Kai Yuan Holdings Limited — Proxy Solicitation & Information Statement 2016

Feb 24, 2016

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Kai Yuan Holdings Limited, you should at once hand this circular with the enclosed form of proxy to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or the transfer was effected for transmission to the purchaser or transferee.

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

KAI YUAN HOLDINGS LIMITED 開源控股有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 1215)

VERY SUBSTANTIAL DISPOSAL AND NOTICE OF SPECIAL GENERAL MEETING

A letter from the board of directors of Kai Yuan Holdings Limited (the “ Company ”) is set out on pages 4 to 19 of this circular.

A notice convening the special general meeting of the Company to be held at 9:30 a.m. on 14 March, 2016, at Board Room, Level 1, South Pacific Hotel, 23 Morrison Hill Road, Wanchai, Hong Kong is set out on pages SGM-1 to SGM-2 of this circular. A form of proxy for use at the special general meeting of the Company is enclosed with this circular.

Whether or not you are able to attend the special general meeting of the Company, you are requested to complete the accompanying form of proxy in accordance with instructions printed thereon and return it to the share registrar of the Company, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible but in any event not later than 48 hours before the time for holding the special general meeting of the Company or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the special general meeting of the Company or any adjournment thereof should you so wish.

25 February 2016

CONTENTS

		Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	1-3
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	4
Sale and Purchase Agreement . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	5-9
Information of the Target Group . . . . . . . .	. . . . . . . . . . . . . . . . . .	9-13
Information of the Group and reasons of Disposal . . . . . . . . . . . .		13-16
Financial effect of the Disposal . . . . . . . . .	. . . . . . . . . . . . . . . . . .	16
Use of proceeds . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	17
Implications of Listing Rules . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	17
SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	17-18
Recommendation . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	19
Further Information . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	19
Appendix I – **Financial information of the **	Target Group . . . . . .	I1-I7
Appendix II – Financial information of the
Associated Companies . .	. . . . . . . . . . . . . . . . . .	II1-II4
Appendix III – **Financial information of the **	Group . . . . . . . . . . . .	III1-III17
Appendix IV – Unaudited pro forma financial information
of the Remaining Group	. . . . . . . . . . . . . . . . . .	IV1-IV13
Appendix V – General information . . . . . .	. . . . . . . . . . . . . . . . . .	V1-V5
Notice of SGM . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . .	SGM1-SGM2

– i –

DEFINITIONS

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

• “Associated Companies” together, JVE 1, JVE 2 and JVE 3

• “associates”

• has the meaning ascribed to it under the Listing Rules

• “Board” the board of Directors

• “Company”

• Kai Yuan Holdings Limited, a company incorporated in Bermuda with limited liability, the issued Shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 1215)

• “Completion”

• completion of the Disposal in accordance with the Sale and Purchase Agreement

• “Conditions Precedent”

• the conditions precedent to the Disposal as set out in the Sale and Purchase Agreement, details of which are set out in the paragraph headed “Conditions Precedent” of the section headed “Sale and Purchase Agreement” in the letter from the Board of this circular

• “connected person”

• has the meaning ascribed to it under the Listing Rules

• “Consideration”

• the total consideration for the Disposal, being HK$2,383,148,035

• “Deposit”

• being HK$20,000,000

• “Director(s)”

• the director(s) of the Company

• “Disposal”

• disposal of the Sale Shares and the Shareholder’s Loan by the Company to the Purchaser pursuant to the Sale and Purchase Agreement

• “Group”

• the Company and its subsidiaries

• “Guarantor”

• Mr. Du Shuang Hua

• “Hong Kong”

• the Hong Kong Special Administrative Region of the PRC

• “Independent Third Parties”

• independent third parties who are independent of and not connected with the Company and the connected person(s) of the Company

– 1 –

DEFINITIONS

• “JVE 1” 日照型鋼有限公司 (Rizhao Medium Section Mill Co., Ltd.), a sino-foreign joint venture enterprise established in the PRC

• “JVE 2” 日照鋼鐵有限公司 (Rizhao Steel Co., Ltd.), a sino-foreign joint venture enterprise established in the PRC

• “JVE 3” 日照鋼鐵軋鋼有限公司 (Rizhao Steel Wire Co., Limited), a sino-foreign joint venture enterprise established in the PRC

• “Latest Practicable Date” 24 February 2016, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained in this circular

• “Lender” Most Honour Limited, a company incorporated in the British Virgin Islands

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

• “Loan Agreement” the loan agreement dated 3 June 2014 entered into between the Company and the Lender

• “Long Stop Date” 31 July 2016 or such other date as the Company and the Purchaser may agree in writing

• “Outstanding Loan”

• the aggregate outstanding principal amount of US$239,265,600 (equivalent to HK$1,854,308,400) owing from the Company to the Lender under the Loan Agreement as at the date of the Sale and Purchase Agreement

• “PRC”

• the People’s Republic of China, excluding Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan for the purpose of this circular

• “Purchaser”

• Intelligent Wealth Limited, a company incorporated in the British Virgin Islands

• “Remaining Group”

• the Group excluding the Target Group

– 2 –

DEFINITIONS

• “Sale and Purchase Agreement” the sale and purchase agreement dated 4 January 2016 entered into among the Company, the Purchaser, the Guarantor and the Lender in relation to the Disposal

• “Sale Shares” the 20,000,000 issued shares of the Target

“SFO”

the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

• “SGM” the special general meeting of the Company to be convened and held for the Shareholders to consider and, if thought fit, approve the Sale and Purchase Agreement and the transactions contemplated thereunder

• “Share(s)” share(s) of the Company

• “Shareholder(s)” holder(s) of the Shares

• “Shareholder’s Loan”

• all amount due and owing from the Target to the Company immediately before Completion

• “Stock Exchange” The Stock Exchange of Hong Kong Limited

• “Target”

Fame Risen Development Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of the Company

• “Target Group” the Target and the Associated Companies

• “€” or “Euro” Euro, the lawful currency of the European Union

• “HK$”

• Hong Kong dollar, the lawful currency of Hong Kong

• “RMB”

• Renminbi, the lawful currency of the PRC

• “US$”

• United States dollars, the lawful currency of the United States of America

“%” per cent.

– 3 –

LETTER FROM THE BOARD

KAI YUAN HOLDINGS LIMITED 開源控股有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 1215)

Executive Directors: Mr. Xue Jian Mr. Law Wing Chi, Stephen

Non-executive Director: Mr. Hu Yishi (Chairman)

Independent non-executive Directors: Mr. Tam Sun Wing Mr. Ng Ge Bun Mr. He Yi

Registered office: Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Principal place of business in Hong Kong: 28th Floor Chinachem Century Tower 178 Gloucester Road Wanchai, Hong Kong

25 February 2016

To the Shareholders,

Dear Sir or Madam,

VERY SUBSTANTIAL DISPOSAL AND NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

On 4 January 2016 (after trading hours), the Company, the Purchaser, the Guarantor and the Lender entered into the Sale and Purchase Agreement, pursuant to which the Company has agreed to sell and the Purchaser has agreed to purchase the Sale Shares (being the entire issued share capital of the Target) and the Shareholder’s Loan at the consideration of HK$2,383,148,035 subject to the terms and conditions of the Sale and Purchase Agreement.

The purpose of this circular is to provide you with information on the Disposal, financial information relating to the Group, the Target Group and the Remaining Group, as well as the notice of SGM.

– 4 –

LETTER FROM THE BOARD

SALE AND PURCHASE AGREEMENT

Date: 4 January 2016 Parties: Vendor: the Company Purchaser: Intelligent Wealth Limited Purchaser’s guarantor: the Guarantor, being Mr. Du Shuang Hua Lender: Most Honour Limited

The Purchaser is a company beneficially and wholly-owned by the Guarantor. According to the Purchaser, the Purchaser is principally engaged in investment holding, it is a special purpose vehicle incorporated for holding the Target Group which currently does not hold any other asset.

As at the Latest Practicable Date, the Guarantor was interested in (i) 85% of the issued share capital of Happy Sino International Limited, which in turn is interested in approximately 5.54% of the issued share capital of the Company; (ii) 18.88% of the ultimate holding company of the controlling joint venture partner of the Associated Companies; and (iii) 18.88% of the minority joint venture partner of JVE 1 and JVE 2. Mr. Xue Jian, an executive Director, has been appointed as the manager and legal representative of the ultimate holding company of the controlling joint venture partner of the Associated Companies. Save for the aforesaid, to the best knowledge of the Directors, having made reasonable enquiries, the Purchaser together with its beneficial owner are Independent Third Parties.

– 5 –

LETTER FROM THE BOARD

Set out below is the shareholding structure in relation to the Guarantor and the Target Group:

==> picture [382 x 370] intentionally omitted <==

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

Zhang He Yi
10.96% 15%
85%
Happy Sino International The Guarantor
Limited
18.88%
5.54% 18.88%
Jinghua Rigang Holding Group Jinghua Innovation Group
The Company Co., Limited * Co., Limited
京華日鋼控股集團有限公司 京華創新集團有限公司
100% 100%
Rizhao Steel Holding Group
Target Company Limited
日照鋼鐵控股集團有限公司
30% 51% 19%
JVE 1
30% 51% 19%
JVE 2
25% JVE 3 75% The Purchaser 100%
The Lender
----- End of picture text -----

• For identification purpose only

Assets to be disposed of

• (i) the Sale Shares, being 20,000,000 issued shares of the Target, representing the entire issued shares of the Target as at the Latest Practicable Date; and

• (ii) the Shareholder’s Loan, being all amount due and owing by the Target to the Company as at the date of Completion. As at the Latest Practicable Date, the amount due and owing by the Target to the Company amounted to approximately HK$27,535,858.

– 6 –

LETTER FROM THE BOARD

As at the Latest Practicable Date, the Target was the foreign joint venture partner of the Associated Companies holding:

• (i) 30% equity interests in JVE 1, which is principally engaged in the manufacturing and sale of wire rod, medium size wide and heavy plate, section steel and related products, including H-beams which are widely used in the construction, infrastructure, aeronautics and ship-building industries;

• (ii) 30% equity interests in JVE 2, which is principally engaged in the manufacturing and sale of common carbon steel, low alloy steel and other steel billet; and

• (iii) 25% equity interests in JVE 3, which is principally engaged in the manufacturing and sale of high-end metal parts, rod and wire materials for construction, strips and related products, including deformed steel bar, round steel bars and steel rolls.

Consideration

The Consideration is HK$2,383,148,035 which shall be payable as follows:

• (i) HK$20,000,000 shall be payable by the Purchaser in cash as deposit and part payment of the Consideration within five business days after the date of the Sale and Purchase Agreement. The Deposit shall be applied towards satisfaction of part of the Consideration at Completion;

• (ii) HK$1,854,308,400 shall be set-off against the Outstanding Loan and applied towards satisfaction of part of the Consideration on a dollar-for-dollar basis at Completion; and

• (iii) HK$508,839,635, being the balance of the Consideration, shall be payable by the Purchaser in cash at Completion.

As at the Latest Practicable Date, the Company was indebted to the Lender, a company wholly owned by the Guarantor, in the principal amount of US$239,265,600 (equivalent to approximately HK$1,854,308,400). Pursuant to the Sale and Purchase Agreement, the Lender has agreed to assign the Outstanding Loan to the Purchaser immediately prior to Completion, such that a set-off of the payment obligations could be made pursuant to (ii) above.

As at the Latest Practicable Date, the Deposit had been paid.

If the Conditions Precedent have not been satisfied before 12:00 noon on the Long Stop Date, the Company shall refund the Deposit (without interest) to the Purchaser within 10 business days after the Long Stop Date.

– 7 –

LETTER FROM THE BOARD

If the Conditions Precedent have been fulfilled but Completion does not take place:

• (i) due to the fault of the Company, the Deposit shall be refunded to the Purchaser (without interest) within 10 business days; or

• (ii) due to reasons other than the fault of the Company, the Company shall be entitled to forfeit the Deposit.

The Consideration was determined after arm’s length negotiations between the Company and the Purchaser with reference to the carrying value of investments in the Associated Companies as at 31 December 2014 which amounted to HK$2,357,383,056 and the Shareholder’s Loan as at 31 October 2015 which amounted to HK$25,764,979.

As disclosed in the Company’s interim report for the six months ended 30 June 2015, the Company recorded share of losses of the Associated Companies of approximately HK$25.7 million and the unaudited net assets value of the Target Group as at 30 June 2015 was lower than that as of 31 December 2014. As disclosed in the financial statements of the Target Group as set out in Appendix I to this circular, the net assets value of the Target Group as at 31 October 2015 was also lower than that at of 31 December 2014. The Company considered it is at the Shareholders’ benefits to dispose the Sale Shares and the Shareholder’s Loan of the Target Group at the consideration of HK$2,383,148,035 taking into account that the Company is merely a passive investor of the Associated Companies and had not been benefited from any dividend distribution since acquisition. The Board also considered that the Disposal allows the Company to be benefited from a disposal gain and provides an opportunity to free up capital from business with uncertainty. Accordingly, the Company is of the view that the Consideration is fair and reasonable and it is commercially justifiable to make reference to the carrying value of the Associated Companies as at 31 December 2014 for the purpose of determining the Consideration.

Based on the above, the Directors consider that the terms of the Disposal are fair and reasonable and are on normal commercial terms, which are in the interests of the Company and the Shareholders as a whole.

Conditions Precedent

The Disposal is subject to the following Conditions Precedent:

• (i) the Shareholders (other than those who are required to abstain from voting according to the Listing Rules) having passed the relevant resolution at the SGM approving the Sale and Purchase Agreement and the transactions contemplated thereunder;

• (ii) the warranties given by the Purchaser and the Guarantor in the Sale and Purchase Agreement are not untrue or misleading and there have been no breach of such warranties; and

• (iii) all necessary consents and approvals in relation to the sale and purchase of the Sale Shares and the Shareholder’s Loan having been obtained.

– 8 –

LETTER FROM THE BOARD

The Conditions Precedent set out above cannot be waived. If the Conditions Precedent are not satisfied on or before 12:00 noon on the Long Stop Date, the Sale and Purchase Agreement shall lapse and shall be of no further effect. Subject to refund of the Deposit as mentioned above, no party to the Sale and Purchase Agreement shall have any claim against or liability to the other party, save in respect of any antecedent breach thereof.

Completion

Completion shall take place on the fifth business day after the Conditions Precedent set out in sub-paragraphs (i) and (iii) above have been satisfied or such other date as the Company and the Purchaser may agree in writing.

Upon Completion, the Group will cease to hold any interest in the Target Group. The Target will cease to be a subsidiary of the Company and each of the Associated Companies will cease to be an associated company of the Company.

INFORMATION OF THE TARGET GROUP

The Target was incorporated in Hong Kong as a limited liability company on 26 June 2002. As at the Latest Practicable Date, the Target was the foreign joint venture partner of the Associated Companies holding:

• (i) 30% equity interests in JVE 1, which is principally engaged in the manufacturing and sale of wire rod, medium size wide and heavy plate, section steel and related products, including H-beams which are widely used in the construction, infrastructure, aeronautics and ship-building industries;

• (ii) 30% equity interests in JVE 2, which is principally engaged in the manufacturing and sale of common carbon steel, low alloy steel and other steel billet; and

• (iii) 25% equity interests in JVE 3, which is principally engaged in the manufacturing and sale of high-end metal parts, rod and wire materials for construction, strips and related products, including deformed steel bar, round steel bars and steel rolls.

– 9 –

LETTER FROM THE BOARD

Set out below is the financial information of the Target for each of the two years ended 31 December 2014 and the ten months ended 31 October 2015, which was prepared in accordance with Hong Kong Financial Reporting Standards and as extracted from Appendix I to this circular:

Net profit before taxation Net profit after taxation Net asset value	For the year ended 31 December 2013 (Unaudited) (HK$’000) 103,349 98,609 As at 31 December 2013 (Unaudited) (HK$’000) 1,687,640	For the year ended 31 December 2014 (Unaudited) (HK$’000) 407,509 386,958 As at 31 December 2014 (Unaudited) (HK$’000) 2,070,607	For the ten months ended 31 October 2015 (Unaudited) (HK$’000) 30,703 29,050
			As at 31 October 2015 (Unaudited) (HK$’000) 2,021,259

The financial information of the Target as set out in the announcement of the Company dated 7 January 2016 (the “ Announcement ”) were extracted from the Company’s consolidated financial statements for the respective period. The Directors considered that the fair value of the financial information of the Target Group as disclosed in the Announcement are relevant and appropriate information for assessing the performance of the Company’s investment in the Associated Companies and for the purpose of calculating the estimated gain on the Disposal. For the purpose of compliance of Listing Rules’ requirement, the financial information of the Target Group set out in Appendix I to this circular has been prepared on a stand-alone basis, which does not include the fair value adjustments as these could only be recognised at the consolidated level in accordance with applicable standards under the Hong Kong Financial Reporting Standards.

– 10 –

LETTER FROM THE BOARD

Set out below are the reconciliation statements on the nature of fair value adjustments of the Target Group included at the consolidated level:

For the six months ended 30 June 2015

Net profit before taxation Net profit after taxation Net asset value	As set out in the Announcement For the six months ended 30 June 2015 (Unaudited) (HK$’000) (25,136) (23,852) 2,290,664	Reconciliation (HK$’000) (HK$’000) (HK$’000) Note 1 Note 2 Note 3 18,972 18,972 (949) (1,192,334) 1,010,481 (45,802)	For the six months ended 30 June 2015 (Unaudited) (HK$’000) (6,164)
			(5,829)
			2,063,009

Note 1: The adjustment represents the fair value adjustment of long-term assets of each associate and the amortization impact of these fair value adjustments.

• Note 2: The adjustment represents the impairment of investment in associates and impairment of long-term assets of each associate.

Note 3: The adjustment represents the adjustment in deferred tax liabilities regarding the change in share of profit in associates due to amortization of fair value adjustments.

For the year ended 31 December 2014

Net profit before taxation Net profit after taxation	As set out in the Announcement For the year ended 31 December 2014 (Unaudited) (HK$’000) 369,650 350,993	Reconciliation (HK$’000) (HK$’000) (HK$’000) Note 1 Note 2 Note 3 37,859 37,859 (1,894)	As set out in Appendix I to this circular
			For the year ended 31 December 2014 (Unaudited) (HK$’000) 407,509
			386,958

– 11 –

LETTER FROM THE BOARD

Net asset value	As set out in the Announcement As at 31 December 2014 (Unaudited) (HK$’000) 2,315,715	Reconciliation (HK$’000) (HK$’000) (HK$’000) Note 1 Note 2 Note 3 (1,210,745) 1,010,136 (44,499)	As set out in Appendix I to this circular
			As at 31 December 2014 (Unaudited) (HK$’000) 2,070,607

Note 1: The adjustment represents the fair value adjustment of long-term assets of each associate and the amortisation impact of these fair value adjustments.

Note 2: The adjustment represents the impairment of investment in associates and impairment of long-term assets of each associate.

Note 3: The adjustment represents the adjustment in deferred tax liabilities regarding the change in share of profit in associates due to amortisation of fair value adjustments.

For the year ended 31 December 2013

Net profit before taxation Net profit after taxation Net asset value	As set out in the Announcement For the year ended 31 December 2013 (Unaudited) (HK$’000) (54,219) (54,073) As set out in the Announcement As at 31 December 2013 (Unaudited) (HK$’000) 1,969,904	Reconciliation (HK$’000) (HK$’000) (HK$’000) Note 1 Note 2 Note 3 52,331 105,237 52,331 105,237 (4,886) Reconciliation (HK$’000) (HK$’000) (HK$’000) Note 1 Note 2 Note 3 (1,253,090) 1,013,567 (42,741)	As set out in Appendix I to this circular
			For the year ended 31 December 2013 (Unaudited) (HK$’000) 103,349
			98,609
			As set out in Appendix I to this circular
			As at 31 December 2013 (Unaudited) (HK$’000) 1,687,640

– 12 –

LETTER FROM THE BOARD

Note 1: The adjustment represents the fair value adjustment of long-term assets of each associate and the amortisation impact of these fair value adjustments.

Note 2: The adjustment represents the impairment of investment in associates and impairment of long-term assets of each associate. The impairment loss was total of HK$105,237,000 for the year ended December 2013, provided for long term assets of the associates of HK$45,392,000 and provided for investments in the associates of HK$59,845,000.

Note 3: The adjustment represents the adjustment in deferred tax liabilities regarding the change in share of profit in associates due to amortisation of fair value adjustments.

INFORMATION OF THE GROUP AND REASONS OF DISPOSAL

The Group is principally engaged in operation of hotels in Hong Kong and Paris.

The Group acquired the Target Group in 2009 at the aggregate fair value of HK$2,167.3 million from Mr. Zhang He Yi and Mr. Qi Shi An to tap into the steel manufacturing and trading business with a view to extending the Group’s participation in the industrial business in the PRC (please refer to note 40 of annual report of the Company for the year ended 31 December 2009 and the circular (the “ 2009 Circular ”) of the Company dated 27 April 2009 for details of the acquisition), taking into consideration (i) the leading position of the Associated Companies in the steel industry; (ii) the satisfactory share of profits recorded by the Target which was generated from the profitable track records of the Associated Companies at the material time; and (iii) the stimulus programme introduced and implemented by the PRC government for the steel industry.

Despite the abovesaid, the Group’s investment in steel manufacturing and trading business has been significantly challenged by structural problems, including but not limited to overcapacity in the PRC’s steel industry, weak demand of steel products mainly attributable to the downturn in the PRC’s property market, and modest economic growth in the PRC since 2011. As disclosed in the annual report of the Company for the year ended 31 December 2011, the Group shared loss of HK$330 million from the Associated Companies for the year ended 31 December 2011.

Steep declines in the contribution to the Group’s profit by the Associated Companies were recorded for the three consecutive financial years ended 31 December 2012. Due to the continuous recession in the steel industry and operation losses from the Associated Companies, the Group had shared impairment loss on long term assets of the Associated Companies of HK$554,710,000[1] and HK$45,392,000[2] for the years ended 31 December 2012 and 31 December 2013 respectively, and recognised provision for impairment on investments in associates of HK$323,059,000[1] and HK$59,845,000[2] for the years ended 31 December 2012 and 31 December 2013 respectively. The weak market sentiments and therefore a lack of recovery in market price of the steel products have continued to exert a significant pressure on the Associated Companies’ profitability.

1 Please refer note 22(iii) on investments in associates in annual report of the Company for the year ended 31 December 2012 for details.

2 Please refer note 21 (iii) on investments in associates in annual report of the Company for the year ended 31 December 2013 for details.

– 13 –

LETTER FROM THE BOARD

Despite the decrease in price of constituent raw materials and the management expertise of the Associated Companies to exercise inventory control and margin maintenance leading to a recovery of profitability of the Associated Companies for the year ended 31 December 2014, the persistent decrease in steel product prices in 2015 in the PRC has adversely affected the business of the Associated Companies. As set out in Appendix II to this circular, the Associated Companies enjoyed the benefits of reduced constituent raw materials costs in 2014. However, price of steel products dropped at a faster rate than the rate of price drop for constituent raw materials in 2015. As a result, the Company recorded share of loss of Associated Companies of approximately HK$25.7 million for the six months ended 30 June 2015. The aforesaid steel price distress factor slightly relaxed after 30 June 2015. For the ten months ended 31 October 2015, the Target shared a profit of approximately HK$33.0 million from the Associated Companies as stated in Appendix I to this circular and the Company recorded a share of profit of approximately HK$1.8 million from the Associated Companies, after taking into account the fair value adjustments at the consolidated level, which has slightly improved. However, it represented a decrease of more than 85% as compared to the corresponding period in 2014. The unfavorable business conditions surrounding the steel industry in the PRC undoubtedly affected the profitability of the Associated Companies and increased the uncertainty in the financial performance of the Associated Companies in the future.

As set out in the Company’s interim report for the six months ended 30 June 2015, the Group expects that perennial problems such as excess capacity will continue to suppress steel product prices in the PRC. Taking into account a series of acute macroeconomic measures taken by the PRC government that have denoted worries on impending economic downturn in the PRC economy, the Group perceives weak market sentiments, and weak demand for steel products is expected to continue to challenge this segment.

In the past few years, the Group had been constantly reviewing its existing business portfolio and had been dedicated to look for new investment opportunities in order to broaden and strengthen its revenue stream. To this end, the Group had successfully acquired Butterfly on Waterfront Sheung Wan (“ Butterfly on Waterfront ”) and Paris Marriott Champs Elysees Hotel (“ Paris Marriott Hotel ”) in France, details of which are set out in the Company’s announcement dated 16 December 2013 and circular dated 29 August 2014 respectively. On 27 May 2015, in order to reduce future financial losses generated from the heat supply business and enable the Group to focus on developing the operation of hotels, the Group entered into a sale and purchase agreement with a third party to dispose of the entire issued share capital of Spread International Group Limited, an indirect wholly-owned subsidiary of the Company, and shareholder’s loan at the consideration of HK$131 million, details of which are set out in the Company’s announcement dated 8 July 2015 and circular dated 14 August 2015. The aforesaid disposal completed in October 2015.

– 14 –

LETTER FROM THE BOARD

During the course of negotiations leading up to signing of the Sale and Purchase Agreement, the Company considers that the possible gain on the Disposal represents an attractive return on this investment with reference to its fluctuation in performance and future prospects. In addition, given (i) the fact that the Company does not have absolute control over the business operation and financing activities of the Associated Companies; (ii) the benefits brought upon from the investments in the Associated Companies have not been realised given the Associated Companies did not distribute any dividend since the Company’s acquisition of the Target; (iii) the disposal of the Target Group will allow the Group to significantly improve the gearing ratio of the Group (assuming the Disposal was completed on 30 June 2015, the Remaining Group’s gearing ratio (total borrowings/total assets) as at 30 June 2015 would be approximately 33.4%; assuming the Disposal was not completed, gearing ratio of the Group as at 30 June 2015 was approximately 48.0%); (iv) the fluctuation in the financial performance of the Target Group in the past years and the prospects of the PRC steel industry, notwithstanding the Associated Companies recorded a profit for the year ended 31 December 2014; and (v) the existing hotel operation business of the Group is expected to continue to serve as a better driver for the Group’s performance with solid revenue base and capital gain potentials, the Board considers that entering into the Sale and Purchase Agreement is in the interests of the Company and the Shareholders as a whole.

The Company has not been approached by other potential purchasers for the Disposal. The Group does not have absolute control over the business operation and financing activities of the Associated Companies. The benefits brought upon from the investments in the Associated Companies have yet been realised given the Associated Companies did not distribute any dividend since the Company’s acquisition of the Target. The Directors does not consider a valuation of the Target Group would be an appropriate indicator of the value of the Target Group given the Associated Companies are private entities in the PRC and there is no open market for trading of its equity interests whilst it is difficult for the Group to identify potential purchasers for the Sale Shares. Thus, the Directors therefore considered that the Disposal represents a good opportunity to realise the investments and to capture the huge capital inflow to the Group. When assessing the Disposal, the Directors also considered, among other things, (i) the business strategy of the Group to focus on the profitability of hotel operation segment; (ii) the significant decrease in the gearing ratio of the Group and finance cost on the Outstanding Loan; and (iii) the difficulty in looking for other potential purchasers for the minority stake in the unlisted Associated Companies and the uncertainty in the steel industry in the PRC.

As set out in the Company’s interim report for the six months ended 30 June 2015, the hotel operation segment generated revenue of approximately HK$160.9 million, representing 100% of the Group’s total revenue generated from continuing operations. During the six months ended 30 June 2015, the hotel operation segment achieved earnings before interests and taxes (EBIT) of approximately HK$30.5 million. The Paris Marriott Hotel in Paris, France, which occupies a prime spot on the Avenue des Champs-Elysées, will continue driving exceptional service and providing a unique Parisian atmosphere and a brilliant Marriott guest experience to maintain its market position and revenue. In order to maximise performance, the Butterfly on Waterfront will encourage guests to make booking through the hotel website directly to minimise commission cost to travel agents.

– 15 –

LETTER FROM THE BOARD

The Company does not consider the slight and short-term improvement in the financial performance of the Associated Companies during the period from 1 July 2015 to 31 October 2015 a material factor when assessing the merits of the Disposal, nor the share of profits from the Associated Companies of approximately HK$33.0 million for the ten months ended 31 October 2015 is significant compared to the consideration of the Disposal of approximately HK$2,383.1 million. The Disposal represents a good opportunity for the Group to realise its investment in the steel manufacturing and trading segment, and will allow the Group to focus on developing the hotel operation business. As at the Latest Practicable Date, it was the intention of the Company to continue the existing business of the Group and not to downsize the same or dispose of the existing business. Notwithstanding the above, the Board will continue to review its existing business portfolio and strive to maximise the returns to the Shareholders. As at the Latest Practicable Date, the Company had no intention or plan to change its management.

In view of the above, the Directors are of the view that the terms of the Disposal are fair and reasonable, which have been arrived at after arm’s length negotiations and are in the interests of the Company and the Shareholders as a whole.

FINANCIAL EFFECT OF THE DISPOSAL

Based on the Consideration of HK$2,383,148,035, the Group is expected to incur a gain on the Disposal of approximately HK$172,537,639.

Such amount is arrived at by:

• (i) deducting the following amounts from the Consideration: (1) the unaudited net asset value of the Target Group as at 30 June 2015 (HK$2,290,664,250); (2) the estimated amount of the Shareholder’s Loan (HK$25,764,979 as at 31 October 2015); (3) the estimated professional fees of approximately HK$6,350,000; (4) the estimated PRC corporate income tax of approximately HK$182,738,306 arising from the Disposal; and adding therefrom;

• (ii) the reclassification of translation reserve from other comprehensive income to profit or loss upon Completion of approximately HK$294,907,139 as at 30 June 2015.

Assets and liabilities

According to the interim report of the Company for the six months ended 30 June 2015, the unaudited consolidated total assets and liabilities of the Group as at 30 June 2015 were approximately HK$7,559,510,000 and HK$4,702,773,000 respectively. Based on the unaudited pro forma financial information of the Remaining Group as set out in Appendix IV to this circular, assuming Completion had taken place on 30 June 2015, the unaudited pro forma consolidated total assets and liabilities of the Remaining Group would be approximately HK$5,506,902,000 and HK$2,772,534,000.

– 16 –

LETTER FROM THE BOARD

Profit attributable to equity Shareholders

For the year ended 31 December 2014, the Group recorded an audited profit attributable to equity Shareholders of approximately HK$106,417,000. Based on the unaudited pro forma financial information of the Remaining Group as set out in Appendix IV to this circular, assuming Completion had taken place on 1 January 2014 and inclusive of possible gain on the Disposal, the unaudited pro forma consolidated loss of the Remaining Group attributable to equity Shareholders would be approximately HK$52,053,000 for the year ended 31 December 2014. The Group shared a loss from the Target Group for the ten months ended 31 October 2015. The Directors are of the view that the Disposal would have a positive impact on earnings of the Remaining Group for the year ended 31 December 2015 if the PRC steel industry continued to decline.

USE OF PROCEEDS

The net proceeds from the Disposal would be approximately HK$339,751,329 (the “ Net Proceeds ”) (being the Consideration of HK$2,383,148,035, less the estimated professional fees of approximately HK$6,350,000, the estimated PRC corporate income tax of approximately HK$182,738,306 and set-off of the Outstanding Loan of approximately HK$1,854,308,400). The Company intends to apply the Net Proceeds of (i) approximately HK$100,000,000 to explore investment opportunities on existing or other business segments; (ii) approximately HK$100,000,000 to conduct money lending business; and (iii) approximately HK$139,751,329 as working capital of the Company. As at the Latest Practicable Date, the Company was not engaged in any discussion on any investment opportunities, nor had the Company commenced money lending business.

IMPLICATIONS OF THE LISTING RULES

As the relevant percentage ratios (as defined in the Listing Rules) exceed 75%, the Disposal constitutes a very substantial disposal of the Company under Chapter 14 of the Listing Rules. Accordingly, the Disposal has to be approved by the Shareholders at the SGM.

SGM

The SGM will be convened and held to consider and, if thought fit, to pass the relevant resolution approving the Sale and Purchase Agreement and the transactions contemplated thereunder.

As set out in the 2009 Circular, the Guarantor was a party acting in concert (as defined in the Hong Kong Code on Takeovers and Mergers) with Mr. Zhang He Yi and Mr. Qi Shi An, both being vendors of the Target. As set out in the 2009 Circular, as at 24 April 2009, (i) the Guarantor was interested in 85% and Mr. Zhang He Yi was interested in 15% respectively of the issued share capital of Happy Sino International Limited, which in turn was interested in approximately 9.95% of the then issued share capital of the Company; (ii) the Guarantor was interested in 67.9% in the equity interests of the then holding company of the joint venture partner of the Associated Companies; (iii) the Guarantor was a director of the Associated Companies as well as their joint venture partners; (iv) upon

– 17 –

LETTER FROM THE BOARD

completion of the acquisition of the Target in 2009 by the Group, Mr. Zhang He Yi and Mr. Qi Shi An, as vendors, would be allotted and issued consideration shares amounting to approximately 21.93% of the then issued share capital of the Company as enlarged by such allotment and issue. Happy Sino International Limited’s shareholding in the Company had decreased to approximately 5.54% as at the Latest Practicable Date. To the best of the Director’s knowledge, information and belief, having made all reasonable enquiries, as at the Latest Practicable Date, (a) the Guarantor was interested in (i) 85% of the issued share capital of Happy Sino International Limited, which in turn is interested in approximately 5.54% of the issued share capital of the Company; (ii) 18.88% of the ultimate holding company of the controlling joint venture partner of the Associated Companies; (iii) 18.88% of the minority joint venture partner of JVE 1 and JVE 2; (b) Mr. Zhang He Yi was interested in 15% of the issued share capital of Happy Sino International Limited; (c) Mr. Zhang He Yi was also interest in 1,400,000,000 Shares, representing approximately 10.96% of the issued share capital of the Company; (d) Mr. Qi Shi An was interested in 600,000,000 Shares, representing approximately 4.70% of the issued share capital of the Company; and (e) Mr. Xue Jian, an executive Director, has been appointed as the manager and legal representative of the ultimate holding company of the controlling joint venture partner of the Associated Companies. Mr. Xue Jian has abstained from voting at the board meeting to approve, among others, the Disposal. Although the Guarantor, Mr. Zhang He Yi and Mr. Qi Shi An’s interests in the Shares and their relationship with the Target Group have significantly changed since 2009, to maintain sound corporate governance practice, Happy Sino International Limited, the Guarantor and his associates, Mr. Zhang He Yi and Mr. Qi Shi An will abstain from voting at the SGM.

Save for the aforesaid, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, no other Shareholder is required to abstain from voting at the SGM.

A notice convening the SGM to be held at Board Room, Level 1, South Pacific Hotel, 23 Morrison Hill Road, Wanchai, Hong Kong at 9:30 a.m. on 14 March 2016 is set out on pages SGM-1 to SGM-2 of this circular.

A form of proxy for use by the Shareholders at the SGM is enclosed with this circular. Whether or not you intend to attend and vote at the SGM in person, you are requested to complete the form of proxy and return it to the office of the Company’s share registrar, Tricor Tengis Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for holding of the SGM or any adjourned meeting. Completion and return of the form of proxy will not prevent you from attending and voting at the SGM or any adjourned meeting should you so wish.

– 18 –

LETTER FROM THE BOARD

RECOMMENDATION

The Directors consider the terms of the Sale and Purchase Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of the resolution to be proposed at the SGM to approve the Sale and Purchase Agreement and the transactions contemplated thereunder.

FURTHER INFORMATION

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

Yours faithfully, for and on behalf of the Board Kai Yuan Holdings Limited Law Wing Chi, Stephen Executive Director

– 19 –

APPENDIX I FINANCIAL INFORMATION OF THE TARGET GROUP

Set out below are the unaudited financial information of Fame Risen Development Limited (the “ Target ”) which comprises the unaudited statements of financial position of the Target as at 31 December 2012, 2013 and 2014 and 31 October 2015 and the related unaudited statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows for the each of the three years ended 31 December 2014 and ten months ended 31 October 2014 and 2015 and certain explanatory notes (altogether the “ Unaudited Financial Information ”).

The Company’s auditor, Ernst & Young, has reviewed the Unaudited Financial Information of the Target in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA and with reference to Practice Note 750 Review of Financial Information under the Hong Kong Listing Rules for a Very Substantial Disposal issued by the HKICPA. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable the auditor to obtain assurance that they would become aware of all significant matters that might be identified in an audit. Based on their review, nothing has come to their attention that causes them to believe that the Unaudited Financial Information of the Target is not prepared, in all material respects, in accordance with the basis of preparation as set out in Note 2 below.

– I-1 –

APPENDIX I FINANCIAL INFORMATION OF THE TARGET GROUP

UNAUDITED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the years ended 31 December 2012, 2013 and 2014, and ten months ended 31 October 2014 and 2015

REVENUE Cost of sales Gross profit Other income and gains Other expenses Finance costs Share of profits of associates (LOSS)/PROFIT BEFORE TAX Income tax expense (LOSS)/PROFIT FOR THE YEAR/PERIOD OTHER COMPREHENSIVE INCOME Other comprehensive income to be reclassified to profit or loss in subsequent periods: Exchange differences on translation of foreign operations OTHER COMPREHENSIVE (LOSS)/INCOME FOR THE YEAR/PERIOD, NET OF TAX TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE YEAR/PERIOD	For the year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 (Unaudited) (Unaudited) (Unaudited) 413,6581 432,5561 –2 (404,328) (419,918) – 9,330 12,638 – 3,388 4,247 467 (4,544) (8,342) (3,970) (35,580) – – 22,720 94,806 411,012 (4,686) 103,349 407,509 (1,136) (4,740) (20,551) (5,822) 98,609 386,958 (108) 50,263 (3,991) (108) 50,263 (3,991) (5,930) 148,872 382,967	For the ten months ended 31 October 2014 2015 HK$’000 HK$’000 (Unaudited) (Unaudited) – – – – – – 402 292 (1,354) (2,607) – – 225,106 33,018 224,154 30,703 (11,258) (1,653) 212,896 29,050 (10,433) (78,398) (10,433) (78,398) 202,463 (49,348)	For the ten months ended 31 October 2014 2015 HK$’000 HK$’000 (Unaudited) (Unaudited) – – – – – – 402 292 (1,354) (2,607) – – 225,106 33,018 224,154 30,703 (11,258) (1,653) 212,896 29,050 (10,433) (78,398) (10,433) (78,398) 202,463 (49,348)
			– 292 (2,607) – 33,018
			30,703 (1,653)
			29,050
			(78,398)
			(78,398)
			(49,348)

1 The amount represented revenue from trading of iron ore and other materials related to steel manufacturing, please refer to business review section of management discussion and analysis of annual reports for the two years ended 31 December 2013 for details.

• 2 The Company ceased the trading business since fourth quarter of the year and reallocated resources to acquire the Butterfly on Waterfront, please refer to business review section of management discussion and analysis of annual reports for the year ended 31 December 2013 for details.

– I-2 –

APPENDIX I FINANCIAL INFORMATION OF THE TARGET GROUP

UNAUDITED STATEMENTS OF FINANCIAL POSITION

At 31 December 2012, 2013 and 2014 and 31 October 2015

NON-CURRENT ASSETS Investments in associates Total non-current assets CURRENT ASSETS Other receivables and prepayments Cash and cash equivalents Total current assets CURRENT LIABILITIES Other payables and accruals Amounts due to related companies Amount due to the ultimate holding company Total current liabilities NET CURRENT LIABILITIES TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Deferred tax liabilities Total non-current liabilities Net assets EQUITY Equity attributable to owners of the Target Share capital Reserves Total equity	As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 (Unaudited) (Unaudited) (Unaudited) 1,603,468 1,749,793 2,156,775 1,603,468 1,749,793 2,156,775 171 171 171 448,867 45,117 77,454 449,038 45,288 77,625 2,095 2,000 150 287 932 1,784 473,414 60,571 97,426 475,796 63,503 99,360 (26,758) (18,215) (21,735) 1,576,710 1,731,578 2,135,040 37,942 43,938 64,433 37,942 43,938 64,433 1,538,768 1,687,640 2,070,607 20,000 20,000 20,000 1,518,768 1,667,640 2,050,607 1,538,768 1,687,640 2,070,607	As at 31 October 2015 HK$’000 (Unaudited) 2,108,963
		2,108,963
		– 1,715
		1,715
		– – 25,765
		25,765
		(24,050)
		2,084,913
		63,654
		63,654
		2,021,259
		20,000 2,001,259
		2,021,259

– I-3 –

APPENDIX I FINANCIAL INFORMATION OF THE TARGET GROUP

UNAUDITED STATEMENTS OF CHANGES IN EQUITY

For the years ended 31 December 2012, 2013 and 2014, and for the ten months ended 31 October 2014 and 2015

At 1 January 2012 Loss for the year Other comprehensive loss for the year: Exchange differences on translation of foreign operations Total comprehensive loss for the year At 31 December 2012 At 1 January 2013 Profit for the year Other comprehensive income for the year: Exchange differences on translation of foreign operations Total comprehensive income for the year At 31 December 2013 At 1 January 2014 Profit for the year Other comprehensive loss for the year: Exchange differences on translation of foreign operations Total comprehensive income for the year At 31 December 2014	Share capital HK$’000 (Unaudited) 20,000 – – – 20,000 20,000 – – – 20,000 20,000 – – – 20,000	Exchange fluctuation reserve* HK$’000 (Unaudited) 128,312 – (108) (108) 128,204 128,204 – 50,263 50,263 178,467 178,467 – (3,991) (3,991) 174,476	Other reserve (i)* HK$’000 (Unaudited) 545,303 – – – 545,303 545,303 – – – 545,303 545,303 – – – 545,303	Retained profits* HK$’000 (Unaudited) 851,083 (5,822) – (5,822) 845,261 845,261 98,609 – 98,609 943,870 943,870 386,958 – 386,958 1,330,828	Total equity HK$’000 (Unaudited) 1,544,698 (5,822) (108)
					(5,930)
					1,538,768
					1,538,768 98,609 50,263
					148,872
					1,687,640
					1,687,640 386,958 (3,991)
					382,967
					2,070,607

– I-4 –

APPENDIX I FINANCIAL INFORMATION OF THE TARGET GROUP

At 1 January 2015 Profit for the period Other comprehensive loss for the period: Exchange differences on translation of foreign operations Total comprehensive loss for the period At 31 October 2015 At 1 January 2014 Profit for the period Other comprehensive loss for the period: Exchange differences on translation of foreign operations Total comprehensive income for the period At 31 October 2014	Share capital HK$’000 (Unaudited) 20,000 – – – 20,000 20,000 – – – 20,000	Exchange fluctuation reserve* HK$’000 (Unaudited) 174,476 – (78,398) (78,398) 96,078 178,467 – (10,433) (10,433) 168,034	Other reserve (i)* HK$’000 (Unaudited) 545,303 – – – 545,303 545,303 – – – 545,303	Retained profits* HK$’000 (Unaudited) 1,330,828 29,050 – 29,050 1,359,878 943,870 212,896 – 212,896 1,156,766	Total equity HK$’000 (Unaudited) 2,070,607 29,050 (78,398)
					(49,348)
					2,021,259
					1,687,640 212,896 (10,433)
					202,463
					1,890,103

(i) Other reserves represent the Company’s share of reverses of the three associates arising from the additional contribution from Jinghua Chuangxin Group Company Limited, who indirectly controls these associates.

• These reserve accounts comprise the reserves of HK$1,518,768,000, HK$1,667,640,000, HK$2,050,607,000 and HK$2,001,259,000 as at 31 December 2012, 2013 and 2014 and 31 October 2015 in the statement of financial position.

– I-5 –

APPENDIX I FINANCIAL INFORMATION OF THE TARGET GROUP

UNAUDITED STATEMENTS OF CASH FLOWS

For the years ended 31 December 2012, 2013 and 2014, and for the ten months ended 31 October 2014 and 2015

CASH FLOWS FROM OPERATING ACTIVITIES (Loss)/profit before tax: Adjustments for: Interest income Finance costs Share of profits of associates Decrease in trade receivables Decrease/(increase) in other receivables and prepayments (Decrease)/increase in other payables and accruals Cash generated/(used in) from operations HK tax paid Interest received Interest paid Net cash flows generated from/(used in) operating activities CASH FLOWS FROM FINANCING ACTIVITIES (Decrease)/increase in amounts due to related companies Net cash flows (used in)/generated from financing activities NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year/period Effect of foreign exchange rate changes, net CASH AND CASH EQUIVALENTS AT END OF YEAR/PERIOD ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances Cash and cash equivalents as stated in the statement of cash flows	For the year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 (Unaudited) (Unaudited) (Unaudited) (4,686) 103,349 407,509 (2,511) (4,180) (467) 35,580 – – (22,720) (94,806) (411,012) 5,663 4,363 (3,970) 70,885 – – (171) – – 2,095 (95) (1,850) 78,472 4,268 (5,820) (162) – – 2,511 4,180 467 (35,580) – – 45,241 8,448 (5,353) 318,420 (412,198) 37,707 318,420 (412,198) 37,707 363,661 (403,750) 32,354 85,228 448,867 45,117 (22) – (17) 448,867 45,117 77,454 448,867 45,117 77,454 448,867 45,117 77,454	For the ten months ended 31 October 2014 2015 HK$’000 HK$’000 (Unaudited) (Unaudited) 225,129 30,703 (402) (292) – – (225,106) (33,018) (379) (2,607) – – – 171 (2,000) (150) (2,379) (2,586) – – 402 292 – – (1,977) (2,294) 34,649 (73,445) 34,649 (73,445) 32,672 (75,739) 45,117 77,454 (18) – 77,771 1,715 77,771 1,715 77,771 1,715	For the ten months ended 31 October 2014 2015 HK$’000 HK$’000 (Unaudited) (Unaudited) 225,129 30,703 (402) (292) – – (225,106) (33,018) (379) (2,607) – – – 171 (2,000) (150) (2,379) (2,586) – – 402 292 – – (1,977) (2,294) 34,649 (73,445) 34,649 (73,445) 32,672 (75,739) 45,117 77,454 (18) – 77,771 1,715 77,771 1,715 77,771 1,715
			(2,607) – 171 (150)
			(2,586) – 292 –
			(2,294)
			(73,445)
			(73,445)
			(75,739) 77,454 –
			1,715
			1,715
			1,715

– I-6 –

APPENDIX I FINANCIAL INFORMATION OF THE TARGET GROUP

NOTES TO THE UNAUDITED FINANCIAL INFORMATION

1 General Information

Fame Risen Development Limited (the “ Target ”) was incorporated in Hong Kong with limited liability. The Target is an direct wholly-owned subsidiary of the Kai Yuan Holdings Limited (the “ Company ”), a company incorporated in Bermuda with limited liability with its shares listed on the Main Board of the Stock Exchange of Hong Kong Limited.

The Target is principally engaged in investment holding and is the foreign joint venture partner of three associates established in the PRC:

• (i) 30% equity interests in Rizhao Medium Section Mill Co., Ltd., which is principally engaged in the manufacturing and sale of wire rod, medium size wide and heavy plate, section steel and related products, including H-beams which are widely used in the construction, infrastructure, aeronautics and ship-building industries;

• (ii) 30% equity interests in Rizhao Steel Co., Ltd., which is principally engaged in the manufacturing and sale of common carbon steel, low alloy steel and other steel billet; and

• (iii) 25% equity interests in Rizhao Steel Wire Co., Limited, which is principally engaged in the manufacturing and sale of high-end metal parts, rod and wire materials for construction, strips and related products, including deformed steel bar, round steel bars and steel rolls.

On 4 January 2016, the Company entered into a Sale and Purchase Agreement with Intelligent Wealth Limited (the “ Purchaser ”), pursuant to which the Company agreed to sell and the Purchaser agreed to purchase the entire issued share capital of the Target subject to the terms and conditions of the Sale and Purchase Agreement (the “ Disposal ”).

The functional currency of the Target is Renminbi (RMB), while the Unaudited Financial Information of the Target is presented in Hong Kong dollars (“HK$”) and all values are rounded to the nearest thousand except when otherwise indicated.

2 Basis of preparation and presentation of the financial information

The Unaudited Financial Information of the Target for each of the three years ended 31 December 2014 and the ten months ended 31 October 2014 and 2015 (the “ Unaudited Financial Information ”) has been prepared in accordance with paragraph 68(2)(a)(i) of Chapter 14 of the Listing Rules, and solely for the purposes of inclusion in this circular to be issued by the Company in connection with the Disposal.

The Unaudited Financial Information has been prepared using the same accounting policies adopted by the Company in the preparation of the financial statements of the Company for years ended 31 December 2012, 2013 and 2014, which conform with the Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants (the “ HKICPA ”).

The Unaudited Financial Information of the Target does not contain sufficient information to constitute a complete set of financial statements as defined in Hong Kong Accounting Standard 1 (Revised) “Presentation of Financial Statements” issued by the HKICPA nor an interim report as defined in Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the HKICPA.

As at 31 October 2015, the current liabilities of the Target exceeded its current assets by HK$24,050,000. The above conditions indicated the existence of uncertainties which may cast significant doubt on the abilities of the Target to continue as a going concern and therefore, the Target may not be able to realise its assets and discharge its liabilities in normal course of business. However, the Company has undertaken to provide continued financial support to enable the Target to fulfill its financial liabilities when they fall due. Accordingly, the Unaudited Financial Information has been prepared by the directors of the Company on a going concern basis.

– I-7 –

APPENDIX II

FINANCIAL INFORMATION OF THE ASSOCIATED COMPANIES

Set out below are the unaudited summarised financial information of Rizhao Steel Co., Limited, Rizhao Medium Section Mill Co., Limited and Rizhao Steel Wire Co., Limited for each of the three years ended 31 December 2014 and for the ten months ended 31 October 2015 respectively. The following financial information had been prepared on the Company’s consolidated level, which was in accordance with Hong Kong Financial Reporting Standards.

Rizhao Steel Co., Limited

Current assets Non-current assets Current liabilities Non-current financial liabilities, excluding trade and other payables and provisions Non-current liabilities Net assets Reconciliation to the Group’s interest in the associate: Proportion of the Group’s ownership Share of net assets of the associate Revenues_(note 1) Cost of sales Gross Profit Profit/(loss) for the year(note 2)_ Total comprehensive income/(loss) for the year	As at 31 December 2012 HK$’000 (Unaudited) 5,214,921 11,963,122 (13,374,555) – (556,038) 3,247,450 30% 974,235 For the year ended 31 December 2012 HK$’000 (Unaudited) 50,093,722 (48,846,618) 1,247,104 (1,178,200) (1,177,422)	As at 31 December 2013 HK$’000 (Unaudited) 12,465,639 13,247,589 (21,277,044) (254,378) (943,252) 3,238,554 30% 971,566 For the year ended 31 December 2013 HK$’000 (Unaudited) 46,429,292 (45,359,082) 1,070,210 (118,967) (30,550)	As at 31 December 2014 HK$’000 (Unaudited) 16,016,885 16,197,143 (24,991,376) (1,521,105) (1,845,246) 3,856,301 30% 1,156,890 For the year ended 31 December 2014 HK$’000 (Unaudited) 41,373,386 (38,891,929) 2,481,457 625,950 617,747	As at 31 October 2015 HK$’000 (Unaudited) 19,682,827 16,678,216 (29,812,836) (1,555,357) (1,269,395)
				3,723,455
				30% 1,117,037
				For the ten months ended 31 October 2015 HK$’000 (Unaudited) 26,904,967 (25,322,490)
				1,582,477 10,311 (132,847)

– II-1 –

APPENDIX II

FINANCIAL INFORMATION OF THE ASSOCIATED COMPANIES

Rizhao Medium Section Mill Co., Limited

	As at		As at		As at		As at
	31 December	31 December		31 December			31 October
	2012		2013		2014		2015
	HK$’000		HK$’000		HK$’000		HK$’000
	(Unaudited)	(Unaudited)		(Unaudited)		(Unaudited)
Current assets	4,902,054		8,183,635		6,487,613		6,202,679
Non-current assets	565,583		475,880		446,041		428,267
Current liabilities	(4,901,690)		(7,803,105)		(6,000,293)		(5,851,352)
Non-current financial liabilities,
excluding trade and other
payables and provisions	–		(189,379)		(188,738)		–
Non-current liabilities	(37,304)		(33,080)		(30,363)		(27,145)
Net assets	528,643		633,951		714,260		752,449
Reconciliation to the Group’s
interest in the associate:
Proportion of the Group’s
ownership	30%		30%		30%		30%
Share of net assets of the associate	158,593		190,185		214,278		225,735
							For the
	For the		For the		For the		ten months
	year ended		year ended		year ended		ended
	31 December	31 December		31 December			31 October
	2012		2013		2014		2015
	HK$’000		HK$’000		HK$’000		HK$’000
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Revenues_(note 1)_	5,775,608		5,624,157		4,746,173		2,873,021
Cost of sales	(5,775,115)		(5,385,316)		(4,528,659)		(2,705,413)
Gross Profit	493		238,841		217,514		167,608
Profit/(loss) for the year_(note 2)_	(240,323)		86,893		82,093		66,115
Total comprehensive income/(loss)
for the year	(241,248)		100,519		80,309		38,189

– II-2 –

APPENDIX II

FINANCIAL INFORMATION OF THE ASSOCIATED COMPANIES

Rizhao Steel Wire Co., Limited

	As at		As at		As at		As at
	31 December	31 December		31 December			31 October
	2012		2013		2014		2015
	HK$’000		HK$’000		HK$’000		HK$’000
	(Unaudited)	(Unaudited)		(Unaudited)		(Unaudited)
Current assets	17,387,758		24,224,828		26,270,008		24,497,698
Non-current assets	5,160,528		4,818,316		4,440,320		4,088,302
Current liabilities	(17,545,799)		(23,244,707)		(23,344,785)		(22,384,265)
Non-current financial liabilities,
excluding trade and other
payables and provisions	–		(203,503)		(1,330,967)		(610,277)
Non-current liabilities	(282,130)		(700,235)		(510,652)		(355,034)
Net assets	4,720,357		4,894,699		5,523,924		5,236,424
Reconciliation to the Group’s
interest in the associate:
Proportion of the Group’s
ownership	25%		25%		25%		25%
Share of net assets of the associate	1,180,089		1,223,675		1,380,981		1,309,106
							For the
	For the		For the		For the		ten months
	year ended		year ended		year ended		ended
	31 December	31 December		31 December			31 October
	2012		2013		2014		2015
	HK$’000		HK$’000		HK$’000		HK$’000
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Revenues_(note 1)_	47,842,105		44,455,624		39,407,261		21,314,596
Cost of sales	(47,645,797)		(43,878,032)		(37,855,896)		(20,897,515)
Gross Profit	196,308		577,592		1,551,365		417,081
Profit/(loss) for the year_(note 2)_	(915,284)		26,820		642,964		(84,678)
Total comprehensive income/(loss)
for the year	(919,140)		153,243		629,226		(287,500)

– II-3 –

APPENDIX II

FINANCIAL INFORMATION OF THE ASSOCIATED COMPANIES

• Note 1: As mentioned in the “Letter from the Board” in this circular, due to the downturn in the PRC’s property market, and modest economic growth in the PRC since 2011, demand and selling price of steel products were adversely affected. As a result, the revenue recorded for each of the Associated Companies for the year ended 31 December 2012, 2013 and 2014 was in a decreasing trend.

• Note 2: The Associated Companies recorded an aggregated loss of approximately HK$2,333.8 million for the year ended 31 December 2012 which were mainly attributable to impairment loss on long term assets, provision for impairment on investments in asociates and decrease in revenue whereas the cost of sales remained at a similar level compared to the past. Due to the continuous recession of the steel industry and excess capacity in the PRC, for the financial year ended 31 December 2013, the management of the Associated Companies implemented stringent inventory control and margin maintenance. As the result of reduction in impairment loss on long term assets and provision for impairment on investments in associates and abovementioned measures, the aggregate loss of the Associated Companies for the year ended 31 December 2013 was reduced to approximately HK$5.3 million. For the year ended 31 December 2014, in addition to the aforesaid management effort, there was a significant decrease in price of constituent raw material. Accordingly, the Associated Companies recorded an aggregate profit of approximately HK$1,351.0 million. For the ten months ended 31 October 2015, due to the continuous slow-down in construction of new property which led to a substantial decrease in price of steel products at a magnitude higher than the rate of drop of the constituent raw materials in 2015, the Associated Companies recorded an aggregate loss of approximately HK$8.3 million.

– II-4 –

APPENDIX III

FINANCIAL INFORMATION OF THE GROUP

1. FINANCIAL INFORMATION OF THE GROUP

The financial information of the Group for the 3 years ended 31 December 2014 and the six months ended 30 June 2015 has been published in the reports as follows:

• (i) the financial information of the Group for the year ended 31 December 2012 is disclosed in pages 26 to 103 of the annual report of the Company for the year ended 31 December 2012 (please refer to the website of the Company at http://www.kaiyuanholdings.com/announcement/rt987.pdf for details);

• (ii) the financial information of the Group for the year ended 31 December 2013 is disclosed in pages 29 to 111 of the annual report of the Company for the year ended 31 December 2013 (please refer to the website of the Company at http://www.kaiyuanholdings.com/announcement/rt1054.pdf for details);

• (iii) the financial information of the Group for the year ended 31 December 2014 is disclosed in pages 29 to 115 of the annual report of the Company for the year ended 31 December 2014 (please refer to the website of the Company at http://www.kaiyuanholdings.com/announcement/rt1136.pdf for details); and

• (iv) the financial information of the Group for the six months ended 30 June 2015 is disclosed in pages 4 to 37 of the interim report of the Company for the six months ended 30 June 2015 (please refer to the website of the Company at http://www.kaiyuanholdings.com/announcement/rt1182.pdf for details).

The annual reports of the Company for the 3 years ended 31 December 2014 and the interim report of the Company for the six months ended 30 June 2015 have been published on the website of the Stock Exchange at www.hkex.com.hk and the website of the Company at www.kaiyuanholdings.com.

2. INDEBTEDNESS

Indebtedness statement of the Remaining Group

As at the close of business on 31 December 2015, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, the Remaining Group had outstanding borrowings of approximately HK$3,468,058,400, comprising (1) bank loan from Societe Generale Corporate & Investment Banking of HK$1,464,750,000 (equivalent to €175,000,000), the loan bears interest at three months EURIBOR plus 2.2% per annum and was secured by the Paris Marriott Hotel property located in Paris, France and its operations; (2) bank loan from The Hong Kong and Shanghai Banking Corporation Limited of approximately HK$149,000,000, the loan bears interest at one month HIBOR plus 2.36% per annum and was secured by the Butterfly on Waterfront located in Hong Kong; and (3) secured loan of approximately HK$1,854,308,400 (equivalent to US$239,265,600) from Most Honour Limited, a company wholly-owned by the

– III-1 –

APPENDIX III

FINANCIAL INFORMATION OF THE GROUP

Guarantor, who in turn is interested in approximately 5.54% of the issued share capital of the Company, the loan bears interest at 4% per annum and was secured by the share of Crown Value Limited, a wholly-owned subsidiary of the Company.

General

For the purpose of the above statement of indebtedness, foreign currency denominated amounts have been translated into Hong Kong dollar at the rates of exchange prevailing at the close of business on 31 December 2015.

Save as aforesaid and apart from intra-group liabilities and normal trade payables, the Remaining Group did not have: (a) any other debt securities issued and outstanding, and authorised or otherwise created but unissued; (b) any other term loans (whether guaranteed, unguaranteed, secured or unsecured); (c) any other borrowings or indebtedness in the nature of borrowing including bank overdrafts and liabilities under acceptances (other than normal trade bills) or acceptance credits or hire purchase commitments; (d) any other mortgages or charges; or (e) any other material guarantees or contingent liabilities as at 31 December 2015.

As at the Latest Practicable Date, the Directors confirmed that, there had been no material change in the indebtedness position of the Remaining Group, except for those mentioned above and any contingent liabilities or any guarantees of the Remaining Group.

3. FINANCIAL AND TRADING PROSPECTS

The Remaining Group will be principally engaged in hotel operations with hotels in France and Hong Kong. The Remaining Group also envisages incubating money lending as a new business segment.

Hotel Operations

The Remaining Group owns hotels in Paris and in Hong Kong, offering an aggregate of over 200 hotel rooms for worldwide travelers. The Remaining Group considers investing in hotels tends to be a relatively low risk investments, whilst offering stable revenue stream and considerable capital gain potential.

The Board considers the Paris Marriott Hotel in France derives unparalleled value to the Remaining Group as the hotel occupies prime location in the heart of the Paris city. Notwithstanding the recent terrorist attack occurred within the Paris city, occupancy and revenue of the Paris Marriott Hotel were adversely affected, the Remaining Group is confident that performance of the Paris Marriott Hotel will soon recover. In order to enhance guest experience during their stay at the hotel, the Remaining Group is considering different renovation plans on guest rooms and reception lobby etc. of the Paris Marriott Hotel. As at the Latest Practicable Date, the Remaining Group had not committed any renovation plan to the Paris Marriott Hotel.

– III-2 –

APPENDIX III

FINANCIAL INFORMATION OF THE GROUP

Based on HVS, the World’s leading hospitality consulting and valuation firm, transactions in the European hotel section from 1 January 2015 up to 1 October 2015 had seen a 58% year-on-year increase as compared to the same period in 2014. The Remaining Group shares same views on investment outlook of mid-level to luxury hotels in Europe, partly due to the sustained depreciation of Euros against United States dollars. In addition to Paris, the Remaining Group will closely look for hotel investment opportunities in major European cities or countries such as London, Spain and Berlin etc.

The Butterfly on Waterfront offers unique hotel guests with beautiful sea view of the Victoria Harbour, and is situated within close reach to a range of public transports. The Board is optimistic about prospects of the Butterfly on Waterfront and expects the hotel will continue providing the Remaining Group with a solid revenue stream as well as capital gain potential. Meanwhile, the Butterfly on Waterfront will deploy electronic marketing tactics with a view to generating bookings, maintaining occupancy and improving average room rates.

Money Lending Business

On 7 November 2013, Kai Yuan Capital Limited, an indirect wholly-owned subsidiary of the Company, was granted with the money lender licence to conduct money lending business in Hong Kong. The Remaining Group is positive towards incubating money lending business as an alternative revenue source to the hotel operations segment. Soon after the grant of money lender licence, money lending market landscape in Hong Kong had changed quickly, due to sudden increase in number of money lender license holders in the market as the result of blooming property market. Furthermore, more attention and resources of the Remaining Group were allocated to the Butterfly on Waterfront newly acquired by December 2013. Therefore, the Remaining Group had not commenced the money lending business.

With regards to types of loan product to offer, the Remaining Group initially intends to operate money lending business under the brand name of “Kai Yuan Capital” (“ Kai Yuan Capital ”). Kai Yuan Capital envisages to provide mainly short-term secured financing and mortgage loans in Hong Kong, whereby personal properties or other securities will be demanded as collaterals. The Remaining Group considers Hong Kong Monetary Authority’s new countercyclical measures enacted on 27 February 2015 to strengthen risk management of authorised institution as an opportunity to divert non-qualified mortgage loan applicants to finance company. With respect to the source of financing, the Remaining Group intends to apply part of the Net Proceeds as the startup capital. As at the Latest Practicable Date, the Remaining Group had not commenced any money lending business.

In conclusion, the Remaining Group will continue to explore investment opportunities and remain dedicated to constantly review and reinforce its existing hotel operation segment, with a view to enhancing and improving returns to our Shareholders.

– III-3 –

APPENDIX III

FINANCIAL INFORMATION OF THE GROUP

4. WORKING CAPITAL

The Directors, after due and careful enquiry, are of the opinion that following Completion, after taking into account the financial resources available to the Remaining Group, including internally generated funds and the available banking facilities, the Remaining Group has sufficient working capital for its present requirements for at least the next 12 months from the date of this circular, in the absence of unforeseeable circumstances.

5. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2014, the date to which the latest published audited consolidated accounts of the Company had been made up.

6. MANAGEMENT DISCUSSION AND ANALYSIS ON THE REMAINING GROUP

Following the Disposal, the Remaining Group shall comprise the Company and its subsidiaries but exclude the Target Group. The management discussion and analysis of the Remaining Group for the three years ended 31 December 2014 and the six months ended 30 June 2015 are set out as follows:

(a) For the six months ended 30 June 2015

Business Review

During the six months ended 30 June 2015 (the “ Period ”), revenue from continuing operations of the Remaining Group amounted to approximately HK$160.8 million, representing an increase of 864.2% from approximately HK$16.7 million for the corresponding period in 2014. Such increase was mainly attributable to recognition of revenue contributed by the Paris Marriott Hotel after the Remaining Group acquired the hotel in the second half of 2014. During the Period, the Remaining Group recorded a loss of approximately HK$36.4 million from continuing operations principally attributable to the payment of finance cost arising from interest on bank loans and loans from a related company (for the purpose of acquiring the Paris Marriott Hotel).

Upon signing a sale and purchase agreement on 27 May 2015, the Remaining Group conditionally agreed to dispose of the entire heat energy supply segment. Therefore, this segment was re-classified as discontinued operations in the interim report of the Company for the Period. Business review on the heat energy supply segment was stated below.

– III-4 –

APPENDIX III

FINANCIAL INFORMATION OF THE GROUP

Segmental review of the Remaining Group’s operations during the Period is as follows:

Hotel operation

In Paris, France, the Remaining Group began to recognise revenue from the Paris Marriott Hotel during the Period. The adverse effect of the tragic Charlie Hebdo attack occurred in Paris in the first quarter of 2015 was extended to the second quarter. As a result, both occupancy rate and average daily rate of the Paris Marriott Hotel declined. Below is a summary on the operating performance of the Paris Marriott Hotel for the Period:

Average Daily

		Occupancy	Room Rate	RevPAR*
Paris Marriott Hotel,
	France	82.8%	€475	€393
*	Revenue per available room

In Hong Kong, according to the Hong Kong Tourism Board, it was reported that overall number of tourists visiting Hong Kong during the Period slightly increased by 2.8%. Despite such increment, the number of overnight visitor arrivals declined by 3.8% during the same period. The decline was partly resulted from the continuous strengthening of Hong Kong dollars against currencies of other popular tourist origins, imposition of once-a-week visit limit on cross-border visits to Hong Kong by Shenzhen residents, and earlier protests against parallel traders. As a result, the Butterfly on Waterfront experienced downward pressure on both occupancy rate and average daily room rate. Below is a summary on the operating performance of the Butterfly on Waterfront during the Period:

Average Daily

	Occupancy	Room Rate	RevPAR*
Butterfly on Waterfront,
Hong Kong	98.6%	HK$793	HK$781

* Revenue per available room

– III-5 –

APPENDIX III

FINANCIAL INFORMATION OF THE GROUP

During the Period, the hotel operation segment recorded a loss of approximately HK$29.5 million, as compared to a loss of HK$19.0 million for the corresponding period in 2014. The increase in loss was mainly attributable to increase in finance cost arising from interests on bank loan and loan from a related company drawn for acquisition of the Paris Marriott Hotel. Thus, assuming interests and taxation were excluded, this segment had earnings before interests and taxes (EBIT) of approximately HK$30.5 million (the six months ended 30 June 2014: loss before interests and taxes of approximately HK$19.0 million).

Heat Energy Supply

During the Period, the heat energy supply segment recorded revenue of approximately HK$174.1 million, representing an increase of approximately 1.8% as compared to revenue of HK$171.0 million for the corresponding period in 2014. This was mainly due to increase in heat supply fees resulted from expansion of heat supply areas. Notwithstanding the increase in revenue, heat energy supply facilities of the Remaining Group’s heat energy supply subsidiaries in Tianjin had yet to be fully utilized to reach economies of scale. As a result, the Remaining Group recorded a loss of approximately HK$9.3 million in this segment during the Period, as compared to a loss of approximately HK$13.9 million in the corresponding period in 2014.

In view of the continuous disappointing performance of this segment, the Group had conditionally agreed to dispose of this entire segment during the Period. The Board considered the disposal represented a good opportunity for the Remaining Group to realise its investment in this segment and allowed the Remaining Group to focus on its strategic business.

Money lending business

With regard to money lending business, the Remaining Group had initiated preparation work essential for conducting money lending business during the Period. It was expected that the preparation should complete around interim report period. As at the date of publication of the 2015 interim report, the Remaining Group had not commenced any money lending business.

Liquidity and Financial Resources

As at 30 June 2015, total assets and net assets of the Remaining Group were approximately HK$5,027.5 million and HK$566.1 million respectively. The cash and bank balance of the Remaining Group as at 30 June 2015 was approximately HK$200.0 million, denominated in Hong Kong dollars, Euro, United States dollars and Renminbi. The total current assets of the Remaining Group as at 30 June 2015 was approximately HK$1,388.5 million. As at 30 June 2015, the net current assets of the Remaining Group were approximately HK$585.9 million.

– III-6 –

APPENDIX III

FINANCIAL INFORMATION OF THE GROUP

The Remaining Group adopted conservative treasury approach and had tight controls over its cash management. As at 30 June 2015, the Remaining Group had outstanding bank and other borrowings amounted to approximately HK$3,628.9[1] million, of which, amounting to approximately HK$127.9 million were due within one year. As at 30 June 2015, the Group’s gearing ratio (total borrowings/total assets) was at approximately 72.2%.

Acquisitions and Disposals

On 27 May 2015, the Remaining Group entered into a sale and purchase agreement with a third party to dispose of the entire share capital of Spread International Group Limited (“ Spread International ”), an indirect wholly-owned subsidiary of the Company, and shareholder loan (the “ Spread International Disposal ”) at the consideration of HK$131.0 million. Spread International was the beneficial owner of 49% equity interests in Tianjin Heating Development Company Limited (天津市供熱發展有限公司), a company established in the PRC, which together with its subsidiaries and associated companies were principally engaged in the supply of heat energy in Tianjin, the PRC. The Spread International Disposal constituted a very substantial disposal of the Company, and a circular of the Spread International Disposal was published on 14 August 2015. The ordinary resolution on the Spread International Disposal was passed by the SGM on 31 August 2015 and the Spread International Disposal was completed in October 2015.

Foreign Exchange Exposure

The Remaining Group had operations in the PRC, France, Luxembourg and Hong Kong where transactions and cash flows were denominated in the local currencies, including Renminbi, Euro and Hong Kong dollars. As a result, the Remaining Group was exposed to foreign currency exposures with respect to Euro which mainly occurred from conducting daily operations and financing activities by local offices where local currency was different from the Remaining Group. For the six months ended 30 June 2015, the Remaining Group had not entered into any forward contracts to hedge the foreign exchange exposure. The Remaining Group managed its foreign exchange risks by performing regular review and monitoring of the foreign exchange exposure. The Remaining Group would consider employing foreign exchange hedging arrangements when appropriate and necessary.

• 1 (i) Approximately HK$1,854.3 million (equivalent to approximately US$239,265,600) at the interest rate of 4% per annum;

• (ii) Approximately HK$1,503.7 million (equivalent to approximately €175,000,000) at the interest rates of 3 months EURIBOR plus 2.2% per annum;

• (iii) Approximately HK$155.0 million at the interest rate of 1 month HIBOR plus 2.36% per annum; and

• (iv) Approximately HK$115.9 million (equivalent to approximately RMB91.4 million) at the interest rate of 8% per annum.

– III-7 –

APPENDIX III

FINANCIAL INFORMATION OF THE GROUP

Contingent Liabilities

As at 30 June 2015, the Remaining Group provided a guarantee, with no charge, for a bank in regard of a loan amounting to HK$101,444,000 granted to Tianjin Jinre Logistics Company Limited, in which the Remaining Group held a 16% equity interests. As at 30 June 2015, the Remaining Group did not have any material contingent liability.

Pledge on the Remaining Group’s Assets

As at 30 June 2015, cash deposits amounting to approximately HK$20.9 million and certain buildings of the Remaining Group with a net carrying amount of approximately HK$3,459.5 million were pledged to secure general banking facilities granted to the Remaining Group. Also, time deposits amounting to HK$9.5 million were pledged to secure certain bills payables.

Employees and Remuneration

The Remaining Group had 169 employees as at 30 June 2015, the toal employee remuneration during the period was approximately HK$20.8 million. Remuneration policies were reviewed regularly to ensure that compensation and benefit packages were in line with the market level. In addition to basic remuneration, the Remaining Group also provided other employee benefits including bonuses, mandatory provident fund scheme and medical scheme. At the discretion of the Board, the Remaining Group might grant share options to eligible employees and participants.

(b) For the year ended 31 December 2014

Business Review

For the year ended 31 December 2014, revenue of the Remaining Group amounted to approximately HK$407.0 million, representing a increase of approximately 25.3% from approximately HK$324.9 million for the preceding year. The increase in revenue was mainly attributable to the recognition of revenue contributed by hotel operation in France and Hong Kong. The Remaining Group recorded a loss for the year of approximately HK$245.4 million, as compared to the loss of approximately HK$42.9 million for the preceding year. The loss for the year was principally attributable to (i) the increase in foreign exchange loss; and (2) one-off direct expenses (including stamp duty, professional fees, government fees and taxation etc.) incurred in relation to the acquisition of the Paris Marriott Hotel.

Segmental review of the Remaining Group’s operations during the year is as follows:

– III-8 –

APPENDIX III

FINANCIAL INFORMATION OF THE GROUP

Hotel operation

The Remaining Group successfully completed the acquisition of the property and hotel operating business of Paris Marriott Hotel in France in the fourth quarter of the year at the aggregate consideration of €344,597,934. Together with the Butterfly on Waterfront (previously known as Hotel de EDGE) located in Hong Kong, both hotels contributed a constant revenue flow for the Remaining Group. The occurrence of “Occupy Central” movement in Hong Kong had adverse effects on occupancy, average daily room rate and RevPAR* of the Butterfly on Waterfront during the movement period. Below is a summary on operational performance of both hotels during the year:

Average Daily

	Occupancy	Room Rate	RevPAR*
Paris Marriott Hotel,
France	90.1%	€471	€425
Butterfly on Waterfront,
Hong Kong	97.5%	HK$936	HK$912

• Revenue per available room

During the year, the Remaining Group recorded revenue of approximately HK$88.7 million from the hotel operation segment, as compared to revenue of approximately HK$1.3 million for the preceding year. The increase in revenue for the year was mainly attributable to an entire year of revenue recognised by the Butterfly on Waterfront. Besides, the Remaining Group began to recognise revenue from the Paris Marriott Hotel from the fourth quarter of the year. This segment recorded a loss of approximately HK$145.1 million, as compared to the loss of approximately HK$7.0 million for the proceeding year. The significant increase in segment loss was mainly attributable to the one-off transaction costs for the acquisition of the Paris Marriott Hotel of approximately HK$162.9 million. The transaction costs included taxation, professional fee and other direct expense relating to the aforesaid acquisition.

Heat energy supply

The Remaining Group’s heat energy supply subsidiaries in Tianjin, PRC operated heat energy supply projects located in the Meijiang district, Jinxia Xindu district and Xiqing Nanhe district (the “ Three Districts ”). During the year, the Remaining Group recorded revenue of HK$318.3 million from the heat energy supply segment as compared to HK$323.6 million for the preceding year. The decrease in revenue was mainly attributable to decrease in heat connection fee from new development projects launched in the Three Districts. Furthermore, the Remaining Group’s heat energy supply facilities had yet to be utilized at efficient levels to achieve economies of scale. During the year, the Remaining Group recorded segmental loss of approximately HK$2.0 million as compared to the profit of approximately HK$30.4 million for the preceding year.

– III-9 –

APPENDIX III

FINANCIAL INFORMATION OF THE GROUP

Money lending business

After the grant of money lending licence, money lending market landscape in Hong Kong had changed quickly, the Remaining Group was attentive to the market climate change and was patient to wait for optimal timing for commencement of the business. As at the date of publication of the 2014 annual report, the Remaining Group had not commenced money lending business.

Liquidity and Financial Resources

As at 31 December 2014, total assets and net assets of the Remaining Group were approximately HK$5,626.0 million and HK$742.9 million respectively. The cash and bank balance of the Remaining Group as at 31 December 2014 was approximately HK$323.4 million, denominated in Hong Kong dollars, Euro, United States dollars and Renminbi. The total current assets of the Remaining Group as at 31 December 2014 were approximately HK$622.4 million. As at 31 December 2014, the net current liabilities of the Remaining Group were approximately HK$62.3 million.

The Remaining Group adopted conservative treasury approach and had tight controls over its cash management. As at 31 December 2014, the Remaining Group had outstanding bank and other borrowings amounted to approximately HK$3,763.9[2] million, of which, amounting to approximately HK$130.4 million were due within one year. As at 31 December 2014, the Remaining Group’s gearing ratio (total borrowings/total assets) was at 66.9%, representing a significant increase as compared with the preceding year. The increase in gearing ratio for the year was mainly attributable to loans from a related company and bank loans incurred to finance the acquisition of the Paris Marriott Hotel.

Acquisitions and Disposals

During the year, the Remaining Group acquired the property and operations of Paris Marriott Hotel from a third party. Details of the acquisition of Paris Marriott Hotel are disclosed in note 39 to the 2014 annual report.

• 2 (i) Approximately HK$1,854.3 million (equivalent to approximately US$239,265,600) at the interest rate of 4% per annum;

• (ii) Approximately HK$1,630.2 million (equivalent to approximately €175,000,000) at the interest rates of 3 months EURIBOR plus 2.2% per annum;

• (iii) Approximately HK$161.0 million at the interest rate of 1 month HIBOR plus 2.36% per annum; and

• (iv) Approximately HK$118.4 million (equivalent to approximately RMB93.4 million) at the interest rate of 8% per annum.

– III-10 –

APPENDIX III

FINANCIAL INFORMATION OF THE GROUP

Foreign Exchange Exposure

The Remaining Group had operations in the PRC, France, Luxembourg and Hong Kong where transactions and cash flows were denominated in the local currencies, including Renminbi, Euro and Hong Kong dollars. As a result, the Remaining Group was exposed to foreign currency exposures with respect to Euro which mainly arose from conducting daily operations and financing activities by local offices where local currency was different from the Remaining Group. For the year ended 31 December 2014, the Remaining Group had not entered into any forward contracts to hedge the foreign exchange exposure. The Remaining Group managed its foreign exchange risks by performing regular review and monitoring of the foreign exchange exposure.

Contingent Liabilities

As at 31 December 2014, the Remaining Group provided a guarantee, with no charge, for a bank in regard of a loan amounting to HK$101,411,000 granted to Tianjin Jinre Logistics Company Limited, in which the Remaining Group held a 16% equity interest. As at 31 December 2014, the Remaining Group did not have any contingent liability.

Pledge on the Remaining Group’s Assets

As at 31 December 2014, time deposits amounting to HK$3.2 million were pledged to secure certain bills payables. Besides, certain of the Remaining Group’s buildings with a net carrying amount of approximately HK$3,727.5 million were pledged to secure general banking facilities granted to the Remaining Group.

Employees and Remuneration

The Remaining Group had 173 employees as at 31 December 2014, the total employee remuneration during the year was approximately HK$30.8 million. Remuneration policies were reviewed regularly to ensure that compensation and benefit packages were in line with the market level. In addition to basic remuneration, the Remaining Group also provided other employee benefits including bonuses, mandatory provident fund scheme and medical scheme.

– III-11 –

APPENDIX III

FINANCIAL INFORMATION OF THE GROUP

(c) For the year ended 31 December 2013

Business review

During the year, revenue of the Remaining Group amounted to approximately HK$324.9 million, representing an increase of 32.4% from approximately HK$245.3 million for the preceding year. The Remaining Group recorded a loss for the year of approximately HK$42.9 million as compared to the loss of HK$106.7 for the preceding year. The decrease in loss for the year was mainly due to the turnaround from loss to profit by the heat supply segment.

Segmental review of the Remaining Group’s operations during the year is as follows:

Heat energy supply

The Remaining Group’s heat energy supply subsidiaries in Tianjin, PRC operated heat energy supply projects located in the Three Districts. During the year, the Remaining Group recorded revenue of HK$323.6 million from the heat energy supply segment as compared to HK$245.3 million for the preceding year. The increase in revenue was mainly attributable to increase in heat connection fee and heat supply fee resulting from increased heat energy usage from new development projects launched in the Three Districts. Despite the increased revenue, the Remaining Group’s heat energy supply facilities had yet to be utilized at efficient levels to achieve economies of scale. During the year, the Remaining Group recorded segmental profit of approximately HK$30.4 million as compared to the loss of approximately HK$47.1 million for the preceding year.

Property investment

The Remaining Group had disposed of its entire interests in Goalreach Investments Limited (the “ Goalreach Disposal ”). Goalreach Investments Limited held the entire share capital of Burlingame (Chinese) Investment Limited (“ BCIL ”) which was a foreign shareholder in 上海地下商城有限公司 (Shanghai Underground Centre Co., Ltd.) (“ SUCCL ”). The Goalreach Disposal was completed in June 2013. The Remaining Group recorded a net profit for the year from the Goalreach Disposal of approximately HK$14.4 million.

The Goalreach Disposal enabled the Remaining Group to realise investment in SUCCL and enhanced the working capital and liquidity. Thus, the Goalreach Disposal was in the interest of the Company and its shareholders as a whole. Further details of the Goalreach Disposal are disclosed in note 13 to the 2013 annual report.

– III-12 –

APPENDIX III

FINANCIAL INFORMATION OF THE GROUP

Hotel operation

The Remaining Group had been constantly seeking to expand its business portfolios with a view to expanding revenue source. With the strong performance of Hong Kong’s tourism industry, the Remaining Group considered that acquisition of a hotel in Hong Kong should broaden income stream of the Remaining Group. On 20 December 2013, the Remaining Group completed the acquisition of the entire issued share capital of A6 Limited, Hotel de EDGE Management Limited and Hotel de EDGE Limited (the “ Hotel Group ”). The Hotel Group owned and operated the Hotel de EDGE, a 90-room boutique hotel situated at Sheung Wan, Hong Kong. With the opening of new stations from the Mass Transit Railway island line western extension in 2014, the Remaining Group considered that Hotel de EDGE should benefit from continuous development in the Sheung Wan district. Further details of the acquisition are disclosed in note 39 to the 2013 annual report. During the year, the Remaining Group recorded revenue of approximately HK$1.3 million from the hotel operation segment.

Money lending business

Kai Yuan Capital Limited, an indirect wholly-owned subsidiary of the Company, was granted a money lenders licence to carry out money lending business in Hong Kong with effect from 7 November 2013. The Remaining Group considered that diversification into money lending business would provide another stream of income to maximise returns to the Shareholders. Subsequent to the application of money lenders licence, money lending market landscape had changed quickly, the Remaining Group will remain vigilant when conducting money lending business. As at the date of publication of the 2013 annual report, the Remaining Group had not commenced money lending business.

Liquidity and Financial Resources

As at 31 December 2013, total assets and net assets of the Remaining Group were approximately HK$1,883.5 million and HK$1,047.2 million respectively. The cash and bank balance of the Remaining Group as at 31 December 2013 was approximately HK$151.7 million, denominated in Hong Kong dollars, Euro, United States dollars and Renmibi. The total current assets of the Remaining Group as at 31 December 2013 were approximately HK$398.4 million. As at 31 December 2013, the net current liabilities of the Remaining Group were approximately HK$196.6 million.

The Remaining Group adopted conservative treasury approach and had tight controls over tis cash management. As at 31 December 2013, the Remaining Group had outstanding bank and other borrowings amounted to approximately HK$126.8 million (equivalent to RMB99.7 million, effective interest rate ranging from 6.6% to 8% per annum), all of which were due within one year. As at 31 December 2013, the Remaining Group’s gearing ratio (total borrowings/total assets) continued to remain at the low level of 6.7%.

– III-13 –

APPENDIX III

FINANCIAL INFORMATION OF THE GROUP

With reference to the announcement made by the Company on 18 December 2013, Ga Leung Investment Company Limited (the “ Subscriber ”), the sole holder of the HK$280.0 million convertible bonds (the “ Convertible Bonds ”), served a conversion notice to the Company to fully convert the Convertible Bonds into Shares at the conversion price of HK$0.15 per Share. On 20 December 2013, the Company allotted and issued 1,866,666,666 Shares, representing approximately 14.61% of the enlarged issued share capital of the Company, to the Subscriber. Thereafter, the Subscriber became the largest Shareholder.

Acquisitions and disposals

During the year, the Company had disposed of its entire interest in Goalreach Investments Limited (“ Goalreach ”) to a third party at a consideration of HK$130.0 million. Goalreach held the entire issued share capital of BCIL, which was a foreign shareholder in SUCCL. Details on the disposal of Goalreach are disclosed in note 13 to the 2013 annual report.

The Remaining Group incurred a gain of approximately HK$14.4 million from disposal Goalreach, together with its subsidiary company and joint venture investment (the “ Goalreach Group ”). Such amount was arrived by (i) adding the consolidated net asset value of the Goalreach Group of approximately HK$132.6 million, (ii) the expenses in relation to disposal of the Goalreach Group of approximately HK$1.3 million, then (iii) deducting therefrom the aggregate sales proceeds of HK$130.0 million, plus (iv) reclassification of translation reserve from other comprehensive income to profit or loss of approximately HK$18.3 million.

Foreign exchange exposure

The operations of the Remaining Group were located in the PRC. Loans and borrowings taken in relation to such operations were mostly denominated in the local currency to match with their relevant local expenditures, thus mitigating risks arising from foreign exchange fluctuations. However, exchange risks might arise as a result of fluctuations in the value of Renminbi when translations and exchanges were made between Renminbi and Hong Kong dollar, as the Remaining Group’s head office operating expenses were incurred in Hong Kong dollars. As Renminbi was not freely convertible into other foreign currencies and cost effective hedging instruments were not widely available, no further hedging was provided and no financial instrument for hedging was employed by the Remaining Group during the year.

– III-14 –

APPENDIX III

FINANCIAL INFORMATION OF THE GROUP

Contingent liabilities

As at 31 December 2013, the Remaining Group provided a guarantee, with no charge, for a bank in regard of a loan amounting to HK$50,877,000 granted to Tianjin Jinre Logistics Company Limited, in which the Remaining Group held a 16% equity interest. As at 31 December 2013, the Remaining Group did not have any material contingent liability.

Pledge on the Remaining Group’s assets

As at 31 December 2013, time deposits amounting to HK$10.4 million were pledged to secure certain bills payables.

Employees and remuneration

The Remaining Group had 209 employees as at 31 December 2013, the total employee remuneration during the year was approximately HK$36.7 million. Remuneration policies were reviewed regularly to ensure that compensation and benefit packages are in line with the market level. In addition to basic remuneration, the Remaining Group also provided other employee benefits including bonuses, mandatory provident fund scheme and medical scheme.

(d) For the year ended 31 December 2012

Business review

For the year ended 31 December 2012, revenue of the Remaining Group amounted to approximately HK$245.3 million and the Remaining Group recorded a loss for the year of HK$106.7 million. The loss for the year was principally attributable to (i) the impairment recognised as the Remaining Group reclassified the carrying amount of interests in a jointly-controlled entity located in Shanghai as held for sale to fair value; and (2) the operating loss of the Remaining Group’s heat energy supply segment as a result of increase in production as well as operating costs.

Segmental review of the Remaining Group’s operations during the year is as follows:

Heat energy supply

The Remaining Group’s heat energy supply segment operated heat energy supply projects in the Three Districts at the southwest fringe of Tianjin city. The Remaining Group recorded revenue of HK$245.3 million from the heat energy supply segment for the year, representing an increase of 34.8% as compared with the HK$182.0 million for the preceding year. The increase in revenue was mainly attributable to increase in heat connection fee as new property projects were launched in districts managed by the heat energy

– III-15 –

APPENDIX III

FINANCIAL INFORMATION OF THE GROUP

supply subsidiaries. Despite the increase in revenue, the heat energy supply segment had been challenged by increase in operating costs and costs of constituent raw materials such as coal. Besides, the heat energy supply facilities had yet to be utilized to reach economies of scale. As a result, the Remaining Group recorded a segmental loss of HK$47.1 million from the heat energy supply segment for the year, representing an increase of approximately 119.1% as compared with a segmental loss of HK$21.5 million for the preceding year.

Property investment

SUCCL operated The Shanghai Underground Shopping Mall in Shanghai, the PRC. Despite severe competition on rental amongst other shopping centres in nearby area, SUCCL managed to achieve a near full capacity in 2012. During the year, revenue recorded by SUCCL was approximately HK$59.1 million, representing an increase of approximately 0.17% compared to approximately HK$59.0 million for the preceding year. Net profit share by the Remaining Group for the year was approximately HK$0.094 million, representing a decrease of approximately 94.1% compared to approximately HK$1.6 million for the preceding year.

With reference to the announcement made by the Company on 25 January 2013, the Remaining Group had the intention to dispose of its entire interests in SUCCL. As a result, the Remaining Group’s investment in SUCCL had been classified as a disposal group held for sale, and was separately presented in the consolidated statement of financial position. The Remaining Group recorded an impairment of HK$44.4 million against the disposal group held for sale for the year.

Liquidity and Financial Resources

As at 31 December 2012, total assets and net assets of the Remaining Group were approximately HK$1,715.6 million and approximately HK$815.4 million respectively. The cash and bank balance of the Remaining Group as at 31 December 2012 was approximately HK$81.6 million, denominated in Hong Kong dollars and Renminbi. The total current assets of the Remaining Group as at 31 December 2012 were approximately HK$838.8 million. As at 31 December 2012, the net current assets of the Remaining Group were approximately HK$40.1 million.

The Remaining Group adopted conservative treasury approach and had tight controls over its cash management. As at 31 December 2012, the Remaining Group had outstanding bank and other borrowings amounted to approximately HK$147.5 million (equivalent to RMB119.6 million, effective interest rate ranging from 6.9% to 8% per annum), all of which were due within one year. As at 31 December 2012, the Remaining Group’s gearing ratio (total borrowings/total assets) continued to remain at the low level of 8.6%.

– III-16 –

APPENDIX III

FINANCIAL INFORMATION OF THE GROUP

Acquisitions and disposals

During the year, the Remaining Group had no material acquisition or disposal of subsidiaries or associated companies.

Foreign exchange exposure

The operations of the Remaining Group were located in the PRC. Loans and borrowings taken in relation to such operations were mostly denominated in the local currency to match with their relevant local expenditures, thus mitigating risks arising from foreign exchange fluctuations. However, exchange risks might arise as a result of fluctuations in the value of Renminbi when translations and exchanges were made between Renminbi and Hong Kong dollar, as the Remaining Group’s head office operating expenses were incurred in Hong Kong dollars. As Renminbi was not freely convertible into other foreign currencies and cost effective hedging instruments were not widely available, no further hedging was provided and no financial instrument for hedging was employed by the Remaining Group during the year.

Contingent liabilities

As at 31 December 2012, the Remaining Group provided a guarantee, with no charge, for a bank in regard of a loan amounting to HK$49,333,000 granted to Tianjin Jinre Logistics Company Limited, in which the Remaining Group held a 16% equity interest. As at 31 December 2012, the Remaining Group did not have any material contingent liability.

Pledge on the Remaining Group’s assets

As at 31 December 2012, no assets were pledged by the Remaining Group.

Employees and Remuneration

The Remaining Group had 187 employees as at 31 December 2012, the total employee remuneration during the year was approximately HK$36.6 million. Remuneration policies were reviewed regularly to ensure that compensation and benefit packages were in line with the market level. In addition to basic remuneration, the Remaining Group also provided other employee benefits including bonuses, mandatory provident fund scheme and medical scheme.

– III-17 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

The following is the text of a report from Ernest & Young, the independent reporting accountants, in respect of the unaudited pro forma financial information of the Remaining Group as set out in this Appendix and prepared for the sole purpose of inclusion in this circular.

22/F, CITIC Tower 1 Tim Mei Avenue Central, Hong Kong

To the Directors of Kai Yuan Holdings Limited

(Incorporated in Bermuda with limited liability)

We have completed our assurance engagement to report on the compilation of pro forma financial information of Kai Yuan Holdings 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 30 June 2015 and the pro forma consolidated statement of profit or loss and other comprehensive income and the pro forma consolidated statement of cash flows for the year ended 31 December 2014 and related notes as set out on pages IV-5 to IV-13 of the circular dated 25 February 2016 (the “ Circular ”) issued by the Company (the “ Pro Forma Financial Information ”). The applicable criteria on the basis of which the Directors have compiled the unaudited Pro Forma Financial Information are described in Section A of Appendix IV to the Circular.

The Pro Forma Financial Information has been compiled by the Directors to illustrate the impact of a very substantial disposal (hereinafter referred to as the “ Disposals ”) by the Group, including proposed disposal of the entire issued share capital of Fame Risen Development Limited (the “ Target ”) and the shareholder’s loans provided by Kai Yuan Holdings Limited to the Target (the “ Shareholder’s Loans ”), on the Group’s financial position as at 30 June 2015 and the Group’s financial performance and cash flows for the year ended 31 December 2014 as if the Disposals had taken place at 30 June 2015 and 1 January 2014, respectively. As part of this process, information about the Group’s financial position has been extracted by the Directors from the Group’s consolidated financial statements for the period ended 30 June 2015, and financial performance and cash flows have been extracted by the Directors from the Group’s consolidated financial statements for the year ended 31 December 2014, on which an interim report and an audit report have been published. Information about the Target’s financial position has been extracted by the Directors from the Target’s financial information for the period ended 31 October 2015, and financial performance and cash flows have been extracted by the Directors from the Target’s financial information for the year ended 31 December 2014, on which a financial information has been published in Appendix I to the Circular.

– IV-1 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING 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 ”) 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 behavior.

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 ACCOUNTANT’S 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 accountant comply with ethical requirements and plan and perform procedures to obtain reasonable assurance about whether the Directors have compiled the Pro Forma Financial Information, in accordance with paragraph 4.29 of the Listing Rules and with reference to AG7 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.

– IV-2 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

The purpose of Pro Forma Financial Information included in the Circular is solely to illustrate the impact of the Disposals on unadjusted financial information of the Group as if the Disposals 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 Disposals 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 transaction, 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 accountant’s judgment, having regard to the reporting accountant’s understanding of the nature of the Group, the Disposals 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.

OPINION

In our opinion:

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

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

• (c) the adjustments are appropriate for the purpose of the Pro Forma Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

Yours faithfully, Ernest & Young Certified Public Accountants Hong Kong

25 February 2016

– IV-3 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

A. BASIS OF PREPARATION OF THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

The following is a summary of illustrative unaudited pro forma consolidated statement of financial position, unaudited pro forma consolidated statement of profit or loss and other comprehensive income, and unaudited pro forma consolidated statement of cash flows (collectively referred to as the “ Pro Forma Financial Information ”), in connection with the proposed disposal of Fame Risen Development Limited (“ Target ”) (the “ Disposal ”). The unaudited Pro Forma Financial Information presented below is prepared to illustrate (i) the financial position of the Group immediately after completion of the Disposal (collectively referred to as the “ Remaining Group ”) as at 30 June 2015 as if the Disposal had been completed on 30 June 2015; and (ii) the results and cash flows of the Remaining Group for the year ended 31 December 2014 as if the Disposal had been completed on 1 January 2014. The unaudited Pro Forma Financial Information is prepared based on the published interim report of the Group for the six months ended 30 June 2015 and annual report of the Group for the year ended 31 December 2014, after giving effect to the pro forma adjustments described in the notes.

The unaudited Pro Forma Financial Information is prepared in accordance with Paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and has been prepared by the Directors of the Company for illustrative purposes only.

Narrative descriptions of the unaudited pro forma adjustments that are directly attributable to the Disposal and factually supportable are summarised in the accompanying notes to the unaudited Pro Forma Financial Information.

The unaudited Pro Forma Financial Information has been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the financial results, cash flows and financial position of the Remaining Group had the Disposal been completed as of the specified dates or any other dates.

The unaudited Pro Forma Financial Information should be read in conjunction with the historical financial information of the Group as set out in the published interim report of the Company for the six months ended 30 June 2015 and annual report of the Company for the year ended 31 December 2014 and other financial information included elsewhere in this Circular.

– IV-4 –

APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

B. PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Pro Forma Consolidated Statement of Financial Position of the Remaining Group As at 30 June 2015

NON-CURRENT ASSETS Property, plant and equipment Goodwill Other intangible assets Investment in associate Deferred tax assets TOTAL NON-CURRENT ASSETS CURRENT ASSETS Inventories Trade receivables Other receivables and prepayments Pledged deposits Cash and cash equivalents Assets of a disposal group classified as held for sale TOTAL CURRENT ASSETS TOTAL ASSETS	Consolidated statement of financial position of the Group as at 30 June 2015 HK$’000 Note 1 3,520,190 304,100 344 2,332,633 37,028 6,194,295 1,232 30,554 9,839 20,907 257,143 319,675 1,045,540 1,365,215 7,559,510	Pro forma adjustments HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Note 2(a) Note 3 Note 4 Note 5 Note 6 (2,108,963) (162,768) (60,902) (2,108,963) (1,715) (734) 25,765 256,709 (1,715) (1,715) (2,110,678)	The Remaining Group HK$’000 3,520,190 304,100 344 – 37,028
			3,861,662
			1,232 30,554 9,839 20,907 537,168
			599,700 1,045,540
			1,645,240
			5,506,902

– IV-5 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

CURRENT LIABILITIES Trade and bills payables Other payables and accruals Receipt in advance Derivative financial instruments Interest-bearing bank borrowings Amounts due to related companies Amounts due to the Remaining Group Tax payable Liabilities of a disposal group classified as held for sale TOTAL CURRENT LIABILITIES NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Interest-bearing bank borrowings Loans from a related company Deferred tax liabilities Derivative financial instruments TOTAL NON-CURRENT LIABILITIES NET ASSETS EQUITY Equity attributable to owners of the Target Share capital Reserves Non-controlling interests TOTAL EQUITY	Consolidated statement of financial position of the Group as at 30 June 2015 HK$’000 Note 1 14,619 46,293 38 8,444 12,000 57,278 – 56 138,728 663,877 802,605 562,610 6,756,905 1,646,738 1,854,308 393,286 5,836 3,900,168 2,856,737 1,277,888 1,278,088 2,555,976 300,761 2,856,737	Pro forma adjustments HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Note 2(a) Note 3 Note 4 Note 5 Note 6 (57,278) (25,765) 25,765 (25,765) (25,765) 24,050 (2,084,913) (1,854,308) (63,654) 44,375 626 (63,654) (2,021,259) (122,369)	The Remaining Group HK$’000 14,619 46,293 38 8,444 12,000 – – 56
			81,450 663,877
			745,327
			899,913
			4,761,575
			1,646,738 – 374,633 5,836
			2,027,207
			2,734,368
			1,277,888 1,155,719
			2,433,607 300,761
			2,734,368

– IV-6 –

APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Pro Forma Consolidated Profit or Loss and Other Comprehensive Income of the Remaining Group

For the year ended 31 December 2014

Revenue Cost of sales Gross profit Other income and gains Other expenses Administrative expenses Finance costs Estimated gain on the Disposals Share of profits of associates PROFIT BEFORE TAX Income tax credit/(expense) PROFIT FOR THE YEAR	Audited consolidated statement of profit or loss and statement of comprehensive income of the Group for the year ended 31 December 2014 HK$’000 Note 1 407,020 (342,885) 64,135 9,261 (68,569) (256,185) (34,753) – 373,156 87,045 18,536 105,581	Proforma adjustments HK$’000 HK$’000 HK$’000 HK$’000 Note 2(b) Note 3 Note 6 Note 7 (467) 3,970 19,985 355,276 (411,012) 37,858 (407,509) 20,551 (1,893) (182,738) (386,958)	The Remaining Group HK$’000 407,020 (342,885)
			64,135 8,794 (64,599) (256,185) (14,768) 355,278 2
			92,655 (145,544) (52,889)

– IV-7 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

OTHER COMPREHENSIVE INCOME Cash flow hedges: Effective portion of changes in fair value of hedging instruments arising during the year Reclassification adjustments for loss included in the consolidated statement of profit or loss Income tax effect Exchange differences on translation of foreign operations Reclassification of translation reserve from other comprehensive income to consolidated statement of profit or loss upon the Disposals OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF TAX TOTAL COMPREHENSIVE LOSS FOR THE YEAR Profit attributable to: Owners of the Target Non-controlling interests Total comprehensive profit attributable to: Owners of the Target Non-controlling interests	Audited consolidated statement of profit or loss and statement of comprehensive income of the Group for the year ended 31 December 2014 HK$’000 Note 1 (25,479) 1,239 8,080 (16,160) (47,883) – (64,043) 41,538 106,417 (836) 105,581 43,418 (1,880) 41,538	Proforma adjustments HK$’000 HK$’000 HK$’000 HK$’000 Note 2(b) Note 3 Note 6 Note 7 3,991 (281,857) 3,991 (382,967) (386,958) (386,958) (382,967) (382,967)	The Remaining Group HK$’000 (25,479) 1,239 8,080
			(16,160) (43,892) (281,857)
			(341,909)
			(394,798)
			(52,053) (836)
			(52,889)
			(392,918) (1,880)
			(394,798)

– IV-8 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Pro Forma Consolidated Statement of Cash Flow of the Remaining Group

For the year ended 31 December 2014

CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax Adjustments for: Finance costs Foreign exchange loss Share of profits of associates Loss on disposal of items of property, plant and equipment Disposal gain on the disposal of the Target Impairment of other receivables Depreciation Recognition of prepaid land lease payments Recognition of other long-term assets Amortisation of intangible assets Increase in inventories Decrease in trade receivables Increase in other receivables and prepayments Decrease in trade and bills payables Decrease in pledged bank deposits Increase in other payables and accruals Decrease in amount due from a related company Increase in receipt in advance Increase in due to related party Cash used in operations Hong Kong profit tax paid Overseas profit tax paid Net cash flows used in operating activities	Audited consolidated statement of cash flows of the Group for the year ended 31 December 2014 HK$’000 Note 1 87,045 34,753 51,213 (373,156) 30 – 3,133 66,622 3,355 809 7,391 (118,805) (2,329) 3,544 (4,142) (31,589) 7,197 15,801 15,465 8,730 31,088 (75,040) (241) (31) (75,312)	Proforma adjustments HK$’000 HK$’000 HK$’000 Note 2(b) Note 3 Note 6&7,8 (407,509) 37,858 375,261 (19,985) 411,012 (37,858) (355,276) 3,503 1,850 5,353 5,353	The Remaining Group HK$’000 92,655 14,768 51,213 (2) 30 (355,276) 3,133 66,622 3,355 809 7,391
			(115,302) (2,329) 3,544 (4,142) (31,589) 7,197 17,651 15,465 8,730 31,088
			(69,687) (241) (31)
			(69,959)

– IV-9 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

CASH FLOWS FROM INVESTING ACTIVITIES Increase in other payables and accruals Purchases of items of property, plant and equipment Acquisition of subsidiaries Disposal of items of property, plant and equipment Net proceeds from Disposal, net of cash of the Target Net cash flows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in amounts due to related companies Increase in amount due from related companies Decrease in other payables and accruals Increase in amount due from related companies New bank loans Loans from a related company Repayment of bank loans Interest paid Net cash flows generated from financing activities NET INCREASE 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	Audited consolidated statement of cash flows of the Group for the year ended 31 December 2014 HK$’000 Note 1 6,871 (53,071) (3,299,093) 117 – (3,345,176) 1,120 (4,607) (10,092) – 1,861,475 1,854,308 (15,313) (4,972) 3,681,919 261,431 196,774 (57,308) 400,897	Proforma adjustments HK$’000 HK$’000 HK$’000 Note 2(b) Note 3 Note 6&7,8 294,635 (37,707) (37,707) (32,354) 17 (32,337)	The Remaining Group HK$’000 6,871 (53,071) (3,299,093) 117 294,635
			(3,050,541)
			1,120 (4,607) (10,092) (37,707) 1,861,475 1,854,308 (15,313) (4,972)
			3,644,212
			523,712 196,774 (57,291)
			663,195

– IV-10 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

C. NOTES TO PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

1. The amounts of the consolidated statement of financial position of the Group are extracted from the audited consolidated statement of financial position as at 30 June 2015 as set out in the published interim report of the company, and the amounts of the consolidated statement of profit or loss, the consolidated statement of comprehensive income and the consolidated statement of cash flows of the Group are extracted from the audited consolidated statement of profit or loss, the audited consolidated statement of comprehensive income and the audited consolidated statement of cash flows of the Group for the year ended 31 December 2014 as set out in the published annual report of the Company.

2. (a) The adjustments represent the exclusion of assets and liabilities of the Target as if the Disposal had taken place on 30 June 2015. The unaudited financial position of the Target as at 31 October 2015 was extracted from the Appendix I to the Circular dated 25 February 2016.

3. (b) The adjustments represent the exclusion of the results and cash flows of the Target for the year ended 31 December 2014 as if the Disposal had been completed on 1 January 2014. The unaudited financial information of the Target for the year ended 31 December 2014 was extracted from the Appendix I to the Circular dated 25 February 2016.

4. These adjustments represent the exclusion of the impact of fair value adjustments related to the Target recorded at consolidated level, which was resulted from the acquisition of the Target by the Group.

5. The adjustments represent the exclusion of net movement in assets and liabilities of the Target from 30 June 2015 to 31 October 2015. Statement of the financial position of the Target was as at 31 October 2015 while the consolidated statement of financial position of the Group was as at 30 June 2015.

6. Pursuant to the Sale and Purchase Agreement entered on 4 January 2016, the Group had agreed to dispose the Shareholder’s Loan. As at 31 October 2015, the balance of the Shareholder’s Loan was HK$25,765,000.

7. The adjustment reflects estimated gain on the sale of the Target with the consideration of HK$2,357,383,000, as if the Disposals were completed on 30 June 2015 is as follows:

Consideration (i): Less: Estimated direct expenses in relation to the Disposal Less: Net assets of the Target on the Company’s consolidation level as at 30 June 2015 (ii) Estimated loss in disposal before release the translation reserve Reclassification of translation reserve from other comprehensive income to statement of profit or loss upon the Disposal (iii) Other reserve released to consolidated statement of profit or loss upon the Disposal (iv) Estimated gain on the Disposal Less: PRC taxation regarding the disposal Estimated gain on the Disposal, net of tax	HK$’000 2,357,383 (6,350)
	2,351,033 (2,290,664)
	60,369 281,857 13,050
	355,276 (182,738)
	172,538

Since the Consideration was determined based on arm’s length negotiations between the Company and the Purchaser with reference to the carrying value of investments in the Associated Companies and the Shareholder’s Loan as at the dates of respective period end, the Directors are of the opinion that the pro forma gain on the sale of the Target as if the Disposal had been completed on 1 January 2014 should not be significantly different from the pro forma gain as if Disposal had been completed on 30 June 2015.

– IV-11 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

• (i) Pursuant to the Sale and Purchase Agreement dated 4 January 2016, the Group had agreed to dispose the Sale Shares at the consideration of HK$2,357,383,000:

• HK$1,854,308,000 shall be set-off against the aggregate outstanding principal amount of US$239,265,600 (equivalent to HK$1,854,308,000) owing from the Company to Most Honour Limited;

• Remaining HK$503,075,000 shall be payable by the Purchaser in cash. After netting off estimated direct expenses of HK$6,350,000 and PRC taxation of HK$182,738,000 regarding the disposal and the repayment of financial cost related to the Outstanding Loan of HK$57,278,000, the Company will obtain proceeds of HK$313,987,000 for the Disposal.

• (ii) The net assets of the Target on the Company’s consolidated level as at 30 June 2015 are reconciled as follows. This amount has not been adjusted for the cash dividend to be declared prior to the completion date of the Disposal.

Net assets of the Target as at 31 October 2015 Impact of fair value adjustments (Note 3): – Investment in associates – Deferred tax liabilities Net assets of the Target on the Company’s consolidation level as at 31 October 2015 including fair value adjustments Net movement in assets and liabilities of the Target from 30 June 2015 to 31 October 2015 (Note 6) – Cash and cash equivalents – Investment in associates – Deferred tax liabilities Net assets of the Target on the Company’s consolidation level as at 30 June 2015	HK$’000 2,021,259
	162,768 44,375
	207,143
	2,228,402
	734 60,902 626
	62,262
	2,290,664

• (iii) The functional currency of the Target is Renminbi (“ RMB ”), while the financial information of the Target is presented in Hong Kong dollars. As at the end of the reporting period, the assets and liabilities of the Target are translated into Hong Kong dollars at the exchange rates prevailing at the end of the reporting period and their statement of profit or loss are translated into Hong Kong dollars at the weighted average exchange rates for the year. The resulting exchange differences are recognised in other comprehensive income and accumulated in the translation reserve. In accordance with Hong Kong Accounting Standard 21 “The Effects of Changes in Foreign Exchange Rates”, upon the disposal of the Group’s entire interest in a foreign operation, all of the exchange differences accumulated in other comprehensive income in respect of that foreign operation attributable to the owners of the Target is reclassified to profit or loss.

– IV-12 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Translation reserve of the Target as at 31 October 2015 (Per Appendix I Financial Information on the Target, unaudited statements of changes in equity) Impact to the translation reserve arising from fair value adjustments as at 31 October 2015 Impact to the translation reserve related to the net movement in assets and liabilities of the Target from 30 June 2015 to 31 October 2015 Total	HK$’000 96,078 86,079 99,700
	281,857

• (iv) Other reserve represents the share of other reserve of Target’s associates. Upon the Disposal, all of the other reserve attributable to the owners of the Target is reclassified to profit or loss.

The financial effects and the actual amount of gain on the Disposal are to be determined based on adjustments to the total consideration, direct expenses in relation to the Disposal, the carrying amount of the net asset value of the Target and the amount due to the Group as at the Completion Date and are therefore subject to change upon completion of the Disposal.

1. The adjustment represents the exclusion of the financial cost of the Company of HK$19,985,000 for the year ended 31 December 2014 arisen from the Outstanding Loan of the Company (note 6(i)) as if the Disposal had been completed on 1 January 2014.

2. The adjustment of approximately HK$294,635,000 represents the net cash inflow as if the Disposal had been completed by 1 January 2014 as below:

Total consideration: Consideration for Shareholder’s Loan Consideration for Sale Shares (Note 6) Less: Estimated direct expenses in relation to the Disposal Estimated PRC corporate income tax arising from the Disposal Set-off against the Outstanding Loan of the Group due to purchaser Cash and cash equivalents of the Target as at 1 January 2014	HK$’000 25,765 2,357,383
	2,383,148
	(6,350) (182,738) (1,854,308) (45,117)
	(2,088,513)
	294,635

– IV-13 –

APPENDIX V

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, the interests or short positions of the Directors or chief executive of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which any such Director or chief executive was taken or deemed to have under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange were as follows:

	Name of
	company in
	which interests
	or short			Approximate
	positions	Nature of	Number of	percentage of
Name	were held	interests	shares	shareholding
Hu Yishi	The Company	Beneficial owner	1,300,000,000	10.17%
			Shares (L)

(L) denotes the long position held in the Shares

Save as disclosed above, none of the Directors or chief executive of the Company had, as at the Latest Practicable Date, any interests or short positions in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which any such Director or chief executive was taken or deemed to have under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, to be notified to the Company and the Stock Exchange.

– V-1 –

APPENDIX V

GENERAL INFORMATION

3. SERVICE CONTRACT

As at the Latest Practicable Date, there was no service contract or any proposed service contract between any of the Directors or proposed Directors and the Company or any member of the Group (including any company which will become a subsidiary of the Company by reason of an acquisition which has been agreed or proposed since 31 December 2014, being the date to which the latest audited consolidated accounts of the Company have been made up), excluding contracts expiring or determinable by the Group (including any company which will become a subsidiary of the Company by reason of an acquisition which has been agreed or proposed since 31 December 2014, being the date to which the latest audited consolidated accounts of the Company have been made up) within a year without payment of any compensation (other than statutory compensation).

4. DIRECTORS’ INTERESTS IN COMPETING BUSINESS

To the best knowledge of the Directors, none of the Directors or their respective associates had any interests in any business which competed or might compete with the business of the Group as at the Latest Practicable Date.

5. MATERIAL INTERESTS

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in the assets which had been, since 31 December 2014, the date to which the latest published audited consolidated accounts of the Company were made up, acquired or disposed of by or leased to any member of the Group (including any company which will become a subsidiary of the Company by reason of an acquisition which has been agreed or proposed since 31 December 2014, being the date to which the latest audited consolidated accounts of the Company have been made up), or were proposed to be acquired or disposed of by or leased to any member of the Group (including any company which will become a subsidiary of the Company by reason of an acquisition which has been agreed or proposed since 31 December 2014, being the date to which the latest audited consolidated accounts of the Company have been made up).

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement which was significant in relation to the business of the Group (including any company which will become a subsidiary of the Company by reason of an acquisition which has been agreed or proposed since 31 December 2014, being the date to which the latest audited consolidated accounts of the Company have been made up).

– V-2 –

APPENDIX V

GENERAL INFORMATION

6. LITIGATION

As at the Latest Practicable Date, so far as the Directors were aware, neither the Company nor any member of the Group (including any company which will become a subsidiary of the Company by reason of an acquisition which has been agreed or proposed since 31 December 2014, being the date to which the latest audited consolidated accounts of the Company have been made up) was engaged in any litigation nor or were these claims of material importance pending or threatened against any member of the Group (including any company which will become a subsidiary of the Company by reason of an acquisition which has been agreed or proposed since 31 December 2014, being the date to which the latest audited consolidated accounts of the Company have been made up).

7. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business) were entered into by members of the Group (including any company which will become a subsidiary of the Company by reason of an acquisition which has been agreed or proposed since 31 December 2014, being the date to which the latest audited consolidated accounts of the Company have been made up) within two years immediately preceding the Latest Practicable Date:

• (a) the purchase option agreement entered into between Splendid Holdings S.à r.l, an indirect wholly-owned subsidiary of the Company, as purchaser and MCE PROPCO as vendor on 3 June 2014 in relation to the sale and purchase of the Paris Marriott Hotel Champs-Elysées property in Paris, France at the consideration of €226,000,000 (equivalent to approximately HK$2,386,560,000);

• (b) the acquisition agreement (“ Acquisition Agreement ”) entered into between Splendid Holdings S.à r.l (“ Splendid ”), an indirect wholly-owned subsidiary of the Company, as purchaser and Tamweelview European Holdings S.A. (“ Tamweelview ”) as vendor on 3 June 2014 in relation to the sale and purchase of entire issued share capital of MCE OpCo HoldCo SAS and MCE OpCo SNC at the consideration of €118,597,934 (equivalent to approximately HK$1,252,394,183);

• (c) the representation and warranties agreement dated 3 June 2014 entered into between Tamweelview and Splendid ancillary to the Acquisition Agreement;

• (d) the sale and purchase agreement entered into between Charter Best Investments Limited, a wholly-owned subsidiary of the Company, as vendor, Colour Blossom Limited as purchaser and Mr. Tsui Pan and Mr. Wang Feng as guarantors on 27 May 2015 in relation to the sale and purchase of entire issued share capital of Spread International Group Limited at the cash consideration of HK$131 million; and

• (e) the Sale and Purchase Agreement.

– V-3 –

APPENDIX V

GENERAL INFORMATION

8. EXPERT AND CONSENT

The following is the qualification of the expert who has given opinion or advice contained in this circular:

Name Qualification Ernst & Young Certified public accountants

The above expert has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and references to its name in the form and context in which it appears.

As at the Latest Practicable Date, the above expert 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, or any interests, directly or indirectly, in any assets which had been, since 31 December 2014, being the date to which the latest audited consolidated accounts of the Company have been made up, acquired, disposed of or leased to any member of the Group, or were proposed to be acquired, disposed of or leased to any member of the Group.

9. MISCELLANEOUS

• (a) The registered address of the Company is Canon’s Court, 22 Victoria Street, Hamilton, HM12, Bermuda. The head office and principal place of business of the Company is at 28th Floor, Chinachem Century Tower, 178 Gloucester Road, Wanchai, Hong Kong.

• (b) The Hong Kong branch share registrar and transfer office of the Company is Tricor Tengis Limited at Level 22, Hopewell Center, 183 Queen’s Road East, Hong Kong.

• (c) The secretary of the Company is Mr. Law Wing Chi, Stephen who is an associate member of The Hong Kong Institute of Certified Public Accountants.

• (d) The English text of this circular shall prevail over the Chinese text.

– V-4 –

APPENDIX V

GENERAL INFORMATION

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at 28th Floor, Chinachem Century Tower, 178 Gloucester Road, Wanchai, Hong Kong during 9 a.m. to 5 p.m. on any business day of the Company, from the date of this circular up to and including the date of the SGM:

• (a) the memorandum of association and bye-laws of the Company;

• (b) the material contracts referred to in the paragraph headed “Material contracts” in this appendix;

• (c) the annual reports of the Company for the two years ended 31 December 2014;

• (d) the letter of the unaudited pro forma financial information of the Remaining Group, the text of which is set out in Appendix IV to this circular;

• (e) the written consent referred to in the paragraph headed “Expert and Consent” in this appendix;

• (f) the circular of the Company dated 14 August 2015; and

• (g) this circular.

– V-5 –

NOTICE OF SGM

KAI YUAN HOLDINGS LIMITED 開源控股有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 1215)

NOTICE IS HEREBY GIVEN THAT an special general meeting (the “ SGM ”) of Kai Yuan Holdings Limited (the “ Company ”) will be held at Board Room, Level 1, South Pacific Hotel, 23 Morrison Hill Road, Wanchai, Hong Kong on 14 March 2016 at 9:30 a.m. for the purpose of considering and, if thought fit, passing the following resolution, with or without amendments, as ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT :

• (i) the terms and conditions of the sale and purchase agreement dated 4 January 2016 entered into among the Company, Intelligent Wealth Limited, Mr. Du Shuang Hua and Most Honour Limited (the “ Sale and Purchase Agreement ”, a copy of which has been produced to the meeting marked “A” and signed by the chairman of the meeting for the purpose of identification) in relation to the sale and purchase of 20,000,000 issued shares of Fame Risen Development Limited (being the entire issued shares of Fame Risen Development Limited) and the shareholder’s loan due and owing by Fame Risen Development Limited to the Company upon completion of the Sale and Purchase Agreement at the consideration of HK$2,383,148,035 be and are hereby approved, confirmed and ratified; and

• (ii) the directors of the Company be and are hereby authorised on behalf of the Company to do all such things and sign, seal, execute, perfect and deliver all such documents as they may in their discretion consider necessary, desirable or expedient, for the purposes of or in connection with the implementation and/or give effect to any matters relating to the Sale and Purchase Agreement and the transactions contemplated thereunder.”

By order of the Board Kai Yuan Holdings Limited Law Wing Chi, Stephen Executive Director

Hong Kong, 25 February 2016

– SGM-1 –

NOTICE OF SGM

Registered office: Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Principal place of business in Hong Kong:

28th Floor, Chinachem Century Tower 178 Gloucester Road, Wanchai Hong Kong

Notes:

1. A shareholder entitled to attend and vote at the above meeting may appoint one or more than one proxy to attend and to vote in his stead. A proxy need not be a shareholder of the Company.

2. Where there are joint registered holders of any share of the Company (the “ Share ”), any one such persons may vote at the meeting, either personally or by proxy, in respect of such Share as if he were solely entitled thereto; but if more than one of such joint holders be present at the meeting personally or by proxy, that one of the said persons so present whose name stands first on the register of members of the Company in respect of such Shares shall alone be entitled to vote in respect thereof.

3. In order to be valid, the form of proxy duly completed and signed in accordance with the instructions printed thereon together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy thereof must be delivered to the office of the Company’s share registrar, Tricor Tengis Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.

4. As at the date of this notice, the executive directors of the Company are Mr. Xue Jian, Mr. Law Wing Chi, Stephen, the non-executive director of the Company is Mr. Hu Yishi, and the independent non-executive directors of the Company are Mr. Tam Sun Wing, Mr. Ng Ge Bun and Mr. He Yi.

– SGM-2 –