THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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.

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

If you have sold or transferred all your shares in Kinetic Development Group Limited , you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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Kinetic Development Group Limited 力量發展集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1277)

CONNECTED TRANSACTION ACQUISITION OF SEEDLIFE AND NOTICE OF EXTRAORDINARY GENERAL MEETING

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

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Capitalized terms used shall have the same meanings as those defined in the section headed “Definitions” in this circular. A letter from the Board is set out on pages 9 to 35 of this circular. A letter from the Independent Board Committee is set out on pages 36 to 37 of this circular. A letter from the Independent Financial Adviser containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 38 to 69 of this circular. A valuation report from Asia-Pacific Consulting and Appraisal Limited is set out on pages I-1 to I-14 of this circular.

A notice convening the EGM to be held at 18/F, 80 Gloucester Road, Wan Chai, Hong Kong on Friday, 3 January 2025 at 2:00 p.m. is set out on pages EGM-1 to EGM-3 of this circular.

A form of proxy for use by the Shareholders at the EGM is enclosed with this circular for dispatch to the Shareholders. Whether or not you intend to attend and/or vote at the EGM in person, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the Company’s share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong as soon as practicable but in any event not later than 48 hours before the time specified for holding the EGM or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

25 November 2024

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . .	36
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . . . . .	38
APPENDIX I — VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
APPENDIX II — GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
NOTICE OF EXTRAORDINARY GENERAL MEETING . . . . . . . . . . . . . . . . . . . . .	EGM-1

– i –

DEFINITIONS

n this circular, unless the context otherwise requires, the following terms shall have the following meanings:

“2022 Adjusted Properties”

the target properties located in Wuhan, Jingmen, Qingdao, Zhongshan, Wuxi and Zunyi, which represent an adjustment to the scope of the Original Properties, the details of which were set out in the “Information on the Target Properties” section in the announcement of the Company dated 12 July 2022;

“2022 Property Purchase Agreement”
the agreement on sale and purchase of properties entered into between the Original Vendors and Kinetic Qinhuangdao on 29 April 2022;
“2022 Terminated Vendors”
the vendors under the 2022 Property Purchase Agreement whose rights and obligations were terminated pursuant to the Supplemental Agreement;
“2023 Adjusted Properties”

the target properties in the 2022 Adjusted Properties which were not among the 2023 Terminated Properties;

“2023 Terminated Properties”
“2024 Agreement Vendors”
the properties among the 2022 Adjusted Properties located in Jingmen, Wuxi and Wuhan which would no longer be sold to Kinetic Qinhuangdao pursuant to the Second Supplemental Agreement, the details of which were set out in the “Scope of Terminated Properties” in the announcement of the Company dated 1 December 2023; the vendors that entered into the Third Supplemental Agreement with Kinetic Qinhuangdao and Guangzhou Hengyi, namely, Vendor 1, Vendor 2, Vendor 4 and Vendor 6;
“2024 Further Terminated Properties”
the properties located in Zunyi and parts of the properties located in Zhongshan among the 2023 Adjusted Properties which would no longer be sold to Kinetic Qinhuangdao pursuant to the Fourth Supplemental Agreement, the details of which are set out in the “Acquisition of Seedlife” section in this circular;
“2024 Target Properties”
the target properties located in Guangzhou, the details of which are set out in the “Information on 2024 Target Properties” section in the announcement of the Company dated 6 June 2024;

– 1 –

DEFINITIONS

“2024 Terminated Properties”
the properties among the 2023 Adjusted Properties located in Wuhan and Zhongshan which would no longer be sold to Kinetic Qinhuangdao pursuant to the Third Supplemental Agreement, the details of which are set out in the “Scope of the 2024 Terminated Properties” section in the announcement of the Company dated 6 June 2024;
“2024 Third Tranche Terminated Properties”
parts of the properties located in Zhongshan among the 2024 Adjusted Target Properties which would no longer be sold to Kinetic Qinhuangdao pursuant to the Fifth Supplemental Agreement, the details of which are set out in the “Scope of the 2024 Third Tranche Terminated Properties” section in the announcement of the Company dated 4 November 2024;
“Actual Profit”
the after-tax net profit of the Target Group for the year ending 31 December 2024, as separately audited by the auditors of the Enlarged Group. The Company expects to obtain the audited financial statements of the Target Group for the financial year ending 31 December 2024, for determining its audited after-tax net profit, by the end of March 2025;
“associate”
has the meaning ascribed to it under the Listing Rules;
“Board”
the board of Directors of the Company;
“Business Day”
any day that is not a Saturday, Sunday, legal holiday or other day on which commercial banks are required or authorized by law to be closed in Hong Kong or PRC;
“Closing”
the consummation of the Seedlife Acquisition, as specified under the Share Purchase Agreement (as amended by the Share Purchase Supplemental Agreement);
“Company” or “Buyer”
Kinetic Development Group Limited (formerly known as Kinetic Mines and Energy Limited), a company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the Stock Exchange;
“connected person(s)” has the meaning ascribed to it under the Listing Rules;
“Directors”
the director(s) of the Company;

– 2 –

DEFINITIONS

“EGM” the extraordinary general meeting to be convened to approve the Share Purchase Agreement, the Share Purchase Supplemental Agreement and the Seedlife Acquisition and the transactions contemplated thereunder; “Enlarged Group” the Group and the Target Group immediately after the Closing; “Fifth Supplemental Agreement” the fifth supplemental agreement entered into between Kinetic Qinhuangdao, Vendor 2, Vendor 4 and Zhuhai Seedland on 1 November 2024; “Formula” the formula to calculate the amount by which the Set-off Amount shall be adjusted downwards, namely: A = D x P/E ratio Where:

A being the amount by which the Set off Amount shall be adjusted downwards;

D being the difference between the Guaranteed Profit and the Actual Profit in the event that the latter falls short of the former; and

P/E ratio means 8.46, being the price/earnings ratio agreed between the Seller and the Buyer;
“Fourth Supplemental Agreement” the fourth supplemental agreement entered into between the Company, Kinetic Qinhuangdao, the 2024 Adjusted Properties Vendors, Seedland Smart Service and Mr. Zhang Liang, Johnson on 6 September 2024;
“Group” the Company and its subsidiaries;

“Guangzhou Hengyi” Guangzhou Hengyi Equipment Installation and Maintenance Co., Ltd.* (廣州恆逸設備安裝維護有限公司), a company incorporated in the PRC with limited liability, which is indirectly held by Mr. Zhang Liang, Johnson as to 100%;

– 3 –

DEFINITIONS

“Guaranteed Profit”
“HKD”
“Hong Kong”
“Independent Board Committee”
“Independent Financial Adviser” or “Rainbow Capital”
“Independent Shareholder(s)”
“Independent Valuer”
“Kinetic Qinhuangdao”

RMB52,000,000 of the after-tax net profit of the Target Group for the year ending 31 December 2024, which shall include profit in the ordinary course of business only and exclude any profits and losses arising from merger, acquisition and disposal or any extraordinary or exceptional items;

Hong Kong dollar, the lawful currency of Hong Kong;
the Hong Kong Special Administrative Region of the PRC;
the independent committee of the Board comprising all the independent non-executive Directors;
Rainbow Capital (HK) Limited, a corporation licensed to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO, being the independent financial adviser to advise the Independent Board Committee and the Independent Shareholder, in relation to the Share Purchase Agreement, the Share Purchase Supplemental Agreement and the Seedlife Acquisition and the transactions contemplated thereunder;
Shareholders other than (i) Mr. Zhang Liang, Johnson who is considered to have a material interest in the Share Purchase Agreement, the Share Purchase Supplemental Agreement and the Seedlife Acquisition and the transactions contemplated thereunder; (ii) Mr. Zhang Li, being an associate of Mr. Zhang Liang, Johnson; and (iii) the respective connected person(s) and associate(s) of Mr. Zhang Liang, Johnson and Mr. Zhang Li;
Asia-Pacific Consulting and Appraisal Limited, an independent valuer appointed by the Company;
Kinetic (Qinhuangdao) Energy Group Ltd. (力量(秦皇島)能源集團有限公司), formerly known as Kinetic (Qinhuangdao) Energy Co., Ltd. (力量(秦皇島)能源有限公司), a company incorporated in the PRC with limited liability and an indirectly wholly-owned subsidiary of the Company;

– 4 –

DEFINITIONS

“Latest Practicable Date”
“Letter of Intent”
“Listing Rules”
“Maoming Acquisition”
“Maoming Share Transfer Agreement”
“Maoming Shengcheng”
“Maoming Shengda”
“Original Properties”
“Original Vendors”

19 November 2024, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein;

the letter of intent dated 6 June 2024 entered into between the Company, Seedland Smart Service and Mr. Zhang Liang, Johnson in relation to the Seedlife Acquisition, which is not legally binding except for certain customary provisions for documents of similar nature;
the Rules Governing the Listing of Securities on the Stock Exchange;

the acquisition of 100% equity interests of each of Maoming Shengda and Maoming Shengcheng; the share transfer agreement dated 1 November 2024 entered into between the Kinetic Qinhuangdao and Zhuhai Seedland in relation to the acquisition of 100% equity interests of each of Maoming Shengda and Maoming Shengcheng;

Maoming Shengcheng Real Estate Co., Ltd.* (茂名晟城置業有限公司), a company incorporated in the PRC with limited liability and is currently held by Zhuhai Seedland as to 100%;
Maoming Shengda Real Estate Co., Ltd.* (茂名晟大置業有限公司), a company incorporated in the PRC with limited liability and is currently held by Zhuhai Seedland as to 100%;

the original target properties located in Wuhan, Jingmen, Tianjin, Huizhou and Qingdao, the details of which are set out in the “Information on the Target Properties” section in the announcement of the Company dated 2 May 2022;

Qingdao Shihaoxing Real Estate Co., Ltd. (青島實昊星置業有限公司), Huizhou Guopeng Color Printing Co., Ltd. (惠州市國鵬彩印有限公司), Tianjin Jinhewan Real Estate Co., Ltd.* (天津金河灣置業有限公司), Vendor 1, Vendor 2 and Vendor 3, being the original vendors under the 2022 Property Purchase Agreement;

– 5 –

DEFINITIONS

“PRC”

The People’s Republic of China, and for the purpose of this circular only, excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan;

“Profit Shortfall”

the difference between the Guaranteed Profit and the Actual Profit in the event that the latter falls short of the former;

“RMB” Renminbi, the lawful currency of the PRC;
“Second Supplemental Agreement” the second supplemental agreement entered into between Kinetic Qinhuangdao, the Vendors and Taiyuan Hetai on 1 December 2023;
“Seedland”
Guangzhou Seedland Real Estate Development Co., Ltd* (實地地產集團有限公司), a company incorporated in the PRC with limited liability and 100%-owned by Mr. Zhang Liang, Johnson;
“Seedland Smart Service” or “Seller”
Seedland Smart Service Group Limited, a limited liability company incorporated under the laws of the Cayman Islands and is held indirectly by Mr. Zhang Liang, Johnson as to 100%;

“Seedlife”

Seedlife Holding Limited, a limited liability company incorporated under the laws of the British Virgin Islands and is held directly by Seedland Smart Service as to 100%;
“Seedlife Acquisition”
the acquisition of 100% equity interests of Seedlife, as contemplated under the Share Purchase Agreement (as amended by the Share Purchase Supplemental Agreement);
“SFO”
Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong);
“Share(s)”
ordinary share(s) with a nominal value of US$0.001 each in the share capital of the Company;
“Share Purchase Agreement”
the share purchase agreement dated 6 September 2024 entered into between the Buyer, Seedland Smart Service and Seedlife in relation to the acquisition of 100% equity interests of Seedlife;

– 6 –

DEFINITIONS

“Share Purchase Supplemental a supplemental agreement dated 12 November 2024 to the Agreement” Share Purchase Agreement entered into between the Buyer, Seedland Smart Service and Seedlife in relation to the acquisition of 100% equity interests of Seedlife;

“Shareholder(s)” holder(s) of the Shares;
“Stock Exchange” The Stock Exchange of Hong Kong Limited;
“Supplemental Agreement” the supplemental agreement entered into between Kinetic Qinhuangdao, the Original Vendors, Vendor 4, Vendor 5 and Vendor 6 on 12 July 2022;
“Taiyuan Hetai” Taiyuan Hetai Shengrui Real Estate Co., Ltd.* (太原和泰盛瑞置業有限公司), a limited liability company established in the PRC, whose entire equity interests were acquired by Kinetic Qinhuangdao pursuant to the Second Supplemental Agreement;
“Target Group” Seedlife and its subsidiaries;
“Third Supplemental Agreement” the third supplemental agreement entered into between the 2024 Agreement Vendors, Kinetic Qinhuangdao and Guangzhou Hengyi on 6 June 2024;
“Transaction Documents” the Share Purchase Agreement, the Share Purchase Supplemental Agreement and each of the other agreements and documents otherwise required in connection with the implementation of the Seedlife Acquisition as designated by the Buyer from time to time;
“US$”
United States dollar, the lawful currency of United States;
“Vendor 1”
Wuhan Pingan Zhongxin Real Estate Co., Ltd.* (武漢平安中信置業有限公司), a company incorporated in the PRC with limited liability and an indirectly wholly-owned subsidiary of Seedland;
“Vendor 2”
Qingdao Shilu Ocean Big Data Investment Development Co., Ltd.* (青島實錄海洋大數據投資開發有限公司), a company incorporated in the PRC with limited liability and an indirectly non-wholly-owned subsidiary of Seedland;

– 7 –

DEFINITIONS

“Vendor 3” Jingmen Shiqiang Real Estate Co., Ltd.* (荊門實強房地產置業有限公司), a company incorporated in the PRC with limited liability and an indirectly non-wholly-owned subsidiary of Seedland;
“Vendor 4” Zhongshan Shidi Real Estate Development Co., Ltd.* (中山實地房地產開發有限公司), a company incorporated in the PRC with limited liability and a directly wholly-owned subsidiary of Seedland;
“Vendor 5” or “Wuxi Shidi” Wuxi Shidi Real Estate Development Co., Ltd.* (無錫實地房地產開發有限公司), a company incorporated in the PRC with limited liability and an indirectly wholly-owned subsidiary of Seedland;
“Vendor 6” Zunyi Shidi Real Estate Development Co., Ltd.* (遵義實地房地產開發有限公司), a company incorporated in the PRC with limited liability and a directly non-wholly-owned subsidiary of Seedland;
“Vendors” collectively, Vendor 1, Vendor 2, Vendor 3, Vendor 4, Vendor 5 and Vendor 6;
“Warrantors” collectively, Seedland Smart Service, Seedlife and its subsidiaries, and a reference to “Warrantor” is to each and every one of them;
“Zhuhai Seedland” Zhuhai Seedland Real Estate Development Co., Ltd.* (珠海實地房地產開發有限公司), a company incorporated in the PRC with limited liability and a directly wholly-owned subsidiary of Seedland; and
“%” per cent.
The English translation of the Chinese names of the respective companies in this circular, where indicated, is included for information purpose only, and should not be regarded as the official English names of the respective companies.

– 8 –

LETTER FROM THE BOARD

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Kinetic Development Group Limited 力量發展集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1277)

Executive Directors: Mr. Ju Wenzhong (Chairman) Mr. Li Bo (Chief Executive Officer) Mr. Ji Kunpeng

Non-executive Director: Ms. Zhang Lin

Independent Non-executive Directors: Ms. Liu Peilian Mr. Chen Liangnuan Ms. Xue Hui

Registered Office: Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Headquarters and Principal Place of Business in the PRC: Dafanpu Coal Mine Majiata Village Xuejiawan Town Zhunge’er Banner Ordos City, Inner Mongolia, China

Principal Place of Business in Hong Kong: 18/F 80 Gloucester Road Wan Chai Hong Kong

25 November 2024

Dear Shareholders,

CONNECTED TRANSACTION ACQUISITION OF SEEDLIFE AND NOTICE OF EXTRAORDINARY GENERAL MEETING

– 9 –

LETTER FROM THE BOARD

INTRODUCTION

References are made to the announcements of the Company dated 2 May 2022, 12 July 2022, 1 December 2023, 12 December 2023, 7 February 2024, 3 June 2024, 6 June 2024, 6 September 2024, 4 November 2024 and 12 November 2024, and to the circulars of the Company dated 30 September 2022 and 21 February 2024.

On 29 April 2022, the Original Vendors entered into the 2022 Property Purchase Agreement with Kinetic Qinhuangdao, an indirect wholly-owned subsidiary of the Company, pursuant to which the Original Vendors agreed to sell, and Kinetic Qinhuangdao agreed to purchase, the Original Properties for the consideration of RMB769,014,000.

On 12 July 2022, Kinetic Qinhuangdao entered into the Supplemental Agreement with the Vendors and the 2022 Terminated Vendors, pursuant to which, among others, the Vendors agreed to sell, and Kinetic Qinhuangdao agreed to purchase, the 2022 Adjusted Properties, which represented an adjustment to the scope of the Original Properties, for the consideration of RMB809,480,000. In addition, pursuant to the Supplemental Agreement, the rights and obligations between the 2022 Terminated Vendors and Kinetic Qinhuangdao under the 2022 Property Purchase Agreement are terminated with effect from the date of the Supplemental Agreement, which effectively replaced the 2022 Property Purchase Agreement.

On 1 December 2023, Kinetic Qinhuangdao entered into the Second Supplemental Agreement with the Vendors and Taiyuan Hetai, pursuant to which, among others, (i) the 2023 Terminated Properties would no longer be sold to Kinetic Qinhuangdao; and (ii) Wuxi Shidi (Vendor 5) has agreed to sell, and Kinetic Qinhuangdao has agreed to acquire, 100% equity interests in Taiyuan Hetai for the consideration of RMB220,000,000, and Wuxi Shidi and Kinetic Qinhuangdao have entered into a share transfer agreement detailing the terms of acquisition of 100% equity interests in Taiyuan Hetai. Accordingly, the Second Supplemental Agreement removed the 2023 Terminated Properties from the scope of the properties to be acquired by Kinetic Qinhuangdao from the Vendors. The acquisition of Taiyuan Hetai contemplated under the Second Supplemental Agreement has been completed on 3 June 2024.

On 6 June 2024, Kinetic Qinhuangdao entered into the Third Supplemental Agreement with the 2024 Agreement Vendors and Guangzhou Hengyi, pursuant to which, among others, (i) Guangzhou Hengyi transferred the 2024 Target Properties to Kinetic Qinhuangdao for a total consideration of RMB45,000,000 which has been completed as at the Latest Practicable Date; (ii) the 2024 Terminated Properties would no longer be sold to Kinetic Qinhuangdao; and (iii) the rights and obligations between the 2024 Agreement Vendors and Kinetic Qinhuangdao in respect of the 2024 Terminated Properties under the 2022 Property Purchase Agreement (as amended by the Supplemental Agreement and the Second Supplemental Agreement) are terminated with effect from the date of the Third Supplemental Agreement. The corporate income tax of RMB4,184,000 payable by Guangzhou Hengyi arising from the acquisition of the 2024 Target Properties has been paid by Kinetic Qinhuangdao, and has been deducted from the total consideration of RMB45,000,000 such that the net consideration payable by Kinetic Qinhuangdao for the acquisition of the 2024 Target Properties became RMB40,816,000.

– 10 –

LETTER FROM THE BOARD

The details of the Original Properties, the 2022 Adjusted Properties and the 2023 Adjusted Properties (excluding the 2024 Terminated Properties) are as follows:

Properties of Vendor 1

Original Properties as agreed on 29 April 2022

2022 Adjusted Properties as agreed on 12 July 2022

2023 Adjusted Properties (excluding the 2024 Terminated Properties) as agreed on 6 June 2024

89 units in Buildings No. 34, No. 35 and No. 36 located in land No. 104C of Wuhan Economic and Technological Development Zone* (武漢高新技術開發區), Wuhan, Hubei Province, with an aggregate building area of approximately 12,180 square meters held by Vendor 1

88 units in Buildings No. 34, No. 35 and No. 36 located in land No. 104C of Wuhan Economic and Technological Development Zone* (武漢高新技術開發區), Wuhan, Hubei Province, with an aggregate building area of approximately 11,706 square meters currently held by Vendor 1
Not applicable as 77 units (out of 88 units in total) were terminated for sale pursuant to the Second Supplemental Agreement and the rest 11 units were terminated for sale pursuant to the Third Supplemental Agreement

Properties of Vendor 2

Consideration 2023 Adjusted Paid for Properties (excluding 2023 Adjusted Original 2022 Adjusted the 2024 Terminated Properties Properties Properties Properties) (excluding the as agreed on as agreed on as agreed on 2024 Terminated Construction Mortgage 29 April 2022 12 July 2022 6 June 2024 Properties) Status Status 2 units located in Ji 2 units located in Ji 2 units located in Ji RMB210,960,000 Expected to be Expected to be Mo District (即墨 Mo District (即墨 Mo District* (即墨 completed by discharged by 區), Qingdao, 區), Qingdao, 區), Qingdao, December 2026 Shandong Province, Shandong Province Shandong Province 2025 with an aggregate with an aggregate with an aggregate building area of building area of building area of approximately approximately approximately 20,312 square 20,312 square meters 20,312 square meters meters held by currently held by currently held by Vendor 2 Vendor 2 Vendor 2

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LETTER FROM THE BOARD

Properties of Vendor 3

Original Properties as agreed on 29 April 2022

1 unit located in Dong Bao District* (東寶區), Jingmen, Hubei Province, with a building area of approximately 2,957 square meters held by Vendor 3

2022 Adjusted Properties as agreed on 12 July 2022

1 unit located in Dongbao District* (東寶區), Jingmen, Hubei Province, with a building area of approximately 4,787 square meters currently held by Vendor 3

2023 Adjusted Properties (excluding the 2024 Terminated Properties) as agreed on 6 June 2024

Not applicable as such properties were terminated for sale pursuant to the Second Supplemental Agreement

– 12 –

LETTER FROM THE BOARD

Properties of Vendor 4

Original Properties as agreed on 29 April 2022

2022 Adjusted Properties as agreed on 12 July 2022

Consideration 2023 Adjusted Paid for Properties (excluding 2023 Adjusted the 2024 Terminated Properties Properties) (excluding the as agreed on 2024 Terminated Construction Mortgage 6 June 2024 Properties) Status Status

Not applicable

25 units located in 21 units located in Huoju Development Huoju Development Zone (火炬開發區), Zone (火炬開發區), Zhongshan, Zhongshan, Guangdong Guangdong Province, with a Province, with a building area of building area of approximately approximately 12,657 square meters 11,861 square meters currently held by currently held by Vendor 4 Vendor 4; and
RMB199,900,000 Completed in Expected to be 2011 discharged by 2026
4 units of properties for commercial use located in Huoju Development Zone* (火炬開發區), Zhongshan, Guangdong Province, with an aggregate building area of approximately 795.3 square meters were terminated for sale pursuant to the Third Supplemental Agreement

– 13 –

LETTER FROM THE BOARD

Properties of Vendor 5

Original Properties as agreed on 29 April 2022

2022 Adjusted Properties as agreed on 12 July 2022

2023 Adjusted Properties (excluding the 2024 Terminated Properties) as agreed on 6 June 2024

Not applicable

2 units located in Huishan District* (惠山區), Wuxi, Jiangsu Province, with a building area of approximately 4,072 square meters currently held by Vendor 5
Not applicable as such properties were terminated for sale pursuant to the Second Supplemental Agreement

Properties of Vendor 6

Not applicable 2 commercial units 2 commercial units RMB139,480,000 Completed in Not yet located in located in 2023 discharged Honghuagang Honghuagang District (紅花崗區), District (紅花崗區), Zunyi (遵義), Zunyi (遵義), Guizhou Province, Guizhou Province, with a building area with a building area of approximately of approximately 16,695 square meters 16,695 square meters currently held by currently held by Vendor 6 Vendor 6

– 14 –

LETTER FROM THE BOARD

Properties of Original Vendors (excluding Vendor 1, Vendor 2 and Vendor 3)

Original Properties as agreed on 29 April 2022

2022 Adjusted Properties as agreed on 12 July 2022

2023 Adjusted Properties (excluding the 2024 Terminated Properties) as agreed on 6 June 2024

1 unit located in Bao Di District (寶坻區), Tianjin, with a building area of approximately 3,025 square meters held by Tianjin Jinhewan Real Estate Co., Ltd. (天津金河灣置業有限公司);

Not applicable as such properties were terminated for sale pursuant to the Supplemental Agreement

1 unit located in Zhong Kai High-Tech Zone (仲愷高新區), Huizhou, Guangdong Province, with a building area of approximately 4,424 square meters held by Huizhou Guopeng Color Printing Co., Ltd. (惠州市國鵬彩印有限公司); and

1 unit located in Xi Hai An New District (西海岸新區), Qingdao, Shandong Province, with a building area of approximately 5,318 square meters held by Qingdao Shihaoxing Real Estate Co., Ltd. (青島實昊星置業有限公司)

On 6 June 2024, the Company entered into the Letter of Intent with Mr. Zhang Liang, Johnson and Seedland Smart Service, pursuant to which, among others, the Company formalized its intent to acquire the 100% equity interests of Seedlife from Seedland Smart Service.

– 15 –

LETTER FROM THE BOARD

ACQUISITION OF SEEDLIFE

On 6 September 2024, the Buyer, Seedland Smart Service and Seedlife entered into the Share Purchase Agreement pursuant to which, among others, the Buyer agreed to acquire (either directly or through its affiliate (the “ Acquiring Affiliate ”)), and Seedland Smart Service agreed to sell, 100% equity interests of Seedlife for a total consideration of RMB423,000,000 (the “ Equity Consideration ”).

The Equity Consideration shall be paid in the following manner: (i) an amount of HKD25,000,000, equivalent to RMB22,770,000, shall be paid as a deposit, which has been transferred by the Company to Mr. Zhang Liang, Johnson under the Letter of Intent (the “ LOI Deposit ”); (ii) an amount of not more than RMB25,000,000 shall be paid by the Buyer to Seedland Smart Service if so requested by Seedland Smart Service within 30 Business Days following the date of the Share Purchase Agreement (the “ Further Cash Payment ”); (iii) an amount which equals the difference between RMB77,230,000 and the Further Cash Payment shall be paid by the Buyer to Seedland Smart Service on the date of the Closing (the “ Closing Cash Payment ”); (iv) an amount of RMB42,300,000, which represents the taxes payable by the Seller arising from the sale of equity interests of Seedlife (the “ Corporate Income Tax ”) and which the Buyer will pay on the Seller’s behalf shall be deducted from the Equity Consideration; (v) an amount of RMB50,000,000, which represents the amount of an account receivable due from the Seller and its subsidiaries (excluding Seedlife) to Seedlife as at the date of the Share Purchase Agreement (the “ Account Receivable ”) shall be further deducted from the Equity Consideration; and (vi) the remaining amount of RMB230,700,000 (the “ Set-off Amount ”) (subject to downward adjustment by an amount calculated using the Formula to take into account any Profit Shortfall, (such adjusted amount (if applicable), referred to as the “ Final Set-off Amount ”)), shall be set off against the equivalent amount in the Pre-existing Outstanding Paid Amount.

In addition, on the same date, Kinetic Qinhuangdao entered into the Fourth Supplemental Agreement with Vendor 2, Vendor 4 and Vendor 6 (the “ 2024 Adjusted Properties Vendors ”) as well as the Company, Seedland Smart Service and Mr. Zhang Liang, Johnson, pursuant to which, among others, (i) the 2024 Further Terminated Properties, with an allocated consideration equal to the Final Set-off Amount, would no longer be sold to Kinetic Qinhuangdao; and (ii) the rights and obligations between the 2024 Adjusted Properties Vendors and Kinetic Qinhuangdao in respect of the 2024 Further Terminated Properties under the 2022 Property Purchase Agreement (as amended by the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement) were terminated with effect from the date of the Fourth Supplemental Agreement.

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LETTER FROM THE BOARD

On 1 November 2024 (after trading hours), Kinetic Qinhuangdao and Zhuhai Seedland entered into the Maoming Share Transfer Agreement, pursuant to which, among others, Kinetic Qinhuangdao agreed to acquire, and Zhuhai Seedland agreed to sell, 100% equity interests of each of Maoming Shengda and Maoming Shengcheng for a total consideration of RMB70,000,000. The corporate income tax of RMB12,250,000 payable by Zhuhai Seedland arising from the Maoming Acquisition will be paid by Kinetic Qinhuangdao, and has been deducted from the total consideration of RMB70,000,000 such that the payable consideration for the Maoming Acquisition becomes RMB57,750,000, which shall be fully set off by the consideration paid for the 2024 Third Tranche Terminated Properties (i.e. approximately RMB57,990,000). On the same date, Kinetic Qinhuangdao entered into the Fifth Supplemental Agreement with Vendor 2 and Vendor 4 as well as Zhuhai Seedland, pursuant to which, among others, (i) the 2024 Third Tranche Terminated Properties would no longer be sold to Kinetic Qinhuangdao; and (ii) the rights and obligations between Vendor 2 and Vendor 4 and Kinetic Qinhuangdao in respect of the 2024 Third Tranche Terminated Properties under the 2022 Property Purchase Agreement (as amended by the Supplemental Agreement, the Second Supplemental Agreement, the Third Supplemental Agreement and the Fourth Supplemental Agreement) were terminated with effect from the date of the Fifth Supplemental Agreement. As the applicable percentage ratios in respect of the Maoming Acquisition are more than 5%, the Maoming Acquisition constitutes a connected transaction of the Company, and is subject to the announcement, annual reporting, and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

A separate circular containing, among other things, (i) further details of the Maoming Share Transfer Agreement and the Maoming Acquisition; (ii) the letter of recommendation from the independent board committee to the independent shareholders in relation to the Maoming Share Transfer Agreement and the Maoming Acquisition; (iii) the letter of advice from the independent financial adviser to the independent board committee and the independent shareholders in relation to the Maoming Share Transfer Agreement and the Maoming Acquisition; and (iv) a notice of the extraordinary general meeting, will be dispatched to the Shareholders as soon as possible, with an expected dispatch date on or before 17 January 2025, to allow sufficient time for the preparation of the relevant information for inclusion in the circular.

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LETTER FROM THE BOARD

As at the Latest Practicable Date, Kinetic Qinhuangdao has already paid RMB803,000,000 (inclusive of value-added tax) to the Vendors for the purchase of 2023 Adjusted Properties, among which the registrations of the properties with the total consideration of approximately RMB542,184,000 have not yet been completed (the “ Pre-existing Outstanding Paid Amount ”). The details of each Set-off Amount against the Pre-existing Outstanding Paid Amount and each value of the terminated properties against that of the remaining target properties are as follows:

				Balance of the
				value of
		Balance of the		the remaining
		Pre-existing		target properties
		Outstanding Paid		(after deducting
		Amount (after	Value of the	the value of the
Each of the relevant		deducting the	terminated	terminated
agreements	Set-off Amount	Set-off Amount)	properties(Note)	properties)
2022 Property Purchase	–	–	–	RMB769,014,000
Agreement dated
29 April 2022
Supplemental Agreement	–	RMB803,000,000	–	RMB809,480,000
dated 12 July 2022
Second Supplemental	RMB220,000,000	RMB583,000,000	RMB218,250,000	RMB591,230,000
Agreement dated
1 December 2023
Third Supplemental	RMB40,816,000	RMB542,184,000	RMB40,890,000	RMB550,340,000
Agreement dated
6 June 2024
Fourth Supplemental	RMB230,700,000	RMB311,484,000	RMB230,700,000	RMB319,640,000
Agreement dated
6 September 2024
Fifth Supplemental	RMB57,750,000	RMB253,734,000	RMB57,990,000	RMB261,650,000
Agreement dated
1 November 2024

Note: The value of the terminated properties under each supplemental agreement represents the aggregate value of the properties selected by the parties which approximately equals, to the extent possible, the set-off amount under each supplemental agreement.

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LETTER FROM THE BOARD

The purpose of this circular is to provide further information in relation to the Share Purchase Agreement (as amended by the Share Purchase Supplemental Agreement) and the Seedlife Acquisition.

THE SEEDLIFE ACQUISITION

The principal terms of the Share Purchase Agreement (as amended by the Share Purchase Supplemental Agreement) are set out below:

Date: Share Purchase Agreement: 6 September 2024 Share Purchase Supplemental Agreement: 12 November 2024 Parties: (i) The Company (the “ Buyer ”) (ii) Seedland Smart Service (the “ Seller ”) (iii) Seedlife (the target company) Assets to be acquired: 100% equity interests in Seedlife Consideration: The total consideration for the Seedlife Acquisition is RMB423,000,000. Payment Terms: The Equity Consideration shall be paid by the Buyer to the Seller in the following manner:

(i) the LOI Deposit with an amount of HKD25,000,000 (equivalent to RMB22,770,000), which has been transferred by the Company to Mr. Zhang Liang, Johnson under the Letter of Intent;
(ii) the Further Cash Payment with an amount of not more than RMB25,000,000 shall be paid by the Buyer to the Seller if so requested by the Seller within 30 Business Days following the date of the Share Purchase Agreement;

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LETTER FROM THE BOARD

(iii) the Closing Cash Payment with an amount which equals the difference between RMB77,230,000 and the Further Cash Payment shall be paid by the Buyer to the Seller on the date of the Closing;
(iv) the Corporate Income Tax in the amount of RMB42,300,000 shall be deducted from the Equity Consideration;
(v) the Account Receivable in the amount of RMB50,000,000 shall be further deducted from the Equity Consideration; and
(vi) the Final Set-off Amount, which equals to RMB230,700,000 (subject to downward adjustment by an amount calculated using the Formula to take into account any Profit Shortfall (if applicable)), shall be set off against the equivalent amount in the Pre-existing Outstanding Paid Amount. Based on the Target Group’s unaudited after-tax net profit of RMB39,500,000 for the nine months ended 30 September 2024, and assuming, solely for illustration purposes only, the Target Group’s unaudited after-tax net profit for the full year ending 31 December 2024 remains as the same level, i.e. RMB39,500,000, it is expected that the downward adjustment will not be more than RMB105,750,000.

The Further Cash Payment (if applicable) and the Closing Cash Payment shall be paid by wire transfer or bank remittance by the Buyer to the bank account of the Seller or such other party designated by the Seller.

On 12 November 2024, the Company, Seedland Smart Service entered into the Share Purchase Supplemental Agreement, pursuant to which, the payment term of the Equity Consideration was amended to provide that the Seller shall refund to the Buyer all payments received by them (including the LOI Deposit and the Further Cash Payment) within 30 days of a written notice by the Buyer if the Buyer cannot obtain all necessary approvals required by the Listing Rules, as well as an interest calculated based on the one-year loan prime rate published by the People’s Bank of China from the date of payment by the Buyer of the relevant amount up to the actual date of repayment.

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LETTER FROM THE BOARD

Closing:

The Closing shall take place via the signing and/or exchange of documents and signatures electronically on the date which is a Business Day by which all closing conditions specified in the section “Conditions Precedent to the Closing” below have either been satisfied, or waived by the Buyer, before or upon the Closing or at such other time and place as the Seller and the Buyer shall mutually agree in writing.

Conditions Precedent to the Closing:

Completion of the Seedlife Acquisition is conditional upon various conditions having been fulfilled, or waived by the Buyer (if applicable) including, among others:

(i) each of the representations and warranties of the Warrantors contained in the Share Purchase Agreement shall have been true, accurate and complete when made and shall be true, accurate and complete on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing;
(ii) the Buyer shall have completed the financial, legal and business due diligence with respect to the Target Group to the extent necessary or desirable as determined by the Buyer in its sole discretion, and shall be satisfied with the outcome of such due diligence;
(iii) each Warrantor shall have performed and complied with all obligations and conditions contained in the Transaction Documents that are required to be performed or complied with by them on or before the Closing;
(iv) no provision of any applicable laws shall prohibit the consummation of any transactions contemplated under the Transaction Documents, and all consents of any competent governmental authority or of any other person that are required to be obtained by any of Seedlife or its subsidiaries or other Warrantor in connection with the consummation of the transactions contemplated under the Transaction Documents have been duly obtained and effective as of the Closing;

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LETTER FROM THE BOARD

(v) the Buyer has obtained all necessary approvals required for the consummation of the transactions contemplated under the Transaction Documents and have completed all procedures required therefor under the Listing Rules;
(vi) all corporate and other proceedings in connection with the transactions to be completed at the Closing shall have been completed in form and substance satisfactory to the Buyer;
(vii) each of the parties to the Transaction Documents, other than the Buyer and the Acquiring Affiliate (if applicable), shall have executed and delivered such Transaction Documents to the Buyer; and
(viii) since 31 December 2023, no material adverse effect shall have occurred, and no event shall have occurred or arisen, and no circumstance shall exist, that would reasonably be expected to result in a material adverse effect.

Except for the condition precedent (v), the rest of the conditions precedent are waivable by the Buyer in its sole discretion. As at the Latest Practicable Date, the conditions precedent (ii), (vi) and (vii) set out above have been fulfilled and no material adverse effect has occurred in terms of the condition precedent (viii).

Key Representations and Warranties:

Each of the Warrantors jointly and severally represents and warrants to the Buyer that multiple statements under the Share Purchase Agreement are true, correct, complete and not misleading as of the Closing, including, among others, (i) each of Seedlife and its subsidiaries is duly organized, validly existing and in good standing under, and by virtue of, the laws of the place of its incorporation or establishment; (ii) the issued share capital of Seedlife is and immediately prior to the Closing shall be 100 ordinary shares with no par value; and (iii) Seedlife is the sole record and beneficial holder of all of the equity securities of its subsidiaries.

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LETTER FROM THE BOARD

Termination of the Share The Share Purchase Agreement may be terminated prior to Purchase Agreement: the Closing:

(i) by mutual written consent of the parties;
(ii) by the Buyer, by written notice, if there has been a material misrepresentation (or any representation or warranty made becomes untrue, inaccurate or misleading) or material breach of a covenant or agreement contained in the Share Purchase Agreement on the part of the Seller or any Warrantor, and such breach, if curable, has not been cured within 14 days of such notice; or
(iii) by the Buyer, if any condition precedent has neither been fulfilled nor waived by 31 January 2025, or if due to change of applicable laws, the consummation of the transactions contemplated thereunder would become prohibited under applicable laws.

Dispute Resolution:

Any dispute, controversy, claim or difference of any kind whatsoever arising out of, relating to or in connection with the Share Purchase Agreement shall be referred to and finally resolved by arbitration administered by the Hong Kong International Arbitration Centre (the “ HKIAC ”) in accordance with the HKIAC Administered Arbitration Rules in force at the time of the commencement of the arbitration.

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LETTER FROM THE BOARD

Pursuant to the Fourth Supplemental Agreement, the scope of the 2024 Further Terminated Properties is set out below:

Properties of Vendor 6

Property Title

No. Location Area Use Certificate No. Mortgage Notes (Square Meter) 1. 23C Group land 7,687.92 Commercial Guizhou (2019) Yes Including S1 slots S1, S2 and S3 Zunyi City slots 101–124, at the intersection of Property Title No. 201–225, S2 Dong Cheng Avenue and 0014121 slots 101–123, Dong Lian No. 2 Line, 201–221, and S3 slots Zunyi City, Guizhou 110–123, 11–19 Province 2. S30, D5 (Plots 06 and 9,007.43 Commercial Guizhou (2016) Yes Including S30 07), intersection of Xinpu Zunyi City slots 151, 201–206, Avenue and Bo Zhou Property Title No. 211–225, 227–263, Avenue, Zunyi City, 0028059 317–362 Guizhou Province Total 16,695.35

Properties of Vendor 4

Property Title No. Location Area Use Certificate No. Mortgage (Square Meter) 1. 1st Floor, Tower 1, Lily 1,964.55 Commercial Guangdong Land Yes Garden, No. 113 Bo Ai Zhongshan 7th Avenue, Zhongshan Properties Title Torch Development Zone No. 0111010909 2. 2nd Floor, Tower 1, Lily 2,625.83 Commercial Guangdong Land Yes Garden, No. 113 Bo Ai Zhongshan 7th Avenue, Zhongshan Properties Title Torch Zone No. 0111010886

2nd Floor, Tower 1, Lily Garden, No. 113 Bo Ai 7th Avenue, Zhongshan Torch Development Zone

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LETTER FROM THE BOARD

No. Location
3.
Room 3, Tower 3, Lily
Garden, No. 113 Bo Ai
7th Avenue, Zhongshan
Torch Development Zone
4.
Room 6, Tower 3, Lily
Garden, No. 113 Bo Ai
7th Avenue, Zhongshan
Torch Development Zone
5.
Room 8, Tower 3, Lily
Garden, No. 113 Bo Ai
7th Avenue, Zhongshan
Torch Development Zone
6.
Room 9, Tower 3, Lily
Garden, No. 113 Bo Ai
7th Avenue, Zhongshan
Torch Development Zone
7.
Room 12, Tower 3, Lily
Garden, No. 113 Bo Ai
7th Avenue, Zhongshan
Torch Development Zone
8.
Room 14, Tower 3, Lily
Garden, No. 113 Bo Ai
7th Avenue, Zhongshan
Torch Development Zone
9.
Room 17, Tower 3, Lily
Garden, No. 113 Bo Ai
7th Avenue, Zhongshan
Torch Development Zone
Total

Area
Use
Property Title
Certificate No.
Mortgage
(Square
Meter)
58.42
Commercial
Guangdong Land
Zhongshan
Properties Title
No. 0112006373
Yes
106.91
Commercial
Guangdong Land
Zhongshan
Properties Title
No. 0112006378
Yes
155.69
Commercial
Guangdong Land
Zhongshan
Properties Title
No. 0112006390
Yes
98.19
Commercial
Guangdong Land
Zhongshan
Properties Title
No. 0112006400
Yes
205.49
Commercial
Guangdong Land
Zhongshan
Properties Title
No. 0112006404
Yes
115.69
Commercial
Guangdong Land
Zhongshan
Properties Title
No. 0112006407
Yes
83.75
Commercial
Guangdong Land
Zhongshan
Properties Title
No. 0112006414
Yes
5,414.52

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LETTER FROM THE BOARD

In selecting the 2024 Further Terminated Properties, the Company has taken into account various factors such as whether the properties are subject to mortgages provided as security in favour of creditors, whether these creditors have initiated legal proceedings against the relevant Vendors, whether these legal proceedings are likely to be resolved within a short period of time, whether the relevant properties are affected by foreclosure or reorganization procedures, and the value of properties.

After taking into consideration of the facts that (i) all of the 2024 Further Terminated Properties are subject to mortgages which have not been discharged given the financial constraints encountered by Vendor 4 and Vendor 6; (ii) the allocated consideration of the 2024 Further Terminated Properties equals the Set-off Amount of Seedlife Acquisition; (iii) Vendor 2 is actively raising funds to complete the construction of the relevant 2023 Adjusted Properties (excluding the 2024 Terminated Properties) by applying for government subsidies for ensuring timely delivery of properties (保交付資金) and for bank loans and is negotiating with its creditors to discharge the mortgages over such properties by expediting the sales of properties to generate proceeds for repayment of debts owed to the creditors through market campaigns and promotions; and (iv) by acquiring 100% equity interest of Seedlife, the Company is able to protect and safeguard its interests as the part of the Equity Consideration shall be set off against the Pre-existing Outstanding Paid Amount, the Company considers the above selection criteria in determining the scope of the 2024 Further Terminated Properties is fair and reasonable and in the interest of the Company and the Shareholders as a whole.

Such scope is subject to potential downward adjustment to take account of the Profit Shortfall. In the case that the Set-off Amount needs to be adjusted based on the Formula as a result of the Profit Shortfall, the scope of the 2024 Further Terminated Properties shall be narrowed by excluding certain properties with a value roughly equaling the amount by which the Set-off Amount shall be adjusted downwards. Kinetic Qinhuangdao will further enter into a supplemental agreement with the 2024 Adjusted Properties Vendors to determine the adjusted scope. The 2024 Adjusted Properties Vendors shall continue to perform its obligations attributable to the properties corresponding to such downward adjustment under the 2022 Property Purchase Agreement (as amended by the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement).

As the Company will continue to follow up with the 2024 Adjusted Properties Vendors to urge them to perform their contractual obligations under the Fourth Supplemental Agreement and within the adjusted scope resulting from the Profit Shortfall (if applicable), and will consider to negotiate with them on the feasibility of different proposals to accelerate the registration procedures for the remaining target properties, the Board believes the adjustment mechanism is able to help achieve the purpose of offsetting the Pre-existing Outstanding Paid Amount in case there is Profit Shortfall and is fair and reasonable after considering (i) that the Seedlife Acquisition provides opportunity and flexibility for the Group to acquire high quality assets with a stable revenue and profit in a down market; (ii) the favourable policies in the real estate market recently announced by the PRC government, which the Board considers it would significantly increase the chance for the Group to successfully complete the registration procedures for the remaining target properties; (iii) the sufficient cash flow of the Group to fund

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LETTER FROM THE BOARD

the Equity Consideration; and (iv) that taking into consideration of the Target Group’s unaudited after-tax net profit of RMB39,500,000 for the nine months ended 30 September 2024, which reflects the business performance of the Target Group for the first three quarters of 2024, and together with the 29 property management contracts secured by the Target Group during the second half of 2024, the Board believes it is likely that the Target Group will be able to achieve the Guaranteed Profit.

The properties to be acquired by the Kinetic Qinhuangdao after excluding the 2024 Further Terminated Properties are as follows:

Properties of Vendor 2

2023 Adjusted Properties (excluding the 2024 Terminated Properties and 2024 Further Terminated Properties) as agreed on 6 September 2024

Consideration Paid Construction Status

2 units located in Ji Mo District* (即墨區), Qingdao, Shandong Province with an aggregate building area of approximately 20,312 square meters currently held by Vendor 2

RMB210,960,000 Expected to be completed by December 2025

Properties of Vendor 4

2023 Adjusted Properties (excluding the 2024 Terminated Properties and 2024 Further Terminated Properties) as agreed on 6 September 2024

12 units located in Huoju Development Zone* (火炬開發區), Zhongshan, Guangdong Province, with a building area of approximately 6,447 square meters currently held by Vendor 4 (Note)

Consideration Paid Construction Status RMB108,680,000 Completed in 2011

Note: 3 units (out of 12 units in total) with an aggregate building area of approximately 3,440.90 square meters were terminated for sale pursuant to the Fifth Supplemental Agreement. The consideration paid for such 3 units amounts to approximately RMB57,990,000.

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LETTER FROM THE BOARD

BASIS OF DETERMINATION OF CONSIDERATION

The consideration for the Seedlife Acquisition and the payment terms under the Share Purchase Agreement (as amended by the Share Purchase Supplemental Agreement) were arrived at after arm’s length negotiations between the Buyer and the Seller with reference to, among other things, the valuation of the Target Group of RMB423,000,000 as at 31 May 2024 according to the valuation report prepared by Asia-Pacific Consulting and Appraisal Limited (the “ Valuation Report ”), the Independent Valuer appointed by the Company, using the market approach.

The Guaranteed Profit of RMB52,000,000 was arrived at after arm’s length negotiations between the Buyer and the Seller with reference to, and the Company considers fair and reasonable after taking into consideration of, among other things, (i) the unaudited post-tax net profits of the Target Group for the year ended 31 December 2023 of RMB48,414,000; and (ii) the 29 property management contracts secured by the Target Group during the second half of 2024.

The Company’s Assessment on the Valuation

In reviewing the Valuation Report prepared by the Independent Valuer, the Company considers the valuation is fair and reasonable after having conducted the following works:

With respect of the qualification of the Independent Valuer

The Board has:

(i) carried out some research based on publicly available information to make sure that the Independent Valuer is a well-established professional appraisal and consultancy firm experienced in providing professional advice on corporate valuation and pricing, helping clients solve their problems encountered in corporate financing, capital investment and mergers or acquisitions;
(ii) obtained the relevant qualifications and credentials of the team members involved in the valuation of the equity interest of the Target Company and understood that they have been appointed as the valuer by over 10 Hong Kong listed companies in the past. Besides, Jack W. J. Li, the signatory of the Valuation Report, is a Chartered Financial Analyst (CFA) and a Chartered Member of Royal Institution of Chartered Surveyors (RICS). He has extensive experience in providing consulting and evaluation services for different types of companies listed in major capital markets in Hong Kong, the United States, Singapore, and the United Kingdom;
(iii) conducted public searches to check that there is no relationship among the Independent Valuer, the Target Group, the Seller and their respective connected persons from the management, operational and financial perspectives;

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LETTER FROM THE BOARD

(iv) discussed with the Independent Valuer and obtained their confirmation that they are independent from the Target Group, the Seller and their respective connected persons; and
(v) confirmed with the Independent Valuer that they are independent from the Company and its respective connected persons.

As such, the Board has no reason to doubt the qualification of the Independent Valuer.

With respect of the valuation methodology

The Board noted that the Independent Valuer adopted the market approach for valuing the Target Group. The Board has considered and discussed with the Independent Valuer about the applicable valuation methodologies and understood that the market approach would be the most appropriate valuation method for the Target Group as at 31 May 2024. On this basis, the Board is of the view that the valuation methodology adopted is fair and reasonable.

With respect to the major assumptions of the Valuation Report

The Board has reviewed the major assumptions in the Valuation Report, which have been set out in the section headed Valuation Assumptions of the Valuation Report. Based on the information obtained and available so far in the due diligence process and the discussion with the management of the Target Group, the Board is not aware of any fact or circumstance which is contradictory to or materially diverts from any of these assumptions, and considers it reasonable and necessary for the Independent Valuer to rely on these assumptions to produce the Valuation Report. On this basis, the Board considers each of these assumptions fair and reasonable.

With respect to the comparable companies selected by the Independent Valuer

Although the operating size of the comparable companies is significantly larger than that of the Target Group, the net profit margin of the Target Group is notably higher. Therefore, considering (i) that there is no complete positive correlation among operating scale, profitability and forward P/E ratios; (ii) the Target Group’s strong net profit margin; and (iii) that the sufficient number of comparable companies need to be selected to support the valuation result derived from market approach, the Board believes that the selection of the comparable companies is fair and reasonable.

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LETTER FROM THE BOARD

The Company’s Assessment on the Payment Terms

Taking into account the consideration and factors detailed above, and the additional factors below, the Board has made the assessment that the payment terms under the Share Purchase Agreement (as amended by the Share Purchase Supplemental Agreement) are fair and reasonable and in the interest of the Company and the Shareholders as a whole:

(1) The Independent Valuer is engaged to prepare an independent valuation of the Target Group. The Board has not noticed any information in the draft Valuation Report or any circumstance which would lead the Board to conclude that the Valuation Report prepared by the Independent Valuer shall not be relied upon;
(2) The Board has considered and agreed with the Independent Valuer’s views set out in the Valuation Report that amongst the common approaches for asset and business valuation such as the market approach, income approach and cost approach, the market approach is the most appropriate valuation approach for this valuation as it takes the market comparables into consideration;
(3) The amount of the Equity Consideration which shall be satisfied by the internal resources of the Group is not more than RMB100,000,000, which only accounts for approximately 29% of the cash and cash equivalents of RMB345,442,000 of the Group as at 30 June 2024 as disclosed in the 2024 interim report of the Company dated 19 August 2024;
(4) Although only part of the Equity Consideration can be set off by the Pre-existing Outstanding Paid Amount, which was arrived at after arm’s length negotiations and the only arrangement that can be reached between the Buyer and the Seller, the Company may benefit from the future operation and management of the Target Group by acquiring 100% equity interests of Seedlife, taking into account the business prospects and the financial performance of the Target Group; and
(5) The Company plans to continue to request the 2024 Adjusted Properties Vendors to perform their contractual obligations under the Fourth Supplemental Agreement after it becoming effective and will consider to negotiate with them on the feasibility of different proposals to accelerate the registration procedures for the remaining target properties. As the scope of the 2024 Further Terminated Properties is subject to potential downward adjustment resulting from the Profit Shortfall, the Company will further discuss with the 2024 Adjusted Properties Vendors on the arrangement to protect and safeguard the remaining amount of the consideration paid under the 2022 Property Purchase Agreement.

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LETTER FROM THE BOARD

INFORMATION ON SEEDLIFE

Seedlife is a limited liability company incorporated under the Laws of the British Virgin Islands and is held directly by Seedland Smart Service as to 100% since its incorporation. It principally engages in property management services through its subsidiaries in the PRC.

According to the unaudited consolidated management accounts in relation to the Target Group, (i) the unaudited pre-tax net profits and the unaudited post-tax net profits of the Target Group for the year ended 31 December 2022 were RMB43,786,000 and RMB33,074,000 respectively; and (ii) the unaudited pre-tax net profits and the unaudited post-tax net profits of the Target Group for the year ended 31 December 2023 were RMB64,587,000 and RMB48,414,000, respectively. The unaudited consolidated assets and net assets of the Target Group as of 31 December 2022 were RMB300,195,000 and RMB44,866,000 respectively. The unaudited consolidated assets and net assets of the Target Group as of 31 December 2023 were RMB399,202,000 and RMB93,280,000, respectively.

INFORMATION ON THE GROUP AND PARTIES INVOLVED IN THIS TRANSACTION

The Group is principally engaged in the extraction and sales of coal products.

The 2024 Adjusted Properties Vendors are companies incorporated in the PRC with limited liability and principally engage in real estate development and property management. As of the Latest Practicable Date, the 2024 Adjusted Properties Vendors are ultimately beneficially owned by Mr. Zhang Liang, Johnson, the settlor and beneficiary of Zhang Family Overseas Limited, which holds 100% equity interests in King Lok Holdings Limited, the controlling Shareholder of the Company, as to 100% (with regards to Vendor 4); 90% (with regards to Vendor 2); and 95% (with regards to Vendor 6), respectively.

Seedland Smart Service is a limited liability company incorporated under the Laws of the Cayman Islands and is held indirectly by Mr. Zhang Liang, Johnson as to 100%. It principally engages in property management services through its subsidiaries in the PRC.

REASONS FOR AND BENEFITS OF THE SEEDLIFE ACQUISITION

As at the Latest Practicable Date, Kinetic Qinhuangdao has already paid RMB803,000,000 (inclusive of value-added tax) to the Vendors for the acquisition of 2023 Adjusted Properties pursuant to the 2022 Property Purchase Agreement as amended by the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement. However, the overall progress of the property registration procedures in relation to the 2023 Adjusted Properties, including in particular the 2024 Further Terminated Properties, have not yet been completed as at the Latest Practicable Date. To protect and safeguard the interests of the Company and the Shareholders, the Group has been proactively exploring opportunities and identifying suitable assets to replace all or part of the 2023 Adjusted Properties which are subject to delay in registration with other assets that can be secured from the Vendors, Seedland and Mr. Zhang Liang, Johnson. Accordingly, the Company has secured the 100% equity interests

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LETTER FROM THE BOARD

of Seedlife from Seedland Smart Service under the Share Purchase Agreement (as amended by the Share Purchase Supplemental Agreement), and has agreed with Seedland Smart Service that the Final Set-off Amount shall be set off against the equivalent amount in the Pre-existing Outstanding Paid Amount.

Although as of the Latest Practicable Date, the Company had no relevant experience or expertise in the Target Group’s business, the Company confirms that it has no intention to dispose the Target Group upon the Closing and it plans to retain the core management team of the Target Group so as to continue with its existing business operations. In addition, the Company plans to hire external personnel with relevant expertise and experience in property management service industry to assist the core management team of the Target Group with the daily business operations.

With regards to the 2023 Adjusted Properties (excluding the 2024 Terminated Properties and the 2024 Further Terminated Properties), the Company has taken and will take the following actions to follow up on the construction status or mortgage status of these properties:

Properties sold by Vendor 2

The construction of properties sold by Vendor 2 is expected to be completed by December 2025. Completion of the construction of such properties was delayed given the financial constraints encountered by Vendor 2, which it is in the process of dealing with by its efforts to secure further funding. Also, the mortgage over such properties has not yet been discharged as Vendor 2 has not repaid the debt owed to its creditors in full.

To follow up on the construction of such properties, the Company has (i) requested Vendor 2 to expedite the construction process as much as possible; (ii) conducted regular on-site visits in Qingdao and requested Vendor 2 to provide periodic updates and the project supervision report (工程監理報告) in order to keep abreast of the construction status; and (iii) regularly monitored the financial standing of Vendor 2.

To follow up on the mortgage status, the finance team of the Company has regularly monitored the financial standing of Vendor 2 and kept abreast of the status of its repayment of debt owed to its creditors, and will regularly discuss with Vendor 2 its plan to discharge the relevant mortgage as soon as possible following the repayment and in any event by 2026. In particular, the Company will closely monitor the sale proceeds to be received by Vendor 2 and with the cooperation of Vendor 2, apply to the banks to allow the Company to monitor the bank account of Vendor 2.

Properties sold by Vendor 4

The construction of properties sold by Vendor 4 has been completed in 2011. However, the mortgage over such properties has not yet been discharged as Vendor 4 has not repaid the debt owed to its creditors in full.

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LETTER FROM THE BOARD

To follow up on the mortgage status, the finance team of the Company has regularly monitored the financial standing of Vendor 4 and kept abreast of the status of its repayment of debt owed to its creditors, and will regularly discuss with Vendor 4 its plan to discharge the relevant mortgage as soon as possible following the repayment and in any event by 2026. In particular, the Company will closely monitor the sale proceeds to be received by Vendor 4 and with the cooperation of Vendor 4, apply to the banks to allow the Company to monitor the bank account of Vendor 4.

The terms and conditions of the Share Purchase Agreement (as amended by the Share Purchase Supplemental Agreement) are negotiated on an arm’s length basis between the relevant parties therein. The Directors (including the independent non-executive Directors whose view is set out in the section headed “Letter from Independent Board Committee” of this circular after taking into account the advice from the Independent Financial Adviser) consider that the terms of the Share Purchase Agreement (as amended by the Share Purchase Supplemental Agreement), including the Equity Consideration, are fair and reasonable, on normal commercial terms and in the interests of the Company and the Shareholders as a whole.

Ms. Zhang Lin, a non-executive Director, being an associate of Mr. Zhang Liang, Johnson, has abstained from voting on the Board resolution approving the Share Purchase Agreement, the Share Purchase Supplemental Agreement and the Seedlife Acquisition.

LISTING RULES IMPLICATIONS

As the applicable percentage ratios as defined under Rule 14.07 of the Listing Rules in respect of the Seedlife Acquisition are more than 5% but less than 25%, the Seedlife Acquisition constitutes a discloseable transaction, and is subject to the notification and announcement requirements under Chapter 14 of the Listing Rules.

As at the Latest Practicable Date, the 2024 Adjusted Properties Vendors and Seedland Smart Service are ultimately beneficially owned by Mr. Zhang Liang, Johnson as to 100% (with regards to Vendor 4); 90% (with regards to Vendor 2); 95% (with regards to Vendor 6); and 100% (with regards to Seedland Smart Service), respectively. As at the Latest Practicable Date, Mr. Zhang Liang, Johnson is interested in 62.96% of the issued Shares of the Company through King Lok Holdings Limited, the controlling Shareholder of the Company, by reason of being a settlor of the Zhang Family Overseas Limited, a discretionary family trust for the benefit of himself and his family members. As such, the 2024 Adjusted Properties Vendors and Seedland Smart Service are associates of Mr. Zhang Liang, Johnson, and thus connected persons of the Company under Chapter 14A of the Listing Rules. As the applicable percentage ratios in respect of the Seedlife Acquisition are more than 5%, the Seedlife Acquisition constitutes a connected transaction of the Company, and is subject to the announcement, reporting, and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

The Company will convene the EGM for the Independent Shareholders to consider and approve, if thought fit, the Share Purchase Agreement, the Share Purchase Supplemental Agreement and the Seedlife Acquisition. Mr. Zhang Liang, Johnson, Mr. Zhang Li and their

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LETTER FROM THE BOARD

respective associates will abstain from voting at the EGM. An Independent Board Committee of the Company has been formed to advise the Independent Shareholders in respect of the Share Purchase Agreement, the Share Purchase Supplemental Agreement and the Seedlife Acquisition. The Independent Financial Adviser has been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

EXTRAORDINARY GENERAL MEETING

The EGM will be held by the Company at 18/F, 80 Gloucester Road, Wan Chai, Hong Kong on 3 January 2025 at 2:00 p.m., to consider and if thought fit, to approve, among other things, the Share Purchase Agreement, the Share Purchase Supplemental Agreement and the Seedlife Acquisition. A form of proxy for use at the EGM is enclosed with this circular.

Any Shareholder and his or her or its associates with a material interest in the resolution will abstain from voting on the resolution to be proposed at the EGM. To the best knowledge, information and belief of the Directors having made all reasonable enquires, save for Mr. Zhang Li, Mr. Zhang Liang, Johnson and their respective associates, no other Shareholders were required to abstain from voting on the resolution at the EGM as at the Latest Practicable Date.

The notice convening the EGM is set out on pages EGM-1 to EGM-3 of this circular.

For those who intend to direct a proxy to attend the EGM, please complete the form of proxy and return the same in accordance with the instructions printed thereon. In order to be valid, the above documents must be delivered to the Company’s share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong not less than 48 hours before the time appointed for the EGM or any adjournment thereof. The register of members of the Company will be closed from Monday, 30 December 2024 to Friday, 3 January 2025 (both days inclusive), during which time no share transfers will be effected. In order to qualify for attending the EGM or any adjournment thereof, all transfers of Shares accompanied by the relevant share certificate(s) must be lodged with the Company’s branch share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited, at Shops 1712−1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong by no later than 4:30 p.m. on Friday, 27 December 2024.

The holders of the Shares whose names appear on the register of members of the Company on Friday, 3 January 2025 are entitled to attend and vote in respect of the resolution to be proposed at the EGM.

You are urged to complete and return the form of proxy whether or not you will attend the EGM. Completion and return of the form of proxy will not preclude you from attending and voting at the EGM (or any subsequent meetings following the adjournments thereof) should you wish to do so.

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LETTER FROM THE BOARD

INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

The Independent Board Committee comprising all independent non-executive Directors has been formed to advise the Independent Shareholders on the reasonableness and fairness in respect of the Share Purchase Agreement, the Share Purchase Supplemental Agreement and the Seedlife Acquisition. Rainbow Capital (HK) Limited has been appointed by the Company as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders on these matters. The letter from the Independent Board Committee is set out on pages 36 to 37 of this circular and the letter from the Independent Financial Adviser containing its advice is set out on pages 38 to 69 of this circular.

RECOMMENDATIONS

The Directors (including the independent non-executive Directors, after considering the advice from the Independent Financial Adviser) consider that while the Share Purchase Agreement, the Share Purchase Supplemental Agreement and the Seedlife Acquisition are not in the ordinary and usual course of business of the Group, they are on normal commercial terms, and the terms are fair and reasonable and in the interests of the Company and the Shareholders as a whole. As such, the Directors recommend that the Independent Shareholders to vote in favour of the resolution to be proposed at the EGM.

ADDITIONAL INFORMATION

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

By Order of the Board Kinetic Development Group Limited Ju Wenzhong Chairman and Executive Director

The English translation of the Chinese names of the respective companies in this circular, where indicated, is included for information purpose only, and should not be regarded as the official English names of the respective companies.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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Kinetic Development Group Limited 力量發展集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1277)

25 November 2024

Dear Independent Shareholders,

CONNECTED TRANSACTION ACQUISITION OF SEEDLIFE

We refer to the circular of the Company dated 25 November 2024 (the “ Circular ”) of which this letter forms a part. Unless the context otherwise requires, terms defined in this letter shall have the same meanings as those defined in the Circular.

We have been appointed by the Board to form the Independent Board Committee to consider and advise the Independent Shareholders as to whether, in our opinion, the entering into of the Share Purchase Agreement, the Share Purchase Supplemental Agreement and the Seedlife Acquisition is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Having considered the terms of the Share Purchase Agreement, the Share Purchase Supplemental Agreement and the advice of the Independent Financial Adviser in relation thereto as set out on pages 38 to 69 of the Circular, we are of the opinion that while the entering into of the Share Purchase Agreement, the Share Purchase Supplemental Agreement and the Seedlife Acquisition are not in the ordinary and usual course of business of the Group, they are fair and reasonable, on normal commercial terms and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution to approve the entering into of the Share Purchase Agreement, the Share Purchase Supplemental Agreement and the Seedlife Acquisition at the EGM.

Yours faithfully,

Independent Board Committee

Ms. Liu Peilian

Independent Non-executive Director

Mr. Chen Liangnuan Independent Non-executive Director

Ms. Xue Hui Independent Non-executive Director

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of a letter of advice from Rainbow Capital, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of incorporation in this circular.

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25 November 2024

To the Independent Board Committee and the Independent Shareholders

Kinetic Development Group Limited

18th Floor 80 Gloucester Road Wan Chai Hong Kong

Dear Sir or Madam,

CONNECTED TRANSACTION ACQUISITION OF SEEDLIFE

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Share Purchase Agreement (as amended by the Share Purchase Supplemental Agreement) and the Seedlife Acquisition, details of which are set out in the “Letter from the Board” (the “ Letter from the Board ”) contained in the circular issued by the Company to the Shareholders dated 25 November 2024 (the “ Circular ”), of which this letter forms part. Unless the context otherwise requires, capitalised terms used in this letter shall have the same meanings as those defined in the Circular.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Property Purchase Agreement are terminated with effect from the date of the Supplemental Agreement, which effectively replaced the 2022 Property Purchase Agreement.

On 6 June 2024, the Company entered into the Letter of Intent with Mr. Zhang Liang, Johnson and Seedland Smart Service, pursuant to which, among others, the Company formalised its intent to acquire the 100% equity interests of Seedlife from Seedland Smart Service.

On 6 September 2024, the Buyer, Seedland Smart Service and Seedlife entered into the Share Purchase Agreement, pursuant to which, among others, the Buyer agreed to acquire (either directly or through the Acquiring Affiliate), and Seedland Smart Service agreed to sell, 100% equity interests of Seedlife for the Equity Consideration of RMB423,000,000.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Cash Payment); (iv) an amount of RMB42,300,000, which represents the taxes payable by the Seller arising from the sale of equity interests of Seedlife (i.e. the Corporate Income Tax) and which the Buyer will pay on the Seller’s behalf shall be deducted from the Equity Consideration; (v) an amount of RMB50,000,000, which represents the amount of an account receivable due from the Seller and its subsidiaries (excluding Seedlife) to Seedlife as at the date of the Share Purchase Agreement (i.e. the Account Receivable) shall be further deducted from the Equity Consideration; and (vi) the remaining amount of RMB230,700,000 (i.e. the Set-off Amount) (subject to downward adjustment by an amount calculated using the Formula to take into account any Profit Shortfall (such adjusted amount (if applicable), referred to as the Final Set-off Amount)), shall be set off against the equivalent amount in the Pre-existing Outstanding Paid Amount.

In the event that the Actual Profit falls short of the Guaranteed Profit (i.e. RMB52,000,000), resulting in a downward adjustment of the Set-off Amount, the Company will publish further announcement(s) and comply with the disclosure requirements under Rules 14.36B and 14A.63 of the Listing Rules. The Company will also disclose whether the actual performance of the Target Group meets the Guaranteed Profit in its next annual report as required under Rules 14.36B(3) and 14A.63(3) of the Listing Rules. In addition, on the same date, Kinetic Qinhuangdao entered into the Fourth Supplemental Agreement with Vendor 2, Vendor 4 and Vendor 6 (i.e. the 2024 Adjusted Properties Vendors) as well as the Company, Seedland Smart Service and Mr. Zhang Liang, Johnson, pursuant to which, among others, (i) the 2024 Further Terminated Properties, with an allocated consideration equal to the Final Set-Off Amount, would no longer be sold to Kinetic Qinhuangdao; and (ii) the rights and obligations between the 2024 Adjusted Properties Vendors and Kinetic Qinhuangdao in respect of the 2024 Further Terminated Properties under the 2022 Property Purchase Agreement (as amended by the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement) were terminated with effect from the date of the Fourth Supplemental Agreement.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Supplemental Agreement, the Third Supplemental Agreement and the Fourth Supplemental Agreement) were terminated with effect from the date of the Fifth Supplemental Agreement.

As the applicable percentage ratios as defined under Rule 14.07 of the Listing Rules in respect of the Seedlife Acquisition are more than 5% but less than 25%, the Seedlife Acquisition constitutes a discloseable transaction and is subject to the notification and announcement requirements under Chapter 14 of the Listing Rules.

As at the Latest Practicable Date, the 2024 Adjusted Properties Vendors and Seedland Smart Service are ultimately beneficially owned by Mr. Zhang Liang, Johnson as to 100% (with regards to Vendor 4); 90% (with regards to Vendor 2); 95% (with regards to Vendor 6); and 100% (with regards to Seedland Smart Service), respectively. As at the Latest Practicable Date, Mr. Zhang Liang, Johnson is interested in 62.96% of the issued Shares of the Company through King Lok Holdings Limited, the controlling Shareholder of the Company, by reason of being a settlor of the Zhang Family Overseas Limited, a discretionary family trust for the benefit of himself and his family members. As such, the 2024 Adjusted Properties Vendors and Seedland Smart Service are associates of Mr. Zhang Liang, Johnson, and thus connected persons of the Company under Chapter 14A of the Listing Rules. As the applicable percentage ratios in respect of the Seedlife Acquisition are more than 5%, the Seedlife Acquisition constitutes a connected transaction of the Company, and is subject to the announcement, reporting, and the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

The Company will seek approval from the Independent Shareholders in respect of the Share Purchase Agreement, the Share Purchase Supplemental Agreement and the Seedlife Acquisition by way of a poll at the EGM. In view of the interest above, Mr. Zhang Liang, Johnson, Mr. Zhang Li and their respective associates will be required to abstain from voting at the EGM.

The Independent Board Committee, comprising all the three independent non-executive Directors, namely Ms. Liu Peilian, Mr. Chen Liangnuan and Ms. Xue Hui, has been formed to advise the Independent Shareholders on whether (i) the entering into of the Share Purchase Agreement, the Share Purchase Supplemental Agreement and the Seedlife Acquisition are conducted in the ordinary and usual course of business of the Group; and (ii) the terms of the Share Purchase Agreement (as amended by the Share Purchase Supplemental Agreement) and the Seedlife Acquisition are fair and reasonable, on normal commercial terms and in the interests of the Company and the Shareholders as a whole, and advise the Independent Shareholders as to voting. We, Rainbow Capital, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in the same regard.

As at the Latest Practicable Date, we did not have any relationships or interests with the Group, Mr. Zhang Liang, Johnson, Seedland Smart Service and Seedlife that could reasonably be

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

regarded as relevant to our independence. We have acted as the independent financial adviser to the independent board committee and the independent shareholders of the Company in relation to (i) a discloseable and connected transaction in relation to the acquisition and subscription of shares in a target company, details of which are set out in the circular of the Company dated 30 June 2023; (ii) a discloseable and connected transaction in respect of the Second Supplemental Agreement, details of which are set out in the circular of the Company dated 21 February 2024; and (iii) a discloseable and connected transaction in respect of the Maoming Acquisition, details of which are set out in the announcement of the Company dated 4 November 2024 (the “ Second Appointment ”). Other than that, there was no engagement between the Group, Mr. Zhang Liang, Johnson, Seedland Smart Service or Seedlife and us in the last two years. Apart from normal professional fees paid or payable to us in connection with this appointment as the Independent Financial Adviser, no other arrangements exist whereby we had received any fees or benefits from the Group or any other party to the Seedlife Acquisition. The relevant fess paid or payable to us for acting as the independent financial advisers in relation to this appointment and the Second Appointment are normal professional fees and shall not affect our independence in both appointments. Accordingly, we are independent from the Company pursuant to the requirement under Rule 13.84 of the Listing Rules and therefore we are qualified to give independent advice in respect of the Share Purchase Agreement, the Share Purchase Supplemental Agreement and the Seedlife Acquisition.

BASIS OF OUR OPINION

In formulating our opinion and advice, we have relied on (i) the information and facts contained or referred to in the Circular; (ii) the information supplied by the Group; (iii) the opinions expressed by and the representations of the Directors and the management of the Group; and (iv) our review of the relevant public information. We have assumed that all the information provided and representations and opinions expressed to us or contained or referred to in the Circular were true, accurate and complete in all respects as at the date thereof and may be relied upon. We have also assumed that all statements contained and representations made or referred to in the Circular are true at the time they were made and continue to be true as at the Latest Practicable Date and all such statements of belief, opinions and intentions of the Directors and the management of the Group and those as set out or referred to in the Circular were reasonably made after due and careful enquiry. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors and the management of the Group. We have also sought and received confirmation from the Directors that no material facts have been withheld or omitted from the information provided and referred to in the Circular and that all information or representations provided to us by the Directors and the management of the Group are true, accurate, complete and not misleading in all respects at the time they were made and continued to be so until the date of the Circular.

We consider that we have reviewed sufficient information currently available to reach an informed view and to justify our reliance on the accuracy of the information contained in the Circular so as to provide a reasonable basis for our recommendation. We have not, however, carried out any independent verification of the information provided, representations made or

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

opinion expressed by the Directors and the management of the Group, nor have we conducted any form of in-depth investigation into the business, affairs, operations, financial position or future prospects of the Group or its respective substantial shareholders, subsidiaries or associates.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In considering the fairness and reasonableness of the Share Purchase Agreement (as amended by the Share Purchase Supplemental Agreement) and the Seedlife Acquisition, we have taken into account the principal factors and reasons set out below:

1. Background information on the Group

The Group is principally engaged in the extraction and sales of coal products. As a leading integrated coal enterprise in China, the Group’s business activities operate through the whole coal industry chain, covering coal production, washing, loading, transportation and trading.

Set out below is a summary of the consolidated financial information of the Group for (i) the two years ended 31 December 2023 (“ FY2022 ” and “ FY2023 ”, respectively) as extracted from the annual report of the Company for FY2023; and (ii) the six months ended 30 June 2023 and 2024 (“ 6M2023 ” and “ 6M2024 ”, respectively) as extracted from the interim report of the Company for 6M2024 (the “ 2024 Interim Report ”):

(i) Financial performance

	FY2022	FY2023	6M2023	6M2024
	RMB’000	RMB’000	RMB’000	RMB’000
	(audited)	(audited)	(unaudited)	(unaudited)
Revenue	6,155,830	4,745,069	1,492,198	2,532,355
Cost of sales	(2,132,372)	(1,942,031)	(675,293)	(977,668)
Gross profit	4,023,458	2,803,038	816,905	1,554,687
Other incomes and losses, net	(65,535)	(27,000)	(15,545)	58,762
Net (losses) gains on fair value
changes of financial assets	(39,860)	29,278	15,296	15,597
Selling expenses	(23,264)	(16,938)	(7,239)	(20,677)
Administrative expenses	(225,417)	(257,146)	(140,310)	(174,431)
Profit from operations	3,669,382	2,531,232	669,107	1,433,938

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

	FY2022	FY2023	6M2023	6M2024
	RMB’000	RMB’000	RMB’000	RMB’000
	(audited)	(audited)	(unaudited)	(unaudited)
Share of profits of associates	14,538	11,109	1,769	12,015
Finance costs	(49,893)	(101,440)	(37,515)	(43,877)
Profit before taxation	3,634,027	2,440,901	633,361	1,402,076
Income tax expense	(977,712)	(368,178)	(64,286)	(316,909)
Profit attributable to the
Shareholders	2,664,533	2,077,831	570,236	1,095,281

FY2023 compared to FY2022

Revenue of the Group decreased by approximately 22.9% from approximately RMB6,155.8 million for FY2022 to approximately RMB4,745.1 million for FY2023. Such decrease was mainly due to (a) the decrease in the Group’s average selling price of the coal products; and (b) the decrease in the sales volume of the coal products of the Group as a result of the faults, fracture zones, increase in pressure in roof plate and a slow progression of mining in the coal mining works of Dafanpu Coal Mine of the Group in the first half of 2023.

Gross profit of the Group decreased by approximately 30.3% from approximately RMB4,023.5 million for FY2022 to approximately RMB2,803.0 million for FY2023. Such decrease was mainly due to (a) the decrease in revenue as stated above; and (b) the decrease in the Group’s gross profit margin from approximately 65.4% for FY2022 to approximately 59.1% for FY2023 as a result of the decrease in the average selling price of the Group’s coal products.

The Group recorded a profit attributable to the Shareholders of approximately RMB2,077.8 million for FY2023, which represented a decrease of approximately 22.0% from approximately RMB2,664.5 million for FY2022. Such decrease was mainly due to (a) the decrease in revenue and gross profit as stated above; (b) the increase in administrative expenses by approximately RMB31.7 million primarily attributable to the increase in staff cost during FY2023; and (c) the increase in finance costs by approximately RMB51.5 million primarily attributable to the increase in average balance of interest-bearing liabilities during FY2023.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

6M2024 compared to 6M2023

Revenue of the Group increased by approximately 69.7% from approximately RMB1,492.2 million for 6M2023 to approximately RMB2,532.4 million for 6M2024, which was primarily due to the resumption of normal production levels at the Group’s Dafanpu Coal Mine.

In line with the increase in revenue as stated above, gross profit of the Group increased by approximately 90.3% from approximately RMB816.9 million for 6M2023 to approximately RMB1,554.7 million for 6M2024.

The Group recorded a profit attributable to the Shareholders of approximately RMB1,095.3 million for 6M2024, which represented a significant increase of approximately 92.1% from approximately RMB570.2 million for 6M2023. Such increase was mainly due to (a) the increase in revenue and gross profit as stated above; and (b) the turnaround from net other losses of approximately RMB15.5 million for 6M2023 to net other incomes of approximately RMB58.8 million for 6M2024 mainly due the increase in government grants and interest income and the decrease in donation, which was partially offset by (a) the increase in selling expenses by approximately RMB13.4 million as a result of the increase in marketing related expenses; and (b) the increase in administrative expenses by approximately RMB34.1 million due to the increase in staff cost during 6M2024.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(ii) Financial position

			As at
	As at 31 December		30 June
	2022	2023	2024
	RMB’000	RMB’000	RMB’000
	(audited)	(audited)	(unaudited)
Non-current assets,
including:	7,880,432	8,780,727	9,219,664
Property, plant and equipment	1,716,365	2,483,678	2,928,013
Intangible assets	3,210,599	3,233,648	3,216,848
Prepayments for proposed
acquisitions	2,546,892	2,449,881	2,211,882
Current assets, including:	1,612,209	2,157,187	2,569,233
Financial assets at fair value
through profit or loss	190,899	220,592	269,035
Inventories	110,213	115,274	1,565,858
Trade and other receivables	220,718	194,053	164,536
Pledged and restricted deposits	475,903	727,784	158,614
Cash at bank and on hand	551,866	734,143	345,442
Total assets	9,492,641	10,937,914	11,788,897
Current liabilities, including:	1,815,415	2,572,076	3,032,879
Trade and other payables	518,906	1,066,741	1,209,627
Contract liabilities	196,283	68,351	817,308
Bank loans and other
borrowing	300,000	1,033,000	598,260
Income tax payable	784,328	402,086	378,088
Non-current liabilities,
including:	1,360,436	945,639	895,681
Bank loans and other
borrowing	583,000	269,800	214,250
Long-term liabilities	638,992	583,936	576,131
Net current assets/(liabilities)	(203,206)	(414,889)	(463,646)
Total liabilities	3,175,851	3,517,715	3,928,560
Equity attributable to the
Shareholders	6,328,794	7,367,850	7,817,789

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As at 30 June 2024, non-current assets of the Group amounted to approximately RMB9,219.7 million, which mainly included (a) property, plant and equipment of approximately RMB2,928.0 million, primarily consisting of the Group’s building, machinery and equipment, mining structures and construction in progress; (b) intangible assets of approximately RMB3,216.8 million, primarily consisting of mining rights arising from the Group’s acquisition of Ningxia Kinetic Mining Co., Ltd. (whose former name is Ningxia Sunshine Mining Co., Ltd.) (“ Ningxia Kinetic ”), a subsidiary which is principally engaged in coal mine construction, extraction and sale of coal products; and (c) prepayments for proposed acquisitions of approximately RMB2,211.9 million which was primarily attributable to the prepayments for the acquisitions of 75% equity interests in Liupanshui Changlin Real Estate Development Co., Ltd., and properties.

As at 30 June 2024, current assets of the Group amounted to approximately RMB2,569.2 million, which mainly included (a) financial assets at fair value through profit or loss of approximately RMB269.0 million, representing trust wealth management investments subscribed by the Group and trading securities held by the Group; (b) inventories of approximately RMB1,565.9 million, primarily consisting of properties under development; (c) trade and other receivables of approximately RMB164.5 million; and (d) cash at bank and on hand of approximately RMB345.4 million.

As at 30 June 2024, current liabilities of the Group amounted to approximately RMB3,032.9 million, which mainly included (a) trade and other payables of approximately RMB1,209.6 million; (b) contract liabilities of approximately RMB817.3 million; (c) bank loans and other borrowing of approximately RMB598.3 million which were secured with effective interest rates ranging from 5.00% to 5.50% per annum; and (d) income tax payable of approximately RMB378.1 million.

As at 30 June 2024, non-current liabilities of the Group amounted to approximately RMB895.7 million, which mainly included (a) bank loans and other borrowing of approximately RMB214.3 million which were secured with effective interest rate ranging from 5.00% to 5.50% per annum; and (b) long-term liabilities of approximately RMB576.1 million primarily consisting of present value of payables in relation to mining rights.

As at 30 June 2024, the Group had equity attributable to the Shareholders of approximately RMB7,817.8 million with net current liabilities of approximately RMB463.6 million.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iii) Overall comment

The financial performance of the Group fluctuated for the periods under review as impacted by the supply and demand of the domestic coal market and the domestic coal policy. In 2023, the Group’s sales volume and the average selling price of coal product both declined as a result of the downward pressure of market coal prices and the decrease of production volume due to the unfavourable underground mining conditions of the Group’s Dafanpu Coal Mine in the first half of 2023. In response, the Group adopted effective measures in a proactive manner in the mining aspect, so that the production and operation have gradually resumed normal in May 2023. In the first half of 2024, the Group’s Dafanpu Coal Mine no longer experienced production disruptions as in the corresponding previous period. With the improvement in extraction efficiency, the Group’s production volume of coal increased significantly year-on-year and returned to the expected normal level during 6M2024.

As disclosed in the 2024 Interim Report, the Group is currently constructing Yong’an Coal Mine and Weiyi Coal Mine. Yong’an Coal Mine is expected to put into operation in the second half of 2024 and reach full capacity in 2027, while Weiyi Coal Mine is expected to be put into operation in the second half of 2025 and reach full capacity in 2027. The Group will be able to tap into the coking coal business, and further increase the production capacity of coking coal by 2.1 million tons per year, thus breaking through the limitations arising from operating a single coal mine with a single coal type, and the coal mine project in Ningxia is expected to be one of the main driving forces of the growth in results in the future. On the other hand, the demand side of the coal market is expected to remain its resilience with the gradual recovery of the economy and the fact that thermal power will maintain its dominant position, as shown in the significant year-on-year increase in the number of new thermal power generating units during the period of the 14th Five-Year Plan. As such, we consider the Group’s prospects shall continue to be positive.

As advised by the management of the Group, on the basis of the steady development of the principal coal business, the Group is diversifying its ancillary business and actively promoting the acquisition of quality projects by utilising surplus funds to strive for remarkable returns for the Shareholders. Taking into account the industry outlook of the property management market in the PRC and the Group’s business strategy of diversification, the Seedlife Acquisition represents a suitable investment opportunity for the Group to diversify its revenue base and generate stable income stream.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2. Information on Seedlife

Set out below is the summary of the unaudited consolidated management accounts of the group companies of Seedlife for the two years ended 31 December 2023:

	FY2022	FY2023
	RMB’000	RMB’000
	(unaudited)	(unaudited)
Revenue	239,297	246,614
Profit before taxation	43,786	64,587
Profit after taxation	33,074	48,414

As at 31 December 2022, the unaudited total assets and net assets of the Target Group amounted to approximately RMB300.2 million and RMB44.9 million, respectively. As at 31 December 2023, the unaudited total assets and net assets of the Target Group amounted to approximately RMB399.2 million and RMB93.3 million, respectively.

3. Reasons for and benefits of the Seedlife Acquisition

With reference to the Letter from the Board, as at the Latest Practicable Date, Kinetic Qinhuangdao has already paid RMB803,000,000 (inclusive of value-added tax) to the Vendors for the acquisition of the 2023 Adjusted Properties pursuant to the 2022 Property Purchase Agreement as amended by the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement. However, the overall progress of the property registration procedures in relation to the 2023 Adjusted Properties, including in particular the 2024 Further Terminated Properties, have not yet been completed as at the Latest Practicable Date due to delay in registration on the part of the Vendors. As advised by the management of the Group, such delay in registration is mainly due to that (i) the 2023 Adjusted Properties are still subject to mortgages which have not been discharged; and (ii) the construction of some of the 2023 Adjusted Properties has not yet been completed. To protect and safeguard the interests of the Company and the Shareholders, the Group has been proactively exploring opportunities and identifying suitable assets to replace all or part of the 2023 Adjusted Properties which are subject to delay in registration with other assets that can be secured from the Vendors, Seedland and Mr. Zhang Liang, Johnson. Accordingly, the Company has secured the 100% equity interests of Seedlife from Seedland Smart Service under the Share Purchase Agreement (as amended by the Share Purchase Supplemental Agreement), and has agreed with Seedland Smart Service that the Final Set-off Amount shall be set off against the equivalent amount in the Pre-existing Outstanding Paid Amount.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In assessing whether there is a breach of contractual obligations on the part of the Vendors regarding the 2024 Further Terminated Properties, we have (i) reviewed the Supplemental Agreement and noted that the Supplemental Agreement did not impose a long stop date to obligate the Vendors to complete the construction works and/or discharge of the mortgages in relation to the 2024 Further Terminated Properties within a specified time period; and (ii) discussed with the PRC legal advisers to the Company and understood that as there was no long stop date of the Supplemental Agreement, the Vendors were not contractually in violation of the terms of the Supplemental Agreement by failing to complete the construction works and/or discharge of the mortgages for 2024 Further Terminated Properties as at the Latest Practicable Date. On the other hand, as advised by the management of the Group, the Company has been actively following up with the Vendors on the progress of the construction works and the release of the mortgages. Taking into account that (i) the Vendors are not in breach of their contractual obligations under the Supplemental Agreement; (ii) the Company has been actively negotiating with the Vendors in good faith for the completion of the construction works and the release of the mortgages; and (iii) the Vendors have been actively negotiating with their creditors for the discharge of the mortgages, we concur with the management of the Group that it is difficult for the Company to claim a breach of contractual obligations regarding the 2024 Further Terminated Properties whose property registration procedures have been significantly delayed on the part of the Vendors.

On the other hand, as discussed in the section headed “1. Background information on the Group” above, the Group is diversifying its business and actively promoting the acquisition of quality projects by utilising surplus funds to strive for remarkable returns for the Shareholders. The Company has tapped into property market in the PRC since 2022 through the acquisition of certain properties. The Seedlife Acquisition, if materialised, will allow the Company to further diversify its business portfolio by tapping into the property management market in the PRC. Furthermore, as set out in the section headed “4. Industry Overview” below, the property management industry in the PRC is expected to continue to grow in a stable manner in the coming years under the impact of the overall domestic economic development and the continued support from the government for the expansion and promotion of the sector. On the other hand, Seedlife recorded profit after taxation for two consecutive years, with a growth of approximately 46.4% from approximately RMB33.1 million for FY2022 to approximately RMB48.4 million for FY2023, and recorded net assets of approximately RMB93.3 million as at 31 December 2023. In light of the above, the Seedlife Acquisition represents a good investment for the Group to meet its business development strategy to enhance its competitiveness and capture the opportunities in the property management sector of the PRC, so as to further enhance the earnings of the Group and maximise returns to the Shareholders.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Taking into account that (i) as advised by the management of the Group, it is difficult to claim a breach of contractual obligations regarding the 2024 Further Terminated Properties whose property registration procedures have been significantly delayed on the part of the Vendors; (ii) the Seedlife Acquisition represent an opportunity for the Group to set off against part of the Pre-existing Outstanding Paid Amount in relation to the 2024 Further Terminated Properties to protect and safeguard the interests of the Group and the Shareholders; (iii) the Seedlife Acquisition is in line with the development strategy of the Group to actively promote the acquisition of quality projects to strive for remarkable returns for the Shareholders; (iv) the solid and stable financial performance and position of Seedlife; and (v) the positive outlook of the property management market in the PRC, we concur with the Directors that although the Seedlife Acquisition is not conducted in the ordinary and usual course of the business of the Group, it is in the interest of the Company and the Shareholders as a whole.

4. Industry overview

Set out below are the gross domestic product (“ GDP ”) of the PRC during the period from 2019 to 2023:

	2019	2020	2021	2022	2023	CAGR
GDP of the PRC (RMB’ billion)	98,652	101,357	114,924	120,472	126,058	6.3%
Disposal income per capita of urban
population in the PRC (RMB)	42,359	43,834	47,412	49,283	51,821	5.2%

Source: National Bureau of Statistics of China

As shown in the table above, the Chinese GDP has increased from approximately RMB98,652 billion in 2019 to approximately RMB126,058 billion in 2023 with a compound annual growth rate (“ CAGR ”) of approximately 6.3%, indicating a solid economic foundation for the PRC during the past five years. During the same period, the disposal income per capita of urban population in the PRC has increased from approximately RMB42,359 in 2019 to approximately RMB51,821 in 2023 with a CAGR of approximately 5.2%, suggesting a significant increase of purchasing power of the Chinese urban residents which would raise consumers’ willingness to pay premiums for the pursuit of quality property management services and produce a high demand for property management services. According to the International Monetary Fund, the Chinese economy is expected to continue to grow with a projected GDP growth rate of approximately 5.0% and 4.5% in 2024 and 2025, respectively (source: https://www.imf.org/en/News/Articles/2024/05/28/pr24184-china-imf-staff-completes2024-art-iv-mission#:~:text=%E2%80%9CChina’s%20economic%20growth%20is%20 projected,data%20and%20recent%20policy%20measures). In line with the steady growth of macro-economy and disposal income per capita of urban population in the PRC, the Chinese property management market is expected to maintain a stable growth.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In addition to the economic fundamentals, the Chinese government has introduced various policies to support and promote the growth of the property management market. With reference to the “Opinions on Promoting the Construction of a Quarter-hour Convenient Living Circle in Cities” (關於推進城市一刻鐘便民生活圈建設的意見) jointly issued by the Ministry of Commerce and other 11 departments in May 2021, it promoted the construction of quarter-hour convenient living circles in cities and encouraged “property service plus living service” to improve the level of convenience and quality of consumption. In December 2022, the Party Central Committee and the State Council issued the “Outline of Strategic Planning for Expanding Domestic Demand (2022−2035)” (擴大內需戰略規劃綱要(2022−2035年)), which indicated that the Chinese government would, among others, improve the quality level of community public services, enhance community service functions, guide social forces to participate in community services, improve the level of intelligence in community services and support the integration and innovation of housekeeping, elderly care, childcare, property and other business services. Furthermore, in November 2023, the National Development and Reform Commission issued the “Implementation Plan for the Construction of Embedded Service Facilities in Urban Communities” (城市社區嵌入式服務設施建設工程實施方案), which piloted the construction of built-in service facilities in urban communities or embedding functional facilities and supporting services in the public space of residential areas to provide accessible, high quality and one-stop community services for residents.

Taking into account (i) the recovery of the PRC economy as the COVID-19 restrictions have been relaxed since the end of 2022; (ii) the continuous growth of the Chinese economy and disposal income per capita of urban population which is expected to produce a high demand for property management services; and (iii) the promulgation and implementation of favourable government policies to support and promote the sustainable development of the property management market, we concur with the Directors that the outlook for the property management market in the PRC is generally positive.

5. Principal terms of the Share Purchase Agreement

Set out below is a summary of the principal terms of the Share Purchase Agreement (as amended by the Share Purchase Supplemental Agreement). Independent Shareholders are advised to read further details of the Share Purchase Agreement as set out in the Letter from the Board.

Date

: Share Purchase Agreement: 6 September 2024

Share Purchase Supplemental Agreement: 12 November 2024

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Parties : (i) the Company (the Buyer); (ii) Seedland Smart Service (the Seller); and (iii) Seedlife (the target company) Assets to be acquired : 100% equity interests of Seedlife Consideration : The total consideration for the Seedlife Acquisition is RMB423,000,000.

The Equity Consideration was arrived at after arm’s length negotiations between the Buyer and the Seller with reference to, among other things, the valuation of the Target Group of RMB423,000,000 as at 31 May 2024 (the “ Valuation ”) according to the valuation report (the “ Valuation Report ”) prepared by Asia-Pacific Consulting and Appraisal Limited (the “ Independent Valuer ”), the independent valuer appointed by the Company, using the market approach.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Payment terms

: The Equity Consideration shall be paid by the Buyer to the Seller in the following manner:
(i) the LOI Deposit with an amount of HKD25,000,000 (equivalent to RMB22,770,000), which has been transferred by the Company to Mr. Zhang Liang, Johnson under the Letter of Intent;
(ii) the Further Cash Payment with an amount of not more than RMB25,000,000 shall be paid by the Buyer to the Seller if so requested by the Seller within 30 Business Days following the date of the Share Purchase Agreement;
(iii) the Closing Cash Payment with an amount which equals the difference between RMB77,230,000 and the Further Cash Payment shall be paid by the Buyer to the Seller on the date of the Closing;
(iv) the Corporate Income Tax in the amount of RMB42,300,000 shall be deducted from the Equity Consideration;
(v) the Account Receivable in the amount of RMB50,000,000 shall be further deducted from the Equity Consideration; and

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(vi) the Final Set-Off Amount, which equals to RMB230,700,000 (subject to downward adjustment by an amount calculated using the Formula to take into account any Profit Shortfall (if applicable)), shall be set off against the equivalent amount in the Pre-existing Outstanding Paid Amount. Based on the Target Group’s unaudited after-tax net profit of RMB39,500,000 for the nine months ended 30 September 2024 and assuming, solely for illustration purposes only, the Target Group’s unaudited after-tax net profit for the full year ending 31 December 2024 remains as the same level, i.e. RMB39,500,000, it is expected that the downward adjustment will not be more than RMB105,750,000.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Closing : The Closing shall take place via the signing and/or exchange of documents and signatures electronically on the date which is a Business Day by which all closing conditions specified in the section “Conditions precedent to the Closing” below have either been satisfied, or waived by the Buyer, before or upon the Closing or at such other time and place as the Seller and the Buyer shall mutually agree in writing.
Conditions precedent to : Completion of the Seedlife Acquisition is the Closing conditional upon, among others, the Buyer has obtained all necessary approvals required for the consummation of the transactions contemplated under the Transaction Documents and have completed all procedures required therefor under the Listing Rules.
Termination of the Share : The Share Purchase Agreement may be terminated Purchase Agreement prior to the Closing:
(i) by mutual written consent of the parties;
(ii) by the Buyer, by written notice, if there has been a material misrepresentation (or any representation or warranty made becomes untrue, inaccurate or misleading) or material breach of a covenant or agreement contained in the Share Purchase Agreement on the part of the Seller or any Warrantor, and such breach, if curable, has not been cured within 14 days of such notice; or
(iii) by the Buyer, if any condition precedent has neither been fulfilled nor waived by 31 January 2025, or if due to change of applicable laws, the consummation of the transactions contemplated thereunder would become prohibited under applicable laws.

As disclosed above, only part of the Equity Consideration amounted to approximately RMB230.7 million will be set off against the equivalent amount in the Pre-existing Outstanding Paid Amount. Taking into account that (i) it is difficult to claim a breach of contractual obligations regarding the 2024 Further Terminated Properties whose property registration procedures have been significantly delayed on the part of the Vendors; (ii) by

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

acquiring 100% equity interest of Seedlife, the Company is able to protect and safeguard its interests as the part of the Equity Consideration shall be set off against the Pre-existing Outstanding Paid Amount; (iii) the amount of the Equity Consideration which shall be satisfied by the internal resources of the Group is approximately RMB100.0 million, which accounts for approximately 28.9% of the Group’s cash balance as at 30 June 2024. The Seedlife Acquisition is expected to generate positive returns to the Group and the Shareholders given the solid and stable financial performance and position of Seedlife and the positive outlook of the property management market in the PRC. As such, it represents a suitable investment opportunity of the Group’s surplus cash on hand; (iv) the aforesaid payment terms is the best terms currently obtained by the Group after its negotiations with the Vendors, Mr. Zhang Liang, Johnson and Seedland Smart Service; and (v) the Company plans to continue to request the 2024 Adjusted Properties Vendors to perform their contractual obligations under the Fourth Supplemental Agreement after it becoming effective and will consider to negotiate with them on the feasibility of different proposals to accelerate the registration procedures for the remaining target properties, we consider that such payment terms are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Pursuant to the Fourth Supplemental Agreement, the scope of the 2024 Further Terminated Properties is set out below:

Properties of Vendor 6

No
Location
1
23C Group land slots S1,
S2 and S3 at the
intersection of Dong
Cheng Avenue and Dong
Lian No. 2 Line, Zunyi
City, Guizhou Province
2
S30, D5 (Plots 06 and
07), intersection of
Xinpu Avenue and Bo
Zhou Avenue, Zunyi
City, Guizhou Province
Total

Area Use
Property title
certificate no.
Mortgage
Notes
(square meter)
7,687.92 Commercial
Guizhou (2019)
Zunyi City
Property Title
No. 0014121
Yes
Including S1 slots
101–124,
201–225, S2 slots
101–123,
201–221, and S3
slots 110–123,
11–19
9,007.43 Commercial
Guizhou (2016)
Zunyi City
Property Title
No. 0028059
Yes
Including S30
slots 151,
201–206,
211–225,
227–263,
317–362
16,695.35

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Properties of Vendor 4

				Property title
No	Location	Area	Use	certificate no.	Mortgage
		(square
		meter)
1	1st Floor, Tower 1, Lily	1,964.55	Commercial	Guangdong Land	Yes
	Garden, No. 113 Bo Ai 7th			Zhongshan
	Avenue, Zhongshan Torch			Properties Title
	Development Zone			No. 0111010909
2	2nd Floor, Tower 1, Lily	2,625.83	Commercial	Guangdong Land	Yes
	Garden, No. 113 Bo Ai 7th			Zhongshan
	Avenue, Zhongshan Torch			Properties Title
	Development Zone			No. 0111010886
3	Room 3, Tower 3, Lily	58.42	Commercial	Guangdong Land	Yes
	Garden, No. 113 Bo Ai 7th			Zhongshan
	Avenue, Zhongshan Torch			Properties Title
	Development Zone			No. 0112006373
4	Room 6, Tower 3, Lily	106.91	Commercial	Guangdong Land	Yes
	Garden, No. 113 Bo Ai 7th			Zhongshan
	Avenue, Zhongshan Torch			Properties Title
	Development Zone			No. 0112006378
5	Room 8, Tower 3, Lily	155.69	Commercial	Guangdong Land	Yes
	Garden, No. 113 Bo Ai 7th			Zhongshan
	Avenue, Zhongshan Torch			Properties Title
	Development Zone			No. 0112006390
6	Room 9, Tower 3, Lily	98.19	Commercial	Guangdong Land	Yes
	Garden, No. 113 Bo Ai 7th			Zhongshan
	Avenue, Zhongshan Torch			Properties Title
	Development Zone			No. 0112006400
7	Room 12, Tower 3, Lily	205.49	Commercial	Guangdong Land	Yes
	Garden, No. 113 Bo Ai 7th			Zhongshan
	Avenue, Zhongshan Torch			Properties Title
	Development Zone			No. 0112006404

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Property title No Location Area Use certificate no. Mortgage (square meter) 8 Room 14, Tower 3, Lily 115.69 Commercial Guangdong Land Yes Garden, No. 113 Bo Ai 7th Zhongshan Avenue, Zhongshan Torch Properties Title Development Zone No. 0112006407 9 Room 17, Tower 3, Lily 83.75 Commercial Guangdong Land Yes Garden, No. 113 Bo Ai 7th Zhongshan Avenue, Zhongshan Torch Properties Title Development Zone No. 0112006414

Total

5,414.52

As disclosed in the Letter from the Board, in selecting the 2024 Further Terminated Properties, the Company has taken into account various factors such as whether the properties are subject to mortgages provided as security in favour of creditors, whether these creditors have initiated legal proceedings against the relevant Vendors, whether these legal proceedings are likely to be resolved within a short period of time, whether the relevant properties are affected by foreclosure or reorganization procedures, and the value of properties.

Having considered that (i) all of the 2024 Further Terminated Properties are subject to mortgages which have not been discharged given the financial constraints encountered by Vendor 4 and Vendor 6; (ii) the allocated consideration of the 2024 Further Terminated Properties equals the Set-off Amount of Seedlife Acquisition; (iii) Vendor 2 is actively raising funds to complete the construction of the relevant 2023 Adjusted Properties (excluding the 2024 Terminated Properties) by applying for government subsidies for ensuring timely delivery of properties (保交付資金) and for bank loans and is negotiating with its creditors to discharge the mortgages over such properties by expediting the sales of properties to generate proceeds for repayment of debts owed to the creditors through market campaigns and promotions; and (iv) by acquiring 100% equity interest of Seedlife, the Company is able to protect and safeguard its interests as the part of the Equity Consideration shall be set off against the Pre-existing Outstanding Paid Amount, we concur with the Directors that the above selection criteria in determining the scope of the 2024 Further Terminated Properties is fair and reasonable and in the interest of the Company and its Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

narrowed by excluding certain properties with a value roughly equalling the amount by which the Set-off Amount shall be adjusted downwards. Kinetic Qinhuangdao will further enter into a supplemental agreement with the 2024 Adjusted Properties Vendors to determine the adjusted scope. The 2024 Adjusted Properties Vendors shall continue to perform its obligations attributable to the properties corresponding to such downward adjustment under the 2022 Property Purchase Agreement (as amended by the Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement).

Having considered that (i) the majority of the Equity Consideration are not satisfied by cash, but through the set off against the equivalent amount in the Pre-existing Outstanding Paid Amount and the Account Receivable; (ii) the aforesaid arrangement regarding the Profit Shortfall is the best terms currently obtained by the Group after its negotiations with the Vendors, Mr. Zhang Liang, Johnson and Seedland Smart Service; (iii) the Seedlife Acquisition is expected to generate positive returns to the Group and the Shareholders given the solid and stable financial performance and position of Seedlife and the positive outlook of the property management market in the PRC; and (iv) it is likely that the Target Group will meet the Guaranteed Profit taking into consideration of its unaudited after-tax net profit of RMB39,500,000 for the nine months ended 30 September 2024 and the fact that the property management services contracts generally cover a certain long time period instead of being only valid for a single time period. As such, the risk and extent of the Profit Shortfall offsetting the Pre-existing Outstanding Paid Amount is limited, we consider the arrangement that the Profit Shortfall is not returned to the Company by cash is fair and reasonable.

Taking into account (i) the reasons for the benefits of the Seedlife Acquisition as detailed above; (ii) the Equity Consideration is determined with reference to the valuation of 100% equity interests in the Target Group conducted by the Independent Valuer; and (iii)

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the Final Set-Off Amount shall be set off against the equivalent amount in the Pre-existing Outstanding Paid Amount so that the Buyer is not required to pay the majority of the Equity Consideration of RMB230.7 million to Seedland Smart Service at the Closing, we consider that the terms of the Share Purchase Agreement (as amended by the Share Purchase Supplemental Agreement) are on normal commercial terms which are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

6. Valuation of Seedlife

As disclosed in the Letter from the Board, the Equity Consideration is determined with reference to the valuation of 100% equity interests in the Target Group of RMB423.0 million as at 31 May 2024 as appraised by the Independent Valuer by way of market approach. The full text of the Valuation Report is set out in Appendix I to the Circular, and the Independent Shareholders are recommended to read in full.

In assessing the fairness and reasonableness of the Valuation, we have taken into the following factors:

(i) The qualification and scope of work of the Independent Valuer

We have conducted an interview with the Independent Valuer to enquire to their qualification and experience in valuing similar companies in the PRC and their independence. In our review of the engagement letter between the Company and the Independent Valuer and other relevant information provided by the Independent Valuer, we noted that the Independent Valuer is a qualified asset appraisal firm to perform valuation works in the PRC, and the responsible persons of the Independent Valuer are chartered surveyors who have years of experience in conducting valuation and possess sufficient qualifications and experience in valuing similar businesses in the PRC. We have also enquired with the Independent Valuer as to their independence, and were given to understand that the Independent Valuer is independent of the Group, Mr. Zhang Liang, Johnson, Seedland Smart Service and Seedlife. The Independent Valuer confirmed that they were not aware of any relationship or interest between themselves and the Group, Mr. Zhang Liang, Johnson, Seedland Smart Service and Seedlife or any other parties that would reasonably be considered to affect their independence to act as the independent valuer for the Company. The Independent Valuer also confirmed that apart from normal professional fees paid or payable to them in connection with their appointment as the Independent Valuer, no other arrangements exist whereby they will receive any fees or benefits from the Group, Mr. Zhang Liang, Johnson, Seedland Smart Service and Seedlife. We have also reviewed the terms of engagement of the Independent Valuer, in particular in relation to their scope of work. We noted that their scope of work is appropriate to form the opinion required to be given and there are no limitations on the scope of work which might adversely impact on the degree of assurance given by the Independent Valuer in the Valuation Report. We have also performed work as required under note (1)(d) to Rule 13.80 of the Listing Rule in relation to the Independent Valuer and its work as regards

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the Valuation. Based on the above, we are satisfied with the terms of engagement of the Independent Valuer as well as their qualification and experience for performing the Valuation, and we are of the view that the scope of work of the Independent Valuer is appropriate. We therefore consider it appropriate to rely on their work and opinion.

(ii) Valuation methodologies

We have reviewed the Valuation Report and discussed with the Independent Valuer the methodologies, bases and assumptions adopted in arriving at the Valuation. We understood that the Independent Valuer has considered three generally accepted approaches, namely, market approach, income approach and asset-based approach and adopted the market approach in the Valuation due to the following considerations:

(a) the selection of the valuation approach in valuing Seedlife is based on, among other criteria, the merits and limitations of each of the aforesaid valuation methodologies, the quantity and quality of the information provided, accessibility to available data, availability of relevant market information, the business nature, financial performance and financial position of Seedlife, professional judgment and technical expertise;
(b) income approach is not considered because it requires significant level of unobservable and subjective assumptions to be made to arrive at, among others, detailed operational information and long-term financial projections, to which the valuation is highly dependent on the numerous assumptions over a long-time horizon prepared by the management of the Group and the result may be very sensitive to certain inputs;
(c) asset-based approach is not considered because it considers the cost to reproduce or replace the assets appraised in accordance with current market prices for similar assets, with allowance for accrued depreciation arising from condition, utility, age, wear and tear, or obsolescence (physical, functional or economical) present, taking into consideration past and present maintenance policy and rebuilding history. However, the cost approach does not directly incorporate information about the economic benefits contributed by Seedlife, and the earning potential of Seedlife cannot be captured in such a valuation given that Seedlife is profit making; and
(d) market approach is considered because it reflects the market expectations over the corresponding industry as the price multiples of the comparable companies were arrived from market consensus. Since there are sufficient public information in similar nature and business to that of Seedlife, their market values are good indicators of the industry of property management.

In view of the nature of the business operations of Seedlife which is expected to sustain its business operations in the foreseeable future and the availability of market

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information of publicly traded comparable companies in the similar industry of Seedlife, we concur with the Independent Valuer that the market approach is the most appropriate approach in arriving at the market value of Seedlife.

Under market approach, the Independent Valuer has adopted forward price-to-earnings (“ P/E(s) ”) to determine the value of Seedlife. For the purpose of independent assessment of the fairness and reasonableness of the Valuation, we have considered the three most commonly used benchmarks in valuing a company, namely P/E, price-to-book (“ P/B(s) ”) and price-to-sale (“ P/S(s) ”) multiples. P/E is usually adopted for judging valuations for companies which are profit-making. P/B is typically applied for valuing companies which hold relatively liquid assets on their balance sheets and their book values approximate their fair market values such as real estate companies and banks whereas P/S is approximate for valuing companies which have volatile earnings or loss but with relatively stable revenue such as retailers offering general merchandise.

Taking into account that (a) P/B is considered not appropriate for the Valuation as the business nature of Seedlife is not asset intensive and the intangible company-specific competencies and advantages are not captured in P/B; (b) P/S is considered not appropriate for the Valuation as it does not reflect the earning potential of Seedlife but only focus on the sales amount which can be easily distorted if the cost structure is not being considered; (c) P/E is appropriate as Seedlife has generated positive earnings in recent years; (d) as stated in the Share Purchase Agreement, the audited net profit after tax of the Target Group for the year ending 31 December 2024 (“ FY2024 ”) shall not be less than the Guaranteed Profit (i.e. RMB52.0 million); and (e) the Target Group has altered its revenue composition in 2024 by discontinuing the rental of car parking spaces and the provision of high-volume procurement group purchase services, both of which had relatively low gross profit margins. The Target Group has obtained certain new property management projects in 2024 and therefore secured property management agreements across a long period of time which will serve as a source of steady revenue for the foreseeable future, we concur with the Independent Valuer that forward P/E for FY2024 which is a P/E multiple based on a forward earnings is the most appropriate multiple to value Seedlife as compared with other valuation multiples.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iii) Analysis of the comparable companies

Seedlife is principally engaged in the provision of property management services through its subsidiaries in the PRC. As set out in the Valuation Report, the Independent Valuer has identified eight comparable companies (the “ Comparable Companies ”) with reference to data as extracted from publicly available information including S&P Capital IQ. In selecting the appropriate comparable companies, the Independent Valuer has adopted the following selection criteria:

(a) the principal business of the company is engaged in the provision of property management and related value-added services, with no less than 90% of its total revenue generated from the related business segment and no less than 50% of its property management services revenue generated from residential properties in the latest financial year;
(b) the company is mainly operated in the PRC;
(c) the company is publicly listed in the PRC or Hong Kong; and
(d) the company records positive net income for the latest financial year and is estimated to record positive net income for the next financial year.

We consider that the Independent Valuer’s selection criteria is appropriate and sufficient for the Valuation as (a) it enables the Independent Valuer to identify companies with similar business (i.e. the provision of property management and related value-added services) and similar type of properties under management (i.e. the residential properties) in the same geographical region (i.e. the PRC) as Seedlife, with sufficient data publicly available for it to conduct the Valuation; and (b) it has covered the prevailing market conditions and sentiments in Hong Kong and the PRC. Based on the above criteria, we have, based on our search on Bloomberg and the websites of the Stock Exchange, identified eight comparable companies which are the same as those identified by the Independent Valuer as set out in the Valuation Report. We consider that no other suitable comparable company is omitted as our independent research results are identical to those identified by the Independent Valuer. Based on our independent research on the Comparable Companies, we are of the view that all of the Comparable Companies fit the selection criteria and are fair and representative. As such, we are of the view that the list of the Comparable Companies analysed by the Independent Valuer for the purpose of determining the valuation of Seedlife are representative and exhaustive.

Although the Comparable Companies are different in size or operating scale with the Target Group, taking into account that (a) as shown in the table below, the size and operating scale of the Comparable Companies are not necessarily correlated to their profitability and forward P/E multiples. For instance, all of China Overseas Property Holdings Limited, Onewo Inc. and Poly Property Services Co., Ltd. have

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

forward P/Es of approximately 10 times. However, they have different levels of total revenue, net profit, total assets and net asset value; (b) the Comparable Companies provide a useful reference on the market valuation of the Chinese property management companies based on their forward earnings under the market conditions as at the valuation date; and (c) the Target Group’s strong net profit margin, we consider the Comparable Companies are representative comparables.

The following table sets out the details of the Comparable Companies:

						Net asset
						value
						attributable
						to its
					Total assets	shareholders
		Principal			as at	as at	Forward
Company name		place of	Total revenue	Net profit	31 December	31 December	P/E as at
(stock code)	Principal activities	operation	for FY2023	for FY2023	2023	2023	31 May 2024
			_(RMB million) _	_(RMB million) _	_(RMB million) _	(RMB million)	(times)
Jinmao Property	Provision of property	PRC	2,704.4	337.3	3,613.8	1,541.8	5.89
Services Co.,	management services and
Limited	value-added services
(816.HK)
SCE Intelligent	Provision of integrated	PRC	1,247.7	257.0	3,396.3	2,655.7	2.12
Commercial	property management
Management	services
Holdings
Limited
(606.HK)
Yuexiu Services	Provision of property	PRC	3,223.6	487.0	6,407.1	3,444.6	8.67
Group Limited	management and operational
(6626.HK)	services
China Overseas	Provision of property	PRC	13,051.3	1,342.5	10,610.8	4,121.4	10.32
Property	management services
Holdings
Limited
(2669.HK)

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

						Net asset
						value
						attributable
						to its
					Total assets	shareholders
		Principal			as at	as at	Forward
Company name		place of	Total revenue	Net profit	31 December	31 December	P/E as at
(stock code)	Principal activities	operation	for FY2023	for FY2023	2023	2023	31 May 2024
			_(RMB million) _	_(RMB million) _	_(RMB million) _	(RMB million)	(times)
China Resources	Provision of property	PRC	14,767.0	2,928.7	27,783.5	15,948.2	16.07
Mixc Lifestyle	management and commercial
Services	operational services
Limited
(1209.HK)
Onewo Inc.	Provision of property	PRC	33,183.5	1,954.7	39,383.1	17,605.4	10.57
(2602.HK)	management services
Poly Property	Provision of property	PRC	15,061.9	1,380.1	14,877.3	8,719.9	10.37
Services Co.,	management services,
Ltd.	community value-added
(6049.HK)	services and value-added
	services
Sino-Ocean	Provision of property	PRC	3,133.2	42.1	4,039.2	2,099.2	3.67
Service	management related services
Holding
Limited
(6677.HK)
						Maximum	16.07
						Minimum	2.12
						Average	8.46
						Median	9.50

Source: the website of the Stock Exchange and Bloomberg

As shown in the table above, the forward P/Es of the Comparable Companies ranges from approximately 2.12 times to 16.07 times with an average and median of approximately 8.46 times and 9.50 times, respectively. We have reviewed the calculation of the forward P/Es of the eight Comparable Companies to verify the average forward P/E adopted by the Independent Valuer in the Valuation. As such, we concur with the Independent Valuer’s view that the adoption of forward P/E of the Comparable Companies to compute the market value of Seedlife is fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iv) Analysis of the valuation adjustments

Marketability is defined as the ability to convert the business interest into cash quickly at a known price with minimum transaction costs. For privately held company, there is usually a cost and a time lag associated with locating interested and capable buyers as there is no established market of readily-available buyers and sellers. All other factors being constant, an interest in a privately held company is worth less than an interest in a publicly traded company as there is no established market of readily available buyers and sellers. We understand that discount for lack of marketability (“ DLOM ”) is a downward adjustment to the value of the business interest to reflect its reduced level of marketability. Since Seedlife is a private company whose shares are not publicly traded in the open market, we consider that it is fair and reasonable to apply a discount for lack of marketability in the course of valuation to discount for lack of ability of converting shares of Seedlife into immediate cash. Based on our discussion with the Independent Valuer, we noted that a DLOM of 21.0% has been applied in the Valuation as computed with reference to the “Finnerty Option Pricing Model” which is a commonly adopted method for reflecting the theoretical marketability discount in a private company. By using the put option method and based on the assumptions on the key parameters including spot price, exercise price, volatility and maturity, the estimated DLOM is approximately 21.0%, which is considered to be fair and reasonable.

In addition, we noted that the Independent Valuer, with reference to the Control Premium Study (1st quarter 2024) publish by FactSet Mergerstat, LLC, applied a premium of 21.7% to reflect the price premium for controlling interest of a company. Since the Seedlife Acquisition represents 100% of the interest of Seedlife and it is widely recognised that an investment which offers an investor control of a business is worth more than a minority stake, we consider it is fair and reasonable to apply a control premium in the Valuation. We noted that FactSet Mergerstat, LLC provides merger and acquisition information for the local, regional, national, and international financial news media. As advised by the Independent Valuer, the Control Premium Study published by FactSet Mergerstat, LLC is a widely accepted source among valuers for analysis of the control premium. We have reviewed the Control Premium Study provided by the Independent Valuer and noted that the applied control premium of 21.7% is the median of equity control premium from transactions within the real estate industry which is considered to be fair and reasonable for the control premium analysis of the Valuation.

(v) Analysis of the valuation computation

The Independent Valuer first derived the estimated 100% equity value of Seedlife by multiplying the Guaranteed Profit of the Target Group for FY2024 by the average forward P/E of the Comparable Companies. In arriving at the Valuation of RMB423.0 million, the Independent Valuer has applied the marketability discount and control premium on the 100% equity value of Seedlife.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Below is the summary of the calculation of the Valuation extracted from the Valuation Report:

		RMB’000
Guaranteed Profit of the Target Group for	A	52,000
FY2024
Average forward P/E (times)	B	8.46
100% equity value of Seedlife as at	C = A x B	439,920
31 May 2024
DLOM	D	21.0%
Control premium	E	21.7%
Adjusted 100% equity value of Seedlife	F = C x (1 – D)	422,952
as at 31 May 2024	x (1 + E)
Valuation		423,000

Based on our review on the Valuation Report and our discussion with the Independent Valuer in relation to the analysis of (i) the selection of valuation methodology and approach; (ii) the selection criteria of the Comparable Companies; (iii) the valuation adjustment applied due to DLOM and control premium; and (iv) the detailed computation of the Valuation, we consider that the methodology, bases, assumptions, parameters and computation adopted for the Valuation are appropriate and reasonable.

In view of (i) the methodology, bases, assumptions, parameters and computation adopted by the Independent Valuer in determining the Valuation are appropriate; (ii) the Equity Consideration is made with reference to the aforementioned independent valuation which was fairly and reasonably determined by the Independent Valuer; (iii) the Equity Consideration is nearly equivalent to the market value of 100% equity interest of the Target Group in the Valuation; and (iv) the reasons for and benefits of the Seedlife Acquisition as discussed in the section headed “3. Reasons for and benefits of the Seedlife Acquisition” above, we consider the Equity Consideration to be fair and reasonable so far as the Independent Shareholders are concerned and is in the interests of the Company and the Shareholders as a whole.

7. Financial effects of the Seedlife Acquisition

Upon Closing of the Seedlife Acquisition, Seedlife will become a wholly-owned subsidiary of the Company and the financial statements of Seedlife will be consolidated into the consolidated financial statements of the Group.

As disclosed in the section headed “2. Information on Seedlife” above, Seedlife recorded net profit of approximately RMB33.1 million and RMB48.4 million for FY2022 and FY2023, respectively. Considering the profit-making performance of Seedlife for

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

FY2022 and FY2023, we concur with the Directors that the Seedlife Acquisition is expected to bring positive contribution to the earnings of the Group upon Closing.

As at 30 June 2024, the Group had cash and cash equivalents of approximately RMB345.4 million. Upon Closing of the Seedlife Acquisition, the majority of the Equity Consideration (i.e. the Final Set-off Amount) shall set off against the equivalent amount in the Pre-existing Outstanding Paid Amount. In other words, the settlement of the Equity Consideration would not result in any substantial cash outflow of the Group upon Closing.

It should be noted that the aforementioned analyses are for illustrative purpose only and do not purport to represent how the financial performance and position of the Group will be upon completion of the Seedlife Acquisition.

OPINION AND RECOMMENDATION

Having taken into account the above principal factors and reasons, we consider that the terms of the Share Purchase Agreement (as amended by the Share Purchase Supplemental Agreement) and the Seedlife Acquisition are on normal commercial terms which are fair and reasonable so far as the Independent Shareholders are concerned. We also consider that the entering into of the Share Purchase Agreement, the Share Purchase Supplemental Agreement and the Seedlife Acquisition, while not in the ordinary and usual course of business of the Group, is nevertheless in the interests of the Company and the Shareholders as a whole. We therefore advise the Independent Board Committee to recommend, and we ourselves recommend, the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM to approve the Share Purchase Agreement, the Share Purchase Supplemental Agreement and the Seedlife Acquisition.

Yours faithfully, For and on behalf of Rainbow Capital (HK) Limited Larry Choi Managing Director

Mr. Larry Choi is a licensed person and a responsible officer of Rainbow Capital (HK) Limited registered with the Securities and Futures Commission to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO. He has over ten years of experience in the corporate finance industry.

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VALUATION REPORT

APPENDIX I

==> picture [123 x 59] intentionally omitted <==

Asia-Pacific Consulting and Appraisal Limited

Flat A, 12/F, Kiu Fu Commercial Bldg, 300 Lockhart Road, Wan Chai, Hong Kong

25 November 2024

The Board of Directors

Kinetic Development Group Limited

18th Floor 80 Gloucester Road Wan Chai Hong Kong

Dear Sirs,

In accordance with the instructions received from Kinetic Development Group Limited (the “ Company ”), we have undertaken a valuation exercise which requires Asia-Pacific Consulting and Appraisal Limited (“ APA ”) to express an independent opinion on the market value of 100% equity interest of Seedlife Holding Limited and its subsidiaries (collectively, “ Seedlife ” or the “ Target Group ”) as at 31 May 2024 (the “ Valuation Date ”).

The purpose of this valuation is for circular purpose of the Company.

We will not accept any responsibility or liability to any person other than the Company in respect of, or arising out of, the contents of this report may be shown. If others choose to rely in any way on the contents of this report they do so entirely at their own risk.

Our valuation was carried out on a market value basis which is defined as “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing and where the parties had each acted knowledgeably, prudently, and without compulsion”.

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VALUATION REPORT

APPENDIX I

INTRODUCTION

Seedlife is a limited liability company incorporated under the Laws of the British Virgin Islands and is held directly by Seedland Smart Service Group Limited (the “ Seller ”) as to 100%. It principally engages in property management services through its subsidiaries in the PRC. It offers property management services mainly include cleaning, greening and gardening, security, repair and maintenance services to property developers, property owners, or residents.

On 6 September 2024, the Company and the Seller intends to enter a share purchase agreement (the “ Share Purchase Agreement ”), pursuant to which the Seller have conditionally agreed to sell and the Company has conditionally agreed to acquire 100% equity interest of the Target Group (the “ Seedlife Acquisition ”). If the Seedlife Acquisition is completed, the Company will own 100% equity interest of the Target Group and the Target Group will become a wholly-owned subsidiary of the Company.

VALUATION METHODOLOGY

In arriving at our assessed value, we have considered three generally accepted approaches, namely market approach, cost approach and income approach.

Market Approach considers prices recently paid for similar assets, with adjustments made to market prices to reflect condition and utility of the appraised assets relative to the market comparative. Assets for which there is an established secondary market may be valued by this approach. Benefits of using this approach include its simplicity, clarity, speed and the need for few or no assumptions. It also introduces objectivity in application as publicly available inputs are used. However, one has to be wary of the hidden assumptions in those inputs as there are inherent assumptions on the value of those comparable assets. It is also difficult to find comparable assets. Furthermore, this approach relies exclusively on the efficient market hypothesis.

Cost Approach considers the cost to reproduce or replace in new condition the assets appraised in accordance with current market prices for similar assets, with allowance for accrued depreciation or obsolescence present, whether arising from physical, functional or economic causes. The cost approach generally furnishes the most reliable indication of value for assets without a known secondary market. Despite the simplicity and transparency of this approach, it does not directly incorporate information about the economic benefits contributed by the subject assets.

Income Approach is the conversion of expected periodic benefits of ownership into an indication of value. It is based on the principle that an informed buyer would pay no more for the project than an amount equal to the present worth of anticipated future benefits (income) from the same or a substantially similar project with a similar risk profile. This approach allows for the prospective valuation of future profits and there are numerous empirical and theoretical justifications for the present value of expected future cash flows. However, this approach relies

– I-2 –

APPENDIX I

VALUATION REPORT

on numerous assumptions over a long-time horizon and the result may be very sensitive to certain inputs. It also presents a single scenario only.

Given the characteristics of the Target Group, there are substantial limitations for the income approach and the cost approach for valuing the underlying asset. Firstly, income approach result would be more dependent on long term financial forecast internally prepared by the management, which is unobservable input and requires subjective assumptions. Secondly, the cost approach does not directly incorporate information about the economic benefits contributed by the subject business.

In view of the above, we have adopted the market approach for the valuation. The market approach considers prices recently paid for similar assets, with adjustments made to market prices to reflect condition and utility of the appraised assets relative to the market comparable. Assets for which there is an established secondary market may be valued by this approach. Benefits of using this approach include its simplicity, clarity, speed and the need for few assumptions. It also introduces objectivity in application as publicly available inputs are used.

In this valuation exercise, the market value of 100% equity interest in the Target Group was developed through the application of the market approach technique known as the guideline public company method. This method requires the research of comparable companies’ benchmark multiples and proper selection of a suitable multiple to derive the market value of the Target Group. We have considered price-to-book (“ P/B ”), price-to-sales (“ P/S ”), enterprise value-tosales (“ EV/S ”), enterprise value-to-EBITDA (“ EV/EBITDA ”) and price-to-earnings (“ P/E ”) multiples.

According to the consolidated financial statements provided by the management of the Target Group, the Target Group has been profit-making while the P/S and EV/S multiples are commonly adopted for valuing loss-making companies. The P/B multiple is not appropriate for this valuation due to the asset-light operation nature of the Target Group.

As the EBITDA and net profit of the Target Group for FY2023 and FY2024 for the period ended at the Valuation Date are positive, EV/EBITDA and P/E multiple can be applied in this valuation. Compared to the P/E multiple, the EV/EBITDA multiple is considered to be less affected by difference in accounting treatment. Yet, since the EV/EBITDA multiple excludes depreciation and amortization expenses, which measure how much the company needs to spend on capital expenditure to maintain its business growth, the multiple does not account for cost of debt capital or its tax effect.

By taking into consideration the asset-light nature of the business and the profitability of the Target Group, it is considered that the P/E multiple is the most appropriate multiple. We have adopted the P/E multiple instead of EV/EBITDA multiple as the Target Group is an asset-light and debt-light business, in which interest, depreciation and amortization shall not play a significant role in its financial performance.

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APPENDIX I

VALUATION REPORT

With respect to the use of the guaranteed net profit (the “ Guaranteed Profit ”) in the Share Purchase Agreement, the forward multiple is more meaningful and representative if the future earnings forming its pricing basis. The Target Group has altered its revenue composition in 2024 by discontinuing the rental of car parking spaces and the provision of high-volume procurement group purchase services, both of which had relatively low gross profit margins. The guaranteed FY2024 net profit for the P/E multiple in this case, is indicative of the Target Group pricing. In order to reflect the future earnings of the Target Group’s business, the market value of the Target Group is calculated by using forward P/E ratio of the comparable companies and then taken into account of market liquidity discount and control premium as the appropriate adjustment.

BASIS OF OPINION

We have conducted our valuation with reference to the International Valuation Standards issued by the International Valuation Standards Council. The valuation procedures employed include a review of legal status and financial condition of the Target Group and an assessment of key assumptions, estimates, and representations made by the proprietor. All matters essential to the proper understanding of the valuation are disclosed in this report.

The following factors form an integral part of our basis of opinion:

The economic outlook in general;
The nature of business and historical financial performance of the Target Group;
The guaranteed FY2024 financial performance of the Target Group;
Financial and business risk of the business including continuity of income;
The Share Purchase Agreement dated on 6 September 2024;
Consideration and analysis on the micro and macro economy affecting the subject business; and
Other operational and market information in relation to the Target Group’s business.

We planned and performed our valuation so as to obtain all the information and explanations that we considered necessary in order to provide us with sufficient evidence to express our opinion on the Target Group.

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VALUATION REPORT

APPENDIX I

VALUATION ASSUMPTIONS

In determining the market value of the equity interest in the Target Group, we make the following key assumptions:

It is assumed that the projected revenue and income will be according to the proposed business plan of the appraised entity and could be achieved with the effort of the Company’s management;
All relevant legal approvals and business certificates or licenses to operate the business in which the Target Group and its subsidiaries operate or intend to operate have been or would be officially obtained and renewable upon expiry;
There will be no major change in the political, legal, economic and social environment in which the Target Group and its subsidiaries operate or intend to operate;
Interest rates and exchange rates in the localities for the operation of the Target Group and its subsidiaries will not differ materially from those presently prevailing;
It is assumed that the operational and contractual terms stipulated in the relevant contracts and agreements will be honored;
The financial and operational information about the Target Group and its subsidiaries provided by the Company and the Target Group is accurate and it is relied to a considerable extent on such information in arriving at the opinion of value;
In order to realize the future economic benefit of the business and maintain a competitive edge, manpower, equipment and facilities are necessary to be employed. For the valuation exercise, we have assumed that all proposed facilities and systems will work properly and will be sufficient for future operation; and
We have assumed that there are no hidden or unexpected conditions associated with the asset valued that might adversely affect the reported value. Further, we assume no responsibility for changes in market conditions after the Valuation Date.

– I-5 –

VALUATION REPORT

APPENDIX I

FINANCIAL INFORMATION OF THE TARGET GROUP

Set out below is extracted from the Share Purchase Agreement as follows:

For the year ended 31 December 2024 Guaranteed Profit

Net profit after taxation

RMB52,000,000

The forward multiple is meaningful and representative if the future earnings forming its pricing basis. The guaranteed FY2024 net profit for the P/E multiple in this case, is indicative of future profit potential of the Target Group. In order to reflect the future earnings of the Target Group’s business, the market value of the Target Group was developed by using the FY2024 forward P/E ratio as at the Valuation Date. The FY2024 Guaranteed Profit of the Target Group as of the Valuation Date would be committed as RMB52,000,000.

MARKET MULTIPLE

In determining the market multiple, the selection criteria include the followings:

The comparable companies are publicly listed;
The comparable companies are mainly operating in People’s Republic of China;
The comparable companies derive most, if not all, no less than 90% of their revenues from the property management service and value-added service, and no less than 50% of property management service revenue for residential properties; and
Earnings for FY2023 and estimated FY2024 of the comparable companies are positive as at the Valuation Date.

Besides, based on our investigation and analysis, it can be found that there is very weak relationship between the operating scale of the companies and their P/E ratio. The selection criteria was determined on the business comparability of the company.

– I-6 –

VALUATION REPORT

APPENDIX I

As sourced from Capital IQ, a reliable third-party database service provider designed by Standard & Poor’s (S&P), an exhaustive list of comparable companies satisfying the above criteria was obtained on a best effort basis and the details of these comparable companies are shown below:

Stock Code	Company Name	Company Description
SEHK: 816	Jinmao Property Services	Jinmao Property Services Co., Limited,
	Co., Limited	an investment holding company,
		provides property management
		services in the People’s Republic of
		China. It offers property management
		services for property owners and
		residents, and property developers and
		value-added services for non-property
		owners.
SEHK: 606	SCE Intelligent	SCE Intelligent Commercial
	Commercial	Management Holdings Limited
	Management Holdings	provides property management
	Limited	services for commercial and
		residential properties in the People’s
		Republic of China. It operates through
		two segments: commercial property
		management and operational services,
		and residential property management
		services.
SEHK: 6626	Yuexiu Services Group	Yuexiu Services Group Limited, an
	Limited	investment holding company, provides
		non-commercial and commercial
		property management services in
		Mainland China and Hong Kong. The
		company operates in two segments:
		non-commercial property management
		and value-added services; and
		commercial property management and
		operational services.

– I-7 –

VALUATION REPORT

APPENDIX I

Stock Code	Company Name	Company Description
SEHK: 2669	China Overseas Property	China Overseas Property Holdings
	Holdings Limited	Limited, an investment holding
		company, provides property
		management services in Hong Kong,
		Macau, and Mainland China. It
		operates through property
		management services, value-added
		services, and car parking space
		trading business segments.
SEHK: 1209	China Resources Mixc	China Resources Mixc Lifestyle
	Lifestyle Services	Services Limited, an investment
	Limited	holding company, provides property
		management and commercial
		operational services in the People’s
		Republic of China. It operates in two
		segments, residential property
		management services; and commercial
		operational and property management
		services.
SEHK: 2602	Onewo Inc.	Onewo Inc., together with its
		subsidiaries, provides property
		management services in the People’s
		Republic of China. It operates through
		three segments: community space
		living consumption services;
		commercial and urban space
		integrated services; and AIoT and
		BPaaS solution services.

– I-8 –

VALUATION REPORT

APPENDIX I

Stock Code	Company Name	Company Description
SEHK: 6049	Poly Property Services	Poly Property Services Co., Ltd.,
	Co., Ltd.	together with its subsidiaries,
		provides property management
		services in the People’s Republic of
		China. The company offers property
		management services for residential
		communities under the Harmony
		Courtyard, Oriental Courtesy, and
		Elegant Life brands; for commercial
		and office buildings under the Nebula
		Ecology brand name; and public and
		other properties under the Poly Public
		Services brand.
SEHK: 6677	Sino-Ocean Service	Sino-Ocean Service Holding Limited, an
	Holding Limited	investment holding company,
		primarily engages in the provision of
		property management, and commercial
		operational and value-added services
		in the People’s Republic of China. It
		operates through three segments:
		property management and commercial
		operational services, community
		value-added services; and value-added
		services to non-property owners.

Source: Capital IQ and financial reports of the companies

– I-9 –

VALUATION REPORT

APPENDIX I

The detailed information of the comparable companies as at the Valuation Date is listed in the following table:

		Twelve months		Twelve months			Twelve months
	Twelve months	ended	Twelve months	ended	Twelve months		ended
	ended	31 December	ended	31 December		ended	31 December
	31 December	2024	31 December	2024	31 December		2024
	2023	estimated	2023	estimated		2023	estimated
Stock Code	revenue	revenue	net profit	net profit	net	profit	net profit
	(RMB million)	(RMB million)	(RMB million)	(RMB million)		%	%
SEHK: 816	2,704	3,293	337	364		12%	11%
SEHK: 606	1,248	N/A	257	254		21%	N/A
SEHK: 6626	3,224	3,946	487	574		15%	15%
SEHK: 2669	13,051	15,817	1,343	1,559		10%	10%
SEHK: 1209	14,767	17,916	2,929	3,577		20%	20%
SEHK: 2602	33,183	36,891	1,955	2,415		6%	7%
SEHK: 6049	15,062	17,146	1,380	1,596		9%	9%
SEHK: 6677	3,133	3,278	42	155		1%	5%
The Target
Group	247	227	48	52		20%	23%
				31 December		31 December
					2023		2023
Stock Code				net assets			total assets
				_(RMB _	million)	(RMB million)
SEHK: 816					1,568		3,614
SEHK: 606					2,676		3,396
SEHK: 6626					3,620		6,407
SEHK: 2669					4,177		10,611
SEHK: 1209					16,036		27,783
SEHK: 2602					18,220		39,383
SEHK: 6049					8,877		14,877
SEHK: 6677					2,146		4,039
The Target Group					93		399

Source: Capital IQ and financial reports of the companies

Notes:

The FY2024 estimated net assets and total assets of comparable companies are not available.
The financial information as 31 December 2023 of the Target Group is unaudited.

– I-10 –

VALUATION REPORT

APPENDIX I

Based on the above-mentioned selection criteria, a list of eight comparable companies as shown above was identified and we are of the opinion that each of them is considered as a fair and representative sample. Further details of these eight comparable companies as at the Valuation Date are shown as follows:

Stock Code Company Name SEHK: 816 Jinmao Property Services Co., Limited SEHK: 606 SCE Intelligent Commercial Management Holdings Limited SEHK: 6626 Yuexiu Services Group Limited SEHK: 2669 China Overseas Property Holdings Limited SEHK: 1209 China Resources Mixc Lifestyle Services Limited SEHK: 2602 Onewo Inc. SEHK: 6049 Poly Property Services Co., Ltd. SEHK: 6677 Sino-Ocean Service Holding Limited Average	Forward P/E ratio as at the Valuation Date 5.89 2.12 8.67 10.32 16.07 10.57 10.37 3.67
	8.46

Stock Code
Company Name
SEHK: 816
Jinmao Property Services Co., Limited
SEHK: 606
SCE Intelligent Commercial Management
Holdings Limited
SEHK: 6626
Yuexiu Services Group Limited
SEHK: 2669
China Overseas Property Holdings Limited
SEHK: 1209
China Resources Mixc Lifestyle Services Limited
SEHK: 2602
Onewo Inc.
SEHK: 6049
Poly Property Services Co., Ltd.
SEHK: 6677
Sino-Ocean Service Holding Limited
Average

Forward
P/E ratio
as at the
Valuation
Date
5.89
2.12
8.67
10.32
16.07
10.57
10.37
3.67

8.46

Source: Capital IQ

Note: As sourced from Capital IQ, the forward P/E ratio of each comparable company shown in the above table is based on the total equity value as at the Valuation Date divided by the estimated net profit of FY2024 as at the Valuation Date. Adopted multiple is calculated as the average of the multiples of the comparable companies.

DISCOUNT FOR LACK OF MARKETABILITY (“DLOM”)

The level of a company value can be described as below:

Marketable Minority Interest Value Price Quoted in public market

Discount for Lack of Marketability

Non-Marketable Minority Interest Value Non-Controlling Shareholder of a Private Company

– I-11 –

APPENDIX I

VALUATION REPORT

A factor to be considered in valuing closely held companies is the marketability of an interest in such businesses. Marketability is defined as the ability to convert the business interest into cash quickly, with minimum transaction and administrative costs, and with a high degree of certainty as to the amount of net proceeds. There is usually a cost and a time lag associated with locating interested and capable buyers of interests in privately-held companies, because there is no established market of readily-available buyers and sellers. All other factors being equal, an interest in a publicly traded company is worth more because it is readily marketable. Conversely, an interest in a private-held company is worth less because no established market exists.

Most of the businesses or financial interests that we are valuing do not enjoy immediate liquidity. we thus face the task of making an adjustment from the value we have estimated from the transactions observed in the market approach to account for the lack of marketability of the business or business interest that we are valuing. That adjustment is what we refer to as the discount for lack of marketability.

We have assessed the DLOM of this investment using the Finnerty method, which is one of the most commonly used theoretical models. The concept is that when comparing a public share and a private share, holder of a public share has the ability to sell the shares to the stock market right away. The estimated DLOM is determined by “Finnerty model” with the following parameters:

Parameter	As of Valuation Date	Remarks
Spot Price	1.00	As we are calculating a percentage for the
		DLOM, for simplicity, we set the spot
		price to be 1.00 in the valuation.
Exercise Price	1.00	According to the study, the Finnerty method
		is at-the-money, such that the exercise
		price should equal the spot price.
Volatility	57%	With reference to the comparable companies,
		as sourced from Capital IQ.
Maturity	3 years	It is an approximation of holding period with
		reference to a market study and assuming
		that a market participant who owns a
		business entity similar to the Target Group
		would dispose of that business entity. The
		management of the Company is satisfied
		that 3 years would be a reasonable
		assumption.

By using the Finnerty method and based on the above assumptions, the estimated DLOM is around 21%. Based on the above analysis, we apply 21% DLOM for this case.

– I-12 –

VALUATION REPORT

APPENDIX I

CONTROL PREMIUM

Control premium is an amount by which the pro rata value of a controlling interest exceeds the pro rata value of a non-controlling interest a business enterprise that reflects the power of a control. Both factors recognize that control owners have rights that minority owners do not and that the difference in those rights and, perhaps more importantly, how those rights are exercisable and to what economic benefits, cause a differential in the per-share value of a control ownership block versus a minority ownership block.

Since the P/E ratio adopted in the valuation was calculated from publicly listed companies and thus market value calculated using such P/E ratio represents the minority ownership interest. Control premium was adopted to adjust such minority interest market value to controlling interest market value.

In this regard, we have referenced to a widely adopted research report titled “Control Premium Study” (1st Quarter 2024) published by FactSet Mergerstat, LLC. The publisher searched globally for transactions with equity premiums by industry that had been closed during the trailing twelve-month period as of the 1st Quarter of 2024. The median equity control premium from transactions within the real estate industry of 21.7% was adopted.

CALCULATION OF VALUATION RESULT

Under the guideline public company method, the market value depends on the market multiples of the comparable companies, sourced from Capital IQ, as at the Valuation Date and we have taken into account for DLOM and control premium of the Target Group that the Company will hold 100% of the equity interest in the Target Group upon completion of this acquisition. The calculation of the market value of the equity interest in the Target Group as at the Valuation Date is as follows:

	As at the
	Valuation Date
Applied P/E ratio	8.46
FY2024 Guaranteed Profit of the Target Group	RMB52,000,000
Equity Value before DLOM and control premium	RMB439,920,000
Adjustment for DLOM	(1-21.0%)
Adjustment for control premium	(1+21.7%)
100% Equity Value of the Target Group (rounded)	RMB423,000,000

– I-13 –

VALUATION REPORT

APPENDIX I

VALUATION COMMENT

The conclusion of value is based on accepted valuation procedures and practices that rely substantially on the use of numerous assumptions and the consideration of many uncertainties, not all of which can be easily quantified or ascertained. Further, while the assumptions and other relevant factors are considered by us to be reasonable, they are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of the Company, the Target Group and Asia-Pacific Consulting and Appraisal Limited.

We do not intend to express any opinion on matters which require legal or other specialized expertise or knowledge, beyond what is customarily employed by valuers. Our conclusions assume continuation of prudent management of the Target Group over whatever period of time that is reasonable and necessary to maintain the character and integrity of the assets valued.

OPINION OF VALUE

Based on the results of our investigations and analyses, we are of the opinion that the market value of 100% equity interest of the Target Group as at the Valuation Date is reasonably stated approximately at the amount of RMB423,000,000 (RENMINBI FOUR HUNDRED AND TWENTY-THREE MILLION YUAN) .

Yours faithfully, for and on behalf of

Asia-Pacific Consulting and Appraisal Limited

Jack W. J. Li

CFA, MRICS, MBA Partner

Note: Jack W. J. Li is a Chartered Surveyor who has more than 15 years’ experience in the valuation of assets in the PRC, Hong Kong and the Asia-Pacific region.

– I-14 –

GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS OF DIRECTORS AND CHIEF EXECUTIVE

Long positions in shares and underlying shares of the Company and its associated corporation

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executive of the Company in the shares, underlying shares and debentures of the Company and its associated corporation (within the meaning of Part XV of the SFO) which were required (i) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they have taken or deemed to have under such provisions of the SFO); (ii) pursuant to Section 352 of the SFO, to be entered in the register of members of the Company; or (iii) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the Model Code ”) of the Listing Rules, to be notified to the Company and the Stock Exchange were as follows:

Long Positions in the shares of the Company

			Approximate
		Number of	percentage of
	Capacity/Type of	ordinary	shareholding
Name of Directors	interest	shares	(Note)
Mr. Ju Wenzhong	Beneficial Interests	9,697,659	0.12%
Mr. Li Bo	Beneficial Interests	2,801,886	0.03%
Ms. Xue Hui	Beneficial Interests	3,860,055	0.05%

Note: The calculation is based on the total number of issued ordinary shares of 8,430,000,000 shares as at the Latest Practicable Date.

Save as disclosed above, as at the Latest Practicable Date, there were no other Directors or the chief executive of the Company or any of their associates who had any interests or short positions in any shares, underlying shares or debentures of the Company or any of its associated

– II-1 –

GENERAL INFORMATION

APPENDIX II

corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO), or which were required to be recorded in the register required to be kept by the Company pursuant to section 352 of the SFO, or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code.

As at the Latest Practicable Date, none of the Directors was a director or an employee of any shareholders of the Company or a company which has an interest or short position in Shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

3. DIRECTORS’ SERVICE CONTRACTS

Each of the executive Directors has entered into a service contract with the Enlarged Group for a term of three years, which may be terminated by not less than three months’ notice in writing served by either party on the other.

The non-executive and independent non-executive Directors have been appointed for a term of three years in accordance with their respective letters of appointment with the Enlarged Group.

As at the Latest Practicable Date, none of the Directors who are proposed for re-election at the forthcoming annual general meeting has a service contract with the Enlarged Group which is not determinable by the Enlarged Group within one year without payment of compensation, other than statutory compensation.

4. EXPERTS’ QUALIFICATIONS AND CONSENTS

The followings are the qualifications of the experts who have given their opinions or advice, which are contained or referred to in this circular:

Name Qualification

Rainbow Capital (HK) Limited A licensed corporation permitted to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO

Asia-Pacific Consulting and Appraisal Limited

Independent valuer qualified in the PRC

– II-2 –

GENERAL INFORMATION

APPENDIX II

Each of the above experts has given and has not withdrawn its written consent to the publication of this circular with the inclusion of its respective letter and report and all references to its name in the form and context in which they respectively appear. The respective letter and report from each of the above experts were given as of the date of this circular for incorporation in this circular.

As at the Latest Practicable Date, the above experts (i) 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; and (ii) had no direct or indirect interests in any assets which had been acquired or disposed of by or leased to any member of the Group since 31 December 2023 (the date to which the latest published audited combined financial statements of the Company were made up) or proposed to be acquired, disposed of or leased to any member of the Group.

5. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2023, being the date to which the latest published audited consolidated financial statements of the Company were made up.

6. DIRECTORS’ INTERESTS IN THE ASSETS OR CONTRACTS

As at the Latest Practicable Date, (i) none of the Directors, proposed director or expert had any interest, direct or indirect, in any assets which had been acquired or disposed of by or leased to any member of the Enlarged Group, or are proposed to be acquired or disposed of by or leased to any member of the Enlarged Group since 31 December 2023, being the date to which the latest published audited accounts of the Company were made up; and (ii) none of the Directors, proposed director or expert was materially interested in any contract or arrangement entered into by any member of the Enlarged Group which was subsisting as at the Latest Practicable Date and was significant in relation to the business of the Enlarged Group.

7. DIRECTORS’ INTEREST IN COMPETING BUSINESS

As at the Latest Practicable Date, so far as the Directors were aware, none of the Directors or their respective close associates (as defined under the Listing Rules) had any interest in a business which competed or was likely to compete, either directly or indirectly, with the business of the Group, or had or might have any other conflicts of interest with the Group pursuant to Rule 8.10 of the Listing Rules.

– II-3 –

GENERAL INFORMATION

APPENDIX II

8. DOCUMENTS ON DISPLAY

Copies of the following documents will be published on the website of the Stock Exchange (www.hkexnews.hk) and the Company’s website (http://www.kineticme.com/) for a period of 14 days from the date of this circular:

(a) Share Purchase Agreement;
(b) Share Purchase Supplemental Agreement;
(c) 2022 Property Purchase Agreement;
(d) the Supplemental Agreement;
(e) the Second Supplemental Agreement;
(f) the Third Supplemental Agreement; and
(g) the Fourth Supplemental Agreement.

9. MISCELLANEOUS

In the event of inconsistency, the English language text of this circular shall prevail over the Chinese language text.

– II-4 –

NOTICE OF EXTRAORDINARY GENERAL MEETING

==> picture [58 x 43] intentionally omitted <==

Kinetic Development Group Limited 力量發展集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1277)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that the extraordinary general meeting (the “ EGM ”) of Kinetic Development Group Limited (the “ Company ”) will be held at 18/F, 80 Gloucester Road, Wan Chai, Hong Kong on Friday, 3 January 2025 at 2:00 p.m., to consider, if thought fit, and transact the following resolution of the Company by way of ordinary resolution:

ORDINARY RESOLUTION

“ THAT :

(a) terms of the share purchase agreement (the “ Share Purchase Agreement ”) and the supplemental agreement (the “ Share Purchase Supplemental Agreement ”) entered into between the Company, Seedland Smart Service Group Limited, a limited liability company held indirectly by Mr. Zhang Liang, Johnson as to 100% (the “ Seedland Smart Service ”), and Seedlife Holding Limited, a limited liability company held directly by Seedland Smart Service as to 100%, dated 6 September 2024 and 12 November 2024, respectively (a copy of which has been produced to this EGM and initialed by the chairman of the meeting for identification purpose) and the transactions in connection therewith and any other ancillary documents be and are hereby confirmed, approved and ratified, subject to such addition or amendment as any director(s) of the Company (the “ Director(s) ”) may consider necessary, desirable or appropriate; and

– EGM-1 –

NOTICE OF EXTRAORDINARY GENERAL MEETING

(b) any authority of the Director(s) to sign, execute, deliver or to authorize the signing, execution and delivery of the Share Purchase Agreement and the Share Purchase Supplemental Agreement, and to do or authorize doing all such acts, matters and things as he/she may in his/her discretion consider necessary, expedient or desirable to give effect to and implement the Share Purchase Agreement and the Share Purchase Supplemental Agreement and any ancillary documents and transactions thereof be and is hereby confirmed, approved and ratified.”

By Order of the Board Kinetic Development Group Limited Ju Wenzhong Chairman and Executive Director

Hong Kong, 25 November 2024

Registered Office: Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Headquarters and Principal Place of Business in the PRC: Dafanpu Coal Mine Majiata Village Xuejiawan Town Zhunge’er Banner Ordos City, Inner Mongolia, China

Principal Place of Business in Hong Kong: 18/F 80 Gloucester Road Wan Chai Hong Kong

Notes:

A shareholder of the Company (the “ Shareholder ”) entitled to attend and vote at the EGM is entitled to appoint another person as his/her proxy to attend and vote in his/her stead. A Shareholder who is the holder of two or more shares in the Company (the “ Shares ”) may appoint more than one proxy to represent him/her and vote on his/her behalf at the EGM. A proxy need not be a Shareholder.
In the case of joint holders of Shares, any one of such joint holders may vote, either in person or by proxy, in respect of such Shares as if he/she were solely entitled thereto, but if more than one of such joint holders are present at the EGM, personally or by proxy, that one of the said persons so present whose name stands first in the register of members of the Company in respect of such Shares shall alone be entitled to vote in respect thereof. The resolution set out in this notice will be decided by poll at the EGM.

– EGM-2 –

NOTICE OF EXTRAORDINARY GENERAL MEETING

In order to be valid, the form of proxy must be in writing under the hand of the appointor or of his attorney duly authorized in writing, or if the appointor is a corporation, either under seal, or under the hand of an officer or attorney duly authorized, and must be deposited with the Company’s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong (together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy thereof) not less than 48 hours before the time fixed for holding of the EGM (or any adjournment thereof).
The register of members of the Company will be closed from Monday, 30 December 2024 to Friday, 3 January 2025 (both days inclusive), during which period no transfer of the Shares will be effected. In order to qualify for attending the EGM or any adjournment thereof, all transfers of Shares accompanied by the relevant share certificate(s) must be lodged with the Company’s Hong Kong branch share registrar and transfer office, Computershare Hong Kong Investor Services Limited, at Shops 1712−1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong for registration by no later than 4:30 p.m. on Friday, 27 December 2024.
Delivery of an instrument appointing a proxy should not preclude a Shareholder from attending and voting in person at the EGM or any adjournment thereof and in such event, the instrument appointing a proxy shall be deemed to be revoked.
The Company reminds all Shareholders that physical attendance in person at the EGM is not necessary for the purpose of exercising voting rights. Shareholders may appoint the chairman of the EGM as their proxy to vote on the relevant resolution at the EGM instead of attending the EGM in person, by completing and return the form of proxy.
If any Shareholder has any question about any resolution or about the Company, or has any matter for communication with the board of directors of the Company, he/she is welcome to send such question or matter in writing to the head office and principal place of business in Hong Kong of the Company or by fax at (852) 2525 7890. If any Shareholder has any question relating to the EGM, please contact Computershare Hong Kong Investor Services Limited, the Company’s Hong Kong branch share registrar as follows:

Computershare Hong Kong Investor Services Limited 17M Floor, Hopewell Centre 183 Queen’s Road East, Wan Chai Hong Kong

As at the date of this notice, the Board comprises seven Directors, of whom three are executive Directors, namely Mr. Ju Wenzhong (Chairman), Mr. Li Bo (Chief Executive Officer) and Mr. Ji Kunpeng; one is a non-executive Director, namely Ms. Zhang Lin; and three are independent non-executive Directors, namely Ms. Liu Peilian, Mr. Chen Liangnuan and Ms. Xue Hui.

– EGM-3 –

AI assistant

Kinetic Development Group Limited — Proxy Solicitation & Information Statement 2024

49818_rns_2024-11-25_8b6bcf88-94c6-4500-8ef4-37d1140e1f3c.pdf

Kinetic Development Group Limited 力 量 發 展 集 團 有 限 公 司

CONNECTED TRANSACTION ACQUISITION OF SEEDLIFE AND NOTICE OF EXTRAORDINARY GENERAL MEETING

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

Kinetic Development Group Limited 力 量 發 展 集 團 有 限 公 司

(Stock Code: 1277)

CONNECTED TRANSACTION ACQUISITION OF SEEDLIFE AND NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Properties of Vendor 1

Original Properties as agreed on 29 April 2022

2022 Adjusted Properties as agreed on 12 July 2022

2023 Adjusted Properties (excluding the 2024 Terminated Properties) as agreed on 6 June 2024

Properties of Vendor 2

Properties of Vendor 3

Original Properties as agreed on 29 April 2022

2022 Adjusted Properties as agreed on 12 July 2022

Properties of Vendor 4

Properties of Vendor 5

Properties of Vendor 6

ACQUISITION OF SEEDLIFE

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

THE SEEDLIFE ACQUISITION

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Closing:

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Properties of Vendor 6

Property Title

Properties of Vendor 4

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Properties of Vendor 2

Consideration Paid Construction Status

Properties of Vendor 4

BASIS OF DETERMINATION OF CONSIDERATION

The Company’s Assessment on the Valuation

With respect of the qualification of the Independent Valuer

With respect of the valuation methodology

With respect to the major assumptions of the Valuation Report

With respect to the comparable companies selected by the Independent Valuer

The Company’s Assessment on the Payment Terms

INFORMATION ON SEEDLIFE

INFORMATION ON THE GROUP AND PARTIES INVOLVED IN THIS TRANSACTION

REASONS FOR AND BENEFITS OF THE SEEDLIFE ACQUISITION

LETTER FROM THE BOARD

Properties sold by Vendor 2

Properties sold by Vendor 4

LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

LETTER FROM THE BOARD

EXTRAORDINARY GENERAL MEETING

The notice convening the EGM is set out on pages EGM-1 to EGM-3 of this circular.

INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

RECOMMENDATIONS

ADDITIONAL INFORMATION

Kinetic Development Group Limited 力 量 發 展 集 團 有 限 公 司

CONNECTED TRANSACTION ACQUISITION OF SEEDLIFE

Yours faithfully,

Ms. Liu Peilian

Kinetic Development Group Limited

CONNECTED TRANSACTION ACQUISITION OF SEEDLIFE

INTRODUCTION

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background information on the Group

(i) Financial performance

Kinetic Development Group Limited Proxy Solicitation & Information Statement 2024

Kinetic Development Group Limited 力量發展集團有限公司

Kinetic Development Group Limited 力量發展集團有限公司

Kinetic Development Group Limited 力量發展集團有限公司

Kinetic Development Group Limited 力量發展集團有限公司