Modern Land (China) Co., Limited - Proxy Solicitation & Information Statement 2017

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Modern Land (China) Co., Limited, you should at once hand this circular with the enclosed form of proxy to the purchaser or transferee or to the bank, stockbroker 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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MODERN LAND (CHINA) CO., LIMITED 當代置業（中國）有限公司

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 1107)

MAJOR TRANSACTION IN RELATION TO JOINT DEVELOPMENT OF A PROPERTY PROJECT WITH YANGO GROUP IN GUANGZHOU

A letter from the Board is set out on pages 4 to 16 of this circular.

8 December 2017

		Pages
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Letter from the	Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Appendix I –	Financial Information of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Appendix II –	Financial Information of the Target Company. . . . . . . . . . . . . . . . . . . . .	23
Appendix III –	Financial Information of Smooth Ever Group. . . . . . . . . . . . . . . . . . . . .	32
Appendix IV –	Unaudited Pro Forma Financial Information of the Resulting Group. .	55
Appendix V –	Management Discussion and Analysis on the Target Group. . . . . . . . . .	62
Appendix VI –	Property Valuation Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	68
Appendix VII –	General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	74

DEFINITIONS

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

“Acquisition” the acquisition of the 51% of the total issued shares of the Target Company from Yango Group pursuant to the Share Transfer Agreement
“Announcement” the announcement of the Company dated 15 September 2017 in relation to, among other things, the Acquisition
“associate” has the meaning as ascribed to it in the Listing Rules “Board” the board of Directors “Business Day” a day on which banks in Hong Kong and PRC are open for normal business (excluding Saturday, Sunday, public holidays in Hong Kong or PRC or days on which a tropical cyclone signal number 8 or above or black rain storm warning is hoisted at any time between 9:00 a.m. to 12:00 noon and which has not been lowered by 12:00 noon on the same day)
“BVI” the British Virgin Islands
“Cityland” Cityland Holdings Limited, a company incorporated in Hong Kong with limited liability
“Company” Modern Land (China) Co., Limited, a company incorporated in the Cayman Islands with limited liability, the Shares of which are listed on the Main Board of the Stock Exchange
“Completion” the completion of the Acquisition under the Share Transfer Agreement
“connected person” has the meaning ascribed to it under the Listing Rules “controlling shareholder(s)” has the meaning ascribed to it under the Listing Rules
“Consideration” the aggregate consideration payable by the Group under the Share Transfer Agreement
“Director(s)” director(s) of the Company from time to time “GFA” gross floor area “Group” the Company and its subsidiaries

DEFINITIONS

“Hengsheng Group Co”	Guangzhou Hengsheng Group Co. Ltd., a company established in
	the PRC with limited liability
“HK$”	Hong Kong dollar, the lawful currency of Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Honkwok Hengsheng”	Guangzhou Honkwok Hengsheng Land Development Ltd., a
	company established in the PRC with limited liability
“Independent Third Party(ies)”	third party(ies) independent of the Company and are not
	connected persons (as defined under the Listing Rules) of the
	Company
“Land”	the land parcels held by Honkwok Hengsheng and situated in
	Tianhe District, Guangzhou, Guangdong Province, the PRC
“Latest Practicable Date”	1 December 2017, being the latest practicable date prior to the
	printing of this circular for ascertaining certain information
	contained herein
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“Modern Land No. 6”	Modern Land (HKNo. 6) Co., Limited, a company incorporated in
	Hong Kong with limited liability and a wholly-owned subsidiary
	of the Company
“PRC”	the People’s Republic of China
“Resulting Group”	the Group upon Completion
“RMB”	Renminbi, the lawful currency of the PRC
“Share Transfer Agreement”	the share transfer agreement dated 15 September 2017 entered
	into between Modern Land No. 6 and Yango Group in relation to,
	among other things, the Acquisition
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
“Shareholder(s)”	holder(s) of the Shares
“Shareholders’ Agreement”	the shareholders’ agreement in relation to the Target Company
	entered into among Modern Land No. 6, Yango Group and the
	Target Company on 15 September 2017

DEFINITIONS

“Share(s)”	ordinary share(s) with a nominal value of US$0.01 each in the
	share capital of the Company
“Share Option Scheme”	the share option scheme adopted by the Company on 14 June
	2013
“Smooth Ever”	Smooth Ever Investments Limited, a company incorporated in the
	BVI with limited liability
“Smooth Ever Group”	Smooth Ever and its subsidiaries
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Super Land”	Super Land Holdings Limited, a company incorporated in the BVI
	with limited liability and a controlling Shareholder as at the
	Latest Practicable Date
“Target Company”	Yango Yuegang Limited, a company incorporated in Hong Kong
	with limited liability
“Target Group”	the Target Company and its subsidiaries
“US$”	US dollar, the lawful currency of the United States of America
“Yango Group”	Yango Group Co., Ltd., a joint stock limited company established
	in the PRC and the shares of which are listed on the Shenzhen
	Stock Exchange (Stock code: 000671)
“%”	per cent.

For the purpose of this circular, the exchange rate of RMB1 = HK$1.13 has been used for currency conversions. This is for the purpose of illustration only and does not constitute a representation that any amounts in RMB or HK$ have been, could have been or may be converted at such rate or any other exchange rate.

In this circular, the English names of the PRC entities are translation of their Chinese names and are included herein for identification purpose only. In the event of any inconsistency, the Chinese names shall prevail.

LETTER FROM THE BOARD

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MODERN LAND (CHINA) CO., LIMITED 當代置業（中國）有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1107)

Executive Directors: Mr. Zhang Lei (Chairman) Mr. Zhang Peng (President) Mr. Chen Yin

Non-executive Directors:

Mr. Fan Qingguo Mr. Chen Zhiwei Mr. Chen Anhua

Independent non-executive Directors:

Mr. Qin Youguo Mr. Cui Jian Mr. Hui Chun Ho, Eric Mr. Zhong Bin

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

Principal place of Business in Hong Kong: Suites 805-6 Champion Tower 3 Garden Road Central Hong Kong

8 December 2017

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION IN RELATION TO JOINT DEVELOPMENT OF A PROPERTY PROJECT WITH YANGO GROUP IN GUANGZHOU

INTRODUCTION

On 15 September 2017, the Board announced that in relation to joint development of a property project with Yango Group in Guangzhou, Modern Land No. 6 and Yango Group entered into the Share Transfer Agreement whereby Modern Land No. 6 agreed to acquire 5,100 shares of the Target Company (representing 51% of the total issued shares of the Target Company) from Yango Group at the Consideration of HK$1,828,623,141.

LETTER FROM THE BOARD

The purpose of this circular is to provide you with information in respect of, among other things, (i) further details of the Share Transfer Agreement; (ii) the financial information of the Group; (iii) the financial information of the Target Company; (iv) the financial information of Smooth Ever Group; (v) the unaudited pro forma financial information of the Resulting Group; and (vi) the valuation report on the Land.

THE SHARE TRANSFER AGREEMENT

The salient terms of the Share Transfer Agreement are set out as follows:

Date

15 September 2017

Parties

(1) Modern Land No. 6 (as purchaser); and
(2) Yango Group (as vendor)

To the best knowledge, information and belief of the Board and after making all reasonable enquiries, Yango Group and its ultimate beneficial owners are Independent Third Parties.

Subject assets to be acquired

Prior to Completion, Yango Group held 100% of the issued share capital of the Target Company. The Target Company is an investment holding company incorporated in Hong Kong and held 100% of the issued share capital of Smooth Ever. Smooth Ever is an investment holding company incorporated in the BVI and holds 100% of the issued share capital of Cityland. Cityland is an investment holding company incorporated in Hong Kong and holds 75% equity interest in Honkwok Hengsheng, which is a company established in the PRC and the registered and beneficial owner of the Land.

Pursuant to the Share Transfer Agreement, Modern Land No. 6 agreed to acquire 5,100 shares of the Target Company (representing 51% of the total issued shares of the Target Company) from Yango Group subject to the conditions and in accordance with the terms therein.

The remaining 25% equity interest in Honkwok Hengsheng is held by Hengsheng Group Co. To the best knowledge, information and belief of the Board and after making all reasonable enquiries, Hengsheng Group Co and its ultimate beneficial owners are Independent Third Parties.

Consideration

The aggregate Consideration payable by the Company for the Acquisition is HK$1,828,623,141. The terms of the Share Transfer Agreement are determined based on arm’s length negotiations between the parties thereto. The Consideration of HK$1,828,623,141 was determined with reference to the market value of the Land of approximately RMB5 billion as at 28 February 2017 valued by an independent property valuer and the prevailing market price of land in Tianhe District, Guangzhou as well as the development potential of the Land.

LETTER FROM THE BOARD

The Board considers that the Consideration of HK$1,828,623,141 is fair and reasonable on the following basis:

The Consideration represents a 30% discount to the market value of the acquired interest of the Land. The market value of the Land as at 30 September 2017 was RMB6,000,000,000 based on the property valuation report of the Land issued by Cushman & Wakefield Limited set out in Appendix VI to this circular. The Consideration of HK$1,828,623,141 (equivalent to approximately RMB1,618,250,567) represents approximately 30% discount to the market value of the 38.25% interest of the Land acquired by the Group (RMB2,295,000,000).
The Consideration is comparable to the acquisition cost of 100% of the issued share capital of Smooth Ever by Yango Group in January 2017. In January 2017, Yango Group entered into the sale and purchase agreement with the original shareholder of Smooth Ever whereby Yango Group agreed to, among other things, acquire 100% of the issued share capital of Smooth Ever and certain loans due from the subsidiaries of Smooth Ever for the consideration of RMB3,181,241,120. The Consideration of HK$1,828,623,141 (equivalent to approximately RMB1,618,250,567) is comparable to 51% of the said previous acquisition cost of Yango Group in the amount of RMB1,622,432,971 (equivalent to approximately HK$1,833,349,257).
The Consideration represents a 15% discount to the adjusted net asset value of the acquired interest of the Target Company (after taking into account the valuation and part of the shareholder’s loans of approximately RMB167,323,000) of approximately RMB1,900,000,000 (equivalent to approximately HK$2,147,000,000).
The price per square metre of floor area in respect of the Land is within the range of the prevailing market price of land in Tianhe District, Guangzhou. The management of the Group made reference to the recent selling prices of residential properties situated adjacent to the Land which are in the range of RMB45,000 and RMB80,000 per square metre. Based on the Group’s 17-year experience in property development in the PRC and the project transactions of the Group in recent years, the land acquisition cost per square metre usually represents 30% of the selling price per square metre of properties erected thereon. As such, it could be estimated that the acquisition cost per square metre of residential properties situated adjacent to the Land were in the range of RMB13,950 and RMB24,000. The acquisition cost per square metre of floor area in respect of the Land of approximately RMB17,000 is within the said range.

The Consideration has been paid by the Group to Yango Group before the Latest Practicable Date and was funded by the Group’s internal resources.

Conditions precedent

The Completion is conditional upon:

(i) the results of the due diligence review carried out by the Group on the assets, business operations, financial situation and prospects of the Target Group are to the satisfaction of the Company;

LETTER FROM THE BOARD

(ii) each of the warranties and representatives given by Yango Group and the Target Company in the Share Transfer Agreement being true, accurate and complete in every material respect as at the date of the Share Transfer Agreement and the date of Completion;
(iii) there has not been any material adverse change in respect of the Target Group since the date of the Share Transfer Agreement or the occurrence of any incident which will have a material adverse effect on the business, prospects, operating performance or financing position of the Target Group;
(iv) Modern Land No. 6, Yango Group and the Target Company having obtained all requisite approvals (including the approval(s) from the board of directors and/or other requisite approvals) and complied with relevant regulations under the applicable laws and the Listing Rules with respect to the Share Transfer Agreement;
(v) Modern Land No. 6 and Yango Group having executed the instrument of transfer and contract notes and submit the same and other supporting documents to the Stamp Office of the Inland Revenue Department of Hong Kong for stamping;
(vi) all requisite filings or registrations having been made with, and all requisite authorisations have been obtained from all applicable governmental authorities, or other third parties which are necessary in connection with the execution and performance of the Share Transfer Agreement and any transaction contemplated therein (including but not limited to the Stock Exchange and the Shenzhen Stock Exchange); and
(vii) each of the Company and Yango Group has complied with all relevant requirements under the Listing Rules (for the Company) and the listing rules of the Shenzhen Stock Exchange (for Yango Group) in relation to the Acquisition under the Share Transfer Agreement, including but not limited to shareholders’ approval and disclosure requirements (if necessary).

In the event that the above conditions precedent cannot be fulfilled or waived (in respect of items (i) to (iii) only) on or before 31 December 2017 (or any other date as agreed by the parties to the Share Transfer Agreement in writing), the Share Transfer Agreement and the transactions contemplated thereunder shall become null and void, without prejudice to the obligations of any party against the other party(ies) in relation to breach of any terms of the Share Transfer Agreement. Except otherwise stated in the Share Transfer Agreement, the parties thereto shall be released from all obligations thereunder.

As at the Latest Practicable Date, all the above conditions precedent have been fulfilled.

Completion

Completion shall take place on any day on or after the date on which all conditions precedent set out in the Share Transfer Agreement have been fulfilled or waived (as the case may be).

LETTER FROM THE BOARD

Completion took place on the date of the Announcement and the Target Company is currently held as to 51% and 49% by Modern Land No. 6 and Yango Group, respectively and accounted for as a joint venture of the Company in the Group’s accounts.

The changes in the shareholding structure of the Target Group before and after the Completion are set out as follows:

Before Completion

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

Yango Group
100%
Target Company
100%
Smooth Ever
100%
Cityland Hengsheng Group Co
75% 25%
Honkwok Hengsheng
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LETTER FROM THE BOARD

After Completion

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Modern Land No. 6 Yango Group
51% 49%
Target Company
100%
Smooth Ever
100%
Cityland Hengsheng Group Co
75% 25%
Honkwok Hengsheng
----- End of picture text -----

Shareholders’ Agreement

Upon Completion (that is, 15 September 2017), Modern Land No. 6, Yango Group and the Target Company entered into the Shareholders’ Agreement for the purpose of regulating their relationship as shareholders inter se and with the Target Company. The major terms of the Shareholders’ Agreement are as follows:

Management and administration

The boards of directors of the Target Company, Smooth Ever and Cityland shall comprise five (5) directors, of whom three (3) shall be appointed by Yango Group and two (2) shall be appointed by Modern Land No. 6. The chairman of the respective boards of directors of the aforesaid companies shall be appointed by Modern Land No. 6.

The general manager and finance controller of the Target Company shall be appointed by Yango Group while the deputy general manager and finance manager shall be appointed by Modern Land No. 6.

LETTER FROM THE BOARD

The property development project of the Land shall be handled according to the rights and obligations system as agreed by Yango Group and Modern Land No. 6. Both parties target to develop the Land and obtain 100% control of Honkwok Hengsheng as well as the project development of the Land as soon as practicable. They will formulate plans to acquire the 25% equity interest in Honkwok Hengsheng and share the costs in connection therewith in proportion to their shareholdings in the Target Company.

The development project of the Land will be branded as “Yango Group • MOMA (陽光城•當代)”.

Disposal of shares and right of first refusal

Subject to the other provisions stated in the Shareholders’ Agreement, each of Modern Land No. 6 and Yango Group agrees with and undertakes to each other that it will not, without the prior written consent of the other party, sell, transfer, or otherwise dispose of or encumber any of its shares in the Target Company.

If any third party offers to acquire all or any of the shares of the Target Company from any shareholder and such shareholder agrees to sell its shares, such third party shall at the same time offer to acquire the shares of the Target Company from other shareholder at the same price and same conditions.

If any of Modern Land No. 6 and Yango Group wishes to transfer its shares in the Target Company, it shall first offer its shares to be transferred in the Target Company to the other party in accordance with the provisions of the Shareholders’ Agreement.

INFORMATION ABOUT THE PARTIES TO THE SHARE TRANSFER AGREEMENT

The Company, Modern Land No. 6 and Group

The Company is incorporated in the Cayman Islands with limited liability and its Shares are listed on the Main Board of the Stock Exchange. Modern Land No. 6 is an investment holding company incorporated in Hong Kong with limited liability and is held as to 100% by the Company. The Group is a property developer focused on the development on green, energy-saving and eco-friendly residences in the PRC.

Yango Group

Yango Group is a joint stock limited company established in the PRC and is principally engaged in real estate development and property management in the PRC. The shares of Yango Group are listed on the Shenzhen Stock Exchange (Stock code: 000671). As at 31 December 2016, Yango Group is held by Shanghai Jiawen Investment Management Co., Ltd., Fujian Yangguang Group Co., Ltd., Dongfang Xinlong Asset Management Co., Ltd. and Fujian Kangtian Group Co., Ltd. as to 18.04%, 17.51%, 13.73% and 10.17%, respectively. To the best knowledge, information and belief of the Board and after making all reasonable enquiries, the ultimate beneficial owners of the major shareholders of Yango Group are Independent Third Parties.

LETTER FROM THE BOARD

INFORMATION ABOUT THE TARGET GROUP AND THE LAND

The Target Company is an investment holding company incorporated in Hong Kong and was 100% held by Yango Group prior to the Completion. Upon Completion and as at the Latest Practicable Date, the Target Company is held by Modern Land No. 6 and Yango Group as to 51% and 49%, respectively. Upon Completion, the Target Company held 100% of the issued share capital of Smooth Ever (an investment holding company incorporated in the BVI). Smooth Ever holds 100% of the issued share capital of Cityland (an investment holding company incorporated in Hong Kong) which in turn holds 75% equity interest in Honkwok Hengsheng (a company established in the PRC). Honkwok Hengsheng is the registered and beneficial owner of the Land and is principally engaged in the property development on the Land.

The Land is situated at Dongguan Zhuang, Tianhe District, Guangzhou. It comprises a total site area of approximately 95,382 square metres and a total GFA of approximately 280,000 square metres for residential, commercial and other uses. After the conversion of acquisition, the land cost per square metre of GFA of the Land is approximately RMB15,000. As at the Latest Practicable Date, the development of the Land is still at its planning and zoning stage. It is currently expected that the construction for the residential and commercial property project in respect of the Land will commence in May 2018 and will be completed in November 2020. The Group currently expects to incur approximately RMB4,400 million as capital expenditure in this project.

According to the valuation report of the Land as at 28 February 2017 prepared by an independent property valuer, the market value of the Land was approximately RMB5 billion. According to the property valuation report of the Land issued by Cushman & Wakefield Limited set out in Appendix VI to this circular, the market value of the Land as at 30 September 2017 was RMB6,000,000,000.

Honkwok Hengsheng received a confirmation on idle land whereby the Land is identified as idle land. According to the grant contract of state-owned land use rights of the Land dated 16 August 2004, if construction is not commenced within 1 year according to the terms of the grant contract, a 20% of land grant fee is payable as idle land fee. If construction is not commenced within 2 years according to the terms of the grant contract, the Land may be seized or repossessed by the transferor at no consideration.

However, according to the reply regarding idle land in Honkwok’s Fulin Land, Dongguanzhuang Road, due to the current status of the Land, the Land is temporarily not treated as idle land by Guangzhou Land Resources and Planning Commission.

As advised by Zhonglun W&D Law Firm, the PRC legal adviser of the Company, the probability of seizure or repossession of the Land by the transferor is low.

As at the Latest Practicable Date, the Land is subject to a freeze order. The freeze order was awarded due to the dispute raised by Guangzhou Gecom Group Co., Ltd. (“ Guangzhou Gecom ”), a previously interested party of the subject properties relating to the joint property development thereof, which initiated an arbitration proceeding against Hengsheng Group Co, Honkwok Hengsheng and Cityland at Guangzhou Arbitration Commission.

LETTER FROM THE BOARD

At the outset, one of the two land parcels comprising the Land with a site area of 56,644 square metres (the “ Subject Land Parcel ”) was property owned by Guangzhou Electronics Industrial Corporation, the predecessor of Guangzhou Electronics Industrial Development Corporation (“ Guangzhou Electronics ”). In September 2000, Guangzhou Electronics and Guangdong Building Materials Urban and Rural Construction Development Company Limited (“ Guangdong Building Materials ”) entered into a joint development contract in respect of the Subject Land Parcel with Hengsheng Group Co (the “ Joint Development Contract ”) whereby it was agreed that, among other things, (i) Guangzhou Electronics and Guangzhou Building Materials shall transfer the land use rights of the Subject Land Parcels to Hengsheng Group Co and in return, Hengsheng Group Co shall pay an aggregate of RMB53 million (with RMB23 million and RMB30 million payable to Guangzhou Electronics and Guangzhou Building Materials respectively); (ii) Guangzhou Electronics and Guangzhou Building Materials shall not be required to inject any capital or participate in the operation; and (iii) Guangzhou Electronics and Guangzhou Building Materials shall have the right to own 21,000 square metres and 1,000 square metres of properties erected on the Subject Land Parcel.

To implement the aforesaid joint development of the Subject Land Parcel, the parties established a joint venture as project company and held by Hengsheng Group Co, Guangzhou Electronics and Guangzhou Building Materials as to 99%, 0.5% and 0.5%, respectively. As Hengsheng Group Co was not able to pay up the land premium to the Land and Resources Bureau for obtaining the land use rights of the Subject Land Parcel by the project company at the material time, Hengsheng Group Co, Cityland and the project company entered into a property project transfer agreement in April 2004 whereby it was agreed that, among other things, (i) Hengsheng Group Co and Cityland shall establish Honkwok Hengsheng as project company and jointly develop the Subject Land Parcel; and (ii) Guangzhou Electronics and Guangzhou Building Materials agreed to transfer the land use rights of the Subject Land Parcel to Hengsheng Group Co and Cityland. The land premium was then paid up by a subsidiary of Cityland.

In August 2004, Guangzhou Electronics and Guangzhou Building Materials entered into the grant contract of state-owned land use rights no. (2004) 177 whereby the land use rights of the Subject Land Parcel was granted to Guangzhou Electronics and Guangzhou Building Materials. In March 2005, Guangzhou Electronics and Guangzhou Building Materials transferred the land use rights of the Subject Land Parcel to Honkwok Hengsheng.

In November 2004, Guangzhou Gecom succeeded to the benefits, rights and obligations of Guangzhou Electronics including but not limited to the interests of Guangzhou Electronics in the Subject Land Parcel.

In January 2005, Hengsheng Group Co executed an undertaking in favour of Guangzhou Gecom whereby Hengsheng Group Co agreed that the 21,000 square metres of properties erected on the Subject Land Parcel entitled by Guangzhou Gecom shall be translated into monetary compensation when construction thereof is completed, the amount of which shall be settled by Honkwok Hengsheng’s transferring the shareholder’s interests entitled by Hengsheng Group Co to Guangzhou Gecom.

LETTER FROM THE BOARD

Due to continuous delay in the development schedule of the Land, Guangzhou Gecom has not been able to obtain the compensation as agreed and as such, in January 2010, it proceeded to initiate a legal proceeding at Guangzhou Intermediate Court to require Hengsheng Group Co and Cityland to pay up RMB147 million as cash equivalent of the 21,000 square metres of properties erected on the Subject Land Parcel. Guangzhou Intermediate Court however refused to accept the case for the reason that the parties to the Joint Development Agreement agreed to resolve any dispute thereunder by arbitration. Therefore, Guangzhou Gecom subsequently initiated an arbitration proceeding in the same year against Hengsheng Group Co, Honkwok Hengsheng and Cityland at Guangzhou Arbitration Commission (Case No. C2010 Sui Zhong An Zi Di 2828 Hao) for the same claims. As advised by Zhonglun W&D Law Firm, the PRC legal adviser of the Company, Guangzhou Arbitration Commission has the authority in respect of the Land dispute, and in the scenario where an arbitral award is granted in favour of Guangzhou Gecom, Hengsheng Group Co will very likely be ordered to sell its 25% equity interest in Honkwok Hengsheng to a third party or Cityland (who has the right of first refusal and is very likely to be the purchaser).

During the arbitration proceeding, Guangzhou Gecom applied to Guangzhou Arbitration Commission for an asset preservation order. Guangzhou Arbitration Commission transferred the application to Guangzhou Intermediate People’s Court which made a Civil Ruling ((2011) Sui Zhong Fa Zhi Di 764 Hao) and the subsequent repeated decisions, as a result of which a section of 24,067.3 square metres under the land use right certificate (No. Sui Guo Yong (2005) Di 10017 Hao) of the Land has been subject to a freeze order till 18 May 2018.

As advised by Zhonglun W&D Law Firm, the PRC legal adviser of the Company, the arbitration proceeding is still ongoing and the Land is subject to the freeze order as at the Latest Practicable Date. The freeze order applied for by Guangzhou Gecom is a common asset preservation measure during arbitration proceedings in the PRC and can be replaced with substitute surety subject to court approval. According to article 72 of the Company Law of the PRC, where a People’s Court transfers the equity interest of a shareholder in a company pursuant to mandatory enforcement procedures under the laws, it shall notify the company and all shareholders. The other shareholders shall have the right of first refusal under the same conditions. If any of the other shareholders fails to exercise its right of first refusal within 20 days upon the notice of the People’s Court, it shall be deemed to have waived such right of first refusal. As indicated in the websites of National Enterprise Credit Information Public System, PRC Enforcement Information Public website, National Court Dishonesty Enforced Person Searching System and Credit China*, the business license of Hengsheng Group Co, which is under the bankruptcy review, has been revoked. It is unlikely that other means of compensation (i.e. cash or land allocation) would be possible because Hengsheng Group Co’s capital is insufficient to pay up its debts. Therefore, if the arbitral award made by Guangzhou Arbitration Commission is not in Hengsheng Group Co’s and the Target Group’s favour, the mandatory enforcement procedure will very likely be commenced, which as discussed above will very likely be the sale of the 25% equity interest in Honkwok Hengsheng by Hengsheng Group Co, as would be requested by Guangzhou Gecom. Cityland, as another shareholder of Honkwok Hengsheng, is very likely to exercise the right of first refusal. The scope of arbitral award made by Guangzhou Arbitration Commission shall be limited to the extent of the arbitration request made by Guangzhou Gecom (as applicant) against Hengsheng Group Co (as respondent). Thus, the exercise of right of first refusal by Cityland will not be overridden by Guangzhou Arbitration Commission. The Company will comply with the requirements under Chapters 14 and 14A of the Listing Rules if Cityland exercises the right of first refusal.

For identification purpose only

LETTER FROM THE BOARD

Regarding the freeze order, it will be released if the arbitral award is in Hengsheng Group Co’s and the Target Group’s favour. If the arbitral award is not in Hengsheng Group Co’s and the Target Group’s favour, the freeze order will be released as soon as Hengsheng Group Co and the Target Group have executed the arbitral award (which will very likely be the sale of the 25% equity interest in Honkwok Hengsheng by Hengsheng Group Co) or substitute surety is provided.

In light of the aforesaid, the Company is of the view that the probability for the freeze order not being released is low and the interest of Honkwok Hengsheng in the Land will not be affected. On this basis, the Company is of the view that the freeze order has no material impact on the valuation of the Land. For the same reason, the release of the freeze order and the conclusion of the arbitration proceeding were not included as conditions precedent under the Share Transfer Agreement and no compensation mechanism or similar arrangement was agreed between the parties in the Share Transfer Agreement. Given the prime location of the Land in Tianhe District, Guangzhou, and that the Consideration represents a 30% discount to the market value of the acquired interest of the Land, the Company is of the view that such arrangement is in the interest of the Company and the Shareholders.

Set out below is the unaudited consolidated financial information of the Target Group prepared according to the PRC accounting standards:

Target Company

The Target Company was incorporated on 24 March 2017 and no profit or loss since then. The unaudited total and net assets value of the Target Company as at 14 September 2017 were RMB3,185,039,863.46.

Smooth Ever Group

	For the year ended	For the year ended
	31 December 2015	31 December 2016
	RMB’000	RMB’000
	(audited)	(audited)
Net loss before taxation and extraordinary items and
before non-controlling interests	2,795	2,974
Net loss after taxation and extraordinary items and
before non-controlling interests	2,795	2,974

The audited total asset and net asset value (after non-controlling interests) of Smooth Ever Group as at 31 December 2016 were RMB397,340,000 and RMB17,867,000, respectively.

The accountants’ report on the historical financial information of the Target Company for the period from its date of incorporation on 24 March 2017 to 31 July 2017 are set out in Appendix II to this circular. The accountants’ report on the historical financial information of Smooth Ever Group for the three years ended 31 December 2016 and the seven months ended 31 July 2017 are set out in Appendix III to this circular. The accounting policies used for preparing the financial statements of the Target Company and Smooth Ever Group are materially consistent with those of the Company.

LETTER FROM THE BOARD

REASONS FOR AND BENEFIT OF ENTERING INTO THE SHARE TRANSFER AGREEMENT

The Group is a property developer focused on the development on green, energy-saving and ecofriendly residences in the PRC.

The Group obtained 38.25% attributable interest of the Land and its property development project as a result of the Acquisition. In view of the prime location, the designated use and development potential of the Land, the Board considers that the Acquisition offers a good opportunity for the Group to enhance its portfolio in the property market in the capital city of Guangdong Province with a view to bringing more investment return for the Shareholders.

The Board is of the view that the terms of the Share Transfer Agreement are on normal commercial terms after arm’s length negotiations between the parties, fair and reasonable and in the interests of the Company and the Shareholders as a whole.

FINANCIAL EFFECT OF THE ACQUISITION

Upon Completion and as at the Latest Practicable Date, the Target Company is held by Modern Land No. 6 and Yango Group as to 51% and 49%, respectively. The Target Company, through Smooth Ever and Cityland (both being investment holding companies), held 75% equity interest in Honkwok Hengsheng, which is the registered and beneficial owner of the Land and is principally engaged in the property development on the Land.

1. Assets and liabilities

As detailed in the unaudited pro forma consolidated statement of assets and liabilities of the Resulting Group in Appendix IV to this circular, assuming the Acquisition was completed as at 30 June 2017, the unaudited pro forma consolidated assets of the Resulting Group would have remain unchanged of approximately RMB37,349,000,000, the unaudited pro forma consolidated liabilities of the Resulting Group would have remain unchanged of approximately RMB30,668,000,000 million and the net assets would have remain unchanged as a result of the Acquisition.

2. Earnings

Upon Completion and as at the Latest Practicable Date, the Group owned 51% of the issued share capital of the Target Company which is accounted for as a joint venture of the Company. Therefore, the financial statements of the Target Company will not be consolidated in the Company’s financial statements. The Acquisition will have no immediate impact on the consolidated earnings of the Group.

LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios set out in the Listing Rules in respect of the Acquisition under the Share Transfer Agreement is/are more than 25% but less than 100%, the entering into of the Share Transfer Agreement constitutes a major transaction of the Company under Chapter 14 of the Listing Rules. As such, the Share Transfer Agreement and the Acquisition contemplated thereunder are subject to the reporting, announcement and Shareholders’ approval requirements under Chapter 14 of the Listing Rules. As at the Latest Practicable Date, Super Land owns 66.01% of the total number of issued Shares. On 15 September 2017, the Company received Super Land’s written consent to the Acquisition and the entering into of the Share Transfer Agreement. As (i) no Shareholder would be required to abstain from voting if the Company were to convene a general meeting for the approval of the Acquisition; and (ii) Super Land holds more than 50% of the voting rights that would be exercisable at such general meeting, Super Land’s written consent is acceptable in lieu of holding a general meeting of the Company for approval of the Acquisition pursuant to Rule 14.44 of the Listing Rules.

RECOMMENDATION

The Directors, including the independent non-executive Directors, are of the view that the terms of the Share Transfer Agreement and the transactions contemplated thereunder is fair and reasonable and in the interest of the Group and the Shareholders as a whole. Accordingly, should a resolution be put at a general meeting of the Company for the Shareholders to consider the same, the Directors would recommend the Shareholders to vote in favour of such resolution.

FURTHER UPDATE OF THE ACQUISITION

On 27 November 2017, the Target Company and Guangzhou Modern Tengxin Investment Company Limited (“Modern Tengxin”) entered into a sale and purchase agreement (the “Sale and Purchase Agreement”) whereby the Target Company agreed to sell one share of Smooth Ever (representing 100% of the issued share capital of Smooth Ever) to Modern Tengxin at the consideration of US$1.00. Modern Tengxin is a company established in the PRC with limited liability. As at the Latest Practicable Date, Modern Tengxin was held by Shenlv Real Estate (Beijing) Company Limited (a wholly-owned subsidiary of the Company) and Guangzhou Libi Huize Real Estate Development Company Limited* (a wholly-owned subsidiary of Yango Group) as to 51% and 49%, respectively. Upon completion of the transaction under the Sale and Purchase Agreement, the shareholdings, rights and liabilities in Smooth Ever Group and the interests on the Land of the Company and Yango Group are the same as those upon the Completion of the Acquisition.

FURTHER INFORMATION

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

Yours faithfully, By Order of the Board

Modern Land (China) Co., Limited Zhang Peng

President and Executive Director

* For identification purpose only

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

I. FINANCIAL INFORMATION OF THE GROUP FOR THE THREE FINANCIAL YEARS ENDED 31 DECEMBER 2016 AND SIX MONTHS ENDED 30 JUNE 2017

Financial information of the Group for the three years ended 31 December 2014, 2015 and 2016 and the six months ended 30 June 2017 are disclosed on pages 105 to 252 of the annual report of the Company for the year ended 31 December 2014, pages 107 to 268 of the annual report of the Company for the year ended 31 December 2015 and pages 156 to 296 of the annual report of the Company for the year ended 31 December 2016 and pages 29 to 66 of the interim report of the Company for the six months ended 30 June 2017, respectively, all of which are published on the website of the Stock Exchange at www.hkexnews.hk and the website of the Company at www.modernland.hk. Quick links to the annual reports of the Company are set out below:

Annual report of the Company for the year ended 31 December 2014:

http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0417/LTN20150417337.pdf

Annual report of the Company for the year ended 31 December 2015:

http://www.hkexnews.hk/listedco/listconews/SEHK/2016/0412/LTN20160412477.pdf

Annual report of the Company for the year ended 31 December 2016:

http://www.hkexnews.hk/listedco/listconews/SEHK/2017/0321/LTN201703211074.pdf

Interim report of the Company for the six months ended 30 June 2017:

http://www.hkexnews.hk/listedco/listconews/SEHK/2017/0824/LTN20170824322.pdf

II. INDEBTEDNESS

1. Borrowings

As at the close of business on 30 September 2017, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, the Resulting Group had outstanding borrowings of approximately RMB19,747,281,000, details of which are set out as follows:

Senior notes, secured and guaranteed Corporate bond, unsecured and unguaranteed Bank loans, secured Other borrowings, secured Amount due to minority owners of subsidiaries unsecured Amount due to third parties, unsecured	RMB’000 4,839,389 1,000,000 4,768,720 3,902,500 2,339,529 2,897,143
	19,747,281

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. Contingent liabilities and other guarantees

As at the close of business on 30 September 2017, the Resulting Group’s financial guarantee and contingent liabilities were as follows:

The Resulting Group provided guarantees to the extent of RMB7,823,482,000 to banks in respect of mortgage loans provided by the banks to the customers for the purchase of properties developed by the Resulting Group. These guarantees provided by the Resulting Group for customers to the banks would be released upon receiving the building ownership certificates of the respective properties by the banks from the customers as a pledge for security to the mortgage loans granted.

As at 30 September 2017, the Resulting Group provided guarantees to bank loans and other loans of joint ventures amounting to RMB1,488,900,000.

III. WORKING CAPITAL

After taking into account the Resulting Group’s available resources, including internally generated funds, external borrowings and the presently available banking facilities, in the absence of unforeseen circumstances, the Directors are of the opinion that the Resulting Group will have sufficient working capital to meet its present requirements for the next twelve months from the date of this circular.

IV. MATERIAL ADVERSE CHANGE

The Directors were not aware of any material adverse change to the financial or trading position of the Group since 31 December 2016, being the date to which the latest audited consolidated financial statements of the Company were published.

V. OUTLOOK AND PROSPECTS

Upon Completion, the Resulting Group will continue to be principally engaged in property development in the PRC while Honkwok Hengsheng, which is the registered and beneficial owner of the Land, will continue to be engaged in development of the Land. The total site area of the Land is approximately 95,382 square metres and the total GFA is approximately 280,000 square metres. The Land is planned for residential, commercial and other uses.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The unaudited pro forma financial information of the Resulting Group illustrating the financial impact of the Acquisition on the assets and liabilities of the Group is set out in Appendix IV to this circular. The unaudited pro forma financial information of the Resulting Group has been prepared for illustration purpose only, based on the judgments and assumptions of the Directors, and, due to its hypothetical nature, it may not give a true picture of the financial position of the Resulting Group as at the date of completion of the Acquisition or any future date.

In the coming ten years, the Directors expect that the real estate industry in China will continue to demonstrate the trend of high differentiation, high concentration and high elimination. Due to the changing demographic structure, the property market in the following decade will record rapid development at a rate of no less than 1 billion square metres of newly constructed area per year. With the gradual changes in lifestyle in the PRC, home communities featuring full-cycle sustainable development of the industry, namely liveable community residence for all age groups will be in the ascendant.

In 2017, the Group grasps this important opportunity to integrate its development in different areas. The Group enlarges its scale by acquiring land steadily. Emphasis would continue to be laid on first and strong second tier cities, including satellite cities nearby unaffected by home-purchase restrictions with a large client base, sufficient industry support and reasonable stock-to-sales ratios. The Group will also continue to promote product innovation and continuously strengthen its core competitiveness (i.e. “unique heating and cooling solutions + unique air quality solutions + unique solutions for reducing energy consumption and operation costs”).

VI. OTHER INFORMATION

(a) Liquidity and Financial Resources

As at 31 December 2016, the Group’s cash, restricted cash and bank balances were approximately RMB6,762,300,000.

As at 31 December 2016, the Group’s total borrowings were approximately RMB10,021,000,000.

(b) Gearing Ratio

As at 31 December 2016, the Group’s net debt ratio (calculated by net borrowings divided by total equity) was approximately 68.9%.

(c) Employee and Remuneration Policy

As at 31 December 2016, the Group had an aggregate of 1,103 employees. The Group recruited and promoted individual persons according to their strength and development potential. The Group determined the remuneration packages of all employees (including the Directors) with reference to individual performance and current market rate.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(d) Material acquisitions by the Group

Other than the Acquisition and the transaction(s) as disclosed below, the Group has not entered into any material acquisitions after 31 December 2016, being the date to which the latest published audited accounts of the Company have been made up:

(1) On 3 March 2017, Tengfei Moma Real Estate (Beijing) Co., Ltd. (an indirect wholly-owned subsidiary of the Company) (“Tengfei Moma”) entered into an equity transfer agreement with Mr. Guan Zhiquan (“Mr. Guan”), Xizang Yulong Real Estate Co., Ltd. (“Xizang Yulong”) and Wuhan Zhonglian Shengming Real Estate Company Limited (“Zhonglian Shengming”), whereby Tengfei Moma conditionally agreed to acquire 2% and 98% equity interest (in aggregate 100% equity interest) in Zhonglian Shengming from Mr. Guan and Xizang Yulong, respectively, at the consideration of RMB949,850,000.
(2) On 11 March 2017, New Power (Beijing) Architectural Technology Co., Ltd. (“Beijing New Power”), an indirect wholly-owned subsidiary of the Company, entered into certain partnership interest transfer agreements to acquire approximately 51.31% and 61.02% partnership interest in Jiaxing Changtian Lifeng No. 1 Investment Management Partnership (Limited Partnership) (“Lifeng No. 1”) and Jiaxing Changtian Lifeng No. 2 Investment Management Partnership (Limited Partnership) (“Lifeng No. 2”), respectively, for an aggregate consideration of RMB3,735,000. On the same date, Lifeng No. 1 and Lifeng No. 2 entered into certain equity transfer agreements to dispose of 3.97% and 2.18% equity interest in First Moma Renju Environmental Technology (Beijing) Company Limited, respectively for the exchange of giving up the transferees’ rights of distribution in Lifeng No. 1 and Lifeng No. 2.
(3) On 5 April 2017, Modern Green Development Group Hongye Benpao Technology (Beijing) Company Limited (“Hongye Benpao”), an indirect wholly-owned subsidiary of the Company, entered into an equity cooperation agreement with Foshan Changxin Tianhao Investment Company Limited (“Tianhao Investment”) and Foshan Changxin Hongchuang Real Estate Company Limited (“Hongchuang Real Estate”), pursuant to which, among other things, Hongye Benpao shall acquire the entire equity interest of Hongchuang Real Estate and the total sum of loans and debts owed by Hongchuang Real Estate to Tianhao Investment and other existing creditors as at the date of the equity cooperation agreement at an aggregate consideration of approximately RMB230,877,436.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(4) On 5 April 2017, Zhihui Hongye Real Estate (Beijing) Company Limited (“Zhihui Hongye”), an indirect wholly-owned subsidiary of the Company, entered into an equity transfer agreement with Foshan Nanhai Yongxin Investment Company Limited (“Yongxin Investment”), Foshan Changxin Yinhao Investment Company Limited (“Yinhao Investment”) and Foshan Xinlong Real Estate Investment Company Limited (“Xinlong Real Estate”), pursuant to which, among other things, Zhihui Hongye shall acquire the entire equity interest in Xinlong Real Estate and the total sum of loans and debts owed by Xinlong Real Estate to Yinhao Investment and Yongxin Investment as at the date of the equity transfer agreement at an aggregate consideration of approximately RMB202,275,598.
(5) On 4 May 2017, Zhanlan Tuozhan Real Estate (Beijing) Co., Ltd. (“Zhanlan Tuozhan”) (an indirect wholly-owned subsidiary of the Company), Xiamen Yuelian Real Estate Company Limited, Xiamen Xinjingdi Group Company Limited (as the vendors) and Fujian Shengshi Lianbang Real Estate Development Company Limited (“Shengshi Lianbang”) entered into a joint development agreement pursuant to which, among other things, the parties agreed to cooperate in the development of the land located in Jinjiang, Fujian Province, the PRC via Shengshi Lianbang. The net consideration payable by Zhanlan Tuozhan under the joint development agreement is RMB1,800,000,000 (equivalent to HK$2,034,000,000). In addition, it is proposed that Zhanlan Tuozhan will inject RMB13,421,000 (equivalent to HK$15,165,730) into Shengshi Lianbang as registered capital.
(6) On 5 May 2017, Zhanlan MOMA Real Estate (Beijing) Co., Ltd. (“Zhanlan MOMA”) and Modern Green Development Co., Ltd. (“Modern Green Development”) (both being indirect wholly-owned subsidiaries of the Company) entered into an equity and loan transfer agreement (the “Transfer Agreement”) with Jiang Yang Group Co., Ltd, Ms. Chen Jun and Mr. Ding Wenquan (collectively, the “Vendors”), pursuant to which, Zhanlan MOMA agreed to acquire the entire equity interest in the target company, namely Jiangsu Jiang Yang Jin Xin Real Estate Development Co., Ltd. (“Jiang Yang Jin Xin”) and settle the outstanding loans owed by Jiang Yang Jin Xin to its external creditor(s) at a total consideration of RMB434,000,000. On 16 June 2017, the parties to the Transfer Agreement entered into a termination agreement (the “Termination Agreement”) whereby the parties agreed to terminate the Transfer Agreement with immediate effect and the Vendors shall refund the first instalment of the consideration under the Transfer Agreement to Zhanlan MOMA.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(7) On 9 May 2017, Modern Green Development entered into an agreement with Shanghai Zhongcheng Canshuo Investment Center (Limited Partnership) (“Zhongcheng Canshuo Investment”), Hongrui (Beijing) Investment Management Company Limited (“Hongrui Investment”) and Shanghai Zhongcheng Allied Investment Management Holdings Limited (“Zhongcheng Allied Investment”) whereby it was agreed that, among other things, major decisions of the board of directors of Wuhan Moma Development Co., Ltd. (“Wuhan Moma”) (a company held as to 51% by the Company and was accounted for as a joint venture of the Group before the entering into of the Agreement) shall be resolved by a simple majority of the members of the board of directors instead of unanimous approval of all directors.
(8) On 22 May 2017, Modern Green Development entered into an agreement with Dingxin Changcheng (Beijing) Investment Management Company Limited (“Dingxin Changcheng”), Shengeng Tuozhan Investment (Beijing) Company Limited (“Shengeng Investment”) and Yingtan Dingxin Yongchun Investment (Limited Partnership) (“Yingtan Dingxin”) whereby it was agreed that, among other things, major decisions of the board of directors of Shengeng Investment (a company held as to 51% and 49% by Modern Green Development and Yingtan Dingxin, respectively, and a non wholly-owned subsidiary of the Company) shall be resolved by an unanimous approval instead of a majority approval.
(9) On 29 June 2017, Beijing Modern Green Investment Fund Management Co., Ltd. (“Beijing Modern Green”) (an indirect wholly-owned subsidiary of the Company) and Jiaxing Lan Lv Jingshen Equity Investment Fund Enterprise (LLP) (“Jiaxing Lan Lv Jingshen”), a limited partnership established by Modern Green Development, entered into the limited partnership agreement with certain other partners who are independent third parties, whereby the partners agreed to, among other things, invest in Jiaxing Lan Lv Zhanfang Equity Investment Fund Enterprise (LLP) with an aggregate capital of RMB1,901,000,000, out of which Beijing Modern Green and Jiaxing Lan Lv Jingshen shall contribute RMB1,000,000 and RMB475,000,000, respectively.
(10) On 16 August 2017, Sushen Lvse (Beijing) Real Estate Co., Ltd., (“Sushen Lvse”, an indirect wholly-owned subsidiary of the Company) (as purchaser) entered into an equity transfer and debt settlement agreement with Suzhou Jieneng Technology Co., Ltd. and Mr. Qian Xinghua (as vendors), whereby Sushen Lvse conditionally agreed to acquire 100% equity interest of Jiangsu Yuzun Real Estate Development Company Limited from the vendors at the consideration of approximately RMB469,000,000.

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

The following is the text of a report set out on pages 23 to 31, received from the Company’s reporting accountants, KPMG, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular.

==> picture [79 x 32] intentionally omitted <==

ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF MODERN LAND (CHINA) CO., LIMITED

Introduction

We report on the historical financial information of Yango Yuegang Limited (the “Target Company”) set out on pages 25 to 31, which comprises the statement of financial position of the Target Company as at 31 July 2017 and the statement of changes in equity for the period from 24 March 2017 (date of incorporation) to 31 July 2017 (the “Relevant Period”), and a summary of significant accounting policies and other explanatory information (together, the “Historical Financial Information”). The Historical Financial Information set out on pages 25 to 31 forms an integral part of this report, which has been prepared for inclusion in the circular issued by Modern Land (China) Co., Limited (the “Company”) dated 8 December 2017 (the “Circular”) in connection with the the proposed acquisition of 51% equity interest in the Target Company by the Company (the “Proposed Acquisition”).

Directors’ responsibility for Historical Financial Information

The directors of the Company are responsible for the preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information, and for such internal control as the directors of the Target Company determine is necessary to enable the preparation of the Historical Financial Information that is free from material misstatement, whether due to fraud or error.

Reporting accountants’ responsibility

Our responsibility is to express an opinion on the Historical Financial Information and to report our opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 200 “Accountants’ Reports on Historical Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). This standard requires that we comply with ethical standards and plan and perform our work to obtain reasonable assurance about whether the Historical Financial Information is free from material misstatement.

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

a true and fair view in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our work also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the Historical Financial Information.

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

Opinion

In our opinion, the Historical Financial Information gives, for the purpose of the accountants’ report, a true and fair view of the Target Company’s financial position as at 31 July 2017 and the Target Company’s financial performance and cash flows for the Relevant Period in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information.

Report on matters under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

Adjustments

In preparing the Historical Financial Information, no adjustments to the Underlying Financial Statements as defined on page 25 have been made.

KPMG

Certified Public Accountants

8th Floor, Prince’s Building 10 Chater Road Central, Hong Kong

8 December 2017

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

HISTORICAL FINANCIAL INFORMATION

Set out below is the Historical Financial Information which forms an integral part of this accountants’ report.

The financial statements of the Target Company for the Relevant Period, on which the Historical Financial Information is based, were audited by KPMG Huazhen LLP in accordance with Hong Kong Standards on Auditing issued by the HKICPA (“Underlying Financial Statements”).

Statement of financial position

(Expressed in Renminbi)

Current assets Other receivables Total current assets Total current liabilities Net current assets NET ASSETS Capital and reserves Share capital TOTAL EQUITY Statement of changes in equity (Expressed in Renminbi) Balance at 24 March 2017 (date of incorporation) Capital injection Balance at 31 July 2017	Paid-in capital RMB’000 – 9 9	Note 4 5 Accumulated losses RMB’000 – – –		At 31 July 2017 RMB’000 9
				9 –
				9
				9

				9
				9

				Total equity RMB’000 – 9
				9

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

NOTES TO THE HISTORICAL FINANCIAL INFORMATION

1 BASIS OF PREPARATION AND PRESENTATION OF HISTORICAL FINANCIAL INFORMATION

Yango Yuegang Limited (the “Target Company”) was incorporated in Hong Kong on 24 March 2017 as an exempted company with limited liability under the Hong Kong Companies Ordinance.

The Target Company is an investment holding company.

As at the date of this report, no audited financial statements have been prepared for the Target Company, as the Target Company has not carried on any business since the date of its incorporation.

The Historical Financial Information has been prepared in accordance with all applicable International Financial Reporting Standards (“IFRSs”) which collective term includes all applicable individual International Financial Reporting Standards, International Accounting Standards and Interpretations issued by the International Accounting Standards Board (“IASB”). Further details of the significant accounting policies adopted are set out in Note 2.

The IASB has issued a number of new and revised IFRSs. For the purpose of preparing this Historical Financial Information, the Target Company has adopted all applicable new and revised IFRSs to the Relevant Period, except for any new standards or interpretations that are not yet effective for the accounting period beginning from 1 January 2017. The revised and new accounting standards and interpretations issued but not yet effective for the accounting year beginning from 1 January 2017 are set out in Note 9.

The Historical Financial Information also complies with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

The accounting policies set out below have been applied consistently to the period presented in the Historical Financial Information.

2 SIGNIFICANT ACCOUNTING POLICIES

(a) Going concern

As at 31 July 2017, the Target Company has not yet generated any revenue and is dependent on financial support for its business continuance. The Historical Financial Information has been prepared on a going concern basis as Modern Land (China) Co., Limited (“Modern Land”) and Yango City Group Co., Ltd (“Yango Group”) have undertaken to provide the necessary financial support, including an undertaking to provide financial support to the Target Company when its debts fall due. Accordingly, the Target Company will be able to meet its financial obligations for the foreseeable future.

(b) Basis of measurement

The functional currency of the Target Company is Hong Kong dollars (“HKD”). The Historical Financial Information is presented in Renminbi (“RMB”), rounded to the nearest thousand. It is prepared on the historical cost basis.

(c) Use of estimates and judgements

The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(d) Cash flow statement

A cash flow statement has not been prepared because the Target Company did not have any cash flows during the Relevant Period nor did it have any cash or cash equivalents during the Relevant Period and at 31 July 2017.

(e) Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit before taxation as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The Target Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

(f)

Financial instruments

Financial assets and financial liabilities are recognised in the statement of financial position when the Target Company becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transactions costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

(i) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including other receivables, amounts due from related parties, bank balances and cash) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment loss on financial assets below).

(ii) Derecognition

Financial assets are derecognised when the contractual rights to receive cash flows from the assets expire, or when the financial assets are transferred and the Target Company has transferred substantially all the risks and rewards of ownership of the financial assets to another entity.

On recognition of a financial asset in its entirety, the difference between the assets’ carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(g) Impairment of assets

(i) Impairment of other receivables

Other current and non-current receivables that are stated at cost or amortised cost are reviewed at the end of each reporting period to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of the Target Company about one or more of the following loss events:

significant financial difficulty of the debtor;
a breach of contract, such as a default or delinquency in interest or principal payments;
it becoming probable that the debtor will enter bankruptcy or other financial reorganisation; and
Significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor;

If any such evidence exists, any impairment loss is determined and recognised as follows:

For other current receivables and other financial assets carried at amortised cost, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material. This assessment is made collectively where these financial assets share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group.

If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result in the asset’s carrying amount exceeding that which would have been determined had no impairment loss been recognised in prior years.

Impairment losses are written off against the corresponding assets directly, except for impairment losses recognised in respect of receivables included within other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Target Company is satisfied that recovery is remote, the amount considered irrecoverable is written off against receivables directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss.

(h) Translation of foreign currencies

Foreign currency transactions during the year are translated at the foreign exchange ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at the end of the reporting period. Exchange gains and losses are recognised in profit or loss.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the foreign exchange rates ruling at the transaction dates. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated using the foreign exchange rates ruling at the dates the fair value was measured.

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(i) Related parties

(a) A person, or a close member of that person’s family, is related to Smooth Ever Group if that person:
(i) has control or joint control over Smooth Ever Group;
(ii) has significant influence over Smooth Ever Group; or
(iii) is a member of the key management personnel of Smooth Ever Group’s parent.
(b) An entity is related to Smooth Ever Group if any of the following conditions applies:
(i) The entity is a member of the same group (which means that each parent, subsidiary and entities controlled by the controlling shareholders is related to the others).
(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).
(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
(v) The entity is a post-employment benefit plan for the benefit of employees of either Smooth Ever Group or an entity related to Smooth Ever Group.
(vi) The entity is controlled or jointly controlled by a person identified in (a).
(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).
(viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the group or to the group’s parent.

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

3 STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Statements of profit or loss and other comprehensive income statement have not been prepared because the Target Company did not have any operation during the Relevant Period.

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

4 DIRECTORS’ EMOLUMENTS

Directors’ emoluments during the Relevant Period are disclosed as follows:

		Salaries,
		allowances		Retirement
	Directors’	and benefits	Discretionary	scheme
	fees	in kind	bonuses	contributions	Total
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Period from 24 March 2017
(date of incorporation) to
31 July 2017
Executive Director:
Liu Yu (appointed on
24 March 2017)	–	–	–	–	–
Chen Lin (appointed on
24 March 2017)	–	–	–	–	–

5 OTHER RECEIVABLES

Other receivables at 31 July 2017 are receivables to the shareholder for the issued share capital which are interest free and repayable on demand.

(a) Impairment of receivables

Impairment losses in respect of receivables are recorded using an allowance account unless the Target Company is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against receivables directly (see Note 2(g)).

(b) Receivables that are not impaired

Balances of receivables at 31 July 2017 are neither past due nor impaired, and are related to the shareholder.

6 SHARE CAPITAL

As at 31 July 2017, the registered capital of the Target Company was HK$10,000 (equivalent to approximately RMB9,000).

7 FINANCIAL RISK MANAGEMENT AND FAIR VALUES

Exposure to credit risk arises in the receivables from the Target Company’s shareholder. The Target Company is not exposed to significant interest rate risk, liquidity risk or currency risk as it has no interest-bearing financial instruments with variable interest rates, and no significant transactions and balances as the Target Company has not carried on any business since the date of its incorporation. The Target Company’s exposure to credit risk and the credit risk management policies and practices used by the Target Company to manage credit risk are described below.

(a) Credit risk

The Target Company’s credit risk is primarily attributable to other receivables. Management has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis.

The maximum exposure to credit risk without taking account of any collateral held is represented by the carrying amount of each financial asset in the statement of financial position after deducting any impairment allowance. The Target Company does not provide any guarantees which would expose the Target Company to credit risk.

Further quantitative disclosures in respect of the Target Company’s exposure to credit risk arising from other receivables are set out in Note 5.

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(b) Fair values

The directors of the Target Company consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the statement of financial position approximate their respective fair values at the end of the reporting period.

8 IMMEDIATE AND ULTIMATE CONTROLLING COMPANIES

As at 31 July 2017, the directors consider the immediate controlling company of the Target Company is Yango Group, and the ultimate controlling company of the Target Company is Fujian Yango Group Limited (“福建陽光集團有限公司”), These entities were both incorporated in People’s Republic of China (“PRC”). Yango Group is a company listed on the Shenzhen Stock Exchange, and its financial statements are available for public use.

9 POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE ACCOUNTING PERIOD BEGINNING FROM 1 JANUARY 2017

Up to the date of issue of the Historical Financial Information, the IASB has issued a number of amendments and new standards which are not yet effective for period beginning from 1 January 2017 and which have not been adopted in the Historical Financial Information.

The Target Company is in the process of making an assessment of what the impact of these amendments is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the Historical Financial Information.

9 EVENTS AFTER THE END OF THE REPORTING PERIOD

In January 2017, Yango Group entered into an agreement to acquire 100% of equity interest of Smooth Ever Investment Limited and its subsidiaries (together, “Smooth Ever Group”), which are principally engaged in property development and hold a land in Guangzhou. The acquisition was completed on 31 August 2017 and Smooth Ever Group became a subsidiary of the Target Company.

In September 2017, Modern Land entered into a share transfer agreement with Yango Group to acquire 51% of equity interest of the Target Company and its subsidiaries. The acquisition was completed on 15 September 2017.

SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Target Company in respect of any period subsequent to 31 July 2017.

APPENDIX III FINANCIAL INFORMATION OF SMOOTH EVER GROuP

The following is the text of a report set out on pages 32 to 54, received from the Company’s reporting accountants, KPMG, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this Circular.

==> picture [79 x 32] intentionally omitted <==

ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF MODERN LAND (CHINA) CO., LIMITED

Introduction

We report on the historical financial information of Smooth Ever Investment Limited (“Smooth Ever”) and its subsidiaries (together, “Smooth Ever Group”) set out on pages 35 to 54, which comprises the consolidated statement of financial position and the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows of Smooth Ever Group, for each of the years ended 31 December 2014, 2015 and 2016 and the seven months ended 31 July 2017 (the “Relevant Period”), and a summary of significant accounting policies and other explanatory information (together, the “Historical Financial Information”). The Historical Financial Information set out on pages 35 to 54 forms an integral part of this report, which has been prepared for inclusion in the circular issued by Modern Land (China) Co., Limited (the “Company”) dated 8 December 2017 (the “Circular”) in connection with the proposed acquisition of 51% equity interest in Yango Yuegang Limited (the “Target Company”) by the Company (the “Proposed Acquisition”).

Directors’ responsibility for Historical Financial Information

The directors of the Company are responsible for the preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information, and for such internal control as the directors of the Company determine is necessary to enable the preparation of the Historical Financial Information that is free from material misstatement, whether due to fraud or error.

Reporting accountants’ responsibility

APPENDIX III FINANCIAL INFORMATION OF SMOOTH EVER GROuP

Our work involved performing procedures to obtain evidence about the amounts and disclosures in the Historical Financial Information. The procedures selected depend on the reporting accountants’ judgement, including the assessment of risks of material misstatement of the Historical Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountants consider internal control relevant to the entity’s preparation of Historical Financial Information that give a true and fair view in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our work also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the Historical Financial Information.

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

Opinion

In our opinion, the Historical Financial Information gives, for the purpose of the accountants’ report, a true and fair view of Smooth Ever Group’s financial position as at 31 December 2014, 2015 and 2016 and 31 July 2017 and of its financial performance and cash flows for the Relevant Period in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information.

Review of stub period corresponding financial information

We have reviewed the stub period corresponding financial information of Smooth Ever Group which comprises the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the seven months ended 31 July 2016 and other explanatory information (the “Stub Period Corresponding Financial Information”). The directors of the Company are responsible for the preparation and presentation of the Stub Period Corresponding Financial Information in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information. Our responsibility is to express a conclusion on the Stub Period Corresponding Financial Information based on our review. We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA. A review consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the Stub Period Corresponding Financial Information, for the purpose of the accountants’ report, is not prepared, in all material respects, in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information.

APPENDIX III FINANCIAL INFORMATION OF SMOOTH EVER GROuP

Report on matters under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

Adjustments

In preparing the Historical Financial Information, no adjustments to the Underlying Financial Statements as defined on page 35 have been made.

KPMG

Certified Public Accountants

8th Floor, Prince’s Building

10 Chater Road Central, Hong Kong

8 December 2017

APPENDIX III FINANCIAL INFORMATION OF SMOOTH EVER GROuP

HISTORICAL FINANCIAL INFORMATION

Set out below is the Historical Financial Information which forms an integral part of this accountants’ report.

The consolidated financial statements of Smooth Ever Group for the Relevant Period, on which the Historical Financial Information is based, were audited by KPMG Huazhen LLP in accordance with Hong Kong Standards on Auditing issued by the HKICPA (“Underlying Financial Statements”).

Consolidated statement of profit or loss and other comprehensive income

(Expressed in RMB)

Notes Revenue Cost of sales Gross profit Administrative expenses Financial costs Loss from operations and loss before taxation Income tax Loss for the year/period Other comprehensive income for the year/period: Exchange differences on translating foreign operations, net of nil tax Total comprehensive income for the year/period	Year ended 31 December 2014 2015 2016 RMB’000 RMB’000 RMB’000 – – – – – – – – – (3,038) (2,792) (2,973) (4) (3) (1) (3,042) (2,795) (2,974) – – – (3,042) (2,795) (2,974) 701 (12,957) (15,056) (2,341) (15,752) (18,030)	Year ended 31 December 2014 2015 2016 RMB’000 RMB’000 RMB’000 – – – – – – – – – (3,038) (2,792) (2,973) (4) (3) (1) (3,042) (2,795) (2,974) – – – (3,042) (2,795) (2,974) 701 (12,957) (15,056) (2,341) (15,752) (18,030)	Seven months ended 31 July 2016 2017 RMB’000 RMB’000 (unaudited) – – – – – – (1,631) (4,894) (2) (3) (1,633) (4,897) – – (1,633) (4,897) (5,231) 8,716 (6,864) 3,819
	2014 RMB’000 – – – (3,038) (4) (3,042) – (3,042) 701 (2,341)	2015 RMB’000 – – – (2,792) (3) (2,795) – (2,795) (12,957) (15,752)	2016 RMB’000 (unaudited) – – – (1,631) (2) (1,633) – (1,633) (5,231) (6,864)

APPENDIX III FINANCIAL INFORMATION OF SMOOTH EVER GROuP

Consolidated statement of profit or loss and other comprehensive income

(Expressed in RMB)

Notes Loss for the year/period attributable to: Owners of the Company Non-controlling interests Total comprehensive income attributable to: Owners of the Company Non-controlling interests	Year ended 31 December 2014 2015 2016 RMB’000 RMB’000 RMB’000 (2,347) (2,097) (2,232) (695) (698) (742) (3,042) (2,795) (2,974) (1,575) (13,724) (15,744) (766) (2,028) (2,286) (2,341) (15,752) (18,030)	Year ended 31 December 2014 2015 2016 RMB’000 RMB’000 RMB’000 (2,347) (2,097) (2,232) (695) (698) (742) (3,042) (2,795) (2,974) (1,575) (13,724) (15,744) (766) (2,028) (2,286) (2,341) (15,752) (18,030)	Seven months ended 31 July 2016 2017 RMB’000 RMB’000 (unaudited) (1,227) (3,675) (406) (1,222) (1,633) (4,897) (5,921) 4,145 (943) (326) (6,864) 3,819
	2014 RMB’000 (2,347) (695) (3,042) (1,575) (766) (2,341)	2015 RMB’000 (2,097) (698) (2,795) (13,724) (2,028) (15,752)	2016 RMB’000 (unaudited) (1,227) (406) (1,633) (5,921) (943) (6,864)

APPENDIX III FINANCIAL INFORMATION OF SMOOTH EVER GROuP

Consolidated statement of financial position

(Expressed in RMB)

Notes Non-current assets Property, plant and equipment Total non-current assets Current assets Properties under development for sale 4 Other receivables Bank balances and cash 5 Total current assets Current liabilities Other payables 6 Total current liabilities Net current assets NET ASSETS Capital and reserves 7 Paid-in capital Reserves Equity attributable to owners of the Company Non-controlling interests TOTAL EQUITY	At 31 December 2014 2015 2016 RMB’000 RMB’000 RMB’000 133 85 48 133 85 48 356,615 376,234 395,989 55 55 143 184 215 1,160 356,854 376,504 397,292 252,788 288,142 326,923 252,788 288,142 326,923 104,066 88,362 70,369 104,199 88,447 70,417 – – –* 47,335 33,610 17,867 47,335 33,611 17,867 56,864 54,836 52,550 104,199 88,447 70,417	At 31 December 2014 2015 2016 RMB’000 RMB’000 RMB’000 133 85 48 133 85 48 356,615 376,234 395,989 55 55 143 184 215 1,160 356,854 376,504 397,292 252,788 288,142 326,923 252,788 288,142 326,923 104,066 88,362 70,369 104,199 88,447 70,417 – – –* 47,335 33,610 17,867 47,335 33,611 17,867 56,864 54,836 52,550 104,199 88,447 70,417	At 31 July 2017 RMB’000 23 23 396,410 163 143 396,716 322,503 322,503 74,213 74,236 –* 22,012 22,012 52,224 74,236
	2014 RMB’000 133 133 356,615 55 184 356,854 252,788 252,788 104,066 104,199 –* 47,335 47,335 56,864 104,199	2015 RMB’000 85 85 376,234 55 215 376,504 288,142 288,142 88,362 88,447 –* 33,610 33,611 54,836 88,447

The paid-in capital of Smooth Ever was equivalent to approximately RMB8 and was rounded to nil on thousand level (see note 7(b)).

APPENDIX III FINANCIAL INFORMATION OF SMOOTH EVER GROuP

Consolidated statement of changes in equity

(Expressed in RMB)

Balance at 1 January 2014 Exchange differences on translating foreign operations Loss for the year Balance at 31 December 2014 and 1 January 2015 Exchange differences on translating foreign operations Loss for the year Balance at 31 December 2015 and 1 January 2016 Exchange differences on translating foreign operations Loss for the year Balance at 31 December 2016 and 1 January 2017 Balance at 31 December 2016 and 1 January 2017 Exchange differences on translating foreign operations Loss for the period Balance at 31 July 2017 *(Unaudited)* Balance at 1 January 2016 Exchange differences on translating foreign operations Loss for the period Balance at 31 July 2016	Attributable to owners of the Company Paid-in capital Foreign currency translation reserve Accumulated losses Total RMB’000 RMB’000 RMB’000 RMB’000 – 63,213 (14,303) 48,910 – 772 – 772 – – (2,347) (2,347) – 63,985 (16,650) 47,335 – (11,627) – (11,627) – – (2,097) (2,097) – 52,358 (18,747) 33,611 – (13,512) – (13,512) – – (2,232) (2,232) – 38,846 (20,979) 17,867 – 38,846 (20,979) 17,867 – 7,820 – 7,820 – – (3,675) (3,675) – 46,666 (24,654) 22,012 – 52,358 (18,747) 33,611 – (4,694) – (4,694) – – (1,227) (1,227) – 47,664 (19,974) 27,690	Attributable to owners of the Company Paid-in capital Foreign currency translation reserve Accumulated losses Total RMB’000 RMB’000 RMB’000 RMB’000 – 63,213 (14,303) 48,910 – 772 – 772 – – (2,347) (2,347) – 63,985 (16,650) 47,335 – (11,627) – (11,627) – – (2,097) (2,097) – 52,358 (18,747) 33,611 – (13,512) – (13,512) – – (2,232) (2,232) – 38,846 (20,979) 17,867 – 38,846 (20,979) 17,867 – 7,820 – 7,820 – – (3,675) (3,675) – 46,666 (24,654) 22,012 – 52,358 (18,747) 33,611 – (4,694) – (4,694) – – (1,227) (1,227) – 47,664 (19,974) 27,690	Non- controlling interests RMB’000 57,630 (71) (695) 56,864 (1,330) (698) 54,836 (1,544) (742) 52,550 52,550 896 (1,222) 52,224 54,836 (537) (406) 53,893	Total equity RMB’000 106,540 701 (3,042) 104,199 (12,957) (2,795) 88,447 (15,056) (2,974) 70,417 70,417 8,716 (4,897) 74,236 88,447 (5,231) (1,633) 81,583
	Paid-in capital RMB’000 – – – – – – – – – – – – – – – – – –	Foreign currency translation reserve Accumulated losses RMB’000 RMB’000 63,213 (14,303) 772 – – (2,347) 63,985 (16,650) (11,627) – – (2,097) 52,358 (18,747) (13,512) – – (2,232) 38,846 (20,979) 38,846 (20,979) 7,820 – – (3,675) 46,666 (24,654) 52,358 (18,747) (4,694) – – (1,227) 47,664 (19,974)

APPENDIX III FINANCIAL INFORMATION OF SMOOTH EVER GROuP

Consolidated cash flow statement

(Expressed in RMB)

				Seven months	ended
	Year	ended 31 December		31 July
	2014	2015	2016	2016	2017
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
				(unaudited)
Operating activities
Loss before taxation	(3,042)	(2,795)	(2,974)	(1,633)	(4,897)
Depreciation of property,
plant and equipment	49	48	20	14	17
	(2,993)	(2,747)	(2,954)	(1,619)	(4,880)
Increase in properties under
development for sale	(3,106)	(19,619)	(19,755)	(346)	(421)
Increase in other receivables	(8)	–	(88)	–	(20)
Increase/(decrease) in other payables	(4)	2	960	554	(399)
Cash used in operating activities	(6,111)	(22,364)	(21,837)	(1,411)	(5,720)
Income tax paid	–	–	–	–	–
Net cash used in operating activities	(6,111)	(22,364)	(21,837)	(1,411)	(5,720)
Investing activities
Proceeds on disposal of property,
plant and equipment	–	–	17	–	8
Net cash generated from investing
activities	–	–	17	–	8
Financing activities
Advances from related parties	6,042	22,382	22,769	1,493	4,660
Net cash generated from financing
activities	6,042	22,382	22,769	1,493	4,660

APPENDIX III

FINANCIAL INFORMATION OF SMOOTH EVER GROuP

Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of the year/period Effects of exchange rate changes on the balance of cash held in foreign currencies Cash and cash equivalents at end of the year/period	Year ended 31 December 2014 2015 2016 RMB’000 RMB’000 RMB’000 (69) 18 949 245 184 215 8 13 (4) 184 215 1,160	Year ended 31 December 2014 2015 2016 RMB’000 RMB’000 RMB’000 (69) 18 949 245 184 215 8 13 (4) 184 215 1,160	Seven months ended 31 July 2016 2017 RMB’000 RMB’000 (unaudited) 82 (1,052) 215 1,160 (11) 35 286 143
	2014 RMB’000 (69) 245 8 184	2015 RMB’000 18 184 13 215	2016 RMB’000 (unaudited) 82 215 (11) 286

APPENDIX III FINANCIAL INFORMATION OF SMOOTH EVER GROuP

NOTES TO THE HISTORICAL FINANCIAL INFORMATION

1 BASIS OF PREPARATION AND PRESENTATION OF HISTORICAL FINANCIAL INFORMATION

Smooth Ever was incorporated in British Virgin Islands (“BVI”). It is an investment holding company and has not carried on any business since the date of its incorporation. Smooth Ever and its subsidiaries (together, “Smooth Ever Group”) are principally engaged in property development.

Up to the date of this report, no audited financial statements have been prepared for Smooth Ever, as it is not subject to statutory audit requirements under the relevant rules and regulations in the jurisdiction of incorporation.

Upon completion of the Proposed Acquisition and as at the date of this report, Smooth Ever has direct or indirect interests in the following subsidiaries, all of which are private companies:

Company name Place and date of incorporation/ establishment Particulars of issued and paid-up capital Cityland Holdings Limited Hong Kong 19 March 2004 Issued and fully paid share HK$1 Guangzhou Honkwok Hengsheng Land Development Ltd (“Honkwok Hengsheng”) PRC 28 October 2004 Registered and paid up capital RMB220,000,000	Proportion of ownership interest Principal activities Name of statutory auditor Held by Smooth Ever Held by the subsidiary 100% N/A Investment holding Ernst & Young N/A 75% Real estate development Guangzhou Zhengda Zhongxin Certified Public Accountants

The IASB has issued a number of new and revised IFRSs. For the purpose of preparing this Historical Financial Information, the Group has adopted all applicable new and revised IFRSs to the Relevant Period, except for any new standards or interpretations that are not yet effective for the accounting period beginning 1 January 2017. The revised and new accounting standards and interpretations issued but not yet effective for the accounting period beginning 1 January 2017 are set out in Note 14.

The accounting policies set out below have been applied consistently to all periods presented in the Historical Financial Information.

The Stub Period Corresponding Financial Information has been prepared in accordance with the same basis of preparation and presentation adopted in respect of the Historical Financial Information.

APPENDIX III FINANCIAL INFORMATION OF SMOOTH EVER GROuP

2 SIGNIFICANT ACCOUNTING POLICIES

(a) Going concern

As at 31 July 2017, Smooth Ever Group has not yet generated any revenue and is dependent on financial support for business continuance. The Historical Financial Information has been prepared on a going concern basis as Modern Land (China) Co., Limited (“Modern Land”) and Yango City Group Co., Ltd (“Yango Group”) have undertaken to provide the necessary financial support, including an undertaking to provide financial support to Smooth Ever Group when its debts fall due. Accordingly, Smooth Ever Group will be able to meet its financial obligations for the foreseeable future.

(b) Basis of measurement

The Historical Financial Information is presented in Renminbi (“RMB”), rounded to the nearest thousand. It is prepared on the historical cost basis.

(c) Use of estimates and judgements

Judgements made by management in the application of IFRSs that have significant effect on the financial statements and major sources of estimation uncertainty are discussed in Note 11.

(d) Properties under development for sale

Properties under development for sale which are intended to be sold in the ordinary course of business upon completion of development are classified as current assets, and carried at the lower of cost and net realisable value. Costs include the related land cost, development expenditure incurred and, where appropriate, borrowing costs capitalised.

Properties under development for sale are transferred to properties held for sale upon completion.

(e) Property, plant and equipment

Property, plant and equipment, other than construction in progress, are stated at cost less accumulated depreciation and any recognised impairment losses.

Properties in the course of construction for production, supply or administrative purpose are carried at cost, less any recognised impairment loss. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

Depreciation is recognised so as to write off the cost of items of property, plant and equipment, other than construction in progress, over their estimated useful lives after taking into account of their estimated residual values, using the straight-line method.

Where parts of an item of property, plant and equipment have different useful lives, the cost or valuation of the item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reviewed annually.

APPENDIX III FINANCIAL INFORMATION OF SMOOTH EVER GROuP

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal or retirement of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in profit or loss in the period in which the item is derecognised.

(f)

Financial instruments

Financial assets and financial liabilities are recognised in the statement of financial position when Smooth Ever Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transactions costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

(i)

Loans and receivables

(ii) Financial liabilities

Financial liabilities including loans, trade payables, other payables and amounts due to related parties are subsequently measured at amortised cost, using the effective interest method.

(iii) Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Interest expense is recognised on an effective interest basis.

(iv) Derecognition

Financial assets are derecognised when the contractual rights to receive cash flows from the assets expire, or when the financial assets are transferred and Smooth Ever Group has transferred substantially all the risks and rewards of ownership of the financial assets to another entity.

On recognition of a financial asset in its entirety, the difference between the assets’ carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.

Financial liabilities are derecognised when Smooth Ever Group’s obligation specified in the relevant contract is discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

APPENDIX III FINANCIAL INFORMATION OF SMOOTH EVER GROuP

(g) Impairment of assets

(i) Impairment of other receivables

Other current and non-current receivables that are stated at cost or amortised cost are reviewed at the end of each reporting period to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of Smooth Ever Group about one or more of the following loss events:

significant financial difficulty of the debtor;
a breach of contract, such as a default or delinquency in interest or principal payments;
it becoming probable that the debtor will enter bankruptcy or other financial reorganisation; and
Significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor;

If any such evidence exists, any impairment loss is determined and recognised as follows:

For other current receivables and other financial assets carried at amortised cost, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material. This assessment is made collectively where these financial assets share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group.

Impairment losses are written off against the corresponding assets directly, except for impairment losses recognised in respect of receivables included within other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When Smooth Ever Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against receivables directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss.

(ii) Impairment of other assets

Internal and external sources of information are reviewed at the end of each reporting period to identify indications that the property, plant and equipment may be impaired or an impairment loss previously recognised no longer exists or may have decreased.

If any such indication exists, the asset’s recoverable amount is estimated.

APPENDIX III FINANCIAL INFORMATION OF SMOOTH EVER GROuP

–

Calculation of recoverable amount

The recoverable amount of an asset is the greater of its fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

– Recognition of impairment losses

An impairment loss is recognised in profit or loss if the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs of disposal (if measurable) or value in use (if determinable).

– Reversals of impairment losses

An impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount.

A reversal of an impairment loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognised.

(h) Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit before taxation as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. Smooth Ever Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

(i) Provisions and contingent liabilities

Provisions are recognised for other liabilities of uncertain timing or amount when Smooth Ever Group has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

APPENDIX III FINANCIAL INFORMATION OF SMOOTH EVER GROuP

(j) Bank balances and cash

Bank balances and cash comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition.

(k) Related parties

(a) A person, or a close member of that person’s family, is related to Smooth Ever Group if that person:
(i) has control or joint control over Smooth Ever Group;
(ii) has significant influence over Smooth Ever Group; or
(iii) is a member of the key management personnel of Smooth Ever Group’s parent.
(b) An entity is related to Smooth Ever Group if any of the following conditions applies:
(i) The entity is a member of the same group (which means that each parent, subsidiary and entities controlled by the controlling shareholders is related to the others).
(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).
(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
(v) The entity is a post-employment benefit plan for the benefit of employees of either Smooth Ever Group or an entity related to Smooth Ever Group.
(vi) The entity is controlled or jointly controlled by a person identified in (a).
(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).
(viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the group or to the group’s parent.

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

(l) Subsidiaries and non-controlling interests

Subsidiaries are entities controlled by the group. The group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. When assessing whether the group has power, only substantive rights (held by the group and other parties) are considered.

An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group balances, transactions and cash flows and any unrealised profits arising from intra-group transactions are eliminated in full in preparing the consolidated financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment.

APPENDIX III FINANCIAL INFORMATION OF SMOOTH EVER GROuP

Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the company, and in respect of which the group has not agreed any additional terms with the holders of those interests which would result in the group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. For each business combination, the group can elect to measure any non-controlling interests either at fair value or at the non-controlling interests’ proportionate share of the subsidiary’s net identifiable assets.

Non-controlling interests are presented in the consolidated statement of financial position within equity, separately from equity attributable to the equity shareholders of the company. Non-controlling interests in the results of the group are presented on the face of the consolidated statement of profit or loss and the consolidated statement of profit or loss and other comprehensive income as an allocation of the total profit or loss and total comprehensive income for the year between non-controlling interests and the equity shareholders of the company. Loans from holders of non-controlling interests and other contractual obligations towards these holders are presented as financial liabilities in the consolidated statement of financial position depending on the nature of the liability.

Changes in the group’s interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within consolidated equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain or loss is recognised.

When the group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former subsidiary at the date when control is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset or, when appropriate, the cost on initial recognition of an investment in an associate or joint venture. In the company’s statement of financial position, an investment in a subsidiary is accounted for using the equity method.

APPENDIX III FINANCIAL INFORMATION OF SMOOTH EVER GROuP

3 DIRECTORS’ EMOLUMENTS

Directors’ emoluments during the Relevant Period are disclosed as follows:

2016 Executive Director: Fun Man-Hei, Herman Chan Yuen Keung 2015 Executive Director: Fun Man-Hei, Herman Chan Yuen Keung 2014 Executive Director: Fun Man-Hei, Herman Chan Yuen Keung Period ended 31 July 2016 *(unaudited)* Executive Director: Fun Man-Hei, Herman Chan Yuen Keung Period ended 31 July 2017 Executive Director: Fun Man-Hei, Herman Chan Yuen Keung	Directors’ fees RMB’000 – – – – – – – – – –	Salaries, allowances and benefits in kind RMB’000 – – – – – – – – – –	Discretionary bonuses RMB’000 – – – – – – – – – –	Retirement scheme contributions RMB’000 – – – – – – – – – –	Total RMB’000 – –

					– –

					– –

					– –

					– –

4 PROPERTIES UNDER DEVELOPMENT FOR SALE

Properties under development for sale	At 31 December 2014 2015 2016 RMB’000 RMB’000 RMB’000 356,615 376,234 395,989	At 31 July
		2017 RMB’000 396,410

APPENDIX III FINANCIAL INFORMATION OF SMOOTH EVER GROuP

(a) The land use right included in properties under development for sale are located in the People’s Republic of China (“PRC”) with periods of right ranging from 40 to 70 years.
(b) The whole balance of properties under development for sale are expected to be recovered after more than one year.
(c) Due to the dispute raised by a previously interested party of the land held by the Honkwok Hengsheng against Guangzhou Hengsheng Group Co. Ltd., a minority shareholder of Honkowk Hengsheng, an arbitration has commenced and in progress, and the Guangzhou Intermediate People’s Court made a Civil Rulings and the subsequent repeated decisions, as a result of which a section of 24,067.3 square metres, out of the total of area of 56,070 square metres, under the land use right certificate of the land held by Honkwok Hengsheng has been subject to a freeze order till 18 May 2018. The Company expects that the freeze order could be released and the interest of Honkwok Hengsheng in the land will not be affected (see details in Note 8).

5 BANK BALANCES AND CASH

Cash on hand Cash at bank		At 31 December	2016 RMB’000 9 1,151 1,160	At 31 July
	2014 RMB’000 3 181 184	2015 RMB’000 3 212 215		2017 RMB’000 – 143
				143

6 OTHER PAYABLES

	At 31 December	At 31 July
2014 RMB’000 252,766 22 252,788	2015 RMB’000 288,117 25 288,142 At 31 December	2017 RMB’000 321,888 625
		322,503

		At 31 July
2014 RMB’000 209,121 43,645 252,766	2015 RMB’000 222,090 66,027 288,117	2017 RMB’000 228,432 93,456
		321,888

As at 31 December 2014, 2015 and 2016, and 31 July 2017, amounts due to related parties represent the advances received from related parties which are unsecured, interest-free and with no fixed terms of repayment.

APPENDIX III FINANCIAL INFORMATION OF SMOOTH EVER GROuP

7 CAPITAL

(a) Movements in components of equity

The reconciliation between the opening and closing balances of each component of Smooth Ever Group’s consolidated equity is set out in the consolidated statement of changes in equity. Details of the changes in Smooth Ever’s individual components of equity between the beginning and the end of the Relevant Period are set out below:

Balance at 1 January 2014 Total comprehensive income for the year Balance at 31 December 2014 and 1 January 2015 Total comprehensive income for the year Balance at 31 December 2015 and 1 January 2016 Total comprehensive income for the year Balance at 31 December 2016 and 1 January 2017 Total comprehensive income for the period Balance at 31 July 2017 *(Unaudited)* Balance at 1 January 2016 Total comprehensive income for the period Balance at 31 July 2016	Paid-in capital RMB’000 – – – – – – – – – – – –	Accumulated losses RMB’000 48,910 (1,575) 47,335 (13,724) 33,611 (15,744) 17,867 4,145 22,012 33,611 (5,921) 27,690	Total RMB’000 48,910 (1,575) 47,335 (13,724) 33,611 (15,744) 17,867 4,145 22,012 33,611 (5,921) 27,690

(b) Paid-in capital

As at 31 December 2014, 2015, and 2016 and 31 July 2017, the registered capital of Smooth Ever was US$1.

As at 31 December 2014, 2015, and 2016 and 31 July 2017, the paid-in capital of the Smooth Ever was US$1(equivalent to approximately RMB8).

(c) Capital management

The shareholders of the Smooth Ever Group actively and regularly review and manage its capital return and safety. As part of this review, the shareholders of Smooth Ever Group consider whether Smooth Ever Group will be able to repay its debts when they fall due and provide financial support to Smooth Ever Group when needed.

8 CONTINGENT LIABILITIES

The non-controlling interests of Smooth Ever Group and Smooth Ever Group were jointly sued by a third party creditor of the non-controlling interests (the “Creditor”) in respect of a payable balance of RMB224,490,000. The Creditor has applied for arbitration. In the meantime, a part of the land parcel held by Smooth Ever Group has been seized by 廣州市中級人民法院 (Guangzhou Intermediate People’s Court) on application by the Creditor (see note 4(c)).

APPENDIX III FINANCIAL INFORMATION OF SMOOTH EVER GROuP

Based on legal advice obtained, the Company expects that the freeze order could be released and the interest of Honkwok Hengsheng in the Land will not be affected.

9 FINANCIAL RISK MANAGEMENT AND FAIR VALUES

Exposure to liquidity risk mainly arises from payables when they full due. Smooth Ever Group is not exposed to significant interest rate risk or currency risk as it has no interest-bearing financial instruments with variable interest rates and the receivables and payables are not denominated in foreign currency. Smooth Ever Group’s exposure to the liquidity risk and the financial risk management policies and practices used by Smooth Ever Group to manage such risk are described below.

(a) Liquidity risk

Smooth Ever Group is responsible for its own cash management, including raising of loans from related parties to cover expected cash demands.

Smooth Ever Group’s policy is to regularly monitor its liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short term.

The following table details the remaining contractual maturities at the end of the each reporting period of Smooth Ever Group’s financial liabilities which are based on contractual undiscounted cash flows and the earliest date Smooth Ever Group can be required to pay:

Other payables		At 31 December	2016 Contractual undiscounted cash outflow Within 1 year or on demand Carrying amount RMB’000 RMB’000 326,923 326,923	At 31 July
	2014 Contractual undiscounted cash outflow Within 1 year or on demand Carrying amount RMB’000 RMB’000 252,788 252,788	2015 Contractual undiscounted cash outflow Within 1 year or on demand Carrying amount RMB’000 RMB’000 288,142 288,142		2017
				Contractual undiscounted cash outflow Within 1 year or on demand Carrying amount RMB’000 RMB’000 322,503 322,503

(b) Fair values

The directors of Smooth Ever Group consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the consolidated statement of financial position approximate their respective fair values at the end of each reporting period.

APPENDIX III FINANCIAL INFORMATION OF SMOOTH EVER GROuP

10 MATERIAL RELATED PARTY TRANSACTIONS

(a) Material related party transactions during the Relevant Period are as follows:

Loans from – An entity controlled by the shareholder	Year ended 31 December 2014 2015 2016 RMB’000 RMB’000 RMB’000 6,042 22,382 22,769	Period ended 31 July
		2016 2017 RMB’000 RMB’000 (unaudited) 1,493 4,660

(b) Balances with related parties as at the end of each reporting period are as follows:

– A shareholder – An entity controlled by the shareholder	At 31 December 2014 2015 2016 RMB’000 RMB’000 RMB’000 209,121 222,090 237,149 43,645 66,027 88,796	At 31 July
		2017 RMB’000 228,432 93,456

11 CRITICAL ACCOUNTING JUDGEMENTS IN APPLYING THE SMOOTH EVER GROUP’S ACCOUNTING POLICIES

Provision for properties under development for sale

As explained in Note 2(d), Smooth Ever Group’s properties under development for sale are stated at the lower of cost and net realisable value. Based on the latest market information, Smooth Ever Group makes estimates of the market price of land based on prevailing market conditions.

If there is an increase in costs to completion or a decrease in net sales value, the net realisable value will decrease and this may result in provision for properties under development for sale. Such provision requires the use of judgement and estimates. Where the expectation is different from the original estimate, the carrying value and provision for properties under development for sale in the periods in which such estimate is changed will be adjusted accordingly.

In addition, given the volatility of the PRC property market and the unique nature of individual properties, the actual outcomes in terms of costs and revenue may be higher or lower than that estimated at the end of the reporting period. Any increase or decrease in the provision would affect profit or loss in future years.

APPENDIX III FINANCIAL INFORMATION OF SMOOTH EVER GROuP

12 COMPANY LEVEL STATEMENT OF FINANCIAL POSITION

Notes Non-current assets Investment in subsidiaries Total non-current assets Current assets Other receivables Total current assets Current liabilities Other payables Total current liabilities Net current liabilities NET ASSETS Capital and reserves Paid-in capital Reserves Total Equity		At 31 December	2016 RMB’000 – 17,900 17,900 237,115 237,115 237,148 237,148 (33) 17,867 –* 17,867 17,867	At 31 July 2017 RMB’000 – 22,065 22,065 228,379 228,379 228,432 228,432 (53) 22,012 –* 22,012 22,012
	2014 RMB’000 – 47,369 47,369 – – 34 34 (34) 47,335 –* 47,335 47,335	2015 RMB’000 – 33,651 33,651 – – 40 40 (40) 33,611 –* 33,611 33,611

The paid-in capital of Smooth Ever was equivalent to approximately RMB8 and was rounded to nil on thousand level (see note 7(b)).

13 IMMEDIATE AND ULTIMATE HOLDING COMPANIES

At 31 December 2014, 2015 and 2016 and 31 July 2017, the directors consider the immediate holding company to be Cheerworld Group Limited and the ultimate holding company to be Lucky Year Finance Limited, which are both incorporated in British Virgin Islands (“BVI”). These entities do not produce financial statements available for public use. An intermediate shareholder, Hon Kwok Land Investment Company, Limited, is a Hong Kong mainboard listed company, of which the financial statements are available for public use.

14 POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE PERIOD BEGINNING FROM 1 JANUARY 2017

Up to the date of issue of this report, the IASB has issued a number of amendments and new standards which are not yet effective for period beginning from 1 January 2017 and which have not been adopted in the Historical Financial Information. These include the following which may be relevant to Smooth Ever Group.

APPENDIX III FINANCIAL INFORMATION OF SMOOTH EVER GROuP

		*Effective for accounting*
		*periods beginning*
		*on or after*
IFRS	9,Financial instruments	1 January 2018
IFRS	15,Revenue from contracts with customers	1 January 2018
IFRS	16,Leases	1 January 2019

Smooth Ever Group is in the process of making an assessment of what the impact of these amendments is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the Historical Financial Information.

15 SUBSEQUENT EVENTS

In January 2017, Yango Group, a PRC real estate developer listed on the Shenzhen Stock Exchange, entered into an agreement to acquire 100% equity interest of Smooth Ever Group. The acquisition was completed on 31 August 2017 and Smooth Ever Group became a wholly-owned subsidiary of Yango Group thereupon.

SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by Smooth Ever and its subsidiaries in respect of any period subsequent to 31 July 2017.

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

APPENDIX IV

(A) REPORT FROM THE REPORTING ACCOUNTANTS

The following is the text of a report received from the reporting accountants, KPMG, Certified Public Accountants, Hong Kong, in respect of the Group’s pro forma financial information for the purpose in this circular.

==> picture [79 x 33] intentionally omitted <==

INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION

TO THE DIRECTORS OF MODERN LAND (CHINA) CO., LIMITED

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of Modern Land (China) Co., Limited (the “Company”) and its subsidiaries (collectively the “Group”) by the directors of the Company (the “Directors”) for illustrative purposes only. The pro forma financial information consists of the unaudited pro forma consolidated statement of assets and liabilities as at 30 June 2017 and related notes as set out in Part B of Appendix IV to the circular dated 8 December 2017 (the “Circular”) issued by the Company. The applicable criteria on the basis of which the Directors have compiled the pro forma financial information are described in Part B of Appendix IV to the Circular.

The pro forma financial information has been compiled by the Directors to illustrate the impact of the acquisition of 51% equity interests in Yango Yuegang Limited (the “Acquisition”) on the Group’s financial position as at 30 June 2017 as if the Acquisition had taken place at 30 June 2017. As part of this process, information about the Group’s financial position as at 30 June 2017 has been extracted by the Directors from the interim financial report of the Company for the period then ended, on which a review report has been published.

Directors’ Responsibilities for the Pro Forma Financial Information

The Directors are responsible for compiling the pro forma financial information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” (“AG 7”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

APPENDIX IV

The firm applies Hong Kong Standard on Quality Control 1 “Quality Control for Firms That Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements” issued by the HKICPA and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountants’ Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements (“HKSAE”) 3420 “Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus” issued by the HKICPA. This standard requires that the reporting accountants plan and perform procedures to obtain reasonable assurance about whether the Directors have compiled the pro forma financial information in accordance with paragraph 4.29 of the Listing Rules, and with reference to AG 7 issued by the HKICPA.

For purpose of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the pro forma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the pro forma financial information.

The purpose of pro forma financial information included in an investment circular is solely to illustrate the impact of a significant event or transaction on the unadjusted financial information of the Group as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the events or transactions at 30 June 2017 would have been as presented.

A reasonable assurance engagement to report on whether the pro forma financial information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the Directors in the compilation of the pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

the related pro forma adjustments give appropriate effect to those criteria; and
the pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

APPENDIX IV

The procedures selected depend on the reporting accountants’ judgement, having regard to the reporting accountants’ understanding of the nature of the Group, the event or transaction in respect of which the pro forma financial information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the pro forma financial information.

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

Opinion

In our opinion:

a) the pro forma financial information has been properly compiled on the basis stated;
b) such basis is consistent with the accounting policies of the Group, and
c) the adjustments are appropriate for the purposes of the pro forma financial information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

KPMG

Certified Public Accountants Hong Kong

8 December 2017

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

APPENDIX IV

(B) UNAUDITED PRO FORMA FINANCIAL INFORMATION

(1) Introduction to the unaudited pro forma financial information

The following is the unaudited pro forma financial information of the Resulting Group as if the Acquisition had been completed on 30 June 2017. Details of the Acquisition are set out in the section headed “Letter from the Board” contained in this Circular.

The unaudited pro forma financial information of the Resulting Group has been prepared in accordance with Paragraph 4.29 of the Listing Rules, for the purpose of illustrating the effect of the Acquisition pursuant to the terms of the share transfer agreement signed by the Company, through its wholly-owned subsidiary, Modern Land (HKNo. 6) Co., Limited. (the “Agreement”). Because of its hypothetical nature, the unaudited pro forma financial information may not give a true picture of the financial position of the Resulting Group had the Acquisition been completed as of the specified date or any future date.

The unaudited pro forma financial information of the Resulting Group is based upon the unaudited consolidated statement of financial position of the Group as at 30 June 2017, which has been extracted from the Group’s published interim report for the period then ended, and adjusted on a pro forma basis to reflect the effect of the Acquisition. These pro forma adjustments are (i) directly attributable to the Acquisition and not relating to other future events and decision and (ii) factually supportable based on the terms of the Agreement.

The unaudited pro forma financial information of the Resulting Group should be read in conjunction with the historical financial information of the Group set out in the interim report of the Group for the period ended 30 June 2017 and other financial information included elsewhere in this Circular.

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

APPENDIX IV

(2) Unaudited pro forma consolidated statement of assets and liabilities

Non-current assets Investment properties Property, plant and equipment Intangible assets Freehold land held for future development Interests in associates Interests in joint ventures Loans to joint ventures Available-for-sale investments Deferred tax assets Total non-current assets Current assets Inventories Properties under development for sale Properties held for sale Trade and other receivables, deposits and prepayments Amounts due from related parties Restricted cash Bank balances and cash Total current assets	The Group as at 30 June 2017 RMB’000 1,931,230 493,719 2,197 32,246 101,348 1,179,382 2,801,658 50,085 352,421 6,944,286 4,674 15,306,015 2,303,442 2,824,698 1,272,742 1,696,944 6,996,538 30,405,053	Pro Forma Adjustments RMB’000 (note 3a) – – – – – 1,451,106 167,323 – – 1,618,429 – – – – – – (1,618,429) (1,618,429)	The Resulting Group RMB’000 1,931,230 493,719 2,197 32,246 101,348 2,630,488 2,968,981 50,085 352,421
			8,562,715
			4,674 15,306,015 2,303,442 3,136,061 1,272,742 1,696,944 5,378,109
			28,786,624

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

APPENDIX IV

Current liabilities Trade and other payables, deposits received and accrued charges Amounts due to related parties Taxation payable Bank and other borrowings – due within one year Senior notes – due within one year Total current liabilities Net current assets Total assets less current liabilities Non-current liabilities Bank and other borrowings – due after one year Corporate bond Long term payable Senior notes – due after one year Deferred tax liabilities Total non-current liabilities Net assets	The Group as at 30 June 2017 RMB’000 12,574,108 2,599,823 1,989,559 3,855,763 686,879 21,706,132 8,698,921 15,643,207 4,040,984 982,754 381,843 3,368,200 187,598 8,961,379 6,681,828	Pro Forma Adjustments RMB’000 (note 3a) – – – – – – – – – – – – – – –	The Resulting Group RMB’000 12,574,108 2,599,823 1,989,559 3,855,763 686,879
			21,706,132
			8,698,921
			15,643,207
			4,040,984 982,754 381,843 3,368,200 187,598
			8,961,379
			6,681,828

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RESULTING GROUP

APPENDIX IV

(3) Notes to the unaudited pro forma financial information of the Resulting Group

a. These adjustments represent the aggregate consideration of the Acquisition for the Target Group. Pursuant to the Agreement, the Group shall acquire 51% equity interest of the Target Company at a cash consideration of HK$1,828,623,141 (equivalent to approximately RMB1,618,429,000), which comprised of equity consideration of RMB1,451,106,000 and shareholder loan of RMB167,323,000. The share acquisition portion of the Acquisition of approximately RMB1,451,106,000 is recorded under “Interests in joint ventures” and the shareholder loan portion of the Acquisition of approximately RMB167,323,000 is recorded under “Loans to joint ventures”. The consideration of the Acquisition is converted into Renbinmi at an exchange rate of 0.8850. No representation is made that the Hong Kong dollar amounts have been, could have been or could be converted into Renminbi, or vice versa, at that rate or at any other rates, or at all.
b. According to the accounting policies adopted by the Group, the Acquisition will be accounted for using equity accounting as prescribed in International Accounting Standard 28 “Investments in Associates and Joint Ventures” (“IAS 28”). The Directors are in the opinion that there is no material difference between the fair value of consideration paid to acquire 51% equity interest in the Target Group and the Group’s share of the fair value of the Target Group’s net identifiable assets.
c. No adjustment has been made to the unaudited pro forma financial information for acquisition-related costs (including fees to legal advisers, reporting accountants, printers, taxes and levies and other expenses) as the Directors determined that such costs are insignificant.
d. Apart from the adjustments as stated above, no adjustment has been made to reflect any trading results or other transactions of the Resulting Group entered into subsequent to 30 June 2017.

MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET GROUP

APPENDIX V

MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET COMPANY

This section summarises the business and financial results, the financial position and other financial information of the Target Company for the period from 24 March 2017 (date of incorporation) to 31 July 2017.

Business and financial results of the Target Company

The Target Company is a company with limited liability incorporated in Hong Kong on 24 March 2017. As at the Latest Practicable Date, the Target Company is an investment holding company.

The Target Company has not carried on any business since the date of its incorporation.

Financial position and other financial information of the Target Company

The Target Company generally finances its operations with paid-in capital.

During the period from 24 March 2017 (date of incorporation) to 31 July 2017, the Target Company did not have any borrowings from third party.

Contingent liabilities

As at 31 July 2017, the Target Company did not have any significant contingent liabilities.

Charge on assets

As at 31 July 2017, the Target Company had no charge on assets.

Foreign currencies

The Target Company currently does not employ a foreign currency hedging policy but the management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

Employees’ remuneration and policy

During the period from 24 March 2017 (date of incorporation) to 31 July 2017, no remuneration were paid to the employees of the Target Company.

Significant investments held

During the period from 24 March 2017 (date of incorporation) to 31 July 2017, the Target Company did not hold any significant investments.

MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET GROUP

APPENDIX V

Material acquisitions and disposals of subsidiaries and associated companies

During the period from 24 March 2017 (date of incorporation) to 31 July 2017, the Target Company did not have any material acquisitions or disposals.

Prospects of the Target Company

The Target Company is an investment holding company incorporated in Hong Kong. Since 6 September 2017, upon the completion of the acquisition of the Smooth Ever Group by the Target Company, the Target Company, through Smooth Ever Group, held 75% equity interest of Honkwok Hengsheng, which is the registered and beneficial owner of the Land. Upon Completion, the Target Company is held by Modern Land No. 6 and Yango Group as to 51% and 49%, respectively. On 27 November 2017, the Target Company and Guangzhou Modern Tengxin Investment Company Limited (“ Modern Tengxin ”) entered into a sale and purchase agreement (the “ Sale and Purchase Agreement ”), whereby the Target Company agreed to sell one share of Smooth Ever (representing 100% of the issued share capital of Smooth Ever) to Modern Tengxin at the consideration of US$1.00. As at the Latest Practicable Date, Modern Tengxin was held by Shenlv Real Estate (Beijing) Company Limited (a wholly-owned subsidiary of the Company) and Guangzhou Libi Huize Real Estate Development Company Limited* (a wholly-owned subsidiary of Yango Group) as to 51% and 49%, respectively. Upon completion of the transaction under the Sale and Purchase Agreement, the Target Company has no interest in the Land.

MANAGEMENT DISCUSSION AND ANALYSIS ON SMOOTH EVER GROUP

This section summarises the business and financial results, the financial position and other financial information of Smooth Ever Group for the years ended 31 December 2014, 2015 and 2016 and the seven months ended 31 July 2017.

Business and financial results of Smooth Ever Group

Smooth Ever was incorporated in the BVI with limited liability and is an investment holding company. It holds 100% of the issued share capital of Cityland (an investment holding company incorporated in Hong Kong) which in turn holds 75% equity interest in Honkwok Hengsheng (a company established in the PRC). Honkwok Hengsheng is the registered and beneficial owner of the Land and is principally engaged in the property development on the Land. The remaining 25% equity interest in Honkwok Hengsheng is held by Hengsheng Group Co, which was under the bankruptcy review as at the Latest Practicable Date. As advised by the PRC legal adviser of the Company, the bankruptcy review of Hengsheng Group Co is still ongoing. The Company instructed the PRC legal adviser to assess the impact of the outcome of the bankruptcy review of Hengsheng Group Co on the Smooth Ever Group’s beneficial interest and the economic rights of the Land. In the event that Hengsheng Group Co is adjudicated bankrupt, the 25% equity interest of Honkwok Hengsheng currently held by Hengsheng Group Co will be transferred to a third party or Cityland who has pre-emptive right over the remaining equity interest of Honkwok Hengsheng. As Honkwok Hengsheng will remain as the owner of the Land, Smooth Ever Group’s beneficial interest and the economic rights of the Land will not be affected. In the event that Cityland exercises the right of first refusal, the consideration for purchase of the 25% equity interest of Honkwok Hengsheng to be paid by the Group may be effected.

* For identification purpose only

MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET GROUP

APPENDIX V

As at the Latest Practicable Date, Honkwok Hengsheng is a project company established for the development of the Land.

Revenue and gross profit

Revenue and gross profit of Smooth Ever Group for the years ended 31 December 2014, 2015 and 2016 and the seven months ended 31 July 2017 are as follows:

				Seven months
	Year	ended 31 December		ended
	2014	2015	2016	31 July 2017
	RMB’000	RMB’000	RMB’000	RMB’000
Revenue	–	–	–	–
Gross profit	–	–	–	–

During the years ended 31 December 2014, 2015 and 2016 and the seven months ended 31 July 2017, Smooth Ever Group generated no revenue.

Cost of sales

				Seven months
	Year	ended 31 December		ended
	2014	2015	2016	31 July 2017
	RMB’000	RMB’000	RMB’000	RMB’000
Cost of sales	–	–	–	–

During the years ended 31 December 2014, 2015 and 2016 and the seven months ended 31 July 2017, Smooth Ever Group had no cost of sales.

Administrative expenses

				Seven months
	Year	ended 31 December		ended
	2014	2015	2016	31 July 2017
	RMB’000	RMB’000	RMB’000	RMB’000
Administrative Expenses	(3,038)	(2,792)	(2,973)	(4,894)

Administrative expenses primarily consist of office expenses and project management expenditures, which is insignificant during the respective years and period.

MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET GROUP

APPENDIX V

Loss for the year/period

				Seven months
	Year	ended 31 December		ended
	2014	2015	2016	31 July 2017
	RMB’000	RMB’000	RMB’000	RMB’000
Loss from operations and loss
before taxation	(3,042)	(2,795)	(2,974)	(4,897)
Income tax expenses	–	–	–	–
Loss for the year/period	(3,042)	(2,795)	(2,974)	(4,897)

Smooth Ever Group recorded a loss for each of the years ended 31 December 2014, 2015 and 2016 and the seven months ended 31 July 2017 with no income tax expenses.

Financial position and other financial information of Smooth Ever Group

Financial resources and gearing ratio

Smooth Ever Group generally finances its operations with paid-in capital and the borrowings from a shareholder and an entity controlled by a shareholder.

As at 31 December 2014, 2015 and 2016 and 31 July 2017, Smooth Ever Group’s borrowings from a shareholder and an entity controlled by a shareholder were as follows:

(i) Borrowings from a shareholder and an entity controlled by a shareholder

			As at 31 December	As at 31 December
	2014		2015		2016		As at 31 July 2017
	Contractual		Contractual		Contractual		Contractual
	undiscounted		undiscounted		undiscounted		undiscounted
	cash outflow		cash outflow		cash outflow		cash outflow
	within 1 year	Carrying	within 1 year	Carrying	within 1 year	Carrying	within 1 year	Carrying
	or on demand	amount	or on demand	amount	or on demand	amount	or on demand	amount
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Loan from a
shareholder	209,121	209,121	222,090	222,090	237,149	237,149	228,432	228,432
Loan from an entity
controlled by a
shareholder	43,645	43,645	66,027	66,027	88,796	88,796	93,456	93,456
Total	252,766	252,766	288,117	288,117	325,945	325,945	321,888	321,888

MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET GROUP

APPENDIX V

Amounts due to a shareholder and an entity controlled by a shareholder are unsecured, denominated in RMB and interest-free with no fixed terms of repayment. The balances included RMB252,766,000, RMB288,117,000, RMB325,945,000 and RMB321,888,000 as at 31 December 2014, 2015 and 2016 and 31 July 2017, respectively.

(ii) Bank borrowings

As at 31 December 2014, 2015 and 2016 and 31 July 2017, Smooth Ever Group did not have any bank borrowings.

Contingent liability

The 25% equity interest of Smooth Ever Group, which is held by Hengsheng Group Co, was sued by a previously interested party of the Land in respect of a payable balance of RMB224,490,000. Such previously interested party applied for arbitration. 24,067.3 square metres of the land use rights of the Land has been under judicial seizure as at the Latest Practicable Date. On 23 March 2011, such previously interested interested party initiated an action in Guangzhou Arbitration Commission for an application for Protection of Property Interests. Guangzhou Intermediate People’s Court subsequently made a Civil Rulings ((2011) Sui Zhong Fa Zhi Di 764 Hao) and the subsequent repeated decisions, as a result of which a section of 24,067.3 square metres under the land use right certificate (No. Sui Guo Yong (2005) Di 10017 Hao) of the Land has been subject to a freeze order till 18 May 2018.

Save as disclosed above, Smooth Ever Group did not have any other contingent liabilities as at 31 December 2014, 2015 and 2016 and 31 July 2017.

Charge on assets

Smooth Ever Group did not have any charge on assets as at 31 December 2014, 2015 and 2016 and 31 July 2017.

Foreign currencies

For the years ended 31 December 2014, 2015 and 2016 and the seven months ended 31 July 2017, there were no formal treasury policies for Smooth Ever Group. The transactions and monetary assets of Smooth Ever Group are principally denominated in RMB. Smooth Ever Group has not experienced any material difficulties or effects on its operations or liquidity as a result of fluctuations in currency exchange rates for the years ended 31 December 2014, 2015 and 2016 and the seven months ended 31 July 2017. Smooth Ever Group did not employ any material financial instrument for hedging purposes.

Employees’ remuneration and policy

As at 31 July 2017, Smooth Ever Group had no employee. During the years ended 31 December 2014, 2015 and 2016 and the seven months ended 31 July 2017, no remuneration were paid to the employees of Smooth Ever Group.

MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET GROUP

APPENDIX V

Segmental Analysis

The operating subsidiary of Smooth Ever Group, namely Honkwok Hengsheng, is mainly engaged in property development in the PRC. It is the project company established for the development of the Land. As the development of the Land is still at its planning and zoning stage, revenue was not classified by business segments for the time being.

Significant investments held

During the years ended 31 December 2014, 2015 and 2016 and the seven months ended 31 July 2017, Smooth Ever Group did not hold any significant investments except for its interest in the Land.

Material acquisitions and disposals of subsidiaries and associated companies

During the years ended 31 December 2014, 2015 and 2016 and the seven months ended 31 July 2017, Smooth Ever Group did not have any material acquisitions or disposals.

Prospects of Smooth Ever Group

Smooth Ever Group is involved in property development in the PRC. It is expected that it will continue with the development of the Land. In view of the prime location, the designated uses and development potential of the Land, the Board considers that the Acquisition offers a good opportunity for the Group to enhance its portfolio in the property market in Guangdong Province with a view to bringing more investment return for the Shareholders. Save for the development of the Land, Smooth Ever Group has no other investment plan. The Company and Yango Group will formulate plans, through Smooth Ever Group, to acquire the remaining 25% equity interest of Honkwok Hengsheng to 100% control Honkwok Hengsheng and the project development of the Land.

PROPERTY VALUATION REPORT

APPENDIX VI

The following is the text of the letter and valuation certificate prepared by Cushman & Wakefield Limited in connection with the valuation of the property held by 廣州市漢國恆生房地產開發有限公司 (Guangzhou Honkwok Hengsheng Land Development Ltd.*) as at 30 September 2017 for the purpose of incorporation in this circular.

==> picture [125 x 51] intentionally omitted <==

16/F Jardine House 1 Connaught Place Central Hong Kong

8 December 2017

The Directors Modern Land (China) Co., Limited 4th Floor Building No. 10 No. 1 Xiangheyuan Road Dongcheng District Beijing the PRC

Dear Sirs,

Re: The development site for a proposed residential development known as Yango Group • MOMA ( 陽光城 • 當代 ), Dongguanzhuang, Tianhe District, Guangzhou, Guangdong Province, the PRC

Instructions, Purpose & Valuation Date

In accordance with your instructions for us to value a property situated in the People’s Republic of China (the “PRC”) intended to be acquired by Modern Land (China) Co., Limited (the “Company”) and its subsidiaries (hereinafter referred to as the “Group”), we confirm that we have carried out inspection, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing the Company with our opinion of the market value of the property as at 30 September 2017 (the “valuation date”).

Definition of Market Value

Our valuation of the property represents its market value which in accordance with The HKIS Valuation Standards 2012 Edition published by the Hong Kong Institute of Surveyors is defined as “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion”.

PROPERTY VALUATION REPORT

APPENDIX VI

Valuation Basis and Assumptions

Our valuation of the property excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangement, special considerations or concessions granted by anyone associated with the sale, or any element of special value.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on the property nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property is free from encumbrances, restrictions and outgoing of an onerous nature which could affect its value.

In the course of our valuation of the property in the PRC, we have assumed that transferable land use rights in respect of the property for a specific term at nominal annual land use fees have been granted and that any premium has already been fully settled. We have relied on the advice given by the Group regarding the title to the property. For the purpose of our valuation, we have assumed that the grantee has an enforceable title to the property.

In valuing the property in the PRC, we have assumed that the grantees or the users of the property have free and uninterrupted rights to use or to assign the property for the whole of the unexpired term as granted.

In valuing the property, we have complied with the requirements set out in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and The HKIS Valuation Standards 2012 Edition published by The Hong Kong Institute of Surveyors.

Method of Valuation

In arriving at our valuation, we have adopted Direct Comparison Method by making reference to comparable sales evidence as available in the relevant market.

Sources of Information

We have relied to a very considerable extent on the information given by the Group and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, identification of land, development proposal, and all other relevant matters. Dimensions, measurements and areas included in the valuation certificate are based on the information provided to us and are therefore only approximations. We have had no reason to doubt the truth and accuracy of the information provided to us by the Group which is material to the valuation. We were also advised that no material facts have been omitted from the information supplied.

We would point out that the copies of documents provided to us are mainly compiled in Chinese characters and the transliteration into English represents our understanding of the contents. We would therefore advise the Company to make reference to the original Chinese edition of the documents and consult your legal adviser regarding the legality and interpretation of these documents.

PROPERTY VALUATION REPORT

APPENDIX VI

Title Investigation

We have been provided with copies of documents in relation to the title to the property. However, we have not been able to conduct searches to verify the ownership of the property or to ascertain any amendment which may not appear on the copies handed to us.

All documents have been used for reference only and all dimensions, measurements and areas are approximate.

In the course of our valuation, we have relied to a considerable extent on the information given by the Group and its legal adviser, Zhonglun W&D Law Firm, in respect of the title to the property in the PRC.

Site Inspection

Our Guangzhou Office valuer, Victor Li (with 3 years’ valuation experience), has inspected the property on 16 October 2017. We have not carried out investigation on site to determine the suitability of the soil conditions and the services etc. for any future development. Our valuation is prepared on the assumption that these aspects are satisfactory and that no extraordinary expenses or delays will be incurred during the construction period. Unless otherwise stated, we have not been able to carry out on-site measurements to verify the site and floor areas of the property and we have assumed that the areas shown on the copies of the documents handed to us are correct.

Currency

Unless otherwise stated, all monetary amounts stated in this valuation report are in Renminbi (“RMB”), the official currency of the PRC.

We attach herewith a valuation certificate.

Yours faithfully, for and on behalf of

Cushman & Wakefield Limited

Andrew K.F. Chan

MSc, MRICS, MHKIS, MCIREA, RPS(GP)

Regional Director

Valuation & Advisory Services, Greater China

Note: Mr. Andrew K. F. Chan is a Registered Professional Surveyor who has over 30 years’ experience in the valuation of properties in the PRC.

PROPERTY VALUATION REPORT

APPENDIX VI

VALUATION CERTIFICATE

Property to be acquired by the Group for future development in the PRC

Property

Description and tenure

Particulars of occupancy

Market value in existing state as at 30 September 2017

The development site for a proposed residential development known as Yango Group•MOMA (陽光城•當代), Dongguanzhuang, Tianhe District, Guangzhou, Guangdong Province, the PRC

The property comprises two parcels of land with a total site area of 95,382 sq m.

The property is planned to be developed into a large-scale development. The property has a total planned gross floor area of 428,431.70 sq m with details as follows:

Use Residential Commercial Ancillaries Kindergarten School Car Park Total:	Approximate Gross Floor Area (sq m) 260,587.00 1,189.00 5,760.00 2,160.00 14,900.00 143,835.70
	428,431.70

At the valuation date, RMB6,000,000,000 the property was a vacant site.

The property is located in the central area of Guangzhou, Guangdong Province and surrounded by South China University of Technology and residential real estate projects of other renowned property developers in the PRC.

The land use rights of the property have been granted for terms of 70 years for residential use, 40 years for commercial use and 50 years for other use from 3 March 2005 and 30 September 2004 respectively.

PROPERTY VALUATION REPORT

APPENDIX VI

Notes:

(1) According to 2 State-owned Land Use Rights Certificates Nos. (2005)10017 and (2005)10039, the land use rights of the property with a total site area of 95,382 sq m have been vested in 廣州市漢國恆生房地產開發有限公司 (Guangzhou Honkwok Hengsheng Land Development Ltd.) (“Honkwok Hengsheng”) with details as follows:

Certificate No. Issue Date Land use term (2005)10017 17 March 2005 70 years for residential use, 40 years for commercial use and 50 years for other use from 3 March 2005 (2005)10039 17 November 2004 70 years for residential use, 40 years for commercial use and 50 years for other use from 30 September 2004 Total	Site area (sq m) 56,070 39,312
	95,382

(2) According to Grant Contract of State-owned Land Use Rights No. (2004)177 dated 16 August 2004, the land use rights of a parcel of land have been contracted to be granted to 廣州電子工業發展總公司 (Guangzhou Electronics Industry Development Controlling Company) and 廣東省建材城鄉建設開發公司 (Guangdong Construction Material Urban-rural Development Company).

The details are summarized as follows:

(i)	Site Area:	56,644 sq m
(ii)	Land Premium:	RMB51,116,317
(iii)	Land Use Term:	70 years for residential use, 40 years for commercial use and 50 years for other
		use commencing from the date of obtaining the land use rights
(iv)	Plot Ratio:	Less than 2.85
(v)	Building Covenant:	Unspecified

According to the Transfer Contract of State-owned Land Use Rights dated 4 March 2005, the land use rights of a parcel of land with a site area of 56,644 sq m have been contracted to be transferred from 廣州電子工業發展總公司 (Guangzhou Electronics Industry Development Controlling Company) and 廣東省建材城鄉建設開發公司 (Guangdong Construction Material Urban-rural Development Company) to Honkwok Hengsheng for the consideration of RMB52,000,000.

According to Grant Contract of State-owned Land Use Rights No. (2004)116 dated 15 June 2004, the land use rights of a parcel of land have been contracted to be granted to 廣州天一房地產開發有限公司 (Guangzhou Tianyi Real Estate Company). The details are summarized as follows:

(i) Site Area: 40,128 sq m (ii) Land Premium: RMB15,103,337

(iii) Land Use Term: 70 years for residential use, 40 years for commercial use and 50 years for other use commencing from the date of obtaining the land use right

(iv) Plot Ratio: Less than 2.65

(v) Building Covenant: Unspecified

PROPERTY VALUATION REPORT

APPENDIX VI

According to the Transfer Contract of State-owned Land Use Rights dated 28 October 2004, the land use rights of a parcel of land with a site area of 40,128 sq m have been contracted to be transferred from 廣州天一房地產開發有限公司 (Guangzhou Tianyi Real Estate Company) to Honkwok Hengsheng for the consideration of RMB15,780,000.

(3) According to 3 Planning Permits for Construction Use of Land No. (2007)115, (2010)356 and 92-0407, the construction site of the property with a total site area of 96,410 sq m is in compliance with the requirements of urban planning requirement.
(4) According to the Share Transfer Agreement and Shareholders Agreement between Modern Land (HKNo. 6) Co., Limited (“Party A”) and 陽光城集團股份有限公司 (Yango Group Co., Ltd.) (Party B), Party A agreed to acquire 51% of the total issued shares of 陽光城粵港有限公司 (Yango Yuegang Limited) from Party B. Yango Yuegang Limited holds 75% equity interest in Honkwok Hengseng, whilst the remaining 25% equity interest in Honkwok Hengseng is held by 廣州恆生集團有限公司 (Guangzhou Hengseng Group Co., Ltd.).
(5) According to Business Licence No. 914401017676768586 dated 28 March 2016, Honkwok Hengsheng was established on 28 October 2004 as a limited liability company with a registered capital of RMB220,000,000.
(6) We have been provided with a legal opinion on the title to the property, which contains, inter-alia, the following information:
(a) Honkwok Hengsheng has obtained the land use rights of the property;
(b) All the land premium stated in the Grant Contract of Land Use Rights has been duly paid and settled;
(c) Due to the dispute raised by a previously interested party of the Land relating to a joint property development, an arbitration (Case No. C2010 Sui Zhong An Zi Di 2828 Hao) which involved four parties, namely Cityland Holdings Limited, Honkwok Hengsheng, Guangzhou Gecom Group Co., Ltd. and Guangzhou Hengsheng Group Co. Ltd. has happened. On 23 March 2011, Guangzhou Gecom Group Co., Ltd. initiated an action in the Guangzhou Arbitration Commission for an application for Protection of Property Interests. The Guangzhou Intermediate People’s Court subsequently made a Civil Rulings ((2011) Sui Zhong Fa Zhi Di 764 Hao) and the subsequent repeated decisions. As a result, 25% equity interest in Honkwok Hengseng held by 廣州恆生集團有限公司 (Guangzhou Hengseng Group Co., Ltd.) has been subject to a freeze order.
(d) The property is judicially seized by the 廣州市中級人民法院 (Guangzhou Intermediate People’s Court). Honkwok Hengsheng has the rights to occupy, uses, lease, transfer, mortgage and dispose of the land use rights of the property if the relevant seizure of the property is withdrawn and comply with the arbitration result;
(e) According to 閑置土地認定書 (Confirmation on Idle Lands), the property is identified as idle lands. However, according to 關於東莞莊路漢國“福林地塊”閑置處理進度的復函 (Reply regarding the idle land in Fulin Land, Zhuanglu Hanguo of Dongguan), due to the current seizure status of the land, the property is temporarily not treated as idle land by Guangzhou Land Resources and Planning Commission;
(f) There is no violation on the PRC laws for Honkwok Hengsheng to use or occupy the land. The property is not subject to forced expropriation and adverse effects except for the seizure of the land, idle land and freeze order.

GENERAL INFORMATION

APPENDIX VII

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

(a) Directors and Chief Executive

As at the Latest Practicable Date, the interests and short positions, if any, of each Director and chief executive of the Company in the Shares, underlying Shares and debentures of the Company and any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which the Directors and chief executive were deemed or taken to have under provisions of the SFO), or which were required to be and are recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO, or as otherwise required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies adopted by the Company were as follows:

			Approximate
		Number of	percentage of
Names of Directors	Nature of interest	Shares(Note 8)	shareholding
Zhang Lei	Beneficiary of a trust	1,827,293,270 (L)	66.01%
		(Note 1)
	Beneficial owner	21,447,140 (L)	0.78%
		(Notes 2 & 7)
Zhang Peng	Interest in a controlled	5,982,240 (L)	0.22%
	corporation	(Notes 3)
	Beneficial owner	16,390,000 (L)	0.59%
		(Notes 4 & 7)
Chen Yin	Interest in a controlled	6,911,520 (L)	0.25%
	corporation	(Note 5)
Fan Qingguo	Interest in a controlled	5,982,240 (L)	0.22%
	corporation	(Note 6)
Hui Chun Ho, Eric	Beneficial owner	187,000 (L)	0.01%
		(Note 7)

GENERAL INFORMATION

APPENDIX VII

Notes:

Such 1,827,293,270 Shares are held by Super Land as a registered holder. The entire issued share capital of Super Land is wholly-owned by Fantastic Energy Ltd., the entire issued share capital of which is in turn wholly-owned by TMF (Cayman) Limited as the trustee of the family trust. The said family trust is a discretionary trust established by Mr. Salum Zheng Lee as the settlor and the capital and income beneficiaries thereof include Mr. Salum Zheng Lee, Mr. Zhang Lei and their respective daughters. Mr. Salum Zheng Lee is the younger brother of Mr. Zhang Lei. Therefore, Mr. Zhang Lei is deemed to have the same interest in the Company.
9,327,890 Shares out of the 21,447,140 Shares are beneficially held by Mr. Zhang Lei in his own capacity while the remaining 12,119,250 Shares are held pursuant to share options granted under the Share Option Scheme.
Mr. Zhang Peng holds 100% of the issued share capital of Zhou Ming Development Ltd., which owns 5,982,240 Shares out of the issued share capital of the Company. Therefore, Mr. Zhang Peng is deemed to have the same interest in the Company.
3,745,000 Shares out of the 16,390,000 Shares are beneficially held by Mr. Zhang Peng in his own capacity while the remaining 12,645,000 Shares are held pursuant to the share options granted under the Share Option Scheme.
Mr. Chen Yin holds 100% of the issued share capital of Dragon Shing Technology Ltd., which owns 6,911,520 Shares out of the issued share capital of the Company. Therefore, Mr. Chen Yin is deemed to have the same interest in the Company.
Mr. Fan Qingguo holds 100% of the issued share capital of Create Success Development Ltd., which owns 5,982,240 Shares out of the issued share capital of the Company. Therefore, Mr. Fan Qingguo is deemed to have the same interest in the Company.
Such share interest (including Mr. Zhang Lei’s interest in 12,119,250 Shares, Mr. Zhang Peng’s interest in 12,645,000 Shares and Mr. Hui Chun Ho, Eric’s interest in 187,000 Shares) is held pursuant to the share options granted under the Share Option Scheme.
“L” stands for a long position in the Shares.

GENERAL INFORMATION

APPENDIX VII

(b) Substantial Shareholders

So far as is known to any Director or the chief executive of the Company, as at the Latest Practicable Date, Shareholders who had interests or short positions in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO were as follows:

			Approximate
		Number of	percentage of
Names of Shareholders	Nature of interest	Shares(Note 3)	shareholding
Super Land	Registered holder	1,827,293,270 (L)	66.01%
		(Note 1)
Fantastic Energy Ltd.	Interest in a controlled	1,827,293,270 (L)	66.01%
	corporation	(Note 1)
TMF (Cayman) Limited	Trustee	1,827,293,270 (L)	66.01%
		(Note 1)
Salum Zheng Lee	Settlor of a	1,827,293,270 (L)	66.01%
	discretionary trust	(Note 1)
Zhang Degui	Interest of a spouse	1,827,293,270 (L)	66.01%
		(Note 2)

Notes:

Such 1,827,293,270 Shares are held by Super Land as a registered holder. The entire issued share capital of Super Land is wholly-owned by Fantastic Energy Ltd., the entire issued share capital of which is in turn wholly-owned by TMF (Cayman) Limited as the trustee of the family trust. The said family trust is a discretionary trust established by Mr. Salum Zheng Lee as the settlor and the capital and income beneficiaries thereof include Mr. Salum Zheng Lee, Mr. Zhang Lei and their respective daughters. Mr. Salum Zheng Lee is therefore deemed to be interested in 1,827,293,270 Shares held by the family trust.
Ms. Zhang Degui is the spouse of Mr. Salum Zheng Lee and is therefore deemed to be interested in 1,827,293,270 Shares held by the family trust.
“L” stands for a long position in the Shares.

Save as disclosed above, so far as is known to the Directors and the chief executive of the Company, as at the Latest Practicable Date, no other person (other than a Director or chief executive of the Company) had, or was deemed or taken to have, an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or held any option in respect of such capital.

GENERAL INFORMATION

APPENDIX VII

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

3. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, each of Mr. Zhang Lei and Mr. Chen Yin entered into a service contract with the Company, pursuant to which each of them agreed to act as an executive Director for a term of three years with effect from 14 June 2016. Mr. Zhang Peng entered into a service contract with the Company to act as an executive Director for a term of three years with effect from 27 January 2017. Mr. Fan Qingguo entered into a service contract with the Company, pursuant to which he agreed to act as a non-executive Director for a term of three years with effect from 26 August 2017. Mr. Chen Zhiwei entered into a service contract with the Company to act as a non-executive Director for a term of three years with effect from 30 December 2016. Mr. Chen Anhua entered into a service contract with the Company to act as a non-executive Director for a term of three years with effect from 27 January 2017. Each of Mr. Qin Youguo, Mr. Cui Jian and Mr. Hui Chun Ho, Eric entered into a letter of appointment with the Company, pursuant to which each of them agreed to act as an independent non-executive Director for a term of three years with effect from 14 June 2016. Mr. Zhong Bin entered into a letter of appointment with the Company to act as an independent non-executive Director for a term of three years with effect from 27 January 2017.

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with any member of the Group or any associated company of the Company (excluding contracts expiring or determinable within one year without payment of compensation, other than statutory compensation).

4. COMPETING BUSINESS INTEREST OF DIRECTORS

In order to eliminate competing business with the Group, Mr. Zheng Lei and Mr. Salum Zheng Lee, among others, entered into a deed of non-competition with the Company on 14 June 2013.

In compliance with the above-mentioned non-competition deed, each of Mr. Zhang Lei and Mr. Salum Zheng Lee made a declaration that all material terms of the non-competition deed have been fully complied with in all material aspects on an annual basis. Mr. Zhang Lei and Mr. Salum Zheng Lee (among others) have confirmed in the non-competition deed that save for the Modern Building Business Hotel project, none of them is engaged in, or is interested in any business (other than the Group) which, directly or indirectly, competes or may compete with the business of the Group.

As at the Latest Practicable Date, save as disclosed above, so far as the Directors were aware, none of the Directors or their respective associates was interested in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group as required to be disclosed pursuant to the Listing Rules.

GENERAL INFORMATION

APPENDIX VII

5. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2016, the date to which the latest published audited accounts of the Company are made up.

6. LITIGATION

As at the Latest Practicable Date, save as disclosed herein, no member of the Resulting Group was engaged in any litigation or arbitration proceedings of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatened by or against any member of the Resulting Group.

7. MATERIAL CONTRACTS

The following contracts have been entered into by the Resulting Group (not being contracts entered into in the ordinary course of business) within the two years immediately preceding the date of this circular and is or may be material:

(1) on 8 January 2016, Modern Green Development and Huainan Xinyi Real Estate Development Co., Ltd. entered into an equity transfer agreement whereby Modern Green Development agreed to acquire from Huainan Xinyi Real Estate Development Co., Ltd. 49% equity interest in Anhui MOMA Development Co., Ltd. for a consideration of RMB65,000,000;
(2) on 15 April 2016, the Company and AVIC Trust Co., Ltd. entered into an equity transfer agreement whereby the Company agreed to acquire from AVIC Trust Co., Ltd. 35% equity interest in Nanchang Moma Real Estate Co., Ltd. for a consideration of RMB161,083,555.85;
(3) on 29 April 2016, the Company, Great Wall Pan Asia International Investment Co., Limited and Modern Land (HKNo. 5) Limited entered into a termination agreement to whereby it was agreed that, among other things, the joint venture arrangement between the Company and Great Wall Pan Asia International Investment Co., Limited shall be terminated and the Company shall buy back the remaining shareholding in each of Modern Land (HKNo. 5) Limited and Modern Land (HKNo. 1) Limited for an aggregate consideration of HK$98;
(4) on 30 May 2016, Modern Land Seattle, LLC, Modern Green Land Bellevue LLC and CW Development LLC entered into a limited liability company agreement to form MGCW, LLC with the investment amount to be contributed by Modern Land Seattle, LLC, Modern Green Land Bellevue LLC and CW Development LLC to be US$15,300,000, US$7,200,000 and US$7,500,000, respectively;

GENERAL INFORMATION

APPENDIX VII

(5) on 20 June 2016, Yuedong Benpao Real Estate (Beijing) Company Limited (“Yuedong Benpao”) (as purchaser) and Nanjing Xinhe Property Development Company Limited (“Nanjing Xinhe”) (as vendor) entered into an equity transfer agreement whereby Nanjing Xinhe agreed to dispose of, and Yuedong Benpao agreed to acquire, 100% equity interest in Nanjing Xinlei Property Development Company Limited (“Nanjing Xinlei”) at the consideration of RMB340,000,000.

On the same date, Yuedong Benpao, Nanjing Xinhe, Nanjing Iron & Steel Group Corporation, Wuhan Sanjing Property Development Company Limited and Nanjing Xinlei entered into a debt settlement agreement whereby Yuedong Benpao agreed to settle on behalf of Nanjing Xinlei the debt in the aggregate amount of RMB680,503,958.31 owed by Nanjing Xinlei to Nanjing Xinhe, Nanjing Iron & Steel Group Corporation and Wuhan Sanjing Property Development Company Limited as at 29 February 2016;

(6) on 27 June 2016, Modern Green Development and Shenzhen Pingan Dahua Huitong Wealth Management Company Limited entered into an equity transfer agreement whereby Modern Green Development agreed to acquire from Shenzhen Pingan Dahua Huitong Wealth Management Company Limited 5% equity interest in Wuhan Modern Green Development Co., Ltd. for a consideration of RMB10,000,000;
(7) on 8 September 2016, the Company entered into a subscription agreement with Great Wall Pan Asia International Investment Company Limited, pursuant to which Great Wall Pan Asia International Investment Company Limited conditionally agreed to subscribe for and the Company conditionally agreed to allot and issue a total of 172,872,000 subscription Shares at the subscription price of HK$1.01;
(8) on 6 October 2016, Modern Land Seattle, LLC (an indirect wholly-owned subsidiary of the Company) (as purchaser), CW Development LLC (as vendor), Modern Green Land Bellevue LLC and MGCW, LLC entered into a purchase agreement, pursuant to which, among other things, Modern Land Seattle, LLC agreed to acquire from CW Development LLC 25% ownership interest in MGCW, LLC for the consideration of US$5,820,379.87;
(9) on 13 October 2016, the Company, certain subsidiaries of the Company organised outside the PRC, Guotai Junan Securities (Hong Kong) Limited, Morgan Stanley & Co. International plc, The Hongkong and Shanghai Banking Corporation Limited, UBS AG Hong Kong Branch, VTB Capital plc and Zhongtai International Securities Limited entered into a purchase agreement in connection with the issue of US$350,000,000 6.875% senior notes due 2019;
(10) on 3 November 2016, the Company entered into the subscription agreement with China Cinda (HK) Asset Management Co., Limited, pursuant to which the China Cinda (HK) Asset Management Co., Limited conditionally agreed to subscribe for and the Company conditionally agreed to allot and issue a total of 243,525,000 subscription Shares at the subscription price of HK$1.10;

GENERAL INFORMATION

APPENDIX VII

(11) on 9 December 2016, Modern Land Seattle, LLC (as vendor) and America Great Wall Modern Land Green (Seattle) Holding LLC (as purchaser) entered into an interest purchase agreement, pursuant to which, among other things, Modern Land Seattle, LLC agreed to sell and America Great Wall Modern Land Green (Seattle) Holding LLC agreed to purchase 76% ownership interest in MGCW, LLC for the consideration of US$18,785,806.25;
(12) on 29 December 2016, the Company, certain subsidiaries of the Company organised outside the PRC, Guotai Junan Securities (Hong Kong) Limited and Zhongtai International Securities Limited entered into a purchase agreement in connection with the issue of the additional US$ denominated senior notes due 2019 in the aggregate principal amount of US$150,000,000 by the Company;
(13) on 3 March 2017, Tengfei Moma (as purchaser) entered into an equity transfer agreement with Mr. Guan and Xizang Yulong (as vendors) and Zhonglian Shengming whereby Tengfei Moma conditionally agreed to acquire 2% and 98% equity interest (in aggregate 100% equity interest) in Zhonglian Shengming from Mr. Guan and Xizang Yulong, respectively, at the consideration of RMB949,850,000;
(14) on 11 March 2017, Beijing New Power entered into certain partnership interest transfer agreements to acquire approximately 51.31% and 61.02% partnership interest in Lifeng No. 1 and Lifeng No. 2, respectively, for an aggregate consideration of RMB3,735,000. On the same date, Lifeng No. 1 and Lifeng No. 2 entered into certain equity transfer agreements to dispose of 3.97% and 2.18% equity interest in First Moma Renju Environmental Technology (Beijing) Company Limited, respectively for the exchange of giving up the transferees’ rights of distribution in Lifeng No. 1 and Lifeng No. 2;
(15) on 5 April 2017, Hongye Benpao, an indirect wholly-owned subsidiary of the Company, entered into an equity cooperation agreement with Tianhao Investment and Hongchuang Real Estate, pursuant to which, among other things, Hongye Benpao shall acquire the entire equity interest of Hongchuang Real Estate and the total sum of loans and debts owed by Hongchuang Real Estate to Tianhao Investment and other existing creditors as at the date of the equity cooperation agreement at an aggregate consideration of approximately RMB230,877,436;
(16) on 5 April 2017, Zhihui Hongye, an indirect wholly-owned subsidiary of the Company, entered into an equity transfer agreement with Yongxin Investment, Yinhao Investment and Xinlong Real Estate, pursuant to which, among other things, Zhihui Hongye shall acquire the entire equity interest in Xinlong Real Estate and the total sum of loans and debts owed by Xinlong Real Estate to Yinhao Investment and Yongxin Investment as at the date of the equity transfer agreement at an aggregate consideration of approximately RMB202,275,598;

GENERAL INFORMATION

APPENDIX VII

(17) on 4 May 2017, Zhanlan Tuozhan, an indirect wholly-owned subsidiary of the Company, entered into a joint development agreement with Xiamen Yuelian Real Estate Company Limited, Xiamen Xinjingdi Group Company Limited (as the vendors) and Shengshi Lianbang, pursuant to which, among other things, the parties agreed to cooperate in the development of the land located in Jinjiang, Fujian Province, the PRC via Shengshi Lianbang. The net consideration payable by Zhanlan Tuozhan under the joint development agreement is RMB1,800,000,000 (equivalent to HK$2,034,000,000). In addition, it is proposed that Zhanlan Tuozhan will inject RMB13,421,000 (equivalent to HK$15,165,730) into Shengshi Lianbang as registered capital;
(18) on 5 May 2017, Zhanlan MOMA and Modern Green Development (both being indirect wholly-owned subsidiaries of the Company) entered into an equity and loan transfer agreement with Jiang Yang Group Co., Ltd, Ms. Chen Jun and Mr. Ding Wenquan, pursuant to which, Zhanlan MOMA agreed to acquire the entire equity interest in the target company, namely Jiang Yang Jin Xin and settle the outstanding loans owed by Jiang Yang Jin Xin to its external creditor(s) at a total consideration of RMB434,000,000;
(19) on 9 May 2017, Modern Green Development entered into an agreement with Zhongcheng Canshuo Investment, Hongrui Investment and Zhongcheng Allied Investment whereby it was agreed that, among other things, major decisions of the board of directors of Wuhan Moma (a company held as to 51% by the Company and was accounted for as a joint venture of the Group before the entering into of the Agreement) shall be resolved by a simple majority of the members of the board of directors instead of unanimous approval of all directors;
(20) on 22 May 2017, Modern Green Development entered into an agreement with Dingxin Changcheng, Shengeng Investment and Yingtan Dingxin whereby it was agreed that, among other things, major decisions of the board of directors of Shengeng Investment (a company held as to 51% and 49% by Modern Green Development and Yingtan Dingxin, respectively, and a non wholly-owned subsidiary of the Company) shall be resolved by an unanimous approval instead of a majority approval;
(21) on 16 June 2017, the parties to the Transfer Agreement entered into the Termination Agreement whereby the parties agreed to terminate the Transfer Agreement with immediate effect and the Vendors shall refund the first instalment of the consideration under the Transfer Agreement to Zhanlan MOMA;
(22) on 29 June 2017, Beijing Modern Green Investment Fund Management Co., Ltd. (“Beijing Modern Green”, a limited partnership established by Modern Green Development) and Jiaxing Lan Lv Jingshen Equity Investment Fund Enterprise (LLP) (“Jiaxing Lan Lv Jingshen”), a limited partnership established by Modern Green Development, entered into a limited partnership agreement with the other partners, pursuant to which, the partners thereto agreed to invest in Jiaxing Lan Lv Zhanfang Equity Investment Fund Enterprise (LLP) (the “Limited Partnership”) with an aggregate capital of RMB1,901,000,000. The capital contribution by Beijing Modern Green and Jiaxing Lan Lv Jingshen to the Limited Partnership will be RMB1,000,000 and RMB475,000,000, representing approximately 0.05% and 25% of the total investment amount of the Limited Partnership, respectively, and satisfied in cash;

GENERAL INFORMATION

APPENDIX VII

(23) on 16 August 2017, Sushen Lvse an indirect wholly-owned subsidiary of the Company) (as purchaser) entered into an equity transfer and debt settlement agreement with Suzhou Jieneng Technology Co., Ltd. and Mr. Qian Xinghua (as vendors), whereby Sushen Lvse conditionally agreed to acquire 100% equity interest of Jiangsu Yuzun Real Estate Development Company Limited from the vendors at the consideration of approximately RMB469,000,000; and
(24) the Share Transfer Agreement.

8. EXPERTS AND CONSENTS

The following are the qualifications of the experts who have been named in this circular or have given opinion or letter contained in this circular:

Name Qualifications KPMG Certified Public Accountants Cushman & Wakefield Property valuer Zhonglun W&D Law Firm PRC legal adviser

As at the Latest Practicable Date, KPMG, Cushman & Wakefield and Zhonglun W&D Law Firm have given and have not withdrawn their written consent to the issue of this circular with the inclusion therein of their letters and references to their names, in the form and context in which they are included.

As at the Latest Practicable date, KPMG, Cushman & Wakefield and Zhonglun W&D Law Firm did not have any shareholding in any member of the Resulting Group and did not have the right to subscribe for or to nominate persons to subscribe for shares in any members of the Resulting Group.

As at the Latest Practicable Date, KPMG, Cushman & Wakefield Limited and Zhonglun W&D Law Firm did not have any interest, direct or indirect, in any assets which have been acquired or disposed of by or leased to any member of the Resulting Group, or which are proposed to be acquired or disposed of by or leased to any member of the Resulting Group since 31 December 2016, being the date to which the latest published audited consolidated financial statements of the Company were made up.

9. GENERAL

(a) None of the Directors had any direct or indirect interest in any assets which had been acquired or disposed of by or leased to any member of the Resulting Group or proposed to be so acquired, disposed of by or leased to any member of the Group since 31 December 2016, being the date to which the latest published audited accounts of the Company were made up, and up to the Latest Practicable Date.

GENERAL INFORMATION

APPENDIX VII

(b) Save as disclosed in this circular, as at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement entered into by any member of the Resulting Group, which was subsisting and was significant in relation to the business of the Resulting Group.
(c) The company secretary of the Company is Mr. Yeung Tak Yip. Mr. Yeung is a fellow member of Association of Chartered Certified Accountants and a member of the Hong Kong Institute of Certified Public Accountants.
(d) The registered office of the Company is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands.
(e) The principal place of business of the Company in Hong Kong is Suites 805-6, Champion Tower, 3 Garden Road, Central, Hong Kong.
(f) The branch share registrar and transfer office of the Company in Hong Kong is Tricor Investor Services Limited.
(g) The principal share registrar and transfer office of the Company is Royal Bank of Canada Trust Company (Cayman) Limited.
(h) The English text of this circular shall prevail over their respective Chinese text for the purpose of interpretation.

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the Company’s principal place of business in Hong Kong at Suites 805-6, Champion Tower, 3 Garden Road, Central, Hong Kong during normal business hours on any weekdays, except public holidays, from the date of this circular up to and including 22 December 2017:

(a) the memorandum and articles of association of the Company;
(b) the annual reports of the Company for the years ended 31 December 2014, 2015 and 2016 and the interim report of the Company for the six months ended 30 June 2017;
(c) the accountants’ report on the Target Company, the text of which is set out in Appendix II to this circular;
(d) the accountants’ report on Smooth Ever Group, the text of which is set out in Appendix III to his circular;
(e) the report on the unaudited pro forma financial information of the Resulting Group, the text of which is set out in Appendix IV to this circular;

GENERAL INFORMATION

APPENDIX VII

(f) the property valuation report of the property interests held by the Target Group, the text of which is set out in Appendix VI to this circular;
(g) the material contracts as referred to in the section headed “Material Contracts” of this Appendix;
(h) the written consents of the experts as referred to in the section headed “Experts and Consents” of this Appendix;
(i) the Share Transfer Agreement; and
(j) this circular.

AI assistant

Modern Land (China) Co., Limited — Proxy Solicitation & Information Statement 2017

49690_rns_2017-12-08_ddda2181-ec52-4fac-b412-d4c609d65732.pdf

MODERN LAND (CHINA) CO., LIMITED 當代置業（中國）有限公司

MAJOR TRANSACTION IN RELATION TO JOINT DEVELOPMENT OF A PROPERTY PROJECT WITH YANGO GROUP IN GUANGZHOU

CONTENTS

DEFINITIONS

DEFINITIONS

MODERN LAND (CHINA) CO., LIMITED 當代置業（中國）有限公司

MAJOR TRANSACTION IN RELATION TO JOINT DEVELOPMENT OF A PROPERTY PROJECT WITH YANGO GROUP IN GUANGZHOU

INTRODUCTION

THE SHARE TRANSFER AGREEMENT

Date

Parties

Subject assets to be acquired

Consideration

Conditions precedent

Completion

Before Completion

LETTER FROM THE BOARD

After Completion

Shareholders’ Agreement

Management and administration

LETTER FROM THE BOARD

Disposal of shares and right of first refusal

INFORMATION ABOUT THE PARTIES TO THE SHARE TRANSFER AGREEMENT

The Company, Modern Land No. 6 and Group

Yango Group

INFORMATION ABOUT THE TARGET GROUP AND THE LAND

LETTER FROM THE BOARD

Target Company

Smooth Ever Group

REASONS FOR AND BENEFIT OF ENTERING INTO THE SHARE TRANSFER AGREEMENT

FINANCIAL EFFECT OF THE ACQUISITION

1. Assets and liabilities

2. Earnings

LISTING RULES IMPLICATIONS

RECOMMENDATION

FURTHER UPDATE OF THE ACQUISITION

FURTHER INFORMATION

I. FINANCIAL INFORMATION OF THE GROUP FOR THE THREE FINANCIAL YEARS ENDED 31 DECEMBER 2016 AND SIX MONTHS ENDED 30 JUNE 2017

http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0417/LTN20150417337.pdf

http://www.hkexnews.hk/listedco/listconews/SEHK/2016/0412/LTN20160412477.pdf

http://www.hkexnews.hk/listedco/listconews/SEHK/2017/0321/LTN201703211074.pdf

http://www.hkexnews.hk/listedco/listconews/SEHK/2017/0824/LTN20170824322.pdf

II. INDEBTEDNESS

1. Borrowings

2. Contingent liabilities and other guarantees

III. WORKING CAPITAL

IV. MATERIAL ADVERSE CHANGE

V. OUTLOOK AND PROSPECTS

APPENDIX I

VI. OTHER INFORMATION

(a) Liquidity and Financial Resources

(b) Gearing Ratio

(c) Employee and Remuneration Policy

(d) Material acquisitions by the Group

ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF MODERN LAND (CHINA) CO., LIMITED

Introduction

Directors’ responsibility for Historical Financial Information

Reporting accountants’ responsibility

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Opinion

Report on matters under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

Adjustments

KPMG

HISTORICAL FINANCIAL INFORMATION

Statement of financial position

NOTES TO THE HISTORICAL FINANCIAL INFORMATION

1 BASIS OF PREPARATION AND PRESENTATION OF HISTORICAL FINANCIAL INFORMATION

2 SIGNIFICANT ACCOUNTING POLICIES

(a) Going concern

(b) Basis of measurement

(c) Use of estimates and judgements

(d) Cash flow statement

(e) Taxation

(f)

Financial instruments

(i) Loans and receivables

(ii) Derecognition

Modern Land (China) Co., Limited Proxy Solicitation & Information Statement 2017