Long Investment Corp — Proxy Solicitation & Information Statement 2011

Dec 15, 2011

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in China Financial Leasing Group Limited (the “ Company ”), you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale was effected for transmission to the purchaser or transferee.

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

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(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2312)

(1) REFRESHMENT OF GENERAL MANDATE TO ISSUE SHARES; (2) ADOPTION OF NEW SHARE OPTION SCHEME AND TERMINATION OF EXISTING SHARE OPTION SCHEME; AND

(3) NOTICE OF EXTRAORDINARY GENERAL MEETING

Independent financial adviser to the Independent Board Committee and the Independent Shareholders

A letter from an independent committee of the board of directors of the Company (the “ Independent Board Committee ”) is set out on page 30 of this circular. A letter from Hooray Capital Limited, the independent financial adviser to the Independent Board Committee and the independent shareholders of the Company, is set out on pages 31 to 45 of this circular.

A notice convening an extraordinary general meeting (“ EGM ”) of the Company to be held at Seminar Hall, 2/F., Soho Tower, 110-118 Caine Road, Central, Hong Kong on Thursday, 12 January 2012 at 10:00 a.m. is set out on pages 55 to 58 of this circular. A form of proxy for use at the EGM is also enclosed with this circular.

Whether or not you are able to attend the EGM, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return the same to the Company’s share registrar in Hong Kong, Tricor Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjourned meeting. Completion and delivery of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof if you so wish.

16 December 2011

• for identification purposes only

CONTENTS

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . . . . . . .	30
LETTER FROM HOORAY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	31
APPENDIX – PRINCIPAL TERMS OF NEW SHARE OPTION SCHEME. . . . . . . . . . . .	46
NOTICE OF EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	55

– i –

DEFINITIONS

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

• “Articles”

the articles of association of the Company as may be amended from time to time

• “associates”

has the same meaning ascribed to it under the Listing Rules

• “Board”

the board of Directors

• “Bonus Issue”

• the proposed issue of four Bonus Shares for every existing Share to the Shareholders whose names appear on the register of members of the Company on the record date being the date for determining the entitlements to the Bonus Issue

• “Bonus Shares”

• new Share(s) to be issued by way of Bonus Issue by the Company

• “Companies Law”

• the Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands

• “Company”

• China Financial Leasing Group Limited, a company incorporated under the laws of the Cayman Islands with limited liability and the shares of which are listed on the Main Board of the Stock Exchange

• “Director(s)”

• director(s) of the Company

• “EGM”

the extraordinary general meeting of the Company to be convened and held at Seminar Hall, 2/F., Soho Tower, 110-118 Caine Road, Central, Hong Kong at 10:00 a.m. on Thursday, 12 January 2012, the notice of which is set out on pages 55 to 58 of this circular, and any adjournment thereof

• “Existing General Mandate”

the general mandate granted by the Shareholders to the Directors at the annual general meeting held on 7 June 2011 authorising the Directors to allot, issue and deal with up to 139,640,700 Shares, representing 20% of the issued share capital of the Company as at the date of passing the relevant resolution

• “Existing Share Option Scheme”

the share option scheme adopted by the Company on 7 October 2002

– 1 –

DEFINITIONS

“Group”

• “Hong Kong”

• “Hooray”

• “Independent Board Committee”

• “Independent Shareholders”

• “Latest Practicable Date”

• “Listing Rules”

• “New General Mandate”

• “New Share Option Scheme”

the Company and its subsidiaries

the Hong Kong Special Administrative Region of the People’s Republic of China

Hooray Capital Limited, a licensed corporation to carry out type 6 regulated activity (advising on corporate finance) under the SFO, the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the refreshment of the Existing General Mandate

• a committee of the Board comprising all the independent non-executive Directors formed for the purpose of advising and giving recommendation to the Independent Shareholders regarding the New General Mandate

• any Shareholders other than controlling Shareholders of the Company and their associates or, which there are no controlling Shareholders, any Shareholders other than Directors (excluding independent non-executive Directors) and the chief executive of the Company and their respective associates

• 13 December 2011, being the latest practicable date prior to the printing of this circular for ascertaining certain information herein

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

• the general mandate proposed to be granted to the Directors at the EGM to allot, issue and otherwise deal with Shares not exceeding 20% of the issued share capital of the Company as at the date of the EGM

the new share option scheme proposed to be adopted at the EGM, a summary of the principal terms is set out in the Appendix to this circular

– 2 –

DEFINITIONS

“SFO” the Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong “Share(s)” ordinary share(s) of HK$0.01 each in the share capital of the Company “Shareholder(s)” holder(s) of Share(s) “Stock Exchange” The Stock Exchange of Hong Kong Limited “HK$” Hong Kong dollars, the lawful currency of Hong Kong “%” percent.

– 3 –

LETTER FROM THE BOARD

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(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2312)

Executive Directors: Mr. Choy Kwok Hung, Patrick (Chairman) Mr. Chan Chi Hung (Managing Director) Mr. Lin Wen Pin

Non-executive Directors: Mr. Shi Rong Chang (Deputy Chairman) Mr. Yang Nai Jiang (Deputy Chairman) Mr. Li Xiao Chen (Deputy Chairman)

Independent Non-executive Directors: Mr. Yue Man Yiu, Matthew Mr. Chung Koon Yan Mr. Chung Shu Kun, Christopher

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

Head office and Principal Place of Business in Hong Kong: Room 4209, Office Tower Convention Plaza 1 Harbour Road, Wan Chai Hong Kong

16 December 2011

To the Shareholders

Dear Sir or Madam,

(1) REFRESHMENT OF GENERAL MANDATE TO ISSUE SHARES; AND (2) ADOPTION OF NEW SHARE OPTION SCHEME AND TERMINATION OF EXISTING SHARE OPTION SCHEME

INTRODUCTION

The purpose of this circular is to provide you the information in relation to (i) the refreshment of the Existing General Mandate; (ii) the recommendation from the Independent Board Committee to the Independent Shareholders in respect of the refreshment of the Existing General Mandate; (iii) the recommendation from Hooray to the Independent Board Committee and the Independent Shareholders in respect of the refreshment of the Existing General Mandate; (iv) the adoption of the New Share Option Scheme and the termination of the Existing Share Option Scheme; and (v) the notice of EGM, at which resolutions will be proposed to be considered and if thought fit, approve the refreshment of the Existing General Mandate, the adoption of New Share Option Scheme and the termination of the Existing Share Option Scheme.

• for identification purposes only

– 4 –

LETTER FROM THE BOARD

REFRESHMENT OF GENERAL MANDATE TO ISSUE SHARES

Background and reasons the refreshment of Existing General Mandate

At the annual general meeting of the Company held on 7 June 2011, among other things, the Directors were granted a general mandate to allot, issue and deal with up to 139,640,700 Shares, which is equivalent to 20% of the then issued share capital of the Company. As announced by the Company on 1 September 2011, the Company and a placing agent entered into a placing agreement (the “ Placing ”) pursuant to which the placing agent has agreed, on a best effort basis, to procure not less than 6 places to subscribe for a total of 139,635,000 new Shares (the “ Placing Shares ”). On 12 September 2011, the Placing Shares were allotted and issued pursuant to the Existing General Mandate, representing approximately 99.996% of the Existing General Mandate. The net proceeds from the Placing of approximately HK$6.80 million has been utilised as to approximately HK$5.16 million on securities investment and approximately HK$1.64 million on general working capital. The securities invested by using the above proceeds are set out below:

		Date of	Investment
	Name of securities/(Stock Code)	Investment	Amount (HK$)
1.	Sinopharm Group Company Limited (1099)	22 September 2011	2,000,000
2.	SJM Holdings Limited (880)	22 September 2011	1,480,000
3.	CSR Corporation Limited (1766)	22 September 2011	1,080,000
4.	Guangzhou R&F Properties
	Company Limited (2777)	22 September 2011	600,000

As the Existing General Mandate has been utilised as a result of the Placing, in order to provide a flexible means for the Company to raise further funds through the issue of new Shares for its future business development if and when an opportunity arises, the Board proposes the grant of New General Mandate to allow the Directors to issue and allot new Shares not exceeding 20% of the issued share capital of the Company as at the date of the EGM.

The Company is an investment holding company. The Group is principally engaged in short to medium term capital appreciation by investing in a diversified portfolio of investments in listed securities in Hong Kong and overseas on a general perspective. In view of the business nature of the Company, the Board considers that it is important for the Company to be able to raise fund quickly in order to seize the investment opportunities that may arise. In accordance to the terms outlined in the Company’s investment objectives and restrictions, the Company is restricted to invest in any company or entity other than wholly-owned subsidiaries of the Company if such investment will result in more than 20% of the net asset value of the Company being invested in such company or entity as at the date the investment is made in such company or entity. Despite to the investment constraint, the Company does not limit their investment portfolio and strives to discover investments in a wide range of assets classes that can diversify the risks and to achieve a reasonable spread. The spread which the Company aims include investing in different regions, industries and types of financial instruments, as well as having different length of holding period.

– 5 –

LETTER FROM THE BOARD

Pursuant to the Company’s diversifying principle, the Directors believe that the grant of the New General Mandate will give the Company the flexibility to raise funds and to expand and develop the business of the Company and therefore, is in the interests of the Company and the Shareholders as a whole. As at the Latest Practicable Date, should the New General Mandate is approved at the EGM and should the New General Mandate is being utilized, the Company intends to apply 20% of the proceeds as general working capital, 50% of the proceeds on investments in listed securities, and the balance of 30% on investments in unlisted securities based on current market sentiment. As at the Latest Practicable Date, the Company has not identified any investment opportunity in unlisted securities and the possible future investments on listed securities are all listed on the Stock Exchange. As at the Latest Practicable Date, the Company has not identified any investment opportunity in both unlisted securities and listed securities. However, the Company have the objective to invest in Hang Seng Index constituents or with listed companies with market capitalization of no less than HK$2 billion, with a principal focus (but not restricted) on the sector of finance, energy, natural resources, domestic consumption and construction materials.

Based on 985,573,020 Shares in issue as at the Latest Practicable Date and assuming that no further Shares changes in the issued share capital until the date of the EGM, subject to passing of the relevant ordinary resolution to approve the grant of the New General Mandate at the EGM, the Directors will be authorised to allot and issue up to 197,114,604 Shares under the New General Mandate. Since the annual general meeting of the Company held on 7 June 2011, the Existing General Mandate has not been refreshed.

Reference to the announcement of the Company dated 23 November 2011 in relation to, among other things, the Bonus Issue, the Board proposed the Bonus Issue which is conditional, among other things, upon: (i) the passing of an ordinary resolution by the Shareholders at the extraordinary general meeting approving the Bonus Issue; and (ii) the Stock Exchange granting the listing of, and permission to deal in, the Bonus Shares. As at the Latest Practicable Date, condition (ii) is fulfilled. As set out in the notice of extraordinary general meeting of the Company dated 5 December 2011, the extraordinary general meeting for approving the Bonus Issue will be held on 21 December 2011. Based on 985,573,020 Shares in issue as at the Latest Practicable Date and assuming that the resolution for the Bonus Issue is passed and 3,942,292,080 Bonus Shares are allotted and issued, the Company’s Shares in issue will be enlarged to 4,927,865,100 Shares. Accordingly, subject to the passing of the relevant ordinary resolution to approve the grant of the New General Mandate at the EGM, the Directors will be authorized to allot and issue up to 985,573,020 Shares under the New General Mandate assuming that no further changes in the issued share capital of the Company from the Latest Practicable Date up to the date of the EGM save for the issue of the Bonus Shares.

The New General Mandate will expire at the earliest of: (a) the conclusion of the next annual general meeting of the Company following the EGM; (b) the date by which the next annual general meeting is required by the Companies Law or the Articles to be held; or (c) when the authority given to the Directors thereunder is revoked or varied by ordinary resolution(s) of the Shareholders in a general meeting prior to the next annual general meeting of the Company.

– 6 –

LETTER FROM THE BOARD

The Independent Board Committee, comprising all of the independent non-executive Directors, has been established to give recommendations to the Independent Shareholders in respect of the proposed refreshment of the Existing General Mandate. Hooray has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the refreshment of the Existing General Mandate.

Refreshment of general mandates in the past three years

During the past three years prior to the Latest Practicable Date, the Company has refreshed the general mandate once on 18 December 2008 of which 67,468,000 shares to be issued under the refreshed mandate. Since the period from 18 December 2008 to the annual general meeting of the Company dated 25 May 2009, such refreshed mandate had not yet been utilized.

PROPOSED ADOPTION OF NEW SHARE OPTION SCHEME AND TERMINATION OF EXISTING SHARE OPTION SCHEME

The Existing Share Option Scheme was adopted by the Company on 7 October 2002 and will expire on 7 October 2012 . In view of the expiration of the Existing Share Option Scheme and in order to enable the Group to grant options to selected eligible participants, including Directors, as incentives or rewards for their contribution to the Group, as well as a way to attract and retain the eligible participants, the Directors propose to recommend to the Shareholders at the EGM to approve the adoption of the New Share Option Scheme and simultaneously terminate the operation of the Existing Share Option Scheme. As at the Latest Practicable Date, the Company does not maintain any share option scheme other than the Existing Share Option Scheme.

The purpose of the New Share Option Scheme is to enable the Group to grant options to the eligible participants as incentives or rewards for their contribution to the Group. It is a share incentive scheme and is established to recognise and acknowledge the contributions made by the eligible participants to the Group. The New Share Option Scheme will provide eligible participants an opportunity to have a personal stake in the Company with the view to achieve the following objectives:

• (1) motivate the eligible participants to optimise their performance and efficiency for the benefit of the Group; and

• (2) attract and retain or otherwise maintain on-going business relationship with the eligible participants whose contributions are or will be beneficial to the long-term growth of the Group.

– 7 –

LETTER FROM THE BOARD

It is proposed that, subject to the approval of the Shareholders for the adoption of the New Share Option Scheme at the EGM, the operation of the Existing Share Option Scheme shall be terminated with effect from the conclusion of the EGM (such that no further options could thereafter be offered under the Existing Share Option Scheme but in all other respects the provisions of the Existing Share Option Scheme shall remain in full force and effect) and the New Share Option Scheme will take effect, subject to the approval of the Stock Exchange, on the date of its adoption at the EGM. Operation of the New Share Option Scheme will commence after all conditions precedent have been fulfilled. Options granted prior to such termination will continue to be valid and exercisable in accordance with the rules of the Existing Share Option Scheme.

As at 28 October 2002, being the date on which trading in the shares of the Company on the Stock Exchange first commenced, the maximum number of shares which may be issued upon exercise of all options to be granted under the Existing Share Option Scheme was 10,542,000 shares, being 10% of the shares in issue on 28 October 2002. The 10% general limit under the Existing Share Option Scheme was subsequently refreshed by the then Shareholders on 18 December 2008. Under the refreshed limit, the Company may grant options to eligible participants to subscribe for a maximum of 168,672,000 Shares.

Since the adoption of the Existing Share Option Scheme, an aggregate of 67,425,000 options granted with an exercise price of HK$0.111 per Share were granted on 14 December 2010, among which, 6,975,000 options were granted to Mr. Choy Kwok Hung, Patrick, the Chairman of the Company, 6,975,000 options were granted to Mr. Chan Chi Hung, the managing Director, and 53,475,000 options were granted to eight employees of the Company, in which they are project managers, account clerk & executive assistant to Director, executive assistant to Director, assistant to manager, assistant to Chairman, assistant to general manager and compliance officer. All these options were exercised on 9 September 2011. As at the Latest Practicable Date, there was no option outstanding and no options has been granted to investee companies.

The New Share Option Scheme is conditional upon:–

• (i) the passing of an ordinary resolution at the EGM to approve the termination of the Existing Share Option Scheme;

• (ii) the passing of an ordinary resolution at the EGM to approve and adopt the New Share Option Scheme and to authorise the Board to grant the options thereunder and to allot, issue and deal with the Shares which fall to be issued by the Company pursuant to the exercise of the options under the New Share Option Scheme; and

• (iii) the Listing Committee of the Stock Exchange granting approval for the listing of and permission to deal in such number of Shares to be issued by the Company pursuant to the exercise of the options which may be granted under the New Share Option Scheme.

– 8 –

LETTER FROM THE BOARD

Under the New Share Option Scheme, the Board has the authority to set terms and conditions in the grant of the options (i.e. to set conditions in relation to the minimum period of the options to be held and/or the performance targets to be achieved before such options can be exercised and the requirement for a minimum subscription price). With such authority and flexibility, the Directors may impose different conditions in the grant of the options to the participants as they consider appropriate with a view to achieving the purpose of the New Share Option Scheme as stated above.

As at the Latest Practicable Date, there were 985,573,020 Shares in issue. Assuming no further issue or repurchase of Shares from the Latest Practicable Date up to the date of approval of the New Share Option Scheme at the EGM, options to subscribe for up to 98,557,302 Shares may be issued under the New Share Option Scheme or any other schemes of the Company pursuant to Rule 17.03(3) of the Listing Rules, representing 10% of the Shares in issue as at the date of approval of the New Share Option Scheme at the EGM.

Based on 985,573,020 Shares in issue as at the Latest Practicable Date and assuming that the resolution for the Bonus Issue is passed and 3,942,292,080 Bonus Shares are allotted and issued, the Company’s Shares in issue will be enlarged to 4,927,865,100 Shares (Details of the Bonus Issue is set out in the section headed “REFRESHMENT OF GENERAL MANDATE TO ISSUE SHARES” in this circular). Assuming that no further issue or repurchase of Shares from the Latest Practicable Date up to the date of approval of the New Share Option Scheme at the EGM save for the issue of the Bonus Shares, options to subscribe for up to 492,786,510 Shares may be issued under the New Share Option Scheme or any other schemes of the Company pursuant to Rule 17.03(3) of the Listing Rules, representing 10% of the Shares in issue as at the date of approval of the New Share Option Scheme at the EGM.

Unless the Board exercises its authority as set out above to determine otherwise, no performance target must be met before the options granted under the New Share Option Scheme can be exercised, and there is no minimum period for which the options granted under the New Share Option Scheme must be held before they can be exercised.

None of the Directors is a trustee of the New Share Option Scheme nor has any direct or indirect interest in the trustees. The exercise price of the options is to be determined by the Board in its absolute discretion which must be at least the higher of (a) the closing price of the Shares as stated in the Stock Exchange’s daily quotations sheet on the date of grant; and (b) the average of the closing price of the Shares as stated in the Stock Exchange’s daily quotations sheets for the five business days immediately preceding the date of grant.

– 9 –

LETTER FROM THE BOARD

Given that (i) the Existing Share Option Scheme will expire on 7 October 2012; and (ii) the purpose of the New Share Option Scheme is to enable the Group to grant options to participants as incentives or rewards for their contribution to the Group and hence can enable the Group to recruit and retain senior management and key employees, attract human resources that are valuable to the Group and to provide the participants with an opportunity to have a personal stake in the Company through the Company offering the grant of options with the view to motivate the participants to optimize their performance and efficiency for the benefit of the Group, the Directors consider that the adoption of the New Share Option Scheme is in the interests of the Company and the Shareholders as a whole.

A summary of the principal terms of the New Share Option Scheme which is proposed to be approved and adopted by the Company at the EGM is set out in the Appendix to this circular.

A copy of the rules of the New Share Option Scheme is available for inspection at the principal place of business of the Company in Hong Kong at Room 4209, Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong during normal business hours on any weekdays other than public holidays from the date of this circular up to and including the date of the EGM.

Scheme mandate limit and maximum number of shares to be issued

Shares which may fall to be issued upon the exercise of all options to be granted under the New Share Option Scheme at any time may not exceed 10% of the Shares in issue as at the date of adoption of the New Share Option Scheme.

On the basis of 985,573,020 Shares in issue as at the Latest Practicable Date and assuming that no further Shares are issued or repurchased by the Company prior to the EGM, the scheme limit for the New Share Option Scheme will be 98,557,302 Shares under Rule 17.03(3) of the Listing Rules, should the New Share Option Scheme be adopted.

Application will be made to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Shares to be issued and allotted pursuant to the exercise of the options in accordance with the terms and conditions of the New Share Option Scheme.

The Directors intend to use the proceeds from the exercise of the options, if any, as general working capital of the Company or securities investments when suitable opportunities arise.

– 10 –

LETTER FROM THE BOARD

Value of the options

The Company considers that it would not be appropriate to state the value of all options that can be granted under the New Share Option Scheme as if they had been granted on the Latest Practicable Date, as a number of variables which are crucial for the calculation of the option value are yet to be determined. Such variables include the subscription price payable for the Shares, exercise period, any lock-up period and any performance target. The Company believes that any calculation of the value of the options as at the Latest Practicable Date based on a number of speculative assumptions would be misleading to the Shareholders.

FUND RAISING ACTIVITIES OF THE COMPANY IN THE LAST THREE YEARS

Set out below is the fund raising activities conducted by the Company (excluding any proceeds generated from the exercise of share options or warrants which were granted earlier) in the past three years prior to the Latest Practicable Date:

			Intended use of
Description	Announcement	Net amount raised	proceeds as announced	Actual use of proceeds	Breakdown of proceeds
Placing of	1 September 2011	Approximately	Securities investment	Investments	Invested on Sinopharm Group
new shares		HK$6.8 million	and general working	made = HK$5.16	Company Limited_(1099)_, SJM
under general			capital	million	Holdings Limited_(880)_, CSR
mandate				Applied as general	Corporation Limited_(1766)_
				working capital =	and Guangzhou R&F Properties
				HK$1.64 million	Company Limited_(2777)_
					Applied on wages, Directors’
					remuneration, rental, professional
					fees and daily expenses, which in
					total approximately HK$500,000
					per month
Placing of	26 November 2010	Approximately	Securities investment	Investments	Invested on Seamless Green China
new shares		HK$8.3 million	and general working	made = HK$6 million	(Holdings) Limited_(8150)_,
under general			capital	Applied as general	United Energy Group Limited
mandate				working capital =	(467), Viva China Holdings
				HK$2.3 million	Limited_(8032)_, Kingston
					Financial Group Limited
					(formerly known as “Golden
					Resorts Group Limited”)(1031),
					Greater China Holdings Limited
					_(431)_and Hong Kong Resources
					Holdings Company Limited
					(2882)

Applied on wages, Directors’ remuneration, rental, professional fees and daily expenses, which in total approximately HK$500,000 per month

– 11 –

LETTER FROM THE BOARD

			Intended use of
Description	Announcement	Net amount raised	proceeds as announced	Actual use of proceeds	Breakdown of proceeds
Open offer of	12 April 2010	Approximately	Additional working	Investments	Invested on TC Interconnect
new shares		HK$10.9 million	capital to strengthen	made = HK$9.188	Holdings Limited_(515)_, Hong
			the Group’s capital	million	Kong Resources Holdings
			base for future	Applied as general	Company Limited_(2882)_,
			investments and	working capital =	and S.G.A.-HIS EU PUT WT
			development of its	HK$1.712 million,	DEC10B_(22660)_
			financial leasing	as the investment into
			business of the Group	the financial leasing	Applied on wages, Directors’
				business was cancelled,	remuneration, rental, professional
				the investment sum	fees and daily expenses, which in
				was applied to	total approximately HK$500,000
				listed shares	per month
Placing of	2 February 2010	Approximately	General working capital	Investments	Invested on Sustainable Forest
new shares		HK$5.65 million	of the Company	made = HK$3.43	Holdings Limited_(723)_, China
under general				million	Aerospace International Holdings
mandate				Applied as general	Limited_(31)_, Sun International
				working capital =	Resources Limited (formerly
				HK$2.22 million	known as “Sun International
					Group Limited”)_(8029)_and
					Hong Kong Resources Holdings
					Company Limited_(2882)_

Applied on wages, Directors’ remuneration, rental, professional fees and daily expenses, which in total approximately HK$500,000 per month

– 12 –

LETTER FROM THE BOARD

During the above period, the Company received approximately HK$7.00 million in cash from exercise of share options by their relevant holders which were granted beyond the said period. Table below illustrates the utilization of the proceeds, which is approximately HK$7.00 million, exercised from the share options:

			Realised
			gains/
Date of	Name of securities/	Investment	( losses)
Investment	(Stock Code)	Amount (HK$)	(HK$)
20/9/2011	SPDR Gold Trust (2840)	2,029,000	24,500
20/9/2011	Esprit Holdings Limited (330)	1,018,000	(115,722)
22/9/2011	Renhe Commercial Holdings Company Limited	3,960,000	(273,520)
	(1387)

On 15 June 2009, the Company proposed to issue convertible notes with the principal amount of up to HK$41.25 million and the proposal was duly passed in the extraordinary general meeting on 25 August 2009 by the then Shareholders. Pursuant to the letter received from the Stock Exchange on 15 January 2010, indicating their rejection to grant a listing approval for the conversion shares on the basis the placing did not comply with the principles in Rule 2.03 of the Listing Rules, the issue on convertible notes was withdrawn.

Save as and except for the above, the Company had not conducted any other fund raising activities in the past three years immediately prior to the Latest Practicable Date.

– 13 –

LETTER FROM THE BOARD

SHAREHOLDING OF THE COMPANY

Set out below a table setting out the shareholding structure of the Company as at the Latest Practicable Date and upon full utilization of the New General Mandate, for illustrative and reference purpose:

After full utilization After full utilization of the New General of the New General Mandate ( subject to Mandate (subject to the passing of the the passing of the proposed resolution proposed resolution for the granting of for the granting of Upon the issue of the New General Mandate New General Mandate Bonus Shares and and assuming that no and assuming that no assuming that no other other Shares are issued other Shares are Shares are issued or or repurchased by the issued or repurchased repurchased by the Company prior to the As at Latest by the Company Company prior EGM save for the issue Shareholders Practicable Date prior to the EGM) to the EGM of the Bonus Shares) No. of Shares % No. of Shares % No. of Shares % No. of Shares % Director: Yang Nai Jiang 24,885,000 2.52 24,885,000 2.10 124,425,000 2.52 124,425,000 2.10 General manager: Choy Git Yan, Timothy 250,927,500 25.46 250,927,500 21.22 1,254,637,500 25.46 1,254,637,500 21.22 Existing Independent Shareholders 709,760,520 72.02 709,760,520 60.01 3,548,802,600 72.02 3,548,802,600 60.01 Shares potentially to be issued pursuant to the New General Mandate 0 0.00 197,114,604 16.67 0 0.00 985,573,020 16.67 Total 985,573,020 100.00 1,182,687,624 100.00 4,927,865,100 100.00 5,913,438,120 100.00

– 14 –

LETTER FROM THE BOARD

INVESTMENT OBJECTIVES AND POLICIES

The Company has adopted the following investment policies:

• (i) the Company’s investments will normally be made in the form of equity or equity related securities and/or debt securities in listed and unlisted companies engaged in different industries including (but not limited to) information technology, manufacturing, life sciences and environmental services, telecommunications, infrastructure, pharmaceuticals and property sectors aiming at maintaining a balance in the Company’s exposure to different industries sectors in order to minimize the impact on the Company of any downturn in any particular sector;

• (ii) the Company may invest in other fields in which the Board believes that there are prospects of earnings growth and/or capital appreciation. In particular, the Company will seek to identify businesses or entities with a potential or record of profit growth, strong management, high levels of technical expertise and research and development capabilities as well as management commitment to the long-term growth of such companies;

• (iii) the Company may invest in companies or other entities which are considered by the Board and/or the Investment Manager as being special or in recovery situations on a case by case basis (e.g., the Company may invest in companies under restructuring or liquidation), which may have extensive growth in shorter period and provide attractive returns;

• (iv) up to a maximum of 90% of the Group’s assets can be invested in:

• (a) equity securities, convertible notes, preference shares, options, warrants or debt securities issued by listed companies;

• (b) equity securities, convertible notes, preference shares, options, warrants or debt securities issued by unlisted companies in the Region; and

• (c) options and futures which are traded on recognized securities or futures exchanges for trading and hedging purposes;

• (v) the Board and the Investment Manager will, where possible, seek to identify investments where there is a certain degree of synergy with other investee companies and where cooperation between such companies would be of mutual benefit to each other;

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LETTER FROM THE BOARD

• (vi) the Company’s investments are intended to be held for short to medium term (i.e. less than one year to five years) capital appreciation. Subject to the foregoing, the Company will realise investments from time to time where to do so is in the opinion of the Board to be in the best interests of the Company or where the terms on which such realisation can be achieved are in the opinion of the Board to be particularly favourable to the Company;

• (vii) before suitable investment projects are identified, the Company may seek to protect the capital value of the Company’s cash assets by placing the same in bank deposits in any currency, bonds, treasury securities issued by the government of the United States or the government of Hong Kong or their respective agencies or securities or other instruments denominated in any currency issued by various governments or international development agencies;

• (viii) before suitable investment projects are identified, the Company may enter into forward interest rate agreements, forward currency agreements, interest rates and bond futures contracts and interest rate swaps and purchase and write (sell) put or call options on interest rates and put or call options on futures on interest rates; and

• (ix) a minimum of 10% of the Group’s assets will be maintained in cash or cash equivalents.

Investors should note that while it is the intention of the Company to invest its funds in accordance with the investment objectives and policies outlined above as far as practicable, due to market and other investment considerations, it may take some time before the funds of the Company are fully invested. The Company currently has no intention to change the investment objectives and policies. However, Shareholders should note that the investment objectives and policies can be changed by the Company without approval from the Shareholders.

INVESTMENT RESTRICTIONS

Under the Articles and the Listing Rules relating to the listing of investment companies, certain restrictions on investments are imposed on the Company. To abide by such restrictions, the Board has resolved that the Company may not:

• (i) either itself or through its wholly owned subsidiaries, if any, or in conjunction with any connected person (as defined in the Listing Rules) take legal, or effective, management control of underlying investments and in no event will the Company itself or through its wholly-owned subsidiaries, if any, own or control more than 30% (or such other percentage as may from time to time be specified in the Takeovers Code as being the level for triggering a mandatory general offer) of the voting rights in such company or other entity, except in relation to such wholly-owned subsidiaries of the Company formed solely for the purpose of investment holding; and

– 16 –

LETTER FROM THE BOARD

• (ii) invest in any company or entity other than wholly-owned subsidiaries of the Company if such investment will result in more than 20% of the Net Asset Value being invested in such company or entity as at the date the investment is made in such company or entity.

The Company has to comply with investment restrictions (i) and (ii) above at all times while it remains listed as an investment company under Chapter 21 of the Listing Rules, and these restrictions are also contained in the Articles and any change of such is subject to Shareholders’ approval.

The Board has no present intention to change any of the above-mentioned investment restrictions.

BORROWING POWER

Pursuant to the Articles, the Company may exercise its borrowing power to borrow up to an aggregate principal amount representing not more than 50% of the latest available Net Asset Value at the time the borrowing is made. In the event that the borrowing should exceed 50% of the latest available Net Asset Value, the Company must obtain prior approval of the Shareholders at a general meeting. The Company’s assets may be charged or pledged as security for borrowings. Subject to the provisions of the memorandum of association, the Articles and the investment management agreement entered with the Investment Manager, the Company may from time to time borrow for the purposes of providing liquidity or taking advantage of investment opportunities.

DISTRIBUTION POLICY

Interest income, dividend income and other incomes of the Company will be used first to meet expenses. The Investment Manager will then assess whether it is reasonable to make provisions for future expenses and/or any possible impairment of investments, and will consider the amount of cash which should be retained by the Company for future investments. It is the Board’s intention to distribute any surplus by way of dividend to the extent permitted by law and the Articles. Dividends will only be paid to the extent that they are covered by net income received from underlying investments. Distributions (if any) will be made annually after the annual audited financial statements of the Company are approved by the Shareholders at the annual general meeting but interim distributions may be made from time to time to the Shareholders if it appears to the Board to be justified by the financial position of the Company. Distributions by way of cash dividends will be made in Hong Kong Dollars.

FOREIGN CURRENCY MANAGEMENT

As at the Latest Practicable Date, the Company did not have investment which denominated in foreign currencies. In the event that the Company’s investments denominated in currencies other than Hong Kong Dollars, the Company may expose to the risk relating to exchange rate fluctuations. The Company will keep monitor if such possible risk arise and take prudent measures such as using forward or hedging contracts to manage the associated foreign currency risk.

– 17 –

LETTER FROM THE BOARD

TAXATION

The taxation of income and capital gains of the Company are subject to the fiscal law and practice of Hong Kong. Prospective investors should consult their own professional advisers on the tax implications of investing, holding or disposing of Shares under the laws of the jurisdiction in which they are liable to taxation.

FEES AND EXPENSES

The Company will pay the fees of the Investment Manager and the custodian, as described below. In addition, the Company will pay certain other costs and expenses incurred in its operation, including taxes, expenses for legal, auditing and consulting services, promotional expenses, registration fees and other expenses due to supervisory authorities in various jurisdictions, insurance, interest and brokerage cost.

Investment management fees

Pursuant to the investment management agreement dated 7 October 2002 (the “Investment Management Agreement”) entered into between the Company and the Investment Manager, the Investment Manager has agreed to provide the Company with investment management services (excluding general administrative services) for a three-year period commencing on 28 October 2002, the date of the commencement of the trading of the Company’s shares on the Stock Exchange. The Investment Management Agreement will continue for successive periods of three years, unless terminated at any time by either the Company or the Investment Manager serving not less than six months’ notice in writing to the other party, and will expire on the last day of the three-year period or any of the relevant successive periods.

With effect from 1 January 2009, the monthly management fee had been changed from HK$30,000 to HK$55,000 per month. The management fee to the Investment Manager is a de minimis transaction under Rule 14A.33(3)(b) of the Listing Rules which is exempt from the reporting, announcement and independent shareholders’ approval requirement.

Custodian fees

DBS Vickers (Hong Kong) Limited (“ Custodian ”) acts as custodian of the Company, the Company will pay the Custodian such reasonable fees, costs and expenses in respect of the custodian account as may from time to time be prescribed by the Custodian which are varied between the markets of the securities held through the Custodian, as for Hong Kong stock, the fee is 0.25% of the market value of the shares as at the date of purchase; for Australian stock, the fee is 0.5% of the market value of the shares as at the date of purchase. Other fees and expenses to be payable including on dividend collection, bonus issue etc.

– 18 –

LETTER FROM THE BOARD

INVESTMENTS PORTFOLIO

A. Existing investment portfolio

Set out below are the details of the existing investment portfolio of the Company as at the Latest Practicable Date:

				Closing price
				of the Latest		Unrealized
	Name of	Number of	% of	Practicable		and unaudited
	Investee	Shares	shareholding	Date	Gross value	gains/(losses)
				HK$	HK$	HK$
1.	SMI Corporation	24,000,000	0.2962%	0.285	6,840,000	(638,300)
	Limited (198)
2.	Sinopharm Group	50,000	0.0021%	18.2	910,000	(90,000)
	Company Limited
	(1099)
3.	The Hong Kong And	170,000	0.0022%	17.64	2,998,800	(56,160)
	China Gas
	Company
	Limited (3)
4.	北京愛爾益地	Not applicable	12%	Not applicable	RMB2,400,000	Nil
	照明工程
	有限公司*

• non-listed

The investment in listed securities were conducted through professional brokers in Hong Kong. The investment in 北京愛爾益地照明工程有限公司 (Beijing LED Lighting Engineering Company Limited) (“Beijing LED”) was conducted on 29 June 2011.

– 19 –

LETTER FROM THE BOARD

B. Top ten securities bought during the years 2008, 2009, 2010 and since 1 January 2011 to the Latest Practicable Date:

Set out below are the top-ten securities bought by the Company during the years 2008, 2009 and 2010 and for the period from 1 January 2011 to the Latest Practicable Date, respectively:

(i) For the year ended 31 December 2008

		Quantity	Investment
Name of securities/(Stock code)		(No. of shares)	Amount (HK$)
1.	Kith Holdings Limited (1201)	800,000	2,504,000
2.	Rubicon Japan Trust (#)	2,100,000	2,005,431
3.	China Communications Construction	200,000	1,459,000
	Company Limited (1800)
4.	Byford International Limited (8272)	1,000,000	1, 300,000
	(Now known as “Chinese Food and
	Beverage Group Limited”)
5.	Build King Holdings Limited (240)	5,000,000	1,029, 990
6.	Henderson Investment Limited (97)	2,574,000	952,380
7.	China Railway Construction Corporation	60,000	541,825
	Limited (1186)
8.	China Shenhua Energy Company Limited	34,000	515,440
	(1088)

# Rubicon Japan Trust was listed on the Australian Securities Exchange, and was delisted on 23 December 2009 due to bankruptcy.

Note: There were only 8 securities bought during the year 2008.

– 20 –

LETTER FROM THE BOARD

(ii) For the year ended 31 December 2009

		Quantity	Investment
Name of securities/(Stock code)		(No. of shares)	Amount (HK$)
1.	Wai Kee Holdings Limited (610)	432,000	663, 340
2.	Prosperity International Holdings (H.K.)	500,000	395,000
	Limited (803)
3.	Seamless Green China (Holdings) Limited	1,000,000	330,000
	(8150)
4.	Build King Holdings Limited (240)	1,000,000	285,000
5.	WLS Holdings Limited (8021)	1,450,000	194, 360

Note: There were only 5 securities bought during the year 2009.

(iii) For the year ended 31 December 2010

		Quantity	Investment
Name of securities/(Stock code)		(No. of shares)	Amount (HK$)
1.	TC Interconnect Holdings Limited (515)	4,500,000	7,530,000
2.	Hong Kong Resources Holdings Company	4,572,000	6,022, 853
	Limited (2882)
3.	Seamless Green China (Holdings) Limited	5,050,000	4,240,300
	(8150)
4.	China Tontine Wines Group Limited (389)	2,100,000	4,171,500
5.	United Energy Group Limited (467)	3,600,000	4,105, 500
6.	Anxin-China Holdings Limited (1149)	2,000,000	3,447,440
7.	Sustainable Forest Holdings Limited (723)	3,000,000	2,115,000
8.	Greater China Holdings Limited (431)	3,588,000	2,051,860
9.	Sun International Resources Limited (8029)	2,030,000	1,624,250
10.	New Capital International Investment	1,000,000	1,430,000
	Limited (1062)

– 21 –

LETTER FROM THE BOARD

(iv) For the period from 1 January 2011 to the Latest Practicable Date

			Quantity	Investment
Name of securities/(Stock code)		(No. of shares)		Amount (HK$)
1.	SMI Corporation Limited (198)		24,000,000	7,478,300
2.	HSBC Holdings plc (5)		88,000	6,180, 100
3.	Renhe Commercial Holdings Company		4,000,000	3, 960,000
	Limited (1387)
4.	SJM Holdings Limited (880)		300,000	3,924,000
5.	Hong Kong and China Gas Company		170,000	3,054,960
	Limited (3)
6.	Sinopharm Group Company Limited (1099)		154,000	2,992,992
7.	北京愛爾益地照明工程有限公司*	Not applicable		RMB2,400,000
8.	United Energy Group Limited (467)		2,124,000	2,739,600
9.	SPDR Gold Trust HK (2840)		1,500	2,029,000
10.	Guangzhou R&F Properties Company		200,000	1,575,484
	Limited (2777)

• non-listed

C. Top ten securities held as at 31 December 2008, 2009 and 2010, and 30 June 2011:

The followings are the details of the ten largest securities held by the Company as at 31 December 2008, 31 December 2010 and 30 June 2011. There were no securities held by the Company as at 31 December 2009.

(i) As at 31 December 2008

			Proportion
			of investee’s
		Carrying value	capital
Name of securities/(Stock code)		(HK$)	owned (%)
1.	ESPCO Technology Holdings Limited (8299)	1,277,000	0.554%
	(Now known as “Grand T G Gold Holdings
	Limited”)
2.	Kith Holdings Limited (1201)	1,252,000	0.239%
3.	Build King Holdings Limited (240)	835,000	0.537%
4.	Byford International Limited (8272) (Now	252,000	0.045%
	known as “Chinese Food and Beverage
	Group Limited”)
5.	Rubicon Japan Trust (#)	90,000	Less than 1%

– 22 –

LETTER FROM THE BOARD

• # Rubicon Japan Trust was listed in ASX, and was delisted on 23 December 2009 due to bankruptcy.

Notes: There were only 5 securities held as at 31 December 2008

(ii) As at 31 December 2010

			Proportion
			of investee’s
		Carrying value	capital
Name of securities/(Stock code)		(HK$)	owned (%)
1.	Seamless Green China (Holdings) Limited	3,919,200	3.007%
	(8150)
2.	New Capital International Investment	1,088,000	0.081%
	Limited (1062)
3.	United Energy Group Limited (467)	930,000	0.005%
4.	Viva China Holdings Limited (8032)	680,000	0.010%
5.	Greater China Holdings Limited (431)	315,840	0.251%

Notes: There were only 5 securities held as at 31 December 2010

(iii) As at 30 June 2011

			Proportion
			of investee’s
		Carrying value	capital
Name of securities/(Stock code)		(HK$)	owned (%)
1.	北京愛爾益地照明工程有限公司*	RMB2,400,000	12.00%
2.	China Agrotech Holdings Limited (1073)	1,261,700	0.104%
3.	China Dongxiang (Group) Company Limited	1,235,000	0.009%
	(3818)
4.	HSBC Holdings plc (5)	770,500	0.000%
5.	Net2Gather (China) Holdings Limited (1049)	474,600	0.057%
6.	Greater China Holdings Limited (431)	274,480	0.251%
7.	King Stone Energy Group Limited (663)	208,000	0.008%
8.	Build King Holdings Limited (240)	43,250	0.020%
*	non-listed

Notes: There were only 8 securities held as at 30 June 2011

– 23 –

LETTER FROM THE BOARD

D. Top three realised loss-making investments in the years 2008, 2009 and 2010 and since 1 January 2011 to the Latest Practicable Date:

The top-three loss-making investments of the Company for the years ended 31 December 2008, 2009, 2010 and for the period from 1 January 2011 to the Latest Practicable Date, respectively and the basis for disposals are set out below:

(i) For the year ended 31 December 2008

		Loss
		amount
Name of securities/(Stock code)		(HK$)
1.	ESPCO Technology Holdings Limited (8299)	1,826,400
	(Now known as “Grand T G Gold Holdings Limited”)
2.	Byford International Limited (8272)	98,000
	(Now known as “Chinese Food and Beverage Group Limited”)
3.	Kith Holdings Limited (1201)	24,795
_Note:_The basis for disposal was based on the market uncertainty.
For	the year ended 31 December 2009
		Loss
		amount
Name of securities/(Stock code)		(HK$)
1.	ESPCO Technology Holdings Limited (8299)	4,085,928
	(Now known as “Grand T G Gold Holdings Limited”)
2.	Kith Holdings Limited (1201)	306,640
3.	Wai Kee Holdings Limited ( 610)	62,205

(ii) For the year ended 31 December 2009

Note: The basis for disposal was based on the market uncertainty.

– 24 –

LETTER FROM THE BOARD

(iii) For the year ended 31 December 2010

		Loss
		amount
Name of securities/(Stock code)		(HK$)
1.	I.T. Limited (999)	229,920
2.	China Aerospace International Holdings Limited (31)	220,000
3.	Shanghai International Shanghai Growth Investment Limited	122,084
	( 770)

Note: The basis for disposal was based on the need of liquidity for other potential investments.

(iv) For the period from 1 January 2011 to the Latest Practicable Date

		Loss
		amount
Name of securities/(Stock code)		(HK$)
1.	United Energy Group Limited (467)	619,860
2.	China Agrotech Holdings Limited (1073)	530,850
3.	China Dongxiang (Group) Company Limited (3818)	477,090

Note: The basis for disposal was based on the need of liquidity for other potential investments.

E. Top three investments recognized impairment losses in the years 2008, 2009 and 2010 and since 1 January 2011 to the Latest Practicable Date:

There were no investments recognized impairment losses recorded for the years ended 31 December 2008, 2009 and 2010 and for the period from 1 January 2011 to the Latest Practicable Date.

– 25 –

LETTER FROM THE BOARD

RELATIONSHIPS BETWEEN THE COMPANY AND ITS INVESTMENTS, ITS SUBSTANTIAL SHAREHOLDERS AND THE DIRECTORS

As at the Latest Practicable Date, Mr. Choy Git Yan, Timothy, the general manager of the Company, holds approximately 25.46% of the issued share capital of the Company. Mr. Choy Git Yan, Timothy is the son of Mr. Choy Kwok Hung, Patrick who is an executive Director and Chairman of the Board.

Mr. Choy Kwok Hung, Patrick has been the director of Beijing LED since 24 March 2009 and up to the Latest Practicable Date. As at the Latest Practicable Date, Beijing LED is beneficially owned as to approximately 12% by the Company and as to approximately 17% by a company beneficially owned by Mr. Choy Kwok Hung, Patrick and Mr. Choy Git Yan, Timothy in the proportion of 90% and 10% respectively. Save as disclosed above, the Company does not have any control or influence on Beijing LED. The investment was made on 29 June 2011. Approximately 71% of the interests of Beijing LED are beneficially owned by independent third parties of the Company. There are three board members of Beijing LED and save for Mr. Choy Kwok Hung, Patrick, none of the Directors is or has been a director of Beijing LED and any company, the securities of which were one of the securities bought by the Company for the three years ended 31 December 2010 and up to the Latest Practicable Date.

The Company believes that the investment on Beijing LED is in line with the investment objectives of the Company as it aims to diversify the investment portfolio and to achieve a reasonable spread. Beijing LED is a company incorporated in Beijing and principally engaged in providing professional LED Lighting design, advices and solution globally, as well as responsible for the public lighting infrastructure maintenance. This investment decision is dissimilar from the securities investment held by the Company portfolio as the majority of them are listed companies on the Stock Exchange. In addition, the Company believes that with the reputation and network developed by Beijing LED, it can definitely provides the Company a path to enter the PRC market and to seek for potential investment opportunities within PRC.

As at the Latest Practicable Date, Mr. Yang Nai Jiang, the non-executive Director, holds approximately 2.52% of the issued share capital of the Company.

Save as disclosed above, none of the Directors hold any Shares of the Company as at the Latest Practicable Date.

– 26 –

LETTER FROM THE BOARD

To the best of knowledge of the Directors, (i) there was no cross-shareholdings between the Company and its major investments for the three years ended 31 December 2010 and up to the Latest Practicable Date; (ii) there was no common investments or common directorships between the Company and its substantial Shareholders; and (iii) there was no common investments between the Company and Directors.

RELATIONSHIP BETWEEN THE COMPANY AND ITS INVESTMENT MANAGER

As at the Latest Practicable Date, Mr. Chan Chi Hung, an executive Director, owns entire interest and is one of the directors of Wealth Assets Management Limited, the investment manager of the Company.

To the best knowledge of the Directors, save as disclosed in this circular, there was no common investments made by the Company and Wealth Assets Management Limited, nor any common directorships between the Company and Wealth Assets Management Limited; and between Wealth Assets Management Limited and the Company’s investments for the three years ended 31 December 2010 and up to the Latest Practicable Date.

EGM

Pursuant to Rule 13.36(4)(a) of the Listing Rules, the New General Mandate requires the approval of the Independent Shareholders at the EGM at which any of the controlling Shareholders and their associates or, where there are no controlling Shareholders, Directors (excluding independent non-executive Directors) and the chief executive of the Company and their respective associates shall abstain from voting in favour of the relevant resolution . As at the Latest Practicable Date, the Company has no controlling Shareholder. Mr. Yang Nai Jiang, a non-executive Director, is interested in 24,885,000 Shares, representing approximately 2.52% of the issued share capital of the Company. Mr. Choy Git Yan, Timothy is the general manager of the Company who is responsible for the business operations of the Company under the authority of the Board is interest in 250,927,500 Shares, representing approximately 25.46% of the issued share capital of the Company. Accordingly, Mr. Yang Nai Jiang and Mr. Choy Git Yan, Timothy, together with their respective associates shall abstain from voting in relation to the relevant resolution approving the grant of the New General Mandate at the EGM.

As at the Latest Practicable Date, none of the Directors and the chief executive and their respective associates have the intention to vote against the resolution in relation to the relevant resolution approving the grant of the New General Mandate at the EGM.

– 27 –

LETTER FROM THE BOARD

To the best knowledge of the Directors, as at the Latest Practicable Date, no Shareholder has a material interest in the New Share Option Scheme different to that of any other Shareholder and accordingly, no Shareholder is required to abstain from voting at the EGM on the resolution approving the adoption of the New Share Option Scheme.

The notice convening the EGM is set out on pages 55 to 58 of this circular. At the EGM, ordinary resolutions will be proposed to approve (i) the refreshment of Existing General Mandate; and (ii) the termination of Existing Share Option Scheme and the adoption of the New Share Option Scheme. A form of proxy for use at the EGM is also enclosed with this circular. Whether or not you are able to attend the EGM, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return the same to the Company’s share registrar in Hong Kong, Tricor Tengis Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjourned meeting. Completion and delivery of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof if you so wish.

RECOMMENDATIONS

The Board considers that all ordinary resolutions to be proposed at the EGM are in the best interests of the Company and the Shareholders as a whole and recommends the Shareholders (or Independent Shareholders as the case may be) to vote in favour of such resolutions at the EGM.

The Independent Board Committee, having taken into account the advice of Hooray , considers the terms of the refreshment of the Existing General Mandate are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committee recommends that the Independent Shareholders should vote in favour of the relevant resolution to be proposed at the EGM to approve the grant of the New General Mandate.

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.

– 28 –

LETTER FROM THE BOARD

GENERAL

Your attention is drawn to the letter from the Independent Board Committee as set out on page 30 of this circular which contains its recommendation to the Independent Shareholders on the refreshment of the Existing General Mandate. Your attention is also drawn to the letter from Hooray as set out on pages 31 to 45 of this circular, which contains its advice to the Independent Board Committee and the Independent Shareholders in relation to the above.

Yours faithfully,

By Order of the Board China Financial Leasing Group Limited Tse Kam Fai Company Secretary

– 29 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of a letter from the Independent Board Committee setting out its recommendation to the Independent Shareholders in relation to the refreshment of the Existing General Mandate:

==> picture [218 x 96] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2312)

16 December 2011

To the Independent Shareholders

Dear Sir or Madam,

REFRESHMENT OF GENERAL MANDATES TO ISSUE SHARES

We refer to the circular (the “ Circular ”) to the Shareholders dated 16 December 2011 issued by the Company of which this letter forms part. Terms used in this letter shall have the same meanings as those defined in the Circular, unless the context otherwise requires.

We have been appointed by the Board as member of the Independent Board Committee to advise the Independent Shareholders in respect of refreshment of the Existing General Mandate, details of which are set out in the Letter from the Board contained in the Circular.

Having taken into account the advice of Hooray, the independent financial adviser of the Company, as set out in their letter of recommendation on pages 31 to 45 of the Circular, we are of the opinion that the refreshment of the Existing General Mandate is fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM to approve the refreshment of the Existing General Mandate.

Yours faithfully,

For and on behalf of Independent Board Committee

Mr. Yue Man Yiu, Mr. Chung Koon Yan Mr. Chung Shu Kun, Matthew Christopher

Independent non-executive Directors

• for identification purposes only

– 30 –

LETTER FROM HOORAY

The following is the full text of the letter from Hooray setting out its advice to the Independent Board Committee and to the Independent Shareholders in respect of the refreshment of the Existing General Mandate, which has been prepared for the purpose of inclusion in this circular:

16 December 2011

• to: the independent board committee and the independent shareholders of China Financial Leasing Group Limited

Dear Sirs,

REFRESHMENT OF GENERAL MANDATE TO ISSUE SHARES

INTRODUCTION

We refer to our appointment as independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the granting of the New General Mandate (“ Granting of New General Mandate ”), details of which are set out in the letter from the Board (the “ Letter from the Board ”) contained in the circular to the Shareholders dated 16 December 2011 (the “ Circular ”), of which this letter forms part. Terms used in this letter shall have the same meanings as those defined in the Circular unless the context requires otherwise.

Pursuant to Rule 13.36(4) of the Listing Rules, the Granting of New General Mandate is subject to the approval of the Independent Shareholders at the EGM by way of poll. Accordingly, the Independent Board Committee (comprising Mr. Yue Man Yiu, Matthew, Mr. Chung Koon Yan and Mr. Chung Shu Kun, Christopher, all being the independent non-executive Directors) has been established to advise the Independent Shareholders as to whether the Granting of New General Mandate fair and reasonable so far as the Independent Shareholders are concerned and is in the interests of the Company and the Independent Shareholders as a whole. We have been appointed as the independent financial adviser to the Independent Board Committee and the Independent Shareholders to advise on the Granting of New General Mandate.

好盈融資有限公司

Hooray Capital Limited

香港灣仔告士打道108號大新金融中心2706-07室

2706-07, Dah Sing Financial Centre, 108 Gloucester Road, Wanchai, Hong Kong Tel. 電話: (852) 2802 2816 Fax. 傳真: (852) 3007 8501

– 31 –

LETTER FROM HOORAY

BASIS OF OUR OPINION

In formulating our opinion and recommendation to the Independent Board Committee and the Independent Shareholders, we have relied on the accuracy of the information, opinions and representations provided to us by the Directors and management of the Company, and have assumed that all information, opinions and representations contained or referred to in this Circular were true and accurate at the time when they were made and will continue to be accurate at the Latest Practicable Date. We have also assumed that all statements of belief, opinion and intention made by the Directors in this Circular were reasonably made after due enquiry. We have no reasons to doubt that any relevant information has been withheld, nor are we aware of any fact or circumstance which would render the information provided and representations and opinions made to us untrue, inaccurate or misleading.

We consider that we have received sufficient information to enable us to reach an informed view and to justify reliance on the accuracy of the information contained in this Circular to provide a reasonable basis for our opinion and recommendation. Having made all reasonable enquiries, the Directors have further confirmed that, to the best of their knowledge, they believe that there are no other facts or representations the omission of which would make any statement in this Circular, including this letter, misleading. We have not, however, carried out any independent verification of the information provided by the Directors and management of the Company, nor have we conducted an independent investigation into the business and affairs of the Company.

In formulating our opinion, we have relied on the audited and unaudited financial information provided by the Company, particularly, on the accuracy and reliability of financial statements and other financial data of the Company. We have not audited, compiled nor reviewed the said financial statements and financial data. We shall not express any opinion or any form of assurance on them. We have had no reason to doubt the truth and accuracy of the information provided to us by the Company. The Directors have also advised us that no material facts have been omitted from the information to reach an informed view, and we have no reason to suspect that any material information has been withheld. We have not carried out any feasibility study on any past, and forthcoming investment decision, opportunity or project undertaken or be undertaken by the Company. Our opinion has been formed on the assumption that any analysis, estimation, forecast, anticipation, condition and assumption provided by the Company are valid and sustainable. Our opinion shall not be constructed as to give any indication to the validity, sustainability and feasibility of any past, existing and forthcoming investment decision, opportunity or project undertaken or to be undertaken by the Company.

Our opinion is necessarily based upon the financial, economic, market, regulatory and other conditions as they existed on, and the facts, information, representations, and opinions made available to us as of, the Latest Practicable Date. We disclaim any undertaking or obligation to advise any person of any change in any fact or matter affecting the opinion expressed herein which may come or be brought to our attention before and after the EGM.

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LETTER FROM HOORAY

Our opinion is formulated only and exclusively for the purpose of the Granting of New General Mandate and shall not be used, in whole or in part, for any other purpose in any circumstance nor for any comparable purpose with any other opinions without our prior written consent.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion to the Independent Board Committee and the Independent Shareholders in respect of the Granting of New General Mandate, we have taken into consideration the following principal factors and reasons:

1. Background to the Granting of New General Mandate

The Company is an investment company listed under Chapter 21 of the Listing Rules and its principal activities are investment in listed securities and unlisted securities for their potential earnings and capital appreciation.

According to the Letter from the Board, at the annual general meeting of the Company held on 7 June 2011 (“ 2011 AGM ”), the Shareholders approved, among other things, an ordinary resolution to grant the Directors the Existing General Mandate to allot up to 139,640,700 Shares, being 20% of the entire issued share capital of the Company as at the date of the 2011 AGM where the said resolution was passed.

According to the Letter from the Board, as at the Latest Practicable Date, pursuant to a placing agreement entered into between the Company and a placing agent on 1 September 2011 (the “ Placing ”), the Existing General Mandate had been utilised as to 139,635,000 Shares, representing approximately 100% of the aggregate number of Shares which were issued and allotted under the Existing General Mandate. The Placing was issued pursuant to the Existing General Mandate and the net proceeds from the Placing were intended for securities investment and general working capital purposes. There has not been any Granting of New General Mandate since the 2011 AGM.

The Board proposes the Granting of New General Mandate to allow the Directors to issue and allot new Shares not exceeding 20% of the issued share capital of the Company as at the date of the EGM. Based on the 985,573,020 Shares in issue as at the Latest Practicable Date and assuming that no further Shares changes in the issued share capital until the date of the EGM, subject to the passing of the relevant ordinary resolution to approve the Granting of the New General Mandate at the EGM, the Directors will be authorised to allot and issue up to 197,114,604 Shares under the New General Mandate.

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LETTER FROM HOORAY

The New General Mandate will expire at the earliest of: (a) the conclusion of the next annual general meeting of the Company following the EGM; (b) the date by which the next annual general meeting is required by the Companies Law or the Articles to be held; or (c) when the authority given to the Directors thereunder is revoked or varied by ordinary resolution(s) of the Shareholders in a general meeting prior to the next annual general meeting of the Company.

2. Reasons for the Granting of New General Mandate

According to the Letter from the Board of the Circular, the New General Mandate will empower the Directors to issue new Shares under the refreshed limit speedily as and when necessary, and without the need to seek further approval from the Shareholders. This could provide the Company with flexibility and ability to capture any appropriate capital raising or investment opportunity when they arise. As at the Latest Practicable Date, the Company did not have any specific plan which may utilise any part of the New General Mandate save and except for general investments and working capital purposes. If the Company proposes to issue any new Shares for business acquisitions or equity fund raising using the New General Mandate, it will make further announcement(s) as and when required pursuant to the Listing Rules.

The New General Mandate proposed to the Shareholders is prior to the Company’s next annual general meeting and therefore, under Rule 13.36(4) of the Listing Rules, the Granting of New General Mandate will be subject to the Independent Shareholders’ approval at the EGM.

3. Fund raising activities of the Company in the past thirty-six months

Set out below is the fund raising activities conducted by the Company (excluding any proceeds generated from the excise of share options or warrants which were granted earlier) in the past thirty-six months prior to the Latest Practicable Date:

			Intended use of
		Net amount	proceeds as	Actual use of
Description	Announcement	raised	announced	proceeds
Placing of new	1 September	Approximately	Securities investment	Investments made
shares under	2011	HK$6.8 million	and general working	= HK$5.16 million
general mandate			capital
				Applied as general
				working capital
				= HK$1.64 million

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LETTER FROM HOORAY

			Intended use of
		Net amount	proceeds as	Actual use of
Description	Announcement	raised	announced	proceeds
Placing of new	26 November	Approximately	Securities investment	Investments made
shares under	2010	HK$8.3 million	and general working	= HK$6 million
general mandate			capital
				Applied as general
				working capital
				= HK$2.3 million
Open offer of	12 April 2010	Approximately	Additional working	Investments made =
new shares		HK$10.9 million	capital to strengthen	HK$9.188 million
			the Group’s capital
			base for future	Applied as general
			investments and	working capital =
			development of its	HK$1.712 million
			financial leasing	(after careful
			business of the	consideration, the
			Group.	Company altered
				the investment
				intention to
				investments in
				listed shares)
Placing of new	2 February 2010	Approximately	General working capital	Investments made =
shares under		HK$5.65	of the Company	HK$3.43 million
general mandate		million
				Applied as general
				working capital =
				HK$2.22 million

Pursuant to the records of the Company, on 9 October 2008, the Company placed 337,300,000 unlisted warrants, on a best effort basis, to professional investors at HK$0.003 each. Gross proceed from such issue of unlisted warrants was amounted to approximately HK$1.01 million. The warrants conferred rights to subscribe for new Shares at the subscription price of HK$0.05 per Share for a period of 36 months commencing from the date of issue of the warrants. Each warrant carried the right to subscribe for one new Share. Within the above period, the Company received approximately HK$24.35 million in cash from excising on issued unlisted warrants and share options by their relevant holders which were granted beyond the said period.

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LETTER FROM HOORAY

According to the Company’s records, The Company applied the above proceeds to the following listed shares investments:

Investees:

Investment Amount (HK$):

1. Hong Kong Resources Holdings Company Limited (2882) 5,065,378 2. TC Interconnect Holdings Limited (515) 4,195,090 3. Renhe Commercial Holdings Company Limited (1387) 3,960,000 4. Seamless Green China (Holdings) Limited (8150) 3,626,609 5. SPDR Gold Trust (2840) 2,029,000 6. Sinopharm Group Co. Ltd. (1099) 2,000,000 7. SJM Holdings Ltd. (880) 1,480,000 8. Sustainable Forest Holdings Limited (723) 1,384,982 9. China Aerospace International Holdings Limited (31) 1,244,476 10. CSR Corporation Ltd. (1766) 1,080,000 11. Esprit Holdings Limited (330) 1,018,000 12. United Energy Group Limited (467) 865,103 13. Viva China Holdings Limited (8032) 672,412 14. Guangzhou R&F Properties Co. Ltd. (2777) 600,000 15. Kingston Financial Group Limited (formerly known as “Golden Resorts Group Limited”) (1031) 551,980

2. S.G.A.-HIS EU PUT WT DEC10B (22660) 508,825 17. Sun International Resources Limited (formerly known as “Sun International Group Limited”) (8029) 409,624

3. Greater China Holdings Limited (431) 163,065 TOTAL 30,854,544

The difference between the invested sum of approximately HK$30.85 million and the sum raised of approximately HK$25.49 million was satisfied by the internal financial resources of the Company and the proceeds for the exercise of Share Options mentioned above.

In addition, pursuant to the records of the Company, on 30 June 2009 the Company announced that it entered into a convertible notes placing agreement, on a best effort basis, for the placing of convertible notes with an aggregate principal amount of HK$41.25 million. On 18 January 2010 the Company announced that the Company did not receive the relevant listing approval from the Stock Exchange. Pursuant to the relevant conditions of the convertible notes placing agreement, the granting of the relevant listing approval was one of the conditions for the completion of such issue, therefore the issue of the convertible notes was not completed and terminated.

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LETTER FROM HOORAY

Save as and except for the above, the Company had not conducted any other fund raising activities in the past thirty-six months immediately prior to the Latest Practicable Date. Furthermore, pursuant to the records of the Company, saved and except the general mandates granted annually at the annual general meetings of the Company, the Company has not refreshed and utilized any general mandates in the past 3 years from the date of this letter. On 18 December 2008 the Company refreshed a general mandate at an extraordinary general meeting but such general mandate was not utilized in whole or in part. Pursuant to our understanding with the Directors, should the New General Mandate is approved in the EGM and should the New General Mandate is being utilized, the Company intends to apply 20% of the proceeds as general working capital, 50% of the proceeds on investments in listed securities, and the balance of 30% on investments in unlisted securities. The Company indicated that the possible future investments on listed securities are all either Hang Seng Index constituents or listed on the Stock Exchange with market capitalization of no less than HK$2 billion, with a principal focus (but not restricted) on the sector of finance, energy, natural resources, domestic consumption and construction materials, and the Company has not identified any investment opportunity in unlisted securities.

4. Investment Portfolio of the Company

Pursuant to the information provided by the Company, below are the details of the investment portfolio of the Company as at the dates stated thereunder:

A. Existing Investment Portfolio

Name of Investee Number of Shares % of shareholding Closing price as at the Latest Practicable Date HK$ 1 Sinopharm Group Co., Ltd. (1099) 50,000 0.0021% 18.2 2 SMI Corporation Limited (198) 24,000,000 0.2962% 0.285 3 The Hong Kong And China Gas Company Limited (3) 170,000 0.0022% 17.64 4 Beijing LED Lighting Engineering Company Limited （北京愛爾益地照明 工程有限公司）* not applicable 12% Not applicable Total:	Gross value HK$ 910,000 6,840,000 2,998,800 RMB2,400,000 (or HK$2,928,000) 13,676,800	Unrealized and unaudited gains/(losses) HK$ (90,000) (638,300) (56,160) Nil
		(784,460)

• Non-listed, assuming RMB1 = HK$1.22

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LETTER FROM HOORAY

The investment in listed securities was conducted through professional brokers in Hong Kong. The investment in Beijing LED Lighting Engineering Co. Ltd. was conducted on 29 June 2011.

According to the information stated above, all of the investments are made in accordance with the provisions set forth in Chapter 21 of the Listing Rules.

• B. Top ten securities bought during the years 2008, 2009, 2010 and since 1 January 2011 to the Latest Practicable Date.

• i. For the year ended 31 December 2008

		Number of	% of	Investment
	Name of Investee	Shares	shareholding	amount
				HK$
1	Kith Holdings Limited (1201)	800,000	0.3060%	2,504,000
2	Rubicon Japan Trust_(#)_	2,100,000	Not applicable	2,005,431
3	China Communications
	Construction Company
	Limited (1800)	200,000	0.0013%	1,459,000
4	Chinese Food and Beverage
	Group Limited (8272)	1,000,000	0.0500%	1,300,000
5	Build King Holdings Limited
	(240)	5,000,000	0.5368%	1,029,990
6	Henderson Investment Limited
	(97)	2,574,000	0.0845%	952,280
7	China Railway Construction
	Corporation
	Limited (1186)	60,000	0.0018%	541,825
8	China Shenhua Energy Company
	Limited (1088)	34,000	0.0002%	515,440

Rubicon Japan Trust was listed on the Australian Securities Exchange , and was delisted on 23 December 2009 due to bankruptcy. Assume an exchange rate of AUD 1 to HK$7.3459.

Only 8 securities were bought in the period.

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LETTER FROM HOORAY

ii. For the year ended 31 December 2009

		Number of	% of	Investment
	Name of Investee	Shares	shareholding	amount
				HK$
1	Wai Kee Holdings Limited (610)	432,000	0.0545%	663,340
2	Prosperity International
	Holdings (H.K.) Limited (803)	500,000	0.0091%	395,000
3	Seamless Green China
	(Holdings) Limited (8150)	1,000,000	0.0236%	330,000
4	Build King Holdings Limited
	(240)	1,000,000	0.1074%	285,000
5	WLS Holdings Limited (8021)	1,450,000	0.1770%	194,360

Only 5 securities were bought in the period.

iii. For the year ended 31 December 2010

		Number of	% of	Investment
	Name of Investee	Shares	shareholding	amount
				HK$
1	TC Interconnect Holdings
	Limited (515)	4,500,000	1.2237%	7,530,000
2	Hong Kong Resources Holdings
	Company Limited (2882)	4,572,000	0.2322%	6,022,853
3	Seamless Green China
	(Holdings) Limited (8150)	5,050,000	3.5647%	4,240,300
4	China Tontine Wines Group
	Limited (389)	2,100,000	0.1041%	4,171,500
5	United Energy Group Limited
	(467)	3,600,000	0.0282%	4,105,500
6	Anxin-China Holdings Limited
	(1149)	2,000,000	0.0962%	3,447,440
7	Sustainable Forest Holdings
	Limited (723)	3,000,000	0.0696%	2,115,000
8	Greater China Holdings Limited
	(431)	3,588,000	1.1966%	2,051,860
9	Sun International Resources
	Limited (8029)	2,030,000	0.2188%	1,624,250
10	New Capital International
	Investment Limited (1062)	1,000,000	0.1018%	1,430,000

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LETTER FROM HOORAY

iv. For the period from 1 January 2011 to the Latest Practicable Date

		Number of	% of	Investment
	Name of Investee	Shares	shareholding	amount
				HK$
1	SMI Corporation Ltd (198)	24,000,000	0.2962%	7,478,300
2	HSBC Holdings plc (5)	88,000	0.0005%	6,180,100
3	Renhe Commercial Holdings
	Company Limited (1387)	4,000,000	0.0189%	3,960,000
4	SJM Holdings Limited (880)	300,000	0.0054%	3,924,000
5	Hong Kong and China Gas Co.,
	Ltd (3)	170,000	0.0022%	3,054,960
6	Sinopharm Group Co. Ltd
	(1099)	154,000	0.0064%	2,992,992
7	Beijing LED Lighting
	Engineering Co., Ltd. *	Not applicable	12%	RMB2,400,000
8	United Energy Group Limited
	(467)	2,124,000	0.0166%	2,739,600
9	SPDR Gold Trust (2840)	1,500	0.0004%	2,029,000
10	Guangzhou R&F Properties
	Co., Ltd. (2777)	200,000	0.0062%	1,575,484

• Non-listed.

Pursuant to the securities trading records of the Company, the summary of the Company’s realized and unrealized loss (excluding relevant investment expenses) for 1 January 2011 to the Lastest Practicable Date, and for the 3 years ended 31 December 2010 is as follow:

	Net realized	Net unrealized
Period	gain/(loss)	gain/(loss)
	(HK$)	HK$
From 1 January 2011
to Latest Practicable Date	(1,693,574.00)	(784,168.00)
For the year ended 31 December 2010	1,230,757.87	333,814.29
For the year ended 31 December 2009	(1,279,320.39)	0
For the year ended 31 December 2008	(1,735,224.13)	(32,642,68.80)

Shareholders can refer to page 19 to 25 of the Letter from the Board of the Circular for further information in relation to the history of investments of the Company.

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LETTER FROM HOORAY

C. Growth of the net asset value per Share

We have also compared the growth of the net asset value per Share with the Hang Seng Index on every 6 month from the period commencing from 1 July 2008 to 30 June 2011 and for the 3 month period commencing from 1 July 2011 to 30 September 2011:

	NAV per		Hang Seng
	Share	% changed	Index	% changed
	at end of	over	at end of	over
Period Ending	date	the period	date	the period
	(HK$)
30 September 2011	0.0241	42.60%	17,592	-21.46%
30 June 2011	0.0169	-41.32%	22,398	-2.77%
31 December 2010	0.0288	22.55%	22,035	14.44%
30 June 2010	0.0235	128.16%	20,128	-7.97%
31 December 2009	0.0103	-55.02%	21,872	19.01%
30 June 2009	0.0229	-34.94%	18,378	27.74%
31 December 2008	0.0352	112.78%	14,387	-34.91%
30 June 2008	0.0158	–	22,102	–
1 July 2008
to 30 September 2011	0.0241	52.53%	17,592	-20.40%

Source: Stock Exchange

For an investment company, among other things, the performance on both realized gains and unrealized gains and the expenses, including the administrative expenses and investment costs, will affect the net asset value of the investment company. An investment company is considered to be generating positive return to its unit holders or shareholders if its net asset value is increasing (assuming no dividends have been declared). We believe that the performance of the NAV per Share would represent a true and accurate view over the overall net return of the Company to its Shareholders, where, among other things, all realized and unrealized returns would have been recorded accordingly. From the period between 1 July 2008 and 30 September 2011 the NAV per Share have recorded a gain of approximately 52.53% while the Hang Seng Index recorded a loss of approximately 20.40% over the same period.

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LETTER FROM HOORAY

In view of the only permitted business activity of the Company is investment, we are in the opinion that a larger investment portfolio in size caused by fund raising activities, hence representing increased scope of business of the Company, would generate greater economies of scales (such as in relation to administrative expenses) and could generate further returns to Shareholders. Therefore it would be beneficial to Shareholders should further capital is available for further investments..

5. Flexibility in financing

Upon our enquiries, the Directors confirmed that the Company had approximately HK$1,590,000 of cash and bank deposits as at 31 August 2011. The Directors also confirmed that the Company has sufficient cash on hand to meet its near future financial obligations pursuant to the completion of the Placing. Pursuant to the information provided by the Company, the Company recorded a total expenses of approximately HK$6.9 million for the period between 1 January 2011 and 30 September 2011. Rental and utilities was amounted to approximately HK$1.19 million, professional fees and investment expenses was amounted to approximately HK$1.72 million, directors fees, salaries and benefits (including insurance) was amounted to approximately HK$2.95 million, and aggregated transportation and motor vehicle expenses was amounted to approximately HK$0.73 million. The balance of approximately HK$0.31 million was utilized as general and administrative expenses and depreciation expense. The Directors expected that more financing flexibility is required (i) for working capital of the Company; (ii) for investment in listed and unlisted securities, of which is the principal source of income for the Company.

Given that equity financing (i) does not incur any interest paying obligations on the Company as compared with bank financing, which would affect the cashflow of the Company; (ii) the Company has limited borrowing pursuant to the Articles, which is limited to 50% of the net asset value of the Company; (iii) is less costly and time consuming than raising funds by way of rights issue or open offer; and (iv) provides the Company with the capability to capture any capital raising or prospective investment opportunity (such as listed securities investments) as and when it arises, it is fair and reasonable to infer that it is not unreasonable for the Directors to propose the Granting of New General Mandate in the EGM in order to give the Company greater flexibility in the issuance of new Shares and/or convertible instruments in future as and when the Company considers desirable for the benefit of the development of the Company. The sole purpose of the refreshment of the general mandate is to provide extra flexibility of equity financing scheme to the Company in accordance with the provisions set forth in Chapter 21 of the Listing Rules.

We consider that the Granting of New General Mandate is in the interests of the Company and the Shareholders as a whole.

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LETTER FROM HOORAY

6. Other Alternatives of Financing

We are represented that it is the Directors’ belief that the New General Mandate will provide the Company with an additional alternative of equity funding when there is funding requirement or when any investment opportunities arise in the future. It is reasonable to suggest that the New General Mandate could enhance the financing flexibility of the Company to raise equity funds, if and when required, by way of the issuance of new Shares and/or convertible instruments for further development of the Company.

The proposed Granting of New General Mandate represents one of the many possible fund raising schemes considered (without any conclusion) by the Company, including but not limited to open offer, rights issue, subscription of Shares by strategic investor and debt financing. Each of the fund raising methods has their advantages and disadvantages. The Company indicated that depending on the prevailing circumstances upon material time, further decision on which type of equity fund raising scheme would be used. General principal factors would be total costs associated, amount of funding required and any other goodwill generated. The New General Mandate has limited fund raising size but has the most efficient funding raising time and lowest in total costs associated. The New General Mandate could be suitable for smaller size fund raising exercise. The Granting of New General Mandate would provide the Company with higher degree of flexibility as allowed under the Listing Rules to issue new Shares and/or convertible instruments to raise capital and strengthen the capital base of the Company as consideration or otherwise for such potential investments and/or acquisitions in the future as and when such opportunities arise, especially in the case where required funding is relatively not substantial. In additional, the Articles limits the borrowings of the Company to 50% of its net asset value. Pursuant to the information provided by the Company, the net asset value of the Company as at 30 September 2011 is approximately HK$ 21.8 million. The Company has not ruled out to seek debt financing up to HK$10.9 million in accordance with the provisions set forth in the Articles. However, we believe that without material tangible assets as collaterals, it may be difficult for the Company to seek meaning sum of debt financing from licensed financing institutes given that the Company is not permitted to have any business except investments (or any material assets except listed shares). On the above basis, it is fair and reasonable to infer that there are reasonable grounds for the Directors to propose the Granting of New General Mandate at the EGM.

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LETTER FROM HOORAY

7. Potential dilution to shareholding interests of the Independent Shareholders

Based on information available from public source and from the Directors, we set out below a table setting out the shareholding structure of the Company as at the Latest Practicable Date and upon full utilization of the New General Mandate, for illustrative and reference purpose:

Shareholders Directors: Yang Nai Jiang General Manager: Choy Git Yan, Timothy Independent Shareholders: Existing public Shareholders Shares potentially to be issued pursuant to the New General Mandate Subtotal Total	As at Latest Practicable Date After full utilization of the New General Mandate (subject to the passing of the proposed resolution for the Granting of New General Mandate and assuming that no other Shares are issued or repurchased by the Company prior to the EGM) No. of Shares % No. of Shares % 24,885,000 2.52 24,885,000 2.10 250,927,500 25.46 250,927,500 21.22 709,766,520 72.02 709,760,520 60.01 0 0.00 197,114,604 16.67 709,760,520 72.02 906,875,124 76.68 985,573,020 100.00 1,182,687,624 100.00	As at Latest Practicable Date After full utilization of the New General Mandate (subject to the passing of the proposed resolution for the Granting of New General Mandate and assuming that no other Shares are issued or repurchased by the Company prior to the EGM) No. of Shares % No. of Shares % 24,885,000 2.52 24,885,000 2.10 250,927,500 25.46 250,927,500 21.22 709,766,520 72.02 709,760,520 60.01 0 0.00 197,114,604 16.67 709,760,520 72.02 906,875,124 76.68 985,573,020 100.00 1,182,687,624 100.00
		76.68
		100.00

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LETTER FROM HOORAY

Assuming that (i) the Granting of New General Mandate will be approved by the Company at the EGM; (ii) the issued share capital of the Company remains at 985,573,020 Shares and no Shares will be repurchased and no new Shares will be issued from the Latest Practicable Date up to the date of the EGM (both dates inclusive); and (iii) upon full utilization of the New General Mandate, 197,114,604 Shares are to be issued, representing 20% and approximately 16.67% of the existing issued share capital as at the Latest Practicable Date and the enlarged issued share capital of the Company respectively, the table above illustrate that the shareholding of the existing public Shareholders will decrease from approximately 72.02% as at the Last Practicable Date to approximately 60.01% upon full utilization of the New General Mandate, which represents a dilution of approximately 12.01%.

Given that the nature of the Company is investments (and investments only), the refreshment of general mandate, or any kind of fund raising activities, is in the interests of the Shareholders as a whole, as it allows the Company to make further investments and generate returns to Shareholders. Again, investments are the only way to general returns to Shareholders. Any fund raising activity by the Company represents de facto new business opportunities of the Company.

Taken into consideration that the benefits of the Granting of New General Mandate as discussed above and the fact that the shareholdings of all Shareholders will be diluted to the same extent at a maximum of 16.67%, and in view it is in the interests of the Shareholders due to the fact it could provide further business opportunities, we consider that the potential dilution effect to shareholding of existing Independent Shareholders upon full utilization of the New General Mandate is acceptable.

RECOMMENDATION

Having considered the above principal factors and reasons and Directors’ representations, on balance and in general terms, we are of the opinion that in such circumstances of the Company and at this stage, the Granting of New General Mandate is on normal commercial term and is fair and reasonable so far as the Independent Shareholders are concerned and the Granting of New General Mandate is in the interests of the Company and the Shareholders as a whole. Accordingly, we advise the Independent Shareholders, and also recommend the Independent Board Committee to advise the Independent Shareholders, to vote in favour of the resolution approving the Granting of New General Mandate at the forthcoming EGM.

Yours faithfully, For and on behalf of

HOORAY CAPITAL LIMITED

SIMON NG

Director

– 45 –

APPENDIX PRINCIPAL TERMS OF NEW SHARE OPTION SCHEME

The following is a summary of the principal terms of the New Share Option Scheme proposed to be adopted at the EGM which serves to summarize the terms of the New Share Option Scheme, but does not constitute the full terms of the same.

In this Appendix, unless the context otherwise requires:

• “Calculation Agent” means the auditors for the time being of the Company or the independent financial advisers appointed by the Company for the purposes of certifying certain adjustments under the rules of the Scheme;

• “Directors” means the directors of the Company for the time being or a duly authorised committee thereof;

• “Eligible Employee” shall mean any employee (whether full time or part time, including any executive director but excluding any nonexecutive director) of the Company, any subsidiary of the Company or any Invested Entity;

• “Eligible Participant” means a persons who may be invited by the Directors to take up Options pursuant to the Scheme;

• “Invested Entity”

• means any entity in which any member of the Group holds any equity interest;

• “Offer”

• means an offer for the grant of an Option pursuant to the Scheme;

• “Offer Date”

• means the date, which must be a business day, on which an Offer is made to an Eligible Participant;

• “Option”

means an option to subscribe for the Shares granted under the Scheme

• “Option Period”

means, in relation to an Option, a period (which may not be later than 10 years from the Offer Date of that Option) to be determined and notified by the Directors to the grantee thereof and, in the absence of such determination, from the Offer Date to the earlier of (i) the date on which such Option lapses under the rules of the Scheme; and (ii) 10 years from the Offer Date of that Option;

“Scheme”

means the New Share Option Scheme proposed to be adopted by the Company at the EGM;

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PRINCIPAL TERMS OF NEW SHARE OPTION SCHEME

APPENDIX

“Shares”

means shares of HK$0.01 each of the Company, or, if there has been a sub-division, consolidation, reclassification or re-construction of the share capital of the Company, shares forming part of the ordinary equity share capital of the Company of such other nominal amount as shall result from any such sub-division, consolidation, re-classification or re-construction;

“Subscription Price”

means the price per Share at which a grantee may subscribe for the Shares on the exercise of an Option.

1. PURPOSE OF THE NEW SHARE OPTION SCHEME

The purpose of the Scheme is to enable the Group to grant Options to the Eligible Participants as incentives or rewards for their contribution to the Group.

2. ELIGIBLE PARTICIPANTS OF THE NEW SHARE OPTION SCHEME

The Directors may in their discretion make an Offer to any person belonging to the following classes of participants to subscribe for Shares:

• (1) any Eligible Employee;

• (2) any non-executive directors (including independent non-executive Directors) of the Company, any subsidiary of the Company or any Invested Entity;

• (3) any supplier of goods or services to any member of the Group or any Invested Entity;

• (4) any customer of any member of the Group or any Invested Entity;

• (5) any person or entity that provides research, development or other technical support to any member of the Group or any Invested Entity;

• (6) any shareholder of any member of the Group or any Invested Entity or any holder of any securities issued by any member of the Group or any Invested Entity;

• (7) any adviser (professional or otherwise) or consultant to any area of business or business development of any member of the Group or any Invested Entity; and

• (8) any other group or classes of participants who have contributed or may contribute by way of joint venture, business alliance or other business arrangement to the development and growth of the Group,

and, for the purposes of the Scheme, the Offer may be made to any company wholly owned by one or more Eligible Participants.

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APPENDIX PRINCIPAL TERMS OF NEW SHARE OPTION SCHEME

The eligibility of any of the Eligible Participants to an Offer shall be determined by the Directors from time to time on the basis of the Directors’ opinion as to his contribution to the development and growth of the Group.

3. PERIOD OF THE SCHEME

The Scheme shall be valid and effective until the close of business of the Company on the date which falls ten (10) years after the date on which the Scheme is adopted, after which period no further options may be issued but the provisions of the Scheme shall remain in force to the extent necessary to give effect to the exercise of any Options granted or exercised prior thereto or otherwise as may be required in accordance with the provisions of the Scheme.

4. PERFORMANCE TARGETS

Unless otherwise determined by the Directors and stated in the Offer to an Eligible Participant who accepts an Offer, the Eligible Participant concerned is not required to achieve any performance targets before the exercise of an Option granted to him.

5. MAXIMUM NUMBER OF SHARES AVAILABLE FOR SUBSCRIPTION

• (a) The maximum number of Shares which may be allotted and issued upon exercise of all outstanding Options granted and yet to be exercised under the Scheme and all share option schemes adopted by the Group (if any), other than this Scheme (the “ Other Schemes ”) shall not exceed 30% of the share capital of the Company in issue from time to time.

• (b) The total number of Shares which may be allotted and issued upon exercise of all Options (excluding, for this purpose, options which have lapsed in accordance with the terms of the Scheme and the Other Schemes) to be granted under the Scheme and the Other Schemes must not in aggregate exceed 10% of the Shares in issue as at the date of passing of resolution by the Shareholders in general meeting approving and adopting the Scheme (the “ General Scheme Limit ”) provided that:

• (1) the Company may seek approval of the Shareholders in general meeting to refresh the General Scheme Limit provided that the total number of Shares which may be allotted and issued upon exercise of all options to be granted under the Scheme and the Other Schemes must not exceed 10% of the Shares in issue as at the date of approval of the limit and for the purpose of calculating the limit, options (including those outstanding, cancelled, lapsed or exercised in accordance with the Scheme and the Other Schemes) previously granted under the Scheme and the Other Schemes will not be counted; and

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PRINCIPAL TERMS OF NEW SHARE OPTION SCHEME

APPENDIX

• (2) the Company may seek separate Shareholders’ approval in general meeting to grant Options under the Scheme beyond the General Scheme Limit or, if applicable, the extended limit referred to rule (1) above to Eligible Participants specifically identified by the Company before such approval is sought.

• (c) The total number of Shares issued and which may fall to be issued upon exercise of the options and the Options granted under Other Schemes (including both exercised or outstanding options) to each grantee in any 12-month’s period shall not exceed 1% of the issued share capital of the Company for the time being. Where any further grant of Options to a grantee under the Scheme would result in the Shares issued and to be issued upon exercise of all options granted and proposed to be granted to such person (including exercised, cancelled and outstanding options) under the Scheme and the Other Schemes in the 12-month’s period up to and including the date of such further grant representing in aggregate over 1% of the Shares in issue, such further grant must be separately approved by Shareholders in general meeting with such grantee and his associates abstaining from voting.

• (d) Where any grant of Options to a substantial Shareholder of the Company or an independent non-executive Director or any of their respective associates, would result in the Shares issued and to be issued upon exercise of all Options already granted and to be granted (including Options exercised, cancelled and outstanding) to such person in the 12-month’s period up to and including the date of such grant:

• (1) representing in aggregate over 0.1% of the Shares in issue; and

• (2) having an aggregate value, based on the closing price of the Shares at the Offer Date of each Offer, in excess of HK$5 million;

such further grant of Options must be approved by the Shareholders in general meeting.

• (e) Any change in the terms of Options granted to any grantee who is a substantial Shareholder or an independent non-executive Director, or any of their respective associates must be approved by the Shareholders in general meeting.

• (f) For the purpose of seeking the approval of the Shareholders under rules of the Scheme summarized above, the Company must send a circular to the Shareholders containing the information required under the Listing Rules and where the Listing Rules shall so require, the vote at the Shareholders’ meeting convened to obtain the requisite approval shall be taken on a poll with those persons required under the Listing Rules abstaining from voting.

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APPENDIX PRINCIPAL TERMS OF NEW SHARE OPTION SCHEME

6. TIME OF ACCEPTANCE AND EXERCISE OF OPTION

• (a) Any Offer may be accepted by an Eligible Participant in respect of less than the number of Shares which are offered provided that such number is clearly stated in the duplicate letter comprising acceptance of the Offer duly signed by such Eligible Participant and received by the Company together with a remittance in favour of the Company of HK$1.00 by way of consideration for the grant thereof within such time as may be specified in the Offer (which shall not be later than 21 days from the Offer Date). Such remittance shall in no circumstances be refundable.

• (b) The Option Period of an Option must not end later than ten (10) years from the Offer Date of that Option.

• (c) For so long as the Shares are listed on the Stock Exchange:

• (1) an Offer may not be made after a price sensitive event has occurred or a price sensitive matter has been the subject of a decision until such price sensitive information has been announced in accordance with the Listing Rules. In particular, during the period commencing one month immediately preceding the earlier of:

  • (a) the date of the board meeting (as such date is first notified to the Stock Exchange under the Listing Rules) for the approval of the Company’s results for any year, half-year, quarterly or any other interim period (whether or not required under the Listing Rules); and

  • (b) the deadline for the Company to publish an announcement of its results for any year or half-year under the Listing Rules, or quarterly or any other interim period (whether or not required under the Listing Rules),

and ending on the date of the results announcement, no Offer may be made; and

• (2) the Directors may not make any Offer to an Eligible Participant who is a Director during the periods or times in which the Directors are prohibited from dealing in Shares pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers prescribed by the Listing Rules or any corresponding code or securities dealing restrictions adopted by the Company.

• (d) An Option shall be personal to the grantee and shall not be transferable or assignable and no grantee shall in any way sell, transfer, charge, mortgage, encumber or otherwise dispose of or create any interest whatsoever in favour of any third party over or in relation to any Option or enter into any agreement so to do. Any breach of the foregoing by a grantee shall entitle the Company to cancel any Option granted to such grantee to the extent not already exercised.

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APPENDIX PRINCIPAL TERMS OF NEW SHARE OPTION SCHEME

• (e) Unless otherwise determined by the Directors and stated in the Offer to a grantee, a grantee is not required to hold an Option for any minimum period nor achieve any performance targets before the exercise of an Option granted to him.

• (f) Shares to be allotted and issued upon the exercise of an Option will be subject to all the provisions of the articles of association of the Company for the time being in force and will rank pari passu in all respects with the then existing fully paid Shares in issue on the date on which the Option is duly exercised or, if that date falls on a day when the register of members of the Company is closed, the first day of the re-opening of the register of members (the “ Exercise Date ”) and accordingly will entitle the holders thereof to participate in all dividends or other distributions paid or made on or after the Exercise Date other than any dividend or other distribution previously declared or recommended or resolved to be paid or made if the record date therefor shall be before the Exercise Date. A Share allotted and issued upon the exercise of an Option shall not carry voting rights until the name of the grantee has been duly entered on the register of members of the Company as the holder thereof.

7. SUBSCRIPTION PRICE

The Subscription Price in respect of any Option shall be at the discretion of the Directors, provided that it shall not be less than the highest of:

• (1) the closing price of the Shares as stated in the Stock Exchange’s daily quotations sheet for trade in one or more board lots of the Shares on the Offer Date;

• (2) the average closing price of the Shares as stated in the Stock Exchange’s daily quotations sheets for the five business days immediately preceding the Offer Date; and

• (3) the nominal value of a Share.

8. ADJUSTMENT TO THE SUBSCRIPTION PRICE

• (a) In the event of any alteration in the capital structure of the Company whilst any Option remains exercisable or the Scheme remains in effect, and such event arises from a capitalisation of profits or reserves, rights issue, consolidation or sub-division of the Shares, or reduction of the share capital of the Company, then, in any such case the Company shall instruct the Calculation Agent to certify in writing the adjustment, if any, that ought in their opinion fairly and reasonably to be made either generally or as regards any particular grantee, to:

• (1) the number or nominal amount of Shares to which the or any Option(s) relates (insofar as it is/they are unexercised); and/or

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PRINCIPAL TERMS OF NEW SHARE OPTION SCHEME

APPENDIX

• (2) the Subscription Price of any Option; and/or

• (3) (unless the relevant grantee elects to waive such adjustment) the number of Shares comprised in an Option or which remains comprised in an Option,

and an adjustment as so certified by the Calculation Agent shall be made, provided that:

• (1) any such adjustment shall give the grantee the same proportion of the issued share capital of the Company for which such grantee would have been entitled to subscribe had he exercised all the Options held by him immediately prior to such adjustment;

• (2) no such adjustment shall be made the effect of which would be to enable a Share to be issued at less than its nominal value;

• (3) the issue of Shares or other securities of the Group as consideration in a transaction shall not be regarded as a circumstance requiring any such adjustment; and

• (4) any such adjustment shall be in compliance with the Listing Rules and such applicable rules, codes, guidance notes and/or interpretation of the Listing Rules from time to time promulgated by the Stock Exchange.

In respect of any adjustment referred to above, other than any adjustment made on a capitalisation issue, the Calculation Agent must confirm to the Directors in writing that the adjustments satisfy the requirements of the relevant provisions of the Listing Rules.

9. LAPSE OF OPTION

The Option period in respect of any Option shall automatically terminate and that Option (to the extent not already exercised) shall lapse on the earliest of:

• (1) the expiry of the Option Period;

• (2) the expiry of any of the periods specified in the rules of the Scheme following a grantee ceasing to be an Eligible Employee by reason of his death, ill-health or retirement or other causes or the occurrence of other circumstances specified in the rules of the Scheme;

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APPENDIX PRINCIPAL TERMS OF NEW SHARE OPTION SCHEME

• (3) in respect of a grantee who is an Eligible Employee, the date on which the grantee ceases to be an Eligible Employee by reason of termination of his employment on the grounds that he has been guilty of persistent or serious misconduct, or has committed any act of bankruptcy or has become insolvent or has made any arrangement or composition with his creditors generally, or has been convicted of any criminal offence (other than an offence which in the opinion of the Directors does not bring the grantee or any member of the Group or the Invested Entity into disrepute);

• (4) in respect of a grantee other than an Eligible Employee, the date on which the Directors shall at their absolute discretion determine that:

• (a) the grantee or his associate has committed any breach of any contract entered into between the grantee or his associate on the one part and any member of the Group or any Invested Entity on the other part; or

• (b) the grantee has committed any act of bankruptcy or has become insolvent or is subject to any winding-up, liquidation or analogous proceedings or has made any arrangement or composition with his creditors generally; or

• (c) the grantee could no longer make any contribution to the growth and development of any member of the Group by reason of the cessation of its relations with the Group or by any other reason whatsoever; and

the option shall lapse as a result of any event specified in sub-paragraph (a), (b) or (c) above; and

• (5) the date on which the Directors shall exercise the Company’s right to cancel the Option by reason of a breach by the grantee of the transfer restriction in respect of that or any other Option.

10. CANCELLATION OF OPTIONS

• (a) Subject to the rules of the Scheme and Chapter 17 of the Listing Rules, any Option granted but not exercised may not be cancelled except with the prior written consent of the relevant grantee and the approval of the Directors.

• (b) Where the Company cancels any Option granted to a grantee but not exercised and issues new Option(s) to the same grantee, the issue of such new Option(s) may only be made with available unissued Options (excluding, for this purpose, the Options so cancelled) within the General Scheme Limit or the limits approved by the Shareholders pursuant to the Scheme.

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APPENDIX PRINCIPAL TERMS OF NEW SHARE OPTION SCHEME

11. ALTERATION OF THE SCHEME

• (a) The Scheme may be altered in any respect by a resolution of the Directors except that:

• (1) the provisions of the Scheme as to the definitions of “Eligible Participants”, “Grantee”, “Option Period” and “Termination Date”;

• (2) the provisions of the Scheme relating to the matters governed by Rule 17.03 of the Listing Rules;

shall not be altered to the advantage of grantees or prospective grantees except with the prior sanction of a resolution of the Shareholders in general meeting, provided that no such alteration shall operate to affect adversely the terms of issue of any Option granted or agreed to be granted prior to such alteration except with the consent or sanction of such majority of the grantees as would be required of the Shareholders under the articles of association for the time being of the Company for a variation of the rights attached to the Shares.

• (b) Any alterations to these Rules which are of a material nature or any change to the terms of Options granted shall be approved by the Shareholders in general meeting except where the alterations take effect automatically under the existing terms of this Scheme.

• (c) Any change to the authority of the Directors or the administrators of the Scheme in relation to any alteration to the terms of the Scheme must be approved by the Shareholders in general meeting.

• (d) The terms of the Scheme and/or any Options amended pursuant to the rule summarized above must comply with the applicable requirements of the Listing Rules.

12. TERMINATION

The Company by resolution in general meeting may at any time terminate the operation of the Scheme and in such event no further Options will be offered but in all other respects the provisions of this Scheme shall remain in force to the extent necessary to give effect to the exercise of any Options (to the extent not already exercised) granted prior thereto or otherwise as may be required in accordance with the provisions of the Scheme and Options (to the extent not already exercised) granted prior to such termination shall continue to be valid and exercisable in accordance with the Scheme.

– 54 –

NOTICE OF EGM

==> picture [218 x 96] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2312)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (“ Meeting ”) of China Financial Leasing Group Limited (“ Company ”) will be held at Seminar Hall, 2/F., Soho Tower, 110118 Caine Road, Central, Hong Kong on Thursday, 12 January 2012 at 10:00 a.m. to consider and, if thought fit, passing, with or without modification, the following ordinary resolutions:

ORDINARY RESOLUTIONS

1. “ THAT :

2. (a) subject to paragraph (c) below, pursuant to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and all other applicable laws, the exercise by the directors (“ Directors ”) of the Company during the Relevant Period (as defined in paragraph (d) below) of all the powers of the Company to allot, issue and deal with new shares (“ Shares ”) of HK$0.01 each in the share capital of the Company, and to make or grant offers, agreements and options (including warrants, bonds and debentures convertible into Shares) which would or might require the exercise of such powers be and is hereby generally and unconditionally approved;

3. (b) the approval in paragraph (a) above shall authorise the Directors during the Relevant Period to make or grant offers, agreements and options (including warrants, bonds and debentures convertible into Shares) which would or might require the exercise of such powers after the end of the Relevant Period;

4. (c) the aggregate nominal amount of the share capital of the Company allotted and issued or agreed conditionally or unconditionally to be allotted and issued (whether pursuant to an option or otherwise) by the Directors pursuant to the approval in paragraph (a) above, otherwise than pursuant to:

   • (i) a Rights Issue (as hereinafter defined); or

• for identification purposes only

– 55 –

NOTICE OF EGM

• (ii) the exercise of any options granted under the share option schemes or similar arrangement for the time being adopted by the Company; or

• (iii) any issue of Shares in lieu of the whole or part of a dividend on Shares in accordance with the Articles of Association of the Company (“ Articles ”) and other relevant regulations; or

• (iv) any issue of Shares upon the exercise of rights of subscription or conversion under the terms of any warrants of the Company or any securities which are convertible into Shares,

shall not exceed 20% of the aggregate nominal amount of the share capital of the Company in issue as at the date of passing of this resolution, and the said approval shall be limited accordingly; and

• (d) for the purpose of this resolution, “ Relevant Period ” means the period from the passing of this resolution until whichever is the earliest of:

• (i) the conclusion of the next annual general meeting of the Company;

• (ii) the expiration of the period within which the next annual general meeting of the Company is required by the Articles or any applicable law to be held; or

• (iii) the date on which such mandate granted under this resolution is revoked or varied by an ordinary resolution of the shareholders of the Company in general meeting.

” Rights Issue ” means an offer of Shares, or offer or issue of warrants, options or other securities giving rights to subscribe for Shares open for a period fixed by the Directors to the holders of Shares or any class of Shares whose names appear on the registers of members of the Company on a fixed record date in proportion to their then holdings of such Shares as at that date (subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any territory applicable to the Company).”

– 56 –

NOTICE OF EGM

1. “ THAT conditional upon The Stock Exchange of Hong Kong Limited granting approval of the listing of and permission to deal in the shares falling to be issued pursuant to the exercise of any options granted under the share option scheme referred to in the circular dispatched to the shareholders of the Company on the same day as this notice, the terms of which are set out in the printed document marked “A” now produced to the Meeting and for the purpose of identification signed by the Chairman hereof (“ Share Option Scheme ”), the Share Option Scheme be approved and adopted to be the Share Option Scheme of the Company and that the Directors be authorised to grant options thereunder and to allot and issue Shares pursuant to the Share Option Scheme and take all such steps as may be necessary or desirable to implement such Share Option Scheme and with effect from the date of the Share Option Scheme becoming unconditional and coming into effect, the existing share option scheme of the Company which was adopted by the Company on 7 October 2002 be terminated with effect from the date on which such resolution shall become unconditional.”

By Order of the Board China Financial Leasing Group Limited Tse Kam Fai Company Secretary

Hong Kong, 16 December 2011

Registered Office: Head Office and Principal Place Cricket Square, Hutchins Drive of Business in Hong Kong: P.O. Box 2681 Room 4209, Office Tower Grand Cayman KY1-1111 Convention Plaza Cayman Islands 1 Harbour Road, Wan Chai Hong Kong

– 57 –

NOTICE OF EGM

Notes:

1. A form of proxy for use at the Meeting is being despatched to the shareholders of the Company together with a copy of this notice.

2. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer or attorney duly authorised.

3. Any shareholder of the Company entitled to attend and vote at the Meeting convened by the above notice shall be entitled to appoint one proxy or, if he is the holder of two or more Shares, more than one proxy to attend and vote instead of him. A proxy need not be a shareholder of the Company.

4. In order to be valid, the form of proxy, together with the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power or authority, must be deposited at the Company’s share registrar in Hong Kong, Tricor Tengis Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the Meeting or any adjournment thereof.

5. Completion and return of the form of proxy will not preclude a shareholder of the Company from attending and voting in person at the Meeting convened or any adjourned meeting and in such event, the form of proxy will be deemed to be revoked.

6. Where there are joint registered holders of any share of the Company, any one of such joint holders may vote, either in person or by proxy, in respect of such share as if he/she were solely entitled thereto, but if more than one of such joint holders are present at the Meeting personally or by proxy, that one of the said persons so present whose name stands first on the register in respect of such shares shall alone be entitled to vote.

7. As at the date of this notice, the board of Directors of the Company comprises Mr. Choy Kwok Hung, Patrick (Chairman), Mr. Chan Chi Hung (Managing Director) and Mr. Lin Wen Pin as executive Directors, Mr. Shi Rong Chang, Mr. Yang Nai Jiang and Mr. Li Xiao Chen as Deputy Chairmen and nonexecutive Directors, and Mr. Yue Man Yiu, Matthew, Mr. Chung Koon Yan and Mr. Chung Shu Kun, Christopher as independent non-executive Directors.

– 58 –