36.94% in eSun which is accounted for as an associated company of the Group. If the eSun Share Offer becomes or is declared unconditional in all respects, eSun will become a subsidiary of the Group. The eSun Group’s principal activities include the development, operation of and investment in media and entertainment, music production and distribution, investment in and production and distribution of television programmes, films and video format products, cinema operation, property development for sale and property investment for rental purposes as well as the development and operation of and investment in cultural, leisure, entertainment and related facilities in the PRC.

The eSun Group is confident in the long term prospects of the property sector in the PRC. Lai Fung, the PRC property arm of the eSun Group, intends to continue to focus on development projects in and around Shanghai, Guangzhou, Zhongshan and Hengqin and to continue to look for opportunities to replenish its landbank should the right opportunities arise. Lai Fung intends to continue to improve its recurrent income base through upgrading existing rental properties and adding new commercial properties from development projects. The eSun Group expects its investment properties to provide a strong base of recurrent income in years to come. In light of the growth of the Mainland China entertainment market, the eSun Group endeavours to strengthen its integrated media platform with an aim to provide valuable and competitive products and to enhance its market position, and intends to continue to explore strategic alliances as well as investment opportunities to enrich its portfolio and broaden its income stream.

The Enlarged Group

The Group and the eSun Group are intended to be managed independently and to focus on their respective principal business activities in their respective geographies as stated above. The Enlarged Group as a whole is intended to continue its prudent expansion strategy while continuing to strengthen its businesses in its existing geographies namely Hong Kong and overseas for the Group and the PRC for the property related business in the eSun Group. The media and entertainment activities are intended to be managed independently.

– I-4 –

FINANCIAL INFORMATION OF THE eSUN GROUP

APPENDIX II

1. FINANCIAL INFORMATION OF THE eSUN GROUP

The financial information of the eSun Group for the three financial years ended 31 July 2017 and the six months ended 31 January 2018 are disclosed in the following documents, which have been published on the respective websites of the Stock Exchange at http://www.hkexnews.hk and eSun at http://www.esun.com:

(a) the annual report of eSun for the year ended 31 July 2015 published on 11 November 2015, from pages 65 to 199;
(b) the annual report of eSun for the year ended 31 July 2016 published on 16 November 2016, from pages 61 to 192;
(c) the annual report of eSun for the year ended 31 July 2017 published on 15 November 2017, from pages 78 to 212; and
(d) the interim report eSun for the six months ended 31 January 2018 published on 19 April 2018, from pages 2 to 24.

2. PROPERTY INTERESTS AND PROPERTY VALUATION REPORT

Knight Frank Petty Limited (“ Knight Frank ”), an independent valuer, has valued the property interests of the eSun Group as at 31 May 2018. The text of the letter, summary of valuation and the valuation certificates are set out in Appendix VIII to this circular.

The reconciliation between the carrying amount of the properties held by the eSun Group as at 31 January 2018 and the valuation of such properties as at 31 May 2018 is as follows:—

Carrying amount of the properties held by the eSun Group as at 31 January 2018 Net changes during the period from 31 January 2018 to 31 May 2018 Valuation surplus Total market value of the properties held by the eSun Group as at 31 May 2018	HK$’000 24,829,778 428,049 5,252,609
	30,510,436

– II-1 –

APPENDIX III FINANCIAL INFORMATION OF THE LAI FUNG GROUP

The financial information of the Lai Fung Group for the three financial years ended 31 July 2017 and the six months ended 31 January 2018 are disclosed in the following documents, which have been published on the respective websites of the Stock Exchange at http://www.hkexnews.hk and Lai Fung at http://www.laifung.com:

(a) the annual report of Lai Fung for the year ended 31 July 2015 published on 11 November 2015, from pages 77 to 170;
(b) the annual report of Lai Fung for the year ended 31 July 2016 published on 16 November 2016, from pages 77 to 168;
(c) the annual report of Lai Fung for the year ended 31 July 2017 published on 15 November 2017, from pages 89 to 190; and
(d) the interim report of Lai Fung for the six months ended 31 January 2018 published on 19 April 2018, from pages 2 to 21.

– III-1 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

Set out below is the management discussion and analysis for the six months ended 31 January 2018 and the two years ended 31 July 2017. The information set out below has been derived from the relevant annual reports and interim report of LSD to provide further information relating to the financial condition and results of operations of the Group during the periods stated. These derived materials were prepared prior to the Latest Practicable Date and speak as of the date they were originally published.

A. MANAGEMENT DISCUSSION AND ANALYSIS ON THE GROUP FOR THE SIX MONTHS ENDED 31 JANUARY 2018 (AND AS COMPARED TO THE SIX MONTHS ENDED 31 JANUARY 2017)

Overview of Interim Results

For the six months ended 31 January 2018, the Group recorded turnover of HK$863.8 million (2017: HK$818.4 million) and a gross profit of HK$496.8 million (2017: HK$484.5 million), representing an increase of approximately 5.5% and 2.5%, respectively over the same period last year.

Set out below is the turnover by segment:

Property investment Property development and sales Restaurant operation Hotel operation and others Total:	Six months ended 31 January 2018 2017 (HK$ million) (HK$ million) 349.5 345.8 — — 268.5 248.7 245.8 223.9 863.8 818.4	Difference (HK$ million) 3.7 — 19.8 21.9 45.4	% change 1.1% N/A 8.0% 9.8%
			5.5%

For the six months ended 31 January 2018, net profit attributable to owners of the Company was approximately HK$1,223.6 million (2017: HK$913.1 million), representing an increase of approximately 34.0% over the same period last year. The increase is primarily due to an increase in the revaluation of investment properties owned by the Group and held through joint ventures of the Group during the period under review.

Basic earnings per share was HK$2.022 (Adjusted 2017: HK$1.513).

Excluding the effect of property revaluations, net profit attributable to owners of the Company was approximately HK$30.0 million (2017: HK$80.0 million). Net profit per share excluding the effect of property revaluations was HK$0.050 (Adjusted 2017: HK$0.133 per share).

– IV-1 –

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Adjustment has been made to the weighted average number of issued shares of the Company for the six months ended 31 January 2017 for the calculation of basic earnings per share and adjusted net profit per share as above due to the consolidation of every fifty issued shares into one share in the share capital of the Company being effective on 15 August 2017 (the “ Share Consolidation ”).

Proft attributable to owners of the Company Reported Less: Adjustments in respect of revaluation gains of investment properties held by — the Company and subsidiaries — associates and joint ventures Net proft after tax excluding revaluation gains of investment properties	Six months ended 31 January 2018 2017 HK$ million HK$ million 1,223.6 913.1 (575.0) (502.9) (618.6) (330.2) 30.0 80.0

Equity attributable to owners of the Company as at 31 January 2018 amounted to HK$28,304.4 million, up from HK$26,599.8 million as at 31 July 2017. Net asset value per share attributable to owners of the Company increased by 6.2% to HK$46.701 per share as at 31 January 2018 from HK$43.965 per share (adjusted) as at 31 July 2017. Adjustment has been made to the total number of issued shares of the Company as at 31 July 2017 due to the Share Consolidation of the Company being effective on 15 August 2017.

Property Portfolio Composition

As at 31 January 2018, the Group maintained a property portfolio with attributable GFA of approximately 2.7 million square feet. Approximate attributable GFA (in ’000 square feet) of the Group’s major properties and number of car-parking spaces is as follows:

Completed Properties Held for Rental 1 Completed Hotel Properties Properties Under Development 2 Completed Properties Held for Sale Total GFA of major properties of the Group	Commercial/ Retail 536 — 80 27 643	Offce 1,128 — — — 1,128	Industrial 64 — — — 64	Residential — — 421 7 428	Hotel — 98 366 — 464	Total (excluding car-parking spaces & ancillary facilities) 1,728 98 867 34 2,727	No. of car-parking spaces attributable to the Group 1,027 — 196 10
							1,233

Completed and rental generating properties
All properties under construction

The above table does not include GFA of properties held by Lai Fung.

– IV-2 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

Property Investment

Rental Income

During the period under review, the Group’s rental operations recorded a turnover of HK$349.5 million (2017: HK$345.8 million), representing a 1.1% increase over the same period last year.

The Group wholly owns three major investment properties in Hong Kong, namely Cheung Sha Wan Plaza, Causeway Bay Plaza 2 and Lai Sun Commercial Centre. The 50:50 joint venture with Henderson Land Development Company Limited (“ Henderson Land ”) at 8 Observatory Road, Kowloon was recognised as a component of “Share of profits and losses of joint ventures” in the condensed consolidated income statement for the period under review.

Breakdown of rental turnover by major investment properties is as follows:

Hong Kong Cheung Sha Wan Plaza (including car-parking spaces) Causeway Bay Plaza 2 (including car-parking spaces) Lai Sun Commercial Centre (including car-parking spaces) Others Subtotal: London, United Kingdom 36 Queen Street 107 Leadenhall Street 100 Leadenhall Street 106 Leadenhall Street Subtotal: Total:	Six months ended 31 January 2018 2017 HK$ million HK$ million 153.7 151.5 89.0 90.2 25.4 29.3 6.3 6.2 274.4 277.2 12.6 11.5 27.4 22.8 32.4 31.6 2.7 2.7 75.1 68.6 349.5 345.8	Period end % occupancy Change (%) 1.5 95.0 (1.3) 98.2 (13.3) 84.1 1.6 (1.0) 9.6 100.0 20.2 100.0 2.5 100.0 — 73.6 9.5 1.1

– IV-3 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

Rental proceeds from joint venture projects Hong Kong CCB Tower #(50% basis) 8 Observatory Road ##(50% basis) Total:	Six months ended 31 January 2018 2017 HK$ million HK$ million 66.1 60.4 28.4 26.3 94.5 86.7	Period end % occupancy Change (%) 9.4 100.0 8.0 100.0 9.0

CCB Tower is a joint venture project with China Construction Bank Corporation (“ CCB ”) in which each of the Group and CCB has an effective 50% interest. For the six months ended 31 January 2018, the rental proceeds recorded by the joint venture were HK$132.2 million (2017: HK$120.7 million).

8 Observatory Road is a joint venture project with Henderson Land in which each of the Group and Henderson Land has an effective 50% interest. For the six months ended 31 January 2018, the rental proceeds recorded by the joint venture were HK$56.8 million (2017: HK$52.6 million).

Breakdown of turnover by usage of our major rental properties was as follows:

	Six months	ended 31 January	2018	Six months	ended 31 January	2017
			Attributable			Attributable
	Group	Turnover	GFA	Group	Turnover	GFA
	interest	(HK$ million)	(square feet)	interest	(HK$ million)	(square feet)
Hong Kong
Cheung Sha Wan Plaza	100%			100%
Commercial		80.4	233,807		79.1	233,807
Offce		63.7	409,896		63.8	409,896
Car-parking spaces		9.6	N/A		8.6	N/A
Subtotal:		153.7	643,703		151.5	643,703
Causeway Bay Plaza 2	100%			100%
Commercial		60.1	109,770		61.5	109,770
Offce		26.4	96,268		26.2	96,268
Car-parking spaces		2.5	N/A		2.5	N/A
Subtotal:		89.0	206,038		90.2	206,038

– IV-4 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

	Six months	ended 31 January	2018	Six months	ended 31 January	2017
			Attributable			Attributable
	Group	Turnover	GFA	Group	Turnover	GFA
	interest	(HK$ million)	(square feet)	interest	(HK$ million)	(square feet)
Lai Sun Commercial Centre	100%			100%
Commercial		11.9	95,063		15.6	95,063
Offce		4.2	74,181		5.0	74,181
Car-parking spaces		9.3	N/A		8.7	N/A
Subtotal:		25.4	169,244		29.3	169,244
Others		6.3	63,592*		6.2	63,592*
Subtotal:		274.4	1,082,577*		277.2	1,082,577*
London, United Kingdom
36 Queen Street	100%			100%
Offce		12.6	60,816		11.5	60,816
107 Leadenhall Street	100%			100%
Commercial		2.5	48,182		2.0	48,149
Offce		24.9	98,424		20.8	98,457
Subtotal:		27.4	146,606		22.8	146,606
100 Leadenhall Street	100%			100%
Offce		32.4	177,700		31.6	177,700
106 Leadenhall Street	100%			100%
Commercial		0.6	3,540		0.5	3,540
Offce		2.1	16,384		2.2	16,384
Subtotal:		2.7	19,924		2.7	19,924
Subtotal:		75.1	405,046		68.6	405,046
Total:		349.5	1,487,623*		345.8	1,487,623*

– IV-5 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

	Six months	ended 31 January	2018	Six months	ended 31 January	2017
			Attributable			Attributable
	Group	Turnover	GFA	Group	Turnover	GFA
	interest	(HK$ million)	(square feet)	interest	(HK$ million)	(square feet)
Joint Venture Projects
Hong Kong
CCB Tower #(50% basis)	50%			50%
Offce		65.8	114,603**		60.1	114,555**
Car-parking spaces		0.3	N/A		0.3	N/A
Subtotal:		66.1	114,603**		60.4	114,555**
8 Observatory Road ##(50% basis)	50%			50%
Commercial		23.0	45,312***		21.1	45,312***
Offce		4.2	37,273***		4.0	37,273***
Car-parking spaces		1.2	N/A		1.2	N/A
Subtotal:		28.4	82,585***		26.3	82,585***
Total:		94.5	197,188		86.7	197,140

Excluding 10% interest in AIA Central.
** Referring to GFA attributable to the Group. The total GFA of CCB Tower is 229,206 square feet.
*** Referring to GFA attributable to the Group. The total GFA of 8 Observatory Road is 165,170 square feet. # CCB Tower is a joint venture project with CCB in which each of the Group and CCB has an effective 50% interest. For the six months ended 31 January 2018, the rental proceeds recorded by the joint venture were HK$132.2 million (2017: HK$120.7 million).
8 Observatory Road is a joint venture project with Henderson Land in which each of the Group and Henderson Land has an effective 50% interest. For the six months ended 31 January 2018, the rental proceeds recorded by the joint venture were HK$56.8 million (2017: HK$52.6 million).

The average Sterling exchange rate for the period under review appreciated by approximately 4.4% compared with the same period last year. Excluding the effect of currency translation, the Sterling denominated turnover from London properties increased by 4.8% during the period under review. Breakdown of rental turnover of London portfolio for the six months ended 31 January 2018 is as follows:

36 Queen Street 107 Leadenhall Street 100 Leadenhall Street 106 Leadenhall Street Total:	2018 HK$’000 12,612 27,370 32,344 2,734 75,060	2017 HK$’000 11,514 22,818 31,570 2,721 68,623	% Change 9.5 19.9 2.5 0.5 9.4	2018 GBP’000 1,206 2,617 3,092 261 7,176	2017 GBP’000 1,149 2,277 3,151 272 6,849	% Change 5.0 14.9 (1.9) (4.0)
						4.8

– IV-6 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

Review of major investment properties

Hong Kong Properties

Cheung Sha Wan Plaza

The asset comprises a 8-storey and a 7-storey office towers erected on top of a retail podium which was completed in 1989. It is located on top of the Lai Chi Kok MTR station with a total GFA of 643,703 square feet (excluding car-parking spaces). The arcade is positioned to serve the local communities nearby with banks and restaurants chains as the key tenants.

Causeway Bay Plaza 2

The asset comprises a 28-storey commercial/office building with car-parking facilities at basement levels which was completed in 1992. It is located at Causeway Bay with a total GFA of 206,038 square feet (excluding car-parking spaces). Key tenants include a HSBC branch and commercial offices and restaurants.

Lai Sun Commercial Centre

The asset comprises a 13-storey commercial/carpark complex completed in 1987. It is located near the Lai Chi Kok MTR station with a total GFA of 169,244 square feet (excluding carparking spaces).

CCB Tower

The Group has a 50:50 interest with CCB in the joint redevelopment project of the former Ritz-Carlton Hotel in Central. This 27-storey office tower is a property in Central featuring underground access to the Central MTR station. The property has a total GFA of 229,206 square feet (excluding car-parking spaces). CCB Tower was completed in 2012 and added 114,603 square feet of attributable GFA to the rental portfolio of the Group. CCB Tower is now fully leased out with 18 floors of the office floors and 2 banking hall floors leased to CCB for its Hong Kong operations.

8 Observatory Road

The Group has a 50:50 interest with Henderson Land in this joint development project at Observatory Road, Kowloon. The property is a 19-storey commercial building with a total GFA of 165,170 square feet (excluding car-parking spaces). The property was completed in June 2015 and is now fully leased out.

– IV-7 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

AIA Central

The Group has 10% interest in AIA Central which is situated in the central business district of Hong Kong and commands views over Victoria Harbour, to Kowloon Peninsula to the north, and across Chater Garden and The Peak to the south. This 39-storey office tower provides prime office space with a total GFA of approximately 428,962 square feet (excluding carparking spaces).

Overseas Properties

36 Queen Street, London EC4, United Kingdom

In February 2011, the Group acquired an office building in the City in central London located at 36 Queen Street. Completed in 1986, it comprises 60,816 square feet gross internal area of office accommodation extending over basement, ground and six upper floors. The building is currently fully leased out.

107 Leadenhall Street, London EC3, United Kingdom

In April 2014, the Group acquired a property located in the City of London, surrounded by 30 St Mary Axe (commonly known as the Gherkin), Lloyd’s of London and the Willis Building at 51 Lime Street. It is a freehold commercial property housing commercial, offices and retail space. The building comprises 146,606 square feet gross internal area of office accommodation extending over basement, ground, mezzanine and seven upper floors. The building is currently fully leased out.

100 Leadenhall Street, London EC3, United Kingdom

Following the acquisition of 107 Leadenhall Street in April 2014, the Group announced the acquisition of 100 Leadenhall Street in November 2014 which was completed in January 2015. This property comprises a basement, a lower ground floor, ground floor and nine upper floors and provides 177,700 square feet gross internal area of offices and ancillary accommodation. The property is currently fully let to Chubb Market Company Limited.

106 Leadenhall Street, London EC3, United Kingdom

In December 2015, the Group acquired the property located adjacent to 100 and 107 Leadenhall Street, namely 106 Leadenhall Street, which is a multi-tenanted asset with approximately 19,924 square feet gross internal area of commercial and offices including ancillary space. Up to 31 January 2018, over 70% floor area of the property had been leased out.

– IV-8 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

Property Development

No turnover from sales of properties was recognised for the six months ended 31 January 2018 (2017: Nil).

Review of major projects for sale

339 Tai Hang Road, Hong Kong

The Group wholly owns the development project located at 339 Tai Hang Road, Hong Kong. The development project is a residential property with a total GFA of approximately 30,400 square feet (excluding car-parking spaces). The total development cost (including land cost and lease modification premium) is approximately HK$670 million. Up to 31 January 2018, 8 out of 9 units of this project had been sold.

Ocean One, 6 Shung Shun Street, Yau Tong

The Group wholly owns this development project, namely “Ocean One” located at No. 6 Shung Shun Street, Yau Tong, Kowloon. This property is a residential-cum-commercial property with a total GFA of about 122,000 square feet (excluding car-parking spaces) or 124 residential units and 2 commercial units. Up to 31 January 2018, all units had been sold other than 2 shops and 7 car-parking spaces.

Review of major projects under development

Ocean Hotel

The Group was named the most preferred proponent by Ocean Park for the Ocean Hotel project in October 2013 and was officially awarded the project in May 2014. The Ocean Hotel, to be operated by the Marriott group, will provide a total of 471 rooms and 365,974 square feet of attributable rental space. The total development cost was estimated to be approximately HK$4.4 billion. Construction is expected to be completed in the second half of 2018.

Alto Residences

In November 2012, the Group successfully tendered for and secured a site located at Area 68A2, Tseung Kwan O, New Territories, through a 50% joint venture vehicle. The lot has an area of 229,338 square feet with a total GFA of 573,268 square feet split into 458,874 square feet for residential use and 114,394 square feet for commercial use. Construction is expected to be completed in the third quarter of 2018.

This project providing 605 flats, including 23 detached houses was named “Alto Residences” and was launched for pre-sale in October 2016. Up to 18 March 2018, the Group had pre-sold 532 units in Alto Residences with saleable area of approximately 298,600 square feet at an average selling price of approximately HK$15,600 per square foot.

– IV-9 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

93 Pau Chung Street

In April 2014, the Group was successful in its bid for the development right to the San Shan Road/Pau Chung Street project from the Urban Renewal Authority in Ma Tau Kok, Kowloon, Hong Kong. The lot has an area of 12,599 square feet with a total GFA of 111,354 square feet split into 94,486 square feet for residential use and 16,868 square feet for commercial use. The total development cost was estimated to be approximately HK$1 billion and construction is expected to be completed in the third quarter of 2018.

This project was named “93 Pau Chung Street” and launched for pre-sale in September 2016, offering 209 flats in total, including studios, one and two-bedroom units. Up to 18 March 2018, the Group had pre-sold 207 units in this project with saleable area of approximately 74,500 square feet at an average selling price of HK$16,300 per square foot.

Novi

On 16 May 2016, the Group has completed the purchase of the remaining unit for the proposed development on Ki Lung Street in Mong Kok, Kowloon. The site comprises numbers 48-56 on Ki Lung Street and has a combined site area of 5,054 square feet. It is planned to be developed primarily into a commercial/residential development for sale with a total GFA of 42,851 square feet. The total development cost was expected to be approximately HK$0.4 billion and construction is expected to be completed in the third quarter of 2019.

This project was named “Novi” and launched for pre-sale in July 2017, offering 138 flats in total, including studios, one and two-bedroom units. Up to 18 March 2018, the Group had pre-sold 135 units in this project with saleable area of approximately 28,000 square feet at an average selling price of HK$18,700 per square foot.

Sai Wan Ho Street project

The Group was successful in September 2015 in its bid for the development rights to the Sai Wan Ho Street project from the Urban Renewal Authority in Shau Kei Wan, Hong Kong. The project site covers an area of 7,642 square feet. Upon completion, it is planned to provide about 144 residential units with a total residential GFA of 59,799 square feet. The total development cost is estimated to be approximately HK$0.9 billion and construction is expected to be completed in the third quarter of 2019.

– IV-10 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

Restaurant Operations

For the six months ended 31 January 2018, restaurant operations contributed HK$268.5 million to the Group’s turnover (2017: HK$248.7 million), representing an increase of approximately 8.0% from the same period last year. The turnover from the restaurants segment was primarily boosted by contributions from Chiu Tang in Central, Hong Kong and Old Bazaar Kitchen in Wanchai, Hong Kong.

As at 31 January 2018, restaurant operations included the Group’s interests in 18 restaurants in Hong Kong and mainland China and 2 restaurants in Macau and Las Vegas under management.

			Attributable interest
Cuisine	Restaurant	Location	to the Group	Award
*Owned restaurants*
Western Cuisine	8 ½Otto e Mezzo BOMBANA Hong Kong	Hong Kong	37%	Three Michelin stars (2012-2018)
	8 ½Otto e Mezzo BOMBANA Shanghai	Shanghai	13%	Two Michelin stars (2017)
	Opera BOMBANA	Beijing	20%
	CIAK - In The Kitchen	Hong Kong	62%	One Michelin star (2015-2017)
	CIAK - All Day Italian	Hong Kong	67%	Michelin Bib Gourmand (2017)
	Beefbar	Hong Kong	62%	One Michelin star (2017-2018)
	Operetta	Hong Kong	67%
	Grubers	Hong Kong	34%
Asian Cuisine	China Tang Landmark	Hong Kong	50%
	China Tang Harbour City	Hong Kong	60%
	Howard’s Gourmet	Hong Kong	50%
	Beijing Howard’s Gourmet	Beijing	67%
	Chiu Tang Central	Hong Kong	67%
	Tang 2	Hong Kong	67%
	Old Bazaar Kitchen	Hong Kong	63%
Japanese Cuisine	Kaiseki Den by Saotome	Hong Kong	59%	One Michelin star (2010-2018)
	(formally known as “Wagyu Kaiseki Den”)
	Takumi by Daisuke Mori	Hong Kong	63%	One Michelin star (2017-2018)
	(formally known as “Wagyu Takumi”)
	Sushi Masataka	Hong Kong	63%
	(formally known as “Rozan”)
*Managed restaurants*
Western Cuisine	8 ½Otto e Mezzo BOMBANA, Macau	Macau	N/A	One Michelin star (2016-2018)
Asian Cuisine	China Tang Las Vegas	Las Vegas	N/A

– IV-11 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

Hotel Operations

Turnover from hotel operations was mainly derived from the Group’s operation of the Caravelle Hotel in Ho Chi Minh City, Vietnam. For the six months ended 31 January 2018, the hotel operation contributed HK$231.9 million to the Group’s turnover (2017: HK$209.1 million).

Caravelle Hotel is a 5-star hotel in the centre of the business, shopping and entertainment district in Vietnam. It is a 24-storey tower with a mixture of French colonial and traditional Vietnamese style and has 335 appointed rooms, suites, exclusive Signature Floors, Signature Lounge and a specially equipped room for the disabled. Total GFA attributable to the Group is 98,376 square feet.

The Group was awarded the hotel tender at Ocean Park in May 2014 and the Ocean Hotel, to be operated by the Marriott group, will provide a total of 471 rooms upon its completion in 2018. The Group is optimistic about the prospects of the Ocean Hotel project given the popularity of Ocean Park, which is underpinned by growth in visitor numbers to Hong Kong coinciding with its expansion.

The hotel operation team has experience in providing consultancy and management services to hotels in Mainland China, Hong Kong and other Asian countries. The division’s key strategy continues to focus on providing management services, particularly to capture opportunities arising from the developments of Lai Fung in Shanghai, Guangzhou, Zhongshan and Hengqin. The hotel division manages Lai Fung’s serviced apartments in Shanghai and Zhongshan under the “STARR” brand. STARR Resort Residence Zhongshan soft opened in August 2013 and comprises two 16-storey blocks with 90 fully furnished serviced apartment units located in the Palm Lifestyle complex in Zhongshan Western district at Cui Sha Road, opposite to the new Zhongshan traditional Chinese medical centre. STARR Hotel Shanghai soft opened in November 2013 and is a 17-storey hotel with 239 fully furnished and equipped hotel units with kitchenette located in the Mayflower Lifestyle complex in the Zhabei inner ring road district, within walking distance to Lines 1, 3 and 4 of the Shanghai Metro Station with access to motorways.

Interest In Associates (eSun)

As at 31 January 2018, the Group’s interest in eSun was 36.94%.

During the period under review, share of loss of eSun amounted to HK$5.3 million (2017: share of profit of HK$11.6 million). The decrease was primarily due to (a) a consolidated loss from MAGHL owing to unsatisfactory performance of the films released by the MAGHL Group during the period under review and (b) lower profit contribution from a joint venture of Lai Fung as sale of the project had been substantially completed, despite a higher fair value gain arising from the revaluation of Lai Fung’s investment properties during the period under review.

– IV-12 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

Interests in Joint Ventures

During the period ended 31 January 2018, contribution from joint ventures amounted to HK$612.6 million (2017: HK$333.8 million), representing an increase of 83.5%. This was primarily due to revaluation gains of CCB Tower and 8 Observatory Road being recognised during the period under review as compared to the same period last year.

Revaluation gains Operating profts Contribution from joint ventures	Six months ended 31 January 2018 2017 (HK$ million) (HK$ million) 562.6 303.0 50.0 30.8 612.6 333.8	Six months ended 31 January 2018 2017 (HK$ million) (HK$ million) 562.6 303.0 50.0 30.8 612.6 333.8
		333.8

Liquidity and Financial Resources

As at 31 January 2018, cash and bank balances and undrawn facilities held by the Group amounted to HK$2,327.5 million and HK$4,129.5 million, respectively.

The Group’s sources of funding comprise mainly internal funds generated from the Group’s business operations, loan facilities provided by banks and guaranteed notes issued to investors.

As at 31 January 2018, the Group had bank borrowings of approximately HK$6,576.0 million and guaranteed notes of approximately HK$3,105.2 million. The gearing ratio, expressed as a percentage of the total outstanding net debt (being the total outstanding bank borrowings and guaranteed notes less the pledged and unpledged bank balances and time deposits) to consolidated net assets attributable to owners of the Company, was approximately 26.0%. The Group’s gearing excluding the net debt of the London portfolio all of which had a positive carry net of financing costs was approximately 20.2%. As at 31 January 2018, the maturity profile of the bank borrowings of HK$6,576.0 million was spread over a period of less than 5 years with HK$172.5 million repayable within 1 year, HK$676.7 million repayable in the second year and HK$5,726.8 million repayable in the third to fifth years. All the Group’s borrowings carried interest on a floating rate basis except for the guaranteed notes issued in 2017 which has a fixed rate of 4.6% per annum.

– IV-13 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

On 13 September 2017, the Group issued guaranteed notes in an aggregate principal amount of US$400 million (“ 2017 Notes ”). The 2017 Notes are guaranteed by the Company, have a maturity term of five years and bear a fixed interest rate of 4.6% per annum with interest payable semi-annually in arrears. The net proceeds from the offering of the 2017 Notes are approximately US$397 million. Apart from refinancing the guaranteed notes of US$350 million issued in 2013, the proceeds have been used for general corporate purposes. The Group entered into cross currency swap agreements with financial institutions for the purpose of hedging the foreign currency risk arising from the 2017 Notes.

As at 31 January 2018, certain investment properties with carrying amounts of approximately HK$16,983.3 million, certain property, plant and equipment with carrying amounts of approximately HK$4,173.2 million, and certain bank balances and time deposits with banks of approximately HK$302.1 million were pledged to banks to secure banking facilities granted to the Group and its joint venture. In addition, certain shares in subsidiaries held by the Group were also pledged to banks to secure banking facilities granted to the Group. Certain shares in joint ventures held by the Group were pledged to banks to secure banking facilities granted to joint ventures of the Group. The Group’s secured bank borrowings were also secured by floating charges over certain assets held by the Group.

The Group’s major assets and liabilities and transactions were denominated in Hong Kong dollars and United States dollars. Considering that Hong Kong dollars are pegged against United States dollars, the Group believes that the corresponding exposure to exchange rate risk arising from United States dollars is nominal. In addition, the Group had investments in the United Kingdom with the assets and liabilities denominated in Pounds Sterling. These investments were primarily financed by bank borrowings denominated in Pounds Sterling in order to minimise the net foreign exchange exposure. Other than the abovementioned, the remaining monetary assets and liabilities of the Group were denominated in Renminbi and Vietnamese Dong. The Group manages its foreign currency risk by reviewing the movement of the foreign currency rate and considers hedging significant foreign currency exposure should the additional need arise.

Contingent liabilities

As at 31 January 2018, the Group had the following contingent liabilities:

(a) Contingent liabilities not provided for in the condensed consolidated interim financial statements:

statements:
	31 January	31 July
	2018	2017
	(Unaudited)	(Audited)
	HK$’000	HK$’000
Guarantees given to banks in connection with
facilities granted to and utilised by joint ventures	787,000	1,092,000

– IV-14 –

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

(b) Pursuant to an indemnity deed (the “ Lai Fung Tax Indemnity Deed ”) dated 12 November 1997 entered into between the Company and Lai Fung, the Company has undertaken to indemnify Lai Fung in respect of certain potential income tax and land appreciation tax (“ LAT ”) of the PRC payable or shared by Lai Fung in consequence of the disposal of any of the property interests attributable to Lai Fung through its subsidiaries and its associates as at 31 October 1997 (the “ Property Interests ”). These tax indemnities given by the Company apply in so far as such tax is applicable to the difference between (i) the value of the Property Interests in the valuation thereon by Chesterton Petty Limited (currently known as Knight Frank), independent chartered surveyors, as at 31 October 1997 (the “ Valuation ”); and (ii) the aggregate costs of such Property Interests incurred up to 31 October 1997, together with the amount of unpaid land costs, unpaid land premium and unpaid costs of resettlement, demolition and public utilities and other deductible costs in respect of the Property Interests. The Lai Fung Tax Indemnity Deed assumes that the Property Interests are disposed of at the values attributed to them in the Valuation, computed by reference to the rates and legislation governing PRC income tax and LAT prevailing at the time of the Valuation.

The indemnities given by the Company do not cover (i) new properties acquired by Lai Fung subsequent to the listing of the shares of Lai Fung (the “ Listing ”) on the Stock Exchange; (ii) any increase in the relevant tax which arises due to an increase in tax rates or changes to the legislation prevailing at the time of the Listing; and (iii) any claim to the extent that provision for deferred tax on the revaluation surplus has been made in the calculation of the adjusted net tangible asset value of Lai Fung as set out in Lai Fung’s prospectus dated 18 November 1997.

After taking into account the Property Interests currently held by Lai Fung as at 31 January 2018 which are covered under the Lai Fung Tax Indemnity Deed and the prevailing tax rates and legislation governing PRC income tax and LAT, the total amount of tax indemnity given by the Company is estimated to be approximately HK$0.8 billion (31 July 2017: HK$0.8 billion).

As at 31 January 2018 and 31 July 2017, the Company recorded an aggregate provision for tax indemnity of approximately HK$93,000,000.

– IV-15 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

Employees and Remuneration Policies

As at 31 January 2018, the Group employed a total of approximately 1,600 employees. The Group recognises the importance of maintaining a stable staff force in its continued success. Under the Group’s existing policies, employees pay rates are maintained at competitive levels whilst promotion and salary increments are assessed on a performance-related basis. Discretionary bonuses are granted to employees based on their merit and in accordance with industry practice. Other benefits including share option scheme, mandatory provident fund scheme, free hospitalisation insurance plan, subsidised medical care and sponsorship for external education and training programmes are offered to eligible employees.

– IV-16 –

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

B. MANAGEMENT DISCUSSION AND ANALYSIS ON THE GROUP FOR THE YEAR ENDED 31 JULY 2017 (AND AS COMPARED TO THE YEAR ENDED 31 JULY 2016)

Property Portfolio Composition

As at 31 July 2017, the Group maintained a property portfolio with attributable GFA of approximately 2.7 million square feet. Approximate attributable GFA (in ‘000 square feet) of the Group’s major properties and number of car-parking spaces was as follows:

Completed Properties Held for Rental 1 Completed Hotel Properties Properties Under Development 2 Completed Properties Held for Sale Total GFA of major properties of the Group	Commercial/ Retail 536 — 79 27 642	Offce 1,128 — — — 1,128	Industrial 64 — — — 64	Residential — — 423 7 430	Hotel — 98 366 — 464	Total (excluding car-parking spaces & ancillary facilities) 1,728 98 868 34 2,728	No. of car-parking spaces attributable to the Group 1,027 — 196 10
							1,233

Completed and rental generating properties
All properties under construction

The above table does not include GFA of properties held by Lai Fung.

– IV-17 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

Property Investment

Rental Income

During the year under review, the Group’s rental operations recorded a turnover of HK$686.7 million (2016: HK$701.6 million), representing a 2.1% decrease over last year. The decrease was primarily due to the lower contributions from London properties post Brexit in June 2016. The average Sterling exchange rate for the year under review depreciated by approximately 11.4% compared with last year. Excluding the effect of currency translation against a depreciating Sterling, the change in the turnover from London properties went from a decrease of 9.0% to an increase of 2.8%.

As at 31 July 2017, the Group wholly owned three major investment properties in Hong Kong, namely Cheung Sha Wan Plaza, Causeway Bay Plaza 2 and Lai Sun Commercial Centre. The 50:50 joint venture with Henderson Land at 8 Observatory Road, Kowloon was fully leased. As at 31 July 2017, this was recognised as a component of “Share of profits and losses of joint ventures” in the consolidated income statement. Breakdown of rental turnover by major investment properties is as follows:

Hong Kong Cheung Sha Wan Plaza (including car-parking spaces) Causeway Bay Plaza 2 (including car-parking spaces) Lai Sun Commercial Centre (including car-parking spaces) Others Subtotal: London, United Kingdom 36 Queen Street 107 Leadenhall Street 100 Leadenhall Street 106 Leadenhall Street Subtotal: Total:	For the year ended 31 July 2017 2016 HK$ million HK$ million 302.1 302.6 181.4 178.0 54.6 59.8 12.3 11.5 550.4 551.9 23.1 25.9 45.6 50.2 61.9 70.1 5.7 3.5 136.3 149.7 686.7 701.6	Year end % Changeoccupancy(%) (0.2) 91.1 1.9 98.8 (8.7) 85.4 7.0 (0.3) (10.8) 100.0 (9.2) 100.0 (11.7) 100.0 62.9 73.6 (9.0) (2.1)

– IV-18 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

Rental proceeds from joint venture projects Hong Kong CCB Tower #(50% basis) 8 Observatory Road ##(50% basis) Total:	For the year ended 31 July 2017 2016 HK$ million HK$ million 122.4 113.7 55.0 30.0 177.4 143.7	Year end % Changeoccupancy(%) 7.7 100.0 83.3 100.0 23.5

During the year ended 31 July 2017, CCB Tower was a joint venture project with CCB in which each of the Group and CCB had an effective 50% interest. For the year ended 31 July 2017, the rental proceeds recorded by the joint venture is HK$244.8 million (2016: HK$227.5 million).
During the year ended 31 July 2017, 8 Observatory Road was a joint venture project with Henderson Land in which each of the Group and Henderson Land had an effective 50% interest. For the year ended 31 July 2017, the rental proceeds recorded by the joint venture is HK$110.0 million (2016: HK$60.0 million).

Breakdown of turnover by usage of our major rental properties is as follows:

	For the	year ended 31 July	2017	For the	year ended 31 July	2016
			Attributable			Attributable
	Group	Turnover	GFA	Group	Turnover	GFA
	interest	(HK$ million)	(square feet)	interest	(HK$ million)	(square feet)
Hong Kong
Cheung Sha Wan Plaza	100%			100%
Commercial		159.7	233,807		163.2	233,807
Offce		124.7	409,896		122.6	409,896
Car-parking spaces		17.7	N/A		16.8	N/A
Subtotal:		302.1	643,703		302.6	643,703
Causeway Bay Plaza 2	100%			100%
Commercial		124.1	109,770		122.3	109,770
Offce		52.3	96,268		50.9	96,268
Car-parking spaces		5.0	N/A		4.8	N/A
Subtotal:		181.4	206,038		178.0	206,038

– IV-19 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

	For the	year ended 31 July	2017	For the	year ended 31 July	2016
			Attributable			Attributable
	Group	Turnover	GFA	Group	Turnover	GFA
	interest	(HK$ million)	(square feet)	interest	(HK$ million)	(square feet)
Lai Sun Commercial Centre	100%			100%
Commercial		27.5	95,063		34.8	95,063
Offce		9.2	74,181		8.2	74,181
Car-parking spaces		17.9	N/A		16.8	N/A
Subtotal:		54.6	169,244		59.8	169,244
Others		12.3	63,592*		11.5	63,592*
Subtotal:		550.4	1,082,577*		551.9	1,082,577*
London, United Kingdom
36 Queen Street	100%			100%
Offce		23.1	60,816		25.9	60,816
107 Leadenhall Street	100%			100%
Commercial		4.6	48,149		6.0	48,149
Offce		41.0	98,457		44.2	98,457
Subtotal:		45.6	146,606		50.2	146,606
100 Leadenhall Street	100%			100%
Offce		61.9	177,700		70.1	177,700
106 Leadenhall Street	100%			100%
Commercial		1.2	4,404		0.6	4,404
Offce		4.5	15,518		2.9	15,518
Subtotal:		5.7	19,922		3.5	19,922
Subtotal:		136.3	405,044		149.7	405,044
Total:		686.7	1,487,621*		701.6	1,487,621*

– IV-20 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

		For the	year ended 31 July	2017	For the	year ended 31 July	2016
				Attributable			Attributable
		Group	Turnover	GFA	Group	Turnover	GFA
		interest	(HK$ million)	(square feet)	interest	(HK$ million)	(square feet)
Joint Venture Projects
Hong Kong
CCB Tower	#(50% basis)	50%			50%
Offce			121.9	114,555**		113.3	114,555**
Car-parking spaces			0.5	N/A		0.4	N/A
Subtotal:			122.4	114,555**		113.7	114,555**
8 Observatory Road ##(50% basis)		50%			50%
Commercial			44.4	45,312***		21.0	45,312***
Offce			8.3	37,273***		7.1	37,273***
Car-parking spaces			2.3	N/A		1.9	N/A
Subtotal:			55.0	82,585***		30.0	82,585***
Total:			177.4	197,140		143.7	197,140

Excluding 10% interest in AIA Central.
** Referring to GFA attributable to the Group. The total GFA of CCB Tower is 229,110 square feet.

*** Referring to GFA attributable to the Group. The total GFA of 8 Observatory Road is 165,170 square feet. # During the year ended 31 July 2017, CCB Tower was a joint venture project with CCB in which each of the Group and CCB had an effective 50% interest. For the year ended 31 July 2017, the rental proceeds recorded by the joint venture were HK$244.8 million (2016: HK$227.5 million).

During the year ended 31 July 2017, 8 Observatory Road was a joint venture project with Henderson Land in which each of the Group and Henderson Land had an effective 50% interest. For the year ended 31 July 2017, the rental proceeds recorded by the joint venture were HK$110.0 million (2016: HK$60.0 million).

Breakdown of rental turnover of London portfolio was as follows:

36 Queen Street 107 Leadenhall Street 100 Leadenhall Street 106 Leadenhall Street Total:	2017 HK$’000 23,119 45,581 61,938 5,666 136,304	2016 HK$’000 25,862 50,192 70,129 3,529 149,712	% Change (10.6) (9.2) (11.7) 60.6 (9.0)	2017 GBP’000 2,333 4,599 6,250 572 13,754	2016 GBP’000 2,311 4,485 6,267 315 13,378	% Change 1.0 2.5 (0.3) 81.6
						2.8

– IV-21 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

Property Development

For the year ended 31 July 2017, recognised turnover from sales of properties was HK$89.2 million (2016: HK$468.7 million), contributed by the sale of one residential unit in 339 Tai Hang Road. The decrease was mainly due to fewer properties being available for sale during the year under review.

Restaurant Operation

For the year ended 31 July 2017, the restaurant operation contributed HK$481.5 million to the Group’s turnover (2016: HK$280.7 million), representing an increase of approximately 71.5% from the previous year. The turnover from the restaurants segment was primarily boosted by contributions from China Tang Harbour City in Hong Kong, Howard’s Gourmet in CCB Tower, Hong Kong, CIAK — All Day Italian in Cityplaza, Hong Kong, Operetta in Pacific Place, Hong Kong, Beefbar in Central, Hong Kong and Old Bazaar Kitchen in Wanchai, Hong Kong.

As at 31 July 2017, the Group’s restaurant operation comprised its interests in 16 restaurants in Hong Kong and mainland China.

Hotel Operation

Turnover from hotel operation was mainly derived from the Group’s operation of the Caravelle Hotel in Ho Chi Minh City, Vietnam. For the year ended 31 July 2017, the hotel operation contributed HK$412.3 million to the Group’s turnover (2016: HK$391.7 million).

Interest in Associates (eSun)

The placing of 248,642,433 new shares of eSun under its general mandate was completed on 9 February 2017, resulting in a dilution of the Group’s interest in eSun from 41.92% to 34.94%. In February 2017, the Group acquired 2% additional interest in eSun and the Group’s interest in eSun increased from 34.94% to 36.94%. As of 31 July 2017, the Group’s interest in eSun was 36.94%.

During the year under review, share of profits of eSun amounted to HK$191.3 million (2016: HK$33.9 million). The increase was a result of (a) lower operating profit due to lower recognised property sales from subsidiaries of Lai Fung; (b) increased profit contribution from the property sales of Lai Fung’s joint venture project; (c) tax indemnity amount received by Lai Fung from the Company pursuant to the Tax Indemnity Deed; and (d) gain on disposal of eSun’s entire interest in 1,480,994 Series C Preferred shares in Pony Media Holdings Inc. in March 2017.

– IV-22 –

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Interests in Joint Ventures

During the year ended 31 July 2017, contribution from joint ventures amounted to HK$837.4 million (2016: HK$770.5 million), representing an increase of 8.7%. This was primarily due to revaluation gains of CCB Tower and 8 Observatory Road being recognised during the year under review as compared to last year.

Revaluation gains Operating profts Contribution from joint ventures	For the year ended 31 July 2017 2016 (HK$ million) (HK$ million) 752.9 682.4 84.5 88.1 837.4 770.5	For the year ended 31 July 2017 2016 (HK$ million) (HK$ million) 752.9 682.4 84.5 88.1 837.4 770.5
		770.5

Liquidity and Financial Resources

As at 31 July 2017, cash and bank balances and undrawn facilities held by the Group amounted to HK$2,947.4 million and HK$3,818.5 million, respectively.

During the year under review, the Group’s sources of funding comprised mainly internal funds generated from the Group’s business operations, loan facilities provided by banks, guaranteed notes issued to investors and rights issue.

As at 31 July 2017, the Group had bank borrowings of approximately HK$6,906.0 million and guaranteed notes of approximately HK$2,731.2 million. The gearing ratio, expressed as a percentage of the total outstanding net debt (being the total outstanding bank borrowings and guaranteed notes less the pledged and unpledged bank balances and time deposits) to consolidated net assets attributable to owners of the Company, was approximately 25.1%. The Group’s gearing excluding the net debt of the London portfolio all of which had a positive carry net of financing costs was approximately 19.3%. As at 31 July 2017, the maturity profile of the bank borrowings of HK$6,906.0 million was spread over a period of less than 5 years with HK$157.6 million repayable within 1 year, HK$1,233.5 million repayable in the second year and HK$5,514.9 million repayable in the third to fifth years. All the Group’s borrowings carried interest on a floating rate basis except for the guaranteed notes issued in January 2013 which has a fixed rate of 5.7% per annum.

– IV-23 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

As at 31 July 2017, certain investment properties with carrying amounts of approximately HK$16,204.9 million, certain property, plant and equipment with carrying amounts of approximately HK$3,445.8 million, certain properties under development for sale of approximately HK$810.0 million and certain bank balances and time deposits with banks of approximately HK$283.3 million were pledged to banks to secure banking facilities granted to the Group and its joint venture. In addition, certain shares in subsidiaries held by the Group were also pledged to banks to secure banking facilities granted to the Group. Certain shares in joint ventures held by the Group were pledged to banks to secure banking facilities granted to joint ventures of the Group. The Group’s secured bank borrowings were also secured by floating charges over certain assets held by the Group.

The Group’s major assets and liabilities and transactions were denominated in Hong Kong dollars and United States dollars. Considering that Hong Kong dollars are pegged against United States dollars, the Group believes that the corresponding exposure to exchange rate risk arising from United States dollars is nominal. In addition, the Group had investments in the United Kingdom with the assets and liabilities denominated in Pounds Sterling. The majority of the investments were partly financed by bank borrowings denominated in Pounds Sterling in order to minimise the net foreign exchange exposure. Other than the abovementioned, the remaining monetary assets and liabilities of the Group were denominated in Renminbi and Vietnamese Dong. During the year, no hedging instruments were employed to hedge for the foreign exchange exposure. The Group manages its foreign currency risk by reviewing the movement of the foreign currency rate and considers hedging significant foreign currency exposure should the need arise.

On 13 September 2017, the Group issued the 2017 Notes in an aggregate principal amount of US$400 million. The 2017 Notes are guaranteed by the Company, have a maturity term of five years and bear a fixed interest rate of 4.6% per annum with interest payable semi-annually in arrears. The net proceeds from the offering of the 2017 Notes were approximately US$396 million and will be used for refinancing the existing guaranteed notes of US$350 million and general corporate purposes.

Contingent Liabilities

As at 31 July 2017, the Group had the following contingent liabilities:

(a) Contingent liabilities not provided for in the financial statements:

	2017	2016
	HK$’000	HK$’000
Guarantees given to banks in connection with facilities
granted to and utilised by joint ventures	1,092,000	897,000

– IV-24 –

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

(b) Pursuant to the Lai Fung Tax Indemnity Deed, the Company has undertaken to indemnify Lai Fung in respect of certain LAT payable or shared by Lai Fung in consequence of the disposal of the Property Interests. These tax indemnities given by the Company apply in so far as such tax is applicable to the difference between (i) the value of the Property Interests in the Valuation; and (ii) the aggregate costs of such Property Interests incurred up to 31 October 1997, together with the amount of unpaid land costs, unpaid land premium and unpaid costs of resettlement, demolition and public utilities and other deductible costs in respect of the Property Interests. The Lai Fung Tax Indemnity Deed assumes that the Property Interests are disposed of at the values attributed to them in the Valuation, computed by reference to the rates and legislation governing PRC income tax and LAT prevailing at the time of the Valuation.

The indemnities given by the Company do not cover (i) new properties acquired by Lai Fung subsequent to the Listing; (ii) any increase in the relevant tax which arises due to an increase in tax rates or changes to the legislation prevailing at the time of the Listing; and (iii) any claim to the extent that provision for deferred tax on the revaluation surplus has been made in the calculation of the adjusted net tangible asset value of Lai Fung as set out in Lai Fung’s prospectus dated 18 November 1997.

After taking into account the Property Interests currently held by Lai Fung as at 31 July 2017 which are covered under the Lai Fung Tax Indemnity Deed and the prevailing tax rates and legislation governing PRC income tax and LAT, the total amount of tax indemnity given by the Company is estimated to be approximately HK$0.8 billion (2016: HK$1.3 billion).

During the year, the Company settled tax indemnity of approximately HK$493,936,000 (2016: Nil) in relation to PRC income tax and LAT incurred and paid by Lai Fung. The Company also reversed an overprovision in prior years of approximately HK$142,451,000 (2016: Nil) which was credited to the consolidated income statement. As at the end of the reporting period, the Company recorded an aggregate provision for tax indemnity of approximately HK$93,000,000 (2016: HK$729,387,000).

– IV-25 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

Employees and Remuneration Policies

As at 31 July 2017, the Group employed a total of approximately 1,600 employees. The Group recognises the importance of maintaining a stable staff force in its continued success. Under the Group’s existing policies, employee pay rates are maintained at competitive levels whilst promotion and salary increments are assessed on a performance-related basis. Discretionary bonuses are granted to employees based on their merit and in accordance with industry practice. Other benefits including share option scheme, mandatory provident fund scheme, free hospitalisation insurance plan, subsidised medical care and sponsorship for external education and training programmes are offered to eligible employees.

– IV-26 –

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

C. MANAGEMENT DISCUSSION AND ANALYSIS ON THE GROUP FOR THE YEAR ENDED 31 JULY 2016 (AND AS COMPARED TO THE YEAR ENDED 31 JULY 2015)

Property Portfolio Composition

As at 31 July 2016, the Group maintained a property portfolio with attributable GFA of approximately 2.7 million square feet. Approximate attributable GFA (in ‘000 square feet) of the Group’s major properties and number of car-parking spaces was as follows:

Completed Properties Held for Rental 1 Completed Hotel Properties Properties Under Development 2 Completed Properties Held for Sale Total GFA of major properties of the Group	Commercial/ Retail 485 — 79 27 591	Offce 1,172 — — — 1,172	Industrial 64 — — — 64	Residential — — 423 10 433	Hotel — 98 366 — 464	Total (excluding car-parking spaces & ancillary facilities) 1,721 98 868 37 2,724	No. of car-parking spaces attributable to the Group 1,027 — 196 11
							1,234

Completed and rental generating properties
All properties under construction

The above table does not include GFA of properties held by Lai Fung.

– IV-27 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

As at 31 July 2015, the Group maintained a property portfolio with attributable GFA of approximately 2.6 million square feet. Approximate attributable GFA (in ‘000 square feet) of the Group’s major properties and number of car-parking spaces was as follows:

Completed Properties Held for Rental 1 Completed Hotel Properties Properties Under Development 2 Completed Properties Held for Sale Total GFA of major properties of the Group	Commercial/ Retail (in ’000 square feet) 521 — 74 27 622	Offce (in ’000 square feet) 1,123 — — — 1,123	Industrial (in ’000 square feet) 59 — — — 59	Residential (in ’000 square feet) — — 324 24 348	Hotel (in ’000 square feet) — 98 366 — 464	Total (excluding car-parking spaces & ancillary facilities) (in ’000 square feet) 1,703 98 764 51 2,616	No. of car-parking spaces attributable to the Group 1,010 — 201 17
							1,228

Completed and rental generating properties
All properties under construction

The above table does not include GFA of properties held by Lai Fung.

– IV-28 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

Property Investment

Rental Income

During the year under review, the Group’s rental operations recorded a turnover of HK$701.6 million (2015: HK$655.5 million), representing a 7.0% increase over last year. The increase was primarily due to the contributions from newly acquired rental properties in London, as well as continued management of tenant mix and rental reversion at major investment properties during the year under review.

As at 31 July 2016, the Group wholly owned three major investment properties in Hong Kong, namely Cheung Sha Wan Plaza, Causeway Bay Plaza 2 and Lai Sun Commercial Centre. The 50:50 joint venture with Henderson Land at 8 Observatory Road, Kowloon was completed in June 2015 and had started to contribute to the Group’s results in the year under review. This was recognised as a component of “Share of profits of joint ventures” in the consolidated income statement.

Breakdown of rental turnover by major investment properties was as follows:

Hong Kong Cheung Sha Wan Plaza (including car-parking spaces) Causeway Bay Plaza 2 (including car-parking spaces) Lai Sun Commercial Centre (including car-parking spaces) Subtotal: London, United Kingdom 36 Queen Street 107-112 Leadenhall Street 100 Leadenhall Street 106 Leadenhall Street Subtotal: Others Total:	For the year ended 31 July 2016 2015 HK$ million HK$ million 302.6 293.9 178.0 170.9 59.8 56.4 540.4 521.2 25.9 26.7 50.2 53.7 70.1 42.5 3.5 — 149.7 122.9 11.5 11.4 701.6 655.5	Year end % Changeoccupancy(%) 3.0 93.3 4.2 96.5 6.0 98.0 3.7 (3.0) 100.0 (6.5) 100.0 64.9 100.0 N/A 94.7 21.8 0.9 7.0

– IV-29 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

	For the year	ended 31 July
	2016	2015		Year end
	HK$ million	HK$ million	% Change	occupancy(%)
Rental proceeds from
joint venture project
Hong Kong
CCB Tower #(50% basis)	113.7	113.6	0.1	100.0
8 Observatory Road ##(50% basis)	30.0	—	N/A	Offce: 86.5
				Retail: 90.4

During the year ended 31 July 2016, CCB Tower was a joint venture project with CCB in which each of the Group and CCB had an effective 50% interest. For the year ended 31 July 2016, the rental proceeds recorded by the joint venture were HK$227.5 million (2015: HK$227.2 million).
During the year ended 31 July 2016, 8 Observatory Road was a joint venture project with Henderson Land in which each of the Group and Henderson Land had an effective 50% interest. For the year ended 31 July 2016, the rental proceeds recorded by the joint venture were HK$60.0 million.

Breakdown of turnover by usage of our major rental properties was as follows:

	For the	year ended 31 July	2016	For the	year ended 31 July	2015
			Attributable			Attributable
	Group	Turnover	GFA	Group	Turnover	GFA
	interest	(HK$ million)	(square feet)	interest	(HK$ million)	(square feet)
Hong Kong
Cheung Sha Wan Plaza	100%			100%
Commercial		163.2	233,807		158.1	233,807
Offce		122.6	409,896		118.5	409,896
Car-parking spaces		16.8	N/A		17.3	N/A
Subtotal:		302.6	643,703		293.9	643,703
Causeway Bay Plaza 2	100%			100%
Commercial		122.3	109,770		114.1	109,770
Offce		50.9	96,268		52.1	96,268
Car-parking spaces		4.8	N/A		4.7	N/A
Subtotal:		178.0	206,038		170.9	206,038

– IV-30 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

	For the	year ended 31 July	2016	For the	year ended 31 July	2015
			Attributable			Attributable
	Group	Turnover	GFA	Group	Turnover	GFA
	interest	(HK$ million)	(square feet)	interest	(HK$ million)	(square feet)
Lai Sun Commercial Centre	100%			100%
Commercial		34.8	95,063		33.4	95,063
Offce		8.2	74,181		7.7	74,181
Car-parking spaces		16.8	N/A		15.3	N/A
Subtotal:		59.8	169,244		56.4	169,244
Others		11.5	63,592*		11.4	59,302*
Subtotal:		551.9	1,082,577*		532.6	1,078,287*
London, United Kingdom
36 Queen Street	100%			100%
Offce		25.9	60,816		26.7	60,816
107-112 Leadenhall Street	100%			100%
Offce		50.2	146,606		53.7	146,606
100 Leadenhall Street	100%			100%
Offce		70.1	177,700		42.5	177,700
106 Leadenhall Street	100%			—
Offce		3.5	12,687		—	—
Subtotal:		149.7	397,809		122.9	385,122
Total:		701.6	1,480,386*		655.5	1,463,409*

– IV-31 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

	For the	year ended 31 July	2016	For the	year ended 31 July	2015
			Attributable			Attributable
	Group	Turnover	GFA	Group	Turnover	GFA
	interest	(HK$ million)	(square feet)	interest	(HK$ million)	(square feet)
Joint Venture Project
Hong Kong
CCB Tower #(50% basis)	50%			50%
Offce		113.3	114,555**		113.6	114,555	#
Car-parking spaces		0.4	N/A			N/A
Subtotal:		113.7	114,555**		113.6	114,555	#
8 Observatory Road ##
(50% basis)	50%			—
Commercial		21.0	46,064***		—	—
Offce		7.1	36,521***		—	—
Car-parking spaces		1.9	N/A		—	—
Subtotal:		30.0	82,585***		—	—

Excluding 10% interest in AIA Central.
** Referring to GFA attributable to the Group. The total GFA of CCB Tower is 229,110 square feet.
*** Referring to GFA attributable to the Group. The total GFA of 8 Observatory Road is 165,170 square feet. # During the year ended 31 July 2016, CCB Tower was a joint venture project with CCB in which each of the Group and CCB had an effective 50% interest. For the year ended 31 July 2016, the rental proceeds recorded by the joint venture were HK$227.5 million (2015: HK$227.2 million).
During the year ended 31 July 2016, 8 Observatory Road was a joint venture project with Henderson Land in which each of the Group and Henderson Land had an effective 50% interest. For the year ended 31 July 2016, the rental proceeds recorded by the joint venture were HK$60.0 million.

Property Development

For the year ended 31 July 2016, recognised turnover from sales of properties was HK$468.7 million (2015: HK$277.8 million), representing an increase of 68.7% over last year. The increase was mainly contributed by the sale of residential units in 339 Tai Hang Road during the year under review.

– IV-32 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

Restaurant Operations

For the year ended 31 July 2016, the restaurant operations contributed HK$280.7 million to the Group’s turnover (2015: HK$201.7 million), representing an increase of approximately 39.2% from the previous year. The contribution from the restaurants segment was boosted by contributions from Tang[2] in Cheung Sha Wan Plaza, Beefbar in Central, Howard’s Gourmet in CCB Tower, Hong Kong, CIAK — All Day Italian in Cityplaza, Hong Kong and China Tang Harbour City in Hong Kong.

As at 31 July 2016, the Group’s restaurant operations comprised its interests in 16 restaurants in Hong Kong and mainland China.

Hotel Operations

Turnover from hotel operation was mainly derived from the Group’s operation of the Caravelle Hotel in Ho Chi Minh City, Vietnam. For the year ended 31 July 2016, the hotel operation contributed HK$391.7 million to the Group’s turnover (2015: HK$384.0 million).

Interests in Associates (eSun)

As at 31 July 2016, the Group’s interest in eSun was 41.92%.

Share of profits of eSun amounted to HK$33.9 million (2015: HK$108.3 million). The decrease was primarily due to a lower revaluation gain rising in the revaluation of Lai Fung’s investment properties during the year under review and decrease in results of the MAGHL Group which was primarily attributable to (i) decrease in both the turnover and the gross profit ratio due to the decrease in the number of large-scale films released and events held by the MAGHL Group during the year under review and (ii) increase in other operating expenses of the MAGHL Group which was mainly due to the exchange loss arising from the depreciation in Renminbi.

Interests in Joint Ventures

During the year under review, contribution from joint ventures increased to HK$770.5 million (2015: HK$354.2 million), representing an increase of 117.5%. This was primarily due to revaluation gains of 8 Observatory Road and CCB Tower.

Revaluation gains Operating profts Contribution from joint ventures	For the year ended 31 July 2016 2015 (HK$ million) (HK$ million) 682.4 282.9 88.1 71.3 770.5 354.2	For the year ended 31 July 2016 2015 (HK$ million) (HK$ million) 682.4 282.9 88.1 71.3 770.5 354.2
		354.2

– IV-33 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

Liquidity and Financial Resources

As at 31 July 2016, cash and bank balances and undrawn facilities held by the Group amounted to HK$2,570.9 million and HK$6,115.0 million, respectively.

As at 31 July 2015, cash and bank balances and undrawn facilities held by the Group amounted to HK$1,253.5 million and HK$1,590.0 million, respectively.

As at 31 July 2016, the Group had bank borrowings of approximately HK$5,402.4 million and guaranteed notes of approximately HK$2,709.2 million. The gearing ratio, expressed as a percentage of the total outstanding net debt (being the total outstanding bank borrowings and guaranteed notes less the pledged and unpledged bank balances and time deposits) to consolidated net assets attributable to owners of the Company, was approximately 22.7%. The Group’s gearing excluding the net debt of the London portfolio all of which had a positive carry net of financing costs was approximately 16.2%. As at 31 July 2016, the maturity profile of the bank borrowings of HK$5,402.4 million was spread over a period of less than 5 years with HK$126.7 million repayable within 1 year, HK$154.2 million repayable in the second year and HK$5,121.5 million repayable in the third to fifth years. All the Group’s borrowings carried interest on a floating rate basis except for the guaranteed notes issued in January 2013 which has a fixed rate of 5.7% per annum.

As at 31 July 2015, the Group had bank borrowings of approximately HK$4,283.2 million and guaranteed notes of approximately HK$2,703.3 million. The net debt to equity ratio expressed as a percentage of the total outstanding net debt (being the total outstanding bank borrowings and guaranteed notes less the pledged and unpledged bank balances and time deposits) to consolidated net assets attributable to owners of the Company was approximately 25.3%. The Group’s gearing excluding the London portfolio all of which had a positive carry net of financing costs was approximately 17.9%. As at 31 July 2015, the maturity profile of the bank borrowings of HK$4,283.2 million was spread over a period of less than 5 years with HK$1,012.6 million repayable within 1 year, HK$1,331.3 million repayable in the second year and HK$1,939.3 million repayable in the third to fifth years. All the Group’s borrowings carried interest on a floating rate basis except for the guaranteed notes issued in January 2013 which has a fixed rate of 5.7% per annum.

– IV-34 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

As at 31 July 2016, certain investment properties with carrying amounts of approximately HK$14,912.7 million, certain property, plant and equipment with carrying amounts of approximately HK$2,390.4 million, certain properties under development for sale of approximately HK$634.6 million and certain bank balances and time deposits with banks of approximately HK$216.2 million were pledged to banks to secure banking facilities granted to the Group. In addition, certain shares in subsidiaries held by the Group were also pledged to banks to secure banking facilities granted to the Group. Certain shares in joint ventures held by the Group were pledged to banks to secure banking facilities granted to joint ventures of the Group. The Group’s secured bank borrowings were also secured by floating charges over certain assets held by the Group.

As at 31 July 2015, certain investment properties with carrying amounts of approximately HK$15,026.0 million, certain properties under development for sale of approximately HK$545.2 million and certain bank balances and time deposits with banks of approximately HK$185.5 million were pledged to banks to secure banking facilities granted to the Group.

The Group’s major assets and liabilities and transactions were denominated in Hong Kong dollars and United States dollars. Considering that Hong Kong dollars are pegged against United States dollars, the Group believes that the corresponding exposure to exchange rate risk arising from United States dollars is nominal. In addition, the Group had investments in the United Kingdom with the assets and liabilities denominated in Pounds Sterling. The majority of the investments were partly financed by bank borrowings denominated in Pounds Sterling in order to minimise the net foreign exchange exposure. Other than the abovementioned, the remaining monetary assets and liabilities of the Group were denominated in Renminbi and Vietnamese Dong. No hedging instruments were employed to hedge for the foreign exchange exposure. The Group manages its foreign currency risk by reviewing the movement of the foreign currency rate and considers hedging significant foreign currency exposure should the need arise.

Contingent Liabilities

As at 31 July 2016, the Group had the following contingent liabilities:

(a) Contingent liabilities not provided for in the financial statements:

	2016	2015
	HK$’000	HK$’000
Guarantees given to banks in connection with facilities
granted to and utilised by a joint venture	897,000	703,000

– IV-35 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX IV

(b) Pursuant to the Lai Fung Tax Indemnity Deed, the Company has undertaken to indemnify Lai Fung in respect of certain LAT payable or shared by Lai Fung in consequence of the disposal of the Property Interests. These tax indemnities given by the Company apply in so far as such tax is applicable to the difference between (i) the value of the Property Interests in the Valuation; and (ii) the aggregate costs of such Property Interests incurred up to 31 October 1997, together with the amount of unpaid land costs, unpaid land premium and unpaid costs of resettlement, demolition and public utilities and other deductible costs in respect of the Property Interests. The Lai Fung Tax Indemnity Deed assumes that the Property Interests are disposed of at the values attributed to them in the Valuation, computed by reference to the rates and legislation governing PRC income tax and LAT prevailing at the time of the Valuation.

After taking into account the Property Interests held by Lai Fung as at 31 July 2016 subject to the Lai Fung Tax Indemnity Deed and the prevailing tax rates and legislation governing PRC income tax and LAT, the total amount of tax indemnity given by the Company was estimated to be approximately HK$1,350,000,000 as at 31 July 2016 (2015: HK$1,350,000,000).

After taking into account the plans and the status of the Property Interests held by Lai Fung as at 31 July 2016 and 31 July 2015 which are covered under the Lai Fung Tax Indemnity Deed and the prevailing tax rates and legislation governing PRC income tax and LAT, the Group recorded an aggregate provision for tax indemnity of approximately HK$729,387,000 as at the end of the period under review (2015: HK$729,387,000).

Employees and Remuneration Policies

As at 31 July 2016, the Group employed a total of approximately 1,500 employees. The Group recognises the importance of maintaining a stable staff force in its continued success. Under the Group’s existing policies, employee pay rates are maintained at competitive levels whilst promotion and salary increments are assessed on a performance-related basis. Discretionary bonuses are granted to employees based on their merit and in accordance with industry practice. Other benefits including share option scheme, mandatory provident fund scheme, free hospitalisation insurance plan, subsidised medical care and sponsorship for external education and training programmes are offered to eligible employees.

– IV-36 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Set out below is the management discussion and analysis for the six months ended 31 January 2018 and the two years ended 31 July 2017. The information set out below has been extracted from the relevant annual reports and interim report of eSun to provide further information relating to the financial condition and results of operations of the eSun Group during the periods stated. These extracted materials were prepared prior to the Latest Practicable Date and speak as of the date they were originally published. Capitalised terms used in this Appendix V shall have the same meanings as defined in the relevant reports.

A. MANAGEMENT DISCUSSION AND ANALYSIS ON THE eSUN GROUP FOR THE SIX MONTHS ENDED 31 JANUARY 2018 (AND AS COMPARED TO THE SIX MONTHS ENDED 31 JANUARY 2017)

Business Review and Outlook

Media and Entertainment/Film Production and Distribution/Cinema Operation

The Mainland China entertainment market continues to grow at an unprecedented pace. The eSun Group continues to expand its media and entertainment businesses in Mainland China, optimising income from its film, TV, live entertainment, artiste management, music and cinema in this fast growing market. The eSun Group is well positioned to capitalise on this trend with its solid foundation in the industry.

Film — continued drive to increase its original production of films which appeal to When Robbers Meet The Monster ”
Chinese language audiences. An action comedy film “ featuring Louis Koo, Zhou Dongyu and Cheney Chen with director Andrew Lau, and an action crime film “ Bodies At Rest ” by director Renny Harlin casting Nick Cheung and Richie Jen, are under post-production.
TV — expanded its activities in production and investments in quality TV drama series in line with the continued strong demand for good programmes from TV stations and online video websites in Mainland China as well as a way to provide exposure and training for the eSun Group’s stable of artistes. Projects under development include “ The Legend of The Condor Heroes ”, Gordon Chan’s new production tribute to the classic work of martial arts from Dr. Louis Cha. “ New Horizon ”, a 50 episode romance drama series starring Zheng Kai and Chen Chiao-en, and “ Shadow of Justice ”, a 36 episode detective drama series tailor-made for the Alibaba’s Youku platforms featuring Julian Cheung and Fiona Sit, are also under post-production stage.
Live Entertainment — successfully produced and promoted a number of concerts in Hong Kong and Mainland China performed by prominent local, Asian and international artistes. The recent “ Super Show 7 in Hong Kong ”, “ Miriam Yeung 321GO! Concert 2017 ” and “ Girls Girls Girls at17 Live In Concert 2017 ” have earned good reputation and public praises. Upcoming events include concerts of EXO.

– V-1 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Music — as international music labels are coming to a mutually acceptable licensing model with major Chinese music portals, the long awaited pay model for digital music is taking shape. With a vast and well-known Chinese music library under management and a continual supply of new hits, the eSun Group is poised to capitalise on this new economic model. During the period under review, the exclusive distribution licenses of our music products with Taobao China Software Co. Ltd. and Warner Music continue to provide stable income to the eSun Group.
Artiste Management — expanded its Chinese artiste roster as well as collaborated with high profile Asian artistes. The eSun Group believes a strong talent roster will complement its media and entertainment businesses and will continue its effort in talent development.
Cinema — acquisition of Intercontinental Group Holdings Limited bolstered the eSun Group’s ambition in this segment and supplemented the film distribution segment of the eSun Group in Hong Kong and Mainland China. The MCL Telford Cinema in Kowloon Bay, Hong Kong was re-opened in December 2017 after renovation with advanced cinema technology and the introduction of House FX Theater and MX4D Motion Theater. The Grubers Cafe in MCL Telford Cinema operated by a joint venture company formed by the eSun Group and LSD offers guests a great dining option before or after the movie. The eSun Group also secured two cinema projects in Hong Kong and Suzhou in Mainland China, which are expected to commence business in the financial year ending 31 July 2018. We are excited by the outlook for cinemas in Hong Kong and Mainland China and we will continue to seek out opportunities to expand our footprint.

Targeting the enormous yet growing China market, the eSun Group endeavors to strengthen its integrated media platform with an aim to provide valuable and competitive products and to enhance its market position, and the eSun Group will continue to explore strategic alliances as well as investment opportunities to enrich its portfolio and broaden its income stream.

Mainland China Property Market

Major economies around the world continue to navigate in uncertain waters during the period under review. The capital market has demonstrated robustness despite a delicate economic outlook, punctuated by global events such as elections in Europe, uncertainties surrounding the terms of Brexit, domestic terror events in the United States and Europe and the geopolitical situation in the Korean peninsula. Some of these events are likely to linger in the near future and continue to cast a shadow on the outlook.

– V-2 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Notwithstanding the seemingly turbulent environment, the Central Government continued to forge ahead and delivered stable economic growth through a combination of proactive fiscal policy and prudent monetary policy. However some sectors such as exports, weakened as a result of lackluster global economic performance. Some of the slowdown has been countered by promoting other sectors and raising domestic consumption. The property sector has been a beneficiary of this as observed in various land auctions and transaction values recently. The eSun Group believes the property sector will remain an important economic pillar and continues to be shaped significantly by government policies. The Central Government’s approach to the economy is certainly good news to the sector in the long run and supportive fiscal policy would be beneficial to investors and developers alike. With the first session of the 13th National People’s Congress and the first session of the 13th National Committee of the Chinese People’s Political Consultative Conference came to a conclusion, it is reassuring that the eSun Group can expect continued stability and continuity going forward.

The regional focus and rental-led strategy of Lai Fung has demonstrated resilience in recent years. The rental portfolio of approximately 3.3 million square feet, primarily in Shanghai and Guangzhou, delivered steady performance in rental income at close to full occupancies for the key assets. The asset swap transaction jointly announced by Lai Fung and eSun on 15 January 2015 in relation to Guangzhou Lai Fung Tower, the office block of Guangzhou Eastern Place Phase V, was completed in August 2017. This enables Lai Fung Group to consolidate its ownership of Guangzhou Lai Fung Tower completely and provide additional flexibility and strategic value to Lai Fung Group. The total gross floor area (“ GFA ”) of this property owned by Lai Fung Group increased to approximately 705,900 square feet excluding car-parking spaces from that of approximately 626,700 square feet as at 31 July 2017 and the commercial area and the office building of this property excluding self-use area have been fully leased.

Lai Fung Group has a number of projects in various stages of development in Shanghai, Guangzhou, Zhongshan and Hengqin. The rental portfolio is expected to increase from approximately 3.3 million square feet to approximately 6.6 million square feet through developing the existing projects on hand over the next few years. Demolition of Shanghai Northgate Plaza I and Hui Gong Building was completed in May 2017 and foundation works for the combined redevelopment of Shanghai Northgate Plaza I, Northgate Plaza II and the Hui Gong Building commenced in September 2017. The redevelopment plan includes an office tower, a shopping arcade and underground car-parking spaces and is expected to add a total GFA of approximately 693,600 square feet excluding car-parking spaces to the rental portfolio of Lai Fung Group.

– V-3 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

The construction works of Phase I of the Novotown project in Hengqin (“ Novotown ”) commenced at the end of 2015 and is now progressing at a good pace. In June 2017, Lai Fung Group entered into a licence agreement with Real Madrid Club de Fútbol in relation to the development and operation of a location based entertainment centre (“ Real Madrid LBE ”) in Novotown. In September 2017, Lai Fung Group entered into a framework agreement with Dr. Ing. h.c. F. Porsche AG in relation to the development and operation of an auto experience theme centre named Porsche City (“ Porsche City ”) in Novotown. In November 2017, Lai Fung Group entered into a cooperation agreement with Harrow International (China) Management Services Limited and ILA Holdings Limited bringing Harrow International China Group, the world’s leading learning institution, to set up an Innovation Leadership Academy Hengqin (“ ILA Hengqin ”) in Hengqin, Zhuhai. The cooperation aims to enhance the general education experience in Hengqin and across the region catering for learning needs of local and overseas families residing within the Pearl River Delta area, including Hengqin, Zhuhai, Macau and the Greater Bay Area. The Real Madrid LBE, Porsche City and ILA Hengqin are planned to be launched in Phase II of the Novotown project in Hengqin, subject to the acquisition of the land for Phase II. Discussions between Lai Fung Group and the Hengqin government regarding the land concession and the Phase II development of the Novotown are ongoing.

The remaining residential units in Zhongshan Palm Spring and the cultural studios of Hengqin Novotown Phase I are expected to contribute to the income of Lai Fung Group in the coming financial years. Lai Fung Group will continue its prudent and flexible approach in growing its landbank.

The eSun Group’s consolidated cash position of HK$5,710.4 million (HK$295.4 million excluding Lai Fung Group and MAGHL (31 July 2017: HK$3,304.6 million (HK$273.8 million excluding Lai Fung Group and MAGHL Group)) with a net debt to equity ratio of 42.2% as at 31 January 2018 (31 July 2017: 35.3%) provides the eSun Group with full confidence and the means to review opportunities more actively. The eSun Group will continue its prudent and flexible approach in managing its financial position.

Overview of Interim Results

For six months ended 31 January 2018, the eSun Group recorded a turnover of HK$1,184.9 million, representing an increase of 1.8% from HK$1,164.5 million for the same period of last year. The gross profit decreased by approximately 26.2% to HK$447.5 million (2017: HK$606.2 million). The significant increase in cost of sales is primarily due to additional amortisation recognised on the films released by MAGHL Group during the period under review due to their unsatisfactory performance.

– V-4 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

For the six months ended 31 January 2018, net loss attributable to owners of eSun was approximately HK$14.3 million (2017: net profit of HK$27.6 million). Net loss per share was HK$0.010 (2017: net profit per share of HK$0.022). The net loss attributable to owners of eSun for the period under review is primarily due to a) consolidated loss from MAGHL owing to the unsatisfactory performance of the films released by MAGHL Group during the period under review and b) lower profit contribution from a joint venture of Lai Fung as sale of the project has been substantially completed, despite a higher revaluation gain arising from revaluations of Lai Fung’s investment properties during the period under review.

Net loss attributable to owners of eSun for the six months ended 31 January 2018 excluding the effect of property revaluations was approximately HK$165.7 million (2017: net loss of HK$37.3 million). Net loss per share attributable to owners of eSun excluding the effect of property revaluations was HK$0.111 per share (2017: net loss of HK$0.030 per share).

Proft/(loss) attributable to owners of eSun Reported Adjustments in respect of investment properties Revaluation of properties Deferred tax on investment properties Non-controlling interests’ share of revaluation movements less deferred tax Net loss after tax excluding revaluation gains of investment properties	Six months ended 31 January 2018 2017 HK$’million HK$’million (14.3) 27.6 (202.0) (88.3) 50.5 22.1 0.1 1.3 (165.7) (37.3)
	2018 HK$’million (14.3) (202.0) 50.5 0.1 (165.7)

Equity attributable to owners of eSun as at 31 January 2018 amounted to HK$9,780.7 million (31 July 2017: HK$9,118.2 million). Net asset value per share attributable to owners of eSun increased by 7.3% to HK$6.556 per share as at 31 January 2018 from HK$6.112 per share as at 31 July 2017.

Media and Entertainment

For the six months ended 31 January 2018, this segment recorded a turnover of HK$237.1 million (2017: HK$239.2 million) and segment results increased from a profit of HK$19.9 million to a profit of HK$25.3 million.

– V-5 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Live Entertainment

The eSun Group remains highly active on the live entertainment front. During the period under review, the eSun Group organised and invested in 62 (2017: 68) shows by popular local, Asian and internationally renowned artistes, including Miriam Yeung, Grasshopper, C AllStar, at17, Ivana Wong and Hins Cheung, Liza Wang, Vivian Chow and Wanna One.

Music Production, Distribution and Publishing

For the six months ended 31 January 2018, the eSun Group released 23 (2017: 11) albums, including titles by Sammi Cheng, Miriam Yeung, William So, C AllStar, at17 and Michael Lai. The eSun Group is expected to continue to increase its music licensing revenue from the exploitation of the music library through new media distribution.

Artiste Management

Film and TV Program Production and Distribution

For the six months ended 31 January 2018, this segment recorded a turnover of HK$199.2 million (2017: HK$220.2 million) and segment results of a loss of HK$181.3 million (2017: a profit of HK$15.4 million).

During the period under review, the eSun Group released 3 films (2017: 1), namely Legend of the Naga Pearls , The Adventurers and Manhunt and distributed 24 (2017: 11) films and 228 (2017: 253) videos with high profile titles including Valerian and the City of a Thousand Planets, Paddington 2, Fast & Furious 8, Spider-Man: Homecoming, Transformers: The Last Knight and Guardians of the Galaxy Vol. 2 .

Cinema Operation

For the six months ended 31 January 2018, this segment recorded a turnover of HK$189.5 million (2017: HK$189.5 million). The eSun Group currently operates eight cinemas in Hong Kong and two cinemas in Mainland China as well as one joint venture cinema in Hong Kong. The MCL Telford Cinema in Kowloon Bay, Hong Kong was re-opened in December 2017 after renovation with advanced cinema technology and the introduction of House FX Theater and MX4D Motion Theater. The eSun Group also secured two cinema projects in Hong Kong and Suzhou in Mainland China, which are expected to commence business in the financial year ending 31 July 2018. The cinema operation provides a complementary distribution channel for the eSun Group’s film production and distribution businesses.

– V-6 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Details on the number of screens and seats of each existing cinema are as follows:

Attributable interest to the Cinema eSun Group (%) Mainland China Guangzhou May Flower Cinema City 100 Zhongshan May Flower Cinema City 100 Subtotal Hong Kong Festival Grand Cinema 85 MCL Metro City Cinema 85 MCL Telford Cinema (including MX4D theatre) 85 STAR Cinema 85 Grand Kornhill Cinema (including MX4D theatre) 85 MCL South Horizons Cinema 85 MCL Green Code Cinema 85 Grand Windsor Cinema 85 The Grand Cinema 25.5 Subtotal Total	No. of screens (Note) 7 5 12 8 7 6 6 5 3 3 3 12 53 65	No. of seats (Note) 606 905
		1,511
		1,196 957 789 622 706 555 285 246 1,566
		6,922
		8,433

Note: On 100% basis

– V-7 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Property Investment

Rental Income

For the six months ended 31 January 2018, Lai Fung Group’s rental operations recorded a turnover of HK$379.5 million (2017: HK$345.8 million), representing a 9.7% increase over the same period of last year. Excluding the effect of currency translation, the growth for Renminbi denominated rental income was 5.6%. Breakdown of rental turnover by major rental properties is as follows:

Six months ended 31 January 2018 # 2017 # Approximate HK$’million HK$’million change (%) Shanghai Shanghai Hong Kong Plaza 206.3 201.3 2.5 Shanghai May Flower Plaza 38.8 37.8 2.6 Shanghai Regents Park 12.4 7.0 77.1 Guangzhou Guangzhou May Flower Plaza 55.0 55.8 -1.4 Guangzhou West Point 9.9 9.1 8.8 Guangzhou Lai Fung Tower 51.9 30.3 71.3 Zhongshan Zhongshan Palm Spring 5.2 4.5 15.6 Total 379.5 345.8 9.7	Six months ended 31 January 2018 2017 Approximate Period end RMB’million RMB’million change occupancy (%) (%) 174.0 176.4 -1.4 Retail: 93.7 Offce: 93.4 Serviced Apartments: 80.7 32.7 33.1 -1.2 Retail: 100.0 Hotel: 69.9 10.5 6.1 72.1 100.0 46.4 48.9 -5.1 99.2 8.3 8.0 3.8 98.8 43.8 26.5 65.3 Retail: 100.0 Offce: 100.0 4.4 4.0 10.0 Retail: 86.0 Serviced Apartments: 49.6 320.1 303.0 5.6	Six months ended 31 January 2018 2017 Approximate Period end RMB’million RMB’million change occupancy (%) (%) 174.0 176.4 -1.4 Retail: 93.7 Offce: 93.4 Serviced Apartments: 80.7 32.7 33.1 -1.2 Retail: 100.0 Hotel: 69.9 10.5 6.1 72.1 100.0 46.4 48.9 -5.1 99.2 8.3 8.0 3.8 98.8 43.8 26.5 65.3 Retail: 100.0 Offce: 100.0 4.4 4.0 10.0 Retail: 86.0 Serviced Apartments: 49.6 320.1 303.0 5.6
	2018 RMB’million 174.0 32.7 10.5 46.4 8.3 43.8 4.4 320.1	2017 RMB’million 176.4 33.1 6.1 48.9 8.0 26.5 4.0 303.0

The exchange rates adopted for the six months ended 31 January 2018 and 2017 are 0.8433 and 0.8762, respectively.

Excluding self-use area

Rental income performed steadily as a whole with almost full occupancy in all the major properties. The strong growth from Guangzhou Lai Fung Tower is primary due to its being fully leased during the period under review.

– V-8 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

The asset swap transaction with Guangzhou Light Industry Real Estate Limited as jointly announced by Lai Fung and eSun on 15 January 2015 in relation to Guangzhou Lai Fung Tower, the office block of Guangzhou Eastern Place Phase V, was completed in August 2017. This enables Lai Fung Group to consolidate its ownership of Guangzhou Lai Fung Tower completely and provide additional flexibility and strategic value to Lai Fung Group. The total GFA of this property owned by Lai Fung Group increased to approximately 705,900 square feet excluding car-parking spaces from that of approximately 626,700 square feet as at 31 July 2017 and the commercial area and the office building of this property excluding self-use area have been fully leased.

Property Development

Recognised Sales

For the six months ended 31 January 2018, Lai Fung Group’s property development operations recorded a turnover of HK$129.9 million (2017: HK$133.2 million) from sale of properties, representing a 2.5% decrease in sales revenue over the same period of last year. Total recognised sales was primarily driven by the sales performance of residential units of Zhongshan Palm Spring.

For the six months ended 31 January 2018, average selling price recognised as a whole (excluding Guangzhou Dolce Vita and car-parking spaces) amounted to approximately HK$1,282 per square foot (2017: HK$3,075 per square foot), which is driven by lower average selling price in Zhongshan compared to Guangzhou. Sales of residential units of Guangzhou Dolce Vita performed well and achieved an average selling price of HK$3,474 per square foot (2017: HK$2,416 per square foot). This is recognised as a component of “Share of profits of joint ventures” in the condensed consolidated income statement.

– V-9 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Breakdown of turnover for the six months ended 31 January 2018 from property sales is as follows:

No. of Recognised basis units Guangzhou Eastern Place Residential Units — Phase V 2 Zhongshan Palm Spring Residential High-rise Units 69 Others Subtotal 71 Guangzhou Eastern Place Car-parking Spaces 19 Guangzhou King’s Park Car-parking Spaces 4 Total Recognised sales from joint venture project Guangzhou Dolce Vita Residential Units (47.5% basis) 40 Retail Units (47.5% basis) — Subtotal 40 Car-parking Spaces (47.5% basis) 39 Total**	Approximate GFA Square feet 2,460 83,629 86,089 85,278 665 85,943	Average selling price # HK$/square foot 6,435 1,131 1,282 3,460 5,365 3,474	Turnover*	Turnover*
			HK$’million ## 14.9 90.1 0.5 105.5 21.3 3.1 129.9 277.4 3.3 280.7 13.6 294.3	RMB’million 12.5 76.0 0.4
				88.9

				18.0 2.6
				109.5

				233.9 2.8
				236.7

				11.5
				248.2

Before business tax and value-added tax inclusive
The exchange rate adopted for the six months ended 31 January 2018 is 0.8433.
After business tax and value-added tax exclusive
** Guangzhou Dolce Vita is a joint venture project with CapitaLand China Holdings Pte. Ltd. (“ CapitaLand China ”) in which each of Lai Fung Group and CapitaLand China has an effective 47.5% interest. For the six months ended 31 January 2018, the recognised sales (after business tax and value-added tax exclusive) attributable to the project on 100% basis is HK$591.0 million (excluding car-parking spaces) and approximately 180,932 square feet (excluding car-parking spaces) of GFA were recognised. The recognised sales from car-parking spaces attributable to the project on 100% basis is HK$28.7 million.

– V-10 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Contracted Sales

As at 31 January 2018, Lai Fung Group’s property development operations, excluding Guangzhou Dolce Vita, has contracted but not yet recognised sales of HK$35.9 million and HK$3.2 million from sales of residential units in Guangzhou Eastern Place Phase V and Zhongshan Palm Spring, respectively and HK$6.3 million from sales of car-parking spaces in Guangzhou Eastern Place and Guangzhou King’s Park. Sales of the remainder of the completed residential units of Guangzhou Eastern Place Phase V and Zhongshan Palm Spring were strong and achieved an average selling price of HK$7,092 and HK$1,225 per square foot, respectively. Excluding the effect of currency translation, the Renminbi denominated contracted but not yet recognised sales of residential units and car-parking spaces, excluding Guangzhou Dolce Vita as at 31 January 2018 amounted to RMB38.3 million (31 July 2017: RMB125.7 million).

The total contracted but not yet recognised sales of Lai Fung Group as at 31 January 2018 including Guangzhou Dolce Vita and car-parking spaces amounted to HK$79.9 million (31 July 2017: HK$402.8 million). The Renminbi denominated contracted but not yet recognised sales of residential units and car-parking spaces, including Guangzhou Dolce Vita as at 31 January 2018 amounted to RMB67.4 million (31 July 2017: RMB353.6 million).

– V-11 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Breakdown of contracted but not yet recognised sales as at 31 January 2018 is as follows:

No. of Contracted basis units Guangzhou Eastern Place Residential Units — Phase V 5 Zhongshan Palm Spring Residential High-rise Units 2 Subtotal 7 Guangzhou Eastern Place Car-parking Spaces 4 Guangzhou King’s Park Car-parking Spaces 2 Subtotal Contracted sales from joint venture project Guangzhou Dolce Vita Residential Units (47.5% basis) 2 Car-parking Spaces (47.5% basis) 2 Subtotal Total (excluding car-parking spaces) 9	Approximate GFA Square feet 5,062 2,613 7,675 7,010 14,685	Average selling price # HK$/square foot 7,092 1,225 5,094 4,822 4,964	Turnover #	Turnover #
			HK$’million ## 35.9 3.2 39.1 4.7 1.6 45.4 33.8 0.7 34.5 72.9	RMB’million 30.3 2.7
				33.0

				4.0 1.3
				38.3

				28.5 0.6
				29.1

				61.5

Before business tax and value-added tax inclusive
The exchange rate adopted for the six months ended 31 January 2018 is 0.8433.
** Guangzhou Dolce Vita is a joint venture project with CapitaLand China in which each of Lai Fung Group and CapitaLand China has an effective 47.5% interest. As at 31 January 2018, the contracted but not yet recognised sales attributable to the project on 100% basis is HK$71.1 million (excluding car-parking spaces) and approximately 14,757 square feet of GFA (excluding car-parking spaces) were sold. The contracted but not yet recognised sales from car-parking spaces attributable to the project on 100% basis is HK$1.5 million.

– V-12 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Liquidity, Financial Resources, Charge on Assets and Gearing

Cash and Bank Balances

As at 31 January 2018, cash and bank balances held by the eSun Group amounted to HK$5,710.4 million (31 July 2017: HK$3,304.6 million) of which around 54.1% was denominated in Hong Kong dollar (“ HKD ”) and United States dollar (“ USD ”) currencies, and around 45.7% was denominated in Renminbi (“ RMB ”). Cash and bank balances held by the eSun Group excluding cash and bank balances held by MAGHL Group and Lai Fung Group as at 31 January 2018 was HK$295.4 million (31 July 2017: HK$273.8 million). As HKD is pegged to USD, the eSun Group considers that the corresponding exposure to USD exchange rate fluctuation is nominal. The conversion of RMB denominated cash and bank balances into foreign currencies and the remittance of such foreign currencies denominated balances out of Mainland China are subject to the relevant rules and regulations of foreign exchanges control promulgated by the government authorities concerned. Apart from the cross currency swap arrangements of Lai Fung Group, the eSun Group does not have any derivative financial instruments or hedging instruments outstanding.

Borrowings

As at 31 January 2018, the eSun Group had outstanding consolidated total borrowings (after intra-group elimination) in the amount of HK$9,839.9 million. The borrowings of the eSun Group (other than MAGHL and Lai Fung), MAGHL and Lai Fung, are as follows:

eSun Group (other than MAGHL and Lai Fung)

As at 31 January 2018, the eSun Group had bank loans of HK$396.9 million. The maturity profile of the eSun Group’s bank loans is spread with HK$319.7 million repayable within 1 year, HK$77.2 million repayable in the second year. All bank loans are on floating rate basis and are denominated in HKD.

In addition, there existed unsecured other borrowings due to the late Mr. Lim Por Yen in the principal amount of HK$113.0 million which is interest-bearing at the HSBC prime rate per annum. The eSun Group’s recorded interest accruals were HK$88.4 million for the said unsecured other borrowings as at 31 January 2018. At the request of the eSun Group, the executor of Mr. Lim Por Yen’s estate confirmed that no demand for the repayment of the outstanding other borrowings or the related interest would be made within one year from 31 January 2018.

– V-13 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

MAGHL

As at 31 January 2018, MAGHL has unsecured and unguaranteed 3-year zero coupon TFN Convertible Notes with an aggregate outstanding principal amount of approximately HK$130.0 million issued to a subscriber. As at 31 January 2018, MAGHL has unsecured and unguaranteed 3-year zero coupon Specific Mandate Convertible Notes with an aggregate outstanding principal amount of HK$166.8 million, comprising approximately HK$100.0 million and approximately HK$66.8 million issued to the eSun Group and other subscribers, respectively. Unless previously converted, redeemed, purchased or cancelled in accordance with the terms and conditions of the TFN Convertible Notes and the Specific Mandate Convertible Notes, they will be redeemed by MAGHL on the maturity dates of 13 May 2018 and 3 July 2018, respectively, at the principal amount outstanding. For accounting purpose, after deducting the equity portion of the convertible notes from the principal amount, the carrying amount of the TFN Convertible Notes as recorded in the eSun Group was HK$126.8 million and the resultant carrying amount of the Specific Mandate Convertible Notes as recorded in the eSun Group was HK$64.3 million as at 31 January 2018 after adjusting for (i) accrued interest and (ii) intra-group elimination.

Lai Fung

As at 31 January 2018, Lai Fung Group had total borrowings in the amount of HK$9,279.6 million comprising bank loans of HK$3,163.3 million, fixed rate senior notes of HK$2,219.7 million, guaranteed notes of HK$2,712.9 million, loans from a subsidiary of eSun of HK$229.1 million, loans from a joint venture of HK$897.0 million and other borrowing of HK$57.6 million. The maturity profile of Lai Fung Group’s borrowings of HK$9,279.6 million is well spread with HK$2,468.1 million repayable within 1 year, HK$1,357.3 million repayable in the second year, HK$5,285.0 million repayable in the third to fifth years, and HK$169.2 million repayable beyond the fifth year.

Approximately 63% and 34% of Lai Fung Group’s borrowings were on a fixed rate basis and floating rate basis, respectively, and the remaining 3% of Lai Fung Group’s borrowings were interest free.

Apart from the fixed rate senior notes and guaranteed notes, Lai Fung Group’s other borrowings of HK$4,347.0 million were 60% denominated in RMB, 29% in HKD and 11% in USD.

Lai Fung Group’s fixed rate senior notes of HK$2,219.7 million were denominated in RMB. Lai Fung Group has entered into cross currency swap agreements with financial institutions for the purpose of hedging the foreign currency risk arising from such notes. Accordingly, the fixed rate senior notes have been effectively converted into USD denominated debts.

Lai Fung Group’s guaranteed notes of HK$2,712.9 million were denominated in USD. Lai Fung Group has entered into cross currency swap agreements with financial institutions and the guaranteed notes have been effectively converted into HKD denominated debts.

– V-14 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Lai Fung Group’s presentation currency is denominated in HKD. Lai Fung Group’s monetary assets, liabilities and transactions are principally denominated in RMB, USD and HKD. Lai Fung Group, with HKD as its presentation currency, is exposed to foreign currency risk arising from the exposure of HKD against USD and RMB, respectively. Considering that HKD is pegged against USD, Lai Fung Group believes that the corresponding exposure to USD exchange rate fluctuation is nominal. However, Lai Fung Group has a net exchange exposure to RMB as Lai Fung Group’s assets are principally located in Mainland China and the revenues are predominantly in RMB. Apart from the aforesaid cross currency swap arrangements, Lai Fung Group does not have any derivative financial instruments or hedging instruments outstanding.

Charge on Assets and Gearing

Certain assets of the eSun Group have been pledged to secure borrowings and banking facility of the eSun Group, including investment properties with a total carrying amount of approximately HK$11,673.0 million, properties under development with a total carrying amount of approximately HK$1,335.7 million, serviced apartments (including related leasehold improvements) with a total carrying amount of approximately HK$1,360.0 million, construction in progress with a total carrying amount of approximately HK$758.8 million and time deposits and bank balances of approximately HK$555.3 million.

In addition, as at 31 January 2018, a revolving loan facility in the amount of HK$350.0 million was granted by a bank to the eSun Group. The said loan facility is secured by the charge over securities accounts and share mortgage of the ordinary shares of Lai Fung and certain ordinary shares of MAGHL held by the eSun Group. The eSun Group has utilised the said loan facility for an amount of HK$250.0 million as at 31 January 2018. As at 31 January 2018, guaranteed general banking facilities in the amount of HK$214.0 million were granted by certain banks to the eSun Group (other than Lai Fung). The said guaranteed general banking facilities (other than a term loan) are subject to annual review by the banks for renewal and the eSun Group had utilised letter of credit and letter of guarantee facilities, term loan and revolving loans for a total amount of HK$154.1 million as at 31 January 2018. As such, the eSun Group (other than Lai Fung) has the undrawn facilities of HK$159.9 million as at 31 January 2018. The undrawn facilities of Lai Fung Group was HK$4,473.6 million as at 31 January 2018.

As at 31 January 2018, the consolidated net assets attributable to the owners of eSun amounted to HK$9,780.7 million (31 July 2017: HK$9,118.2 million). The gearing ratio, being net debt (total borrowings of HK$9,839.9 million less pledged and restricted bank balances and time deposits of HK$1,007.0 million and cash and cash equivalents of HK$4,703.4 million) to net assets attributable to the owners of eSun was approximately 42.2%.

Taking into account the amount of cash being held as at the end of the reporting period, the available banking facilities, certain bank loans and the recurring cash flows from the eSun Group’s operating activities, the eSun Group believes that it would have sufficient liquidity for its present requirements to finance its existing operations and projects underway.

– V-15 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Contingent Liabilities

There has been no material change in contingent liabilities of the eSun Group since 31 July 2017.

Employees and Remuneration Policies

As at 31 January 2018, the eSun Group employed a total of around 1,880 (31 January 2017: 2,060) employees. The eSun Group recognises the importance of maintaining a stable staff force in its continued success. Under the eSun Group’s existing policies, employee pay rates are maintained at competitive levels whilst promotion and salary increments are assessed on a performance-related basis. Discretionary bonuses are granted to employees based on their merit and in accordance with industry practice. Other benefits including share option scheme, mandatory provident fund scheme, free hospitalisation insurance plan, subsidised medical care and sponsorship for external education and training programmes are offered to eligible employees.

– V-16 –

APPENDIX V MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

B. MANAGEMENT DISCUSSION AND ANALYSIS ON THE eSUN GROUP FOR THE YEAR ENDED 31 JULY 2017 (AND AS COMPARED TO THE YEAR ENDED 31 JULY 2016)

Overview

Media and Entertainment

For the year ended 31 July 2017, this segment recorded a turnover of HK$448.4 million (2016: HK$537.1 million) and segment results increased from a profit of HK$16.5 million to a profit of HK$25.5 million.

Live Entertainment

The eSun Group remains highly active on the live entertainment front. During the year under review, the eSun Group organised and invested in 168 (2016: 197) shows by popular local, Asian and internationally renowned artistes, including Chan Po Chu and Mui Suet See, Sammi Cheng, Ivana Wong and Hins Cheung, Grasshopper, EXO, MayDay, Rene Liu, Tsai Chin, Ronald Cheng, Della, Yoga Lin and Lee Teuk@Super Junior.

Music Production, Distribution and Publishing

For the year ended 31 July 2017, the eSun Group released 30 (2016: 57) albums, including titles by Sammi Cheng, Ivana Wong, C AllStar, Jan Lamb, Tang Siu Hau and Leslie Cheung. The eSun Group is expected to continue to increase its music licensing revenue from the exploitation of the music library through new media distribution.

Artiste Management

The eSun Group has a strong artiste management team and a sizeable number of talents and will continue to expand its profile and in tandem with our growing television drama production and film production business. The eSun Group is actively looking for new talent in Mainland China and further co-operation with Asian artistes.

Film and TV Program Production and Distribution

For the year ended 31 July 2017, this segment recorded a turnover of HK$418.5 million (2016: HK$343.6 million) and segment results of a loss of HK$126.2 million (2016: a loss of HK$55.5 million).

During the year under review, the eSun Group released a total of 6 films (2016: 7), namely Line Walker, Love Off The Cuff, Wine War, God of War, The House That Never Dies II and The Founding of An Army and distributed 31 (2016: 33) films and 488 (2016: 308) videos with high profile titles including Doraemon: New Nobita and the Birth of Japan, John Wick: Chapter Two, Ghost In The Shell, Baywatch, xXx: Reactivated, Captain America: Civil War and Beauty & The Beast (2017) .

– V-17 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Cinema Operation

For the year ended 31 July 2017, this segment recorded a turnover of HK$418.6 million (2016: HK$364.9 million). As at 31 July 2017, the eSun Group operates four cinemas in Mainland China and eight cinemas in Hong Kong as well as one joint venture cinema in Hong Kong. Our new cinema, MCL Green Code Cinema in Fanling, Hong Kong was opened on 21 January 2017. The Grand Kornhill Cinema in Kornhill Plaza, Hong Kong was re-opened on 1 April 2017 after renovation and is the first cinema in Hong Kong installed with a MX4D theatre providing the most advanced 4D movie experience. The MCL Telford Cinema has just completed its renovation in mid October 2017, with the success of the MX4D theatre in Grand Kornhill Cinema, MCL Telford Cinema has also installed with a MX4D theatre. The eSun Group also secured one cinema project in Suzhou in Mainland China, which is expected to commence business in the financial year ending 31 July 2018. The cinema operation provides a complementary distribution channel for the eSun Group’s film production and distribution businesses.

Details on the number of screens and seats of each cinema as at 31 July 2017 are as follows:

Attributable interest to the Cinema eSun Group (%) Mainland China Guangzhou May Flower Cinema City 100 Zhongshan May Flower Cinema City 100 MCL Cinema City in Shekou 85 MCL Cinema City in Luohu 85 Subtotal Hong Kong Festival Grand Cinema 85 MCL Metro City Cinema 85 MCL Telford Cinema (including MX4D Theatre) 85 STAR Cinema 85 Grand Kornhill Cinema (including MX4D Theatre) 85 MCL South Horizons Cinema 85 MCL Green Code Cinema 85 Grand Windsor Cinema 85 The Grand Cinema 25.5 Subtotal Total	No. of screens (Note) 7 5 5 5 22 8 7 6 6 5 3 3 3 12 53 75	No. of Seats (Note) 606 905 629 529
		2,669
		1,196 957 789 622 706 555 285 246 1,566
		6,922
		9,591

Note: On 100% basis

– V-18 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Property Investment

Rental Income

For the year ended 31 July 2017, Lai Fung Group’s rental operations recorded a turnover of HK$702.1 million (2016: HK$629.4 million), representing an 11.6% increase over last year. Excluding the effect of currency translation against a depreciated Renminbi, the growth for Renminbi denominated rental income was 17.0%. Breakdown of rental turnover by major rental properties is as follows:

For the year ended 31 July
2017
#
2016
# Approximate
HK$’million
HK$’million
change
(%)
Shanghai
Shanghai Hong Kong Plaza
399.4
398.2
0.3
Shanghai May Flower Plaza
75.4
71.4
5.6
Shanghai Regents Park
20.0
14.3
39.9
Shanghai Northgate Plaza I
—
4.9
-100.0
Guangzhou
Guangzhou May Flower Plaza
105.5
109.5
-3.7
Guangzhou West Point
18.4
17.2
7.0
Guangzhou Lai Fung Tower
74.9
6.2
1,108.1
Zhongshan
Zhongshan Palm Spring
8.5
7.7
10.4
Total
702.1
629.4
11.6

For the year ended 31 July
2017
2016 Approximate
Year end
RMB’million
RMB’million
change
occupancy
(%)
(%)
350.6
333.2
5.2
Retail: 95.2
Offce: 91.8
Serviced Apartments: 85.3
66.2
59.7
10.9
Retail: 100.0
Hotel: 81.6
17.5
12.0
45.8
100.0
—
4.1
-100.0
0.0
92.6
91.6
1.1
99.2
16.1
14.4
11.8
99.6
65.7
5.2
1,163.5
Retail: 100.0
Offce: 100.0
7.5
6.4
17.2
Retail: 86.4**
Serviced Apartments: 56.9
616.2
526.6
17.0

2017
RMB’million
350.6
66.2
17.5
—
92.6
16.1
65.7
7.5
616.2

The exchange rates adopted for the years ended 31 July 2017 and 2016 are 0.8777 and 0.8367, respectively.

All tenants were vacated for project redevelopment and demolition has been completed in May 2017.
** Excluding the office area that is subject to the asset swap transaction as jointly announced by Lai Fung and eSun on 15 January 2015 and the asset swap transaction has been completed in August 2017.
*** Excluding self-use area

– V-19 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Rental income performed steadily as a whole with almost full occupancy in all the major properties. Rental income growth was partially offset by depreciation of Renminbi during the year under review.

The asset swap transaction with Guangzhou Light Industry Real Estate Limited as jointly announced by Lai Fung and eSun on 15 January 2015 in relation to Guangzhou Lai Fung Tower, the office block of Guangzhou Eastern Place Phase V, has been completed in August 2017 post year end. This enables Lai Fung to consolidate its ownership of Guangzhou Lai Fung Tower completely and provide additional flexibility and strategic value to Lai Fung Group. The total GFA of this property owned by Lai Fung Group increased to approximately 707,800 square feet excluding car-parking spaces from that of approximately 626,700 square feet as at 31 July 2017 and the commercial area and the office building of this property have been fully leased.

The acquisition of Hui Gong Building was completed in September 2016. Lai Fung Group plans to redevelop Shanghai Northgate Plaza I, Northgate Plaza II and the Hui Gong Building together under a comprehensive redevelopment plan which includes an office tower, a shopping arcade and underground car-parking spaces and is expected to add a total GFA of approximately 693,600 square feet excluding car-parking spaces to the rental portfolio of Lai Fung Group. Demolition of Shanghai Northgate Plaza I and Hui Gong Building has been completed in May 2017 and foundation works commenced in September 2017.

Excluding self-use area of approximately 53,223 square feet, all commercial area of Zhongshan Palm Spring Rainbow Mall has been reclassified as rental properties.

Property Development

Recognised Sales

For the year ended 31 July 2017, Lai Fung Group’s property development operations recorded a turnover of HK$624.6 million (2016: HK$1,414.1 million) from sale of properties, representing a 55.8% decrease in sales revenue over last year.

Total recognised sales were primarily driven by the sales performance of residential units of Guangzhou Eastern Place Phase V and Zhongshan Palm Spring of which approximately 21,364 and 641,366 square feet of residential GFA were sold, respectively, achieving sales revenue of HK$129.2 million and HK$485.3 million, respectively.

For the year ended 31 July 2017, average selling price recognised as a whole (excluding Guangzhou Dolce Vita and car-parking spaces) amounted to approximately HK$983 per square foot (2016: HK$4,207 per square foot). Sales of residential units of Guangzhou Dolce Vita performed well and achieved an average selling price of HK$2,584 per square foot (2016: HK$2,915 per square foot). This is recognised as a component of “Share of profits and losses of joint ventures” in the consolidated income statement.

– V-20 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Breakdown of turnover for the year ended 31 July 2017 from property sales is as follows:

Recognised basis No. of units Guangzhou Eastern Place Residential Units — Phase V 19 Zhongshan Palm Spring Residential High-rise Units 479 Residential House Units 15 Others Subtotal 513 Guangzhou King’s Park Car-parking Spaces 14 Guangzhou West Point Car-parking Space 1 Total Recognised sales from joint venture project Guangzhou Dolce Vita Residential Units (47.5% basis) 514 Retail Units (47.5% basis) 2 Subtotal 516 Car-parking Spaces (47.5% basis) 373 Total**	Approximate Average GFA selling price # Square feet HK$/square foot 21,364 6,481 597,959 743 43,407 1,582 662,730 983 737,122 2,570 2,521 6,521 739,643 2,584	Turnover*	Turnover*
		HK$’million ## 129.2 420.1 65.2 0.4 614.9 9.0 0.7 624.6 1,794.7 15.6 1,810.3 122.4 1,932.7	RMB’million 113.4 368.7 57.2 0.4
			539.7

			7.9 0.6
			548.2

			1,575.2 13.7
			1,588.9

			107.4
			1,696.3

– V-21 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Before business tax and value-added tax inclusive
The exchange rate adopted for the year ended 31 July 2017 is 0.8777.
After business tax and value-added tax exclusive
** Guangzhou Dolce Vita is a joint venture project with CapitaLand China in which each of Lai Fung Group and CapitaLand China has an effective 47.5% interest. For the year ended 31 July 2017, the recognised sales (after business tax and value-added tax exclusive) attributable to the full project was HK$3,811.2 million (excluding car-parking spaces) and approximately 1,557,142 square feet (excluding car-parking spaces) of GFA were recognised. The recognised sales from car-parking spaces attributable to the full project was HK$257.7 million.

Contracted Sales

As at 31 July 2017, Lai Fung Group’s property development operations, excluding Guangzhou Dolce Vita, has contracted but not yet recognised sales of HK$91.1 million and HK$49.7 million from sales of residential units in Zhongshan Palm Spring and Guangzhou Eastern Place Phase V, respectively and HK$2.3 million from sales of 3 car-parking spaces in Guangzhou King’s Park. Sales of the remainder of the completed residential units of Zhongshan Palm Spring were strong and achieved an average selling price of HK$1,087 per square foot. Excluding the effect of currency translation against a depreciated Renminbi, the Renminbi denominated contracted but not yet recognised sales of residential units and car-parking spaces, excluding Guangzhou Dolce Vita as at 31 July 2017 amounted to RMB125.7 million (31 July 2016: RMB484.4 million).

The total contracted but not yet recognised sales of Lai Fung Group as at 31 July 2017 including Guangzhou Dolce Vita and car-parking spaces amounted to HK$402.8 million (31 July 2016: HK$2,249.1 million). The Renminbi denominated contracted but not yet recognised sales of residential units and car-parking spaces, including Guangzhou Dolce Vita as at 31 July 2017 amounted to RMB353.6 million (31 July 2016: RMB1,881.8 million).

– V-22 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Breakdown of contracted but not yet recognised sales as at 31 July 2017 is as follows:

Contracted basis No. of units Guangzhou Eastern Place Residential Units — Phase V 7 Zhongshan Palm Spring Residential High-rise Units 69 Subtotal 76 Guangzhou King’s Park Car-parking Spaces 3 Subtotal Contracted sales from joint venture project Guangzhou Dolce Vita Residential Units (47.5% basis) 38 Car-parking Spaces (47.5% basis) 9 Subtotal Total (excluding car-parking spaces) 114	Approximate Average GFA selling price # Square feet HK$/square foot 7,522 6,607 83,791 1,087 91,313 1,542 80,140 3,203 171,453 2,318	Turnover #	Turnover #
		HK$’million ## 49.7 91.1 140.8 2.3 143.1 256.6 3.1 259.7 397.4	RMB’million 43.6 80.0
			123.6

			2.1
			125.7

			225.2 2.7
			227.9

			348.8

Before business tax and value-added tax inclusive
The exchange rate adopted for the year ended 31 July 2017 is 0.8777.
Guangzhou Dolce Vita is a joint venture project with CapitaLand China in which each of Lai Fung Group and CapitaLand China has an effective 47.5% interest. As at 31 July 2017, the contracted but not yet recognised sales attributable to the full project was HK$540.2 million (excluding car-parking spaces) and approximately 168,715 square feet of GFA (excluding car-parking spaces) were sold. The contracted but not yet recognised sales from car-parking spaces attributable to the full project was HK$6.5 million.

– V-23 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Liquidity, Financial Resources, Charge on Assets and Gearing

Cash and Bank Balances

As at 31 July 2017, cash and bank balances held by the eSun Group amounted to HK$3,304.6 million (2016: HK$4,365.6 million) of which around 24.2% was denominated in Hong Kong dollar (“ HKD ”) and United States dollar (“ USD ”) currencies, and around 75.5% was denominated in Renminbi (“ RMB ”). Cash and bank balances held by the eSun Group excluding cash and bank balances held by MAGHL Group and Lai Fung Group as at 31 July 2017 was HK$273.8 million (2016: HK$303.0 million). As HKD is pegged to USD, the eSun Group considers that the corresponding exposure to USD exchange rate fluctuation is nominal. The conversion of RMB denominated cash and bank balances into foreign currencies and the remittance of such foreign currencies denominated balances out of Mainland China are subject to the relevant rules and regulations of foreign exchanges control promulgated by the government authorities concerned. Apart from the cross currency swap arrangements of Lai Fung Group, the eSun Group does not have any derivative financial instruments or hedging instruments outstanding.

Borrowings

As at 31 July 2017, the eSun Group had outstanding consolidated total borrowings (after intragroup elimination) in the amount of HK$6,525.3 million. The borrowings of the eSun Group (other than MAGHL and Lai Fung), MAGHL and Lai Fung, are as follows:

eSun Group (other than MAGHL and Lai Fung)

As at 31 July 2017, the eSun Group had bank loans of HK$271.4 million. The maturity profile of the eSun Group’s bank loans is spread with HK$179.4 million repayable within 1 year, HK$34.8 million repayable in the second year and HK$57.2 million repayable in the third years. All bank loans are on floating rate basis and are denominated in HKD.

In addition, there existed unsecured other borrowings due to the late Mr. Lim Por Yen in the principal amount of HK$113.0 million which is interest-bearing at the HSBC prime rate per annum. The eSun Group’s recorded interest accruals were HK$85.5 million for the said unsecured other borrowings as at 31 July 2017. At the request of the eSun Group, the executor of Mr. Lim Por Yen’s estate confirmed that no demand for the repayment of the outstanding other borrowings or the related interest would be made within one year from 31 July 2017.

– V-24 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

MAGHL

As at 31 July 2017, MAGHL has unsecured and unguaranteed 3-year zero coupon TFN Convertible Notes with an aggregate outstanding principal amount of approximately HK$130.0 million issued to a subscriber. As at 31 July 2017, MAGHL has unsecured and unguaranteed 3-year zero coupon Specific Mandate Convertible Notes with an aggregate outstanding principal amount of HK$166.8 million, comprising approximately HK$100.0 million and approximately HK$66.8 million issued to the eSun Group and other subscribers, respectively. Unless previously converted, redeemed, purchased or cancelled in accordance with the terms and conditions of the TFN Convertible Notes and the Specific Mandate Convertible Notes, they will be redeemed by MAGHL on the maturity dates of 13 May 2018 and 3 July 2018, respectively, at the principal amount outstanding. For accounting purpose, after deducting the equity portion of the convertible notes from the principal amount, the carrying amount of the TFN Convertible Notes as recorded in the eSun Group was HK$121.1 million and the resultant carrying amount of the Specific Mandate Convertible Notes as recorded in the Group was HK$61.2 million as at 31 July 2017 after adjusting for (i) accrued interest and (ii) intra-group elimination.

Lai Fung

As at 31 July 2017, Lai Fung Group had total borrowings in the amount of HK$6,091.4 million comprising bank loans of HK$2,896.1 million, fixed rate senior notes of HK$2,080.4 million, loans from a subsidiary of eSun of HK$218.3 million, loans from a joint venture of HK$842.5 million and other borrowing of HK$54.1 million. The maturity profile of Lai Fung Group’s borrowings of HK$6,091.4 million is well spread with HK$2,355.1 million repayable within 1 year, HK$692.9 million repayable in the second year, HK$2,954.2 million repayable in the third to fifth years, and HK$89.2 million repayable beyond the fifth year.

Approximately 48% and 48% of Lai Fung Group’s borrowings were on a fixed rate basis and floating rate basis, respectively, and the remaining 4% of Lai Fung Group’s borrowings were interest free.

Apart from the fixed rate senior notes, Lai Fung Group’s other borrowings of HK$4,011.0 million were 55% denominated in RMB, 33% in HKD and 12% in USD.

Lai Fung Group’s fixed rate senior notes of HK$2,080.4 million were denominated in RMB. On 25 April 2013, issue date of the RMB denominated senior notes (“ 2013 Notes ”), Lai Fung Group entered into cross currency swap agreements with financial institutions for the purpose of hedging the foreign currency risk arising from such notes. Accordingly, the 2013 Notes have been effectively converted into USD denominated loans.

– V-25 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Charge on Assets and Gearing

Certain assets of the eSun Group have been pledged to secure borrowings and banking facility of the eSun Group, including investment properties with a total carrying amount of approximately HK$10,401.2 million, properties under development with a total carrying amount of approximately HK$500.6 million, serviced apartments (including related leasehold improvements) with a total carrying amount of approximately HK$1,372.9 million, construction in progress with a total carrying amount of approximately HK$730.2 million and time deposits and bank balances of approximately HK$401.4 million.

In addition, as at 31 July 2017, a revolving loan facility in the amount of HK$600.0 million was granted by a bank to the eSun Group. The said loan facility is secured by the charge over securities accounts and share mortgage of the ordinary shares of Lai Fung and certain ordinary shares of MAGHL held by the eSun Group (other than Lai Fung and MAGHL). The eSun Group has utilised the said loan facility for an amount of HK$150.0 million as at 31 July 2017. As at 31 July 2017, guaranteed general banking facilities in the amount of HK$214.0 million were granted by certain banks to the eSun Group (other than Lai Fung). The said guaranteed general banking facilities (other than a term loan) are subject to annual review by the banks for renewal and the eSun Group had utilised letter of credit and letter of guarantee facilities, term loan and revolving loans for a total amount of HK$130.6 million as at 31 July 2017. As such, the eSun Group (other than Lai Fung) has the undrawn facilities of HK$533.4 million as at 31 July 2017. The undrawn facilities of Lai Fung Group was HK$3,528.0 million as at 31 July 2017.

As at 31 July 2017, the consolidated net assets attributable to the owners of eSun amounted to HK$9,118.2 million (2016: HK$8,599.3 million). The gearing ratio, being net debt (total borrowings of HK$6,525.3 million less pledged bank balances and time deposits of HK$571.1 million and cash and cash equivalents of HK$2,733.5 million) to net assets attributable to the owners of eSun was approximately 35.3%.

– V-26 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Taking into account the amount of cash being held as at the end of the reporting period, the available banking facilities, expected refinancing of fixed rate senior notes, certain bank loans and the recurring cash flows from the eSun Group’s operating activities, the eSun Group believes that it would have sufficient liquidity for its present requirements to finance its existing operations and projects underway.

Contingent Liabilities

(a) The eSun Group had provided guarantees to certain banks in respect of mortgage loan facilities granted by such banks to certain end-buyers of property units developed by the eSun Group. Pursuant to the terms of the guarantees, upon default in mortgage payments by these end-buyers, the eSun Group will be responsible to repay the outstanding mortgage loan principals together with accrued interest owed by the end-buyers in default. The eSun Group’s obligation in relation to such guarantees has been gradually relinquished along with the settlement of the mortgage loans granted by the banks to the end-buyers. Such obligation will also be relinquished when the property ownership certificates for the relevant properties are issued and/or the end-buyers have fully repaid the mortgage loans. As at 31 July 2017, in respect of these guarantees, the contingent liabilities of the eSun Group amounted to approximately HK$596,225,000 (2016: HK$666,669,000).
(b) The eSun Group had provided corporate guarantees to certain banks in connection with the banking facilities granted to certain subsidiaries and the respective letter of credit and letter of guarantee facilities of approximately HK$6,616,000 (2016: HK$15,634,000) were utilised.

Employees and Remuneration Policies

As at 31 July 2017, the eSun Group employed a total of around 2,010 (2016: 2,100) employees. The eSun Group recognises the importance of maintaining a stable staff force in its continued success. Under the eSun Group’s existing policies, employee pay rates are maintained at competitive levels whilst promotion and salary increments are assessed on a performancerelated basis. Discretionary bonuses are granted to employees based on their merit and in accordance with industry practice. Other benefits including share option scheme, mandatory provident fund scheme, free hospitalisation insurance plan, subsidised medical care and sponsorship for external education and training programmes are offered to eligible employees.

– V-27 –

APPENDIX V MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

C. MANAGEMENT DISCUSSION AND ANALYSIS ON THE eSUN GROUP FOR THE YEAR ENDED 31 JULY 2016 (AND AS COMPARED TO THE YEAR ENDED 31 JULY 2015)

Overview

Media and Entertainment

For the year ended 31 July 2016, this segment recorded a turnover of HK$537.1 million (2015: HK$576.3 million) and segment result decreased from a profit of HK$50.2 million to a profit of HK$16.5 million.

Live Entertainment

The eSun Group remains highly active on the live entertainment front. During the year ended 31 July 2016, the eSun Group organised and invested in 197 (2015: 114) shows by popular local, Asian and internationally renowned artistes, including Sammi Cheng, Miriam Yeung, Ivana Wong, EXO, Infinite, SHINee, Super Junior, a group of Ekin Cheng, Jordan Chan, Michael Tse, Jerry Lamb and Chin Ka Lok, Grasshopper, Kelly Chen, George Lam, Rene Liu, Jolin Tsai and Hebe Tien. Besides pop music events, the eSun Group has also extended its production to Cantonese Opera to promote traditional Chinese culture. The famous title 《牡丹亭驚夢》 featuring Ms. Chan Po Chu and Ms. Mui Suet See gained huge support when staged in May 2016 and has been rerun in August 2016.

Music Production, Distribution and Publishing

For the year ended 31 July 2016, the eSun Group released 57 (2015: 85) albums, including titles by Miriam Yeung, Ivana Wong, Grasshopper, C AllStar, a group of Richie Jen, William So, Edmond Leung and Steve Wong, Justin Lo, Sean Pang, RubberBand and Han Hong. The eSun Group is expected to continue to increase its music licensing revenue from the exploitation of the music library through new media distribution.

Artiste Management

Film and TV Programme Production and Distribution

For the year ended 31 July 2016, this segment recorded a turnover of HK$343.6 million (2015: HK$457.6 million) and segment results of a loss of HK$55.5 million (2015: a profit of HK$34.4 million).

– V-28 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

For the year ended 31 July 2016, the eSun Group released theatrically a total of 7 (2015: 7) films which were produced/invested by the Group, namely The Assassin, All You Need Is Love, Office, She Remembers, He Forgets, From Vegas to Macau III, Trivisa and Three . In addition, the eSun Group has completed principal photography of another 5 films, most of them are expected to be released by 2017, whilst with 11 other films in the production pipeline or under development. The eSun Group also distributed 33 (2015: 29) films and 308 (2015: 287) videos with high profile titles including No Escape, Point Break, Dirty Grandpa, Gods of Egypt, Scouts Guide to the Zombie Apocalypse, Star Trek Beyond, Avengers: Age of Ultron, Jurassic World, Star Wars: The Force Awakens and Zootopia .

The eSun Group has made investments in the production of 7 (2015: 3) TV drama series in Mainland China which are expected to generate return to the eSun Group in the coming financial years.

Cinema Operation

For the year ended 31 July 2016, this segment recorded a turnover of HK$364.9 million (2015: HK$294.9 million). As at 31 July 2016, the eSun Group operates four cinemas in Mainland China and eight cinemas in Hong Kong as well as one joint venture cinema in Hong Kong. The eSun Group’s new cinemas, the Grand Windsor Cinema in Causeway Bay in Hong Kong, MCL South Horizons Cinema in South Horizons in Hong Kong and the Festival Grand Cinema in the Festival Walk in Kowloon Tong were opened on 26 September 2015, 23 March 2016 and 8 June 2016, respectively. It is expected that the new cinema in Green Code in Fanling, Hong Kong will commence operations by the end of 2016. The eSun Group also secured two cinema projects in Suzhou and Wuxi in Mainland China, which are expected to commence businesses in the financial years ending 31 July 2017 and 31 July 2018, respectively. The cinema operation provides a complementary distribution channel for the Group’s film production and distribution businesses.

– V-29 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Details on the number of screens and seats of each cinema as at 31 July 2016 are as follows:

Attributable interest to the Cinema eSun Group (%) Mainland China Guangzhou May Flower Cinema City 100 Zhongshan May Flower Cinema City 100 MCL Cinema City in Shekou 85 MCL Cinema City in Luohu 85 Subtotal Hong Kong Festival Grand Cinema 85 MCL Metro Cinema 85 MCL Telford Cinema 85 STAR Cinema 85 MCL Kornhill Cinema 85 MCL South Horizons Cinema 85 Grand Windsor Cinema 85 MCL JP Cinema 85 The Grand Cinema 25.5 Subtotal Total	No. of screens (Note) 7 5 5 5 22 8 7 6 6 5 3 3 2 12 52 74	No. of seats (Note) 606 905 629 529
		2,669
		1,196 957 819 622 836 555 246 658 1,566
		7,455
		10,124

Note: On 100% basis

Property Investment

The following details are extracted from Lai Fung’s annual reports for the two years ended 31 July 2016 and 31 July 2015.

– V-30 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Rental Income

For the year ended 31 July 2016, Lai Fung Group’s rental operations recorded a turnover of HK$629.4 million (2015: HK$626.0 million), representing a 0.5% increase over last year. Excluding the effect of currency translation against a depreciated Renminbi, the growth for Renminbi denominated rental income was 5.2%. Breakdown of rental turnover by major rental properties is as follows:

Shanghai Shanghai Hong Kong Plaza Shanghai May Flower Plaza Shanghai Regents Park Shanghai Northgate Plaza I Guangzhou Guangzhou May Flower Plaza Guangzhou West Point Guangzhou Lai Fung Tower Zhongshan Zhongshan Palm Spring Total	For the year ended 31 July 2016 2015 HK$’million HK$’million 398.2 407.2 71.4 61.7 14.3 13.4 4.9 10.8 109.5 108.9 17.2 17.2 6.2 — 7.7 6.8 629.4 626.0	Approximate percentage Year end change occupancy (%) (%) -2.2 Retail: 98.3 Offce: 97.8 Serviced Apartments: 88.8 15.7 Retail: 99.5 Hotel: 90.4 6.7 100.0 -54.6 0.0 0.6 98.6 — 98.7 N/A Retail: 91.8 Offce: 53.9 13.2 Retail: 82.0* Serviced Apartments: 57.1 0.5
	2016 HK$’million 398.2 71.4 14.3 4.9 109.5 17.2 6.2 7.7 629.4

All tenants have been vacated for project redevelopment.

** Excluding self-use area

– V-31 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Rental income performed steadily as a whole with almost full occupancy in all the major properties. Rental income growth was partially offset by depreciation of Renminbi during the year under review. The increase in turnover of Shanghai May Flower Plaza is mainly driven by a better performance of the STARR Hotel Shanghai since its soft opening in November 2013.

Guangzhou Lai Fung Tower, the office block of Guangzhou Eastern Place Phase V, was completed and added to the rental portfolio of Lai Fung Group in June 2016 and has started to contribute to the rental income of Lai Fung Group. Up to 31 July 2016, excluding the office area that is subject to the asset swap transactions as jointly announced by Lai Fung and the Company on 15 January 2015, approximately 83.5% of the GFA of the building has been leased or has offers to lease.

All tenants of Shanghai Northgate Plaza I have been vacated for redevelopment of Shanghai Northgate Plaza I, Northgate Plaza II and the 6th to 11th floors of Hui Gong Building acquired by Lai Fung Group in September 2016. Lai Fung Group discussed the redevelopment proposal with professional consultants and local authorities.

A portion of the Zhongshan Palm Spring Rainbow Mall, amounting to approximately 62% of total GFA, has been reclassified as rental properties as the floor space was leased out. Further reclassification and rental income recognition will take place in due course as the property becomes fully leased.

Property Development

Recognised Sales

For the year ended 31 July 2016, Lai Fung Group’s property development operations recorded a turnover of HK$1,414.1 million (2015: HK$1,275.4 million) from sale of properties, representing a 10.9% increase in sales revenue over last year. Total recognised sales were primarily driven by the sales performance of residential units of Guangzhou Eastern Place Phase V of which approximately 182,574 square feet of residential GFA were sold, achieving sales revenue of HK$1,052.5 million. Excluding the effect of currency translation against a depreciated Renminbi, the growth for Renminbi denominated turnover from sales of properties during the year under review was 16.0%.

Primarily due to the depreciation of Renminbi, average selling price recognised as a whole (excluding Guangzhou Dolce Vita) for the year ended 31 July 2016 decreased to approximately HK$4,207 per square foot (2015: HK$4,243 per square foot).

Sales of Guangzhou Dolce Vita performed well and achieved an average selling price of HK$2,915 per square foot.

– V-32 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Breakdown of turnover for the year ended 31 July 2016 from property sales is as follows:

Approximate
Average
Recognised basis
GFA
selling price#
Square feet HK$/square foot
Shanghai May Flower Plaza
Residential Units
9,681
5,169
Offce Apartment Units
12,564
3,660
Guangzhou Eastern Place
Residential Units — Phase V
182,574
6,087
Residential Units — Phase IV
891
4,226
Guangzhou King’s Park
Residential Units
21,404
4,707
Zhongshan Palm Spring
Residential High-rise Units
11,190
701
Residential House Units
113,709
1,416
Subtotal
352,013
4,207
Guangzhou King’s Park
Car-parking Spaces
Total
Recognised sales from joint venture project
Guangzhou Dolce Vita
Residential Units(47.5% basis)
249,775
2,886
Retail Units(47.5% basis)
1,953
6,516
Subtotal
251,728
2,915
Car-parking Spaces(47.5% basis)
Total**

Turnover
HK$’million
47.2
43.4
1,052.5
3.6
95.0
7.4
151.8
1,400.9
13.2
1,414.1
680.9
11.7
692.6
19.2
711.8*

– V-33 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Before business tax and value-added tax inclusive
After business tax and value-added tax exclusive
** Guangzhou Dolce Vita is a joint venture project with CapitaLand China in which each of Lai Fung Group and CapitaLand China has an effective 47.5% interest. For the year ended 31 July 2016, the recognised sales (after business tax and value-added tax exclusive) attributable to the full project is HK$1,458.1 million (excluding car-parking spaces) and approximately 529,954 square feet of GFA (excluding car-parking spaces) were recognised. The recognised sales from car-parking spaces attributable to the full project is HK$40.4 million.

Contracted Sales

As at 31 July 2016, Lai Fung Group’s property development operations, excluding Guangzhou Dolce Vita, have contracted but not yet recognised sales of HK$571.7 million from sale of residential units in Zhongshan Palm Spring and HK$7.3 million from sales of 10 car-parking spaces in Guangzhou King’s Park. Sales of the remainder of completed residential units of Zhongshan Palm Spring were strong and achieved an average selling price of HK$846 per square foot (excluding car-parking spaces). Excluding the effect of currency translation against a depreciated Renminbi, the Renminbi denominated contracted but not yet recognised sales of residential units, excluding Guangzhou Dolce Vita as at 31 July 2016 amounted to RMB478.3 million (2015: RMB162.1 million).

The total contracted but not yet recognised sales of Lai Fung Group as at 31 July 2016 including Guangzhou Dolce Vita amounted to HK$2,249.1 million (including car-parking spaces of Guangzhou King’s Park and Guangzhou Dolce Vita). The Renminbi denominated contracted but not yet recognised sales of residential units, including Guangzhou Dolce Vita as at 31 July 2016 amounted to RMB1,875.2 million (2015: RMB1,048.4 million).

– V-34 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Breakdown of contracted but not yet recognised sales as at 31 July 2016 is as follows:

Approximate
Average
Contracted basis
GFA
selling price#
Square feet HK$/square foot
Zhongshan Palm Spring
Residential High-rise Units
635,762
798
Residential House Units
39,917
1,611
Subtotal
675,679
846
Guangzhou King’s Park
Car-parking Spaces
Subtotal
Contracted sales from joint venture project
Guangzhou Dolce Vita
Residential Units(47.5% basis)
665,452
2,492
Retail Units(47.5% basis)
1,585
6,814
Subtotal
667,037
2,503
Car-parking Spaces(47.5% basis)
Subtotal
Total (excluding car-parking spaces)
1,342,716
1,669**

Turnover#
HK$’million
507.4
64.3
571.7
7.3
579.0
1,658.6
10.8
1,669.4
0.7
1,670.1
2,241.1

Before business tax and value-added tax inclusive

** Guangzhou Dolce Vita is a joint venture project with CapitaLand China in which each of Lai Fung Group and CapitaLand China has an effective 47.5% interest. As at 31 July 2016, the contracted but not yet recognised sales attributable to the full project is HK$3,514.5 million (excluding car-parking spaces) and approximately 1,404,288 square feet of GFA (excluding car-parking spaces) were sold. The contracted but not yet recognised sales from car-parking spaces attributable to the full project is HK$1.5 million.

– V-35 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Liquidity, Financial Resources, Charge on Assets and Gearing

Cash and Bank Balances

As at 31 July 2016, cash and bank balances held by the eSun Group amounted to HK$4,365.6 million (2015: HK$4,647.4 million) of which around 22% was denominated in Hong Kong dollar (“ HKD ”) and United States dollar (“ USD ”) currencies, and around 78% was denominated in Renminbi (“ RMB ”). Cash and bank balances held by the eSun Group excluding cash and bank balances held by MAGHL Group and Lai Fung Group as at 31 July 2016 was HK$303.0 million (2015: HK$1,061.3 million). As HKD is pegged to USD, the eSun Group considers that the corresponding exposure to USD exchange rate fluctuation is nominal. The conversion of RMB denominated cash and bank balances into foreign currencies and the remittance of such foreign currencies denominated balances out of Mainland China are subject to the relevant rules and regulations of foreign exchanges control promulgated by the government authorities concerned. Apart from the cross currency swap arrangements of Lai Fung Group, the eSun Group does not have any derivative financial instruments or hedging instruments outstanding.

Borrowings

As at 31 July 2016, the eSun Group had outstanding consolidated total borrowings (after intragroup elimination) in the amount of HK$6,479.9 million. The borrowings of the eSun Group (other than MAGHL and Lai Fung), MAGHL and Lai Fung, are as follows:

eSun Group (other than MAGHL and Lai Fung)

As at 31 July 2016, the eSun Group had revolving bank loans of HK$365.2 million. The maturity profile of the eSun Group’s bank loans is spread with HK$24 million repayable within 1 year and HK$341.2 million repayable in the second year. All bank loans are on floating rate basis and are denominated in HKD.

During the year, the eSun Group repurchased and redeemed the secured guaranteed notes of HK$766.3 million which were denominated in RMB with original maturity date of 24 June 2018 for bullet repayment. These notes were effectively delisted on 5 July 2016. In addition, there existed unsecured other borrowings due to the late Mr. Lim Por Yen in the principal amount of HK$113.0 million which is interest-bearing at the HSBC prime rate per annum. The eSun Group’s recorded interest accruals were HK$79.8 million for the said unsecured other borrowings as at 31 July 2016. At the request of the eSun Group, the executor of Mr. Lim Por Yen’s estate confirmed that no demand for the repayment of the outstanding other borrowings or the related interest would be made within one year from 31 July 2016.

– V-36 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

MAGHL

As at 31 July 2016, MAGHL has unsecured and unguaranteed 3-year zero coupon TFN Convertible Notes with an aggregate outstanding principal amount of HK$130.0 million issued to a subscriber. As at 31 July 2016, MAGHL has unsecured and unguaranteed 3-year zero coupon Specific Mandate Convertible Notes with an aggregate outstanding principal amount of HK$166.8 million, comprising HK$100.0 million and HK$66.8 million issued to the eSun Group and other subscribers, respectively. Unless previously converted, redeemed, purchased or cancelled in accordance with the terms and conditions of the TFN Convertible Notes and the Specific Mandate Convertible Notes, they will be redeemed by MAGHL on the maturity dates of 13 May 2018 and 3 July 2018, respectively, at the principal amount outstanding. For accounting purpose, after deducting the equity portion of the convertible notes from the principal amount, the carrying amount of the TFN Convertible Notes as recorded in the eSun Group was HK$110.6 million and the resultant carrying amount of the Specific Mandate Convertible Notes as recorded in the eSun Group was HK$55.6 million as at 31 July 2016 after adjusting for (i) accrued interest and (ii) intra-group elimination.

Lai Fung

As at 31 July 2016, Lai Fung Group had total borrowings in the amount of HK$5,977.4 million comprising bank loans of HK$3,035.5 million, fixed rate senior notes of HK$2,092.7 million, loans from a subsidiary of the Company of HK$221.7 million, loans from a joint venture of HK$572.8 million and other borrowing of HK$54.7 million. The maturity profile of Lai Fung Group’s borrowings of HK$5,977.4 million is well spread with HK$637.9 million repayable within 1 year, HK$2,906.6 million repayable in the second year, HK$2,307.7 million repayable in the third to fifth years, and HK$125.2 million repayable beyond the fifth year.

Approximately 44% and 51% of Lai Fung Group’s borrowings were on a fixed rate basis and floating rate basis, respectively, and the remaining 5% of Lai Fung Group’s borrowings were interest free.

Apart from the fixed rate senior notes, Lai Fung Group’s other borrowings of HK$3,884.7 million were 46% denominated in RMB, 42% in HKD and 12% in USD.

Lai Fung Group’s fixed rate senior notes of HK$2,092.7 million were denominated in RMB. On 25 April 2013, issue date of the RMB denominated senior notes (“ 2013 Notes ”), Lai Fung Group entered into cross currency swap agreements with financial institutions for the purpose of hedging the foreign currency risk arising from such notes. Accordingly, the 2013 Notes have been effectively converted into USD denominated loans.

– V-37 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Charge on Assets and Gearing

Certain assets of the eSun Group have been pledged to secure borrowings and banking facility of the eSun Group, including investment properties with a total carrying amount of approximately HK$9,398.1 million, completed properties for sale with a total carrying amount of approximately HK$55.6 million, properties under development with a total carrying amount of approximately HK$365.0 million, serviced apartments (including related leasehold improvements) with a total carrying amount of approximately HK$1,471.6 million, properties and construction in progress with a total carrying amount of approximately HK$513.5 million and bank balances of approximately HK$131.6 million.

In addition, as at 31 July 2016, a revolving loan facility in the amount of HK$600.0 million was granted by a bank to the Group. As at 31 July 2016, the said loan facility is secured by the charge over securities accounts and share mortgage of the ordinary shares of Lai Fung and certain ordinary shares of MAGHL held by eSun. The eSun Group has utilised the said loan facility for an amount of HK$350 million as at 31 July 2016. As at 31 July 2016, guaranteed general banking facilities in the amount of HK$79.0 million were granted by other banks to the eSun Group. The said guaranteed general banking facilities are subject to annual review by the banks for renewal and the eSun Group had utilised letter of credit and letter of guarantee facilities and revolving loans for a total amount of HK$39.6 million as at 31 July 2016. As such, the eSun Group (other than Lai Fung) has the undrawn facilities of HK$289.4 million as at 31 July 2016. The undrawn facilities of Lai Fung Group was HK$3,576.2 million as at 31 July 2016.

As at 31 July 2016, the consolidated net assets attributable to the owners of eSun amounted to HK$8,599.3 million (2015: HK$9,164.7 million). The gearing ratio, being net debt (total borrowings of HK$6,479.9 million less pledged bank balances and time deposits of HK$1,066.5 million and cash and cash equivalents of HK$3,299.1 million) to net assets attributable to the owners of eSun was approximately 24.6%.

– V-38 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE eSUN GROUP

APPENDIX V

Taking into account the amount of cash being held as at the end of the reporting period, the available banking facilities, expected refinancing of certain bank loans and the recurring cash flows from the eSun Group’s operating activities, the eSun Group believes that it would have sufficient liquidity for its present requirements to finance its existing operations and projects underway.

Contingent Liabilities

(a) The eSun Group had provided guarantees to certain banks in respect of mortgage loan facilities granted by such banks to certain end-buyers of property units developed by the eSun Group. Pursuant to the terms of the guarantees, upon default in mortgage payments by these end-buyers, the eSun Group will be responsible to repay the outstanding mortgage loan principals together with accrued interest owed by the end-buyers in default. The eSun Group’s obligation in relation to such guarantees has been gradually relinquished along with the settlement of the mortgage loans granted by the banks to the end-buyers. Such obligation will also be relinquished when the property ownership certificates for the relevant properties are issued and/or the end-buyers have fully repaid the mortgage loans. As at 31 July 2016, in respect of these guarantees, the contingent liabilities of the eSun Group amounted to approximately HK$666,669,000 (2015: HK$120,159,000).
(b) The eSun Group had provided corporate guarantees to certain banks in connection with the banking facilities granted to certain subsidiaries and the respective letter of credit and letter of guarantee facilities of approximately HK$15,634,000 (2015: HK$15,735,000) were utilised.

Employees and Remuneration Policies

As at 31 July 2016, the eSun Group employed a total of around 2,100 (2015: 1,900) employees. The eSun Group recognises the importance of maintaining a stable staff force in its continued success. Under the eSun Group’s existing policies, employee pay rates are maintained at competitive levels whilst promotion and salary increments are assessed on a performancerelated basis. Discretionary bonuses are granted to employees based on their merit and in accordance with industry practice. Other benefits including share option scheme, mandatory provident fund scheme, free hospitalisation insurance plan, subsidised medical care and sponsorship for external education and training programmes are offered to eligible employees.

– V-39 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Set out below is the management discussion and analysis for the six months ended 31 January 2018 and the two years ended 31 July 2017. The information set out below has been extracted from the relevant annual report and interim report of Lai Fung to provide further information relating to the financial condition and results of operations of the Lai Fung Group during the periods stated. These extracted materials were prepared prior to the Latest Practicable Date and speak as of the date they were originally published. Capitalised terms used in this Appendix VI shall have the same meanings as defined in the relevant reports.

A. MANAGEMENT DISCUSSION AND ANALYSIS ON THE LAI FUNG GROUP FOR THE SIX MONTHS ENDED 31 JANUARY 2018 (AND AS COMPARED TO THE SIX MONTHS ENDED 31 JANUARY 2017)

Business Review and Outlook

Notwithstanding the seemingly turbulent environment, the Central Government continued to forge ahead and delivered stable economic growth through a combination of proactive fiscal policy and prudent monetary policy. However some sectors such as exports, weakened as a result of lackluster global economic performance. Some of the slowdown has been countered by promoting other sectors and raising domestic consumption. The property sector has been a beneficiary of this as observed in various land auctions and transaction values recently. We believe the property sector will remain an important economic pillar and continues to be shaped significantly by government policies. The Central Government’s approach to the economy is certainly good news to the sector in the long run and supportive fiscal policy would be beneficial to investors and developers alike. With the first session of the 13th National People’s Congress and the first session of the 13th National Committee of the Chinese People’s Political Consultative Conference came to a conclusion, it is reassuring that we can expect continued stability and continuity going forward.

The Group’s regional focus and rental-led strategy has demonstrated resilience in recent years. The rental portfolio of approximately 3.3 million square feet, primarily in Shanghai and Guangzhou, delivered steady performance in rental income at close to full occupancies for the key assets. The asset swap transaction as announced on 15 January 2015 in relation to Guangzhou Lai Fung Tower, the office block of Guangzhou Eastern Place Phase V, was completed in August 2017. This enables the Group to consolidate its ownership of Guangzhou Lai Fung Tower completely and provide additional flexibility and strategic value to the Group. The total gross floor area (“ GFA ”) of this property owned by the Group increased to approximately 705,900 square feet excluding car-parking spaces from that of approximately 626,700 square feet as at 31 July 2017 and the commercial area and the office building of this property excluding self-use area have been fully leased.

– VI-1 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

The Group has a number of projects in various stages of development in Shanghai, Guangzhou, Zhongshan and Hengqin. The rental portfolio is expected to increase from approximately 3.3 million square feet to approximately 6.6 million square feet through developing the existing projects on hand over the next few years. Demolition of Shanghai Northgate Plaza I and Hui Gong Building was completed in May 2017 and foundation works for the combined redevelopment of Shanghai Northgate Plaza I, Northgate Plaza II and the Hui Gong Building commenced in September 2017. The redevelopment plan includes an office tower, a shopping arcade and underground car-parking spaces and is expected to add a total GFA of approximately 693,600 square feet excluding car-parking spaces to the rental portfolio of the Group.

The construction works of Phase I of the Novotown project in Hengqin (“ Novotown ”) commenced at the end of 2015 and is now progressing at a good pace. In June 2017, the Group entered into a licence agreement with Real Madrid Club de Fútbol (“ Real Madrid ”) in relation to the development and operation of a location based entertainment centre (“ Real Madrid LBE ”) in Novotown. In September 2017, the Group entered into a framework agreement with Dr. Ing. h.c. F. Porsche AG (“ Porsche ”) in relation to the development and operation of an auto experience theme centre named Porsche City (“ Porsche City ”) in Novotown. In November 2017, the Group entered into a cooperation agreement with Harrow International (China) Management Services Limited and ILA Holdings Limited bringing Harrow International China Group, the world’s leading learning institution, to set up an Innovation Leadership Academy Hengqin (“ ILA Hengqin ”) in Hengqin, Zhuhai. The cooperation aims to enhance the general education experience in Hengqin and across the region catering for learning needs of local and overseas families residing within the Pearl River Delta area, including Hengqin, Zhuhai, Macau and the Greater Bay Area. The Real Madrid LBE, Porsche City and ILA Hengqin are planned to be launched in Phase II of the Novotown project in Hengqin, subject to the acquisition of the land for Phase II. Discussions between the Group and the Hengqin government regarding the land concession and the Phase II development of the Novotown are ongoing.

The remaining residential units in Zhongshan Palm Spring and the cultural studios of Hengqin Novotown Phase I are expected to contribute to the income of the Group in the coming financial years. The Group will continue its prudent and flexible approach in growing its landbank.

– VI-2 –

APPENDIX VI MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

Set out below is the expected growth of the rental portfolio of the Group and the pipeline of development projects of the Group as at 31 January 2018:

==> picture [62 x 7] intentionally omitted <==

----- Start of picture text -----

Rental Portfolio
----- End of picture text -----

==> picture [422 x 200] intentionally omitted <==

----- Start of picture text -----

FY 2019 FY 2021 FY 2022
Properties to be Properties to be Properties to be
added: added: added:
Hengqin Haizhu Plaza Northgate Plaza
Novotown redevelopment
Phase I project
6,604
5,910
5,307 5,307 694
603
3,269 3,269 2,038
5,910
5,307 5,307
3,269 3,269 3,269
31 January 2018 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
Existing Newly completed rental properties to be added
Attributable rental GFA (’000 sq.ft.)
----- End of picture text -----

==> picture [422 x 205] intentionally omitted <==

----- Start of picture text -----

For-sale Projects
FY 2018 FY 2019 FY 2021 FY 2023
Completion: Completion: Completion: Completion:
Cultural studios Cultural studios Palm Spring Palm Spring
of Hengqin of Hengqin Phase III Phase IV
Novotown Novotown
Phase I (part) Phase I (part)
Shanghai Wuli
Bridge project
1,576
512 523
158 122
31 January 2018 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023
Attributable saleable GFA (’000 sq.ft.)
----- End of picture text -----*

Excluding commercial portion of the Zhongshan Palm Spring for self-use.

The share consolidation on a 1-for-50 basis (“ Share Consolidation ”) and change in board lot size from 20,000 shares to 400 shares announced by the Group on 18 July 2017 is effective from 15 August 2017. It is hoped that this will make investing in the shares of the Group more attractive to a broader range of investors, in particular to institutional investors whose house rules might otherwise prohibit or restrict trading in securities that are priced below a prescribed floor and thus help to further broaden the shareholder base of the Company.

– VI-3 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

As at 31 January 2018, the Group has a landbank of 5.7 million square feet. The Group’s strong cash position of HK$5,040.0 million of cash on hand and undrawn facilities of HK$4,473.6 million with a net debt to equity ratio of 26% as at 31 January 2018 provides the Group with full confidence and the means to review opportunities more actively. The financial liquidity of the Group has been bolstered by the US$350 million guaranteed notes issued in January 2018 which is listed on the Stock Exchange of Hong Kong Limited. The proceeds from this guaranteed notes will help to refinance the CNY1,800 million fixed rate senior notes issued by the Company in 2013 which will mature in April 2018. However, the Group will continue its prudent and flexible approach in growing the landbank and managing its financial position.

Overview of Interim Results

For the six months ended 31 January 2018, the Group recorded a turnover of HK$509.4 million (2017: HK$479.0 million) and a gross profit of HK$345.7 million (2017: HK$340.4 million), representing an increase of approximately 6.3% and 1.6%, respectively over the same period last year. The average Renminbi exchange rate for the period under review appreciated by approximately 3.9% over the same period last year. Excluding the effect of currency translation, the increase in Renminbi denominated turnover was 2.4%. Set out below is the turnover by segment:

Rental income Sales of properties Total:	For the six months ended 31 January 2018 2017 % (HK$ million) (HK$ million) change** 379.5 345.8 9.7% 129.9 133.2 -2.5% 509.4 479.0 6.3%	For the six months ended 31 January 2018 2017 % (RMB million) (RMB million) change 320.1 303.0 5.6% 109.5 116.7 -6.2% 429.6 419.7 2.4%	For the six months ended 31 January 2018 2017 % (RMB million) (RMB million) change 320.1 303.0 5.6% 109.5 116.7 -6.2% 429.6 419.7 2.4%
			2.4%

The exchange rates adopted for the six months ended 31 January 2018 and 2017 are 0.8433 and 0.8762, respectively

Net profit attributable to owners of the Company was approximately HK$358.9 million (2017: HK$336.4 million), representing an increase of approximately 6.7% over the same period last year. The increase is due to a mix of: i) higher revaluation gain arising from the revaluation of the Group’s investment properties for the six months ended 31 January 2018 as compared to the same period last year; and ii) decreased profit contribution from the sales of Guangzhou Dolce Vita, the joint venture project with CapitaLand China Holdings Pte Ltd (“ CapitaLand China ”) as compared to the same period last year, which has been substantially sold and is recognised as a component of “Share of profits of joint ventures” in the condensed consolidated income statement.

Basic earnings per share was HK$1.102 (2017 (adjusted): HK$1.038).

– VI-4 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Excluding the effect of property revaluations, net profit attributable to owners of the Company was approximately HK$132.7 million (2017: HK$246.3 million), representing a decrease of approximately 46.1% over the same period last year. Basic earnings per share excluding the effect of property revaluations decreased to HK$0.4075 (2017 (adjusted): HK$0.7597).

Adjustment has been made to the weighted average number of issued shares of the Company for the six months ended 31 January 2017 for the calculations of basic earnings per share and adjusted basic earnings per share as above due to the Share Consolidation of the Company being effective on 15 August 2017.

Proft attributable to owners of the Company (HK$ million) Reported Adjustments in respect of investment properties Revaluation of properties Deferred tax on investment properties Non-controlling interests’ share of revaluation movements less deferred tax Net proft after tax excluding revaluation gains of investment properties	Six months ended 31 January 2018 2017 358.9 336.4 (351.2) (124.0) 87.8 31.0 37.2 2.9 132.7 246.3

Net assets attributable to owners of the Company as at 31 January 2018 amounted to HK$16,130.4 million (31 July 2017: HK$14,584.1 million). The increase is primarily due to increase in exchange fluctuation reserve arising from RMB appreciation during the period under review. Net asset value per share attributable to owners of the Company increased to HK$49.32 per share as at 31 January 2018 from HK$44.78 per share (adjusted) as at 31 July 2017. Adjustment has been made to the total number of issued shares of the Company as at 31 July 2017 due to the Share Consolidation of the Company being effective on 15 August 2017.

– VI-5 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Property Portfolio Composition

Approximate attributable GFA (in ’000 square feet) and number of car-parking spaces as at 31 January 2018:

Commercial/ Retail Completed Properties Held for Rental 1 1,623 Completed Hotel Properties and Serviced Apartments — Properties under Development 2 1,100 Completed Properties Held for Sale 66 3 Total GFA of major properties of the Group 2,789	Offce 1,048 — 1,740 — 2,788	Serviced apartments — 598 821 — 1,419	Total (excluding car-parking spaces & No. of ancillary car-parking Residential facilities) spaces — 2,671 799 — 598 — 2,052 5,713 4,380 500 566 2,234 2,552 9,548 7,413	Total (excluding car-parking spaces & No. of ancillary car-parking Residential facilities) spaces — 2,671 799 — 598 — 2,052 5,713 4,380 500 566 2,234 2,552 9,548 7,413
				7,413

Completed and rental generating properties
All properties under construction
Completed properties for sale, including 53,223 square feet of commercial space in Zhongshan Palm Spring Rainbow Mall which is currently for self-use.

– VI-6 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Property Investment

Rental Income

For the six months ended 31 January 2018, the Group’s rental operations recorded a turnover of HK$379.5 million (2017: HK$345.8 million), representing a 9.7% increase over the same period last year. Excluding the effect of currency translation, the growth for Renminbi denominated rental income was 5.6%. Breakdown of rental turnover by major rental properties is as follows:

Six months ended 31 January 2018 # 2017 # % (HK$ million) (HK$ million) Change Shanghai Shanghai Hong Kong Plaza 206.3 201.3 2.5 Shanghai May Flower Plaza 38.8 37.8 2.6 Shanghai Regents Park 12.4 7.0 77.1 Guangzhou Guangzhou May Flower Plaza 55.0 55.8 -1.4 Guangzhou West Point 9.9 9.1 8.8 Guangzhou Lai Fung Tower 51.9 30.3 71.3 Zhongshan Zhongshan Palm Spring 5.2 4.5 15.6 Total: 379.5 345.8 9.7	Six months ended 31 January 2018 2017 % Period end (RMB million) (RMB million) Change occupancy(%) 174.0 176.4 -1.4 Retail: 93.7% Offce: 93.4% Serviced Apartments: 80.7% 32.7 33.1 -1.2 Retail: 100.0% Hotel: 69.9% 10.5 6.1 72.1 100.0% 46.4 48.9 -5.1 99.2% 8.3 8.0 3.8 98.8% 43.8 26.5 65.3 Retail: 100.0% Offce: 100.0% 4.4 4.0 10.0 Retail: 86.0% Serviced Apartments: 49.6% 320.1 303.0 5.6	Six months ended 31 January 2018 2017 % Period end (RMB million) (RMB million) Change occupancy(%) 174.0 176.4 -1.4 Retail: 93.7% Offce: 93.4% Serviced Apartments: 80.7% 32.7 33.1 -1.2 Retail: 100.0% Hotel: 69.9% 10.5 6.1 72.1 100.0% 46.4 48.9 -5.1 99.2% 8.3 8.0 3.8 98.8% 43.8 26.5 65.3 Retail: 100.0% Offce: 100.0% 4.4 4.0 10.0 Retail: 86.0% Serviced Apartments: 49.6% 320.1 303.0 5.6
	2018 (RMB million) 174.0 32.7 10.5 46.4 8.3 43.8 4.4 320.1	2017 (RMB million) 176.4 33.1 6.1 48.9 8.0 26.5 4.0 303.0

The exchange rates adopted for the six months ended 31 January 2018 and 2017 are 0.8433 and 0.8762, respectively

Excluding self-use area

– VI-7 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Breakdown of turnover by usage of our major rental properties is as follows:

	Six months	ended 31 January	2018	Six months	ended 31 January	2017
			Attributable			Attributable
	Group	Turnover	GFA	Group	Turnover	GFA
	interest	(HK$ million)	(square feet)	interest	(HK$ million)	(square feet)
Shanghai
Shanghai Hong Kong Plaza	100%			100%
Retail Offce		90.4 50.0	468,434 362,096		91.8 48.2	468,434 360,687
Serviced Apartments
(room revenue and F&B)		62.0	355,267		58.1	355,267
Car-parking Spaces		3.9	N/A		3.2	N/A
		206.3	1,185,797		201.3	1,184,388
Shanghai May Flower Plaza	100%			100%
Retail		17.3	320,314		17.6	320,314
Hotel
(room revenue and F&B)		19.4	143,846		18.3	143,846
Car-parking Spaces		2.1	N/A		1.9	N/A
		38.8	464,160		37.8	464,160
Shanghai Regents Park	95%			95%
Retail		10.3	77,959		5.5	77,959
Car-parking Spaces		2.1	N/A		1.5	N/A
		12.4	77,959		7.0	77,959
Guangzhou
Guangzhou May Flower Plaza	100%			100%
Retail Offce		47.8 5.7	357,424 79,431		48.8 5.3	357,424 79,431
Car-parking Spaces		1.5	N/A		1.7	N/A
		55.0	436,855		55.8	436,855
Guangzhou West Point	100%			100%
Retail		9.9	171,968		9.1	171,968
Guangzhou Lai Fung Tower	100%			100%
Retail Offce		6.3 42.7	99,399 606,495		4.6 24.7	100,701 525,463
Car-parking Spaces		2.9	N/A		1.0	N/A
		51.9	705,894		30.3	626,164
Zhongshan
Zhongshan Palm Spring	100%			100%
Retail*		2.1	127,884		2.0	112,124
Serviced Apartments
(room revenue)		3.1	98,556		2.5	98,556
		5.2	226,440		4.5	210,680
Total:		379.5	3,269,073		345.8	3,172,174

Excluding self-use area

– VI-8 –

APPENDIX VI MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

Rental income performed steadily as a whole with almost full occupancy in all the major properties. The strong growth from Guangzhou Lai Fung Tower is primarily due to its being fully leased during the period under review.

The asset swap transaction with Guangzhou Light Industry Real Estate Limited (“ Guangzhou Light Industry ”) as announced on 15 January 2015 in relation to Guangzhou Lai Fung Tower, the office block of Guangzhou Eastern Place Phase V, was completed in August 2017. This enables the Group to consolidate its ownership of Guangzhou Lai Fung Tower completely and provide additional flexibility and strategic value to the Group. The total GFA of this property owned by the Group increased to approximately 705,900 square feet excluding car-parking spaces from that of approximately 626,700 square feet as at 31 July 2017 and the commercial area and the office building of this property excluding self-use area have been fully leased.

Review of Major Rental Properties

Shanghai Hong Kong Plaza

Shanghai Hong Kong Plaza is a twin-tower property located on both the North and South sides of the street at a prime location on Huaihaizhong Road in Huangpu District, Shanghai. The twin-towers are connected by a footbridge.

The property’s total GFA is approximately 1.19 million square feet excluding 350 car-parking spaces. The property comprises an office tower, shopping arcades and a serviced apartment tower with total GFA of approximately 362,100 square feet, 468,400 square feet and 355,300 square feet, respectively. The property is directly above the Huangpi South Road Metro Station and is within walking distance of Xintiandi, a well-known landmark in Shanghai. The shopping arcades are now one of the most visible high-end retail venues for global luxury brands in the area. Anchor tenants include The Apple Store, Cartier, Coach, GAP, Tiffany and internationally renowned luxury brands and a wide array of dining options.

The serviced apartments are managed by the Ascott Group and the Group has successfully leveraged the Ascott Group’s extensive experience and expertise in operating serviced apartments to position the serviced apartments as a high-end product.

The Group owns 100% of this property.

Shanghai May Flower Plaza

Shanghai May Flower Plaza is a mixed-use project located at the junction of Da Tong Road and Zhi Jiang Xi Road in Su Jia Xiang in the Jing’an District in Shanghai. This project is situated near the Zhongshan Road North Metro Station.

The Group owns 100% in the retail podium which has approximately 320,300 square feet of GFA including the basement commercial area. The asset is positioned as a community retail facility.

– VI-9 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Guangzhou May Flower Plaza

Guangzhou May Flower Plaza is a prime property situated at Zhongshanwu Road, Yuexiu District directly above the Gongyuanqian Metro Station in Guangzhou, the interchange station of Guangzhou Subway Lines No. 1 and 2. This 13-storey complex has a total GFA of approximately 436,900 square feet excluding 136 car-parking spaces.

The building comprises of retail spaces, restaurants, office units and car-parking spaces. The property is almost fully leased to tenants comprising well-known corporations, consumer brands and restaurants.

The Group owns 100% of this property.

Guangzhou West Point

Guangzhou West Point is located on Zhongshan Qi Road and is within walking distance from the Ximenkou Subway Station. This is a mixed-use property where the Group has sold all the residential and office units and retained a commercial podium with GFA of approximately 172,000 square feet. Tenants of the retail podium include renowned restaurants and local retail brands.

Guangzhou Lai Fung Tower

The asset swap transaction with Guangzhou Light Industry as announced on 15 January 2015 was completed in August 2017. The total GFA of this property owned by the Group increased to approximately 705,900 square feet excluding car-parking spaces from that of approximately 626,700 square feet as at 31 July 2017 and the commercial area and the office building of this property excluding self-use area have been fully leased.

Zhongshan Palm Spring Rainbow Mall

Zhongshan Palm Spring Rainbow Mall is the commercial element of the Group’s whollyowned residential project, Zhongshan Palm Spring. Zhongshan Palm Spring is located in Caihong Planning Area, Western District of Zhongshan. It has a total GFA of approximately 181,100 square feet and excluding self-use area, the occupancy rate as at period end was approximately 86.0%.

– VI-10 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Hotel and Serviced Apartments

Ascott Huaihai Road Shanghai

Ascott Huaihai Road in Shanghai Hong Kong Plaza is managed by the Ascott Group and it is one of a premier collection of the Ascott Limited’s serviced residences in over 70 cities in Asia Pacific, Europe and the Gulf region. The residence with total GFA of approximately 357,000 square feet and approximately 355,300 square feet GFA attributable to the Group has 308 contemporary apartments of various sizes: studios (640-750 sq.ft.), one-bedroom apartments (915-1,180 sq.ft.), two-bedroom apartments (1,720 sq.ft.), three-bedroom apartments (2,370 sq.ft.) and two luxurious penthouses on the highest two floors (4,520 sq.ft.). An average occupancy rate of 86.9% was achieved during the period under review and the average room tariff was approximately HK$1,221.

STARR Hotel Shanghai

STARR Hotel Shanghai is a 17-storey hotel located in the Mayflower Lifestyle complex in Jing’an District, within walking distance to Lines 1, 3 and 4 of the Shanghai Metro Station with easy access to major motorways. There are 239 fully furnished and equipped hotel units with stylish separate living room, bedroom, fully-equipped kitchenette and luxurious bathroom amenities for short or extended stays to meet the needs of the business travelers from around the world and the total GFA is approximately 143,800 square feet. The GFA attributable to the Group is approximately 143,800 square feet. An average occupancy rate of 78.6% was achieved during the period under review and the average room tariff was approximately HK$537.

STARR Resort Residence Zhongshan

STARR Resort Residence Zhongshan comprises two 16-storey blocks located in the Palm Lifestyle complex in Zhongshan Western District at Cui Sha Road. It is 30 minutes away from Zhongshan ferry pier and an ideal place for weekend breaks with a wide range of family oriented facilities such as an outdoor Swimming Pool, Gym, Yoga Room, Reading Room, Wine Club, Card Game/Mahjong Room, Tennis Court, etc. There are 90 fully furnished serviced apartment units with kitchenette, unit type: one- and two-bedroom suite and the total GFA is approximately 98,600 square feet. The resort also has an F&B outlet of 80 seats, suitable for private party and BBQ, etc. An average occupancy rate of 56.4% was achieved during the period under review and the average room tariff was approximately HK$370.

– VI-11 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Property Development

Recognised Sales

For the six months ended 31 January 2018, the Group’s property development operations recorded a turnover of HK$129.9 million (2017: HK$133.2 million) from sale of properties, representing a 2.5% decrease in sales revenue over the same period last year. Total recognised sales was primarily driven by the sales performance of residential units of Zhongshan Palm Spring.

– VI-12 –

APPENDIX VI MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

Breakdown of turnover for the six months ended 31 January 2018 from property sales is as follows:

No. of Recognised basis units Guangzhou Eastern Place Residential Units — Phase V 2 Zhongshan Palm Spring Residential High-rise Units 69 Others Subtotal 71 Guangzhou Eastern Place Car-parking Spaces 19 Guangzhou King’s Park Car-parking Spaces 4 Total Recognised sales from joint venture project Guangzhou Dolce Vita Residential Units (47.5% basis) 40 Retail Units(47.5% basis) — Subtotal 40 Car-parking Spaces (47.5% basis) 39 Total**	Approximate Average GFA selling price # (square feet) (HK$/square foot) 2,460 6,435 83,629 1,131 86,089 1,282 85,278 3,460 665 5,365 85,943 3,474	Turnover (HK$ million ##) (RMB million) 14.9 12.5 90.1 76.0 0.5 0.4 105.5 88.9 21.3 18.0 3.1 2.6 129.9 109.5 277.4 233.9 3.3 2.8 280.7 236.7 13.6 11.5 294.3 248.2*	Turnover (HK$ million ##) (RMB million) 14.9 12.5 90.1 76.0 0.5 0.4 105.5 88.9 21.3 18.0 3.1 2.6 129.9 109.5 277.4 233.9 3.3 2.8 280.7 236.7 13.6 11.5 294.3 248.2*
			88.9

			18.0 2.6
			109.5

			233.9 2.8
			236.7

			11.5
			248.2

Before business tax and value-added tax inclusive
The exchange rate adopted for the six months ended 31 January 2018 is 0.8433
After business tax and value-added tax exclusive
** Guangzhou Dolce Vita is a joint venture project with CapitaLand China in which each of the Group and CapitaLand China has an effective 47.5% interest. For the six months ended 31 January 2018, the recognised sales (after business tax and value-added tax exclusive) attributable to the project on 100% basis is HK$591.0 million (excluding car-parking spaces) and approximately 180,932 square feet (excluding carparking spaces) of GFA were recognised. The recognised sales from car-parking spaces attributable to the project on 100% basis is HK$28.7 million.

– VI-13 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Contracted Sales

As at 31 January 2018, the Group’s property development operations, excluding Guangzhou Dolce Vita, has contracted but not yet recognised sales of HK$35.9 million and HK$3.2 million from sales of residential units in Guangzhou Eastern Place Phase V and Zhongshan Palm Spring, respectively and HK$6.3 million from sales of car-parking spaces in Guangzhou Eastern Place and Guangzhou King’s Park. Sales of the remainder of the completed residential units of Guangzhou Eastern Place Phase V and Zhongshan Palm Spring were strong and achieved an average selling price of HK$7,092 and HK$1,225 per square foot, respectively. Excluding the effect of currency translation, the Renminbi denominated contracted but not yet recognised sales of residential units and car-parking spaces, excluding Guangzhou Dolce Vita as at 31 January 2018 amounted to RMB38.3 million (31 July 2017: RMB125.7 million).

The total contracted but not yet recognised sales of the Group as at 31 January 2018 including Guangzhou Dolce Vita and car-parking spaces amounted to HK$79.9 million (31 July 2017: HK$402.8 million). The Renminbi denominated contracted but not yet recognised sales of residential units and car-parking spaces, including Guangzhou Dolce Vita as at 31 January 2018 amounted to RMB67.4 million (31 July 2017: RMB353.6 million).

– VI-14 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Breakdown of contracted but not yet recognised sales as at 31 January 2018 is as follows:

No. of Contracted basis units Guangzhou Eastern Place Residential Units — Phase V 5 Zhongshan Palm Spring Residential High-rise Units 2 Subtotal 7 Guangzhou Eastern Place Car-parking Spaces 4 Guangzhou King’s Park Car-parking Spaces 2 Subtotal Contracted sales from joint venture project Guangzhou Dolce Vita Residential Units (47.5% basis) 2 Car-parking Spaces (47.5% basis) 2 Subtotal Total (excluding car-parking spaces) 9	Approximate Average GFA selling price # (square feet) (HK$/square foot) 5,062 7,092 2,613 1,225 7,675 5,094 7,010 4,822 14,685 4,964	Turnover # (HK$ million ##) (RMB million) 35.9 30.3 3.2 2.7 39.1 33.0 4.7 4.0 1.6 1.3 45.4 38.3 33.8 28.5 0.7 0.6 34.5 29.1 72.9 61.5	Turnover # (HK$ million ##) (RMB million) 35.9 30.3 3.2 2.7 39.1 33.0 4.7 4.0 1.6 1.3 45.4 38.3 33.8 28.5 0.7 0.6 34.5 29.1 72.9 61.5
			33.0

			4.0 1.3
			38.3

			28.5 0.6
			29.1
			61.5

Before business tax and value-added tax inclusive

The exchange rate adopted for the six months ended 31 January 2018 is 0.8433

** Guangzhou Dolce Vita is a joint venture project with CapitaLand China in which each of the Group and CapitaLand China has an effective 47.5% interest. As at 31 January 2018, the contracted but not yet recognised sales attributable to the project on 100% basis is HK$71.1 million (excluding car-parking spaces) and approximately 14,757 square feet of GFA (excluding car-parking spaces) were sold. The contracted but not yet recognised sales from car-parking spaces attributable to the project on 100% basis is HK$1.5 million.

– VI-15 –

APPENDIX VI MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

Review of Major Properties Completed for Sale and under Development

Shanghai Northgate Plaza redevelopment project

Shanghai Northgate Plaza I is located on Tian Mu Road West in the Jing’an District of Shanghai near the Shanghai Railway Terminal and comprises office units, a retail podium and car-parking spaces. Shanghai Northgate Plaza II is a vacant site adjacent to Northgate Plaza I. In September 2016, the Group completed the acquisition of the 6th to 11th floors of Hui Gong Building which is physically connected to Northgate Plaza I, together with the right to use 20 car-parking spaces in the basement. The Group plans to redevelop Shanghai Northgate Plaza I, Northgate Plaza II and the Hui Gong Building together under a comprehensive redevelopment plan which includes an office tower, a shopping arcade and underground car-parking spaces and is expected to add a total GFA of approximately 693,600 square feet excluding car-parking spaces to the rental portfolio of the Group. Demolition of Northgate Plaza I and Hui Gong Building was completed in May 2017 and foundation works commenced in September 2017. This project is expected to complete in the third quarter of 2021.

Shanghai May Flower Plaza

Shanghai May Flower Plaza is a completed mixed-use project located at the junction of Da Tong Road and Zhi Jiang Xi Road in Su Jia Xiang in the Jing’an District in Shanghai and situated near the Zhongshan Road North Metro Station.

The residential portion of Shanghai May Flower Plaza is branded “The Mid-town” which comprises 628 residential units and approximately 627,500 square feet of GFA. As of 31 January 2018, 458 car-parking spaces of this development remained unsold with a carrying amount of approximately HK$110.9 million.

Shanghai Wuli Bridge Project

In July 2014, the Group succeeded in the auction for the land use rights of a piece of land located by Huangpu River in Huangpu District in Shanghai with a site area of approximately 74,100 square feet. The proposed development has attributable GFA of approximately 83,700 square feet and is intended to be developed into a high end luxury residential project. Construction works commenced in August 2017. This project is expected to complete in the first quarter of 2019.

Guangzhou Eastern Place Phase V

Guangzhou Eastern Place is a multi-phase project located on Dongfeng East Road, Yuexiu District, Guangzhou. Phase V has a total GFA of approximately 1,025,300 square feet, comprising two residential blocks (GFA 319,400 square feet approximately), an office block and ancillary retail spaces (GFA 705,900 square feet approximately). Construction work of residential blocks was completed during the year ended 31 July 2015 and the office block was completed in June 2016.

– VI-16 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

The residential portion of the Guangzhou Eastern Place Phase V comprised of 317 units. For the six months ended 31 January 2018, 2,460 square feet was recognised at an average selling price of HK$6,435 per square foot, which contributed HK$14.9 million to the turnover. As at 31 January 2018, completed residential units held for sale in this development amounted to approximately 5,062 square feet with a carrying amount of approximately HK$14.2 million.

Guangzhou Dolce Vita

The Guangzhou Dolce Vita is a joint venture project with CapitaLand China in which each of the Group and CapitaLand China has a 47.5% interest. This development in Jinshazhou, Hengsha, Baiyun District, Guangzhou has a total project GFA of approximately 5.459 million square feet. The project comprises of approximately 2,796 low-rise and high-rise residential units and shopping amenities totaling 3.833 million square feet excluding ancillary facilities and car-parking spaces. It is conveniently located near the business centre of Jinshazhou as well as several shopping and entertainment areas and is easily accessible via Guangzhou Subway Line 6 and other transport modes. Praised as the model metropolis for Guangzhou and Foshan, Jinshazhou is located in northwest Guangzhou.

During the period under review, 85,943 square feet attributable to the Group was recognised and generated attributable sale proceeds of HK$280.7 million. As at 31 January 2018, contracted but not yet recognised sales excluding car-parking spaces amounted to HK$33.8 million at average selling prices of HK$4,822 per square foot. Construction of this project has been completed.

Guangzhou King’s Park

This is a high-end residential development located on Donghua Dong Road in Yuexiu District. The attributable GFA is approximately 98,300 square feet excluding 57 car-parking spaces and ancillary facilities. The project was launched for sale in January 2014.

During the period under review, the sales of 4 car-parking spaces contributed HK$3.1 million to the turnover. As at 31 January 2018, the contracted but not yet recognised sales of the 2 carparking spaces amounted to approximately HK$1.6 million.

Guangzhou Haizhu Plaza

Guangzhou Haizhu Plaza is located on Chang Di Main Road in Yuexiu District, Guangzhou along the Pearl River. The Group owns the entire project. The proposed development has a total project GFA of approximately 602,800 square feet and is intended to be developed for rental purposes. The completion is expected to be in the first half of 2021.

– VI-17 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Zhongshan Palm Spring

The project is located in Caihong Planning Area, Western District of Zhongshan. The overall development has a total planned GFA of approximately 6.075 million square feet. The project will comprise of high-rise residential towers, townhouses, serviced apartments and commercial blocks totaling 4.466 million square feet.

During the period under review, 83,629 square feet of high-rise residential units were recognised at average selling prices of HK$1,131 per square foot, which contributed a total of HK$90.1 million to the sales turnover. As at 31 January 2018, contracted but not yet recognised sales for high-rise residential units amounted to HK$3.2 million, at average selling prices of HK$1,225 per square foot. As at 31 January 2018, completed units held for sale in this development amounted to 488,000 square feet with a carrying amount of approximately HK$425.0 million. The remaining GFA under development was approximately 2,099,200 square feet. Set out below is the current expectation on the development of the remaining phases:

		Approximate	Expected
Phase	Description	GFA*	completion
		(square feet)
III	High-rise residential units including commercial units	523,100	Q3 2020
IV	High-rise residential units including commercial units	1,576,100	Q3 2022

Excluding car-parking spaces and ancillary facilities

The Group is closely monitoring the market conditions and will adapt the pace of development accordingly.

Hengqin Novotown

On 25 September 2013, the Company announced it had successfully won Phase I of the Novotown project in Hengqin which is 80% owned by the Group and 20% owned by eSun Holdings Limited. The Phase I of Novotown has a total GFA of 4.2 million square feet including car-parking spaces and ancillary facilities. The minimum investment requirement for the Phase I of Novotown is approximately RMB3.0 billion (equivalent to approximately HK$3.7 billion), of which approximately RMB523.3 million (equivalent to approximately HK$645.9 million) is land cost as per the land grant contract entered into between the Group and The Land and Resources Bureau of Zhuhai on 27 September 2013. The master layout plan for Phase I of Novotown has been approved in January 2015 and construction work commenced at the end of 2015. Completion is expected to be in the fourth quarter of 2018.

– VI-18 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

The expected GFA breakdown by usage is set out below:

Usage	GFA(square feet)
Cultural themed hotel	596,727
Cultural workshop	429,641
Cultural commercial area	523,843
Performance halls	167,982
Cultural attractions	286,247
Offce	542,447
Cultural studios (for sale)	244,936
Car-parking spaces	582,827
Ancillary facilities and others	844,817
Total:	4,219,467

Hyatt group was engaged as the manager for the cultural themed hotel in March 2015. On 30 October 2015, a licensing agreement was entered into with Lionsgate LBE, Inc. for the development and operation of the Lionsgate Entertainment World[TM] in one of the two performance halls in the Phase I of Novotown. Village Roadshow Theme Parks, the world renowned theme park operator with attractions across Australia and America, was appointed in July 2016 to consult during the construction phase, oversee its preopening and to operate the Lionsgate Entertainment World[TM] for a minimum of ten years. The Lionsgate Entertainment World[TM] is expected to feature attractions, retail, and dining experiences themed around Lionsgate’s most captivating global film franchises, including The Hunger Games, The Twilight Saga, The Divergent Series, Now You See Me, Gods of Egypt and Escape Plan.

The Group also entered into licensing agreements on 30 October 2015 with a master license holder of National Geographic Society to develop a family edutainment center called National Geographic Ultimate Explorer, the size of which is expected to be approximately 50,200 square feet, containing 18 individual attractions including rides, F&B facilities, retail premises, virtual reality and/or 4-D interactive experiences, and other types of entertainment and educational attractions.

In June 2017, the Group entered into a cooperation agreement with Trans-Island Limousine Service Limited, a wholly-owned subsidiary of Kwoon Chung Bus Holdings Limited for the development of a cross-border bus service between Hong Kong and Hengqin. The sole and exclusive bus terminus in Hengqin will be located at the Novotown.

In January 2017, the Group entered into a shareholders’ agreement with Sanitas Management Company Limited, which owns the Taipei Beitou Health Management Hospital in Taiwan to form a joint venture company co-developing a healthcare and beauty center in the Phase I of Novotown. This healthcare tourism destination is expected to have an area of approximate 80,000 square feet, providing visitors with comprehensive medical check-ups, beauty consultation and wellness services.

– VI-19 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

In June 2017, the Group entered into a licence agreement with Real Madrid in relation to the development and operation of the Real Madrid LBE in Novotown. In September 2017, the Group entered into a framework agreement with Porsche in relation to the development and operation of Porsche City in Novotown. In November 2017, the Group entered into a cooperation agreement with Harrow International (China) Management Services Limited and ILA Holdings Limited bringing Harrow International China Group, the world’s leading learning institution, to set up ILA Hengqin in Hengqin. Real Madrid LBE, the Porsche City and the ILA Hengqin are planned to be launched in Phase II of the Novotown project in Hengqin, subject to the acquisition of the land for Phase II. Discussions between the Group and the Hengqin government regarding the land concession and the Phase II development of the Novotown are ongoing.

Capital Structure, Liquidity and Debt Maturity Profile

As at 31 January 2018, cash and bank balances held by the Group amounted to HK$5,040.0 million and undrawn facilities of the Group was HK$4,473.6 million.

As at 31 January 2018, the Group had total borrowings amounting to HK$9,279.6 million (as at 31 July 2017: HK$6,091.4 million), representing an increase of HK$3,188.2 million from 31 July 2017. The consolidated net assets attributable to the owners of the Company amounted to HK$16,130.4 million (as at 31 July 2017: HK$14,584.1 million). The gearing ratio, being net debt (total borrowings less cash and bank balances) to net assets attributable to the owners of the Company was approximately 26% (as at 31 July 2017: 24%). The maturity profile of the Group’s borrowings of HK$9,279.6 million is well spread with HK$2,468.1 million repayable within 1 year, HK$1,357.3 million repayable in the second year, HK$5,285.0 million repayable in the third to fifth years and HK$169.2 million repayable beyond the fifth year.

Approximately 63% and 34% of the Group’s borrowings were on a fixed rate basis and floating rate basis, respectively, and the remaining 3% of the Group’s borrowings were interest free.

Apart from the fixed rate senior notes and guaranteed notes, the Group’s other borrowings of HK$4,347.0 million were 60% denominated in Renminbi (“ RMB ”), 29% in Hong Kong dollars (“ HKD ”) and 11% in United States Dollars (“ USD ”).

The Group’s fixed rate senior notes of HK$2,219.7 million were denominated in RMB. The Group has entered into cross currency swap agreements with financial institutions for the purpose of hedging the foreign currency risk arising from such notes. Accordingly, the fixed rate notes have been effectively converted into USD denominated debts. The Group’s guaranteed notes of HK$2,712.9 million were denominated in USD. The Group has entered into cross currency swap agreements with financial institutions and the guaranteed notes have been effectively converted into HKD denominated debts.

The Group’s cash and bank balances of HK$5,040.0 million were 45% denominated in RMB, 6% in HKD and 49% in USD.

– VI-20 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

The Group’s presentation currency is denominated in HKD. The Group’s monetary assets, liabilities and transactions are principally denominated in RMB, USD and HKD. The Group, with HKD as its presentation currency, is exposed to foreign currency risk arising from the exposure of HKD against USD and RMB, respectively. Considering that HKD is pegged against USD, the Group believes that the corresponding exposure to USD exchange rate fluctuation is nominal. However, the Group has a net exchange exposure to RMB as the Group’s assets are principally located in China and the revenues are predominantly in RMB. Apart from the aforesaid cross currency swap arrangements, the Group does not have any derivative financial instruments or hedging instruments outstanding.

Certain assets of the Group have been pledged to secure borrowings of the Group, including investment properties with a total carrying amount of approximately HK$11,673.0 million, properties under development with a total carrying amount of approximately HK$1,333.6 million, serviced apartments and related properties with a total carrying amount of approximately HK$507.2 million, construction in progress with a total carrying amount of approximately HK$754.1 million and bank balances of approximately HK$555.2 million.

Taking into account the amount of cash being held as at the end of the reporting period, the available banking facilities and the recurring cash flows from the Group’s operating activities, the Group believes that it would have sufficient liquidity to finance its existing property development and investment projects.

Contingent Liabilities

There has been no material change in contingent liabilities of the Group since 31 July 2017.

Employees and Remuneration Policies

As at 31 January 2018, the Group employed a total of around 1,300 employees. The Group recognises the importance of maintaining a stable staff force in its continued success. Under the Group’s existing policies, employee pay rates are maintained at competitive levels whilst promotion and salary increments are assessed on a performance-related basis. Discretionary bonuses are granted to employees based on their merit and in accordance with industry practice. Other benefits including share option scheme, mandatory provident fund scheme, free hospitalisation insurance plan, subsidised medical care and sponsorship for external education and training programmes are offered to eligible employees.

– VI-21 –

APPENDIX VI MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

B. MANAGEMENT DISCUSSION AND ANALYSIS ON THE LAI FUNG GROUP FOR THE YEAR ENDED 31 JULY 2017 (AND AS COMPARED TO THE YEAR ENDED 31 JULY 2016)

Overview

Despite the challenging operating environment during the year under review, the business delivered an encouraging set of results underpinned by the steady and growing recurrent rental income base from investment properties of the Group.

Property Portfolio Composition

Approximate attributable GFA (in ’000 square feet) and number of car-parking spaces as at 31 July 2017:

Commercial/ Retail Completed Properties Held for Rental 1 1,625 Completed Hotel Properties and Serviced Apartments — Properties under Development 2 1,109 Completed Properties Held for Sale 63 3 Total GFA of major properties of the Group 2,797	Serviced Offce Apartments 967 — — 598 1,745 821 77 — 2,789 1,419	Total (excluding car-parking spaces & No. of ancillary car-parking Residential facilities) spaces — 2,592 799 — 598 — 2,051 5,726 4,402 671 811 2,319 2,722 9,727 7,520	Total (excluding car-parking spaces & No. of ancillary car-parking Residential facilities) spaces — 2,592 799 — 598 — 2,051 5,726 4,402 671 811 2,319 2,722 9,727 7,520
			7,520

Completed and rental generating properties
All properties under construction
Completed properties for sale, including 53,223 square feet of commercial space in Zhongshan Palm Spring which is currently for self-use and expected to be reclassified as completed properties held for rental purpose as it is being leased out over time.

– VI-22 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Property Investment

Rental Income

For the year ended 31 July 2017, the Group’s rental operations recorded a turnover of HK$702.1 million (2016: HK$629.4 million), representing an 11.6% increase over last year. Excluding the effect of currency translation against a depreciated Renminbi, the growth for Renminbi denominated rental income was 17.0%. Breakdown of rental turnover by major rental properties is as follows:

Shanghai Shanghai Hong Kong Plaza Shanghai May Flower Plaza Shanghai Regents Park Shanghai Northgate Plaza I Guangzhou Guangzhou May Flower Plaza Guangzhou West Point Guangzhou Lai Fung Tower Zhongshan Zhongshan Palm Spring Total:	For the year ended 31	For the year ended 31	July % Change 0.3 5.6 39.9 -100.0 -3.7 7.0 1,108.1 10.4 11.6	For the year ended 31	For the year ended 31	July % Year end Change occupancy(%) 5.2 Retail: 95.2% Offce: 91.8% Serviced Apartments: 85.3% 10.9 Retail: 100.0% Hotel: 81.6% 45.8 100.0% -100.0 0.0% 1.1 99.2% 11.8 99.6% 1,163.5 Retail: 100.0% Offce: 100.0% 17.2 Retail: 86.4%** Serviced Apartments: 56.9% 17.0
	2017 # (HK$ million) 399.4 75.4 20.0 — 105.5 18.4 74.9 8.5 702.1	2016 # (HK$ million) 398.2 71.4 14.3 4.9 109.5 17.2 6.2 7.7 629.4		2017 (RMB million) 350.6 66.2 17.5 — 92.6 16.1 65.7 7.5 616.2	2016 (RMB million) 333.2 59.7 12.0 4.1 91.6 14.4 5.2 6.4 526.6

The exchange rates adopted for the years ended 31 July 2017 and 2016 are 0.8777 and 0.8367, respectively

All tenants were vacated for project redevelopment and demolition has been completed in May 2017

** Excluding the office area that is subject to the asset swap transaction as announced by the Company on 15 January 2015 and the asset swap transaction has been completed in August 2017

*** Excluding self-use area

– VI-23 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Breakdown of turnover by usage of our major rental properties is as follows:

	For the year ended 31 July	For the year ended 31 July	2017	For the year ended 31 July	For the year ended 31 July	2016
			Attributable			Attributable
	Group	Turnover	GFA	Group	Turnover	GFA
	interest	(HK$ million)	(square feet)	interest	(HK$ million)	(square feet)
Shanghai
Shanghai Hong Kong Plaza	100%			100%
Retail Offce		181.7 93.4	468,434 362,096		175.4 93.0	468,434 360,687
Serviced Apartments
(room revenue and F&B)		117.1	355,267		123.3	354,239
Car-parking spaces		7.2	N/A		6.5	N/A
		399.4	1,185,797		398.2	1,183,360
Shanghai May Flower Plaza	100%			100%
Retail		35.1	320,314		30.1	320,314
Hotel
(room revenue and F&B)		36.6	143,846		38.3	143,846
Car-parking spaces		3.7	N/A		3.0	N/A
		75.4	464,160		71.4	464,160
Shanghai Regents Park	95%			95%
Retail		16.6	77,959		10.7	77,959
Car-parking spaces		3.4	N/A		3.6	N/A
		20.0	77,959		14.3	77,959
Shanghai Northgate Plaza I*	100%			100%
Retail Offce		— —	— —		— 4.7	192,348 130,233
Car-parking spaces		—	—		0.2	N/A
		—	—		4.9	322,581
Guangzhou
Guangzhou May Flower Plaza	100%			100%
Retail Offce		91.3 10.9	357,424 79,431		94.5 11.4	357,424 79,431
Car-parking spaces		3.3	N/A		3.6	N/A
		105.5	436,855		109.5	436,855
Guangzhou West Point	100%			100%
Retail		18.4	171,968		17.2	171,968
Guangzhou Lai Fung Tower	100%			100%
Retail Offce		9.4 62.5	101,283 525,463		0.7 5.1	100,341 525,463
Car-parking spaces		3.0	N/A		0.4	N/A
		74.9	626,746		6.2	625,804
Zhongshan
Zhongshan Palm Spring	100%			100%
Retail		3.3	127,884		2.9	112,124
Serviced Apartments
(room revenue)		5.2	98,556		4.8	98,556
		8.5	226,440		7.7	210,680
Total:		702.1	3,189,925		629.4	3,493,367

Demolition of this property has been completed in May 2017 and foundation works for the redevelopment of Shanghai Northgate Plaza I, Northgate Plaza II and Hui Gong Building in Shanghai commenced in September 2017

– VI-24 –

APPENDIX VI MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

Rental income performed steadily as a whole with almost full occupancy in all the major properties. Rental income growth was partially offset by depreciation of Renminbi during the year under review.

The asset swap transaction with Guangzhou Light Industry as announced on 15 January 2015 in relation to Guangzhou Lai Fung Tower, the office block of Guangzhou Eastern Place Phase V, has been completed in August 2017 post year end. This enables the Group to consolidate its ownership of Guangzhou Lai Fung Tower completely and provide additional flexibility and strategic value to the Group. As at the date of this Annual Report, the total GFA of this property owned by the Group increased to approximately 707,800 square feet excluding carparking spaces from that of approximately 626,700 square feet as at 31 July 2017 and the commercial area and the office building of this property have been fully leased.

The acquisition of Hui Gong Building was completed in September 2016. The Group plans to redevelop Shanghai Northgate Plaza I, Northgate Plaza II and the Hui Gong Building together under a comprehensive redevelopment plan which includes an office tower, a shopping arcade and underground car-parking spaces and is expected to add a total GFA of approximately 693,600 square feet excluding car-parking spaces to the rental portfolio of the Group. Demolition of Shanghai Northgate Plaza I and Hui Gong Building has been completed in May 2017 and foundation works commenced in September 2017.

Excluding self-use area of approximately 53,223 square feet, all commercial area of Zhongshan Palm Spring Rainbow Mall has been reclassified as rental properties.

Review of Major Rental Properties

Shanghai Hong Kong Plaza

– VI-25 –

APPENDIX VI MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

The Group owns 100% of this property.

Shanghai May Flower Plaza

The Group owns 100% in the retail podium which has approximately 320,300 square feet of GFA including the basement commercial area. The asset is positioned as a community retail facility.

Guangzhou May Flower Plaza

The Group owns 100% of this property.

Guangzhou West Point

– VI-26 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Guangzhou Lai Fung Tower

The asset swap transaction with Guangzhou Light Industry as announced on 15 January 2015 has been completed in August 2017 post year end. As at the date of this Annual Report, the total GFA of this property owned by the Group increased to approximately 707,800 square feet excluding car-parking spaces from that of approximately 626,700 square feet as at 31 July 2017 and the commercial area and the office building have been fully leased.

Zhongshan Palm Spring Rainbow Mall

Hotel and Serviced Apartments

Ascott Huaihai Road Shanghai

Ascott Huaihai Road in Shanghai Hong Kong Plaza is managed by the Ascott Group and it is one of a premier collection of the Ascott Limited’s serviced residences in over 70 cities in Asia Pacific, Europe and the Gulf region. The residence with total GFA of approximately 357,000 square feet and approximately 355,300 square feet GFA attributable to the Group has 308 contemporary apartments of various sizes: studios (640-750 sq.ft.), one-bedroom apartments (915-1,180 sq.ft.), two-bedroom apartments (1,720 sq.ft.), three-bedroom apartments (2,370 sq.ft.) and two luxurious penthouses on the highest two floors (4,520 sq.ft.). An average occupancy rate of 83.1% was achieved during the year under review and the average room tariff was approximately HK$1,220.

STARR Hotel Shanghai

STARR Hotel Shanghai is a 17-storey hotel located in the Mayflower Lifestyle complex in Jing’an District, within walking distance to Lines 1, 3 and 4 of the Shanghai Metro Station with easy access to major motorways. There are 239 fully furnished and equipped hotel units with stylish separate living room, bedroom, fully-equipped kitchenette and luxurious bathroom amenities for short or extended stays to meet the needs of the business travelers from around the world and the total GFA is approximately 143,800 square feet. The GFA attributable to the Group is approximately 143,800 square feet. An average occupancy rate of 79.1% was achieved during the year under review and the average room tariff was approximately HK$507.

– VI-27 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

STARR Resort Residence Zhongshan

STARR Resort Residence Zhongshan comprises two 16-storey blocks located in the Palm Lifestyle complex in Zhongshan Western District at Cui Sha Road. It is 30 minutes away from Zhongshan ferry pier and an ideal place for weekend breaks with a wide range of family oriented facilities such as an outdoor Swimming Pool, Gym, Yoga Room, Reading Room, Wine Club, Card Game/Mahjong Room, Tennis Court, etc. There are 90 fully furnished serviced apartment units with kitchenette, unit type: one- and two-bedroom suite and the total GFA is approximately 98,600 square feet. The resort also has an F&B outlet of 80 seats, suitable for private party and BBQ, etc. An average occupancy rate of 50.0% was achieved during the period under review and the average room tariff was approximately HK$354.

Property Development

Recognised Sales

For the year ended 31 July 2017, the Group’s property development operations recorded a turnover of HK$624.6 million (2016: HK$1,414.1 million) from sale of properties, representing a 55.8% decrease in sales revenue over last year.

Total recognised sales was primarily driven by the sales performance of residential units of Guangzhou Eastern Place Phase V and Zhongshan Palm Spring of which approximately 21,364 and 641,366 square feet of residential GFA were sold, respectively, achieving sales revenue of HK$129.2 million and HK$485.3 million, respectively.

For the year ended 31 July 2017, average selling price recognised as a whole (excluding Guangzhou Dolce Vita and car-parking spaces) amounted to approximately HK$983 per square foot (2016: HK$4,207 per square foot). Sales of residential units of Guangzhou Dolce Vita performed well and achieved an average selling price of HK$2,584 per square foot (2016: HK$2,915 per square foot). This is recognised as a component of “Share of profits of joint ventures” in the consolidated income statement.

– VI-28 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Breakdown of turnover for the year ended 31 July 2017 from property sales is as follows:

No. of Recognised basis units Guangzhou Eastern Place Residential Units — Phase V 19 Zhongshan Palm Spring Residential High-Rise Units 479 Residential House Units 15 Others Subtotal 513 Guangzhou King’s Park Car-parking Spaces 14 Guangzhou West Point Car-parking Spaces 1 Total Recognised sales from joint venture project Guangzhou Dolce Vita Residential Units (47.5% basis) 514 Retail Units(47.5% basis) 2 Subtotal 516 Car-parking Spaces (47.5% basis) 373 Total**	Approximate Average GFA Selling Price # (Square feet) (HK$/square foot) 21,364 6,481 597,959 743 43,407 1,582 662,730 983 737,122 2,570 2,521 6,521 739,643 2,584	Turnover (HK$ million ##) (RMB million) 129.2 113.4 420.1 368.7 65.2 57.2 0.4 0.4 614.9 539.7 9.0 7.9 0.7 0.6 624.6 548.2 1,794.7 1,575.2 15.6 13.7 1,810.3 1,588.9 122.4 107.4 1,932.7 1,696.3*	Turnover (HK$ million ##) (RMB million) 129.2 113.4 420.1 368.7 65.2 57.2 0.4 0.4 614.9 539.7 9.0 7.9 0.7 0.6 624.6 548.2 1,794.7 1,575.2 15.6 13.7 1,810.3 1,588.9 122.4 107.4 1,932.7 1,696.3*
			368.7 57.2
			0.4
			539.7

			7.9 0.6
			548.2

			1,575.2 13.7
			1,588.9

			107.4
			1,696.3

Before business tax and value-added tax inclusive ## The exchange rate adopted for the year ended 31 July 2017 is 0.8777
After business tax and value-added tax exclusive
** Guangzhou Dolce Vita is a joint venture project with CapitaLand China in which each of the Group and CapitaLand China has an effective 47.5% interest. For the year ended 31 July 2017, the recognised sales (after business tax and value-added tax exclusive) attributable to the full project was HK$3,811.2 million (excluding car-parking spaces) and approximately 1,557,142 square feet (excluding car-parking spaces) of GFA were recognised. The recognised sales from car-parking spaces attributable to the full project was HK$257.7 million.

– VI-29 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Contracted Sales

As at 31 July 2017, the Group’s property development operations, excluding Guangzhou Dolce Vita, has contracted but not yet recognised sales of HK$91.1 million and HK$49.7 million from sales of residential units in Zhongshan Palm Spring and Guangzhou Eastern Place Phase V, respectively and HK$2.3 million from sales of 3 car-parking spaces in Guangzhou King’s Park. Sales of the remainder of the completed residential units of Zhongshan Palm Spring were strong and achieved an average selling price of HK$1,087 per square foot. Excluding the effect of currency translation against a depreciated Renminbi, the Renminbi denominated contracted but not yet recognised sales of residential units and car-parking spaces, excluding Guangzhou Dolce Vita as at 31 July 2017 amounted to RMB125.7 million (31 July 2016: RMB484.4 million).

The total contracted but not yet recognised sales of the Group as at 31 July 2017 including Guangzhou Dolce Vita and car-parking spaces amounted to HK$402.8 million (31 July 2016: HK$2,249.1 million). The Renminbi denominated contracted but not yet recognised sales of residential units and car-parking spaces, including Guangzhou Dolce Vita as at 31 July 2017 amounted to RMB353.6 million (31 July 2016: RMB1,881.8 million).

– VI-30 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Breakdown of contracted but not yet recognised sales as at 31 July 2017 is as follows:

No. of Contracted basis Units Guangzhou Eastern Place Residential Units — Phase V 7 Zhongshan Palm Spring Residential High-rise Units 69 Subtotal 76 Guangzhou King’s Park Car-parking Spaces 3 Subtotal Contracted sales from joint venture project Guangzhou Dolce Vita Residential Units (47.5% basis) 38 Car-parking Spaces (47.5% basis) 9 Subtotal Total (excluding car-parking spaces) 114	Approximate Average GFA Selling Price # (Square feet) (HK$/square foot) 7,522 6,607 83,791 1,087 91,313 1,542 80,140 3,203 171,453 2,318	Turnover # (HK$ million ##) (RMB million) 49.7 43.6 91.1 80.0 140.8 123.6 2.3 2.1 143.1 125.7 256.6 225.2 3.1 2.7 259.7 227.9 397.4 348.8	Turnover # (HK$ million ##) (RMB million) 49.7 43.6 91.1 80.0 140.8 123.6 2.3 2.1 143.1 125.7 256.6 225.2 3.1 2.7 259.7 227.9 397.4 348.8
			123.6

			2.1
			125.7

			225.2 2.7
			227.9

			348.8

Before business tax and value-added tax inclusive

The exchange rate adopted for the year ended 31 July 2017 is 0.8777

** Guangzhou Dolce Vita is a joint venture project with CapitaLand China in which each of the Group and CapitaLand China has an effective 47.5% interest. As at 31 July 2017, the contracted but not yet recognised sales attributable to the full project was HK$540.2 million (excluding car-parking spaces) and approximately 168,715 square feet of GFA (excluding car-parking spaces) were sold. The contracted but not yet recognised sales from car-parking spaces attributable to the full project was HK$6.5 million.

– VI-31 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Review of Major Properties Completed for Sale and under Development

Shanghai Northgate Plaza redevelopment project

Shanghai Northgate Plaza I is located on Tian Mu Road West in the Jing’an District of Shanghai near the Shanghai Railway Terminal and comprises office units, a retail podium and car-parking spaces. Shanghai Northgate Plaza II is a vacant site adjacent to Northgate Plaza I. In September 2016, the Group completed the acquisition of the 6th to 11th floors of Hui Gong Building which is physically connected to Northgate Plaza I, together with the right to use 20 car-parking spaces in the basement. The Group plans to redevelop Shanghai Northgate Plaza I, Northgate Plaza II and the Hui Gong Building together under a comprehensive redevelopment plan which includes an office tower, a shopping arcade and underground car-parking spaces and is expected to add a total GFA of approximately 693,600 square feet excluding car-parking spaces to the rental portfolio of the Group. Demolition of Northgate Plaza I and Hui Gong Building has been completed in May 2017 and foundation works commenced in September 2017.

Shanghai May Flower Plaza

The residential portion of Shanghai May Flower Plaza is branded “The Mid-town” which comprises 628 residential units with a total GFA of approximately 627,500 square feet. The for sale portion of the office apartments comprised of 96 units with a total GFA of approximately 57,500 square feet. All residential units and office apartments units have been sold out. As of 31 July 2017, 458 car-parking spaces of this development remained unsold with a carrying amount of approximately HK$104.2 million.

Shanghai Wuli Bridge Project

In July 2014, the Group succeeded in the auction for the land use rights of a piece of land located by Huangpu River in Huangpu District in Shanghai with a site area of approximately 74,100 square feet. The proposed development has attributable GFA of approximately 83,700 square feet and is intended to be developed into a high end luxury residential project. Construction work commenced in August 2017. This project is expected to complete in the first quarter of 2019.

Guangzhou Eastern Place Phase V

Guangzhou Eastern Place is a multi-phase project located on Dongfeng East Road, Yuexiu District, Guangzhou. The current Phase V development will have a total GFA attributable to the Group of approximately 946,100 square feet, comprising two residential blocks (GFA 319,400 square feet approximately), an office block and ancillary retail spaces (GFA 626,700 square feet approximately). Construction work of residential blocks was completed during the year ended 31 July 2015 and the office block was completed in June 2016.

– VI-32 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

The residential portion of the Guangzhou Eastern Place Phase V comprised of 317 units. For the year ended 31 July 2017, 21,364 square feet was recognised at an average selling price of HK$6,481 per square foot, which contributed HK$129.2 million to the turnover. As at 31 July 2017, completed residential units held for sale in this development amounted to approximately 7,522 square feet with a carrying amount of approximately HK$19.9 million.

Guangzhou Dolce Vita

During the year under review, 739,643 square feet attributable to the Group was recognised and generated attributable sale proceeds of HK$1,810.3 million. As at 31 July 2017, contracted but not yet recognised sales excluding car-parking spaces amounted to HK$256.6 million at average selling prices of HK$3,203 per square foot. Up to the year end, constructions of this project have been completed except for the commercial units with a total GFA of approximately 18,900 square feet that are currently used by the Group as a sales centre for the project. These commercial units are expected to be refurbished for sale by end of 2017.

Guangzhou King’s Park

During the year under review, the sales of 14 car-parking spaces contributed HK$9.0 million to the turnover. As at 31 July 2017, the contracted but not yet recognised sales of the 3 carparking spaces amounted to approximately HK$2.3 million.

Guangzhou Haizhu Plaza

– VI-33 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Zhongshan Palm Spring

During the year under review, 43,407 square feet of house units and 597,959 square feet of residential units were recognised at average selling prices of HK$1,582 and HK$743 per square foot, respectively, which contributed a total of HK$485.3 million to the sales turnover. As at 31 July 2017, contracted but not yet recognised sales for high-rise residential units amounted to HK$91.1 million, at average selling prices of HK$1,087 per square foot. As at 31 July 2017, completed residential units held for sale in this development amounted to 571,600 square feet with a carrying amount of approximately HK$456.3 million. The remaining GFA under development was approximately 2,099,200 square feet.

Set out below is the current expectation on the development of the remaining phases:

		Approximate	Expected
Phase	Description	GFA*	completion
		(square feet)
III	High-rise residential units including commercial units	523,100	Q3 2020
IV	High-rise residential units including commercial units	1,576,100	Q3 2022

Excluding car-parking spaces and ancillary facilities

The Group is closely monitoring the market conditions and will adapt the pace of development accordingly.

Hengqin Novotown

On 25 September 2013, the Company announced it had successfully won Phase I of the Novotown project in Hengqin which is 80% owned by the Group and 20% owned by eSun Holdings Limited. The Phase I of Novotown has a total GFA of 4.2 million square feet including car-parking spaces and ancillary facilities. The minimum investment requirement for the Phase I of Novotown is approximately RMB3.0 billion (equivalent to approximately HK$3.5 billion), of which approximately RMB523.3 million (equivalent to approximately HK$606.7 million) is land cost as per the land grant contract entered into between the Group and The Land and Resources Bureau of Zhuhai on 27 September 2013. The master layout plan for Phase I of Novotown has been approved in January 2015 and construction work commenced at the end of 2015.

– VI-34 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

The expected GFA breakdown of Hengqin Novotown Phase I by usage is set out below:

Usage	GFA(square feet)
Cultural themed hotel	596,727
Cultural workshop	429,641
Cultural commercial area	523,843
Performance halls	167,982
Cultural attractions	286,247
Offce	542,447
Cultural studios (for sale)	250,553
Car-parking spaces	593,797
Ancillary facilities and others	828,800
Total	4,220,037

Hyatt group was engaged as the manager for the cultural themed hotel in March 2015. On 30 October 2015, a licensing agreement was entered into with Lionsgate LBE, Inc. for the development and operation of an immersive experience center in one of the two performance halls in Novotown. Village Roadshow Theme Parks, the world renowned theme park operator with attractions across Australia and America, was appointed in July 2016 to consult during the construction phase of the Lionsgate-themed immersive experience center in Phase I of Novotown, oversee the preopening and to operate the immersive experience center for a minimum of ten years. The immersive experience center is expected to feature attractions, retail, and dining experiences themed around some of Lionsgate’s most captivating global film franchises, including The Hunger Games, The Divergent Series, Now You See Me and three additional film franchises yet to be announced.

The Group also entered into licensing agreements on 30 October 2015 with a master license holder of National Geographic Society to develop a Family Edutainment Center. The size of the Family Edutainment Center is expected to be approximately 50,200 square feet, containing no less than 5 individual attractions including rides, F&B facilities, retail premises, virtual reality and/or 4-D interactive experiences, and other types of entertainment and educational attractions.

In April 2016, the Group entered into a cooperation framework agreement with Trans-Island Limousine Service Limited, a wholly-owned subsidiary of Kwoon Chung Bus Holdings Limited for the development of a cross-border bus service between Hong Kong and Hengqin. The sole and exclusive bus terminus in Hengqin will be located at the Novotown.

– VI-35 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

In January 2017, the Group entered into a shareholders’ agreement with Sanitas Management Company Limited, which owns the Taipei Beitou Health Management Hospital in Taiwan to form a joint venture company co-developing a healthcare and beauty center in the Phase I of Novotown. This healthcare tourism destination is expected to have an area of approximately 86,000 square feet, providing visitors with comprehensive medical check-ups, beauty consultation and wellness services.

In June 2017, the Group entered into a licence agreement with Real Madrid in relation to the development and operation of a location based entertainment centre in Novotown and subsequent to the year end, the Group entered into a framework agreement in September 2017 with Porsche in relation to the development and operation of an auto experience theme centre in Novotown. Both Real Madrid LBE and the Porsche Experience Centre are planned to be launched in Phase II of the Novotown project in Hengqin, subject to the acquisition of the land for Phase II. Discussions between the Group and the Hengqin government regarding the land concession and the Phase II development of the Novotown are ongoing.

Capital Structure, Liquidity and Debt Maturity Profile

As at 31 July 2017, cash and bank balances held by the Group amounted to HK$2,628.4 million and undrawn facilities of the Group was HK$3,528.0 million.

As at 31 July 2017, the Group had total borrowings amounting to HK$6,091.4 million (2016: HK$5,977.4 million), representing an increase of HK$114.0 million from 2016. The consolidated net assets attributable to the owners of the Company amounted to HK$14,584.1 million (2016: HK$13,314.8 million). The gearing ratio, being net debt (total borrowings less cash and bank balances) to net assets attributable to the owners of the Company was approximately 24% (2016: 18%). The maturity profile of the Group’s borrowings of HK$6,091.4 million is well spread with HK$2,355.1 million repayable within 1 year, HK$692.9 million repayable in the second year, HK$2,954.2 million repayable in the third to fifth years and HK$89.2 million repayable beyond the fifth year.

Approximately 48% and 48% of the Group’s borrowings were on a fixed rate basis and floating rate basis, respectively, and the remaining 4% of the Group’s borrowings were interest free.

Apart from the fixed rate senior notes, the Group’s other borrowings of HK$4,011.0 million were 55% denominated in Renminbi (“ RMB ”), 33% in Hong Kong dollars (“ HKD ”) and 12% in United States dollars (“ USD ”).

The Group’s fixed rate senior notes of HK$2,080.4 million were denominated in RMB. On 25 April 2013, issue date of the RMB denominated senior notes (“ 2013 Notes ”), the Group entered into cross currency swap agreements with financial institutions for the purpose of hedging the foreign currency risk arising from such notes. Accordingly, the 2013 Notes have been effectively converted into USD denominated loans.

– VI-36 –

APPENDIX VI MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

The Group’s cash and bank balances of HK$2,628.4 million were 81% denominated in RMB, 11% in HKD and 8% in USD.

Certain assets of the Group have been pledged to secure borrowings of the Group, including investment properties with a total carrying amount of approximately HK$10,401.2 million, properties under development with a total carrying amount of approximately HK$497.2 million, serviced apartments and related properties with a total carrying amount of approximately HK$517.6 million, construction in progress with a total carrying amount of approximately HK$726.1 million and bank balances of approximately HK$401.3 million.

Taking into account the amount of cash being held as at the end of the reporting period, the available banking facilities, expected refinancing of the fixed rate senior notes and the recurring cash flows from the Group’s operating activities, the Group believes that it would have sufficient liquidity to finance its existing property development and investment projects.

Contingent Liabilities

Details of contingent liabilities of the Group as at the end of the reporting period are set out in note 34 to the financial statements.

Employees and Remuneration Policies

As at 31 July 2017, the Group employed a total of around 1,300 employees. The Group recognises the importance of maintaining a stable staff force in its continued success. Under the Group’s existing policies, employee pay rates are maintained at competitive levels whilst promotion and salary increments are assessed on a performance-related basis. Discretionary bonuses are granted to employees based on their merit and in accordance with industry practice. Other benefits including share option scheme, mandatory provident fund scheme, free hospitalisation insurance plan, subsidised medical care and sponsorship for external education and training programmes are offered to eligible employees.

– VI-37 –

APPENDIX VI MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

C. MANAGEMENT DISCUSSION AND ANALYSIS ON THE LAI FUNG GROUP FOR THE YEAR ENDED 31 JULY 2016 (AND AS COMPARED TO THE YEAR ENDED 31 JULY 2015)

Overview

Property Portfolio Composition

Approximate attributable GFA (in ’000 square feet) and number of car-parking spaces as at 31 July 2016:

Commercial/ Retail Completed Properties Held for Rental 1 1,801 Completed Hotel Properties and Serviced Apartments — Properties under Development 2 1,206 Completed Properties Held for Sale 81 3 Total GFA of major properties of the Group 3,088	Serviced Offce Apartments 1,096 — — 597 1,446 822 76 — 2,618 1,419	Total (excluding car-parking spaces No. of & ancillary car-parking Residential facilities) spaces — 2,897 792 — 597 — 3,841 7,315 5,471 280 437 1,230 4,121 11,246 7,493	Total (excluding car-parking spaces No. of & ancillary car-parking Residential facilities) spaces — 2,897 792 — 597 — 3,841 7,315 5,471 280 437 1,230 4,121 11,246 7,493
			7,493

Completed and rental generating properties
All properties under construction
Completed properties for sale, including 68,982 square feet of shopping arcade space which is expected to be reclassified as completed properties held for rental purpose as it is being leased out over time

– VI-38 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Property Investment

Rental Income

For the year ended 31 July 2016, the Group’s rental operations recorded a turnover of HK$629.4 million (2015: HK$626.0 million), representing a 0.5% increase over last year. Excluding the effect of currency translation against a depreciated Renminbi, the growth for Renminbi denominated rental income was 5.2%. Breakdown of rental turnover by major rental properties is as follows:

Shanghai Hong Kong Plaza Shanghai May Flower Plaza Shanghai Regents Park Shanghai Northgate Plaza I Guangzhou May Flower Plaza Guangzhou West Point Guangzhou Lai Fung Tower Zhongshan Palm Spring Total:	For the year 2016 HK$ million 398.2 71.4 14.3 4.9 109.5 17.2 6.2 7.7 629.4	ended 31 July 2015 HK$ million 407.2 61.7 13.4 10.8 108.9 17.2 — 6.8 626.0	% Year end Change occupancy(%) -2.2 Retail: 98.3% Offce: 97.8% Serviced Apartments: 88.8% 15.7 Retail: 99.5% Hotel: 90.4% 6.7 100.0% -54.6 0.0% 0.6 98.6% 0 98.7% N/A Retail: 91.8% Offce: 53.9% 13.2 Retail: 82.0%* Serviced Apartments: 57.1% 0.5

All tenants have been vacated for project redevelopment

** Excluding self-use area

– VI-39 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Breakdown of turnover by usage of our major rental properties is as follows:

For theyear ended 31 July 2016 Attributable Group Turnover GFA interest (HK$ million) (square feet) 100% 175.4 468,434 93.0 360,687 123.3 354,239 6.5 N/A 398.2 1,183,360 100% 30.1 320,314 38.3 143,846 3.0 N/A 71.4 464,160 95% 10.7 77,959 3.6 N/A 14.3 77,959 100% — 192,348 4.7 130,233 0.2 N/A 4.9 322,581 100% 94.5 357,424 11.4 79,431 3.6 N/A 109.5 436,855 100% 17.2 171,968 100% 0.7 100,341 5.1 525,463 0.4 N/A 6.2 625,804 100% 2.9 112,124 4.8 98,556 7.7 210,680 629.4 3,493,367	For theyear ended 31 July 2016 Attributable Group Turnover GFA interest (HK$ million) (square feet) 100% 175.4 468,434 93.0 360,687 123.3 354,239 6.5 N/A 398.2 1,183,360 100% 30.1 320,314 38.3 143,846 3.0 N/A 71.4 464,160 95% 10.7 77,959 3.6 N/A 14.3 77,959 100% — 192,348 4.7 130,233 0.2 N/A 4.9 322,581 100% 94.5 357,424 11.4 79,431 3.6 N/A 109.5 436,855 100% 17.2 171,968 100% 0.7 100,341 5.1 525,463 0.4 N/A 6.2 625,804 100% 2.9 112,124 4.8 98,556 7.7 210,680 629.4 3,493,367	For theyear ended 31 July 2015 Attributable Group Turnover GFA interest (HK$ million) (square feet) 100% 179.9 468,434 96.0 360,687 124.1 354,239 7.2 N/A 407.2 1,183,360 100% 27.8 320,314 32.0 143,846 1.9 N/A 61.7 464,160 95% 11.0 77,959 2.4 N/A 13.4 77,959 99% — 190,425 10.2 128,931 0.6 N/A 10.8 319,356 100% 94.2 357,424 10.9 79,431 3.8 N/A 108.9 436,855 100% 17.2 171,968 100% — 23,326 — N/A — N/A — 23,326 100% 1.9 74,174 4.9 98,556 6.8 172,730 626.0 2,849,714	For theyear ended 31 July 2015 Attributable Group Turnover GFA interest (HK$ million) (square feet) 100% 179.9 468,434 96.0 360,687 124.1 354,239 7.2 N/A 407.2 1,183,360 100% 27.8 320,314 32.0 143,846 1.9 N/A 61.7 464,160 95% 11.0 77,959 2.4 N/A 13.4 77,959 99% — 190,425 10.2 128,931 0.6 N/A 10.8 319,356 100% 94.2 357,424 10.9 79,431 3.8 N/A 108.9 436,855 100% 17.2 171,968 100% — 23,326 — N/A — N/A — 23,326 100% 1.9 74,174 4.9 98,556 6.8 172,730 626.0 2,849,714	For theyear ended 31 July 2015 Attributable Group Turnover GFA interest (HK$ million) (square feet) 100% 179.9 468,434 96.0 360,687 124.1 354,239 7.2 N/A 407.2 1,183,360 100% 27.8 320,314 32.0 143,846 1.9 N/A 61.7 464,160 95% 11.0 77,959 2.4 N/A 13.4 77,959 99% — 190,425 10.2 128,931 0.6 N/A 10.8 319,356 100% 94.2 357,424 10.9 79,431 3.8 N/A 108.9 436,855 100% 17.2 171,968 100% — 23,326 — N/A — N/A — 23,326 100% 1.9 74,174 4.9 98,556 6.8 172,730 626.0 2,849,714
Group interest 100% 100% 95% 100% 100% 100% 100% 100%	Turnover (HK$ million) 175.4 93.0 123.3 6.5 398.2 30.1 38.3 3.0 71.4 10.7 3.6 14.3 — 4.7 0.2 4.9 94.5 11.4 3.6 109.5 17.2 0.7 5.1 0.4 6.2 2.9 4.8 7.7 629.4	Group interest 100% 100% 95% 99% 100% 100% 100% 100%	Turnover (HK$ million) 179.9 96.0 124.1 7.2 407.2 27.8 32.0 1.9 61.7 11.0 2.4 13.4 — 10.2 0.6 10.8 94.2 10.9 3.8 108.9 17.2 — — — — 1.9 4.9 6.8 626.0
				1,183,360 320,314 143,846 N/A
				464,160 77,959 N/A
				77,959 190,425 128,931 N/A
				319,356 357,424 79,431 N/A
				436,855 171,968 23,326 N/A N/A
				23,326 74,174 98,556
				172,730
				2,849,714

– VI-40 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Guangzhou Lai Fung Tower, the office block of Guangzhou Eastern Place Phase V, was completed and added to the rental portfolio of the Group in June 2016 and has started to contribute to the rental income of the Group. Up to the date of this Annual Report, excluding the office area that is subject to the asset swap transaction as announced by the Company on 15 January 2015, approximately 83.5% of the GFA of the building has been leased or has offers to lease.

All tenants of Shanghai Northgate Plaza I have been vacated for redevelopment of Shanghai Northgate Plaza I, Northgate Plaza II and the 6th to 11th floors of Hui Gong Building acquired by the Group in September 2016. The Group is currently discussing the redevelopment proposal with professional consultants and local authorities.

Review of Major Rental Properties

Shanghai Hong Kong Plaza

The property’s total GFA is approximately 1.18 million square feet excluding 350 car-parking spaces. The property comprises an office tower, shopping arcades and a serviced apartment tower with total GFA of approximately 360,700 square feet, 468,400 square feet and 354,200 square feet, respectively. The property is directly above the Huangpi South Road Metro Station and is within walking distance of Xintiandi, a well-known landmark in Shanghai. The shopping arcades are now one of the most visible high-end retail venues for global luxury brands in the area. Anchor tenants include The Apple Store, Cartier, Coach, GAP, MCM, Tiffany, Y3 and internationally renowned luxury brands and a wide array of dining options. Asset enhancement aimed at improving foot traffic at the higher levels of the retail podium of the Shanghai Hong Kong Plaza has been completed and new tenants have moved in by the end of 2014.

– VI-41 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

The Group owns 100% of this property.

Shanghai May Flower Plaza

The Group owns 100% in the retail podium which has approximately 320,300 square feet of GFA including the basement commercial area. The asset is positioned as a community retail facility with Lotte Mart as the anchor tenant.

Shanghai Northgate Plaza

Shanghai Northgate Plaza I (now closed and pending redevelopment) comprises office units, a retail podium and car-parking spaces. Located on Tian Mu Road West in the Jing’an District of Shanghai near the Shanghai Railway Terminal, this property has a total GFA of approximately 322,600 square feet excluding car-parking spaces and ancillary area. The Group acquired the 1% minority interest in this property in March 2016 and now owns 100% of this property.

Shanghai Northgate Plaza II is a vacant site adjacent to Northgate Plaza I. The site area of Northgate Plaza II is approximately 44,300 square feet and its buildable GFA is approximately 259,900 square feet excluding car-parking spaces and ancillary facilities. The Group acquired the 1% minority interest in this property in March 2016 and now owns 100% of this property.

In September 2016, the Group completed the acquisition of the 6th to 11th floors of Hui Gong Building which is physically connected to Northgate Plaza I with a total GFA of approximately 111,400 square feet, together with the right to use 20 car-parking spaces in the basement. The Group plans to redevelop Shanghai Northgate Plaza I, Northgate Plaza II and the Hui Gong Building together under a comprehensive redevelopment plan. The redeveloped project will include an office tower, a shopping arcade and underground car-parking spaces. The Group is currently discussing the redevelopment proposal with professional consultants and local authorities and all tenants of Northgate Plaza I have been vacated for such redevelopment.

Guangzhou May Flower Plaza

The Group owns 100% of this property.

– VI-42 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Guangzhou West Point

Guangzhou Lai Fung Tower

Guangzhou Lai Fung Tower is the office block of Phase V of Guangzhou Eastern Place, which is a multi-phase project located on Dongfeng East Road, Yuexiu District, Guangzhou. This 38-storey office building was completed in June 2016. The Group currently owns a total GFA of approximately 625,800 square feet of this property excluding 204 car-parking spaces.

The asset swap transaction with Guangzhou Light Industry as announced on 15 January 2015 was approved by the shareholders of eSun, the ultimate holding company of the Company, on 5 March 2015 and is now pending for completion. This would enable the Group to consolidate its ownership of Guangzhou Lai Fung Tower completely and provide additional flexibility and strategic value to the Group. Upon completion of the asset swap transaction, the total GFA of Guangzhou Lai Fung Tower is expected to be approximately 707,000 square feet excluding car-parking spaces.

Up to the date of this Annual Report, excluding the office area that is subject to the asset swap transaction with Guangzhou Light Industry, approximately 83.5% of the GFA of the building has been leased or has offers to lease.

Hotel and Serviced Apartments

Ascott Huaihai Road Shanghai

Ascott Huaihai Road in Shanghai Hong Kong Plaza is managed by the Ascott Group and it is one of a premier collection of the Ascott Limited’s serviced residences in over 70 cities in Asia Pacific, Europe and the Gulf region. The residence with total GFA of approximately 357,000 square feet and approximately 354,200 square feet GFA attributable to the Group has 308 contemporary apartments of various sizes: studios (640-750 sq.ft.), one bedroom apartments (915-1,180 sq.ft.), two-bedroom apartments (1,720 sq.ft.), three-bedroom apartments (2,370 sq.ft.) and two luxurious penthouses on the highest two floors (4,520 sq.ft.). An average occupancy rate of 87.0% was achieved during the year under review and the average room tariff was approximately HK$1,290.

– VI-43 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

STARR Hotel Shanghai

STARR Hotel Shanghai soft opened in November 2013 and is a 17-storey hotel located in the Mayflower Lifestyle complex, within walking distance to Lines 1, 3 and 4 of the Shanghai Metro Station with easy access to major motorways. There are 239 fully furnished and equipped hotel units with stylish separate living room, bedroom, fully-equipped kitchenette and luxurious bathroom amenities for short or extended stays to meet the needs of the business travelers from around the world. The GFA attributable to the Group is approximately 143,800 square feet. An average occupancy rate of 83.1% was achieved during the year under review since its soft opening in November 2013 and the average room tariff was approximately HK$520.

STARR Resort Residence Zhongshan

STARR Resort Residence Zhongshan comprises two 16-storey blocks located in the Palm Lifestyle complex in Zhongshan Western District at Cui Sha Road. It is 30 minutes away from Zhongshan ferry pier and an ideal place for weekend breaks with a wide range of family oriented facilities such as an outdoor Swimming Pool, Gym, Yoga Room, Reading Room, Wine Club, Card Game/Mahjong Room, Tennis Court, etc. There are 90 fully furnished serviced apartment units with kitchenette, unit type one- and two-bedroom suite and the total GFA is approximately 98,600 square feet. The resort also has a F&B outlet of 80 seats, suitable for private party and BBQ, etc. An average occupancy rate of 47.4% was achieved during the year under review and the average room tariff was approximately HK$370.

Property Development

Recognised Sales

For the year ended 31 July 2016, the Group’s property development operations recorded a turnover of HK$1,414.1 million (2015: HK$1,275.4 million) from sale of properties, representing a 10.9% increase in sales revenue over last year. Total recognised sales was primarily driven by the sales performance of residential units of Guangzhou Eastern Place Phase V of which approximately 182,574 square feet of residential GFA were sold, achieving sales revenue of HK$1,052.5 million. Excluding the effect of currency translation against a depreciated Renminbi, the growth for Renminbi denominated turnover from sales of properties during the year under review was 16.0%.

Sales of Guangzhou Dolce Vita performed well and achieved an average selling price of HK$2,915 per square foot. This is recognised as a component of “Share of profits of joint ventures” in the consolidated income statement.

– VI-44 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Breakdown of turnover for the year ended 31 July 2016 from property sales is as follows:

Recognised basis Shanghai May Flower Plaza Residential Units Offce Apartment Units Guangzhou Eastern Place Residential Units — Phase V Residential Units — Phase IV Guangzhou King’s Park Residential Units Zhongshan Palm Spring Residential High-Rise Units Residential House Units Subtotal Guangzhou King’s Park Car-parking Spaces Total Recognised sales from joint venture project Guangzhou Dolce Vita Residential Units(47.5% basis) Retail Units(47.5% basis) Subtotal Car-parking Spaces(47.5% basis) Total**	Average Approximate GFA Selling Price # (Square feet) (HK$/square foot) 9,681 5,169 12,564 3,660 182,574 6,087 891 4,226 21,404 4,707 11,190 701 113,709 1,416 352,013 4,207 249,775 2,886 1,953 6,516 251,728 2,915	Turnover (HK$ million) 47.2 43.4 1,052.5 3.6 95.0 7.4 151.8 1,400.9 13.2 1,414.1 680.9 11.7 692.6 19.2 711.8*

– VI-45 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Before business tax and value-added tax inclusive
After business tax and value-added tax exclusive
** Guangzhou Dolce Vita is a joint venture project with CapitaLand China in which each of the Group and CapitaLand China has an effective 47.5% interest. For the year ended 31 July 2016, the recognised sales (after business tax and value-added tax exclusive) attributable to the full project is HK$1,458.1 million (excluding car-parking spaces) and approximately 529,954 square feet of GFA (excluding car-parking spaces) were recognised. The recognised sales from car-parking spaces attributable to the full project is HK$40.4 million.

Contracted Sales

As at 31 July 2016, the Group’s property development operations, excluding Guangzhou Dolce Vita, has contracted but not yet recognised sales of HK$571.7 million from sale of residential units in Zhongshan Palm Spring and HK$7.3 million from sales of 10 car-parking spaces in Guangzhou King’s Park. Sales of the remainder of completed residential units of Zhongshan Palm Spring were strong and achieved an average selling price of HK$846 per square foot (excluding car-parking spaces). Excluding the effect of currency translation against a depreciated Renminbi, the Renminbi denominated contracted but not yet recognised sales of residential units, excluding Guangzhou Dolce Vita as at 31 July 2016 amounted to RMB478.3 million (2015: RMB162.1 million).

The total contracted but not yet recognised sales of the Group as at 31 July 2016 including Guangzhou Dolce Vita amounted to HK$2,249.1 million (including car-parking spaces of Guangzhou King’s Park and Guangzhou Dolce Vita). The Renminbi denominated contracted but not yet recognised sales of residential units, including Guangzhou Dolce Vita as at 31 July 2016 amounted to RMB1,875.2 million (2015: RMB1,048.4 million).

– VI-46 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Breakdown of contracted but not yet recognised sales as at 31 July 2016 is as follows:

Contracted basis Zhongshan Palm Spring Residential High-rise Units Residential House Units Subtotal Guangzhou King’s Park Car-parking spaces Subtotal Contracted sales from joint venture project Guangzhou Dolce Vita Residential Units(47.5% basis) Retail Units(47.5% basis) Subtotal Car-parking spaces(47.5% basis) Subtotal Total (excluding car-parking spaces)**	Average Approximate GFA Selling Price # (Square feet) (HK$/square foot) 635,762 798 39,917 1,611 675,679 846 665,452 2,492 1,585 6,814 667,037 2,503 1,342,716 1,669	Turnover # (HK$ million) 507.4 64.3
		571.7

		7.3
		579.0

		1,658.6 10.8
		1,669.4

		0.7
		1,670.1

		2,241.1

Before business tax and value-added tax inclusive

** Guangzhou Dolce Vita is a joint venture project with CapitaLand China in which each of the Group and CapitaLand China has an effective 47.5% interest. As at 31 July 2016, the contracted but not yet recognised sales attributable to the full project is HK$3,514.5 million (excluding car-parking spaces) and approximately 1,404,288 square feet of GFA (excluding car-parking spaces) were sold. The contracted but not yet recognised sales from car-parking spaces attributable to the full project is HK$1.5 million.

– VI-47 –

APPENDIX VI MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

Review of Major Properties Completed for Sale and under Development

Shanghai May Flower Plaza

The residential portion of Shanghai May Flower Plaza is branded “The Mid-town” which comprises 628 residential units and approximately 627,500 square feet of GFA. During the year under review, 9,681 square feet was recognised at an average selling price of HK$5,169 per square foot, which contributed HK$47.2 million to the turnover. The for sale portion of the office apartments comprised of 96 units with a total GFA of approximately 57,500 square feet. During the year under review, sales of 12,564 square feet was recognised at an average selling price of HK$3,660 per square foot, which contributed HK$43.4 million to the turnover.

As of 31 July 2016, 458 car-parking spaces of this development remained unsold with a carrying amount of approximately HK$105.2 million.

Shanghai Wuli Bridge Project

In July 2014, the Group succeeded in the auction for the land use rights of a piece of land located by Huangpu River in Huangpu district in Shanghai with a site area of approximately 74,100 square feet. The proposed development has attributable GFA of approximately 83,200 square feet and is intended to be developed into a high end luxury residential project. This project is expected to complete in the fourth quarter of 2018.

Guangzhou Eastern Place Phase V

Guangzhou Eastern Place is a multi-phase project located on Dongfeng East Road, Yuexiu District, Guangzhou. The current Phase V development will have a total GFA attributable to the Group of approximately 964,700 square feet, comprising two residential blocks (GFA 319,400 square feet approximately), an office block (GFA 625,800 square feet approximately) and ancillary retail spaces. Construction work of residential blocks was completed during the year ended 31 July 2015 and the office block was completed in June 2016.

The residential portion of the Guangzhou Eastern Place Phase V comprised of 317 units. For the year ended 31 July 2016, 182,574 square feet was recognised at an average selling price of HK$6,087 per square foot, which contributed HK$1,052.5 million to the turnover. As at 31 July 2016, completed residential units held for sale in this development amounted to approximately 28,839 square feet with a carrying amount of approximately HK$79.7 million.

– VI-48 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Guangzhou Dolce Vita

The Guangzhou Dolce Vita is a joint venture project with CapitaLand China in which each of the Group and CapitaLand China has a 47.5% interest. This development in Jinshazhou, Hengsha, Baiyun District, Guangzhou will have a total project GFA of approximately 5.860 million square feet. The project will comprise of approximately 2,796 low-rise and highrise residential units and shopping amenities totaling 3.820 million square feet excluding ancillary facilities and car-parking spaces. It is conveniently located near the business centre of Jinshazhou as well as several shopping and entertainment areas and is easily accessible via Guangzhou Subway Line 6 and other transport modes. Praised as the model metropolis for Guangzhou and Foshan, Jinshazhou is located in northwest Guangzhou.

The project is divided into five phases of development. Phase I comprising 8 high-rise residential blocks has been sold out. During the year under review, 251,728 square feet attributable to the Group was recognised and generated attributable sale proceeds of HK$692.6 million. As at 31 July 2016, attributable GFA of completed units held for sale amounted to 202,067 square feet with a carrying amount of approximately HK$246.1 million (excluding car-parking spaces). The remaining high-rise residential units under development was approximately 1,313,187 square feet and expected to be completed in the fourth quarter of 2016.

Guangzhou King’s Park

During the year under review, sales of 21,404 square feet was recognised at an average selling price of HK$4,707 per square foot, which contributed HK$95.0 million to the turnover. As at 31 July 2016, attributable GFA of a completed commercial unit held for sale amounted to 3,337 square feet and 34 car-parking spaces with a carrying amount of approximately HK$33.5 million.

Guangzhou Paramount Centre

This property locates at the junction of Da Sha Tou Road and Yan Jiang Dong Road in Yuexiu District. The attributable GFA is approximately 83,000 square feet excluding 46 carparking spaces and ancillary facilities. This project is subject to the asset swap transaction that was announced by the Company and eSun on 15 January 2015, which is now pending for completion.

– VI-49 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Guangzhou Haizhu Plaza

Zhongshan Palm Spring

The project is located in Caihong Planning Area, Western District of Zhongshan. The overall development has a total planned GFA of approximately 6.041 million square feet. The project will comprise of high-rise residential towers, townhouses, serviced apartments and commercial blocks totaling 4.461 million square feet.

Phase Ia of the project, which was completed during the first half of the financial year ended 31 July 2013, comprises of high-rise residential towers and house units. During the year under review, 11,190 square feet of high-rise residential units and 113,709 square feet of house units were recognised at average selling prices of HK$701 and HK$1,416 per square foot, respectively, which contributed a total of HK$159.2 million to the sales turnover. As at 31 July 2016, contracted but not yet recognised sales for high-rise and townhouses amounted to HK$507.4 million and HK$64.3 million, at average selling prices of HK$798 and HK$1,611 per square foot, respectively. As at 31 July 2016, completed units held for sale in this development amounted to 51,838 square feet with a carrying amount of approximately HK$54.1 million. The remaining GFA under development was approximately 3,405,900 square feet.

Set out below is the current expectation on the development of the remaining phases:

		Approximate	Expected
Phase	Description	GFA*	completion
		(square feet)
Ib	High-rise residential units	980,400	Q2 2017
II	Townhouses	202,400	Q3 2017
III	High-rise residential units including commercial units	1,571,600	Q3 2020
IV	High-rise residential units including commercial units	651,500	Q3 2022

Excluding car-parking spaces and ancillary facilities

The Group is closely monitoring the market conditions and will adapt the pace of development accordingly.

– VI-50 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Hengqin Novotown

On 25 September 2013, the Company announced it had successfully won Phase I of the Novotown project in Hengqin (“ Novotown ”) which is 80% owned by the Group and 20% owned by eSun. The Novotown has a total GFA of 4.1 million square feet including carparking spaces and ancillary facilities. The minimum investment requirement for the Novotown is approximately RMB3.0 billion (equivalent to approximately HK$3.5 billion), of which approximately RMB523.3 million (equivalent to approximately HK$612.6 million) is land cost as per the land grant contract entered into between the Group and The Land and Resources Bureau of Zhuhai on 27 September 2013. The master layout plan for Novotown has been approved in January 2015 and construction work commenced in the end of 2015.

The expected GFA breakdown by usage is set out below:

Usage	GFA(square feet)
Cultural themed hotel	596,416
Cultural workshop	430,610
Cultural commercial area	527,376
Performance halls	150,551
Cultural attractions	285,246
Offce	559,966
Cultural studios	362,503
Car-parking spaces	564,500
Ancillary facilities and others	671,207
Total:	4,148,375

Hyatt group was engaged as the manager for the cultural themed hotel in March 2015. On 30 October 2015, a licensing agreement was entered into with Lionsgate LBE, Inc. (“ LG ”) for the development and operation of an immersive experience center in the Novotown. Village Roadshow Theme Parks, the world renowned theme park operator with attractions across Australia and America, was appointed in July 2016 to consult during the construction phase of the Lionsgate-themed immersive experience center in Novotown, oversee the preopening and operate the experience center for a minimum of ten years. The immersive experience center is expected to feature attractions, retail, and dining experiences themed around some of Lionsgates most captivating global film franchises, including The Hunger Games, The Divergent Series, Now You See Me and three additional properties yet to be announced.

The Group also entered into licensing agreements on 30 October 2015 with a master license holder of National Geographic Society to develop a Family Edutainment Center. The size of the Family Edutainment Center is expected to be approximately 48,400 square feet, containing no less than 5 individual attractions including rides, F&B facilities, retail premises, virtual reality and/or 4-D interactive experiences, and other types of entertainment & educational attractions.

– VI-51 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Capital Structure, Liquidity and Debt Maturity Profile

As at 31 July 2016, cash and bank balances held by the Group amounted to HK$3,612.6 million and undrawn facilities of the Group was HK$3,576.2 million.

As at 31 July 2016, the Group had total borrowings amounting to HK$5,977.4 million (2015: HK$5,902.4 million), representing an increase of HK$75.0 million from 2015. The consolidated net assets attributable to the owners of the Company amounted to HK$13,314.8 million (2015: HK$13,466.4 million). The gearing ratio, being net debt (total borrowings less cash and bank balances) to net assets attributable to the owners of the Company was approximately 18% (2015: 23%). The maturity profile of the Group’s borrowings of HK$5,977.4 million is well spread with HK$637.9 million repayable within 1 year, HK$2,906.6 million repayable in the second year, HK$2,307.7 million repayable in the third to fifth years and HK$125.2 million repayable beyond the fifth year.

Approximately 44% and 51% of the Group’s borrowings were on a fixed rate basis and floating rate basis, respectively, and the remaining 5% of the Group’s borrowings were interest free.

Apart from the fixed rate senior notes, the Group’s other borrowings of HK$3,884.7 million were 46% denominated in Renminbi (“ RMB ”), 42% in Hong Kong dollars (“ HKD ”) and 12% in United States dollars (“ USD ”).

The Group’s fixed rate senior notes of HK$2,092.7 million were denominated in RMB. On 25 April 2013, issue date of the RMB denominated senior notes (“ 2013 Notes ”), the Group entered into cross currency swap agreements with financial institutions for the purpose of hedging the foreign currency risk arising from such notes. Accordingly, the 2013 Notes have been effectively converted into USD denominated loans.

The Group’s cash and bank balances of HK$3,612.6 million were 86% denominated in RMB, 5% in HKD and 9% in USD.

– VI-52 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

APPENDIX VI

Certain assets of the Group have been pledged to secure borrowings of the Group, including investment properties with a total carrying amount of approximately HK$9,431.5 million, properties under development with a total carrying amount of approximately HK$361.7 million, serviced apartments and related properties with a total carrying amount of approximately HK$572.1 million, completed properties for sale with a total carrying amount of approximately HK$55.9 million, construction in progress with a total carrying amount of approximately HK$411.9 million and bank balances of approximately HK$131.5 million.

Contingent Liabilities

Details of contingent liabilities of the Group as at the end of the reporting period are set out in note 33 to the financial statements.

Employees and Remuneration Policies

As at 31 July 2016, the Group employed a total of around 1,400 employees. The Group recognises the importance of maintaining a stable staff force in its continued success. Under the Group’s existing policies, employee pay rates are maintained at competitive levels whilst promotion and salary increments are assessed on a performance-related basis. Discretionary bonuses are granted to employees based on their merit and in accordance with industry practice. Other benefits including share option scheme, mandatory provident fund scheme, free hospitalisation insurance plan, subsidised medical care and sponsorship for external education and training programmes are offered to eligible employees.

– VI-53 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following unaudited pro forma financial information prepared in accordance with Rule 4.29 of the Listing Rules is for illustrative purposes only and is set out below to provide further information on how the Offers might have affected the financial position, net tangible assets per share, and results of operations of the Group after the completion of the Offers.

Although reasonable care has been exercised in preparing the pro forma financial information, it is hypothetical in nature and the figures are inherently subject to adjustments and may not give a true and complete picture of the actual financial performance and condition of the Group as at 31 July 2017 and for the year then ended or at any future date and for any future period.

The unaudited pro forma financial information should be read in conjunction with the other financial information included in this circular.

A. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(i) Introduction

The following is the illustrative unaudited pro forma consolidated financial information (the “ Unaudited Pro Forma Financial Information ”) of the Enlarged Group immediately after the (1) conditional voluntary general cash offer by HSBC on behalf of the Offeror to acquire all of the issued shares of eSun (other than those already owned or agreed to be acquired by LSD, the Offeror or their respective subsidiaries) and to cancel all the outstanding share options of eSun and (2) possible unconditional mandatory general cash offer by HSBC on behalf of the Offeror to acquire all of the issued shares of Lai Fung (other than those already owned or agreed to be acquired by LSD, the Offeror, eSun or their respective subsidiaries) and to cancel all the outstanding share options of Lai Fung (the “ Acquisition ”).

The Unaudited Pro Forma Financial Information comprises the unaudited pro forma consolidated statement of financial position of the Enlarged Group as at 31 July 2017, the unaudited pro forma consolidated income statement and the unaudited pro forma consolidated statement of cash flows of the Enlarged Group for the year ended 31 July 2017, which have been prepared by the Directors in accordance with Rule 4.29 of the Listing Rules for the purpose of illustrating the effect of the Acquisition.

The preparation of the unaudited pro forma consolidated statement of financial position of the Enlarged Group is based on (i) the audited consolidated statement of financial position of LSD as at 31 July 2017, which has been extracted from the published annual report of LSD for the year ended 31 July 2017; (ii) the audited consolidated statement of financial position of eSun as at 31 July 2017, which has been extracted from the published annual report of eSun for the year ended 31 July 2017, and adjusted in accordance with the pro forma adjustments described in the notes thereto, as if the Acquisition had been completed on 31 July 2017.

– VII-1 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The preparation of the unaudited pro forma consolidated income statement and the unaudited pro forma consolidated statement of cash flows of the Enlarged Group is based on (i) the audited consolidated income statement and the audited consolidated statement of cash flows of LSD for the year ended 31 July 2017, which have been extracted from the published annual report of LSD for the year ended 31 July 2017; (ii) the audited consolidated income statement and the audited consolidated statement of cash flows of eSun for the year ended 31 July 2017, which have been extracted from the published annual report of eSun for the year ended 31 July 2017, and adjusted in accordance with the pro forma adjustments described in the notes thereto, as if the Acquisition had been completed on 1 August 2016.

The pro forma adjustments of the Acquisition that are directly attributable to the transactions are summarised in the accompanying notes.

The Unaudited Pro Forma Financial Information has been prepared on a number of assumptions, estimates and currently available information, is subject to uncertainties and has been prepared for illustrative purposes only. Because of its hypothetical nature, it may not purport to describe the results of operations, the financial position or the cash flows of the Enlarged Group had the Acquisition been completed as at the respective dates to which it is made up to or at any future date. The Unaudited Pro Forma Financial Information does not purport to predict the future results of operations, financial position or cash flows of the Enlarged Group.

The Unaudited Pro Forma Financial Information should be read in conjunction with the respective published annual reports of LSD and eSun for the year ended 31 July 2017 and the other financial information included elsewhere in this circular. For the avoidance of doubt, the Unaudited Pro Forma Financial Information does not take into account any trading or other transactions subsequent to 31 July 2017.

For the purpose of the Unaudited Pro Forma Financial Information, the Acquisition refers to the following two possible scenarios of the result of the Offers:

In Scenario I, it is assumed that the eSun Offers will be accepted in full and there will be no acceptance of the Lai Fung Offers at all. Accordingly, in Scenario I, upon completion of the Acquisition, LSD will hold 100% of the eSun Shares and (through eSun) 50.6% of the Lai Fung Shares.
In Scenario II, it is assumed that the eSun Offers will be accepted in full and the level of acceptances of the Lai Fung Offers will be such that LSD together with eSun will hold 75% of the Lai Fung Shares (24.4% held directly by the Offeror and 50.6% held indirectly though eSun, with the remainder of the Lai Fung Shares being held by the public) upon completion of the Acquisition. Accordingly, in Scenario II, upon completion of the Acquisition, LSD will hold 100% of the eSun Shares and (through both the Offeror and eSun) 75% of the Lai Fung Shares.

– VII-2 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(ii) Unaudited pro forma consolidated statement of financial position as at 31 July 2017- Scenario I

NON-CURRENT ASSETS Property, plant and equipment Prepaid land lease payments Investment properties Properties under development Film rights Film products Music catalogs Goodwill Other intangible assets Interests in associates Interests in joint ventures Available-for-sale fnancial assets Pledged bank balances and time deposits Deposits, prepayments and other receivables Deferred tax assets Total non-current assets CURRENT ASSETS Properties under development Completed properties for sale Films under production Inventories Debtors, deposits paid, prepayments and other receivables Prepaid tax Pledged and restricted bank balances and time deposits Cash and cash equivalents Asset classifed as held for sale Total current assets	LSD as at 31 July 2017 HK$’000 4,034,466 19,873 16,447,014 1,571,635 — — — 5,161 — 3,555,876 7,224,183 1,589,670 69,675 231,868 — 34,749,421 — 252,121 — 31,327 530,416 — 213,640 2,664,066 3,691,570 — 3,691,570	Unaudited Pro Forma Adjustments eSun as at 31 July 2017 Note 2 Note 3 Note 4 Note 5 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 3,041,562 1,020,343 — 16,903,419 1,346,220 1,634,680 20,960 125,921 11,438 82,440 16,557 28,587 (3,368,263) 1,438,287 151,155 123,435 — 124,362 6,050 23,269,238 215,303 446,697 993,460 818,840 463,105 35,111 640,390 43,033 571,142 2,733,435 1,900,000 (1,306,765) 5,694,979 278,531 37,374 5,973,510	The Enlarged Group as at 31 July 2017 HK$’000 8,096,371 19,873 33,350,433 4,552,535 20,960 125,921 11,438 87,601 16,557 216,200 8,813,625 1,713,105 69,675 356,230 6,050
			57,456,574 662,000 2,064,421 463,105 66,438 1,170,806 43,033 784,782 5,990,736
			11,245,321 315,905
			11,561,226

– VII-3 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

CURRENT LIABILITIES Creditors, deposits received, accruals and deferred income Tax payable Convertible notes Fixed rate senior notes Guaranteed notes Bank borrowings Loans from a joint venture Derivative fnancial instruments Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Bank borrowings Other borrowings Loans from a joint venture Deferred tax Provision for tax indemnity Long term deposits received and other payables Deferred rental Total non-current liabilities	LSD as at 31 July 2017 HK$’000 452,005 119,062 — — 2,731,230 157,582 — — 3,459,879 231,691 34,981,112 6,748,399 — — 141,291 93,000 886,435 7,448 7,876,573 27,104,539	Unaudited Pro Forma Adjustments eSun as at 31 July 2017 Note 2 Note 3 Note 4 Note 5 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 1,914,613 128,554 182,346 2,080,366 — 261,392 192,731 208,223 4,968,225 1,005,285 24,274,523 2,906,097 1,900,000 252,618 649,779 3,104,284 1,708,992 — (93,000) 138,875 — 7,051,653 17,222,870	The Enlarged Group as at 31 July 2017 HK$’000 2,366,618 247,616 182,346 2,080,366 2,731,230 418,974 192,731 208,223
			8,428,104
			3,133,122
			60,589,696
			11,554,496 252,618 649,779 4,954,567 — 1,025,310 7,448
			18,444,218
			42,145,478

– VII-4 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

EQUITY Equity attributable to owners of the Company Share capital Share premium account Contributed surplus Investment revaluation reserve Share option reserve Hedging reserve Capital reduction reserve General reserve Other reserve Statutory reserve Exchange fuctuation reserve Retained profts Non-controlling interests	LSD as at 31 July 2017 HK$’000 4,063,736 — — 1,442,513 64,693 1,852 4,692 646,700 215,998 46,240 (382,327) 20,495,693 26,599,790 504,749 27,104,539	eSun as at 31 July 2017 HK$’000 745,927 4,257,351 891,289 17,176 15,293 5,373 — — 574,951 115,261 (561,572) 3,057,151 9,118,200 8,104,670 17,222,870	Unaudited Pro Forma Adjustments Note 2 Note 3 Note 4 Note 5 HK$’000 HK$’000 HK$’000 HK$’000 (745,927) (4,257,351) (891,289) (17,176) (15,293) (5,373) (574,951) (115,261) 172,144 561,572 (3,000,388) 5,571,150 1,136,212	The Enlarged Group as at 31 July 2017 HK$’000 4,063,736 — — 1,442,513 64,693 1,852 4,692 646,700 215,998 46,240 (210,183) 26,123,606
				32,399,847 9,745,631
				42,145,478

– VII-5 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(iii) Unaudited pro forma consolidated income statement for the year ended 31 July 2017- Scenario I

LSD for the year ended 31 July 2017 HK$’000 TURNOVER 1,704,080 Cost of sales (735,959) Gross proft 968,121 Other revenue 54,416 Selling and marketing expenses (35,746) Administrative expenses (280,214) Other operating gains — Other operating expenses (293,003) Gain on disposal of an available-for-sale investment — Fair value gains on cross currency swaps — Fair value gains on investment properties, net 1,238,092 Reversal of provision for tax indemnity 142,451 PROFIT FROM OPERATING ACTIVITIES 1,794,117 Finance costs (175,608) Share of profts and losses of associates 177,940 Share of profts and losses of joint ventures 837,413 Loss on deemed disposal of interest in an associate (573,121) Discount on acquisition of additional interest in an associate 142,822 Loss on disposal of previously held equity interest in an associate — Gain on bargain purchase on acquisition of a subsidiary —	eSun for the year ended 31 July 2017 HK$’000 2,677,388 (1,596,001) 1,081,387 188,705 (235,458) (621,289) 19,801 (499,263) 109,534 111,657 832,118 — 987,192 (199,214) 4,696 313,866 — — — —	Unaudited Pro Forma Adjustments Note 1 Note 2 Note 3 Note 4 Note 5 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (13,144) (88,956) 13,144 (6,220) (29,021) (142,451) (62,450) (342,404) (2,925,088) 8,881,778	The Enlarged Group for the year ended 31 July 2017 HK$’000 4,368,324 (2,420,916)
			1,947,408 243,121 (271,204) (894,579) 19,801 (821,287) 109,534 111,657 2,070,210 —
			2,514,661 (437,272) 182,636 808,875 (573,121) 142,822 (2,925,088) 8,881,778

– VII-6 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

PROFIT BEFORE TAX Income tax expense Tax indemnity PROFIT FOR THE YEAR Attributable to: Owners of the Company Non-controlling interests	LSD for the year ended 31 July 2017 HK$’000 2,203,563 (76,450) — 2,127,113 2,093,572 33,541 2,127,113	eSun for the year ended 31 July 2017 HK$’000 1,106,540 (573,262) 493,936 1,027,214 514,233 512,981 1,027,214	Unaudited Pro Forma Adjustments Note 1 Note 2 Note 3 Note 4 Note 5 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 91,161 (493,936) — (62,450) (976,586) (2,925,088) 8,861,551 (15,014)	The Enlarged Group for the year ended 31 July 2017 HK$’000 8,595,291 (558,551) —
				8,036,740

				7,505,232 531,508
				8,036,740

– VII-7 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(iv) Unaudited pro forma consolidated statement of cash flows for the year ended 31 July 2017- Scenario I

LSD
eSun
for the
for the
year ended
year ended
31 July 2017
31 July 2017
HK$’000
HK$’000
CASH FLOWS FROM
OPERATING ACTIVITIES
Proft before tax
2,203,563
1,106,540
Adjustments for:
Finance costs
175,608
199,214
Share of profts and losses
of associates
(177,940)
(4,696)
Share of profts and losses of
joint ventures
(837,413)
(313,866)
Loss on deemed disposal of
interest in an associate
573,121
—
Discount on acquisition of
additional interest in
an associate
(142,822)
—
Loss on disposal of previously held
equity interest in an associate
—
—
Gain on bargain purchase on
acquisition of a subsidiary
—
—
Fair value gains on investment
properties, net
(1,238,092)
(832,118)
Fair value gains on cross
currency swaps
—
(111,657)
Gain on disposal of an
available-for-sale investment
—
(109,534)
Reversal of provision for
tax indemnity
(142,451)
—
Depreciation
76,991
158,691
Amortisation of prepaid land
lease payments
1,028
—
Amortisation of flm rights
—
4,853
Amortisation of flm products
—
222,801
Amortisation of music catalogs
—
3,480
Amortisation of other intangible
assets
—
12,632
Write-off of items of property,
plant and equipment
—
176

Unaudited Pro Forma Adjustments
The Enlarged
Group for the
year ended
Note 2
Note 3
Note 4
Note 5
31 July 2017
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
(62,450)
(231,407)
(2,925,088)
8,504,133
8,595,291
62,450
437,272
(182,636)
342,404
(808,875)
573,121
(142,822)
2,925,088
2,925,088
(8,881,778)
(8,881,778)
(2,070,210)
(111,657)
(109,534)
142,451
—
35,241
270,923
1,028
4,853
222,801
3,480
12,632
176

– VII-8 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX VII

Loss/(gain) on disposal of items of property, plant and equipment Impairment of goodwill Reversal of write-down of completed properties for sale to net realisable value Impairment/write-off of flms under production Impairment of flm rights Provision for doubtful debts Provision for advances and other receivables Reversal of provision for advances and other receivables Reversal of provision for amounts due from joint ventures Provision for inventories Ineffective portion of the effective hedge recognised in proft or loss Interest income Dividend income from unlisted available-for-sale fnancial assets Employee share option benefts Foreign exchange differences, net Increase in properties under development Increase in other loan receivables Decrease in completed properties for sale Increase in asset classifed as held for sale Increase in inventories Additions of flm rights Additions of flms under production Additions of flm products	LSD for the year ended 31 July 2017 HK$’000 1,222 — — — — — — — — — — (20,666) (23,240) 188 22,030 471,127 (193,253) (19,412) 69,388 — (5,428) — — —	eSun for the year ended 31 July 2017 HK$’000 (576) 41,000 (3,829) 82,754 599 1,181 2,895 (2,061) (2,193) 3,907 7,925 (26,519) — 680 61,336 503,615 (488,333) — 601,425 (23,374) (5,252) (2,730) (318,445) (1,148)	Unaudited Pro Forma Adjustments Note 2 Note 3 Note 4 Note 5 HK$’000 HK$’000 HK$’000 HK$’000 88,956	The Enlarged Group for the year ended 31 July 2017 HK$’000 646 41,000 (3,829) 82,754 599 1,181 2,895 (2,061) (2,193) 3,907 7,925 (47,185) (23,240) 868 83,366
				885,786 (681,586) (19,412) 759,769 (23,374) (10,680) (2,730) (318,445) (1,148)

– VII-9 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(Increase)/decrease in debtors, deposits paid, prepayments and other receivables Increase/(decrease) in creditors, deposits received, accruals and deferred income Cash generated from operations Interest received Interest paid on bank borrowings Interest paid on guaranteed notes Tax indemnity received Hong Kong profts tax paid, net Mainland China taxes paid, net Overseas taxes paid Net cash fows from/(used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES Interest received Purchase of items of property, plant and equipment Additions to investment properties Deposits paid for purchase of items of property, plant and equipment Deposits paid for additions to investment properties Additions of other intangible assets Acquisition of unlisted available-for-sale fnancial assets Proceeds from disposal of an unlisted available-for-sale fnancial asset	LSD for the year ended 31 July 2017 HK$’000 (395,095) 787,198 714,525 20,666 (118,666) (155,368) — (44,602) — (31,354) 385,201 — (1,017,679) (47,535) (2,538) (2,104) — (6,907) 4,918	eSun for the year ended 31 July 2017 HK$’000 171,426 (324,117) 113,067 — — — 493,936 (1,714) (539,140) — 66,149 26,519 (360,012) (677,066) (7,677) — (584) — 98,713	Unaudited Pro Forma Adjustments Note 2 Note 3 Note 4 Note 5 HK$’000 HK$’000 HK$’000 HK$’000 (62,450) (493,936)	The Enlarged Group for the year ended 31 July 2017 HK$’000 (223,669) 463,081
				827,592 20,666 (181,116) (155,368) — (46,316) (539,140) (31,354)
				(105,036)
				26,519 (1,377,691) (724,601) (10,215) (2,104) (584) (6,907) 103,631

– VII-10 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX VII

Proceeds from disposal of items of property, plant and equipment Refund of partial capital of an available-for-sale investment Acquisition of a subsidiary Acquisition of additional interest in an associate Acquisition of an associate Capital contribution to associates Advances to associates Repayment from associates Dividend income from associates Acquisition of a joint venture Advances to joint ventures Repayment from joint ventures Dividend income from joint ventures Dividends received from unlisted available-for-sale fnancial assets (Increase)/decrease in pledged and restricted bank balances and time deposits Settlement of tax indemnity Net cash fows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES New bank borrowings raised Repayment of bank borrowings Bank fnancing charges Loans from a joint venture Repayments of loans from a joint venture Net proceeds from issue of shares Acquisition of additional interests in subsidiaries	LSD for the year ended 31 July 2017 HK$’000 2,800 — — (25,426) (159,555) — (187) 4,844 700 (114,099) (154,500) 637,090 — 23,240 (67,074) (493,936) (1,417,948) 3,319,138 (1,851,844) (19,144) — — — —	Unaudited Pro Forma Adjustments eSun for the year ended 31 July 2017 Note 2 Note 3 Note 4 Note 5 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 2,030 2,638 — (1,306,765) — — (283) (982) 68 4,200 — (8,523) 13,075 31 — 495,352 — 493,936 (412,501) 588,468 1,900,000 (846,085) (329,450) 609,490 (342,143) 150,875 (16,055)	The Enlarged Group for the year ended 31 July 2017 HK$’000 4,830 2,638 (1,306,765) (25,426) (159,555) (283) (1,169) 4,912 4,900 (114,099) (163,023) 650,165 31 23,240 428,278 —
			(2,643,278)
			5,807,606 (2,697,929) (348,594) 609,490 (342,143) 150,875 (16,055)

– VII-11 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX VII

Dividend paid Dividends paid to non-controlling shareholders of subsidiaries Capital contribution from non-controlling shareholders of subsidiaries Repayment to non-controlling shareholders of a subsidiary Share options exercised Share options of a subsidiary exercised Net cash fows from/(used in) fnancing activities NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year Effect of foreign exchange rate changes, net CASH AND CASH EQUIVALENTS AT END OF YEAR ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Non-pledged and non-restricted cash and bank balances Non-pledged and non-restricted time deposits	LSD for the year ended 31 July 2017 HK$’000 (47,689) (62,720) 484 (744) 2,705 — 1,340,186 307,439 2,354,682 1,945 2,664,066 971,795 1,692,271 2,664,066	Unaudited Pro Forma Adjustments eSun for the year ended 31 July 2017 Note 2 Note 3 Note 4 Note 5 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 — (19,255) 3,867 — — 3,990 (196,298) (542,650) 3,299,148 (23,063) 2,733,435 2,328,476 1,837,550 — — (1,306,765) 404,959 2,733,435	The Enlarged Group for the year ended 31 July 2017 HK$’000 (47,689) (81,975) 4,351 (744) 2,705 3,990
			3,043,888
			295,574 5,653,830 (21,118)
			5,928,286

			3,831,056 2,097,230
			5,928,286

– VII-12 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(v) Notes to the Unaudited Pro Forma Financial Information of the Enlarged Group - Scenario I

Notes:

The adjustment represents the elimination of rental and building management fees recorded between LSD and eSun for the year ended 31 July 2017 as if the Acquisition had taken place on 1 August 2016.
The adjustment represents the financing for the Offers. LSD would incur additional borrowings of HK$1,900,000,000 and additional finance costs of approximately HK$62,450,000 for the year ended 31 July 2017 in connection with the utilisation of certain of the loan facilities to partially fund the consideration for the Offers.
Upon completion of the Acquisition, LSD will directly own 100% issued shares of eSun and indirectly own 50.6% of the issued shares of Lai Fung. The identifiable assets and liabilities of eSun will be accounted for in the consolidated financial statements of the Enlarged Group at their fair value at the date of completion of the Acquisition under the acquisition method of accounting in accordance with Hong Kong Financial Reporting Standard 3 (Revised) “Business Combination”. For the purpose of preparing the Unaudited Pro Forma Financial Information, the Directors have estimated the fair value of the identifiable assets and liabilities of eSun based on the assumption that the Acquisition was completed on 31 July 2017 or 1 August 2016, as appropriate.

The details of the fair value adjustments of property interests of landed properties (“ Landed Properties ”) are as follows:

Property, plant and equipment Properties under development Interests in joint ventures Completed properties for sale Assets classifed as held for sale Deferred tax liabilities Non-controlling interests of eSun Total	Fair values as at 31 July 2017 HK$’000 4,061,905 3,642,900 1,589,442 1,812,300 315,905 (4,813,276) (9,194,940) (2,585,764)	Carrying amounts as at 31 July 2017 HK$’000 3,041,562 1,561,523 1,438,287 993,460 278,531 (3,104,284) (8,104,670) (3,895,591)	Fair value adjustments as at 31 July 2017 HK$’000 1,020,343 2,081,377 151,155 818,840 37,374 (1,708,992) (1,090,270) 1,309,827

The fair values of Landed Properties included in the above property, plant and equipment, properties under development, interests in joint ventures, completed properties for sales and assets classified as held for sale were estimated as if the Acquisition had been completed on 31 July 2017. The properties have been valued by reference to sales evidence as available in the market, and where appropriate, on the basis of the capitalisation of the rental income. The valuations allowed for outgoings, and where appropriate, made provisions for reversionary income potential.

Deferred tax liabilities of approximately HK$1,708,992,000 are also recognised in the Unaudited Pro Forma Financial Information of the Enlarged Group as at 31 July 2017 as a result of the aforesaid fair value adjustments on Landed Properties. Deferred tax liabilities are calculated at the prevailing tax rates and in accordance with relevant legislation governing PRC corporate income tax (“ CIT ”) and land appreciation tax (“ LAT ”) as appropriate. PRC CIT rate is calculated at 25% on assessable income. PRC LAT rate is calculated in accordance with a regime of progressive rates from 30% to 60% on the appreciation of land value or at a specific rate assessed by the tax authority.

– VII-13 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Except for the above Landed Properties, the directors assume that the fair values of other identifiable assets and liabilities of eSun approximated to their carrying amounts as at 31 July 2017 and 1 August 2016.

Pursuant to an indemnity deed (the “ Tax Indemnity Deed ”) dated 12 November 1997 entered into between LSD and Lai Fung, LSD has undertaken to indemnify Lai Fung in respect of certain potential PRC CIT and LAT payable or shared by Lai Fung in consequence of the disposal of certain property interests attributable to Lai Fung through its subsidiaries and its joint ventures as at 31 October 1997. During the year ended 31 July 2017, LSD paid under the tax indemnity approximately HK$493,936,000 in relation to PRC income tax and LAT which Lai Fung recorded as tax indemnity income in its consolidated income statement for the year ended 31 July 2017. For the year ended 31 July 2017, LSD reversed an overprovision for the tax indemnity in prior years of approximately HK$142,451,000 which was credited to its consolidated income statement. As at 31 July 2017, LSD recorded an aggregate provision for the tax indemnity of approximately HK$93,000,000 (1 August 2016: HK$729,387,000). Such provision would be adjusted upon the completion of the Acquisition.

The adjusted net assets attributable to owners of eSun as at 31 July 2017 and 1 August 2016, respectively, are calculated as follows:

As if the Acquisition had been taken place on 31 July 2017 Net assets attributable to owners of eSun as at 31 July 2017 Add: Fair value adjustments related to the Landed Properties, net of deferred tax liabilities and non-controlling interests of eSun as at 31 July 2017 Add: Adjustment of provision for tax indemnity as at 31 July 2017 for eSun’s 50.6% equity interest in Lai Fung (HK$93,000,000 x 50.6%) Adjusted net assets attributable to owners of eSun as at 31 July 2017 for the pro forma consolidated statement of fnancial position (a) As if the Acquisition had been taken place on 1 August 2016 Net assets attributable to owners of eSun as at 1 August 2016 Add: Fair value adjustments related to the Landed Properties, net of deferred tax liabilities and non-controlling interests of eSun as at 31 July 2017 Add: Effect on properties sold during the year ended 31 July 2017 Add: Adjustment of provision for tax indemnity as at 1 August 2016 for eSun’s 50.6% equity interest in Lai Fung (HK$729,387,000 x 50.6%) Adjusted net assets attributable to owners of eSun as at 1 August 2016 for the pro forma consolidated income statement and consolidated statement of cash fows (b)	HK$’000 9,118,200 1,309,827 47,058
	10,475,085

	8,599,258 1,309,827 340,199 369,070
	10,618,354

– VII-14 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

For the purpose of the pro forma consolidated income statement and consolidated statement of cash flows as if the Acquisition had been taken place on 1 August 2016, the fair value adjustments on Landed Properties are calculated on the fair values of Landed Properties as at 31 July 2017 and adjusted for the effect of properties sold by eSun during the year ended 31 July 2017, and resulted in decrease in completed properties for sale of approximately HK$88,956,000.
The adjustment represents the consolidation adjustments to derecognise the previously held equity interest in eSun and record the pro forma gain on disposal of the previously held equity interest in eSun as if the Acquisition had been taken place on 31 July 2017 and 1 August 2016, respectively.

As if the Acquisition had been taken place on 31 July 2017
Fair value of 36.94% equity interest in eSun as at 31 July 2017
Less: Carrying value of LSD’s 36.94% equity interest in eSun
as at 31 July 2017
Less: Release of eSun’s exchange reserve shared
by LSD up to 31 July 2017
Pro forma loss on disposal of the previously held equity interest
in eSun for the pro forma consolidated statement of fnancial position
As if the Acquisition had been taken place on 1 August 2016
Fair value of 36.94% equity interest in eSun as at 1 August 2016
Less: Carrying value of LSD’s 36.94% equity interest in eSun
as at 1 August 2016
Less: Release of eSun’s exchange reserve shared
by LSD up to 1 August 2016
Pro forma loss on disposal of the previously held equity interest
in eSun for the pro forma consolidated income statement and
consolidated statement of cash fows

HK$’000
#540,019
(3,368,263)
(172,144)
(3,000,388)
#429,811
(3,176,566)
(178,333)
(2,925,088)

LSD held 551,040,186 shares of eSun as at 31 July 2017 and at the current date, representing 36.94% equity interest in eSun. When calculating the fair values of equity interest in eSun held by LSD for the purpose of the pro forma loss on disposal of the previously held equity interest in eSun, management adopted the closing share price of HK$0.98 on 31 July 2017 and HK$0.78 on 1 August 2016, and assumed LSD held 551,040,186 shares of eSun, representing 36.94% equity interest in eSun, as at 1 August 2016.

– VII-15 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The adjustment represents the consolidation adjustments to eliminate the pre-acquisition reserves of eSun and record the pro forma gain on bargain purchase on acquisition of additional equity interest in eSun and Lai Fung.

The pro forma gain on bargain purchase is calculated as follows:

As if the Acquisition had been taken place on 31 July 2017
Fair value of total identifable assets and liabilities
attributable to owners of eSun as at 31 July 2017
(a)
Less: Consideration paid for eSun Offers
Less: Fair value of LSD’s 36.94% equity interest in eSun
as at 31 July 2017
Less: Estimated direct costs attributable to the Acquisition
Pro forma gain on bargain purchase for the pro forma consolidated
statement of fnancial position
As if the Acquisition had been taken place on 1 August 2016
Fair value of total identifable assets and liabilities
attributable to owners of eSun as at 1 August 2016
(b)
Less: Consideration paid for eSun Offers
Less: Fair value of LSD’s 36.94% equity interest in eSun
as at 1 August 2016
Less: Estimated direct costs attributable to the Acquisition
Pro forma gain on bargain purchase for the pro forma consolidated
income statement and consolidated statement of cash fows

HK$’000
10,475,085
(1,265,765)
#(540,019)
(41,000)
8,628,301
10,618,354
(1,265,765)
#(429,811)
(41,000)
8,881,778

For the pro forma consolidated income statement and consolidated statement of cash flows for the year ended 31 July 2017, additional depreciation on property, plant and equipment of approximately HK$35,241,000 is recognised (included as administrative expenses of HK$6,220,000 and other operating expenses of HK$29,021,000), which is due to fair value adjustment net of the estimated corresponding effects on deferred tax liabilities for certain properties in respect thereof, of which HK$15,014,000 is attributable to non-controlling interests.

As the purchase price allocation and the fair values of the identifiable assets and liabilities had not yet been finalised as at the date of this circular, the amounts of identifiable assets and liabilities to be recognised upon the completion of the Acquisitions are subject to change, and the amounts may be different for those currently presented in the Unaudited Pro Forma Financial Information.

– VII-16 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(vi) Unaudited pro forma consolidated statement of financial position as at 31 July 2017- Scenario II

NON-CURRENT ASSETS Property, plant and equipment Prepaid land lease payments Investment properties Properties under development Film rights Film products Music catalogs Goodwill Other intangible assets Interests in associates Interests in joint ventures Available-for-sale fnancial assets Pledged bank balances and time deposits Deposits, prepayments and other receivables Deferred tax assets Total non-current assets CURRENT ASSETS Properties under development Completed properties for sale Films under production Inventories Debtors, deposits paid, prepayments and other receivables Prepaid tax Pledged and restricted bank balances and time deposits Cash and cash equivalents Asset classifed as held for sale Total current assets	LSD as at 31 July 2017 HK$’000 4,034,466 19,873 16,447,014 1,571,635 — — — 5,161 — 3,555,876 7,224,183 1,589,670 69,675 231,868 — 34,749,421 — 252,121 — 31,327 530,416 — 213,640 2,664,066 3,691,570 — 3,691,570	Unaudited Pro Forma Adjustments eSun as at 31 July 2017 Note 7 Note 8 Note 9 Note 10 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 3,041,562 1,020,343 — 16,903,419 1,346,220 1,634,680 20,960 125,921 11,438 82,440 16,557 28,587 (3,368,263) 1,438,287 151,155 123,435 — 124,362 6,050 23,269,238 215,303 446,697 993,460 818,840 463,105 35,111 640,390 43,033 571,142 2,733,435 1,900,000 (1,776,731) 5,694,979 278,531 37,374 5,973,510	The Enlarged Group as at 31 July 2017 HK$’000 8,096,371 19,873 33,350,433 4,552,535 20,960 125,921 11,438 87,601 16,557 216,200 8,813,625 1,713,105 69,675 356,230 6,050
			57,456,574 662,000 2,064,421 463,105 66,438 1,170,806 43,033 784,782 5,520,770
			10,775,355 315,905
			11,091,260

– VII-17 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

CURRENT LIABILITIES Creditors, deposits received, accruals and deferred income Tax payable Convertible notes Fixed rate senior notes Guaranteed notes Bank borrowings Loans from a joint venture Derivative fnancial instruments Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Bank borrowings Other borrowings Loans from a joint venture Deferred tax Provision for tax indemnity Long term deposits received and other payables Deferred rental Total non-current liabilities	LSD as at 31 July 2017 HK$’000 452,005 119,062 — — 2,731,230 157,582 — — 3,459,879 231,691 34,981,112 6,748,399 — — 141,291 93,000 886,435 7,448 7,876,573 27,104,539	Unaudited Pro Forma Adjustments eSun as at 31 July 2017 Note 7 Note 8 Note 9 Note 10 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 1,914,613 128,554 182,346 2,080,366 — 261,392 192,731 208,223 4,968,225 1,005,285 24,274,523 2,906,097 1,900,000 252,618 649,779 3,104,284 1,708,992 — (93,000) 138,875 — 7,051,653 17,222,870	The Enlarged Group as at 31 July 2017 HK$’000 2,366,618 247,616 182,346 2,080,366 2,731,230 418,974 192,731 208,223
			8,428,104
			2,663,156
			60,119,730
			11,554,496 252,618 649,779 4,954,567 — 1,025,310 7,448
			18,444,218
			41,675,512

– VII-18 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

EQUITY Equity attributable to owners of the Company Share capital Share premium account Contributed surplus Investment revaluation reserve Share option reserve Hedging reserve Capital reduction reserve General reserve Other reserve Statutory reserve Exchange fuctuation reserve Retained profts Non-controlling interests	LSD as at 31 July 2017 HK$’000 4,063,736 — — 1,442,513 64,693 1,852 4,692 646,700 215,998 46,240 (382,327) 20,495,693 26,599,790 504,749 27,104,539	eSun as at 31 July 2017 HK$’000 745,927 4,257,351 891,289 17,176 15,293 5,373 — — 574,951 115,261 (561,572) 3,057,151 9,118,200 8,104,670 17,222,870	Unaudited Pro Forma Adjustments Note 7 Note 8 Note 9 Note 10 HK$’000 HK$’000 HK$’000 HK$’000 (745,927) (4,257,351) (891,289) (17,176) (15,293) (5,373) (574,951) (115,261) 172,144 561,572 (3,000,388) 9,191,506 1,136,212 (4,090,322)	The Enlarged Group as at 31 July 2017 HK$’000 4,063,736 — — 1,442,513 64,693 1,852 4,692 646,700 215,998 46,240 (210,183) 29,743,962
				36,020,203 5,655,309
				41,675,512

– VII-19 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(vii) Unaudited pro forma consolidated income statement for the year ended 31 July 2017- Scenario II

LSD for the year ended 31 July 2017 HK$’000 TURNOVER 1,704,080 Cost of sales (735,959) Gross proft 968,121 Other revenue 54,416 Selling and marketing expenses (35,746) Administrative expenses (280,214) Other operating gains — Other operating expenses (293,003) Gain on disposal of an available-for-sale investment — Fair value gains on cross currency swaps — Fair value gains on investment properties, net 1,238,092 Reversal of provision for tax indemnity 142,451 PROFIT FROM OPERATING ACTIVITIES 1,794,117 Finance costs (175,608) Share of profts and losses of associates 177,940 Share of profts and losses of joint ventures 837,413 Loss on deemed disposal of interest in an associate (573,121) Discount on acquisition of additional interest in an associate 142,822 Loss on disposal of previously held equity interest in an associate — Gain on bargain purchase on acquisition of a subsidiary —	eSun for the year ended 31 July 2017 HK$’000 2,677,388 (1,596,001) 1,081,387 188,705 (235,458) (621,289) 19,801 (499,263) 109,534 111,657 832,118 — 987,192 (199,214) 4,696 313,866 — — — —	Unaudited Pro Forma Adjustments Note 6 Note 7 Note 8 Note 9 Note 10 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (13,144) (88,956) 13,144 (6,220) (29,021) (142,451) (62,450) (342,404) (2,925,088) 12,502,987	The Enlarged Group for the year ended 31 July 2017 HK$’000 4,368,324 (2,420,916)
			1,947,408 243,121 (271,204) (894,579) 19,801 (821,287) 109,534 111,657 2,070,210 —
			2,514,661 (437,272) 182,636 808,875 (573,121) 142,822 (2,925,088) 12,502,987

– VII-20 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

PROFIT BEFORE TAX Income tax expense Tax indemnity PROFIT FOR THE YEAR Attributable to: Owners of the Company Non-controlling interests	LSD for the year ended 31 July 2017 HK$’000 2,203,563 (76,450) — 2,127,113 2,093,572 33,541 2,127,113	eSun for the year ended 31 July 2017 HK$’000 1,106,540 (573,262) 493,936 1,027,214 514,233 512,981 1,027,214	Unaudited Pro Forma Adjustments Note 6 Note 7 Note 8 Note 9 Note 10 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 91,161 (493,936) — (62,450) (976,586) (2,925,088) 12,482,760 (15,014)	The Enlarged Group for the year ended 31 July 2017 HK$’000 12,216,500 (558,551) —
				11,657,949

				11,126,441 531,508
				11,657,949

– VII-21 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(viii) Unaudited pro forma consolidated statement of cash flows for the year ended 31 July 2017- Scenario II

LSD
eSun
for the
for the
year ended
year ended
31 July 2017
31 July 2017
HK$’000
HK$’000
CASH FLOWS FROM
OPERATING ACTIVITIES
Proft before tax
2,203,563
1,106,540
Adjustments for:
Finance costs
175,608
199,214
Share of profts and losses
of associates
(177,940)
(4,696)
Share of profts and losses of
joint ventures
(837,413)
(313,866)
Loss on deemed disposal of
interest in an associate
573,121
—
Discount on acquisition of
additional interest in
an associate
(142,822)
—
Loss on disposal of previously
held equity interest in an associate
—
—
Gain on bargain purchase on
acquisition of a subsidiary
—
—
Fair value gains on investment
properties, net
(1,238,092)
(832,118)
Fair value gains on cross
currency swaps
—
(111,657)
Gain on disposal of an
available-for-sale investment
—
(109,534)
Reversal of provision for
tax indemnity
(142,451)
—
Depreciation
76,991
158,691
Amortisation of prepaid land
lease payments
1,028
—
Amortisation of flm rights
—
4,853
Amortisation of flm products
—
222,801
Amortisation of music catalogs
—
3,480
Amortisation of other intangible
assets
—
12,632
Write-off of items of property,
plant and equipment
—
176

Unaudited Pro Forma Adjustments
The Enlarged
Group for the
year ended
Note 7
Note 8
Note 9
Note 10
31 July 2017
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
(62,450)
(573,811)
(2,925,088)
12,467,746
12,216,500
62,450
437,272
(182,636)
342,404
(808,875)
573,121
(142,822)
2,925,088
2,925,088
(12,502,987)
(12,502,987)
(2,070,210)
(111,657)
(109,534)
142,451
—
35,241
270,923
1,028
4,853
222,801
3,480
12,632
176

– VII-22 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX VII

Loss/(gain) on disposal of items of property, plant and equipment Impairment of goodwill Reversal of write-down of completed properties for sale to net realisable value Impairment/write-off of flms under production Impairment of flm rights Provision for doubtful debts Provision for advances and other receivables Reversal of provision for advances and other receivables Reversal of provision for amounts due from joint ventures Provision for inventories Ineffective portion of the effective hedge recognised in proft or loss Interest income Dividend income from unlisted available-for-sale fnancial assets Employee share option benefts Foreign exchange differences, net Increase in properties under development Increase in other loan receivables Decrease in completed properties for sale Increase in asset classifed as held for sale Increase in inventories Additions of flm rights Additions of flms under production Additions of flm products	LSD for the year ended 31 July 2017 HK$’000 1,222 — — — — — — — — — — (20,666) (23,240) 188 22,030 471,127 (193,253) (19,412) 69,388 — (5,428) — — —	eSun for the year ended 31 July 2017 HK$’000 (576) 41,000 (3,829) 82,754 599 1,181 2,895 (2,061) (2,193) 3,907 7,925 (26,519) — 680 61,336 503,615 (488,333) — 601,425 (23,374) (5,252) (2,730) (318,445) (1,148)	Unaudited Pro Forma Adjustments Note 7 Note 8 Note 9 Note 10 HK$’000 HK$’000 HK$’000 HK$’000 88,956	The Enlarged Group for the year ended 31 July 2017 HK$’000 646 41,000 (3,829) 82,754 599 1,181 2,895 (2,061) (2,193) 3,907 7,925 (47,185) (23,240) 868 83,366
				885,786 (681,586) (19,412) 759,769 (23,374) (10,680) (2,730) (318,445) (1,148)

– VII-23 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(Increase)/decrease in debtors, deposits paid, prepayments and other receivables Increase/(decrease) in creditors, deposits received, accruals and deferred income Cash generated from operations Interest received Interest paid on bank borrowings Interest paid on guaranteed notes Tax indemnity received Hong Kong profts tax paid, net Mainland China taxes paid, net Overseas taxes paid Net cash fows from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Interest received Purchase of items of property, plant and equipment Additions to investment properties Deposits paid for purchase of items of property, plant and equipment Deposits paid for additions to investment properties Additions of other intangible assets Acquisition of unlisted available-for-sale fnancial assets Proceeds from disposal of an unlisted available-for-sale fnancial asset	LSD for the year ended 31 July 2017 HK$’000 (395,095) 787,198 714,525 20,666 (118,666) (155,368) — (44,602) — (31,354) 385,201 — (1,017,679) (47,535) (2,538) (2,104) — (6,907) 4,918	eSun for the year ended 31 July 2017 HK$’000 171,426 (324,117) 113,067 — — — 493,936 (1,714) (539,140) — 66,149 26,519 (360,012) (677,066) (7,677) — (584) — 98,713	Unaudited Pro Forma Adjustments Note 7 Note 8 Note 9 Note 10 HK$’000 HK$’000 HK$’000 HK$’000 62,450 (493,936)	The Enlarged Group for the year ended 31 July 2017 HK$’000 (223,669) 463,081
				827,592 20,666 (56,216) (155,368) — (46,316) (539,140) (31,354)
				19,864
				26,519 (1,377,691) (724,601) (10,215) (2,104) (584) (6,907) 103,631

– VII-24 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX VII

Proceeds from disposal of items of property, plant and equipment Refund of partial capital of an available-for-sale investment Acquisition of subsidiaries Acquisition of additional interest in an associate Acquisition of an associate Capital contribution to associates Advances to associates Repayment from associates Dividend income from associates Acquisition of a joint venture Advances to joint ventures Repayment from joint ventures Dividend income from joint ventures Dividends received from unlisted available-for-sale fnancial assets (Increase)/decrease in pledged and restricted bank balances and time deposits Settlement of tax indemnity Net cash fows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES New bank borrowings raised Repayment of bank borrowings Bank fnancing charges Loans from a joint venture Repayments of loans from a joint venture Net proceeds from issue of shares Acquisition of additional interests in subsidiaries	LSD for the year ended 31 July 2017 HK$’000 2,800 — — (25,426) (159,555) — (187) 4,844 700 (114,099) (154,500) 637,090 — 23,240 (67,074) (493,936) (1,417,948) 3,319,138 (1,851,844) (19,144) — — — —	Unaudited Pro Forma Adjustments eSun for the year ended 31 July 2017 Note 7 Note 8 Note 9 Note 10 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 2,030 2,638 — (1,776,731) — — (283) (982) 68 4,200 — (8,523) 13,075 31 — 495,352 — 493,936 (412,501) 588,468 1,900,000 (846,085) (329,450) 609,490 (342,143) 150,875 (16,055)	The Enlarged Group for the year ended 31 July 2017 HK$’000 4,830 2,638 (1,776,731) (25,426) (159,555) (283) (1,169) 4,912 4,900 (114,099) (163,023) 650,165 31 23,240 428,278 —
			(3,113,244)
			5,807,606 (2,697,929) (348,594) 609,490 (342,143) 150,875 (16,055)

– VII-25 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX VII

Dividend paid Dividends paid to non-controlling shareholders of subsidiaries Capital contribution from non-controlling shareholders of subsidiaries Repayment to non-controlling shareholders of a subsidiary Share options exercised Share options of a subsidiary exercised Net cash fows from/(used in) fnancing activities NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year Effect of foreign exchange rate changes, net CASH AND CASH EQUIVALENTS AT END OF YEAR ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Non-pledged and non-restricted cash and bank balances Non-pledged and non-restricted time deposits	LSD for the year ended 31 July 2017 HK$’000 (47,689) (62,720) 484 (744) 2,705 — 1,340,186 307,439 2,354,682 1,945 2,664,066 971,795 1,692,271 2,664,066	Unaudited Pro Forma Adjustments eSun for the year ended 31 July 2017 Note 7 Note 8 Note 9 Note 10 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 — (19,255) 3,867 — — 3,990 (196,298) (542,650) 3,299,148 (23,063) 2,733,435 2,328,476 1,962,450 — — (1,776,731) 404,959 2,733,435	The Enlarged Group for the year ended 31 July 2017 HK$’000 (47,689) (81,975) 4,351 (744) 2,705 3,990
			3,043,888
			(49,492) 5,653,830 (21,118)
			5,583,220

			3,485,990 2,097,230
			5,583,220

– VII-26 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(ix) Notes to the Unaudited Pro Forma Financial Information of the Enlarged GroupScenario II

Notes:

The adjustment represents the elimination of rental and building management fees recorded between LSD and eSun for the year ended 31 July 2017 as if the Acquisition had taken place on 1 August 2016.
The adjustment represents the financing for the Offer. LSD would incur additional borrowings of HK$1,900,000,000 and additional finance costs of approximately HK$62,450,000 for the year ended 31 July 2017 in connection with the utilisation of certain of the loan facilities to partially fund the consideration for the Offer.
Upon completion of the Acquisition, LSD will directly own 100% issued shares of eSun and indirectly own 50.6% of the issued shares of Lai Fung. The identifiable assets and liabilities of eSun will be accounted for in the consolidated financial statements of the Enlarged Group at their fair value at the date of completion of the Acquisition under the acquisition method of accounting in accordance with Hong Kong Financial Reporting Standard 3 (Revised) “Business Combination”. For the purpose of preparing the Unaudited Pro Forma Financial Information, the Directors have estimated the fair value of the identifiable assets and liabilities of eSun based on the assumption that the Acquisition was completed on 31 July 2017 or 1 August 2016, as appropriate.

The details of the fair value adjustments of Landed Properties are as follows:

Property, plant and equipment Properties under development Interests in joint ventures Completed properties for sale Assets classifed as held for sale Deferred tax liabilities Non-controlling interests of eSun Total	Fair values as at 31 July 2017 HK$’000 4,061,905 3,642,900 1,589,442 1,812,300 315,905 (4,813,276) (9,194,940) (2,585,764)	Carrying amounts as at 31 July 2017 HK$’000 3,041,562 1,561,523 1,438,287 993,460 278,531 (3,104,284) (8,104,670) (3,895,591)	Fair value adjustments as at 31 July 2017 HK$’000 1,020,343 2,081,377 151,155 818,840 37,374 (1,708,992) (1,090,270) 1,309,827

– VII-27 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Pursuant to the Tax Indemnity Deed, LSD has undertaken to indemnify Lai Fung in respect of certain potential PRC CIT and LAT payable or shared by Lai Fung in consequence of the disposal of certain property interests attributable to Lai Fung through its subsidiaries and its joint ventures as at 31 October 1997. During the year ended 31 July 2017, LSD paid under the tax indemnity approximately HK$493,936,000 in relation to PRC income tax and LAT which Lai Fung recorded as tax indemnity income in its consolidated income statement for the year ended 31 July 2017. For the year ended 31 July 2017, LSD reversed an overprovision for the tax indemnity in prior years of approximately HK$142,451,000 which was credited to its consolidated income statement. As at 31 July 2017, LSD recorded an aggregate provision for the tax indemnity of approximately HK$93,000,000 (1 August 2016: HK$729,387,000). Such provision would be adjusted upon the completion of the Acquisition.

The adjusted net assets attributable to owners of eSun as at 31 July 2017 and 1 August 2016, respectively, are calculated as follows:

As if the Acquisition had been taken place on 31 July 2017 Net assets attributable to owners of eSun as at 31 July 2017 Add: Fair value adjustments related to the Landed Properties, net of deferred tax liabilities and non-controlling interests of eSun as at 31 July 2017 Add: Adjustment of provision for tax indemnity as at 31 July 2017 for eSun’s 50.6% equity interest in Lai Fung (HK$93,000,000 x 50.6%) Adjusted net assets attributable to owners of eSun as at 31 July 2017 for the pro forma consolidated statement of fnancial position (a) As if the Acquisition had been taken place on 1 August 2016 Net assets attributable to owners of eSun as at 1 August 2016 Add: Fair value adjustments related to the Landed Properties, net of deferred tax liabilities and non-controlling interests of eSun as at 31 July 2017 Add: Effect on properties sold during the year ended 31 July 2017 Add: Adjustment of provision for tax indemnity as at 1 August 2016 for eSun’s 50.6% equity interest in Lai Fung (HK$729,387,000 x 50.6%) Adjusted net assets attributable to owners of eSun as at 1 August 2016 for the pro forma consolidated income statement and consolidated statement of cash fows (b)	HK$’000 9,118,200 1,309,827 47,058
	10,475,085

	8,599,258 1,309,827 340,199 369,070
	10,618,354

– VII-28 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

For the purpose of the pro forma consolidated income statement and consolidated statement of cash flows as if the Acquisition had been taken place on 1 August 2016, the fair value adjustments on Landed Properties are calculated on the fair values of Landed Properties as at 31 July 2017 and adjusted for the effect of properties sold by eSun during the year ended 31 July 2017, and resulted in decrease in completed properties for sale of approximately HK$88,956,000.
The adjustment represents the consolidation adjustments to derecognise the previously held equity interest in eSun and record the pro forma gain on disposal of the previously held equity interest in eSun as if the Acquisition had been taken place on 31 July 2017 and 1 August 2016, respectively.

HK$’000
#540,019
(3,368,263)
(172,144)
(3,000,388)
#429,811
(3,176,566)
(178,333)
(2,925,088)

LSD held 551,040,186 shares of eSun as at 31 July 2017 and at the current date, representing 36.94% equity interest in eSun. When calculating the fair values of equity interest in eSun held by LSD for the purpose of the pro forma loss on disposal of the previously held equity interest in eSun, management adopted the closing share price of HK$0.98 on 31 July 2017 and HK$0.78 on 1 August 2016, and assumed LSD held 551,040,186 shares of eSun, representing 36.94% equity interest in eSun, as at 1 August 2016.

– VII-29 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The adjustment represents the consolidation adjustments to eliminate the pre-acquisition reserves of eSun and record the pro forma gain on bargain purchase on acquisition of additional equity interest in eSun and Lai Fung.

The fair value of equity interest in Lai Fung is calculated as follows:

As if the Acquisition had been taken place on 31 July 2017 Net assets attributable to owners of Lai Fung as at 31 July 2017 Add: Fair value adjustments related to the Landed Properties, net of deferred tax liabilities and non-controlling interests of Lai Fung as at 31 July 2017 Add: Adjustment related to the Tax Indemnity as at 31 July 2017 Adjusted net assets attributable to owners of Lai Fung as at 31 July 2017 for the pro forma consolidated statement of fnancial position (c) As if the Acquisition had been taken place on 1 August 2016 Net assets attributable to owners of Lai Fung as at 1 August 2016 Add: Fair value adjustments related to the Landed Properties, net of deferred tax liabilities and non-controlling interests of Lai Fung as at 31 July 2017 Add: Effect on properties sold during the year ended 31 July 2017 Add: Adjustment related to the Tax Indemnity as at 1 August 2016 Adjusted net assets attributable to owners of Lai Fung as at 1 August 2016 for the pro forma consolidated income statement and consolidated statement of cash fows (d)	HK$’000 14,584,111 2,086,505 93,000
	16,763,616

	13,314,767 2,086,505 636,452 729,387
	16,767,111

– VII-30 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The pro forma gain on bargain purchase is calculated as follows:

As if the Acquisition had been taken place on 31 July 2017
Fair value of total identifable assets and liabilities
attributable to owners of eSun as at 31 July 2017
(a)
Less: Consideration paid for eSun Offers
Less: Fair value of 36.94% equity interest in eSun
as at 31 July 2017
Fair value of 24.40% equity interest in Lai Fung
as at 31 July 2017
(c)x24.40%
Less: Consideration paid for Lai Fung Offers
Less: Estimated direct costs attributable to the Acquisition
Pro forma gain on bargain purchase for pro forma consolidated
statement of fnancial position
As if the Acquisition had been taken place on 1 August 2016
Fair value of total identifable assets and liabilities
attributable to owners of eSun as at 1 August 2016
(b)
Less: Consideration paid for eSun Offers
Less: Fair value of 36.94% equity interest in eSun
as at 1 August 2016
Fair value of 24.40% equity interest in Lai Fung
as at 1 August 2016
(d)x24.40%
Less: Consideration paid for Lai Fung Offers
Less: Estimated direct costs attributable to the Acquisition
Pro forma gain on bargain purchase for pro forma consolidated
income statement and consolidated statement of cash fows

HK$’000
10,475,085
(1,265,765)
#(540,019)
4,090,322
(469,966)
(41,000)
12,248,657
10,618,354
(1,265,765)
#(429,811)
4,091,175
(469,966)
(41,000)
12,502,987

– VII-31 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is the text of a report, prepared for the sole purpose of inclusion in this Circular from the independent reporting accountant, Ernst & Young, Certified Public Accountants.

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

==> picture [86 x 70] intentionally omitted <==

22/F, CITIC Tower 1 Tim Mei Avenue Central, Hong Kong

To the Directors of Lai Sun Development Company Limited

We have completed our assurance engagement to report on the compilation of pro forma financial information of Lai Sun Development Company Limited (the “ Company ”) and its subsidiaries (hereinafter collectively referred to as the “ Group ”) by the directors of the Company (the “ Directors ”) for illustrative purposes only. The pro forma financial information consists of the pro forma consolidated statement of financial position as at 31 July 2017, the pro forma consolidated income statement and the pro forma consolidated statement of cash flows for the year then ended, and related notes as set out in Appendix VII of the circular dated 23 July 2018 issued by the Company (the “ Pro Forma Financial Information ”). The applicable criteria on the basis of which the Directors have compiled the Pro Forma Financial Information are described in Appendix VII.

The Pro Forma Financial Information has been compiled by the Directors to illustrate the impact of the (i) conditional voluntary general cash offer by HSBC on behalf of Transtrend Holdings Limited (the “ Offeror ”), a wholly-owned subsidiary of the Company, to acquire all of the issued shares of eSun Holdings Limited (“ eSun ”) (other than those already owned or agreed to be acquired by the Company, the Offeror or their respective subsidiaries) and to cancel all the outstanding share options of eSun; and (ii) the possible unconditional mandatory general cash offer by HSBC on behalf of the Offeror to acquire all of the issued shares of Lai Fung Holdings Limited (“ Lai Fung ”) (other than those already owned or agreed to be acquired by the Company, the Offeror, eSun or their respective subsidiaries) and to cancel all the outstanding share options of Lai Fung (the “ Transactions ”) on the Group’s financial position as at 31 July 2017, the Group’s financial performance and cash flows for the year then ended as if the Transactions had taken place at 31 July 2017 and 1 August 2016, respectively. As part of this process, information about the Group’s financial position, financial performance and cash flows has been extracted by the Directors from the Group’s financial statements for the year ended 31 July 2017, on which an annual report has been published.

– VII-32 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Directors’ responsibility for the Pro Forma Financial Information

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

Our independence and quality control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

Our firm applies Hong Kong Standard on Quality Control 1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements , and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting accountants’ responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the 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 accountants plan and perform procedures to obtain reasonable assurance about whether the Directors have compiled the Pro Forma Financial Information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the 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 Pro Forma Financial Information.

– VII-33 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The purpose of the Pro Forma Financial Information included in the Circular is solely to illustrate the impact of the Transactions on unadjusted financial information of the Group as if the Transactions 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 Transactions 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 Transactions, and to obtain sufficient appropriate evidence about whether:

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

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

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.

– VII-34 –

APPENDIX VII UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Opinion

In our opinion:

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

Yours faithfully,

Ernst & Young Certified Public Accountants Hong Kong

23 July 2018

– VII-35 –

APPENDIX VIII VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

The following is the full text of the letter and valuation report prepared for the purpose of incorporation into the eSun Composite Document, the circular of LSG dated 23 July 2018 and this circular received from Knight Frank Petty Limited, an independent valuer, in connection with the valuation as at 31 May 2018 of the market values of the property interests of eSun, its subsidiaries and associated companies which it has a direct or indirect interest of 30% or more of the voting rights.

==> picture [104 x 43] intentionally omitted <==

Knight Frank 4/F Shui On Centre 6-8 Harbour Road Wanchai Hong Kong T +852 2840 1177 F +852 2840 0600 www.knightfrank.com.hk

Board of Directors Lai Sun Garment (International) Limited 11th Floor Lai Sun Commercial Centre 680 Cheung Sha Wan Road Hong Kong Board of Directors Lai Sun Development Company Limited 11th Floor Lai Sun Commercial Centre 680 Cheung Sha Wan Road Hong Kong Board of Directors Transtrend Holdings Limited 11th Floor Lai Sun Commercial Centre 680 Cheung Sha Wan Road Hong Kong

Board of Directors eSun Holdings Limited 11th Floor Lai Sun Commercial Centre 680 Cheung Sha Wan Road Hong Kong 23 July 2018

– VIII-1 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Dear Sirs

Valuation of Various Property Interests in the People’s Republic of China, Hong Kong and Macao

In accordance with your instructions for us to value the property interests held by eSun Holdings Limited (“ eSun ”), its subsidiaries and associated companies which it has a direct or indirect interest of 30% or more of the voting rights (hereinafter together referred to in this letter and the attached valuation reports as the “ eSun Group ”) in the People’s Republic of China (the “ PRC ”), Hong Kong and Macao, we confirm that we have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market values of the property interests as at 31 May 2018.

Basis of Valuation

Our valuation is our opinion of the market value of the property interest which we would define as “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.”

The market value is the best price reasonably obtainable by the seller and the most advantageous price reasonably obtainable by the buyer. This estimate specifically excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangements, special considerations or concessions granted by anyone associated with the sale, or any element of value available only to a specific owner or purchaser. The market value of an asset or liability is also estimated without regard to costs of sale or purchase (or transaction) and without offset for any associated taxes or potential taxes.

In preparing our valuation report, we have complied with “The HKIS Valuation Standards 2017” published by the Hong Kong Institute of Surveyors, all requirements contained in the provision of Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited and Rule 11 of the Code on Takeovers and Mergers published by the Securities and Futures Commission.

Valuation Methodology

In forming our opinion of the values of the property interests in Groups I and III, we have valued the properties by using “Income Approach — term and reversion method” by capitalizing the net income shown on tenancy schedules handed to us by the eSun Group and made provisions for reversionary income potential. We have also made reference to sales evidence as available in the market.

We have valued the property interests in Group II by using Market Approach whenever market comparable transactions are available and assumed sale of property interests with the benefit of vacant possession.

– VIII-2 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

In valuing property interests in Group IV, we have valued the property interests on the basis that the properties will be developed and completed in accordance with the eSun Group’s latest development proposals provided to us. We have assumed that approvals for the proposals have been obtained without any onerous condition which would affect the values of the property interests. In arriving at our opinion of values, we have made reference to comparable transactions in the locality and also taken into account the construction costs that will be expended to reflect the quality of the completed developments.

Due to the specific purpose for which the buildings and structures of the cultural attractions portion of property no 21 have been designed, there is no readily identifiable market comparable, we have thus valued the property by Cost Approach. Our valuation is based on an estimate of the market value for the existing use of the land, plus the current Gross Replacement Cost of the improvements, less allowances for physical deterioration and all relevant forms of obsolescence and optimization, if any. We would define “Gross Replacement Cost” as the estimated cost of erecting the building or a modern substitute building having the same area as the existing building at price levels as at the valuation date. The estimated building cost includes professional fees and finance charges payable during the construction period and other associated expenses directly related to the construction of the building. We must state that cessation of the existing business (if any) would have significant impact on the market value of the property as derived by the Cost Approach. While the cultural attractions portion was under construction as at the date of the valuation, we relied upon the information including but not limited to the profit forecast of the cultural attractions provided that revenue of the cultural attractions will be able to sustain the future on-going operation.

For property interest no 24 in Group V which is subject to intergroup lease, we have valued by using “Income Approach — term and reversion method” by capitalizing the net income shown on tenancy schedules handed to us and made provisions for reversionary income potential. We have also made reference to sales evidence as available in the market.

For property interest nos 25 & 27 in Group V which are designated as common area according to supplemental deeds of mutual covenant, we therefore attributed no commercial value to these property interests. For the remaining property interests in Group V and VI, we have valued them by using Market Approach by making reference to sales evidence as available in the market.

Title Documents and Encumbrances

We have caused land searches to be made at the Land Registry for the Hong Kong properties valued and have been provided by the eSun Group with extracts of title documents relating to the property interests in the PRC. In addition, we have caused land searches to be made at the Conservatória do Registo Predial for the Macao property valued. However, we have not inspected the original documents to ascertain any amendments which may not appear on the copies handed to us by the eSun Group. In the course of our valuations, we have relied on the information given by the eSun Group and its PRC legal advisers, Allbright Law Offices, Guangda Law Firm and Guangdong G&Z Law Firm, regarding the title and other legal matters relating to the properties in the PRC.

– VIII-3 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

No allowance has been made in our report for any charges, mortgages or amounts owing on the property interests nor for any expenses or taxation which may be incurred in affecting a sale. Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions and outgoings of an onerous nature which could affect their values.

Source of Information

We have relied to a considerable extent on the information given to us by the eSun Group and the legal opinion of the eSun Group’s PRC legal advisers. We have no reason to doubt the truth and accuracy of the information provided to us by the eSun Group and/or its PRC legal advisers which is material to the valuation. We have accepted advice given by the eSun Group on such matters as planning approvals or statutory notices, easements, tenure, completion date of buildings, particulars of occupancy, tenancy summaries, joint-venture agreements, development schemes, construction costs, site and floor areas. Dimensions, measurements and areas included in the valuation reports attached are based on information provided to us and are therefore only approximations. We have not been able to carry out on-site measurements to verify the correctness of site and floor areas of the properties. We have exercised our due diligence in verifying the provided site and floor areas by checking against the relevant documents provided. Meanwhile, for the remaining portion of the properties without relevant supporting documents, we have further assumed that the site and floor areas shown on the documents handed to us are correct. We were also advised by the eSun Group that no material facts have been omitted from the information provided.

Inspection and Structural Condition

We have inspected the exterior and, where possible, the interior of the properties. The inspection was carried out by our Ocean Ruan, Jun Wang and Beny Chan in June 2018. However, we have not carried out investigations on site to determine the suitability of the ground conditions and the services, etc for any future development. Our valuations are prepared on the assumption that these aspects are satisfactory. Moreover, no structural survey has been made, but in the course of our inspection, we did not note any serious defects. We are not, however, able to report that the properties are free from rot, infestation or any other structural defects, nor were any tests carried out to any of the services.

Identity of Property to be valued

We exercised reasonable care and skill (but will not have an absolute obligation to the eSun Group) to ensure that the properties, identified by the property addresses in the instructions, are the properties inspected by us and contained within our valuation reports.

– VIII-4 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Environmental Issues

We are not environmental specialists and therefore we have not carried out any scientific investigations of sites or buildings to establish the existence or otherwise of any environmental contamination, nor have we undertaken searches of public archives to seek evidence of past activities that might identify potential for contamination. In the absence of appropriate investigations and where there is no apparent reason to suspect potential for contamination, our valuation is prepared on the assumption that the properties are unaffected. Where contamination is suspected or confirmed, but adequate investigation has not been carried out and made available to us, then the valuations will be qualified.

Compliance with Relevant Ordinances and Regulations

We have assumed that the properties have been constructed, occupied and used in full compliance with, and without contravention of any ordinances, statutory requirements and notices except only where otherwise stated. We have further assumed that, for any use of the properties upon which this report is based, any and all required licences, permits, certificates, consents, approvals and authorisation have been obtained, except only where otherwise stated.

Remarks

In our valuation, Knight Frank has prepared the valuation based on information and data available to us as at the valuation date. It must be recognised that the real estate market is subject to market fluctuations, while changes in policy direction and social environment could be immediate and have sweeping impact on the real estate market. It should therefore be noted that any market violation, policy and social changes or other unexpected incidents after the valuation date may affect the values of the properties.

According to the information provided by the eSun Group, the potential tax liability which would arise on the disposal of property interests of Groups V and VI in Hong Kong and Macao is mainly stamp duty, normally borne by the purchaser and property interests of Groups I, II, III and IV in the PRC are mainly PRC land appreciation tax (at progressive rates from 30% to 60% on the appreciation amount) and PRC corporate income tax (at 25% on the gain).

– VIII-5 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Currency

Unless otherwise stated, all sums stated in our valuation reports are in Hong Kong dollars. The exchange rates adopted for conversion are HK$1 = RMB0.8151 and HK$1 = M$1.03 as at the date of valuation.

Our summary of values and valuation reports are attached.

Yours faithfully For and on behalf of Knight Frank Petty Limited

Clement Leung

Clement Leung Thomas Lam MSC (FIN) MCIREA MRICS MHKIS RPS(GP) MCIREA FRICS FHKIS RPS(GP) RICS Registered Valuer RICS Registered Valuer Executive Director, Head of China Valuation Senior Director, Head of Valuation & Advisory & Advisory

Notes: Clement Leung is a qualified valuer who has 25 years of experiences in property valuation and consultancy services in the PRC and Hong Kong.

Thomas Lam is a qualified valuer who has 18 years of extensive experiences in market research, valuation and consultancy in the PRC, Hong Kong, Macao and the Asia Pacific region.

– VIII-6 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

SUMMARY OF VALUES

				Market value
				in existing state
		Market value in	Interest	attributable to
		existing state	attributable	the eSun Group
		as at	to the	as at
	Property	31 May 2018	eSun Group	31 May 2018
Group	I — Property interests held by the eSun Group in the PRC for investment		purpose
1.	Hong Kong Plaza	HK$7,566,000,000	50.6%	HK$3,828,396,000
	282 & 283 Huaihaizhong Road
	Huangpu District, Shanghai
	The PRC
	(portion owned by Shanghai Li Xing
	Real Estate Development Co Ltd)
2.	Various serviced apartment units in	HK$1,303,000,000	50.6%	HK$659,318,000
	North Tower
	Hong Kong Plaza
	282 Huaihaizhong Road
	Huangpu District, Shanghai
	The PRC
	(portion owned by Good Strategy Ltd)
3.	B3 Hui Yi Garden	HK$46,000,000	50.6%	HK$23,276,000
	No 18 of Alley 905, Huashan Road
	Xuhui District, Shanghai
	The PRC
4.	Commercial portion of Regents Park	HK$247,000,000	48.07%	HK$118,732,900
	88 Huichuan Road
	Changning District, Shanghai
	The PRC
5.	Various portions of	HK$1,304,000,000	50.6%	HK$659,824,000
	Shanghai May Flower Plaza
	the junction of Da Tong Road and
	Zhi Jiang Xi Road, Sujiaxiang
	Jing’an District, Shanghai
	The PRC

– VIII-7 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Market value in
Interest
existing state
attributable
as at
to the
Property
31 May 2018
eSun Group
6.
May Flower Plaza
HK$2,254,000,000
50.6%
68 Zhongshanwu Road
Yuexiu District, Guangzhou
Guangdong Province
The PRC
7.
Commercial portion of West Point
HK$335,300,000
50.6%
the junction of Zhongshan Qi Road
and Guangfu Road
Liwan District, Guangzhou
Guangdong Province
The PRC
8.
Various portions of
HK$280,500,000
50.6%
Stage I of Palm Spring
Caihong Planning Area
Westem District, Zhongshan
Guangdong Province
The PRC
9.
Lai Fung Tower
HK$3,245,600,000
50.6%
787 Dongfeng East Road
Yuexiu District, Guangzhou
Guangdong Province
The PRC
Sub-total:HK$16,581,400,000
Group II — Property interests held by the eSun Group in the PRC for sale purpose
10.
Unsold car parking spaces of
HK$249,000,000
48.07%
Regents Park
88 Huichuan Road
Changning District, Shanghai
The PRC

Market value
in existing state
attributable to
the eSun Group
as at
31 May 2018
HK$1,140,524,000
HK$169,661,800
HK$141,933,000
HK$1,642,273,600

HK$8,383,939,300
HK$119,694,300

– VIII-8 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

				Market value
				in existing state
		Market value in	Interest	attributable to
		existing state	attributable	the eSun Group
		as at	to the	as at
	Property	31 May 2018	eSun Group	31 May 2018
11.	Unsold car parking spaces of	HK$168,600,000	50.6%	HK$85,311,600
	Shanghai May Flower Plaza
	the junction of Da Tong Road and
	Zhi Jiang Xi Road, Sujiaxiang
	Jing’an District, Shanghai
	The PRC
12.	Unsold car parking spaces of	HK$98,800,000	50.6%	HK$49,992,800
	West Point
	the junction of Zhongshan Qi Road
	and Guangfu Road
	Liwan District, Guangzhou
	Guangdong Province
	The PRC
13.	Unsold car parking spaces of	HK$12,000,000	50.6%	HK$6,072,000
	King’s Park
	Nos 558-596/1006-1044
	Donghua Dong Road
	Yuexiu District, Guangzhou
	Guangdong Province
	The PRC
14.	Unsold portions of Stage I and II of	HK$1,296,500,000	50.6%	HK$656,029,000
	Palm Spring
	Caihong Planning Area
	Western District, Zhongshan
	Guangdong Province
	The PRC

– VIII-9 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Market value in
Interest
existing state
attributable
as at
to the
Property
31 May 2018
eSun Group
15.
Unsold portions of Dolce Vita
HK$73,200,000
24.04%
(Xunfeng Yujinsha Yuan)
Jinshazhou, Heng Sha
Baiyun District, Guangzhou
Guangdong Province
The PRC
16.
Unsold car parking spaces of Phase V of
HK$22,900,000
50.6%
Eastern Place
787 Dongfeng East Road
Yuexiu District, Guangzhou
Guangdong Province
The PRC
Sub-total:HK$1,921,000,000
Group III — Property interest held by the eSun Group in the PRC for owner occupation purpose
17.
Commercial portion of
HK$55,000,000
50.6%
Eastern Place
787 Dongfeng East Road
Yuexiu District, Guangzhou
Guangdong Province
The PRC
Sub-total:
HK$55,000,000
Group IV — Property interests held under development by the eSun Group in the PRC
18.
A commercial development
HK$1,834,000,000
50.6%
located at Tian Mu Road West
and Da Tong Road
Jing’an District, Shanghai
The PRC

Market value
in existing state
attributable to
the eSun Group
as at
31 May 2018
HK$17,597,280
HK$11,587,400

HK$946,284,380
HK$27,830,000

HK$27,830,000
HK$928,004,000

– VIII-10 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

				Market value
				in existing state
		Market value in	Interest	attributable to
		existing state	attributable	the eSun Group
		as at	to the	as at
	Property	31 May 2018	eSun Group	31 May 2018
19.	Haizhu Plaza	HK$1,540,000,000	50.6%	HK$779,240,000
	Chang Di Main Road
	Yuexiu District, Guangzhou
	Guangdong Province
	The PRC
20.	Remaining stage of Palm Spring	HK$1,540,300,000	50.6%	HK$779,391,800
	Caihong Planning Area
	Western District, Zhongshan
	Guangdong Province
	The PRC
21.	Two parcels of land located at the	HK$5,808,000,000	60.48%	HK$3,512,678,400
	east side of Yiwener Road
	south side of Caihong Road
	west side of Tianyu Road and
	north side of Hengqin Main Road
	Hengqin New Area, Zhuhai
	Guangdong Province
	The PRC
22.	A parcel of land located at	HK$1,014,000,000	50.6%	HK$513,084,000
	Wuliqiao Road 104 Jie Fang
	Huangpu District, Shanghai
	The PRC
		Sub-total:HK$11,736,300,000		HK$6,512,398,200
Group	V — Property interests held by the eSun Group in Hong Kong for owner		occupation purpose
23.	20th Floor of May Tower II and	HK$115,000,000	50.6%	HK$58,190,000
	Car Parking Space No 57 on
	Ground Floor of May Towers I and II
	Nos 5 and 7 May Road
	Mid-Levels
	Hong Kong

– VIII-11 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Market value in Interest existing state attributable as at to the Property 31 May 2018 eSun Group 24. 4th, 5th Floors and Roof, HK$137,000,000 100% East Commercial Block, South Horizons, No 18A South Horizon Drive, Ap Lei Chau, Hong Kong 25. Car Park Nos 7, 8 & 9 on no commercial value 100% Ground Floor, Forda Industrial Building, No 16 Wang Chau Road, Yuen Long, New Territories, Hong Kong 26. Store Room on 10th Floor, HK$72,000 100% Forda Industrial Building, No 16 Wang Chau Road, Yuen Long, New Territories, Hong Kong 27. Common Areas on 10th Floor, no commercial value 100% Forda Industrial Building, No 16 Wang Chau Road, Yuen Long, New Territories, Hong Kong Sub-total: HK$252,072,000 Group VI — Property interest held by the eSun Group in Macao for owner occupation purpose 28. Unit B on 25th Floor of Tower 3, HK$37,864,000 100% One Central Residences, Nos 28 - 248 Avenida de Sagres, Nos 18 - 52 Praceta 24 de Junho, Nos 945 — 973Y Avenida Dr. Sun Yat-Sen, Macao Sub-total: HK$37,864,000 Grand Total:HK$30,583,636,000	Market value in existing state attributable to the eSun Group as at 31 May 2018 HK$137,000,000 no commercial value HK$72,000 no commercial value
	HK$195,262,000
	HK$37,864,000
	HK$37,864,000
	HK$16,103,577,880

– VIII-12 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

VALUATION REPORT

Group I — Property interests held by the eSun Group in the PRC for investment purpose

Property

Description and tenure

Particulars of occupancy

Market Value in existing state as at 31 May 2018

1 Hong Kong Plaza Hong Kong Plaza is a composite 282 & 283 development comprising a 32-storey Huaihaizhong office tower (known as South Tower) Road and a 32-storey serviced apartment Huangpu District tower (known as North Tower), each Shanghai surmounting a 7-level (including 3 The PRC basement levels) commercial/car (portion owned by parking podium. The North Tower Shanghai Li Xing and South Tower are connected Real Estate together by a flyover. The property Development was completed in October 1997 and Co Ltd) refurbished in 2011.

The property comprises various portions of Hong Kong Plaza owned by Shanghai Li Xing Real Estate Development Co Ltd with gross floor areas as follows:

South Tower Use Floor Commercial B1 1 2 3 4 Offce 6-38 Total:	Approximate Gross Floor Area sq m sq ft 3,275.25 35,255 4,174.85 44,938 4,098.90 44,120 4,702.15 50,614 4,812.51 51,802 33,639.52 362,096 54,703.18 588,825	Approximate Gross Floor Area sq m sq ft 3,275.25 35,255 4,174.85 44,938 4,098.90 44,120 4,702.15 50,614 4,812.51 51,802 33,639.52 362,096 54,703.18 588,825
		588,825

According to the information HK$7,566,000,000 provided, office and (HONG KONG commercial portion of the DOLLARS property with a total gross SEVEN BILLION floor area of approximately FIVE HUNDRED 30,334 sq m and a total AND SIXTY SIX leasable area of approximately MILLION ONLY) 20,792 sq m respectively is let under various tenancies (50.6% interest yielding a total monthly attributable rental of approximately to the eSun Group: RMB20,990,000 with the HK$3,828,396,000) last tenancy expiring on 15 November 2026 whilst the (please see note 7) remaining portion of the property is vacant or for selfuse.

In addition, the whole serviced apartment portion (including the subject serviced apartment portion and that stated in property no. 2 in this report) of the development is let under various short term tenancies and managed by Ascott Property Management (Shanghai) Co., Ltd. yielding an annual gross income of approximately RMB104,700,000.

– VIII-13 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Property

Description and tenure

Particulars of occupancy

Market Value in existing state as at 31 May 2018

North Tower Use Floor Commercial B1 1 2 3 4 Commercial/ Club House/ Restaurant 6-7 Serviced Apartment 8-38 Total:	Approximate Gross Floor Area sq m sq ft 2,958.93 31,850 3,952.47 42,544 3,970.76 42,741 4,636.30 49,905 4,622.00 49,751 2,314.46 24,913 13,332.28 143,509 35,787.20 385,213	Approximate Gross Floor Area sq m sq ft 2,958.93 31,850 3,952.47 42,544 3,970.76 42,741 4,636.30 49,905 4,622.00 49,751 2,314.46 24,913 13,332.28 143,509 35,787.20 385,213
		385,213

The property also comprises a total of 350 car parking spaces in B1 to B3 levels of the podium and various advertising boards.

The land use rights of the property have been granted for a term from 16 September 1992 to 15 September 2042.

– VIII-14 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Notes:

Pursuant to two State-owned Land Use Right Certificates Nos 001161 and 001162 both issued by the Shanghai Real Estate Administration Bureau and dated 17 July 1995, the titles to the property with a total site area of 14,645 sq m are both held by Shanghai Li Xing Real Estate Development Co Ltd (“ Shanghai Li Xing ”), a 50.6% owned subsidiary of eSun, for a common term commencing from 16 September 1992 to 15 September 2042 for commercial and office uses.
Pursuant to five Real Estate Title Certificates Nos Hu Fang Di Shi Zi (1998) Di 002601, Hu Fang Di Shi Zi (2001) Di 007656, Hu Fang Di Lu Zi (2008) Di 002196, Hu Fang Di Lu Zi (2011) Di 000751 and Hu (2017) Huang Zi 001203 all issued by the Shanghai Real Estate Administration Bureau dated 25 June 1998, 10 October 2001, 31 August 2008, 29 March 2011 and 14 February 2017 respectively, the title to portion of the property with respective gross floor areas of 69,731.66 sq m, 1,211.83 sq m, 130.91 sq m, 130.91 sq m and 130.91 sq m is held by Shanghai Li Xing for composite use (refer to whole South Tower of the property including basement). As advised by eSun, portion of the property under title certificate No. Hu Fang Di Shi Zi (1998) Di 002601 has been sold.
Pursuant to the Shanghai Certificate of Real Estate Ownership No Hu Fang Di Lu Zi (2011) Di 000021 issued by the Shanghai Planning, Land and Resources Administration Bureau dated 4 January 2011, the title to portion of the property with a total gross floor area of 44,132.55 sq m is held by Shanghai Li Xing for office, residential, commercial and others uses (refer to North Tower of the property including basement).
Pursuant to twenty three Shanghai Certificates of Real Estate Ownership all issued by the Shanghai Planning, Land and Resources Administration Bureau, the title to portion of the property with a total gross floor area of 2,192.45 sq m is held by Shanghai Li Xing for apartment use (refer to North Tower of the property). Details of which are as follows:

Certifcate No
Tower
Unit
Use
1.
Hu Fang Di Lu Zi (2008) Di 002406
North
2612
Apartment
2.
Hu Fang Di Lu Zi (2009) Di 003023
North
2807
Apartment
3.
Hu Fang Di Lu Zi (2009) Di 003102
North
2805
Apartment
4.
Hu Fang Di Lu Zi (2009) Di 004295
North
2512
Apartment
5.
Hu Fang Di Lu Zi (2009) Di 004300
North
2804
Apartment
6.
Hu Fang Di Lu Zi (2009) Di 004466
North
3107
Apartment
7.
Hu Fang Di Lu Zi (2010) Di 000094
North
2810
Apartment
8.
Hu Fang Di Lu Zi (2010) Di 000479
North
2205
Apartment
9.
Hu Fang Di Lu Zi (2010) Di 000489
North
2306
Apartment
10.
Hu Fang Di Lu Zi (2010) Di 000574
North
2501
Apartment
11.
Hu Fang Di Lu Zi (2010) Di 000609
North
2811
Apartment
12.
Hu Fang Di Lu Zi (2010) Di 000675
North
2604
Apartment
13.
Hu Fang Di Lu Zi (2010) Di 000797
North
2209
Apartment
14.
Hu Fang Di Lu Zi (2010) Di 001134
North
2505
Apartment
15.
Hu Fang Di Lu Zi (2010) Di 001310
North
2212
Apartment
16.
Hu Fang Di Lu Zi (2010) Di 001348
North
2608
Apartment
17.
Hu Fang Di Lu Zi (2010) Di 001349
North
2812
Apartment
18.
Hu Fang Di Lu Zi (2010) Di 001350
North
2801
Apartment
19.
Hu Fang Di Lu Zi (2010) Di 002334
North
2705
Apartment
20.
Hu Fang Di Huang Zi (2012) Di 052466
North
2202
Apartment
21.
Hu Fang Di Huang Zi (2013) Di 052704
North
2304
Apartment
22.
Hu Fang Di Huang Zi (2014) Di 051673
North
2504
Apartment
23.
Hu Fang Di Huang Zi (2016) Di 052998
North
2208
Apartment
Total:

Gross Floor Area
64.92 sq m
127.41 sq m
97.33 sq m
64.92 sq m
98.39 sq m
127.41 sq m
133.96 sq m
95.45 sq m
131.19 sq m
64.92 sq m
116.25 sq m
98.39 sq m
95.21 sq m
97.33 sq m
62.93 sq m
97.33 sq m
64.92 sq m
64.92 sq m
97.33 sq m
99.71 sq m
98.39 sq m
98.39 sq m
95.45 sq m

2,192.45 sq m

– VIII-15 –

APPENDIX VIII VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

Pursuant to the Equity Joint Venture Contract and Supplemental Contracts all entered into among Shanghai Central City Enterprises (Group) Real Estate Company Limited (“ Party A ”), Sunlite Investment Ltd (“ Party B ”), Shanghai Grand Development Co Ltd (“ Party C ”) and Tai Hong Company Limited (“ Party D ”) dated 26 October 1992, 31 May 1995, 18 March 2000 and 8 August 2001 respectively, all parties agreed to establish a joint-venture company named Shanghai Li Xing Real Estate Development Co Ltd. The salient conditions stipulated in the Joint Venture Contract and the Supplemental Contracts are, interalia, as follows:

(i) Total investment amount : US$105,000,000 (ii) Registered Capital : US$36,000,000 (iii) Period of operation : 50 years (iv) Profit-sharing/risk-bearing ratio : According to the respective shares of each party in the registered capital

Pursuant to the Business Licence with Unified Social Credit No 913100006072415998 dated 18 July 2017, Shanghai Li Xing was established with an operation period from 28 April 1993 to 27 April 2043.
Pursuant to the management agreement entered into between Shanghai Li Xing and Ascott Property Management (Shanghai) Co., Ltd. (“ Ascott ”) on 5 May 2009, Ascott agreed to provide certain management services to Shanghai Li Xing in relation to units of serviced apartments owned by the eSun Group. The salient conditions stipulated in the management agreement are, inter-alia, as follows:

(i) Term : an initial term of 10 years commencing from the date when the official operations and leasing activity of the serviced apartments commence and renewable for two successive terms of five years at the option of Ascott and subject to the agreement of Shanghai Li Xing (ii) Base management fee : 2% of total revenue + X% of gross operating profit (“ GOP ”) (X=4 if GOP margin is less than 50%; X=5 if GOP margin is less than 55% but more than or equal to 50%; X=5.5 if GOP margin is less than 60% but more than or equal to 55%; and X=6 if GOP margin is more than or equal to 60%)

(iii) Other service fee : — RMB160 per serviced apartment unit per month for provision of computer modular programs for use in connection with the management and operation of a serviced apartment
— RMB2,000,000 per annum adjusted annually from year 3 onwards in accordance with the Singapore Consumer Price Index subject to a cap of RMB2,500,000 per annum for global marketing services and use of the intellectual property rights of Ascott Group

In the course of our valuation, we have taken into account of the above-mentioned management agreement.

We have been provided with the eSun Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:
(i) Shanghai Li Xing legally owns the building ownership of the property;
(ii) Portion of the property is subject to mortgage and the mortgage is valid and enforceable;
(iii) Shanghai Li Xing can sell, lease, transfer or re-mortgage the property according to the relevant laws and regulations and subject to approval from the mortgagee; and
(iv) Except for the mortgage mentioned in note (8) (ii), the property is free from encumbrances.

– VIII-16 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Description and tenure

Property

2 Various serviced Hong Kong Plaza is a composite apartment units development comprising a 32-storey in North Tower office tower (known as South Hong Kong Plaza Tower) and a 32-storey serviced 282 Huaihaizhong apartment tower (known as North Road Tower), surmounting a common Huangpu District 7-level (including 3 basement levels) Shanghai commercial/car parking podium. The The PRC North Tower and South Tower are (portion owned by connected together by a flyover. The Good Strategy Ltd) property was completed in October 1997 and refurbished in 2011.

(please see note 2 for details) The property comprises various serviced apartment units in the North Tower of Hong Kong Plaza owned by Good Strategy Ltd with a total gross floor area of approximately 19,672.77 sq m (211,758 sq ft). The gross floor area of each unit ranges from 60.70 sq m (653 sq ft) to 276.98 sq m (2,981 sq ft).

Market Value in existing state as at 31 May 2018

Particulars of occupancy

The whole serviced apartment HK$1,303,000,000 portion (including the subject (HONG KONG property and the serviced DOLLARS apartment portion stated in ONE BILLION property no. 1 in this report) THREE of the development is let HUNDRED AND under various short term THREE MILLION tenancies and managed by ONLY) Ascott Property Management (Shanghai) Co., Ltd. (50.6% interest yielding an annual gross attributable income of approximately to the eSun Group: RMB104,700,000. HK$659,318,000)

(please see note 3)

The land use rights of the property have been granted for a term commencing from 3 January 2000 to 15 September 2042.

– VIII-17 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Notes:

Pursuant to 181 Real Estate Title Certificates Nos Hu Fang Di Shi Zi (2000) Di 000372-000395, 000410-000451, 000454-000458, 000485-000507, 000510-000569, 000572-000597 and 000640 all issued by the Shanghai Real Estate and Land Administration Bureau, the property with a total gross floor area of approximately 19,672.77 sq m is held by Good Strategy Limited, a 50.6% owned subsidiary of eSun, for composite use.
The property comprises Unit Nos 1 to 13 on each of 15th to 21st floors and Unit Nos 1 to 6 on each of 34th to 36th floors, Unit Nos 3, 6, 7 and 10 on 22nd floor, Unit Nos 3, 7, 10 and 11 on 23rd floor, Unit Nos 3, 6, 7 and 11 on 25th floor, Unit Nos 2, 3, 6, 7, 10 and 11 on 26th floor, Unit Nos 2, 3, 6, 7, 10 and 11 on 27th floor, Unit Nos 2, 3, and 6 on 28th floor, Unit Nos 2, 3, 6, 7, 10 and 11 on 29th floor, Unit Nos 2, 3, 6 and 11 on 30th floor, Unit Nos 2, 3, 4, 6, 9, 10, 11 and 12 on 31st floor, Unit Nos 1, 2, 3, 4, 8, 10, 11 and 12 on 32nd floor and Unit Nos 1, 2, 3, 4, 9, 10, 11 and 12 on 33rd floor.
Pursuant to the management agreement entered into between Shanghai Li Xing Real Estate Development Co Ltd (“ Shanghai Li Xing ”) and Ascott Property Management (Shanghai) Co., Ltd. (“ Ascott ”) on 5 May 2009, Ascott agreed to provide certain management services to Shanghai Li Xing in relation to units of serviced apartments owned by the eSun Group. The salient conditions stipulated in the management agreement are, inter-alia, as follows:
(i) Term : an initial term of 10 years commencing from the date when the official operations and leasing activity of the serviced apartments commence and renewable for two successive terms of five years at the option of Ascott and subject to the agreement of Shanghai Li Xing
(ii) Base management fee : 2% of total revenue + X% of gross operating profit (“ GOP ”) (X=4 if GOP margin is less than 50%;
- X=5 if GOP margin is less than 55% but more than or equal to 50%;
- X=5.5 if GOP margin is less than 60% but more than or equal to 55%; and X=6 if GOP margin is more than or equal to 60%)
(iii) Other service fee : — RMB160 per serviced apartment unit per month for provision of computer modular programs for use in connection with the management and operation of a serviced apartment
- RMB2,000,000 per annum adjusted annually from year 3 onwards in accordance with the Singapore Consumer Price Index subject to a cap of RMB2,500,000 per annum for global marketing services and use of the intellectual property rights of Ascott Group

In the course of our valuation, we have taken into account of the above-mentioned management agreement.

We have been provided with the eSun Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:
(i) Good Strategy Limited legally owns the building ownership of the property;
(ii) The property is subject to mortgage and the mortgage is valid and enforceable;
(iii) Good Strategy Limited can sell, lease, transfer or re-mortgage the property according to the relevant laws and regulations and subject to approval from the mortgagee; and
(iv) Except for the mortgage mentioned in note (4) (ii), the property is free from encumbrances.

– VIII-18 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Property

Description and tenure

Particulars of occupancy

Market Value in existing state as at 31 May 2018

3 B3 Hui Yi Garden The property comprises a 3-storey No 18 of detached house, a garden and a car Alley 905 parking lot all standing on a levelled Huashan Road site with an area of 415.98 sq m (4,478 Xuhui District sq ft). Shanghai The PRC The 3-storey detached house is of brick/reinforced concrete structure completed in 1993 with a total gross floor area of approximately 317.80 sq m (3,421 sq ft) and the site area of the garden is approximately 179 sq m (1,927 sq ft).

As advised, the property is HK$46,000,000 currently vacant. (HONG KONG DOLLARS FORTY SIX MILLION ONLY)

(50.6% interest attributable to the eSun Group: HK$23,276,000)

(please see note 2)

The land use rights of the property have been granted for an unspecified term (please see note 2 below for details) .

Notes:

Pursuant to the Real Estate Title Certificate No Hu Fang Di Shi Zi (2002) Di 010907 dated 30 October 2002 issued by the Shanghai Real Estate and Land Resources Administration Bureau, the title to the property with a site area of approximately 415.98 sq m and the 3-storey building with a gross floor area of approximately 317.80 sq m is vested in Canvex Limited, a 50.6% owned subsidiary of eSun, for residential use for an unspecified term.
As advised by eSun, land use rights of the property will be granted for a land use right term of 70 years for residential use subject to a land premium of approximately RMB6,360,000 and we have deducted the aforesaid land premium in the course of our valuation.
We have been provided with the eSun Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:
(i) Canvex Limited legally owns the building ownership of the property;
(ii) Canvex Limited can sell, lease, transfer or mortgage the property according to the relevant laws and regulations; and
(iii) The property is free from mortgage and other encumbrances.

– VIII-19 –

APPENDIX VIII

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

Property

Description and tenure

Particulars of occupancy

Market Value in existing state as at 31 May 2018

4 Commercial Regents Park (the “ Development ”) is portion of a large-scale residential/commercial Regents Park composite development developed in 88 Huichuan two phases. Road Changning The property comprises commercial District portion of the Development with a Shanghai total gross floor area of approximately The PRC 7,623.79 sq m (82,062 sq ft) completed in 2006.

The land use rights of the Development have been granted for a term of 70 years commencing from 4 May 1996 for residential use.

According to the information HK$247,000,000 provided, the property (HONG KONG is fully leased subject to DOLLARS various tenancies yielding TWO HUNDRED a total monthly rental of AND FORTY approximately RMB1,430,000 SEVEN MILLION with the last tenancy expiring ONLY) on 15 March 2027. (48.07% interest attributable to the eSun Group: HK$118,732,900)

Notes:

Pursuant to the Shanghai Real Estate Title Certificate No Hu Fang Di Chang Zi (2006) Di 010832 issued by the Shanghai Housing and Land Resources Administration Bureau dated 10 June 2006, the title to portion of the Development (Phase I and basement car park) with a total gross floor area of 114,009.40 sq m is held by Shanghai Wa Yee Real Estate Development Co., Limited (“ Shanghai Wa Yee ”), a 48.07% owned subsidiary of eSun, for a land use rights term of 70 years from 4 May 1996 to 3 May 2066 for residential use. As advised by eSun, portion of the property under this Title Certificate has been sold.
Pursuant to the Equity Joint Venture Contract entered into between Kingscord Investment Limited, interest held in trust for Lai Fung Holdings Limited (a 50.6% owned subsidiary of eSun), (“ Party A ”), Wide Angle Development Limited, (a 50.6% owned subsidiary of eSun), (“ Party B ”) and 上海長寧房地產（集團）公司 (Shanghai Changning Real Estate (Group) Company) (“ Party C ”) on 1 March 1996, all parties agreed to establish a joint-venture company named Shanghai Wa Yee Real Estate Development Co., Limited. The said contract contains, inter-alia, the following salient conditions:

(i) Total investment amount : US$25,000,000

(ii) Registered capital : US$10,000,000 Party A : 70% Party B : 25% Party C : 5% (iii) Period of operation : 70 years

Pursuant to the Business Licence with Unified Social Credit No 9131000060737771XE dated 3 June 2016, Shanghai Wa Yee was established with an operation period from 3 September 1997 to 19 August 2067.
We have been provided with the eSun Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:
(i) Shanghai Wa Yee legally owns the building ownership of the property;
(ii) Shanghai Wa Yee can sell, lease, transfer or mortgage the property according to the relevant laws and regulations; and
(iii) The property is free from mortgage and other encumbrances.

– VIII-20 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Description and tenure

Property

5 Various portions Shanghai May Flower Plaza (the of Shanghai “ Development ”) is a composite May Flower Plaza development with residential and the junction of office apartment towers erected Da Tong Road on a commercial podium. The and Development also comprises a Zhi Jiang Xi Road 3-storey basement for car park use. Sujiaxiang Jing’an District The property comprises commercial Shanghai portion and 239 office apartment units The PRC in Tower 4 of the Development with a total gross floor area of approximately 29,757.87 sq m (320,314 sq ft) and 13,363.58 sq m (143,846 sq ft) respectively completed in 2011 with gross floor areas as follows:

Use/Level Commercial (Basement 1) Commercial (Level 1) Commercial (Level 2) Commercial (Level 3) Commercial (Level 4) Commercial (Level 5) Offce apartment Total:	Approximate Gross Floor Area sq m sq ft 11,961.06 128,749 6,413.88 69,039 7,260.09 78,148 1,541.54 16,593 1,639.54 17,648 941.76 10,137 13,363.58 143,846 43,121.45 464,160	Approximate Gross Floor Area sq m sq ft 11,961.06 128,749 6,413.88 69,039 7,260.09 78,148 1,541.54 16,593 1,639.54 17,648 941.76 10,137 13,363.58 143,846 43,121.45 464,160
		464,160

Market Value in existing state as at 31 May 2018

Particulars of occupancy

HK$1,304,000,000 (HONG KONG DOLLARS ONE BILLION THREE HUNDRED AND FOUR MILLION ONLY)

According to the information provided, commercial portion of the property with a total leasable area of approximately 25,527 sq m is let under various tenancies yielding a total monthly rental of approximately RMB2,440,000 with the last tenancy expiring on

on (50.6% interest 14 September 2027 whilst the attributable remaining commercial portion to the eSun Group: of the property is vacant or for HK$659,824,000) self-use.

(please see note 7)

The office apartment portion of the property is currently operated as serviced apartment.

The land use rights of the property have been granted for terms of 70 years for residential use, 40 years for commercial use and 50 years for office use commencing from 5 February 2007.

– VIII-21 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Notes:

Pursuant to the Shanghai Certificate of Real Estate Ownership Hu Fang Di Zha Zi No (2007) 017286 issued by the Shanghai Housing and Land Resources Administration Bureau dated 12 November 2007, the land use rights of the property, having a site area of 19,742 sq m, is vested in Shanghai Hu Xin Real Estate Development Co., Ltd (“ Shanghai Hu Xin ”), a 50.6% owned subsidiary of eSun, for land use rights terms of 70 years for residential use, 40 years for commercial use and 50 years for office use commencing from 5 February 2007.
Pursuant to the Shanghai Certificate of Real Estate Ownership No Hu Fang Di Zha Zi (2012) Di 006136 issued by the Shanghai Planning, Land and Resources Administration Bureau dated 30 June 2012, the title to the Development with a total gross floor area of 137,129.94 sq m is held by Shanghai Hu Xin.
Pursuant to the Equity Joint Venture Contract entered into between 上海和田城市建設開發公司 (Shanghai He Tian City Construction Development Co) (“ Party A ”), Kingscord Investment Limited (“ Party B ”) and Fore Bright Limited (“ Party C ”), all parties agreed to establish a joint venture company named Shanghai Hu Xin Real Estate Development Co., Ltd. Both Party B and Party C are 50.6% owned subsidiaries of eSun. The said contract contains, inter-alia, the following salient conditions:

(i) Total investment amount : US$80,000,000 (ii) Registered capital : US$40,000,000 Party A : 5% Party B : 55% Party C : 40% (iii) Period of operation : 70 years (iv) Profit sharing/risk : According to the respective shares of each party in the registered capital bearing ratio

Pursuant to the Agreement for Share Transfer, Party A agreed to sell its entire interest in Shanghai Hu Xin to Party B. Consequently, the interest of Party B in Shanghai Hu Xin is 60%.
Pursuant to the Business Licence with Unified Social Credit No 91310000607350656K dated 4 March 2016, Shanghai Hu Xin was established with an operation period from 23 April 1995 to 22 April 2065.
Pursuant to the Construction Work Completion Recording Certificate No 2011SH0470 dated 13 December 2011, the construction work of the Development with a total gross floor area of 147,923 sq m was completed and recorded.
As per your specific terms of instruction, we have valued the office apartment portion of the property on vacant possession basis.
We have been provided with the eSun Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:
(i) Shanghai Hu Xin legally owns the building ownership of the property;
(ii) Shanghai Hu Xin can sell, lease, transfer or mortgage the property according to the relevant laws and regulations; and
(iii) The property is free from mortgage and other encumbrances.

– VIII-22 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Description and tenure

Property

6 May Flower Plaza May Flower Plaza is erected on an 68 Zhongshanwu irregular-shaped site with an area of Road approximately 3,912.27 sq m (42,112 Yuexiu District sq ft). Guangzhou Guangdong The property comprises the whole Province of May Flower Plaza including a The PRC 13-storey office and commercial tower erected over four basement levels completed in 2005 with approximate gross floor areas (excluding public ancillary facilities area of about 1,037.04 sq m) as follows:

Use Floor Car park B4 Car park B3 Retail/Car park B2 Retail/Car park B1 Retail L1 Retail L2 Retail L3 Retail L4 Retail L5 Cinema L6 Cinema/Offce L7 Retail L8 Retail L9 Offce L10 Offce L11 Offce L12 Offce L13 Total:	Approximate Gross Floor Area sq m sq ft 3,864.36 41,596 3,677.21 39,581 3,430.32 36,924 2,544.93 27,394 2,288.92 24,638 4,245.21 45,695 4,103.83 44,174 3,978.91 42,829 3,406.65 36,669 3,310.88 35,638 1,732.81 18,652 3,363.03 36,200 2,140.67 23,042 2,079.35 22,382 1,760.05 18,945 1,769.96 19,052 1,769.96 19,052 49,467.05 532,463	Approximate Gross Floor Area sq m sq ft 3,864.36 41,596 3,677.21 39,581 3,430.32 36,924 2,544.93 27,394 2,288.92 24,638 4,245.21 45,695 4,103.83 44,174 3,978.91 42,829 3,406.65 36,669 3,310.88 35,638 1,732.81 18,652 3,363.03 36,200 2,140.67 23,042 2,079.35 22,382 1,760.05 18,945 1,769.96 19,052 1,769.96 19,052 49,467.05 532,463
		532,463

Market Value in existing state as at 31 May 2018

Particulars of occupancy

According to the information HK$2,254,000,000 provided, office and retail (HONG KONG portion of the property DOLLARS (including cinema) with TWO BILLION a total gross floor area of TWO HUNDRED approximately 40,019 sq m is AND FIFTY FOUR subject to various tenancies MILLION ONLY) yielding a total monthly rental of approximately (50.6% interest RMB7,520,000 with the attributable last tenancy expiring on 31 to the eSun Group: October 2030 whilst the HK$1,140,524,000) remaining portion of the property is vacant or for selfuse.

The basement level of the property accommodates a total of approximately 136 car parking spaces and the property also comprises various advertising boards.

The land use rights of the property have been granted for terms of 40 years for commercial use and 50 years for other uses commencing from 14 October 1997.

– VIII-23 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Notes:

Pursuant to nineteen Guangzhou Real Estate Title Certificates all issued by the Guangzhou Land Resources and Real Estate Administration Bureau in 2016, the title to the property with a total gross floor area of approximately 49,467.05 sq m is vested in Guangzhou Jieli Real Estate Co Ltd (“ Guangzhou Jieli ”), a 50.6% owned subsidiary of eSun. Details of which are as follows:

Certificate No

Certifcate No
Level
Use
1.
Yue (2016) Guangzhou Shi Bu Dong Chan Quan
Di 00243486
Basement 4
Car park
2.
Yue (2016) Guangzhou Shi Bu Dong Chan Quan
Di 00243505
Basement 3
Car park
3.
Yue (2016) Guangzhou Shi Bu Dong Chan Quan
Di 00243488
Basement 2
Commercial and catering
4.
Yue (2016) Guangzhou Shi Bu Dong Chan Quan
Di 00243489
Basement 2
Car park
5.
Yue (2016) Guangzhou Shi Bu Dong Chan Quan
Di 00243490
Basement 1
Commercial and catering
6.
Yue (2016) Guangzhou Shi Bu Dong Chan Quan
Di 00243491
Basement 1
Car park
7.
Yue (2016) Guangzhou Shi Bu Dong Chan Quan
Di 00243492
Level 1
Commercial
8.
Yue (2016) Guangzhou Shi Bu Dong Chan Quan
Di 00243493
Level 2
Commercial and catering
9.
Yue (2016) Guangzhou Shi Bu Dong Chan Quan
Di 00243494
Level 3
Commercial and catering
10.
Yue (2016) Guangzhou Shi Bu Dong Chan Quan
Di 00243503
Level 4
Commercial
11.
Yue (2016) Guangzhou Shi Bu Dong Chan Quan
Di 00243495
Level 5
Catering
12.
Yue (2016) Guangzhou Shi Bu Dong Chan Quan
Di 00243496
Level 6
Cinema
13.
Yue (2016) Guangzhou Shi Bu Dong Chan Quan
Di 00243497
Level 7
Cinema
14.
Yue (2016) Guangzhou Shi Bu Dong Chan Quan
Di 00243498
Level 8
Catering
15.
Yue (2016) Guangzhou Shi Bu Dong Chan Quan
Di 00243487
Level 9
Catering
16.
Yue (2016) Guangzhou Shi Bu Dong Chan Quan
Di 00243499
Level 10
Offce
17.
Yue (2016) Guangzhou Shi Bu Dong Chan Quan
Di 00243500
Level 11
Offce
18.
Yue (2016) Guangzhou Shi Bu Dong Chan Quan
Di 00243501
Level 12
Offce
19.
Yue (2016) Guangzhou Shi Bu Dong Chan Quan
Di 00243502
Level 13
Offce
Total:

Gross Floor Area
sq m
3,864.36
3,677.21
2,707.16
723.16
1,927.46
617.47
2,288.92
4,245.21
4,103.83
3,978.91
3,406.65
3,310.88
1,732.81
3,363.03
2,140.67
2,079.35
1,760.05
1,769.96
1,769.96

49,467.05

Pursuant to the State-owned Land Use Right Certificate No Sui Fu Guo Yong (1997) Zi Di Te 028 issued by the People’s Government of Guangzhou dated 14 October 1997, the title to the property with a site area of approximately 5,782 sq m is held by Guangzhou Jieli for land use rights terms of 70 years for residential use, 40 years for commercial uses and 50 years for other uses.
Pursuant to the Business Licence No Wai S0102014023301 dated 11 July 2016, Guangzhou Jieli was established with an operation period from 31 December 1993 to 31 December 2033.
We have been provided with the eSun Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:
(i) Guangzhou Jieli legally owns the property;
(ii) The property is subject to a mortgage and the mortgage is valid and enforceable;
(iii) Guangzhou Jieli can sell, lease or transfer the property according to the relevant laws and regulations and subject to approval from the mortgagee; and
(iv) Except for the mortgage mentioned in note (4) (ii), the property is free from encumbrances.

– VIII-24 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Description and tenure

Property

7 Commercial West Point (the “ Development ”) is a portion of composite development comprising a West Point residential tower and an office tower the junction of both erected on a 4-level commercial Zhongshan Qi podium and a 2-level basement car Road and park completed around 2010. Guangfu Road Liwan District The property comprises the Guangzhou commercial portion on Levels 1 to 4 of Guangdong the Development having a total gross Province floor area of approximately 16,940.18 The PRC sq m (182,344 sq ft) with gross floor areas as follows:

Use Level Retail Level 1 Retail Level 2 Retail Level 3 Retail Level 4 Sub-total: Clubhouse and kiosk Total:	Approximate Gross Floor Area sq m sq ft 3,158.96 34,003 4,384.20 47,192 4,546.58 48,939 3,886.49 41,834 15,976.23 171,968 963.95 10,376 16,940.18 182,344	Approximate Gross Floor Area sq m sq ft 3,158.96 34,003 4,384.20 47,192 4,546.58 48,939 3,886.49 41,834 15,976.23 171,968 963.95 10,376 16,940.18 182,344
		171,968 10,376
		182,344

Market Value in existing state as at 31 May 2018

Particulars of occupancy

According to the information HK$335,300,000 provided, portion of the (HONG KONG property with a total gross DOLLARS floor area of approximately THREE 15,976 sq m is subject to HUNDRED various tenancies yielding THIRTY FIVE a total monthly rental of MILLION approximately RMB1,190,000 AND THREE with last tenancy expiring on HUNDRED 30 April 2024 whilst the THOUSAND remaining portion is vacant ONLY) or for self-use.

(50.6% interest attributable to the eSun Group: HK$169,661,800)

The land use rights of the Development have been granted for terms of 70 years for residential use, 40 years for commercial, tourism and entertainment uses and 50 years for other use.

– VIII-25 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Notes:

Pursuant to seven Guangzhou Real Estate Title Certificates Nos Yue Fang Di Quan Zheng Sui Zi Di 0120285921 to 0120285927 all issued by the Guangzhou Land Resources and Real Estate Administration Bureau dated 11 November 2011, the title to the property with a total gross floor area of approximately 16,940.18 sq m is vested in Guangzhou Honghui Real Estate Development Co., Ltd. (“ Guangzhou Honghui ”), a 50.6% owned subsidiary of eSun.
Pursuant to the State-owned Land Use Right Certificate No Sui Guo Yong (2005) Di 348 issued by the People’s Government of Guangzhou dated 11 January 2006, the title to the Development with a site area of approximately 6,003 sq m is held by Guangzhou Honghui for land use rights terms of 70 years for residential use, 40 years for commercial, tourism and entertainment uses and 50 years for other use.
Pursuant to three Supplementary Agreements of Co-operative Joint Venture Contract all entered into between 廣州市白雲城市建設開發有限公司 (Guangzhou Bai Yun City Construction Development Co Ltd) (“ Party A ”) and Frank Light Development Limited (“ Party B ”) on 29 September 1998, 4 February 2008 and 8 April 2010, Guangzhou Honghui was established by Party A and Party B with a total investment amount of RMB182,510,000 and registered capital of RMB79,720,000 which is fully paid by Party B and Party A is entitled to receive an amount of RMB35,866,500 from Party B as fixed profit. As advised by eSun, portion of the aforesaid fixed profit (RMB16,500,000) had been settled as at the valuation date.
Pursuant to the Business Licence No Wai S0102014021917 dated 11 November 2015, Guangzhou Honghui was established with an operation period from 11 February 1993 to 11 February 2019.
We have been provided with the eSun Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:
(i) Guangzhou Honghui legally owns the property;
(ii) Guangzhou Honghui can sell, lease or transfer the property according to the relevant laws and regulations; and
(iii) The property is free from mortgage and other encumbrances.

– VIII-26 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Description and tenure

Property

8 Various portions Palm Spring (the “ Development ”) of Stage I of is a large-scale residential Palm Spring development having a total site area Caihong Planning of approximately 236,649.80 sq m Area (2,547,298 sq ft). Westem District Zhongshan The Development is planned to be Guangdong developed by various stages with a Province total gross floor area of approximately The PRC 564,388 sq m (6,075,072 sq ft).

The property comprises various units on Levels 1 to 3 of the commercial centre of Stage I of the Development with a total gross floor area of 11,880.70 sq m (127,884 sq ft) and serviced apartments with a total gross floor area of 9,156.10 sq m (98,556 sq ft) completed in 2012 with gross floor areas as follows:

Market Value in existing state as at 31 May 2018

Particulars of occupancy

According to the information HK$280,500,000 provided, commercial (HONG KONG portion of the property DOLLARS with a total gross floor area TWO HUNDRED of approximately 10,186 EIGHTY sq m is leased subject to MILLION AND various tenancies yielding FIVE HUNDRED a total monthly rental of THOUSAND approximately RMB293,000 ONLY) with last tenancy expiring on 31 October 2030 whilst the (50.6% interest remaining commercial portion attributable of the property is vacant. to the eSun Group: HK$141,933,000)

The serviced apartments portion of the property is currently operated.

(please see note 5)

Use Commercial (Level 1) Commercial (Level 2) Commercial (Level 3) Serviced apartments Total:	Approximate Gross Floor Area sq m sq ft 3,391.74 36,509 4,266.74 45,927 4,222.22 45,448 9,156.10 98,556 21,036.80 226,440	Approximate Gross Floor Area sq m sq ft 3,391.74 36,509 4,266.74 45,927 4,222.22 45,448 9,156.10 98,556 21,036.80 226,440
		226,440

The land use rights of the property have been granted for various terms with the last term expiring on 30 March 2075 for commercial/ residential uses.

– VIII-27 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Notes:

Pursuant to two State-owned Land Use Right Certificates Nos Zhong Fu Guo Yong (2004) Di 201494 and (2011) Di 2000310 both issued by the People’s Government of Zhongshan, the title to portion of the Development with a site area of approximately 10,679.70 sq m and 12,902.60 sq m respectively are both held by 中山市寶麗房地產發展有限公司 (Zhongshan Bao Li Properties Development Co. Ltd.) (“ Zhongshan Bao Li ”), a 50.6% owned subsidiary of eSun for various terms expiring on 17 May 2074 and 30 March 2075 respectively for commercial/residential uses.
Pursuant to the Real Estate Title Proof No 2013-011052 dated 27 August 2013, the title to the serviced apartment portion of the Development (Tower 8) with a total gross floor area of approximately 9,169.6 sq m is vested in Zhongshan Bao Li.
Pursuant to twenty seven Real Estate Title Certificates, the title to commercial portion of the Development with a total gross floor area of 16,875.23 sq m is vested in Zhongshan Bao Li.
Pursuant to the Business Licence with Unified Social Credit No 914420007480421393 dated 5 November 2015, Zhongshan Bao Li was established with an operation period from 17 April 2003 to 16 April 2053.
As per your specific terms of instruction, we have valued the serviced apartments portion of the property on vacant possession basis.
We have been provided with the eSun Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:
(i) Zhongshan Bao Li legally owns the property;
(ii) Zhongshan Bao Li can sell, lease or transfer the property according to the relevant laws and regulations; and
(iii) The property is free from mortgage and other encumbrances.

– VIII-28 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Description and tenure

Property

9 Lai Fung Tower Eastern Place is a large-scale 787 Dongfeng commercial/residential composite East Road development developed by phases. Yuexiu District Guangzhou The property comprises the whole Guangdong of Lai Fung Tower in Phase V of Province Eastern Place with a total gross floor The PRC area of approximately 65,579.11 sq m (705,894 sq ft) completed in 2015 and 313 basement car parking spaces (including 216 mechanical car parking spaces). Gross floor areas are as follows:

Use Level Retail L1 Retail L2 Retail L3&4 Offce L5-28 Total:	Approximate Gross Floor Area sq m sq ft 3,319.59 35,732 1,517.89 16,339 4,396.86 47,328 56,344.77 606,495 65,579.11 705,894	Approximate Gross Floor Area sq m sq ft 3,319.59 35,732 1,517.89 16,339 4,396.86 47,328 56,344.77 606,495 65,579.11 705,894
		705,894

Market Value in existing state as at 31 May 2018

Particulars of occupancy

According to the information HK$3,245,600,000 provided, the property with (HONG KONG a total gross floor area of DOLLARS approximately 65,387 sq m THREE BILLION is let under various tenancies TWO HUNDRED yielding a total monthly FORTY FIVE rental of approximately MILLION AND RMB7,520,000 with the SIX HUNDRED last tenancy expiring on THOUSAND 14 January 2027 whilst the ONLY) remaining portion of the property is vacant or for self(50.6% interest use. attributable to the eSun Group: HK$1,642,273,600)

The land use rights of the property have been granted for terms of 70 years for residential use, 40 years for commercial, tourism and entertainment uses and 50 years for other use.

– VIII-29 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Notes:

Pursuant to the State-owned Land Use Right Certificate No Sui Fu Guo Yong (2003) Di 309 issued by the People’s Government of Guangzhou dated 30 October 2003, the title to the subject development with an area of approximately 17,293.00 sq m is held by Guangzhou Grand Wealth Properties Ltd (“ Guangzhou Grand Wealth ”), a 50.6% owned subsidiary of eSun, for land use rights terms of 70 years for residential use, 40 years for commercial, tourism and entertainment uses and 50 years for other use.
Pursuant to the Construction Work Completion Recording Certificate No Sui Gui Yan Zheng (2015) 279 dated 2 June 2015, construction work of portion of Phase V of Eastern Place with a total gross floor area of 59,139 sq m is completed and recorded.
Pursuant to the Construction Work Completion Recording Certificate No Sui (Jian) Jian Yan Bei 2016-015 dated 30 June 2016, construction work of portion of Phase V of Eastern Place with a total gross floor area of 70,522 sq m is completed and recorded.
Pursuant to 310 Real Estate Title Certificates, the title to 310 car parking spaces of the property is vested in Guangzhou Grand Wealth.
Pursuant to the Co-operative Joint Venture Contract and eleven Supplemental Contracts all entered into between Guangzhou Light Industry Real Estate Development Company (formerly known as Guangzhou Yuexing Real Estate Development Company) (“ Party A ”) and Grand Wealth Ltd (“ Party B ”) dated 23 November 1993, 3 June 1996, 31 December 1996, 3 May 1997, 5 August 1997, 14 February 2006, 10 May 2006, 2 April 2007, 10 July 2008, 8 May 2009, 5 March 2014 and 15 January 2015 respectively, both parties agreed to establish a joint venture company named Guangzhou Grand Wealth Properties Limited. The said contracts contain, inter-alia, the following conditions:
(i) Total investment amount : HK$560,000,000 (ii) Registered capital : HK$280,000,000
(iii) Party B shall be responsible for the total investment amount as stipulated in the contract.
(iv) Party A shall be entitled to a gross floor area of 19,500 sq m whilst Party B shall be entitled to the remaining floor area of the Development and sale proceeds derived therefrom.
(v) The portion mentioned in 5 (iv) entitled by Party A comprises various units in Lai Fung Tower with a total gross floor area of approximately 7,539.4 sq m.
(vi) Both parties agreed that instead of the property mentioned in note 5 (v) above, Gangjing Shangwulou, Nos 407 and 409 Yan Jiang Dong Road, Yuexiu District, Guangzhou with a total gross floor area of approximately 12,395 sq m shall be allocated to Party A.
Pursuant to the Business Licence No Wai S0102014007787 dated 12 July 2016, Guangzhou Grand Wealth was established with an operation period from 15 June 1994 to 15 June 2019.
We have been provided with the eSun Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:
(i) Guangzhou Grand Wealth legally owns the property;
(ii) Portion of the property is subject to a mortgage and the mortgage is valid and enforceable;
(iii) Guangzhou Grand Wealth should hold the retail portion with a total gross floor area of 2,312.26 sq m and 216 mechanical car parking spaces of the property and has the right to lease such portions and to grant the lessee to sublease;
(iv) Save as abovementioned, Guangzhou Grand Wealth can sell, lease or transfer the property according to the relevant laws and regulations and subject to approval from the mortgagee; and
(v) Except for the mortgage mentioned in note (7) (ii), the property is free from encumbrances.

– VIII-30 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Group II — Property interests held by the eSun Group in the PRC for sale purpose

Description and tenure

Property Description and tenure
10 Unsold car Regents Park (the “ Development ”) is parking spaces of a large-scale residential/commercial Regents Park composite development developed in 88 Huichuan two phases. Road Changning The property comprises 406 District basement car parking spaces of the Shanghai Development with a total gross floor The PRC area of approximately 13,085.38 sq m (140,851 sq ft) completed in 2006.

The land use rights of the Development have been granted for a term of 70 years commencing from 4 May 1996 for residential use.

Market Value in existing state as at Particulars of occupancy 31 May 2018

As advised, the property is HK$249,000,000 currently subject to various (HONG KONG licences with terms ranging DOLLARS from 1 month to 1 year. TWO HUNDRED AND FORTY NINE MILLION ONLY) (48.07% interest attributable to the eSun Group: HK$119,694,300)

Notes:

Pursuant to the Shanghai Real Estate Title Certificate No Hu Fang Di Chang Zi (2009) Di 003008 issued by the Shanghai Housing and Land Resources Administration Bureau dated 20 March 2009, the title to the property (406 basement car parking spaces) with a total gross floor area of 13,085.38 sq m is held by Shanghai Wa Yee Real Estate Development Co., Limited (“ Shanghai Wa Yee ”), a 48.07% owned subsidiary of eSun for a land use rights term of 70 years from 4 May 1996 to 3 May 2066 for residential use.
Pursuant to the Equity Joint Venture Contract entered into between Kingscord Investment Limited, interest held in trust for Lai Fung Holdings Limited (a 50.6% owned subsidiary of eSun), (“ Party A ”), Wide Angle Development Limited, (a 50.6% owned subsidiary of eSun), (“ Party B ”) and 上海長寧房地產（集團）公司 (Shanghai Changning Real Estate (Group) Company) (“ Party C ”) on 1 March 1996, all parties agreed to establish a joint-venture company named Shanghai Wa Yee Real Estate Development Co., Limited. The said contract contains, inter-alia, the following salient conditions:

(i) Total investment amount : US$25,000,000 (ii) Registered capital : US$10,000,000 Party A : 70% Party B : 25% Party C : 5% (iii) Period of operation : 70 years

Pursuant to the Business Licence with Unified Social Credit No 9131000060737771XE dated 3 June 2016, Shanghai Wa Yee was established with an operation period from 3 September 1997 to 19 August 2067.
We have been provided with the eSun Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:
(i) Shanghai Wa Yee legally owns the property;
(ii) Shanghai Wa Yee can sell, lease, transfer or mortgage the property according to the relevant laws and regulations; and
(iii) The property is free from mortgage and other encumbrances.

– VIII-31 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Property

Description and tenure

Particulars of occupancy

Market Value in existing state as at 31 May 2018

11 Unsold car Shanghai May Flower Plaza (the parking spaces of “ Development ”) is a composite Shanghai development with residential and May Flower Plaza office apartment towers erected the junction of on a commercial podium. The Da Tong Road Development also comprises a and 3-storey basement for car park use. Zhi Jiang Xi Road Sujiaxiang The property comprises 458 basement Jing’an District car parking spaces of the Development Shanghai completed in 2011. The PRC

The land use rights of the Development have been granted for terms of 70 years for residential use, 40 years for commercial use and 50 years for office use commencing from 5 February 2007.

As advised, the property is HK$168,600,000 currently subject to various (HONG KONG licences with terms ranging DOLLARS from one month to one year. ONE HUNDRED SIXTY EIGHT MILLION AND SIX HUNDRED THOUSAND ONLY)

(50.6% interest attributable to the eSun Group: HK$85,311,600)

Notes:

Pursuant to the Shanghai Certificate of Real Estate Ownership No Hu Fang Di Zha Zi (2012) Di 006136 issued by the Shanghai Planning, Land and Resources Administration Bureau dated 30 June 2012, the title to the Development with a total gross floor area of 137,129.94 sq m is held by Shanghai Hu Xin Real Estate Development Co., Ltd (“ Shanghai Hu Xin ”), a 50.6% owned subsidiary of eSun.
Pursuant to the Shanghai Certificate of Real Estate Ownership Hu Fang Di Zha Zi (2007) Di 017286 issued by the Shanghai Housing and Land Resources Administration Bureau dated 12 November 2007, the land use rights of the Development, having a site area of 19,742 sq m, is vested in Shanghai Hu Xin for land use rights terms of 70 years for residential use, 40 years for commercial use and 50 years for office use commencing from 5 February 2007.
Pursuant to the Equity Joint Venture Contract entered into between 上海和田城市建設開發公司 (Shanghai He Tian City Construction Development Co) (“ Party A ”), Kingscord Investment Limited (“ Party B ”) and Fore Bright Limited (“ Party C ”), all parties agreed to establish a joint venture company named Shanghai Hu Xin Real Estate Development Co., Ltd. Both Party B and Party C are 50.6% owned subsidiaries of eSun. The said contract contains, inter-alia, the following salient conditions:

(i) Total investment amount : US$80,000,000 (ii) Registered capital : US$40,000,000 Party A : 5% Party B : 55% Party C : 40%

(iii) Period of operation : 70 years (iv) Profit sharing/risk : According to the respective shares of each party in the registered capital bearing ratio

– VIII-32 –

APPENDIX VIII VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

Pursuant to the Agreement for Share Transfer, Party A agreed to sell its entire interest in Shanghai Hu Xin to Party B. Consequently, the interest of Party B in Shanghai Hu Xin is 60%.
Pursuant to the Business Licence with Unified Social Credit No 91310000607350656K dated 4 March 2016, Shanghai Hu Xin was established with an operation period from 23 April 1995 to 22 April 2065.
Pursuant to the Construction Work Completion Recording Certificate No 2011SH0470 dated 13 December 2011, construction work of the Development with a total gross floor area of 147,923 sq m is completed and recorded.
We have been provided with the eSun Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:
(i) Shanghai Hu Xin legally owns the property;
(ii) Shanghai Hu Xin can sell, lease, transfer or mortgage the property according to the relevant laws and regulations; and
(iii) The property is free from mortgage and other encumbrances.

– VIII-33 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Property

Description and tenure

Particulars of occupancy

Market Value in existing state as at 31 May 2018

12 Unsold car
West Point (the “ Development ”) is a
parking spaces of composite development comprising a West Point residential tower and an office tower the junction of both erected on a 4-level commercial Zhongshan Qi podium and a 2-level basement car Road and park completed around 2010. Guangfu Road Liwan District The property comprises 127 Guangzhou basement car parking spaces of the Guangdong Development. Province The PRC The land use rights of the Development have been granted for terms of 70 years for residential use, 40 years for commercial, tourism and entertainment uses and 50 years for other use.

As advised, the property is HK$98,800,000 currently let on hourly basis. (HONG KONG DOLLARS NINETY EIGHT MILLION AND EIGHT HUNDRED THOUSAND ONLY)

(50.6% interest attributable to the eSun Group: HK$49,992,800)

Notes:

Pursuant to 127 Guangzhou Real Estate Title Certificates Nos Yue Fang Di Quan Zheng Sui Zi Di 0120285929, 0120285935, 0120285939, 0120285941 to 0120285971, 0120285973 to 0120285977, 0120285979 to 0120285991, 0120285993 to 0120285994, 0120286000 to 0120286040 and 0120286043 to 0120286074 all issued by the Guangzhou Land Resources and Real Estate Administration Bureau dated 11 November 2011, the title to the property is held by Guangzhou Honghui Real Estate Development Co., Ltd. (“ Guangzhou Honghui ”), a 50.6% owned subsidiary of eSun for car park use.
Pursuant to the State-owned Land Use Right Certificate No Sui Guo Yong (2005) Di 348 issued by the People’s Government of Guangzhou dated 11 January 2006, the title to the Development with a site area of approximately 6,003 sq m is held by Guangzhou Honghui for land use rights terms of 70 years for residential use, 40 years for commercial, tourism and entertainment uses and 50 years for other use.
Pursuant to three Supplementary Agreement of Co-operative Joint Venture Contracts all entered into between 廣州市白雲城市建設開發有限公司 (Guangzhou Bai Yun City Construction Development Co Ltd) (“ Party A ”) and Frank Light Development Limited (“ Party B ”) dated 29 September 1998, 4 February 2008 and 8 April 2010, Guangzhou Honghui was established by Party A and Party B with a total investment amount of RMB182,510,000 and registered capital of RMB79,720,000 which is fully paid by Party B and Party A is entitled to receive an amount of RMB35,866,500 from Party B as fixed profit. As advised by eSun, portion of the aforesaid fixed profit (RMB16,500,000) had been settled as at the valuation date.
Pursuant to the Business Licence No Wai S0102014021917 dated 11 November 2015, Guangzhou Honghui was established with an operation period from 11 February 1993 to 11 February 2019.
We have been provided with the eSun Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:
(i) Guangzhou Honghui legally owns the property;
(ii) Guangzhou Honghui can sell, lease or transfer the property according to the relevant laws and regulations; and
(iii) The property is free from mortgage and other encumbrances.

– VIII-34 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Property

Description and tenure

Particulars of occupancy

Market Value in existing state as at 31 May 2018

13 Unsold car King’s Park (the “ Development ”) is a parking residential development erected on a spaces of roughly rectangular-shaped site with a King’s Park site area of approximately 2,405.00 Nos 558-596/ sq m (25,887 sq ft). 1006-1044
Donghua Dong The property comprises 15 basement Road car parking spaces of the Development Yuexiu District completed in 2013. Guangzhou Guangdong The land use rights of the Province Development will be granted for The PRC terms of 70 years for residential use, 40 years for commercial, tourism and entertainment uses and 50 years for other use.

As advised, the property is HK$12,000,000 currently vacant. (HONG KONG DOLLARS TWELVE MILLION ONLY)

(50.6% interest attributable to the eSun Group: HK$6,072,000)

(please see note 4)

Notes:

Pursuant to the State-owned Land Use Right Certificate No Sui Fu Guo Yong (2012) Di 01100013 issued by the People’s Government of Guangzhou dated 6 April 2012, the title to the Development, having a site area of 2,405 sq m, is held by Guangzhou Gentle Real Estate Co Ltd (“ Guangzhou Gentle ”), a 50.6% owned subsidiary of eSun, for land use rights terms of 70 years for residential use, 40 years for commercial, tourism & entertainment uses and 50 years for other use.
Pursuant to the Business Licence No Wai S0102014021483 dated 12 July 2016, Guangzhou Gentle was established with an operation period from 15 June 2007 to 15 June 2027.
Pursuant to fifteen Guangzhou Real Estate Title Certificates, the title to the property is vested in Guangzhou Gentle.
As advised by eSun, 2 car parking spaces of the property have been sold at a total consideration of approximately RMB1,332,800 prior to the date of valuation. According to eSun’s instruction, the title of the sold portion was still held by Guangzhou Gentle as at the date of valuation and was thus included in this valuation. We have also made reference to the contracted consideration in the course of our valuation.
We have been provided with the eSun Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:
(i) Guangzhou Gentle legally owns the property;
(ii) Except for the sold portion as mentioned in note (4), Guangzhou Gentle can sell, lease or transfer the property according to the relevant laws and regulations; and
(iii) The property is free from mortgage and other encumbrances.

– VIII-35 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Description and tenure

Property

14 Unsold portions of Palm Spring (the “ Development ”) Stage I and II of is a large-scale residential Palm Spring development having a total site area Caihong Planning of approximately 236,649.80 sq m Area (2,547,298 sq ft). Western District Zhongshan The Development is planned to be Guangdong developed by various stages with a Province total gross floor area of approximately The PRC 564,388 sq m (6,075,072 sq ft).

The property comprises various unsold residential units and commercial centre of Stage I and II of the Development with a total gross floor area of 52,115.22 sq m (560,968 sq ft) together with 1,186 car parking spaces completed in 2012 and 2017 respectively. The area details are as follows:

Market Value in existing state as at 31 May 2018

Particulars of occupancy

According to the information HK$1,296,500,000 provided, the property is either (HONG KONG vacant or for self-use. DOLLARS ONE BILLION TWO HUNDRED NINETY SIX MILLION AND FIVE HUNDRED THOUSAND ONLY)

(50.6% interest attributable to the eSun Group: HK$656,029,000)

(please see note 14)

Use Residential (apartment) Residential (terrace house) Club house Commercial centre Total:	Approximate Gross Floor Area sq m sq ft 25,619.62 275,770 19,584.11 210,803 1,966.96 21,172 4,944.53 53,223 52,115.22 560,968	Approximate Gross Floor Area sq m sq ft 25,619.62 275,770 19,584.11 210,803 1,966.96 21,172 4,944.53 53,223 52,115.22 560,968
		560,968

In addition, the property also comprise 1,186 basement car parking spaces of the Development. (As advised by eSun, 230 basement car parking spaces among the 1,186 car parking spaces cannot be sold and will be leased on long-term basis).

The land use rights of the property have been granted for various terms with the last term expiring on 30 March 2075 for commercial/ residential uses.

– VIII-36 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Notes:

Pursuant to three State-owned Land Use Right Certificates Nos Zhong Fu Guo Yong (2004) Di 201494, (2011) Di 2000310 and (2011) Di 2000745 all issued by the People’s Government of Zhongshan, the title to portions of the Development with site areas of approximately 10,679.70 sq m, 12,902.60 sq m and 16,608.00 sq m respectively are all held by 中山市寶麗房地產發展有限公司 (Zhongshan Bao Li Properties Development Co. Ltd.) (“ Zhongshan Bao Li ”), a 50.6% owned subsidiary of eSun for various terms expiring on 17 May 2074, 30 March 2075 and 23 October 2073 respectively for commercial/residential uses.
Pursuant to the Real Estate Title Certificate No Yue (2017) Zhongshan Shi Bu Dong Chan Quan Di 0294136, the title to the club house portion of the Development with a total gross floor area of 1,966.96 sq m is vested in Zhongshan Bao Li.
Pursuant to twenty seven Real Estate Title Certificates, the title to commercial portion of the Development with a total gross floor area of 16,875.23 sq m is vested in Zhongshan Bao Li.
Pursuant to two Real Estate Title Certificates Nos Yue (2017) Zhongshan Shi Bu Dong Chan Quan Di 0294133 and 0294136, the title to the residential (apartment) portion of the Development with a total gross floor area of 25,635.74 sq m is vested in Zhongshan Bao Li.
Pursuant to fifteen Real Estate Title Certificates, the title to residential (terrace house) portion of the Development with a total gross floor area of 21,183.72 sq m is vested in Zhongshan Bao Li.
Pursuant to two Real Estate Title Proof Nos 2013-011237 and 2013-011239, the title to the residential (terrace house) portion of the Development with a total gross floor area of 792.11 sq m is vested in Zhongshan Bao Li.
Pursuant to two Real Estate Title Certificates Nos Yue (2017) Zhongshan Shi Bu Dong Chan Quan Di 0294244 and 0090718, the title to 1,052 car parking spaces of the Development is vested in Zhongshan Bao Li.
Pursuant to the Real Estate Title Proof No 2013-011235, the title to 55 car parking spaces of the Development is vested in Zhongshan Bao Li.
Pursuant to the Business Licence with Unified Social Credit No 914420007480421393 dated 5 November 2015, Zhongshan Bao Li was established with an operation period from 17 April 2003 to 16 April 2053.
Pursuant to the Construction Work Completion Recording No Zhong Jian Yan Zi 2017 Nian Di 720 and 1121 dated 17 March 2017 and 25 April 2017 issued by the Zhongshan Housing and Urban and Rural Construction Bureau, the construction work of portion of the Development with a total gross floor area of 175,327.06 sq m is completed and recorded.
Pursuant to two Zhongshan Commodity Housing Pre-sale Permits Nos Zhong Jian Fang (Yu) Zi Di 2011346 and 2011445 both issued by the Zhongshan Housing and Urban and Rural Construction Bureau, pre-sale of portion of the Development with a total gross floor area of 46,807.03 sq m is permitted.
Pursuant to four Zhongshan Commodity Housing Pre-sale Permits Nos Zhong Jian Fang (Yu) Zi Di 2011269, 2012024, 2012023 and 2012029 all issued by the Zhongshan Housing and Urban and Rural Construction Bureau, pre-sale of portion of the Development with a total gross floor area of 27,756.91 sq m is permitted.
Pursuant to four Zhongshan Commodity Housing Pre-sale Permits Nos Zhong Jian Fang (Yu) Zi Di 2015103, 2015115, 2015119 and 2016181 all issued by the Zhongshan Housing and Urban and Rural Construction Bureau, pre-sale of portion of the Development with a total gross floor area of 107,887.80 sq m is permitted.
As advised by eSun, residential (apartment) portion of the property with a total gross floor area of 121.38 sq m have been sold at a total consideration of RMB1,408,008 prior to the date of valuation. According to eSun’s instruction, the title of the sold portion was still held by Zhongshan Bao Li as at the date of valuation and was thus included in this valuation. We have also made reference to the contracted consideration in the course of our valuation.
We have been provided with the eSun Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:
(i) Zhongshan Bao Li legally owns the property;
(ii) Except for the sold portion as mentioned in note (14), Zhongshan Bao Li can sell, lease or transfer the property according to the relevant laws and regulations; and
(iii) The property is free from mortgage and other encumbrances.

– VIII-37 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Description and tenure

Property

15 Unsold portions Dolce Vita (the “ Development ”) of Dolce Vita comprises an irregular-shaped site (Xunfeng with an area of approximately 298,938 Yujinsha Yuan) sq m (3,217,769 sq ft). Jinshazhou Heng Sha The Development is a residential Baiyun District development developed in five Guangzhou phases with a total gross floor area Guangdong of approximately 507,167 sq m Province (5,459,146 sq ft) and comprises The PRC medium to high-rise apartments, terraced houses, semi-detached houses, commercial, school, kindergarten and car parking spaces.

Particulars of occupancy

As advised, the property is currently vacant.

Market Value in existing state as at 31 May 2018

HK$73,200,000 (HONG KONG DOLLARS SEVENTY THREE MILLION AND TWO HUNDRED THOUSAND ONLY)

(24.04% interest attributable to the eSun Group: HK$17,597,280)

(please see note 5)

The property comprises various unsold retail units of the Development with a total gross floor area of 1,747 sq m (18,805 sq ft) together with 60 car parking spaces completed in 2014 to 2017.

The land use rights of the Development have been granted for terms of 70 years for residential use, 40 years for commercial, tourist and entertainment uses and 50 years for other use commencing from 14 October 2008.

– VIII-38 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Notes:

Pursuant to the State-owned Land Use Right Certificate No Sui Fu Guo Yong (2008) Di 01100190 issued by the People’s Government of Guangzhou dated 17 October 2008, the title to portion of the Development, having a site area of 226,912.48 sq m, is held by Guangzhou Beautiwin Real Estate Development Co., Ltd. (“ Guangzhou Beautiwin ”, a 95% owned subsidiary of Beautiwin Limited (“ Beautiwin ”, a 25.3% owned joint venture of eSun)) for land use rights terms of 70 years for residential use, 40 years for commercial, tourist and entertainment uses and 50 years for other use commencing from 14 October 2008.
Pursuant to the Business Licence No 440101400026872 dated 16 August 2011, Guangzhou Beautiwin was established with an operation period from 31 July 1998 to 31 July 2028.
Pursuant to two Real Estate Certificates No Sui (2017) Guangzhou Shi Bu Dong Chan Quan Zheng Di 00066699 and 00066700 both issued by the Guangzhou Land Resources and Real Estate Administration Bureau, the title to the retail portion of the property with a total gross floor area of approximately 1,746.50 sq m is vested in Guangzhou Beautiwin.
Pursuant to sixty Guangzhou Real Estate Title Certificates all issued by the Guangzhou Land Resources and Real Estate Administration Bureau, the title to the car park potion of the property is vested in Guangzhou Beautiwin.
As advised by eSun, 2 car parking spaces of the property have been sold at a total consideration of RMB616,479 prior to the date of valuation. According to eSun’s instruction, the title of the sold portion was still held by Guangzhou Beautiwin as at the date of valuation and were thus included in this valuation. We have also made reference to the contracted consideration in the course of our valuation.
We have been provided with the eSun Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:
(i) Guangzhou Beautiwin legally owns the property;
(ii) Except for the sold portion as mentioned in note (5),Guangzhou Beautiwin can sell, lease or transfer the property according to the relevant laws and regulations; and
(iii) The property is free from mortgage and other encumbrances.

– VIII-39 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Property

Description and tenure

Market Value in existing state as at Particulars of occupancy 31 May 2018

16 Unsold car Eastern Place (the “ Development ”) is parking spaces a large-scale commercial/residential of Phase V of composite development developed by Eastern Place phases. 787 Dongfeng East Road The property comprises 21 basement Yuexiu District car parking spaces of Phase V of the Guangzhou Development completed in 2015. Guangdong Province The land use rights of the The PRC Development have been granted for terms of 70 years for residential use, 40 years for commercial, tourism and entertainment uses and 50 years for other use.

The property is currently HK$22,900,000 vacant. (HONG KONG DOLLARS TWENTY TWO MILLION AND NINE HUNDRED THOUSAND ONLY) (50.6% interest attributable to the eSun Group: HK$11,587,400)

(please see note 10)

Notes:

Pursuant to the State-owned Land Use Right Certificate No Sui Fu Guo Yong (2003) Di 309 issued by the People’s Government of Guangzhou dated 30 October 2003, the title to portion of the Development with a site area of approximately 17,293.00 sq m is held by Guangzhou Grand Wealth Properties Ltd (“ Guangzhou Grand Wealth ”), a 50.6% owned subsidiary of eSun, for land use rights terms of 70 years for residential use, 40 years for commercial, tourism and entertainment uses and 50 years for other use.
Pursuant to 20 Real Estate Title Certificates, the title to 20 car parking spaces of the property is vested in Guangzhou Grand Wealth.
Pursuant to the Contract for Grant of State-owned Land Use Right No Sui Guo Di Chu He (1997) 359 and its supplemental contracts all entered into between Guangzhou State Land Bureau (“ Party A ”) and Guangzhou Grand Wealth (“ Party B ”) dated 30 September 1997, 1 November 2000, 8 August 2008, 28 November 2013 and 12 January 2017 respectively, Party A agreed to grant the land use rights of portion of the land, comprising a site area of approximately 43,161 sq m to Party B. The said contract contains, inter-alia, the following salient conditions:

(i)	Use	:	Offce, residential and commercial
(ii)	Land use term	:	70 years for residential, 40 years of commercial, tourism and entertainment, 50 years
			for offce
(iii)	Total gross foor area	:	236,698.97 sq m
(iv)	Maximum height	:	36 storeys
(v)	Land grant fee	:	RMB198,831,203

Pursuant to the Business Licence No Wai S0102014007787 dated 12 July 2016, Guangzhou Grand Wealth was established with an operation period from 15 June 1994 to 15 June 2019.
Pursuant to the Construction Engineering Planning Permit No Sui Gui Jian Zheng (2011) 1415 issued by the Guangzhou Urban Planning Bureau dated 11 July 2011, portion of the Development with a total gross floor area of 35,846 sq m (above ground) and 22,979 sq m (below ground) is permitted to be constructed.

– VIII-40 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Pursuant to the Construction Engineering Planning Permit No Sui Gui Jian Zheng (2012) 1660 issued by the Guangzhou Urban Planning Bureau dated 12 September 2012, portion of the Development with a total gross floor area of 70,505.9 sq m is permitted to be constructed.
Pursuant to the Construction Work Commencing Permit No 440101201206150101 dated 15 June 2012, portion of the Development with a total gross floor area of 58,825 sq m is permitted to be commenced.
Pursuant to the Construction Work Commencing Permit No 440101201304190101 dated 19 April 2013, portion of the Development with a total gross floor area of 70,505.9 sq m is permitted to be commenced.
Pursuant to the Co-operative Joint Venture Contract and eleven Supplemental Contracts all entered into between Guangzhou Light Industry Real Estate Development Company (formerly known as Guangzhou Yuexing Real Estate Development Company) (“ Party C ”) and Grand Wealth Ltd (“ Party D ”) dated 23 November 1993, 3 June 1996, 31 December 1996, 3 May 1997, 5 August 1997, 14 February 2006, 10 May 2006, 2 April 2007, 10 July 2008, 8 May 2009, 5 March 2014 and 15 January 2015 respectively, both parties agreed to establish a joint venture company named Guangzhou Grand Wealth Properties Limited. The said contracts contain, inter-alia, the following conditions:
(i) Total investment amount : HK$560,000,000
(ii) Registered capital : HK$280,000,000
(iii) Party D shall be responsible for the total investment amount as stipulated in the contract.
(iv) Party C shall be entitled to a gross floor area of 19,500 sq m whilst Party D shall be entitled to the remaining floor area of the Development and sale proceeds derived therefrom.
(v) The portion mentioned in 9 (iv) entitled by Party C comprises various units in the office tower of Phase V of Eastern Place with a total gross floor area of approximately 7,539.4 sq m.
(vi) Both parties agreed that instead of the property mentioned in note 9 (v) above, Gangjing Shangwulou, Nos 407 and 409 Yan Jiang Dong Road, Yuexiu District, Guangzhou with a total gross floor area of approximately 12,395 sq m shall be allocated to Party C.
As advised by eSun, a car parking space of the property has been sold at a consideration of RMB1,000,000 prior to the date of valuation. According to eSun’s instruction, the title of the sold portion was still held by Guangzhou Grand Wealth as at the date of valuation and were thus included in this valuation. We have also made reference to the contracted consideration in the course of our valuation.
We have been provided with the eSun Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:
(i) Guangzhou Grand Wealth legally owns the property;
(ii) Except for the sold portion as mentioned in note (10), Guangzhou Grand Wealth can sell, lease or transfer the property according to the relevant laws and regulations; and
(iii) The property is free from mortgage and other encumbrances.

– VIII-41 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Group III — Property interest held by the eSun Group in the PRC for owner occupation purpose

Property

Description and tenure

Particulars of occupancy

Market Value in existing state as at 31 May 2018

17 Commercial Eastern Place (the “ Development ”) is portion of a large-scale commercial/residential Eastern Place composite development developed by 787 Dongfeng phases. East Road Yuexiu District The property comprises a 3-level Guangzhou commercial block of the Development Guangdong with a total gross floor area of 4,042 Province sq m (43,508 sq ft) completed in 2000. The PRC Details of gross floor area breakdown are as follows:

Use Floor Retail 1 Retail 2 Offce 2 Club house 1-2 Others 1-3 Total:	Approximate Gross Floor Area sq m sq ft 235 2,529 552 5,942 874 9,408 2,358 25,381 23 248 4,042 43,508	Approximate Gross Floor Area sq m sq ft 235 2,529 552 5,942 874 9,408 2,358 25,381 23 248 4,042 43,508
		43,508

According to the information HK$55,000,000 provided, portion of the (HONG KONG property with a total gross DOLLARS floor area of approximately FIFTY FIVE 3,145 sq m is let under MILLION ONLY) various tenancies yielding a total monthly rental of (50.6% interest approximately RMB103,000 attributable with the last tenancy expiring to the eSun Group: on 31 December 2021 whilst HK$27,830,000) the remaining portion of the property is for self-use or operated by the eSun Group as a club house.

The land use rights of the property have been granted for a term of 50 years commencing from 30 September 1997 for composite use.

– VIII-42 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Notes:

Pursuant to the Guangzhou Real Estate Title Proof No A0001036 issued by the Guangzhou Land Resources and Real Estate Administration Bureau dated 8 June 2007, the title of the club house and basement car park portion of the Development with a total gross floor area of 12,369.26 sq m is vested in Guangzhou Grand Wealth Properties Ltd (“ Guangzhou Grand Wealth ”), a 50.6% owned subsidiary of eSun, for a term of 50 years commencing from 30 September 1997 for composite use.
Pursuant to the Co-operative Joint Venture Contract and eleven Supplemental Contracts all entered into between Guangzhou Light Industry Real Estate Development Company (formerly known as Guangzhou Yuexing Real Estate Development Company) (“ Party A ”) and Grand Wealth Ltd (“ Party B ”) dated 23 November 1993, 3 June 1996, 31 December 1996, 3 May 1997, 5 August 1997, 14 February 2006, 10 May 2006, 2 April 2007, 10 July 2008, 8 May 2009, 5 March 2014 and 15 January 2015 respectively, both parties agreed to establish a joint venture company named Guangzhou Grand Wealth Properties Limited. The said contracts contain, inter-alia, the following conditions:
(i) Total investment amount : HK$560,000,000
(ii) Registered capital : HK$280,000,000
(iii) Party B shall be responsible for the total investment amount as stipulated in the contract.
(iv) Party A shall be entitled to a gross floor area of 19,500 sq m whilst Party B shall be entitled to the remaining floor area of the Development and sale proceeds derived therefrom.
(v) The portion mentioned in 2 (iv) entitled by Party A comprises various units in the office tower of Phase V of Eastern Place with a total gross floor area of approximately 7,539.4 sq m.
(vi) Both parties agreed that instead of the property mentioned in note 2 (v) above, Gangjing Shangwulou, Nos 407 and 409 Yan Jiang Dong Road, Yuexiu District, Guangzhou with a total gross floor area of approximately 12,395 sq m shall be allocated to Party A.
Pursuant to the Business Licence No Wai S0102014007787 dated 12 July 2016, Guangzhou Grand Wealth was established with an operation period from 15 June 1994 to 15 June 2019.
We have been provided with the eSun Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:
(i) Guangzhou Grand Wealth legally owns the property;
(ii) Guangzhou Grand Wealth can transfer the property provided that, inter alia, 1) prior to title transfer, there is a 15-day public notice within the Development; 2) no individual owners of the Development raise objection in the period of 15-day public notice; and 3) the nature of the property for club house use would not change;
(iii) Save as abovementioned, Guangzhou Grand Wealth can sell, lease or transfer the property according to the relevant laws and regulations; and
(iv) The property is free from mortgage and other encumbrances.

– VIII-43 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Group IV — Property interests held under development by the eSun Group in the PRC

Property

Description and tenure

Particulars of occupancy

Market Value in existing state as at 31 May 2018

18 A commercial The property comprises a parcel of development land with a site area of 9,961 sq m located at (107,220 sq ft). Tian Mu Road West and The property is planned to be Da Tong Road developed into a 33-storey office Jing’an District building erected upon a 3-level Shanghai commercial podium and three levels The PRC of car park basement with a total gross floor area of approximately 100,255 sq m (1,079,145 sq ft). The area details are listed as follows:

Use Offce Offce (transfer to government) Retail Other Car park (basement) Total:	Approximate Gross Floor Area sq m sq ft 55,688 599,426 5,392 58,039 8,749 94,174 6,636 71,430 23,790 256,076 100,255 1,079,145	Approximate Gross Floor Area sq m sq ft 55,688 599,426 5,392 58,039 8,749 94,174 6,636 71,430 23,790 256,076 100,255 1,079,145
		1,079,145

Foundation work of the HK$1,834,000,000 property is in progress and (HONG KONG the construction work of the DOLLARS property is scheduled to be ONE BILLION completed in the fourth quarter EIGHT of 2021. HUNDRED AND THIRTY FOUR MILLION ONLY)

(50.6% interest attributable to the eSun Group: HK$928,004,000)

(please see notes 1, 7 and 8)

The land use rights of the property have been granted for terms of 40 years and 50 years from 30 September 2016 for commercial use and office use respectively.

– VIII-44 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Notes:

Pursuant to the Contract for Grant of Shanghai State-owned Construction Land Use Right No Hu Jing Gui Tu (2016) Chu Rang He Tong Bu Zi Di 15 (the “ Land Grant Contract ”) entered into between the Shanghai Jingan Planning, Land and Resources Administrative Bureau (“ Party A ”), Shanghai Hankey Real Estate Development Co Ltd (“ Shanghai Hankey ”) and Shanghai Zhabei Plaza Real Estate Development Co. Ltd (“ Shanghai Zhabei ”), 50.6% owned subsidiaries of eSun (collectively referred to as “ Party B ”) dated 30 September 2016, Party A agreed to grant the land use rights of a parcel of land to Party B. The said contract contains, inter-alia, the following salient conditions:
(i) Total site area : 9,961.30 sq m (ii) Use : Commercial and office (iii) Land use term : 40 years for commercial use and 50 years for office use commencing from 30 September 2016
(iv) Plot ratio : 7.1 (above ground) (v) Total gross floor area : 70,557 sq m (above ground) (commercial gross floor area ≤ 20% and office gross floor area ≥ 80%) and 23,790 sq m (below ground)
(vi) Building height : Not exceeding 180 m (vii) Green area ratio : Not less than 20% of site area (viii) Land grant fee : RMB91,114,703.98 (ix) Interest : Shanghai Hankey: 46% Shanghai Zhabei: 54%
(x) Building covenant : Construction works should be commenced on or before 30 September 2017 and construction works should be completed on or before 29 September 2021
(xi) Remarks: : — portion of the office portion of the property with a total gross floor area of 5,392 sq m will be transferred to the government at nil consideration upon completion.
- office and commercial portion of the property must be held by Party B for self-operation for not less than 20 years from the date of real estate title registration.
- 150 basement car parking spaces of the property, upon completion, will be used by the government at nil rent.
Pursuant to the Real Estate Certificate No Hu (2017) Jing Zi Bu Dong Chan Quan Di 016752 issued by the Shanghai Real Estate Registration Bureau dated 25 September 2017, the land use rights of a site with site area of approximately 9,961 sq m have been granted to Shanghai Hankey and Shanghai Zhabei for a term of 40 years for commercial use and 50 years for office use commencing from 30 September 2016. The office and commercial portion of the property must be held by Party B for selfoperation for not less than 20 years from the date of real estate title registration.
Pursuant to the Business Licences Nos 00000002201707270023 and 00000002201707270021 dated 27 July 2017, Shanghai Hankey and Shanghai Zhabei were established with operation periods from 25 October 1993 to 24 October 2066 and from 12 September 1994 to 11 September 2067, respectively.
Pursuant to the Construction Land Use Planning Permit No Hu Jing Di (2016) EA31010620165117 issued by the Shanghai Planning and Land Resources Administration Bureau dated 1 December 2016, the proposed development of the property with a site areas of 9,961.3 sq m and a total gross floor area of 70,557 sq m was permitted to be developed.

– VIII-45 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Pursuant to the Construction Engineering Planning Permit No Hu Jing Jian (2017) FA31010620174768 issued by the Shanghai Jiangan District Planning and Land Administration Bureau dated 27 July 2017, the proposed development of the property was permitted to be constructed.
Pursuant to the Construction Work Commencement Permit No 1702JA0113D01 issued by the Shanghai Jiangan District Construction and Management Committee dated 26 September 2017, piling work of the proposed development of the property was permitted to be commenced.
According to note 1 (xi) as mentioned above, portion of the office portion of the property with a total gross floor area of 5,392 sq m will be transferred to the government at nil consideration upon completion. In addition, 150 basement car parking spaces of the property, upon completion, will be used by the government at nil rent. In the course of our valuation, we have not opined any market value to such portions.
As advised by eSun, the outstanding construction costs (including professional fees) and outstanding ancillary facilities cost of the property were approximately RMB1,004,000,000 and RMB80,200,000 respectively as at the date of valuation. Accordingly, we have taken into account the said costs in our valuation. In our opinion, the gross development value of the proposed developments of the property, assuming it were complete as at the valuation date, was estimated approximately as RMB3,092,000,000.
We have been provided with the eSun Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:
(i) Shanghai Hankey and Shanghai Zhabei legally own the land use right and construction works of the property;
(ii) Shanghai Hankey and Shanghai Zhabei can transfer, lease or mortgage the land use right and construction works of the property subject to the compliance of the Contract for Grant of Shanghai State-owned Construction Land Use Right as mentioned in note (1); and
(iii) The property is free from mortgage and other encumbrances.

– VIII-46 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Property

Description and tenure

Particulars of occupancy

Market Value in existing state as at 31 May 2018

19 Haizhu Plaza The property comprises an Chang Di Main irregular-shaped site with a site area Road of approximately 8,427 sq m Yuexiu District (90,708 sq ft). Guangzhou Guangdong The property is planned to be Province developed into an office/apartment The PRC development with approximate gross floor areas listed as follows:

Use Offce Apartment Retail Historical building Car park & facilities Total:	Approximate Gross Floor Area sq m sq ft 47,460 510,860 8,540 91,925 1,990 21,420 17,448 187,810 75,438 812,015	Approximate Gross Floor Area sq m sq ft 47,460 510,860 8,540 91,925 1,990 21,420 17,448 187,810 75,438 812,015
		812,015

The property is being occupied HK$1,540,000,000 by dilapidated buildings due to (HONG KONG be demolished. DOLLARS ONE BILLION FIVE HUNDRED AND FORTY MILLION ONLY)

(50.6% interest attributable to the eSun Group: HK$779,240,000)

(please see note 5)

The land use rights of the property have been granted for terms of 40 years for commercial, tourism and entertainment uses and 50 years for other use.

Notes:

Pursuant to the Contract for Grant of State-owned Land Use Right No Sui Guo Di Chu He (97) 155 entered into between Guangzhou State Land Bureau (“ Party A ”) and Guangzhou Guang Bird Property Development Ltd (“ Guangzhou Guang Bird ”), a 50.6% owned subsidiary of eSun (“ Party B ”) dated 29 April 1997, Party A agreed to grant the land use rights of the land to Party B. The said contract contains, inter-alia, the following salient conditions:

(i)	Site area	:	8,427 sq m
(ii)	Use	:	Commercial
(iii)	Land use term	:	40 years for commercial, tourism and entertainment uses and 50 years for others use
(iv)	Plot ratio	:	12.46
(v)	Total gross floor area	:	104,500 sq m (6,650 sq m for commercial use, 96,650 sq m for office use and 1,200
			sq m for club house)
(vi)	Maximum/average height	:	38 storeys
(vii)	Land grant fee	:	RMB56,108,811

– VIII-47 –

APPENDIX VIII VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

Pursuant to the Co-operative Joint Venture Contract and three Amendment Contracts all entered into between Guang Yuan Industry & Commerce Company Limited (“ Party C ”) and Nicebird Co., Ltd (“ Party D ”) dated 8 December 1992, 3 September 1996, 18 May 1997 and 29 April 2008 respectively and an approval letter No Sui Wai Jing Mao Zi Pi (2008) 177 dated 4 June 2008, both parties agreed to establish a joint venture company named Guangzhou Guang Bird Property Development Ltd. The salient conditions stipulated in the contract as amended by the Amendment Contracts are, inter-alia, as follows:

(i) Total investment amount : US$92,000,000 (ii) Registered capital : US$46,000,000 (iii) Period of operation : 20 years from the date of issue of business licence

(iv) Party C shall provide the land use rights of a plot of land with a site area of approximately 8,000 sq m whilst Party D shall contribute the entire amount of development fund including the land grant fee.
(v) Party C shall complete the demolition, resettlement, compensation and site leveling works before the end of March 1998.
(vi) After deducting the development costs, taxes and Party C’s investment capital and interest, the remaining profit will be distributed as to 20% for Party C and as to 80% for Party D.
Pursuant to two Amendment Contracts and a Resolution Agreement all entered into between Party C and Party D dated 22 January 2000, the salient conditions stipulated in the contracts and agreement are, inter-alia, as follows:
(i) Party C shall assist Guangzhou Guang Bird to resume the planned land use of the proposed development to commercial and high-end residential uses.
(ii) Party C shall assist Guangzhou Guang Bird to apply to relevant authority to reduce or exempt from the public facilities construction levy and composite development levy.
(iii) The completed building of the proposed development will be sold to domestic and overseas purchasers in the ratio of 80% and 20%. The board of directors can apply to relevant authority to adjust this ratio according to the market condition.
(iv) The income of Guangzhou Guang Bird for selling the building will be primarily to settle the investment costs and interests and any tax and levy. All remaining after-tax profit will be distributed to Party D.
Pursuant to the Business Licence No Wai S0102014005781 dated 8 July 2016, Guangzhou Guang Bird was established with an operation period from 18 September 1993 to 18 September 2023.
As advised by eSun, the outstanding relocation cost and ancillary facilities cost of the property was approximately RMB98,300,000 as at the date of valuation. Accordingly, we have taken into account the said costs in our valuation.
According to the information provided by eSun, the development is in preliminary planning stage and no estimated completion date of the proposed development can be provided for the time being.
We have been provided with the eSun Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:
(i) The Contract for Grant of State-owned Land Use Right is valid;
(ii) Guangzhou Guang Bird has no legal obstacles to obtaining State-owned Land Use Right Certificate in compliance with related legal procedures;
(iii) After obtaining the State-owned Land Use Right Certificate, Guangzhou Guang Bird can sell, lease or transfer the property according to the relevant laws and regulations; and
(iv) The property is free from mortgage and other encumbrances.

– VIII-48 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Description and tenure

Property

20 Remaining stage Palm Spring (the “ Development ”) is of Palm Spring a large-scale residential development Caihong Planning comprising four roughly rectangularArea shaped sites (namely plot A, B, C and Western District D) with a total area of approximately Zhongshan 236,649.80 sq m (2,547,298 sq ft). Guangdong Province The Development is planned to be The PRC developed by various stages with a total gross floor area of approximately 564,388 sq m (6,075,072 sq ft).

The property comprises the remaining stage of the Development with a proposed total gross floor area of 257,255 sq m (2,769,093 sq ft). The area details are listed as follows:

Market Value in existing state as at 31 May 2018

Particulars of occupancy

The property is currently under HK$1,540,300,000 construction and scheduled to (HONG KONG be completed in between the DOLLARS third quarter of 2020 to the ONE BILLION third quarter of 2022. FIVE HUNDRED FORTY MILLION AND THREE HUNDRED THOUSAND ONLY)

(50.6% interest attributable to the eSun Group: HK$779,391,800)

(please see note 6)

Use Residential (apartment) Commercial Others Car park (basement) Total:	Approximate Gross Floor Area sq m sq ft 182,801 1,967,670 12,216 131,493 4,280 46,070 57,958 623,860 257,255 2,769,093	Approximate Gross Floor Area sq m sq ft 182,801 1,967,670 12,216 131,493 4,280 46,070 57,958 623,860 257,255 2,769,093
		2,769,093

The land use rights of the property have been granted for a term expiring on 30 March 2075 for commercial/ residential uses.

– VIII-49 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Notes:

Pursuant to two State-owned Land Use Right Certificates Nos Zhong Fu Guo Yong (2005) Di 200204 and Zhong Fu Guo Yong (2011) Di 2000311 both issued by the People’s Government of Zhongshan, the titles to portion of the Development with a site area of approximately 55,434.0 sq m and 31,614.9 sq m respectively are both held by 中山市寶麗房地產發展有限公司 (Zhongshan Bao Li Properties Development Co. Ltd.) (“ Zhongshan Bao Li ”), a 50.6% owned subsidiary of eSun for a common term expiring on 30 March 2075 for commercial/residential uses.
Pursuant to the Business Licence with Unified Social Credit No 914420007480421393 dated 5 November 2015, Zhongshan Bao Li was established with an operation period from 17 April 2003 to 16 April 2053.
Pursuant to the Construction Land Use Planning Permit No De Zi Di 281222010030037(Bu) issued by the Zhongshan Planning Bureau dated 7 April 2010, portion of the Development with a site area of approximately 181,095.20 sq m was permitted to be developed.
Pursuant to two Construction Engineering Planning Permit No Jian Zi Di 281212017010039 and 281212017010038 both issued by the Zhongshan Urban and Rural Planning Bureau dated 19 June 2017, portion of the Development with a total gross floor area of approximately 272,347.90 sq m is permitted to be constructed.
Pursuant to two Construction Work Commencing Permits Nos 442000201712012201 and 442000201712051801 both issued by the Zhongshan Housing, Urban and Rural Construction Bureau dated 1 December 2017 and 5 December 2017 respectively, portion of the Development with a total gross floor area of 272,347.90 sq m is permitted to be commenced.
As advised by eSun, the outstanding construction cost (including professional fee) of the proposed development of the property was approximately RMB969,500,000 as at the date of valuation. Accordingly, we have taken into account the said cost in our valuation. In our opinion, the gross development value of the proposed developments of the property, assuming it were complete as at the valuation date, was estimated approximately as RMB3,265,000,000.
We have been provided with the eSun Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:
(i) Zhongshan Bao Li legally owns the property;
(ii) Zhongshan Bao Li can sell, lease or transfer the property according to the relevant laws and regulations; and
(iii) The property is free from mortgage and other encumbrances.

– VIII-50 –

APPENDIX VIII

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

Property

Description and tenure

Particulars of occupancy

Market Value in existing state as at 31 May 2018

21 Two parcels of The property comprises two parcels land located at of adjacent land located at the east the east side of side of Yiwener Road, south side of Yiwener Road, Caihong Road, west side of Tianyu south side of Road and north side of Hengqin Main Caihong Road, Road in Hengqin New Area of Zhuhai. west side of The total site area is approximately Tianyu Road 130,173.16 sq m. and north side of Hengqin Main The property is located at Hengqin Road New Area which is situated at the Hengqin southern part of Zhuhai. The locality New Area is mainly construction sites and is Zhuhai planned to be a tourist and leisure Guangdong area. It takes about 30 minutes to drive Province to the city centre of Zhuhai. The PRC

The property is currently under HK$5,808,000,000 construction and scheduled (HONG KONG to be completed in the fourth DOLLARS quarter of 2018. FIVE BILLION EIGHT HUNDRED AND EIGHT MILLION ONLY)

(60.48% interest attributable to the eSun Group: HK$3,512,678,400)

(please see notes 11 and 12)

The property is planned to be developed into a comprehensive development including commercial, office, hotel, cultural development with a total plot ratio gross floor area of approximately 260,342.92 sq m (2,802,331 sq ft).

– VIII-51 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Property

Description and tenure

Particulars of occupancy

Market Value in existing state as at 31 May 2018

The area details are listed as follows:

	Approximate	Approximate
	Gross Floor Area
Use	sq m	sq ft
Offce	50,394.55	542,447
Offce/serviced apartment
(cultural workshop)	39,914.65	429,641
Retail
(cultural/commercial area)	48,666.15	523,843
Cultural
(cultural attractions)	26,593.00	286,247
Cultural
(performance halls)	15,605.91	167,982
Villa (cultural studios)	22,755.14	244,936
Hotel
(cultural themed hotel)	55,437.33	596,727
Sub-total:	259,366.73	2,791,823
Car park (below ground)	40,165.70	432,344
Car park (above ground)	13,980.18	150,483
Others	78,485.38	844,817
Total:	391,997.99	4,219,467

The land use rights of the property have been granted for terms of 40 years for office, commercial and servicing, hotel uses and 50 years for other uses commencing from 31 December 2013.

– VIII-52 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Notes:

Pursuant to two Guangdong Province Real Estate Title Certificates Nos Yue Fang Di Quan Zheng Zhu Zi Di 0100244267 and 0100244268 both issued by the Zhuhai Real Estate Registration Centre dated 27 May 2014, the title to the property, having a total site area of 130,173.16 sq m, is held by 珠海橫琴麗新文創天地有限公司 (“ 珠海橫琴 ”), a 60.48% owned subsidiary of eSun for land use rights terms of 40 years for office, commercial and servicing, hotel uses and 50 years for other uses commencing from 31 December 2013.
Pursuant to the Contract for Grant of State-owned Construction Land Use Right No. 440401-2013-000023 (the “ Land Grant Contract ”) entered into between the Land and Resources Bureau of Zhuhai (“ Party A ”) and Winfield Concept Limited (永輝基業有限公司) (“ Party B ”) dated 27 September 2013, Party A agreed to grant the land use rights of two parcels of land to Party B. The said contract contains, inter-alia, the following salient conditions:
(i) Total site area : 130,173.16 sq m (Land parcel 1: 93,137.04 sq m, Land parcel 2: 37,036.12 sq m)
(ii) Use : Cultural/creative and commercial/servicing
(iii) Land use term : 50 years for cultural and creative uses and 40 years for commercial, office and hotel uses
(iv) Plot ratio : Not exceeding 2.0
(v) Total gross floor area
: Not exceeding 260,346.32 sq m (Land parcel 1: 186,274.08 sq m, Land parcel 2: 74,072.24 sq m)
(vi) Building height
: Not exceeding 100 m
(vii) Green area ratio
: Not less than 30% of site area
(viii) Land grant fee : RMB523,296,103.2
(ix) Building covenant
- : Construction works should be commenced within twelve months since the handover of the land and construction works should be completed within forty eight months since the handover of the land
(x) Remarks: : — Gross floor areas allocation for commercial use and hotel and office uses should not be greater than 10% and 20% respectively whilst that for cultural use should not be less than 70%.
```
 - Saleable gross floor area is restricted to 50% of total countable plot ratio gross floor area of the property.
```
Advised by eSun, Party B is a 60.48% owned subsidiary of eSun.
After signing of the Land Grant Contract, Winfield Concept Limited has established 珠海橫琴 with Business Licence No 440003490000497 dated 3 January 2014 and 珠海橫琴 has obtained two Guangdong Province Real Estate Title Certificates as mentioned in note 1.
Pursuant to the Construction Land Use Planning Permit No Zhu Heng Xin Gui Tu (Di Gui) (2014) 13 issued by the Zhuhai Hengqin New District Management Committee — Land & Planning Bureau dated 11 March 2014, the property with a total site area of 130,173.16 sq m was permitted to be developed.
Pursuant to five Construction Engineering Planning Permits Nos Zhu Heng Xin Gui Tu (Jian) (2016) 008, 009, 085, 086 and 087 all issued by Zhuhai Hengqin New District Management Committee — Land & Planning Bureau in 2016, portion of the property with a total gross floor area of 392,050.93 sq m is permitted to be constructed.
Pursuant to the Construction Work Commencing Permit No 440405201510270101 dated 5 August 2016 issued by Zhuhai Hengqin New District Management Committee — Construction and Environmental Bureau, construction works of portion of the property with a total gross floor area of 340,862.50 sq m is permitted to be commenced.
Pursuant to four Construction Work Commencing Permit No 440405201605240101, 440410201611180101, 440410201611170101 and 440405201609300301 all issued by Zhuhai Hengqin New District Management Committee — Construction and Environmental Bureau in 2016, construction works of portion of the property with a total gross floor area of 381,055.03 sq m is permitted to be commenced.

– VIII-53 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Pursuant to the Construction Work Commencing Permit No 440405201803090101 dated 9 March 2018 issued by Zhuhai Hengqin New District Management Committee — Construction and Environmental Bureau, construction works of portion of the property with a total gross floor area of 8,623.48 sq m is permitted to be commenced.
Pursuant to the Zhuhai Commodity Housing Pre-sale Permit No HQS2017009 dated 7 December 2017, pre-sale of portion of the property with a total gross floor area of 18,342.35 sq m was permitted.
As advised by eSun, the outstanding construction cost (including professional fee) of the property (excluding the cultural attractions portion) was approximately RMB1,985,400,000 as at the date of valuation. Accordingly, we have taken into account the said costs in our valuation. In our opinion, the gross development value of the proposed developments of the property (excluding the cultural attractions portion), assuming it were complete as at the valuation date, was estimated approximately as RMB7,597,000,000.
Due to the specific purpose for which the buildings and structures of cultural attractions portion of property no 21 which is held by the eSun Group under development have been designed, there is no readily identifiable market comparable, we have thus valued the property by using Cost Approach. Our valuation is based on an estimate of the market value for the existing use of the land, plus the current Gross Replacement Cost of the improvements, less allowances for physical deterioration and all relevant forms of obsolescence and optimization, if any. We would define “Gross Replacement Cost” as the estimated cost of erecting the building or a modern substitute building having the same area as the existing building at price levels as at the valuation date. The estimated building cost includes professional fees and finance charges payable during the construction period and other associated expenses directly related to the construction of the building. We must state that cessation of the existing business (if any) would have significant impact on the market value of the property as derived by the Cost Approach. While the cultural attractions portion was under construction as at the date of the valuation, we relied upon the information including but not limited to the profit forecast of the cultural attractions provided that revenue of the cultural attractions will be able to sustain the future on-going operation.
We have been provided with the eSun Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:
(i) 珠海橫琴 legally owns the property;
(ii) As mentioned in note (2) (x), 50% of the total countable plot ratio gross floor area of the property is restricted for sale at the moment. 珠海橫琴 should hold such portion and has the right to lease such portion and to grant the lessee to sublease;
(iii) Portion of the property (including land and construction work) is subject to a mortgage and the mortgage is valid and enforceable;
(iv) Save as abovementioned, 珠海橫琴 can sell, lease or transfer the property according to the relevant laws and regulations and subject to approval from the mortgagee; and
(v) Except for the mortgage mentioned in note (13) (iii), the property is free from encumbrances.

– VIII-54 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Description and tenure

Property

22 A parcel of land The property comprises a parcel of located at land roughly rectangular in shape Wuliqiao Road located at the Wuliqiao Road in 104 Jie Fang Huangpu District of Shanghai. The Huangpu District total site area is approximately Shanghai 6,885.20 sq m. The PRC

The property is planned to be developed into a residential development with a total gross floor area of approximately 15,798.04 sq m (170,050 sq ft). The area details are as follows:

Market Value in existing state as at 31 May 2018

Particulars of occupancy

The property is currently under HK$1,014,000,000 construction and scheduled (HONG KONG to be completed in the first DOLLARS quarter of 2019. ONE BILLION AND FOURTEEN MILLION ONLY)

(50.6% interest attributable to the eSun Group: HK$513,084,000)

(please see notes 8 and 9)

Use Residential Residential (basement) Residential (Indemnifcatory apartment) Club house (basement) Car park (basement) Others Total:	Approximate Gross Floor Area sq m sq ft 6,579.05 70,817 1,196.55 12,880 2,785.00 29,978 434.74 4,679 4,368.71 47,025 433.99 4,671 15,798.04 170,050	Approximate Gross Floor Area sq m sq ft 6,579.05 70,817 1,196.55 12,880 2,785.00 29,978 434.74 4,679 4,368.71 47,025 433.99 4,671 15,798.04 170,050
		170,050

The land use rights of the property have been granted for terms of 70 years for residential use expiring on 24 March 2085.

– VIII-55 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Notes:

Pursuant to the Shanghai Certificate of Real Estate Ownership Hu Fang Di Huang Zi (2015) Di 053145 issued by the Shanghai Housing and Land Resources Administration Bureau dated 23 September 2015, the land use rights of the property, having a site area of 6,885.2 sq m, is vested in 上海麗星房地產發展有限公司 (“ 上海麗星 ”), a 50.6% owned subsidiary of eSun, for a land use rights term of 70 years for residential use commencing from 25 March 2015 and expiring on 24 March 2085.
Pursuant to the Business Licence No 00000002201511090064 dated 9 November 2015, 上海麗星 was established with an operation period from 16 September 2014 to 15 September 2064.
Pursuant to the Construction Land Use Planning Permit No Hu Gui Di (2015) EA31000020154388 issued by the Shanghai Planning and Land Resources Administration Bureau dated 23 April 2015, the property with a total site area of 6,885.20 sq m was permitted to be developed.
Pursuant to the Construction Engineering Planning Permit No Hu Jing Jian (2017) FA31000020174306 issued by the Shanghai Planning and Land Administration Bureau dated 31 March 2017, piling work of the proposed development of the property was permitted to be constructed.
Pursuant to the Construction Engineering Planning Permit No Hu Jing Jian (2017) FA31000020174766 issued by the Shanghai Planning and Land Administration Bureau dated 24 July 2017, the proposed development of the property with a total gross floor area of 15,798.04 sq m was permitted to be constructed.
Pursuant to the Construction Work Commencement Permit No 1601HP0003D01 issued by the Shanghai Housing and Rural & Urban Construction Management Committee dated 14 April 2017, piling work of the proposed development of the property was permitted to be commenced.
Pursuant to the Construction Work Commencement Permit No 1601HP0003D02 issued by the Shanghai Housing and Rural & Urban Construction Management Committee dated 16 August 2017, construction work of the proposed development of the property with a total gross floor area of 15,798.04 sq m was permitted to be commenced.
As advised by eSun, residential portion of the property with a total gross floor area of 2,785 sq m will be transferred to the government as indemnificatory apartment upon completion without consideration. Therefore, in the course of our valuation of the aforesaid portion, we have only taken into account the construction cost while no value was assigned.
As advised by eSun, the outstanding construction cost (including professional fee) of the property was approximately RMB152,800,000 as at the date of valuation and the outstanding ancillary facilities cost of the property was approximately RMB950,000 as at the date of valuation. Accordingly, we have taken into account the said costs in our valuation. In our opinion, the gross development value of the proposed developments of the property, assuming it were complete as at the valuation date, was estimated approximately as RMB1,144,000,000.
We have been provided with the eSun Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:
(i) 上海麗星 legally owns the building ownership and construction works of the property;
(ii) The property is subject to a mortgage and the mortgage is valid and enforceable;
(iii) 上海麗星 can sell, lease or transfer the land use right and construction works of the property according to the relevant laws and regulations and subject to approval from the mortgagee; and
(iv) Except for the mortgage mentioned in note (10) (ii), the property is free from encumbrances.

– VIII-56 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Group V — Property interests held by the eSun Group in Hong Kong for owner occupation purpose

Property

Description and tenure

Particulars of occupancy

Market Value in existing state as at 31 May 2018

23 20th Floor of May Tower II is a 26-storey centrally May Tower II air-conditioned apartment building and Car Parking surmounting a 3-storey carparking/ Space recreational podium completed in No 57 on 1992.
Ground Floor of May Towers I The property comprises an apartment and II unit within May Tower II with a gross Nos 5 and 7 floor area of approximately 315.22 May Road sq m (3,393 sq ft). The property also Mid-Levels comprises a covered car parking space Hong Kong on Ground Floor.

As advised, the property is HK$115,000,000 currently owner-occupied. (HONG KONG DOLLARS ONE HUNDRED AND FIFTEEN MILLION ONLY)

(50.6% interest attributable to the eSun Group: HK$58,190,000)

35/2,480th shares The property is held from the of and in Government under a Government Inland Lot Lease and Conditions of Extension No 1772 and the No 6018 for a term of 75 years Extension thereto commencing from 8 April 1907 renewable for a further term of 75 years. The Government Rent payable for the whole lot and the extension is HK$140,400 per annum.

Notes:

The registered owner of the property is South Hill Limited, a 50.6% owned subsidiary of eSun.
The property lies within an area zoned “Residential (Group B)” under Mid-Levels West Outline Zoning Plan No S/H11/15 as at the date of valuation.
The property was subject to the following encumbrances:
i. Occupation Permit vide memorial no UB5225592 dated 12 March 1992.
ii. Deed of Mutual Covenant and Management Agreement in favour of Kerry Real Estate Agency Limited “The Manager” vide memorial no UB5247138 dated 30 March 1992.
iii. Permission Letter with plan (Re from District Lands Officer, Hong Kong West and South) vide memorial no 08042101880013 dated 19 March 2008.

– VIII-57 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Description and tenure

Property

24 4th, 5th Floors and Roof, East Commercial Block, South Horizons, 18A South Horizon Drive, Ap Lei Chau, Hong Kong

South Horizons is a large private and Roof, East residential estate located on the Commercial eastern portion of Ap Lei Chau district Block, South of Hong Kong Island. The whole Horizons, 18A estate comprises a total of 34 high South Horizon rise residential towers together with Drive, Ap Lei ancillary recreational and carparking Chau, Hong Kong facilities completed in phases from 1991 to 1995. Commercial 202/168,000th facilities are provided within the two undivided shares commercial blocks in South Horizons of and in the and were respectively known as Remaining East Commercial Block and West Portion of Commercial Block (also known as Ap Lei Chau Marina Square). Inland Lot No 121

The East Commercial Block of South Horizons is situated at the junction of South Horizon Drive and Yi Nam Road. It is a 6-storey shopping/ recreational complex surmounting a 2-level underground carpark and was completed in 1994.

The property comprises the whole of the 4th and 5th floors and roof of East Commercial Block and is being operated as a cinema. The approximate gross floor areas of the property, as per approved building plans, are summarized as follows:

Floor 4/F: 5/F: Total:	Gross Floor Area (sq m) (sq ft) 1,732.339 18,647 250.774 2,699 1,983.113 21,316	Gross Floor Area (sq m) (sq ft) 1,732.339 18,647 250.774 2,699 1,983.113 21,316
		21,316

Market Value in existing state as at 31 May 2018

Particulars of occupancy

As advised, the property is HK$137,000,000 currently owner-occupied. (HONG KONG DOLLARS As at the date of valuation, 4/F ONE HUNDRED and 5/F and the roof of the AND THIRTY property were subject to an SEVEN MILLION intra-group tenancy for a term ONLY) of 10 years and 2 months from 22 January 2016 with rent free (100% interest period for the first 2 months attributable and stepped rents as below: to the eSun Group: HK$137,000,000)

		Monthly Rent
		(exclusive of
		rates and
Year		management fees)
Year	1 - 3	HK$260,000
Year	4 - 6	HK$273,000
Year	7 - 9	HK$286,650
Year	10	HK$300,983

There are also additional turnover rent provisions which are summarized as follows:

Annual	Turnover Rent
Cumulative gross	payable to the
box-offce receipt	Landlord
At or below	Nil
HK$22m
HK$22m –	16% of gross
HK$26m	box-offce receipt
	in excess of
	HK$22 million
HK$26m –	HK$640,000 +18%
HK$30m	of gross box-offce
	receipt in excess of
	HK$26 million
Over HK$30m	HK$1,360,000 +20%
	of gross box-offce
	receipt in excess of
	HK$30 million

– VIII-58 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Property

Description and tenure

Particulars of occupancy

Market Value in existing state as at 31 May 2018

The property also comprises flat roofs of approximately 72.46 sq m (780 sq ft) or thereabouts and roofs of approximately 1,004.55 sq m (10,813 sq ft) or thereabouts. Ap Lei Chau Inland Lot No 121 is held under Conditions of Exchange No UB11998 for a term from 28 January 1988 to 31 March 2040 at an annual Government rent of 3% of the rateable value for the time being of the property.

Notes:

The registered owner of the property is Kaleidoscope International Limited, a 100% owned subsidiary of eSun.
The property lies within an area zoned “Commercial” uses under the draft Aberdeen & Ap Lei Chau Outline Zoning Plan No S/H15/32 as at the date of valuation.
The property was subject to the following encumbrances:
i. Deed of Mutual Covenant vide memorial no UB5168423 dated 14 January 1992.
ii. Occupation Permit no H22/94 vide memorial no UB6025073 dated 17 February 1994.
iii. Re-registration of Sub-Deed of Mutual Covenant Memorial No UB5675751 (Re commercial development, garage, common areas (excluding residential common areas) and government accommodation of 15,000/168,000 shares vide memorial no UB6074715 dated 15 May 1993.
iv. Sub-Sub-Deed of Mutual Covenant and Management Agreement in favour of Marina Square Property Management Company Limited, “The Sub-Manager” vide memorial no UB6155283 dated 10 October 1994.
v. Memorandum of Variation to the 3rd Schedule of Sub-Sub-Deed of Mutual Covenant and Management Agreement memorial no 6155283 in relation to the change of use of the stalls vide memorial no UB7253418 dated 4 September 1997.
vi. Deed of Covenant vide memorial no UB7264632 dated 25 August 1997.

– VIII-59 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Property

Description and tenure

Particulars of occupancy

Market Value in existing state as at 31 May 2018

25 Car Park Nos 7, Forda Industrial Building is 14-storey 8 and 9 on industrial building completed in 1978. Ground Floor, Forda Industrial The property comprises 3 car parking Building, No 16 spaces on the Ground Floor of Forda Wang Chau Road, Industrial Building. Yuen Long,

As advised, the property is No commercial currently vacant. value

New Territories, According to supplemental deed Hong Kong of mutual covenant vide memorial no YL302375, the property was
3/1,188th designated as common area.
undivided shares
of and in Yuen Long Town Lot No 221 is Yuen Long Town held under a New Grant for a term Lot No 221 of 99 years commencing from 1 July 1898 less the last 3 days and has been extended to 30 June 2047 at an annual Government rent at 3% of the rateable value for the time being of the property.

Notes:

The registered owner of the property is Active Light Limited, a 100% owned subsidiary of eSun.
The property lies within an area zoned “Residential (Group E)” uses under the approved Yuen Long Outline Zoning Plan No S/YL/23 as at the date of valuation.
The property was subject to the following encumbrances:
i. Letter with amended car parks lay-out plan vide memorial no YL214864 dated 9 December 1978.
ii. Mutual Covenant vide memorial no YL216183 dated 14 December 1978.
iii. Supplemental Deed of Mutual Covenant vide memorial no YL302375 dated 20 April 1985.
iv. Certified copy Certificate of Compliance vide memorial no YL347740 dated 14 June 1978.
v. Supplemental Deed of Mutual Covenant vide memorial no YL372993 dated 3 August 1987.
vi. Management Agreement vide memorial no YL565323 dated 2 September 1993.
By virtue of Supplemental Deed of Mutual Covenant dated 20 April 1985 and registered vide memorial no YL302375 between Town Investment Property Limited (a previous owner of all these 3 car parking spaces or “ Party A ”) and the other owners of the remaining interests (collectively referred to as “ Party B ”) in Forda Industrial Building, Party A and its successors and assigns abandon waive and disclaim its exclusive right and privilege to hold use occupy and enjoy the said parking spaces. Whilst Party B and their respective successors and assigns tenants agents servants and other authorized persons shall be entitled to (without reference to Party A) enter into and use the said parking spaces at any time hereafter in common with Party A and all others having the like right. Thereafter, these 3 car parking spaces became for common use of all the owners and occupiers in Forda Industrial Building and hence no commercial value is assigned.

– VIII-60 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Property

Description and tenure

Particulars of occupancy

Market Value in existing state as at 31 May 2018

26 Store Room on Forda Industrial Building is 14-storey 10th Floor, industrial building, completed in 1978.
Forda Industrial Building, The property comprises a store room No 16 Wang Chau on the 10th Floor of Forda Industrial Road, Yuen Long, Building.
New Territories,

Hong Kong The saleable area of the property is approximately 7.6 sq m (82 sq ft).

1/60 of 60/1,188th

undivided shares Yuen Long Town Lot No 221 is of and in held under a New Grant for a term Yuen Long Town of 99 years commencing from 1 July Lot No 221 1898 less the last 3 days and has been extended to 30 June 2047 at an annual Government rent at 3% of the rateable value for the time being of the property.

As advised, the property is HK$72,000 currently vacant. (HONG KONG DOLLARS SEVENTY TWO THOUSAND ONLY) (100% interest attributable to the eSun Group: HK$72,000)

Notes:

The registered owner of the property is Active Light Limited, a 100% owned subsidiary of eSun.
The property lies within an area zoned “Residential (Group E)” uses under the approved Yuen Long Outline Zoning Plan No S/YL/23 as at the date of valuation.
The property was subject to the following encumbrances:
i. Mutual Covenant vide memorial no YL216183 dated 14 December 1978.
ii. Supplemental Deed of Mutual Covenant vide memorial no YL302375 dated 20 April 1985.
iii. Certified copy Certificate of Compliance vide memorial no YL347740 dated 14 June 1978.
iv. Supplemental Deed of Mutual Covenant vide memorial no YL372993 dated 3 August 1987.
v. Management Agreement vide memorial no YL565323 dated 2 September 1993.
vi. Mortgage to secure general credit facilities in favour of Onshine Finance Limited (Re the consideration is to an unlimited extent for partial releases see respective SDR) vide memorial no YL1069586 dated 10 January 2004.
vii. Sub-Deed of Mutual Covenant vide memorial no YL1108851 dated 1 November 2004.

– VIII-61 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Property

Description and tenure

Particulars of occupancy

Market Value in existing state as at 31 May 2018

27 Common Areas Forda Industrial Building is 14-storey on 10th Floor, industrial building, completed in 1978. Forda Industrial Building, No 16 The property comprises common Wang Chau Road, corridor, male and female lavatories Yuen Long, on the 10th Floor of Forda Industrial New Territories, Building with a saleable area of Hong Kong approximately 123.6 sq m (1,330 sq ft).

As advised, the property is No commercial currently vacant. value

1/60 of 60/1,188th undivided shares According to supplemental deed of and in of mutual covenant vide memorial Yuen Long Town no YL1108851, the property was Lot No 221 designated as common area which are shown “Yellow and Yellow-Hatch Black” on the plan attached to the aforesaid memorial.

Yuen Long Town Lot No 221 is held under a New Grant for a term of 99 years commencing from 1 July 1898 less the last 3 days and has been extended to 30 June 2047 at an annual Government rent at 3% of the rateable value for the time being of the property.

Notes:

The registered owner of the property is Active Light Limited, a 100% owned subsidiary of eSun.
The property lies within an area zoned “Residential (Group E)” uses under the approved Yuen Long Outline Zoning Plan No S/YL/23 as at the date of valuation.
The property was subject to the following encumbrances:
i. Mutual Covenant vide memorial no YL216183 dated 14 December 1978.
ii. Supplemental Deed of Mutual Covenant vide memorial no YL302375 dated 20 April 1985.
iii. Certified copy Certificate of Compliance vide memorial no YL347740 dated 14 June 1978.
iv. Supplemental Deed of Mutual Covenant vide memorial no YL372993 dated 3 August 1987.
v. Management Agreement vide memorial no YL565323 dated 2 September 1993.
vi. Mortgage to secure general credit facilities in favour of Onshine Finance Limited (Re the consideration is to an unlimited extent for partial releases see respective SDR) vide memorial no YL1069586 dated 10 January 2004.
vii. Sub-Deed of Mutual Covenant vide memorial no YL1108851 dated 1 November 2004.
The existing owner of this property interest originally owned the whole of 10/F of Forda Industrial Building. By virtue of SubDeed of Mutual Covenant dated 1 November 2004 registered vide memorial no YL1108851, the whole 10/F was subdivided into Unit A, Unit B, a store room and this common area. Both Unit A and Unit B were subsequently sold to other third parties with this property interest, being the common areas on 10/F, still held under Active Light Limited.

– VIII-62 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Group VI — Property interest held by the eSun Group in Macao for owner occupation purpose

Description and tenure

Property Description and tenure
28 Unit B on One Central (the “ Development ”) is 25th Floor of a waterfront mixed-used development Tower 3, comprising retail, residential and One Central apartment facilities together with a Residences, world-class hotel managed by The Nos 28-248 Mandarin Oriental Hotel Group, Avenida de which was completed in about 2009. Sagres, One Central directly links to MGM Nos 18-52 Grand Macau and is in close proximity Praceta 24 de to Wynn Macau, the Macau Tower Junho, Convention and Entertainment Centre Nos 945-973Y and Grand Lisboa. Avenida Dr Sun Yat-Sen, One Central Residences consists of 7 Macao residential towers of 32 to 38 storeys erected over a 9-storey podium (3-storey retail, 4-storey carpark, 1-storey residential main lobby and 1-storey podium garden) plus 2-storey basement carpark. A 5-level indoor and outdoor leisure and recreational space is provided in the club house.

Market Value in existing state as at 31 May 2018

Particulars of occupancy

As advised, the property is HK$37,864,000 currently owner-occupied. (HONG KONG DOLLARS THIRTY SEVEN MILLION EIGHT HUNDRED AND SIXTY FOUR THOUSAND ONLY)

(100% interest attributable to the eSun Group: HK$37,864,000)

Under Despacho No 87/2006 (第 87/2006號運輸工務司司長批示), a 5-star hotel development and a residential/commercial complex are permitted to be built within the Development.

The property comprises a residential unit on the 25th Floor of Tower 3 of One Central Residences. As per sales brochure from the web-site, the gross floor area and saleable area of the Property is approximately 279.3 sq m (3,006 sq ft) and 217.9 sq m (2,345 sq ft).

– VIII-63 –

VALUATION ON THE PROPERTY INTERESTS OF THE eSUN GROUP

APPENDIX VIII

Property

Description and tenure

Particulars of occupancy

Market Value in existing state as at 31 May 2018

The property is held under Concessão Por Arrendamento (政府租賃批地) for a term of 25 years commenced from 7 June 2006 and renewable in accordance with the relevant Macao’s laws and the Government rent payable for the lot is as follows:—

i) During the construction period, the annual rent shall be MOP550,320 for the development while the unit rent is MOP30 per sq m.
ii) Upon completion of the construction, the annual rents are as follows:—

5-Star Hotel MOP15 per sq m Car Park (Hotel) MOP10 per sq m Outdoor (Hotel) MOP10 per sq m Residential MOP10 per sq m Car Park (Residential) MOP10 per sq m Outdoor (Residential) MOP10 per sq m

Notes:

The registered owner of the property is Grandeur Limited, a 100% owned subsidiary of eSun.
The property is zoned for “Hotel Area, Residential and Commercial” uses as per Planta de Alinhamento Oficial (街道準線圖) issued on 22 April 2005.
There is no material encumbrance registered against the property.

– VIII-64 –

GENERAL INFORMATION

APPENDIX IX

A. RESPONSIBILITY STATEMENT

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

B. DISCLOSURE OF INTERESTS

Directors’ and chief executive’s interests and short positions in the shares, underlying shares and debentures of LSD or its associated corporations

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executive of LSD in the shares, underlying shares and debentures of LSD or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be (i) notified to LSD and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions, if any, which they were taken or deemed to have under such provisions of the SFO); or (ii) as recorded in the register required to be kept by LSD pursuant to Section 352 of the SFO; or (iii) as otherwise notified to LSD and the Stock Exchange pursuant to the Code of Practice for Securities Transactions by Directors and Designated Employees adopted by LSD (“ Securities Code ”) were as follows:

– IX-1 –

GENERAL INFORMATION

APPENDIX IX

(1) The Company

Long positions in the ordinary shares and the underlying shares in the Company

							Approximate
							% of total
							interests to
Name of		Personal	Family	Corporate	Other	Total	total issued
Director	Capacity	interests	interests	interests	interests	interests	LSD shares
Dr. Peter Lam	Benefcial	429,232	Nil	340,023,572	417,308	340,870,112	56.24%
	owner/	(Note 1)		(Note 1)	(Note 5)
	Owner of
	controlled
	corporations
Mr. FA Chew	Benefcial	Nil	Nil	400,000	3,773,081	4,173,081	0.69%
	owner/			(Note 3)	(Note 5)
	Owner of
	controlled
	corporations
Mr. Julius Lau	Benefcial	263,500	Nil	Nil	2,086,540	2,350,040	0.39%
	owner	(Note 4)			(Note 5)
Mr. Lester Lam	Benefcial	Nil	Nil	Nil	4,173,081	4,173,081	0.69%
(Note 6)	owner				(Note 5)
Madam U	Benefcial	26,919	Nil	Nil	Nil	26,919	0.01%
(Note 2)	owner	(Note 2)

Notes:

(1) LSG and two of its wholly-owned subsidiaries, namely Zimba International Limited (“ Zimba International ”) and Joy Mind Limited (“ Joy Mind ”), beneficially owned 340,023,572 LSD Shares, representing approximately 56.10% of the issued share capital of LSD. Dr. Peter Lam was deemed to be interested in the same 340,023,572 LSD Shares by virtue of, in aggregate, his personal and deemed interests of approximately 42.05% in the issued share capital of LSG. LSG is approximately 12.68% owned by Dr. Peter Lam and is approximately 29.37% owned by Wisdoman Limited which in turn is 100% beneficially owned by Dr. Peter Lam.

– IX-2 –

GENERAL INFORMATION

APPENDIX IX

On 15 August 2017, the Company implemented the Share Consolidation on the basis that every fifty (50) issued shares in the share capital of the Company were consolidated into one (1) consolidated share in the share capital of the Company. The issued share capital of the Company was decreased from 30,251,304,984 to 605,026,099 as a result of the Share Consolidation.

During the six months ended 31 January 2018 under review, 60,000 ordinary shares were issued in respect of share options exercised under the Company’s share option scheme increasing the number of issued shares from 605,026,099 to 605,086,099.

On 30 January 2018, the Company allotted and issued 990,515 new ordinary shares pursuant to its Scrip Dividend Scheme in relation to the final dividend for the year ended 31 July 2017, increasing the total number of issued shares in the Company from 605,086,099 to 606,076,614.

LSG placed up to 50,934,000 LSD Shares under the secondary block trade agreement dated 16 August 2017 which was completed on 21 August 2017 (“ Placing ”).

The personal interests of Dr. Peter Lam were changed from 21,461,617 LSD Shares to 429,232 LSD Shares following the completion of the Share Consolidation.

LSG pledged approximately 208,513,987 LSD Shares (10,425,699,353 issued shares of the Company before the Share Consolidation) held by LSG, Zimba International and Joy Mind as security pursuant to its 7.70% secured guaranteed notes due 2018 under a Share Charge dated 24 July 2014.

LSG and Joy Mind acquired in aggregate 17,319,000 LSD Shares on the market in May, June and July 2018, thereby increasing their shareholding interests in the Company from 322,704,572 LSD Shares to 340,023,572 LSD Shares.

Dr. Peter Lam is also a director of LSG.
(2) Madam U is the widow of the late Mr. Lim Por Yen whose estate includes an interest of 3,957,189 LSD Shares (197,859,550 LSD Shares before the Share Consolidation), representing approximately 0.65% of the issued share capital of the Company.

The personal interests of Madam U were changed from 1,345,974 LSD Shares to 26,919 LSD Shares following the completion of the Share Consolidation.

Madam U is also a director of LSG.

(3) The 20,000,000 LSD Shares owned by The Orchid Growers Association Limited changed to 400,000 LSD Shares following the completion of the Share Consolidation. By virtue of his 100% interest in the issued share capital of The Orchid Growers Association Limited, Mr. FA Chew was deemed to be interested in these 400,000 shares.

Mr. FA Chew is also a director of LSG.

(4) The personal interests of Mr. Julius Lau were changed from 13,175,000 LSD Shares to 263,500 LSD Shares following the completion of the Share Consolidation.

– IX-3 –

GENERAL INFORMATION

APPENDIX IX

(5) A share option was granted by the Company to each of Dr. Peter Lam, Mr. FA Chew, Mr. Julius Lau and Mr. Lester Lam, the particulars of which are set out below:

		*Number of*	*Number of*
		*underlying*	*underlying*
		*shares*	*shares*
		*comprised in*	*comprised in*
		*the option*	*the option*		*Subscription*	*Subscription*
		*before the*	*after the*		*price before*	*price after*
		*Share*	*Share*		*the Share*	*the Share*
*Registered Name*	*Date of grant*	*Consolidation*	*Consolidation*	*Option period*	*Consolidation*	*Consolidation*
Dr. Peter Lam	18/01/2013	20,865,408	417,308	18/01/2013-	HK$0.322 per	HK$16.100 per
				17/01/2023	LSD Share	LSD Share
Mr. FA Chew	05/06/2012	188,654,089	3,773,081	05/06/2012-	HK$0.107 per	HK$5.350 per
				04/06/2022	LSD Share	LSD Share
Mr. Julius Lau	18/01/2013	104,327,044	2,086,540	18/01/2013-	HK$0.322 per	HK$16.100 per
				17/01/2023	LSD Share	LSD Share
Mr. Lester Lam	18/01/2013	208,654,089	4,173,081	18/01/2013-	HK$0.322 per	HK$16.100 per
				17/01/2023	LSD Share	LSD Share

(6) Mr. Lester Lam is also a director of LSG.

(2) Associated Corporations

(i) LSG — the ultimate holding company of the Company

Long positions in the ordinary shares and the underlying shares in LSG

							Approximate
							% of total
							interests to
Name of		Personal	Family	Corporate	Other	Total	total issued
Director	Capacity	interests	interests	interests	interests	interests	shares
Dr. Peter Lam	Benefcial	48,116,366	Nil	113,127,277	708,575	161,952,218	42.05%
	owner/	(Note 1)		(Note 1)	(Note 6)
	Owner of
	controlled
	corporations
Mr. FA Chew	Owner of	Nil	Nil	202,422	3,819,204	4,021,626	1.04%
	controlled			(Note 2)	(Note 6)
	corporations
Mr. Lester Lam	Benefcial	12,283,938	Nil	Nil	7,571,626	19,855,564	5.16%
	owner	(Note 3)			(Note 6)
Dr. Lam Kin Ming	Benefcial	1,007,075	Nil	Nil	Nil	1,007,075	0.26%
	owner	(Note 4)
Madam U	Benefcial	825,525	Nil	Nil	Nil	825,525	0.21%
	owner	(Note 5)

– IX-4 –

GENERAL INFORMATION

APPENDIX IX

Notes:

(1) On 15 August 2017, LSG implemented the share consolidation on the basis that every five (5) issued shares in the share capital of LSG were consolidated into one (1) consolidated share in the share capital of LSG (“ LSG Share Consolidation ”).

On 30 January 2018, LSG allotted and issued 1,917,209 new ordinary shares (“ Scrip Shares ”) pursuant to its Scrip Dividend Scheme in relation to the final dividend for the year ended 31 July 2017, increasing the total number of issued shares in LSG from 383,220,448 to 385,137,657.

The interests of Wisdoman Limited were changed from 562,590,430 shares to 112,518,086 shares following the completion of the LSG Share Consolidation. On 30 January 2018, Wisdoman Limited has elected to receive a total of 609,191 Scrip Shares in lieu of cash dividend pursuant to the Scrip Dividend Scheme of LSG, increasing Wisdoman’s interests in LSG from 112,518,086 shares to 113,127,277 shares. Dr. Peter Lam was deemed to be interested in 113,127,277 shares (representing approximately 29.37% of LSG’s issued share capital) by virtue of his 100% interests in the issued share capital of Wisdoman Limited.

The personal interests of Dr. Peter Lam were changed from 239,286,305 shares to 47,857,260 shares following the completion of the LSG Share Consolidation. On 30 January 2018, Dr. Peter Lam has elected to receive a total of 259,106 Scrip Shares in lieu of cash dividend pursuant to the Scrip Dividend Scheme of LSG, increasing his personal interests in LSG from 47,857,260 shares to 48,116,366 shares.

(2) The 1,012,111 shares held by The Orchid Growers Association Limited, a company whollyowned by Mr. FA Chew changed to 202,422 shares following the completion of the LSG Share Consolidation. Mr. FA Chew was deemed to be interested in these 202,422 shares.
(3) The personal interests of Mr. Lester Lam were changed from 61,088,946 shares to 12,217,789 shares following the completion of the LSG Share Consolidation. On 30 January 2018, Mr. Lester Lam has elected to receive a total of 66,149 scrip shares in lieu of cash dividend pursuant to the Scrip Dividend Scheme of LSG increasing his personal interests in LSG from 12,217,789 shares to 12,283,938 shares.
(4) The personal interests of Dr. Lam Kin Ming were changed from 5,008,263 shares to 1,001,652 shares following the completion of the LSG Share Consolidation. On 30 January 2018, Dr. Lam Kin Ming has elected to receive a total of 5,423 Scrip Shares in lieu of cash dividend pursuant to the Scrip Dividend Scheme of LSG increasing his personal interests in LSG from 1,001,652 shares to 1,007,075 shares.
(5) The personal interests of Madam U were changed from 4,127,625 shares to 825,525 shares following the completion of the LSG Share Consolidation.

– IX-5 –

GENERAL INFORMATION

APPENDIX IX

(6) Share options were granted by LSG to each of Dr. Peter Lam, Mr. FA Chew and Mr. Lester Lam, the particulars of which are set out below:

		*Number of*	*Number of*
		*underlying*	*underlying*
		*shares*	*shares*
		*comprised in*	*comprised in*
		*the option*	*the option*		*Subscription*	*Subscription*
		*before the*	*after the*		*price before*	*price after*
		*LSG Share*	*LSG Share*		*the LSG Share*	*the LSG Share*
*Registered Name*	*Date of grant*	*Consolidation*	*Consolidation*	*Option period*	*Consolidation*	*Consolidation*
Dr. Peter Lam	18/01/2013	1,876,211	375,242	18/01/2013-	HK$1.21	HK$6.05
				17/01/2023	per share	per share
	19/06/2017	1,666,666	333,333	19/06/2017-	HK$3.00	HK$15.00
				18/06/2027	per share	per share
Mr. FA Chew	19/06/2017	19,096,022	3,819,204	19/06/2017-	HK$3.00	HK$15.00
				18/06/2027	per share	per share
Mr. Lester Lam	18/01/2013	18,762,111	3,752,422	18/01/2013-	HK$1.21	HK$6.05
				17/01/2023	per share	per share
	19/06/2017	19,096,022	3,819,204	19/06/2017-	HK$3.00	HK$15.00
				18/06/2027	per share	per share

(ii) eSun — an associate of the Company

Long positions in the ordinary shares and the underlying shares in eSun

							Approximate
							% of total
							interests to
Name of		Personal	Family	Corporate	Other	Total	total issued
Director	Capacity	interests	interests	interests	interests	interests	shares
Dr. Peter Lam	Benefcial	2,794,443	Nil	551,040,186	1,243,212	555,077,841	37.21%
	owner/			(Note 1)	(Note 2)
	Owner of
	controlled
	corporations
Mr. FA Chew	Benefcial	Nil	Nil	Nil	6,216,060	6,216,060	0.42%
	owner				(Note 2)
Mr. Lester Lam	Benefcial	2,794,443	Nil	Nil	12,432,121	15,226,564	1.02%
	owner				(Note 2)

– IX-6 –

GENERAL INFORMATION

APPENDIX IX

Notes:

(1) The Offeror was interested in 551,040,186 shares in eSun, representing approximately 36.94% of the issued share capital of eSun. As such, Dr. Peter Lam was deemed to be interested in the same 551,040,186 shares in eSun by virtue of, in aggregate, his personal and deemed interests of approximately 42.05% and 56.24% in the issued share capital of LSG and the Company, respectively.
(2) A share option was granted by eSun to each of Dr. Peter Lam, Mr. FA Chew and Mr. Lester Lam, the particulars of which are set out below:

		*Number of*
		*underlying shares*
		*comprised in*
*Registered Name*	*Date of grant*	*the option*	*Option period*	*Subscription price*
Dr. Peter Lam	18/01/2013	1,243,212	18/01/2013-17/01/2023	HK$1.612 per share
Mr. FA Chew	05/06/2012	6,216,060	05/06/2012-04/06/2022	HK$0.92 per share
Mr. Lester Lam	18/01/2013	12,432,121	18/01/2013-17/01/2023	HK$1.612 per share

(iii) Lai Fung — a subsidiary of eSun

Long positions in the ordinary shares and the underlying shares in Lai Fung

							Approximate
							% of total
							interests to
Name of		Personal	Family	Corporate	Other	Total	total issued
Director	Capacity	interests	interests	interests	interests	interests	shares
Dr. Peter Lam	Benefcial	Nil	Nil	165,485,406	321,918	165,807,324	50.70%
	owner/			(Note 1)	(Note 4)
	Owner of
	controlled
	corporations
Mr. FA Chew	Benefcial	Nil	Nil	600,000	1,009,591	1,609,591	0.49%
	owner/			(Note 2)	(Note 4)
	Owner of
	controlled
	corporations
Mr. Julius Lau	Benefcial	235	Nil	Nil	965,754	965,989	0.30%
	owner	(Note 3)			(Note 4)
Mr. Lester Lam	Benefcial	Nil	Nil	Nil	3,219,182	3,219,182	0.98%
	owner				(Note 2)

– IX-7 –

GENERAL INFORMATION

APPENDIX IX

Notes:

(1) On 15 August 2017, Lai Fung implemented the Share Consolidation on the basis that every fifty (50) issued shares in the share capital of Lai Fung were consolidated into one (1) consolidated share in the share capital of Lai Fung (“ Lai Fung Share Consolidation ”).

On 30 January 2018, Lai Fung allotted and issued 1,122,400 new ordinary shares pursuant to its Scrip Dividend Scheme in relation to the final dividend for the year ended 31 July 2017, increasing the total number of issued shares in Lai Fung from 325,921,734 to 327,044,134.

The 8,274,270,422 shares held by eSun were changed to 165,485,406 shares in Lai Fung following the completion of the Lai Fung Share Consolidation. Dr. Peter Lam was deemed to be interested in the same 165,485,406 issued shares in Lai Fung by virtue of, in aggregate, his personal and deemed shareholding interests of approximately 37.21% in the issued share capital of eSun.

(2) The deemed interests of Mr. FA Chew were changed from 30,000,000 shares to 600,000 shares following the completion of the Lai Fung Share Consolidation. These shares were held by The Orchid Growers Association Limited, a company wholly-owned by Mr. FA Chew.
(3) The personal interests of Mr. Julius Lau were changed from 11,772 shares to 235 shares following the completion of the Lai Fung Share Consolidation.
(4) A share option was granted by Lai Fung to each of Dr. Peter Lam, Mr. FA Chew, Mr. Julius Lau and Mr. Lester Lam, the particulars of which are set out below:

		*Number of*	*Number of*
		*underlying*	*underlying*
		*shares*	*shares*
		*comprised in*	*comprised in*
		*the option*	*the option*		*Subscription*	*Subscription*
		*before the*	*after the*		*price before the*	*price after the*
		*Lai Fung Share*	*Lai Fung Share*		*Lai Fung Share*	*Lai Fung Share*
*Registered Name*	*Date of grant*	*Consolidation*	*Consolidation*	*Option period*	*Consolidation*	*Consolidation*
Dr. Peter Lam	18/01/2013	16,095,912	321,918	18/01/2013-	HK$0.228	HK$11.400
				17/01/2023	per share	per share
Mr. FA Chew	12/06/2012	50,479,564	1,009,591	12/06/2012-	HK$0.133	HK$6.650
				11/06/2020	per share	per share
Mr. Julius Lau	18/01/2013	48,287,738	965,754	18/01/2013-	HK$0.228	HK$11.400
				17/01/2023	per share	per share
Mr. Lester Lam	18/01/2013	160,959,129	3,219,182	18/01/2013-	HK$0.228	HK$11.400
				17/01/2023	per share	per share

– IX-8 –

GENERAL INFORMATION

APPENDIX IX

(iv) MAGHL — a subsidiary of eSun

Long positions in the shares and underlying shares in MAGHL

				Total
				number of	Approximate
		Number of	Number of	issued	% of total
		ordinary	underlying	shares and	interests to
		shares	shares	underlying	total issued
Name of Director	Capacity	held	held	shares	shares
Dr. Peter Lam	Owner of	1,443,156,837	Nil	1,443,156,837	67.56%
	controlled	(Note 1)
	corporations

Notes:

(1) As at the Latest Practicable Date, these interests in MAGHL represented the shares beneficially owned by Perfect Sky Holdings Limited (“ Perfect Sky ”), a wholly-owned subsidiary of eSun, representing approximately 67.56% of the issued share capital of MAGHL. eSun is owned as to approximately 36.94% by the Company which in turn is owned as to approximately 56.10% by LSG. As LSG is approximately 12.68% owned by Dr. Peter Lam and approximately 29.37% owned by Wisdoman Limited which is turn 100% beneficially owned by Dr. Peter Lam, he was deemed to be interested in the said 1,443,156,837 shares in MAGHL.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and the chief executive of the Company and their respective close associates was interested or was deemed to be interested in the long and short positions in the shares, underlying shares and/ or debentures of the Company or any of its associated corporations, which were required to be notified to the Company and the Stock Exchange, or recorded in the Register of Directors and Chief Executive as aforesaid, notified under the Securities Code or otherwise known by the Directors.

– IX-9 –

GENERAL INFORMATION

APPENDIX IX

Substantial Shareholders and Other Persons’ Interests

As at the Latest Practicable Date, so far as was known by or otherwise notified by any Director or the chief executive of the Company, the particulars of the corporations or individuals (are being a Director), who had 5% or more interests in the following long positions in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept under section 336 of the SFO or were entitled to exercise, or control the exercise of, 10% or more of the voting power at any general meeting of the Company (“ Voting Entitlements ”) (i.e. within the meaning of Substantial Shareholders of the Listing Rules) were as follows:

Long positions in the Shares and the underlying Shares of the Company

			Number of	Approximate
			shares and	% of shares
Name	Capacity	Nature of interests	underlying shares	in issue
LSG	Benefcial owner	Corporate	340,023,572	56.10%
			(Note 1)
Dr. Peter Lam	Benefcial owner/	Personal and	340,870,112	56.24%
	Owner of	corporate	(Note 1)
	controlled
	corporations
Yu Cheuk Yi	Benefcial owner	Personal	95,498,010	15.76%
			(Note 2)
Yu Siu Yuk	Benefcial owner	Personal	95,498,010	15.76%
			(Note 2)

Notes:

(1) As at the Latest Practicable Date, LSG and two of its wholly-owned subsidiaries, namely Zimba International and Joy Mind, beneficially owned 340,023,572 LSD Shares, representing approximately 56.10% of the issued share capital of the Company following the completion of the Share Consolidation and the Placing. Dr. Peter Lam was deemed to be interested in the same 340,023,572 LSD Shares by virtue of, in aggregate, his personal and deemed interests of approximately 42.05% in the issued share capital of LSG.
(2) As at the Latest Practicable Date, the Yu Shareholders jointly held 95,498,010 LSD Shares (15.76%) according to shareholding shown in last Individual Substantial Notice (Form 1) filed for an event on 21 June 2018.

Save as disclosed above, the Directors are not aware of any other corporation or individual (other than a Director or the chief executive of LSD) who, as at the Latest Practicable Date, had the Voting Entitlements or 5% or more interests or short positions in the shares or underlying shares of LSD recorded in the register of LSD Shareholders.

– IX-10 –

GENERAL INFORMATION

APPENDIX IX

C. DIRECTORS’ SERVICE CONTRACTS

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

D. LITIGATION

As at the Latest Practicable Date, none of the members of the Enlarged Group was engaged in any litigation or claim of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatened against the members of the Enlarged Group.

E. COMPETING INTERESTS

As at the Latest Practicable Date, the following Directors were considered to have interests in businesses which compete or may compete with the businesses of the Group (which would be required to be disclosed under Rule 8.10 of the Listing Rules if each of them was a controlling shareholder of LSD):

Dr. Peter Lam, Mr. FA Chew, Dr. Lam Kin Ming, Madam U and Mr. Lester Lam (together, “ Interested Directors ”) held shareholding interests and/or directorships in companies/entities engaged in the businesses of property investment and development in Hong Kong including Crocodile Garments Limited.

Dr. Peter Lam held shareholding or other interests and/or directorships in companies or entities engaged in the business of investment in and operation of restaurants in Hong Kong.

Dr. Lam Kin Ming held shareholding or other interests and/or directorships in companies or entities engaged in the production of pop concerts, music production and distribution and management of artistes.

The Directors do not consider the interests held by the Interested Directors to be competing in practice with the relevant businesses of the Group in view of:

(1) different locations and different uses of the properties owned by the above companies and those of the Group; and
(2) different target customers of the restaurant operations as well as the concerts and albums of the above companies and those of the Group.

– IX-11 –

GENERAL INFORMATION

APPENDIX IX

The Board is independent from the boards of directors/governing committees of the aforesaid companies/entities and none of the Interested Directors can personally control the Board. Further, each of the Interested Directors is fully aware of, and has been discharging his/her fiduciary duty to LSD and has acted and will continue to act in the best interest of LSD and its shareholders as a whole. Therefore, the Group is capable of carrying on its businesses independently of, and at arm’s length from, the businesses of such companies/entities.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and their respective associates had any interest in a business which competes or may compete with the businesses of the Group (which would be required to be disclosed under Rule 8.10 of the Listing Rules if each of them was a controlling shareholder of LSD).

F. INTEREST IN ASSETS AND CONTRACTS

As at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any assets which had been, since 31 July 2017 (being the date to which the latest published audited financial statements of the Group were made up), acquired or disposed of by or leased to any member of the Enlarged Group, or are proposed to be acquired or disposed of by or leased to any member of the Enlarged Group.

As at the Latest Practicable Date, there was no contract or arrangement subsisting in which any of the Directors are materially interested and which is significant to the business of the Enlarged Group.

G. EXPERTS

The names and qualifications of the professional advisers who have been named in this circular or given its opinion or advice which are contained in this circular are set forth below:

Name	Qualifcation
Red Sun	Independent fnancial adviser
Ernst & Young	Certifed public accountants
Knight Frank	Valuer

Each of the above experts has given and has not withdrawn its respective written consent to the issue of this circular with the inclusion of their letter and/or reference to their respective names or opinions in the form and context in which they appear.

– IX-12 –

GENERAL INFORMATION

APPENDIX IX

As at the Latest Practicable Date:

(a) the experts above did not have any direct or indirect interests in any assets which have been, since 31 July 2017 (being the date to which the latest published audited financial statements of the Group were made up), acquired, disposed of or leased to, or which are proposed to be acquired, disposed of by or leased to, any member of the Enlarged Group; and
(b) the experts did not have any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

H. MATERIAL CONTRACTS

The following contracts (being contracts entered into outside the ordinary course of business carried on by the Enlarged Group) have been entered into by members of the Enlarged Group within the two years immediately preceding the date of this circular:

(a) the subscription agreement dated 6 September 2017 entered into among the LSD Bonds (2017) Limited (the “ Issuer ”, a company wholly-owned by LSD), LSD and BNP Paribas, DBS Bank Ltd., The Hongkong and Shanghai Banking Corporation Limited and Standard Chartered Bank (as the joint lead managers) in relation to the subscription for the 4.60% guaranteed notes due 2022 in the principal amount of U.S.$400,000,000 issued by the Issuer (the “ Notes ”) and the offering of the Notes;
(b) the sale and purchase agreement dated 30 September 2016 (“ SPA ”) and entered into among the Action Charm Limited (a wholly-owned subsidiary of LSD) as the purchaser (the “ Purchaser ”), 1782 Group as the vendor and Mr. Gualtiero Giori as the guarantor in relation to, among other things, the purchase of shares representing 49.92% of the issued share capital of Camper & Nicholsons International SA (the “ Target Company ”), for the Consideration of EUR13,080,896. Under the SPA, after completion, the Purchaser shall also: (a) subscribe for one new share of the Target Company at the price of EUR775, which increases its shareholding interest in the Target Company to approximately 49.96%; and (b) advance to the Target Company a shareholder’s loan in proportion to its shareholding interest in the amount of EUR499,565;

– IX-13 –

GENERAL INFORMATION

APPENDIX IX

(c) the share purchase agreement entered into between Nice Sound Limited (an indirect wholly-owned subsidiary of eSun) as seller, Alibaba Investment Limited as purchaser and Pony Media Holdings Inc. (“ Pony Media ”) dated 21 March 2017 in respect of the sale of 1,480,994 Series C Preferred Shares of Pony Media, for a consideration of US$14,902,230;
(d) the subscription agreement dated 10 January 2018 and entered into among Lai Fung Bonds (2018) Limited (the “ LF Issuer ”, a wholly-owned subsidiary of Lai Fung), Lai Fung, LSD and DBS Bank Ltd., The Hongkong and Shanghai Banking Corporation Limited, Oversea-Chinese Banking Corporation Limited and UBS AG Hong Kong Branch (as the joint lead managers) in relation to the issue and distribution of the 5.65% guaranteed notes due 2023 in the principal amount of US$350,000,000 issued by the LF Issuer;
(e) a conditional placing agreement dated 20 January 2017 entered into between Get Nice Securities Limited as the placing agent and eSun in respect of the placing of up to 248,642,433 new eSun Shares at HK$0.620 per eSun Share by Get Nice Securities Limited on a best effort basis;
(f) a cooperation agreement dated 1 June 2017 entered into between Zhuhai Hengqin Laisun Creative Culture City Co. Ltd. (珠海橫琴麗新文創天地有限公司) (“ ZH ”) (a company owned as to 20% by eSun and 80% by Lai Fung) and Trans-Island Limousine Service Limited (環島旅運有限公司) (“ Trans-Island* ”) to develop cross-border bus services, whereby ZH shall lease a retail space with gross floor area of approximately 119.37 square metres in Phase I of the Novotown project at a monthly rental rate of RMB67 per square metre to Trans-Island as customer service centre together with six bus parking spaces for its provision of the aforementioned cross-border bus services, and Trans-Island shall provide the cross-border bus services and other tourist services as set out in the cooperation agreement;
(g) a licence agreement dated 30 June 2017 entered into between Fortunate Century Limited (“ Fortunate Century ”) (a wholly-owned subsidiary of Lai Fung) (as the licensee) and Real Madrid Club de Futbol (“ Real Madrid ”) (as the licensor) in relation to the development and operation of a location based entertainment centre (“ Real Madrid LBE ”) which is planned to be launched in Phase II of the Novotown project, subject to the successful acquisition of the relevant Phase II lands by Lai Fung for the Novotown project, whereby Real Madrid shall license its licensed intellectual property rights to Fortunate Century in return for payments, largely in the form of royalties against various revenue streams of the Real Madrid LBE payable on a yearly basis (subject to adjustments pursuant to the terms of the licence agreement);
(h) a cooperation agreement dated 22 November 2017 (as supplemented) entered into between Supreme Motion Limited (“ Supreme Motion ”) (a wholly-owned subsidiary of Lai Fung), Harrow International (China) Management Services Limited (“ HICMS ”) and ILA Holdings Limited (“ ILA ”) in relation to the setting up of the Innovation Leadership

– IX-14 –

APPENDIX IX

GENERAL INFORMATION

Academy Hengqin (“ School ”) in Phase II of the Novotown project, subject to, among other things, the successful acquisition of the relevant Phase II lands by Lai Fung for the Novotown project, whereby Supreme Motion shall acquire the relevant land use right and develop the relevant land for the setting up of the School (“ Development ”) and HICMS and ILA shall pay Supreme Motion the total costs and expenses incurred by it for the Development in annual instalment of 7% of the gross revenue of the School and/ or such other amounts as may be paid by HICMS and ILA pursuant to the cooperation agreement;

(i) a shareholders agreement dated 6 December 2017 entered into between Marvel Day Ventures Limited (an indirect non-wholly-owned subsidiary of eSun), Cosmic Dragon Limited (an indirect non-wholly-owned subsidiary of LSD) and Love Grubers Limited (“ Love Grubers ”) (which is beneficially owned as to 50% by Marvel Day Ventures Limited and 50% by Cosmic Dragon Limited) pursuant to which the parties agreed to procure Love Grubers to incorporate a wholly-owned subsidiary, Grubers Telford Limited, for the purpose of operating a cafe within the premises of MCL Telford Cinema located at Level 2 (Portion) and Level 3, Telford Gardens, No. 33 Wai Yip Street, Kowloon Bay, Kowloon, Hong Kong, whereby Marvel Day Ventures Limited and Cosmic Dragon Limited shall contribute all working or investment funding or capital which is required for the business or operations of Love Grubers (including an initial share capital funding amount being US$2 and a shareholders’ loan in the amount of HK$8 million) pro rata to their shareholding in Love Grubers;
(j) a sale and purchase agreement dated 13 December 2017 entered into between eSun (as seller) and Ms. Zhai Madalina-Elena (as purchaser) for the sale and purchase of all issued shares of Biu Kei Investments Limited (a wholly-owned subsidiary of eSun, holding a PRC subsidiary which engaged in cosmetic business in the PRC) at a consideration of HK$800,000;
(k) a cooperation agreement dated 14 December 2017 entered into between eSun Cinema Holdings (PRC) Limited (an indirect wholly-owned subsidiary of eSun) and Zhejiang Xinmu Cinema Management Co. Ltd.* (浙江新幕影院經營管理有限公司) in relation to the development of cinemas in the Tier One, Tier Two and Tier Three cities in the PRC through a 50:50 joint venture company;
(l) a loan agreement dated 29 June 2018 entered into between eSun (as lender) and MAGHL (as borrower) in respect of a term loan facility in the amount of HK$100,000,000 provided by eSun to MAGHL; and
(m) a preferred stock purchase agreement entered into by Nice Sound Limited, a whollyowned subsidiary of eSun, on 29 June 2018 and Stampede Entertainment, Inc. in respect of the subscription by Nice Sound Limited of 333,161 Series A-2 preferred stock for a consideration of US$1,999,998.90.

* for identification purposes only

– IX-15 –

GENERAL INFORMATION

APPENDIX IX

I. GENERAL

(a) The address of the registered office of the Company is 11th Floor, Lai Sun Commercial Centre, 680 Cheung Sha Wan Road, Kowloon, Hong Kong.
(b) Mr. Chow Kwok Wor is the company secretary of the Company. He is a fellow member of The Institute of Chartered Secretaries and Administrators, The Hong Kong Institute of Chartered Secretaries and The Hong Kong Institute of Certified Public Accountants.
(c) The share registrar of the Company is Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(d) In case of inconsistency, the English text of this circular shall prevail over the Chinese text.

J. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at 11th Floor, Lai Sun Commercial Centre, 680 Cheung Sha Wan Road, Kowloon, Hong Kong for 14 days from the date of this circular during the business hours (i.e. from 9:30 a.m. to 12:30 p.m. and from 2:30 p.m. to 5:30 p.m.) on any weekday (Saturdays and public holidays excepted) unless (i) a tropical cyclone warning signal number 8 or above is hoisted; or (ii) a black rainstorm warning signal is issued:

(a) the articles of association of the Company;
(b) the material contracts referred to under the paragraph headed “ H. Material Contracts ” in this Appendix;
(c) the annual reports of the Company for the two financial years ended 31 July 2016 and 31 July 2017;
(d) the annual reports of eSun for the two financial years ended 31 July 2016 and 31 July 2017;
(e) the letter from Red Sun;
(f) the report on the pro forma financial information from Ernst & Young as set out in Appendix VII to this circular;
(g) the valuation report in Appendix VIII to this circular;
(h) the written consent from each of the experts referred to in the paragraph headed “ Experts ” in this appendix; and
(i) this circular.

– IX-16 –

NOTICE OF GENERAL MEETING

==> picture [217 x 104] intentionally omitted <==

NOTICE OF GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT a general meeting (“ GM ”) of the members (“ Members ”) of Lai Sun Development Company Limited (“ Company ”) will be held at Harbour View Rooms I & II, 3rd Floor, The Excelsior, Hong Kong, 281 Gloucester Road, Causeway Bay, Hong Kong on Wednesday, 8 August 2018 at 12:00 noon (or, if later, immediately following the conclusion of the relevant general meeting of Lai Sun Garment (International) Limited) for the purpose of considering and, if thought fit, passing, with or without modifications, the following resolutions as ordinary resolutions:

ORDINARY RESOLUTIONS

THAT the making of the Offers by HSBC on behalf of the Offeror (as more particularly described in the circular of the Company dated 23 July 2018), all actions taken (or to be taken) by the Company (or any of its subsidiaries) in relation thereto and all other matters contemplated thereunder be and are hereby approved (terms defined in such circular having the same meanings when used in this resolution).
THAT the making of the Share Offers by HSBC on behalf of the Offeror to the Yu Shareholders (as more particularly described in the circular of the Company dated 23 July 2018), all actions taken (or to be taken) by the Company (or any of its subsidiaries) in relation thereto and all other matters contemplated thereunder be and are hereby approved (terms defined in such circular having the same meanings when used in this resolution).

By order of the board of directors of Lai Sun Development Company Limited Chow Kwok Wor Company Secretary

Hong Kong, 23 July 2018

Registered Office: 11th Floor Lai Sun Commercial Centre 680 Cheung Sha Wan Road Kowloon, Hong Kong

– GM-1 –

NOTICE OF GENERAL MEETING

Notes:

A Member entitled to attend and vote at the GM convened by the above notice (“ Notice ”) or its adjourned meeting (as the case may be) is entitled to appoint one (or if he/she/it holds two or more shares in the share capital of the Company (“ Shares ”), more than one) proxy to attend and to speak at the GM and, on a poll, vote on his/her/its behalf in accordance with the Articles of Association of the Company. A proxy need not be a Member.
A form of proxy for use at the GM is enclosed with this Notice and is also available at the respective websites of The Stock Exchange of Hong Kong Limited (“ Stock Exchange ”) and the Company.
To be valid, a form of proxy, together with the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power or authority, must be lodged with the Company’s share registrar, Tricor Tengis Limited (“ Registrar ”), at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not less than 48 hours before the time appointed for holding the GM or its adjourned meeting (as the case may be) and in default, the form of proxy shall not be treated as valid. Completion and return of the form of proxy shall not preclude Members from attending in person and voting at the GM or at its adjourned meeting (as the case may be) should they so wish. In such case, the said form(s) of proxy shall be deemed to be revoked.

The contact phone number of the Registrar is (852) 2980 1333.

To ascertain the entitlements to attend and vote at the GM, Members must lodge the relevant transfer document(s) and share certificate(s) at the office of the Registrar not later than 4:30 p.m. on Thursday, 2 August 2018 for registration.
Where there are joint registered holders of any Share, any one of such joint holders may attend and vote at the GM or its adjourned meeting (as the case may be), either personally or by proxy, in respect of such Share as if he/she/it was solely entitled thereto; but if more than one of such joint holders are present at the GM or its adjourned meeting (as the case may be) personally or by proxy, that one of such holders so present whose name stands first in the Register of Members of the Company in respect of such Share shall alone be entitled to vote in respect thereof.
In compliance with Rule 13.39(4) of the Listing Rules, voting on the resolutions proposed in this Notice will be taken by poll.
If a tropical cyclone warning signal No. 8 or above is expected to be hoisted or a black rainstorm warning signal is expected to be in force at any time after 7:30 a.m. on the date of the GM, the GM will be postponed and Members will be informed of the date, time and venue of the postponed GM by a supplementary notice, posted on the respective websites of the Company and the Stock Exchange.

If a tropical cyclone warning signal No. 8 or above or a black rainstorm warning signal is lowered or cancelled at or before 7:30 a.m. on the date of the GM and where conditions permit, the GM will be held as scheduled.

The GM will be held as scheduled when an amber or red rainstorm warning signal is in force.

Members should decide whether they would attend the GM under a bad weather condition after considering their own situations and if they do so, they are advised to exercise care and caution.

Members are advised to read the circular of the Company dated 23 July 2018, which contains information concerning the resolutions to be proposed in the GM.

– GM-2 –

AI assistant

IRC Limited — Proxy Solicitation & Information Statement 2018

49636_rns_2018-07-22_f4ae86e5-9074-4362-a6f8-ed5e2e11a9ba.pdf

(1) POSSIBLE VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION

(4) NOTICE OF GENERAL MEETING

Financial Adviser to LSD and the Offeror

CONTENTS

ACCOMPANYING DOCUMENT: FORM OF PROXY

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

Executive Directors:

Non-executive Directors:

Independent Non-executive Directors:

To the LSD Shareholders

(1) POSSIBLE VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION

(4) NOTICE OF GENERAL MEETING

1. INTRODUCTION

2. INTRODUCTION TO THE eSUN OFFERS

3. THE eSUN SHARE OFFER

4. THE eSUN SHARE OFFER PRICE

5. HIGHEST AND LOWEST CLOSING PRICES OF eSUN SHARES

6. THE eSUN OPTION OFFER AND THE eSUN OPTION OFFER PRICE

LETTER FROM THE BOARD

7. CONDITIONS TO THE eSUN OFFERS

8. VALUE OF THE eSUN OFFERS

9. POSSIBLE COMPULSORY ACQUISITION AND WITHDRAWAL OF LISTING OF eSUN SHARES

10. SHAREHOLDING STRUCTURE OF eSUN

LETTER FROM THE BOARD

LETTER FROM THE BOARD

11. INTRODUCTION TO THE LAI FUNG SHARE OFFER

12. THE LAI FUNG SHARE OFFER

13. THE LAI FUNG SHARE OFFER PRICE

14. HIGHEST AND LOWEST CLOSING PRICES OF LAI FUNG SHARES

15. THE LAI FUNG OPTION OFFER AND THE LAI FUNG OPTION OFFER PRICE

LETTER FROM THE BOARD

16. CONDITIONS TO THE LAI FUNG OFFERS

17. VALUE OF THE LAI FUNG OFFERS

18. PUBLIC FLOAT OF LAI FUNG

19. MAINTAINING THE LISTING STATUS OF LAI FUNG

20. SHAREHOLDING STRUCTURE OF LAI FUNG

PART (3): MAXIMUM CONSIDERATION PAYABLE UNDER THE OFFERS

21. TOTAL CONSIDERATION UNDER THE OFFERS

22. SETTLEMENT OF CONSIDERATION OF THE OFFERS

23. HONG KONG STAMP DUTY

PART (4): LISTING RULES IMPLICATIONS

24. POSSIBLE VERY SUBSTANTIAL ACQUISITION OF LSD

25. POSSIBLE DE MINIMIS CONNECTED TRANSACTIONS OF LSD

LETTER FROM THE BOARD

26. POSSIBLE CONNECTED TRANSACTION OF LSD WHICH IS NOT DE MINIMIS

27. NO OTHER POSSIBLE CONNECTED TRANSACTION OF LSD

28. GENERAL MEETING

29. DIRECTORS’ VIEWS AND RED SUN’S ADVICE

PART (5): GENERAL

30. INFORMATION ON THE GROUP AND THE OFFEROR

31. INFORMATION ON THE eSUN GROUP

32. INFORMATION ON THE LAI FUNG GROUP

33. REASONS FOR AND BENEFITS OF THE OFFERS

For holders of the eSun Offer Shares

An opportunity to monetise eSun Shares without adversely affecting the market price

For eSun

The making of the eSun Offers affirms LSD’s confidence in and commitment to the eSun Group

For LSD

(a) An opportunity to increase shareholding in the eSun Group

(b) Financial effect of the consolidation of the eSun Group on LSD

(c) Streamlined corporate structure in the event that eSun is delisted

34. INTENTIONS OF LSD WITH REGARD TO THE eSUN GROUP

35. FINANCIAL EFFECT OF THE OFFERS

36. RECOMMENDATION

Dear Sir or Madam,

Yours faithfully,

(1) POSSIBLE VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION

INTRODUCTION

IRC Limited Proxy Solicitation & Information Statement 2018