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 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 ACQUISITION OF 100% EQUITY INTEREST IN A PRC COMPANY HOLDING A LAND PARCEL IN WUHAN

A letter from the Board is set out on pages 4 to 11 of this circular.

2 May 2017

			Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			4
Appendix I	–	Financial Information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Appendix II	–	Financial Information of the Target Company . . . . . . . . . . . . . . . . . . . .	16
Appendix III	–	Unaudited Pro Forma Financial Information of the Enlarged Group . . . .	34
Appendix IV	–	Management Discussion and Analysis on the Target Company . . . . . . . . .	41
Appendix V	–	Property Valuation Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	45
Appendix VI	–	General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	50

DEFINITIONS

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

“Acquisition” the proposed acquisition of the entire equity interest of the Target Company pursuant to the terms and conditions of the Equity Transfer Agreement “Announcement” the announcement of the Company dated 3 March 2017 in relation to 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)

“Company” Modern Land (China) Co., Limited (當代置業（中國）有限公司) , an exempted company incorporated on 28 June 2006 under the laws of the Cayman Islands with limited liability, whose Shares are listed on the Main Board of the Stock Exchange “connected person” has the meaning ascribed to it under the Listing Rules “Consideration” the aggregate consideration payable by Tengfei Moma for the Acquisition in the amount of RMB949,850,000 (equivalent to approximately HK$1,073,330,500)

“controlling shareholder (s) ” has the meaning ascribed to it under the Listing Rules “Director (s) ” director (s) of the Company from time to time

“Enlarged Group”

the Group as enlarged by the consolidation of the Target Company

“Equity Transfer Agreement” the equity transfer agreement dated 3 March 2017 entered into among Tengfei Moma (an indirect wholly-owned subsidiary of the Company) (as purchaser) , Vendor I, Vendor II and the Target Company relating to the Acquisition

“Group” the Company and its subsidiaries

“HK$”

Hong Kong dollar, the lawful currency of Hong Kong

DEFINITIONS

“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“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 parcel situated in Miliang Village, Hanyang District,
	Wuhan, Hubei Province, the PRC
“Latest Practicable Date”	28 April 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
“PRC”	the People’s Republic of China
“RMB”	Renminbi, the lawful currency of the PRC
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
“Shareholder (s) ”	holder (s) of the Shares
“Share (s) ”	ordinary share (s) with a nominal value of US$0.01 each in the
	share capital of the Company
“Share Option Scheme”	the share option scheme adopted by the Company on 14 June 2013
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Super Land”	Super Land Holdings Limited, a company incorporated in the
	British Virgin Islands with limited liability and a controlling
	Shareholder as at the Latest Practicable Date
“Target Company”	武漢市中聯晟鳴置業有限公司 (Wuhan Zhonglian Shengming
	Real Estate Company Limited*) , a company established in the
	PRC with limited liability
“Tengfei Moma”	騰飛摩碼置業（北京）有限公司 (Tengfei Moma Real Estate
	(Beijing) Co., Ltd.*) , a company established in the PRC with
	limited liability and an indirect wholly-owned subsidiary of the
	Company as at the Latest Practicable Date
“US$”	US dollar, the lawful currency of the United States

DEFINITIONS

“Vendor I”	Mr. Guan Zhiquan (管志權先生) , a PRC resident
“Vendor II”	西藏煜隆置業有限公司(Xizang Yulong Real Estate Co., Ltd.*) , a
	company established in the PRC with limited liability
“Vendors”	collectively, Vendor I and Vendor II
“%”	per cent.

The figures in RMB are converted into HK$ at the rate of RMB1:HK$1.130 throughout this circular for indicative purpose only.

For identification purposes only
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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. Zhong Tianxiang Mr. Chen Zhiwei Mr. Chen Anhua

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

Principal Place of business in Hong Kong:

Room 505 Independent non-executive Directors: ICBC Tower Mr. Qin Youguo 3 Garden Road Mr. Cui Jian Central Mr. Hui Chun Ho, Eric Hong Kong Mr. Zhong Bin

2 May 2017

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION IN RELATION TO ACQUISITION OF 100% EQUITY INTEREST IN A PRC COMPANY HOLDING A LAND PARCEL IN WUHAN

INTRODUCTION

On 3 March 2017, the Board announced that Tengfei Moma (an indirect wholly-owned subsidiary of the Company) (as purchaser) entered into the Equity Transfer Agreement with the Vendors (as vendors) and the Target Company, whereby Tengfei Moma has conditionally agreed to acquire 2% and 98% equity interest (in aggregate 100% equity interest) in the Target Company from Vendor I and Vendor II, respectively, at the Consideration of RMB949,850,000 (equivalent to approximately HK$1,073,330,500) .

LETTER FROM THE BOARD

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

THE ACQUISITION

As disclosed in the Announcement, on 3 March 2017, Tengfei Moma (an indirect wholly-owned subsidiary of the Company) (as purchaser) entered into the Equity Transfer Agreement with the Vendors (as vendors) and the Target Company, whereby Tengfei Moma has conditionally agreed to acquire 2% and 98% equity interest (in aggregate 100% equity interest) in the Target Company from Vendor I and Vendor II, respectively, at the Consideration of RMB949,850,000 (equivalent to approximately HK$1,073,330,500) .

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

Equity Transfer Agreement

Date

3 March 2017

Parties

(1) Tengfei Moma (an indirect wholly-owned subsidiary of the Company) ;
(2) Vendor I;
(3) Vendor II; and
(4) the Target Company

To the best knowledge, information and belief of the Board and after making all reasonable enquiry, each of Vendor I, Vendor II and its ultimate beneficial owner (s) are Independent Third Parties.

Subject assets to be acquired

As at the Latest Practicable Date, the Target Company had a registered capital of RMB10,000,000, which was fully paid up. The entire equity interest of the Target Company was held as to 2% and 98% by Vendor I and Vendor II, respectively. The Vendors have pledged their respective equity interest as security for obtaining shareholder’s loans which was advanced to the Target Company for payment of the transfer price and transaction service charge in respect of the Land.

Pursuant to the terms of the Equity Transfer Agreement, Tengfei Moma has conditionally agreed to acquire 2% and 98% equity interest (in aggregate 100% equity interest) in the Target Company from Vendor I and Vendor II, respectively, at the Consideration of RMB949,850,000 (equivalent to approximately HK$1,073,330,500) .

LETTER FROM THE BOARD

Consideration

The aggregate Consideration payable by Tengfei Moma for the Acquisition is RMB949,850,000 (equivalent to approximately HK$1,073,330,500) , which consists of the consideration for acquisition of the equity interest and debts of the Target Company of RMB532,574,775.44 and RMB417,275,224.56, respectively. The terms of the Equity Transfer Agreement were determined based on arm’s length negotiations among the parties thereto. The Consideration of RMB949,850,000 was determined by the estimated gross floor area of the Land of 172,700 square metres, multiplied by RMB5,500 per square metre. The price per square metre of RMB5,500 was determined based on the prevailing market price of land in Hanyang District, Wuhan, Hubei Province, the PRC.

The Consideration of RMB949,850,000 is substantially more than the original cost of the Land of RMB425,000,000 for the following reasons:

(1) The Land is situated inside the third ring of Hanyang District, Wuhan, which is a prime location, and close to the subway station.
(2) The Target Company was engaged in the demolition work in the process of the land consolidation of the Land. Therefore, directional conditions were set in favor of the Target Company when the Land was listed to be traded publicly. The Target Company acquired the land use rights of the Land at the base price without any premium.
(3) The Target Company, as a local property development company, was not planning to develop the Land itself, but transfer the land use rights of the Land to have cash realisation. Currently, competition is very fierce in both the open market and secondary mergers and acquisitions market in Wuhan.
(4) If there was no directional condition set in favor of the Target Company and the Land were for sale in open bidding process, the price of the Land could be above RMB950,000,000 based on the historical land market performance in Wuhan. With reference to the two land transactions in the surrounding area, the price per square metre of floor area in respect of the land transaction in April 2016 was RMB4,483 per square metre while that for the land transaction in December 2016 was RMB6,033 per square metre. As the location, permitted uses and area of the comparable land parcels are similar to the Land, it is fair to make a comparison between such land parcels and the Land. As the land price of Wuhan has been on the upward trend since April 2016, it is reasonable to assume that the transacted price of the Land could be above RMB950,000,000 (RMB5,500 per square metre) if the Land were to put to sale in open bidding process.

The Board considers that the Consideration is fair and reasonable on the following basis:–

(1) The Consideration was negotiated among the parties to the Equity Transfer Agreement taking into account the current land market situation in Wuhan.
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LETTER FROM THE BOARD

(2) The recent selling price of residential properties situated adjacent to the Land is approximately RMB13,000 to 15,000 per square metre, including but not limited to Binjiang No. 1 (濱江壹號) of Kaisa Group with average selling price of RMB13,500 per square metre and International Garden (國際花園) of China Railway Construction Corporation Limited with selling price of RMB12,500 to RMB15,500 per square metre. It can be estimated that the floor price of the Land (after deducting all construction cost and related expenses in connection with the property development project) would be approximately RMB5,000 to 6,000 per square metre.
(3) The most recent land transaction in the surrounding area of the Land took place on 13 September 2016. The floor price was RMB3,022 per square metre without demolition work involved.

On the bases that (a) if the land parcels situated in the same area are for sale in open bidding process, the price could be far above RMB5,500 per square metre; (b) no cleared land parcel situated inside the third ring of Hanyang District, Wuhan was sold below RMB5,000 per square metre (except for the Land acquired by the Target Company) since May 2016; and (c) the selling price of the residential properties situated adjacent to the Land is approximately RMB13,000 to 15,000 per square metre, the Board considers that adopting the floor price of RMB5,500 per square metre as the basis for the Consideration is fair and reasonable.

The Consideration will be payable by Tengfei Moma in cash as described below:

The first installment

(i) Upon execution of the Equity Transfer Agreement and within three Business Days from the date on which the confirmation from the pledgor to release the equity pledges and early repayment of the shareholder’s loans shall have been received by the Vendors, RMB484,423,500 shall be paid by Tengfei Moma as the first installment (the “ First Installment ”) of the Consideration to a bank account (the “ Joint Account ”) jointly set up by Tengfei Moma and the Vendors.
(ii) Within seven days from the payment of the First Installment and upon certain conditions have been satisfied, the amount corresponding to the amount of the shareholders’ loans of the Target Company shall be transferred from the Joint Account to the account of the Target Company, which shall be used to settle the debts of the Target Company, and the balance of the First Installment shall be released to the Vendors.
(iii) The conditions mentioned in item (ii) above include: (a) the release of 100% equity pledge of the Target Company; (b) the completion of registration procedures with regard to transfer of 51% equity interest in the Target Company to Tengfei Moma with the relevant administration for industry and commerce; (c) the change of the legal representative of the Target Company to the personnel designated by Tengfei Moma; and (d) the change of two-thirds of the directors of the Target Company to the personnel designated by Tengfei Moma.

As at the Latest Practicable Date, all conditions set out in item (iii) have been fulfilled.

LETTER FROM THE BOARD

(iv) After full payment of the First Installment, the control of the Land will be handed over to Tengfei Moma and the Vendors shall cooperate with Tengfei Moma on its entry and construction of the Land.

As at the Latest Practicable Date, the First Installment has been paid in full by Tengfei Moma and 51% equity interest in the Target Company has been transferred to Tengfei Moma.

The second installment

(i) Within three Business Days from the date on which certain conditions have been satisfied, RMB455,426,500 shall be paid by Tengfei Moma as the second installment (the “ Second Installment ”) of the Consideration to the Joint Account.
(ii) The conditions mentioned in item (i) above are, among others, within two months upon the satisfaction of the conditions set out in item (i) under the paragragh headed “The first installment” above:
(a) the Vendors have completed the remaining small amount of demolition work within the Land; and
(b) the Target Company has executed the contract for the transfer of state-owned construction land use rights 《國有建設用地使用權出讓合同》( ) and obtained the land use rights certificate with the cooperation of the Vendors.

It is expected that the land use rights certificate will be obtained on or before 31 May 2017.

(iii) Within the next Business Day on which the registration procedures with regard to transfer of 49% equity interest in the Target Company to Tengfei Moma with the relevant administration for industry and commerce are completed, the Second Installment shall be released to the Vendors.

The third installment

Within seven Business Days after the first phase completion certificate (首期竣工備案證) is obtained by the Target Company, after deducting the loss suffered by Tengfei Moma as a result of violation of the terms of the Equity Transfer Agreement by the Vendors (if any) , RMB10,000,000 shall be paid by Tengfei Moma to the Vendors as the third installment of the Consideration.

The Consideration will be funded from internal resources of the Group.

Completion

The completion of the Acquisition shall take place upon completion of the registration of transfer of 100% equity interest of the Target Company with the relevant administration for industry and commerce.

LETTER FROM THE BOARD

Upon completion of the Acquisition, the Target Company will become an indirect wholly-owned subsidiary of the Company and its results will be consolidated into the accounts of the Group.

As at the Latest Practicable Date, completion of the Acquisition has not taken place.

INFORMATION ABOUT PARTIES TO THE EQUITY TRANSFER AGREEMENT

The Company and Tengfei Moma

The Company is incorporated in the Cayman Islands with limited liability and its Shares are listed on the Main Board of the Stock Exchange. The Group is a property developer focused on the development on green, energy-saving and eco-friendly residences in the PRC.

Tengfei Moma is a company established in the PRC with limited liability. It is an indirect whollyowned subsidiary of the Company and has not commenced operation as at the Latest Practicable Date.

Vendor I

Vendor I is a PRC resident and a merchant.

Vendor II

Vendor II is a company established in the PRC with limited liability and is principally engaged in property development in the PRC.

INFORMATION ABOUT THE TARGET COMPANY AND THE LAND

The Target Company

The Target Company is a company established in the PRC with limited liability. As at the Latest Practicable Date, it had a registered capital of RMB10,000,000, which was fully paid up. It is principally engaged in the property development in the PRC.

Set out below is the audited financial information of the Target Company for the two years ended 31 December 2015 and 2016 prepared in accordance with International Financial Reporting Standards:

			For the year ended	For the year ended
			31 December 2016	31 December 2015
			(RMB)	(RMB)
Net	loss	before tax	(111,934.39)	(198,166.23)
Net	loss	after tax	(111,934.39)	(198,166.23)

The total and net asset value of the Target Company as at 28 February 2017 were approximately RMB479,379,302.16 and RMB9,504,427.60, respectively.

LETTER FROM THE BOARD

Please refer to Appendix II to this circular for further details about the financial information of the Target Company for the period from 5 May 2014 (date of establishment) to 31 December 2014 and the years ended 31 December 2015 and 2016.

The Land

The Target Company acquired the land use rights of the Land on 24 January 2017 through bidding procedures. The Land is situated in Miliang Village, Hanyang District, Wuhan, Hubei Province, the PRC. It has a site area of approximately 45,200 square metres, with estimated gross floor area of approximately 172,700 square metres and is planned for residential use. As at the Latest Practicable Date, the Land is in initial planning stage.

Please refer to Appendix V to this circular for the property valuation report of the property interests held by the Target Company.

REASONS FOR AND BENEFIT OF ENTERING INTO THE EQUITY TRANSFER AGREEMENT

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

The Acquisition will enable the Group to acquire the entire equity interest of the Target Company, which holds the land use rights of the Land. In view of the prime location and the designated use 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 Hubei Province, the PRC with a view to bringing more investment return for the Shareholders.

Based on the aforesaid, the Directors (including independent non-executive Directors) consider that the terms of the Equity Transfer Agreement are on normal commercial terms after arm’s length negotiations among 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 of the Acquisition, the Target Company will become an indirect wholly-owned subsidiary of the Company and its financial results will be consolidated into the Group.

1. Assets and liabilities

As detailed in the unaudited pro forma statement of the consolidated assets and liabilities of the Enlarged Group in Appendix III to this circular, assuming the Acquisition was completed as at 31 December 2016, the unaudited pro forma consolidated assets of the Enlarged Group would have increased from approximately RMB28,507,000,000 to RMB28,559,600,000, the unaudited pro forma consolidated liabilities of the Enlarged Group would have remain unchanged of approximately RMB20,794,200,000 and the net assets would have remain unchanged as a result of the Acquisition.

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LETTER FROM THE BOARD

2. Earnings

Upon completion of the Acquisition, the financial results of the Target Company will be consolidated into the consolidated financial statements of the Group. While there is no immediate material impact on earnings of the Group, the Directors believe that the Acquisition would enhance the Group’s business development.

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 Equity Transfer Agreement is/are more than 25% but less than 100%, the entering into of the Equity Transfer Agreement constitutes a major transaction of the Company under Chapter 14 of the Listing Rules. As such, the Equity Transfer Agreement and the transactions contemplated thereunder are subject to reporting, announcement and Shareholders’ approval requirements under Chapter 14 of the Listing Rules.

As at the Latest Practicable Date, Super Land owns approximately 66.35% of the number of issued Shares of the Company. On 3 March 2017, the Company received Super Land’s written consent to the Acquisition and the entering into of the Equity Transfer Agreement by Tengfei Moma. 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 any 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 Equity 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 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 Lei Chairman

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

I. FINANCIAL INFORMATION OF THE GROUP FOR THE THREE FINANCIAL YEARS ENDED 31 DECEMBER 2016

Financial information of the Group for the three years ended 31 December 2014, 2015 and 2016 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, 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

II. INDEBTEDNESS

1. Borrowings

As at the close of business on 28 February 2017, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, the Enlarged Group had outstanding borrowings of approximately RMB12,036,210,000, 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 4,296,875 1,000,000 2,488,786 2,300,000 1,387,458 563,091
	12,036,210

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. Contingent liabilities and other guarantees

As at 28 February 2017, the Enlarged Group provided guarantees to the extent of RMB7,480,868,917 in respect of mortgage loans provided by the banks to customers for the purchase of properties developed by the Enlarged Group. These guarantees provided by the Enlarged Group 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 28 February 2017, the Enlarged Group provided guarantees to bank loans and other loans of joint ventures amounting to RMB966,900,000.

III. WORKING CAPITAL

After taking into account the Enlarged 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 Enlarged 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 of the Acquisition, the Enlarged Group will continue to be principally engaged in property development in the PRC while the Target Company will continue to be engaged in development of the Land. The Land has a site of approximately 45,200 square metres with estimated gross floor area of approximately 172,700 square metres and is planned for residential use. As at the Latest Practicable Date, the Land is in initial planning stage.

The unaudited pro forma financial information of the Enlarged Group illustrating the financial impact of the Acquisition on the assets and liabilities of the Group is set out in Appendix III to this circular. The unaudited pro forma financial information of the Enlarged 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 Enlarged Group as at the date of completion of the Acquisition or any future date.

In the coming ten years, 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.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

In 2017, the Group will grasp this important opportunity to integrate its development in different areas. The Group will enlarge 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.

(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 11 March 2017, New Power (Beijing) Architectural Technology Co., Ltd. (新動力（北京）建築科技有限公司) (“ 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) * (嘉興長天曆峰一號投資管理合夥企業（有限合夥）) (“ Lifeng No.1 ”) and Jiaxing Changtian Lifeng No.2 Investment Management Partnership (Limited Partnership) * (嘉興長天曆峰二號投資管理合夥企業（有限合夥）) (“ 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
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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

of 3.97% and 2.18% equity interest in First Moma Renju Environmental Technology (Beijing) Company Limited* (第一摩碼人居環境科技（北京）有限公司) , respectively for the exchange of giving up the transferees’ rights of distribution in Lifeng No.1 and Lifeng No.2.

(2) On 5 April 2017, Modern Green Development Group Hongye Benpao Technology (Beijing) Company Limited (當代節能置業集團鴻業奔跑科技（北京）有限公司) (“ Hongye Benpao ”) , an indirect wholly-owned subsidiary of the Company, entered into an equity cooperation agreement with Foshan Changxin Tianhao Investment Company Limited (佛山市長信天昊投資有限公司) (“ Tianhao Investment ”) and Foshan Changxin Hongchuang Real Estate Company Limited (佛山市長信宏創房地產有限公司) (“ 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.
(3) On 5 April 2017, Zhihui Hongye Real Estate (Beijing) Company Limited (智慧鴻業置業（北京）有限公司) (“ Zhihui Hongye ”) , an indirect wholly-owned subsidiary of the Company, entered into an equity transfer agreement with Foshan Nanhai Yongxin Investment Company Limited (佛山市南海區永信投資有限公司) (“ Yongxin Investment ”) , Foshan Changxin Yinhao Investment Company Limited (佛山市長信銀昊投資有限公司) (“ Yinhao Investment ”) and Foshan Xinlong Real Estate Investment Company Limited (佛山市信隆置業投資有限公司) (“ 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.
For identification purposes only
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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

The following is the text of a report, prepared for the purpose of incorporation in this circular, received from the Company’s reporting accountants, KPMG, Certified Public Accountants, Hong Kong.

==> picture [78 x 31] intentionally omitted <==

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

2 May 2017

The Directors Modern Land (China) Co., Limited

Dear Sirs,

INTRODUCTION

We set out below our report on the financial information relating to Wuhan Zhonglian Shengming Real Estate Company Limited (the “Target Company”) comprising the statements of financial position of the Target Company as at 31 December 2014, 2015 and 2016, the statements of comprehensive income, the statements of changes in equity and the cash flow statements for the period from 5 May 2014 (date of establishment) to 31 December 2014, the year ended 31 December 2015 and 2016 (the “Relevant Periods”) , and a summary of significant accounting policies and other explanatory information (the “Financial Information”) , for inclusion in the circular issued by Modern Land (China) Co., Limited (the “Company”) dated 2 May 2017 (the “Circular”) in connection with the proposed acquisition of 100% equity interest in the Target Company by the Company (the “Proposed Acquisition”) .

The Target Company was established in the People’s Republic of China (the “PRC”) on 5 May 2014 with limited liability.

The Target Company has adopted 31 December as its financial year end date. No statutory financial statements have been prepared for the Target Company during the Relevant Periods.

The directors of the Target Company have prepared the financial statements for the Relevant Periods (the “Underlying Financial Statements”) in accordance with International Financial Reporting Standards (“IFRSs”) issued by the International Accounting Standards Board (the “IASB”) . The Underlying Financial Statements for the Relevant Periods were audited by KPMG Huazhen LLP (畢馬威華振會計師事務所（特殊普通合夥）) in accordance with International Standards on Auditing issued by the International Auditing and Assurance Standards Board (the “IAASB”) .

The Financial Information has been prepared by the directors of the Company for inclusion in the Circular in connection with the Proposed Acquisition based on the Underlying Financial Statements, with no adjustments made thereon and in accordance with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) .

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL INFORMATION

The directors of the Company are responsible for the preparation of the Financial Information that gives a true and fair view in accordance with IFRSs issued by the IASB and the applicable disclosure provisions of the Listing Rules, and for such internal control as the directors of the Company determine is necessary to enable the preparation of the Financial Information that is free from material misstatement, whether due to fraud or error.

REPORTING ACCOUNTANTS’ RESPONSIBILITY

Our responsibility is to form an opinion on the Financial Information based on our procedures performed in accordance with Auditing Guideline “Prospectuses and the Reporting Accountant” (Statement 3.340) issued by the Hong Kong Institute of Certified Public Accountants. We have not audited any financial statements of the Target Company in respect of any period subsequent to 31 December 2016.

OPINION

In our opinion, the Financial Information gives, for the purpose of this report, a true and fair view of the financial position of the Target Company as at 31 December 2014, 2015 and 2016 and of the Target Company’s financial performance and cash flows for the Relevant Periods then ended.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

A FINANCIAL INFORMATION OF THE TARGET COMPANY

1 STATEMENTS OF COMPREHENSIVE INCOME

Section B Note Revenue Cost of sales Gross profit Administrative expenses Loss from operations and loss before taxation Income tax Loss and total comprehensive income for the period/year	Period from 5 May 2014 (date of establishment) to 31 December 2014 RMB’000 – – – (512) (512) – (512)	Year ended 31 December 2015 2016 RMB’000 RMB’000 – – – – – – (199) (112) (199) (112) – – (199) (112)

The accompanying notes form part of the Financial Information.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2 STATEMENTS OF FINANCIAL POSITION

			At 31 December
	Section B	2014	2015	2016
	Note	RMB’000	RMB’000	RMB’000
Non-Current assets
Property, plant and equipment		16	13	10
Total Non-Current assets		16	13	10
Current assets
Other receivables	4	60,000	65,095	52,594
Bank balances and cash	5	7	57	67
Total current assets		60,007	65,152	52,661
Current liabilities
Other payables	6	60,535	65,876	53,494
Total current liabilities		60,535	65,876	53,494

Net current liabilities		(528)	(724)	(833)

NET LIABILITIES		(512)	(711)	(823)
Capital and reserves	7
Paid-in capital		–	–	–
Reserves		(512)	(711)	(823)
TOTAL EQUITY		(512)	(711)	(823)

The accompanying notes form part of the Financial Information.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

3 STATEMENTS OF CHANGES IN EQUITY

		Paid-in	Accumulated
	Section B	capital	losses	Total equity
	Note	RMB’000	RMB’000	RMB’000
Balance at 5 May 2014
(date of establishment)		–	–	–
Loss and total comprehensive
income for the period		–	(512)	(512)
Balance at 31 December 2014
and 1 January 2015		–	(512)	(512)
Loss and total comprehensive
income for the year		–	(199)	(199)
Balance at 31 December 2015
and 1 January 2016		–	(711)	(711)
Loss and total comprehensive
income for the year		–	(112)	(112)
Balance at 31 December 2016		–	(823)	(823)

The accompanying notes form part of the Financial Information.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

4 CASH FLOW STATEMENTS

Operating activities Loss before taxation Depreciation of property, plant and equipment (Increase) /decrease in other receivables Increase/ (decrease) in trade and other payables Cash (used in) /generated from operating activities Income tax paid Net cash (used in) /generated from operating activities Investing activities Purchase of property, plant and equipment Net cash used in investing activities Financing activities Repayment to related parties Advances from related parties Net cash generated from/ (used in) financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the period/year Cash and cash equivalents at end of the period/year	Period from 5 May 2014 (date of establishment) to 31 December 2014 RMB’000 (512) 1 (511) (60,000) 126 (60,385) – (60,385) (17) (17) – 60,409 60,409 7 – 7	Year ended 31 December 2015 2016 RMB’000 RMB’000 (199) (112) 3 3 (196) (109) (5,095) 12,501 – (126) (5,291) 12,266 – – (5,291) 12,266 – – – – – (21,000) 5,341 8,744 5,341 (12,256) 50 10 7 57 57 67

The accompanying notes form part of the Financial Information.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

B NOTES TO FINANCIAL INFORMATION

1 BACKGROUND

The Target Company was established under the laws of China on 5 May 2014, and is mainly involved in the business of property development. The equity interest of the Target Company was owned as to 98% by Wuhan Zhonglian Real Estate Development Company Limited 武漢市中聯房地產開發有限公司 (“Wuhan Zhonglian”) and 2% by an individual. The Target Company was ultimately owned by Wuhan Zhengbang Investment Group Company Limited 武漢正邦投資集團有限公司 (“Wuhan Zhengbang”) , an entity owned by Huang Lian (“Ms. Huang”) .

On 6 September 2016, Wuhan Zhonglian transferred 98% of the equity interests in the Target Company to Xizang Yulong Real Estate Company Limited 西藏煜隆置業有限公司 (“Xizang Yulong”) , which is ultimately owned by individuals independent from Wuhan Zhonglian.

2 SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance

The Financial Information set out in this report 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 the remainder of this Section B.

The IASB has issued a number of new and revised IFRSs. For the purpose of preparing this Financial Information, the Target Company has adopted all applicable new and revised IFRSs to the Relevant Periods, except for any new standards or interpretations that are not yet effective for the accounting period beginning from 1 January 2016. The revised and new accounting standards and interpretations issued but not yet effective for the accounting period beginning from 1 January 2016 are set out in Note 12.

The 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 all periods presented in the Financial Information.

(b) Basis of presentation and going concern

As at 31 December 2016, the Target Company has not yet generated any revenue and is dependent on financial support for business continuance. The Financial Information has been prepared on a going concern basis as Modern Land (China) Co., Limited, on the condition that the acquisition of the Target Company would be successful, has 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.

(c) Basis of measurement

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

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(d) Use of estimates and judgements

The preparation of the Financial Information 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.

Judgements made by management in the application of IFRSs that have significant effect on the Financial Information and major sources of estimation uncertainty are discussed in Note 10.

(e) 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.

(f) Properties held for sale

Properties held for sale are stated at the lower of cost and net realisable value. Cost includes the costs of land, development expenditure incurred and, where appropriate, borrowing costs capitalised. Net realised value is determined based on prevailing market conditions.

Properties held for sale are transferred to property, plant and equipment when there is a change of intention to hold the properties held for sale for own use.

(g) 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) Financial assets

The Target Company’s financial assets are classified into loans and receivables. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(ii) Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Interest income is recognised on an effective interest basis for debt instruments, of which interest income is included in other income.

(iii) 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) .

(iv) 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.

(v) 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.

(vi) 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.

Financial liabilities are derecognised when the Target Company’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.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(h) 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;
significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and

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.

(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.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

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.

(i) 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.

(j) Provisions and contingent liabilities

Provisions are recognised for other liabilities of uncertain timing or amount when the Target Company 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.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

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.

(k) Related parties

(a) A person, or a close member of that person’s family, is related to the Target Company if that person:
(i) has control or joint control over the Target Company;
(ii) has significant influence over the Target Company; or
(iii) is a member of the key management personnel of the Target Company’s parent.
(b) An entity is related to the Target Company 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 the Target Company or an entity related to the Target Company.
(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.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

3 DIRECTORS’ EMOLUMENTS

Directors’ emoluments during the Relevant Periods is disclosed as follows:

2016 Executive director: Mr. Chen Mengxin (resigned on 4 January 2016) Ms. Huang (appointed on 4 January 2016) 2015 Executive director: Mr. Chen Mengxin Period from 5 May 2014 (date of establishment) to 31 December 2014 Executive director: Mr. Chen Mengxin	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 OTHER RECEIVABLES

Other receivables as at 31 December 2014, 2015 and 2016 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 (h) ) .

(b) Loans and receivables that are not impaired

Balances of receivables at 31 December 2014, 2015 and 2016 are neither past due nor impaired, which related to a third party and debtor for whom there was no recent history of default.

5 BANK BALANCES AND CASH

				December
			2014	2015	2016
			RMB’000	RMB’000	RMB’000
Cash	at	bank	7	57	67

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

6 OTHER PAYABLES

		At 31 December
	2014	2015	2016
	RMB’000	RMB’000	RMB’000
Amounts due to related parties	60,409	65,750	53,494
Other payables	126	126	–
	60,535	65,876	53,494

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

7 SHARE CAPITAL

(a) Paid-in capital

As at 31 December 2014, 2015 and 2016, the registered capital of the Target Company was RMB10,000,000, and the paid-in capital of the Target Company was nil.

(b) Capital management

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

8 FINANCIAL RISK MANAGEMENT AND FAIR VALUES

Exposure to credit and liquidity risks arises in the normal course of the Target Company’s business. The Target Company is not exposed to significant interest rate risk and currency risk as it has no interest-bearing financial instruments with variable interest rates, and no transactions and balances are in foreign currency. The Target Company’s exposure to these risks and the financial risk management policies and practices used by the Target Company to manage these risks 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.

With respect to credit risk arising from amount due from a third party, the Target Company’s exposure to credit risk arising from default of the counterparty is limited as the receivables are guaranteed by the shareholders of the Target Company.

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 4.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(b) Liquidity risk

The Target Company is responsible for its own cash management, including advance provided to third party for further corporation and raising of loans from related parties to cover expected cash demands.

The Target Company’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 the Target Company’s financial liabilities which are based on contractual undiscounted cash flows and the earliest date the Target Company can be required to pay:

Other payables		At 31 December
	2014 Contractual undiscounted cash outflow Within 1 year or on demand Carrying amount RMB’000 RMB’000 60,535 60,535	2015 Contractual undiscounted cash outflow Within 1 year or on demand Carrying amount RMB’000 RMB’000 65,876 65,876	2016 Contractual undiscounted cash outflow Within 1 year or on demand Carrying amount RMB’000 RMB’000 53,494 53,494

(c) 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 each reporting period.

9 MATERIAL RELATED PARTY TRANSACTIONS

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

	Period from
	5 May 2014 (date
	of establishment)
	to 31 December	Year ended 31 December
	2014	2015	2016
	RMB’000	RMB’000	RMB’000
Loans from related parties
– Wuhan Zhonglian (note a)	40,309	4,441	8,744
– Wuhan Zhengbang and a fellow subsidiary
of the Target Company (note a)	15,100	900	–
– Huang Hui (note b)	5,000	–	–
Loans repaid to
– Wuhan Zhengbang and a fellow subsidiary
of the Target Company (note a)	–	–	16,000
– Huang Hui (note b)	–	–	5,000

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

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

			At 31 December
		2014	2015	2016
		RMB’000	RMB’000	RMB’000
–	Wuhan Zhonglian	40,309	44,750	53,494
–	Wuhan Zhengbang and a fellow subsidiary of
	the Target Company	15,100	16,000	–
–	Huang Hui	5,000	5,000	–
		60,409	65,750	53,494

Notes:

(a) As at 31 December 2016, Wuhan Zhonglian, Wuhan Zhengbang and its subsidiaries are owned by Ms. Huang, the key management of the Target Company.
(b) Huang Hui is a close family member of Ms. Huang.

10 CRITICAL ACCOUNTING JUDGEMENTS IN APPLYING THE TARGET COMPANY’S ACCOUNTING POLICIES

Impairment for other receivables

The Target Company estimates impairment losses for other receivables resulting from the inability of the parties to make the required payments. The Target Company assesses the estimates based on the aging of the other receivable balance, credit-worthiness, and historical write-off experience. If the financial conditions of the parties were to deteriorate, actual provisions would be higher than that estimated.

11 IMMEDIATE AND ULTIMATE HOLDING COMPANIES

At 31 December 2016, the directors consider the immediate holding company to be Xizang Yulong and the ultimate holding company of the Target Company to be Wanzhixun (Wuhan) Business Management Co., Ltd. 萬之訊（武漢）商業運營管理有限公司, both of which are established in the PRC. These entities do not produce financial statements available for public use.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

12 POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE ACCOUNTING PERIOD BEGINNING FROM 1 JANUARY 2016

Up to the date of issue of the Financial Information, the IASB has issued a number of amendments and new standards which are not yet effective for period beginning from 1 January 2016 and which have not been adopted in the Financial Information. These include the following which may be relevant to the Target Company.

	Effective for accounting
	periods beginning on or after
Amendments to IAS 7, Disclosure initiative	1 January 2017
Amendments to IAS 12, Income taxes – Recognition of deferred tax assets for
unrealised losses	1 January 2017
IFRS 9, Financial instruments (2014)	1 January 2018
IFRS 9, Financial instruments (2010)	1 January 2018
IFRS 9, Financial instruments (2009)	1 January 2018
IFRS 15, Revenue from contracts with customers	1 January 2018
Annual Improvements to IFRSs 2014-2016 cycle IFRS 1 First-time Adoption of
International Financial Reporting Standards	1 January 2018
IFRS 16, Leases	1 January 2019

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 Financial Information except for the following:

IFRS 15 Revenue from contracts with customers

IFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 will supersede the current revenue recognition guidance including IAS 18 Revenue , IAS 11 Construction Contracts and the related interpretations when it becomes effective.

The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Standard introduces a 5-step approach to revenue recognition:

Step 1: Identify the contract (s) with customer
• Step 2: Identify the performance obligations in the contract • Step 3: Determine the transaction price • Step 4: Allocate the transaction price to the performance obligations in the contract • Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation

Under IFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when “control” of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in IFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by IFRS 15. The directors of the Target Company anticipate that the application of IFRS 15 in the future may have an impact on the amounts reported and disclosures made in the Target Company’s financial statements. However, it is not practicable to provide a reasonable estimate of the effect of IFRS 15 until the Target Company performs a detailed review.

The Target Company does not plan to early adopt the above new standards or amendments. With respect to IFRS 15 given the Target Company has not completed its assessment of their full impact on the Target Company, their possible impact on the Target Company’s results of operations and financial position has not been quantified.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

13 EVENT AFTER THE END OF THE REPORTING PERIOD

On 24 January 2017, the Target Company acquired the land use rights of state-owned construction land in Wuhan for a total consideration of RMB426,438,000. The acquisition of the land use rights was financed by equity injection of RMB10,000,000 from the shareholders of the Target Company and loans of RMB416,438,000 provided by the shareholders of the Target Company, which are secured by the 100% equity interests of the Target Company.

C SUBSEQUENT FINANCIAL STATEMENTS AND DIVIDENDS

No audited financial statements have been prepared by the Target Company in respect of any period subsequent to 31 December 2016. No dividend or distribution has been declared or made by the Target Company in respect of any period subsequent to 31 December 2016.

Yours faithfully,

KPMG

Certified Public Accountants Hong Kong

33 -

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(A) INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION

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 [78 x 31] intentionally omitted <==

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

2 May 2017

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

We have completed our assurance engagement to report on the compilation of 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 31 December 2016 and related notes as set out in Part B of Appendix III to the circular dated 2 May 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 III to the Circular.

The pro forma financial information has been compiled by the Directors to illustrate the impact of the proposed acquisition of 100% equity interest in Wuhan Zhonglian Shengming Real Estate Company Limited (the “Proposed Acquisition”) on the Group’s financial position as at 31 December 2016 as if the Proposed Acquisition had taken place at 31 December 2016. As part of this process, information about the Group’s financial position as at 31 December 2016 has been extracted by the Directors from the consolidated financial statements of the Group for the year then ended, on which an audit 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 behavior.

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APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The firm applies Hong Kong Standard on Quality Control 1 “Quality Control for Firms That Perform Audits and Reviews of Historical Financial Information, 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 events or transactions as at 31 December 2016 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.
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APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

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

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APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(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 Enlarged Group, being the Group together with the Target Company, as if the Acquisition had been completed on 31 December 2016 for the unaudited pro forma consolidated statement of assets and liabilities. 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 Enlarged 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 purchase agreements entered into the Company, through its whollyowned subsidiary, Tengfei Moma Real Estate (Beijing) Co., Ltd. (the “Purchase Agreements”) . Because of its hypothetical nature, the unaudited pro forma financial information may not give a true picture of the financial position of the Enlarged Group had the Acquisition been completed as of the specified date or any future date.

The unaudited pro forma financial information of the Enlarged Group is based upon the consolidated statement of financial position of the Group as at 31 December 2016, which has been extracted from the Group’s published annual report for the year 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 Purchase Agreements.

The unaudited pro forma financial information of the Enlarged Group should be read in conjunction with the historical financial information of the Group set out in the annual report of the Group for the year ended 31 December 2016 and other financial information included elsewhere in this Circular.

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APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(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 31 December 2016 RMB’000 1,820,000 517,273 2,455 31,564 99,890 643,355 2,163,958 46,350 274,230 5,599,075 4,737 10,331,289 2,277,087 2,775,600 756,858 2,177,946 4,584,391 22,907,908	Pro forma adjustments The Target Company as at 31 December 2016 Other pro forma adjustments RMB’000 RMB’000 RMB’000 (note 3a) (note 3b) (note 3c) – – – 10 – – – – – – – – – – – – – – – – – – – – – – – 10 – – – – – – 426,438 523,398 – – – 52,594 – – – – – – – – 67 – (949,850) 52,661 426,438 (426,452)	The Enlarged Group RMB’000 1,820,000 517,283 2,455 31,564 99,890 643,355 2,163,958 46,350 274,230
		The Target Company as at 31 December 2016 RMB’000 (note 3a) – 10 – – – – – – – 10 – – – 52,594 – – 67 52,661
			5,599,085
			4,737 11,281,125 2,277,087 2,828,194 756,858 2,177,946 3,634,608
			22,960,555

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APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Pro forma adjustments

		The Target
	The Group	Company as
	as at 31	at 31				The
	December	December	Other pro	forma		Enlarged
	2016	2016	adjustments			Group
	RMB’000	RMB’000	RMB’000	RMB’000		RMB’000
		(note 3a)	(note 3b)	_(note _	3c)
Current liabilities
Trade and other payables,
deposits received and accrued
charges	9,263,016	53,494	416,438	(417,275)		9,315,673
Amounts due to related parties	2,257,987	–	–		–	2,257,987
Taxation payable	1,760,075	–	–		–	1,760,075
Bank and other borrowings –
due within one year	2,463,064	–	–		–	2,463,064
Total current liabilities	15,744,142	53,494	416,438	(417,275)		15,796,799

Net current assets	7,163,766	(833)	10,000	(9,177)		7,163,756

Total assets less current
liabilities	12,762,841	(823)	10,000	(9,177)		12,762,841
Non-current liabilities
Bank and other borrowings –
due after one year	3,288,500	–	–		–	3,288,500
Senior notes	3,245,630	–	–		–	3,245,630
Corporate bond	1,023,769	–	–		–	1,023,769
Long term payable	295,317	–	–		–	295,317
Deferred tax liabilities	178,159	–	–		–	178,159
Total non-current liabilities	8,031,375	–	–		–	8,031,375

Net assets	4,731,466	(823)	10,000	(9,177)		4,731,466

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APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

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

a. The adjustment represents the Acquisition as if it had been completed on 31 December 2016 for the unaudited pro forma consolidated statement of assets and liabilities. The adjustment amounts are derived from the financial information of the Target Company as set out in Appendix II to this circular for the unaudited pro forma consolidated statement of assets and liabilities as at 31 December 2016.
b. The adjustment represents the acquisition of the land use rights in Wuhan (“Wuhan Land”) by the Target Company at a total consideration of RMB425,000,000 on 24 January 2017 and the related transaction costs of RMB1,438,000. The acquisition of the land use rights was financed by equity injection of RMB10,000,000 from and loans of RMB416,438,000 provided by the shareholders of the Target Company. For the purpose of this pro forma financial information, adjustment has been made to reflect the effect of the acquisition of the land use rights as if the acquisition had been completed on 31 December 2016.
c. The adjustment represents the total consideration for the Acquisition of RMB949,850,000 to be satisfied by cash as if the Acquisition had been completed on 31 December 2016 for the unaudited pro forma consolidated statement of assets and liabilities, including the consideration for the equity of the Target Company of RMB532,575,000 and repayment of the shareholders loan of RMB416,438,000 and payable to a related party of RMB837,000 pursuant to the Equity Transfer Agreement.

The Target Company is a project company established for development of the Wuhan Land. Given that the Wuhan Land was in initial planning stage at the date of the Purchase Agreement, the Target Company is not expected to be capable of being conducted and managed to provide a return to its owner by way of dividends, lower costs or other economic benefits prior to the completion of the Acquisition. Therefore, the assets acquired and liabilities assumed in the Target Company did not constitute a business as defined in IFRS 3 Business Combinations and, as a result, the Acquisition has been accounted for as assets acquisition. The cost of acquisition is allocated between the individual identifiable assets and liabilities in the Target Company based on their relative fair values at the acquisition date and for the purpose of the pro forma financial information, the fair values as at 28 February 2017 are used for allocation. The fair values of the identifiable assets and liabilities of the Target Company are subject to change upon the completion of the valuation of the fair values of the identifiable assets and liabilities of the Target Company on the date of completion of the Acquisition. Consequently, the actual allocation of the cost of acquisition at the date of completion will likely result in different amounts than those stated in this pro forma financial information.

d. No adjustment has been made to the unaudited pro forma financial information for acquisitionrelated costs (including fees to legal advisers, reporting accountants, printers, taxes and levies and other expenses) as the Directors determined that such costs are insignificant.
e. Apart from the adjustments as stated above, no adjustment has been made to reflect any trading results or other transactions of the Enlarged Group entered into subsequent to 31 December 2016.
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MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET COMPANY

APPENDIX IV

This appendix summarises the business and financial results and other financial information of the Target Company for the period from 5 May 2014 (date of establishment) to 31 December 2014 and the years ended 31 December 2015 and 2016.

BUSINESS AND FINANCIAL RESULTS OF THE TARGET COMPANY

The Target Company was established in the PRC with limited liability on 5 May 2014, which holds the land use rights of the Land located in Miliang Village, Hanyang District, Wuhan, Hubei Province, the PRC.

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

Revenue and gross profit

Revenue and gross profits of the Target Company for the period from 5 May 2014 to 31 December 2014 and the years ended 31 December 2015 and 2016 are as follows:

	Period from
	5 May 2014 (date
	of establishment)
	to 31 December	Year ended 31 December
	2014	2015	2016
	RMB’000	RMB’000	RMB’000
Revenue	—	—	—
Gross profit	—	—	—

During the period from 5 May 2014 to 31 December 2014 and the years ended 31 December 2015 and 2016, the Target Company generated no revenue.

Cost of sales

			Period from
			5 May 2014 (date
			of establishment)
			to 31 December	Year ended 31 December
			2014	2015	2016
			RMB’000	RMB’000	RMB’000
Cost	of	sales	—	—	—

The Target Company had no cost of sales for the period from 5 May 2014 to 31 December 2014 and the years ended 31 December 2015 and 2016.

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MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET COMPANY

APPENDIX IV

Administrative expenses and income tax

	Period from
	5 May 2014 (date
	of establishment)
	to 31 December	Year ended 31 December
	2014	2015	2016
	RMB’000	RMB’000	RMB’000
Administrative expenses	(512)	(199)	(112)
Income tax expenses	—	—	—

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

There is no income tax expense during the respective years/period.

Loss for the year/period

Period from

	Period from
	5 May 2014 (date
	of establishment)
	to 31 December	Year ended 31 December
	2014	2015	2016
	RMB’000	RMB’000	RMB’000
Loss from operations and loss
before taxation	(512)	(199)	(112)
Income tax expenses	—	—	—
Loss and total comprehensive
income for the year/period	(512)	(199)	(112)

The Target Company recorded a loss for the period from 5 May 2014 to 31 December 2014 and each of the years ended 31 December 2015 and 2016 with no income tax expenses.

FINANCIAL POSITION AND OTHER INFORMATION OF THE TARGET COMPANY

Financial resources and gearing ratio

The Target Company generally finances its operations from borrowings from its then immediate holding company, ultimate holding company and a fellow subsidiary and a close family member of its key management.

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MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET COMPANY

APPENDIX IV

As at 31 December 2014, 2015 and 2016, the Target Company’s borrowings from its then immediate holding company, ultimate holding company and a fellow subsidiary and a close family member of its key management were as follows:

(i) From the then immediate holding company, ultimate holding company and a fellow subsidiary and a close family member of the key management

	As at 31 December 2014	As at 31 December 2014	As at 31 December 2015	As at 31 December 2015	As at 31 December 2016	As at 31 December 2016
	Contractual		Contractual		Contractual
	undiscounted		undiscounted		undiscounted
	cash outflow		cash outflow		cash outflow
	within 1 year		within 1 year		within 1 year
	or on	Carrying	or on	Carrying	or on	Carrying
	demand	amount	demand	amount	demand	amount
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Wuhan Zhonglian	40,309	40,309	4,441	44,750	8,744	53,494
Wuhan Zhengbang and a fellow
subsidiary of the Target Company	15,100	15,100	900	16,000	—	—
Huang Hui	5,000	5,000	—	5,000	—	—
Total	60,409	60,409	5,341	65,750	8,744	53,494

Amounts due to the then immediate holding company, ultimate holding company and a fellow subsidiary and a close family member of the key management are unsecured, denominated in RMB and interest-free with no fixed terms of repayment. The balances included RMB60,409,000, RMB65,750,000 and RMB53,494,000 as at 31 December 2014, 2015 and 2016, respectively.

(ii) Bank borrowings

As at 31 December 2014, 2015 and 2016, the Target Company did not have any bank borrowings.

CONTINGENT LIABILITIES

As at 31 December 2016, the Target Company had no material contingent liability.

CHARGE ON ASSETS

As at 31 December 2016, the Target Company had no change on assets.

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MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET COMPANY

APPENDIX IV

FOREIGN CURRENCIES

For the period from 5 May 2014 (date of establishment) to 31 December 2014 and the years ended 31 December 2015 and 2016, there were no formal treasury policies for the Target Company. The transactions and monetary assets of the Target Company are principally denominated in RMB. The Target Company has not experienced any material difficulties or effects on its operations or liquidity as a result of fluctuations in currency exchange rates for the period from 5 May 2014 (date of establishment) to 31 December 2014 and the years ended 31 December 2015 and 2016. The Target Company did not employ any material financial instrument for hedging purposes.

EMPLOYEES’ REMUNERATION AND POLICY

During the period from 5 May 2014 to 31 December 2014 and the years ended 31 December 2015 and 2016, no remuneration was paid to the employees of the Target Company.

SEGMENTAL ANALYSIS

The Target Company is engaged in property investment and property development in the PRC. It is the project company established for the development of the Land. As the Target Company is still in its early stage of development, therefore revenue was not classified by business segments for the time being.

SIGNIFICANT INVESTMENTS HELD

During the period from 5 May 2014 to 31 December 2014 and the years ended 31 December 2015 and 2016, the Target Company did not hold any significant investments except for its interest in the Land.

MATERIAL ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES AND ASSOCIATED COMPANIES

During the period from 5 May 2014 to 31 December 2014 and the years ended 31 December 2015 and 2016, the Target Company did not have any material acquisitions or disposals.

PROSPECTS OF THE TARGET COMPANY

The Target Company is involved in property investment and property development in the PRC. It is expected that it will continue with the development of the Land. In view of the prime location and designated use 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 Hubei Province, the PRC with a view to bringing more investment return for the Shareholders. Save for the development of the Land, the Target Company has no other investment plan.

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PROPERTY VALUATION REPORT

APPENDIX V

The following is the text of the letter and valuation certificate prepared by DTZ Cushman & Wakefield Limited in connection with the valuation of the property interest held by 武漢市中聯晟鳴置業有限公司 (Wuhan Zhonglian Shengming Real Estate Company Limited) (the “ Target Company ”) as at 2 May 2017 for the purpose of incorporation in this circular.

==> picture [132 x 50] intentionally omitted <==

16/F Jardine House 1 Connaught Place Central Hong Kong

2 May 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: A parcel of land situated adjacent to the junction between San Wan Road and Hanyang Avenue, Hanyang District, Wuhan, Hubei 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 ”) 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 28 February 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”.

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PROPERTY VALUATION REPORT

APPENDIX V

VALUATION BASIS AND ASSUMPTION

Our valuation of the property exclude 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 valuing the property, we have used Direct Comparison Method by making reference to comparable sales transactions as available in the relevant market.

SOURCE 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, site and floor areas 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.

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.

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PROPERTY VALUATION REPORT

APPENDIX V

All documents and leases 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, 北京市中倫文德律師事務所, in respect of the title to the property in the PRC.

SITE INSPECTION

We have inspected the property. The site inspection was carried out on 7 March 2017 by Mr. Elvis Xia of our Wuhan office. 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 enclose herewith our valuation certificate.

Yours faithfully, For and on behalf of

DTZ 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 (General Practice) who has over 29 years’ experience in the valuation of properties in the PRC.

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PROPERTY VALUATION REPORT

APPENDIX V

VALUATION CERTIFICATE

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

Market value in Particulars of existing state as at Property Description and tenure occupancy 28 February 2017 A parcel of land The property comprises a parcel of At the date of No commercial situated adjacent to land with a site area of 45,207.97 valuation, there value the junction sq m. were a number of between San Wan temporary buildings Road and Hanyang The property is a planned erected thereon. Avenue, Hanyang residential development. The District, Wuhan, property has a total planned gross Hubei Province, floor area of 172,700 sq m. the PRC The property is located at urban area of Hanyang District of Wuhan. Developments nearby are mainly residential in nature. According to the information provided by the Group, the property is for residential use.

The land use rights of the property have been granted for a term of 70 years for residential use.

Notes:–

(1) In the course of valuation, we have ascribed no commercial value to the property as the State-owned Land Use Rights Certificate has not been obtained. Had the Group obtained the State-owned Land Use Rights Certificate and transferred land use rights been granted, the market value of the property in its existing state as at 28 February 2017 would be RMB950,000,000.
(2) According to State-owned Land Use Rights Transaction Confirmation Letter No. (2016) 183 entered into between the Wuhan Land Resources and Planning Bureau and 武漢市中聯晟鳴置業有限公司 (Wuhan Zhonglian Shengming Real Estate Company Limited) (the “ Target Company ”) on 24 January 2017, the land use rights of the property have been contracted to be sold to the Target Company with details as follows:–

(i) Site Area : 45,207.97 sq m (ii) Use : Residential, park and greenery (iii) Total Gross Floor Area : 172,700 sq m (iv) Land Premium : RMB425,000,000

48 -

PROPERTY VALUATION REPORT

APPENDIX V

(v) Utility or ancillary facilities : Construction of a kindergarten on a site area of not less than 3,800 sq m; construction of a post office with a gross floor area of not less than 200 sq m and construction of public rental housing (not less than 5% of the gross floor area of commodity housing)
(3) According to the Reserved Land Development Compensation Agreement (the “ Compensation Agreement ”) entered into between Wuhan Land Reservation Centre and Wuhan Zhonglian Shengming Real Estate Company Limited on 24 January 2017, the Target Company is responsible for constructing a residential development (which is proposed to be built adjacent to the subject site) with a gross floor area of 90,000 sq m. (the “ Construction Obligation ”) . Once completed, the development shall be handed over 武漢市漢陽區永豐街米糧村村民委員會 (the “ Committee ”) . The Committee shall pay the cost (based on construction unit cost of RMB2,800 per sq m) to Wuhan Zhonglian Shengming Real Estate Company Limited. As advised by the Group, the relevant parties propose to enter into a supplemental agreement to the Compensation Agreement to remove the Construction Obligation in the Compensation Agreement.
(4) We have been specially instructed by the Group to value the property on the basis assuming that the property at the valuation date was a vacant land and Construction Obligation as stated in note (3) has been removed.
(5) According to Business Licence No. 914201133033508093, the Target Company was established on 5 May 2014 as a limited company with a registered capital of RMB10,000,000.
(6) We have been provided with a legal opinion on the title to the property, which contains, inter-alia, the following information:–
(i) State-owned Land Use Rights Transaction Confirmation Letter was entered into between the Target Company and Wuhan Land Resources and Planning Bureau;
(ii) According to the PRC laws and the terms and conditions stated in the State-owned Land Use Rights Transaction Confirmation Letter, the Target Company is entitled to apply for the State-owned Land Use Rights Grant Contract of the property. There is no potential legal obstacle in applying for the State-owned Land Use Rights Grant Contract;
(iii) Once the State-owned Land Use Rights Grant Contract has been signed and the relevant taxes have been settled, the Target Company shall be entitled to apply for State-owned Land Use Rights Certificate of the property. There is no legal impediment in obtaining the State-owned Land Use Rights Certificate;
(iv) The Target Company shall be entitled to occupy, use, transfer, mortgage and dispose of the land use rights of the property after obtaining the State-owned Land Use Rights Certificate;
(v) Prior to the signing of the Land Use Rights Grant Contract and obtaining the State-owned Land Use Rights Certificate, the land use rights of the property is owned by the State; and
(vi) Once the supplemental agreement to the Compensation Agreement has been signed, the Target Company shall no longer be bound by the Construction Obligation in the Compensation Agreement.
49 -

GENERAL INFORMATION

APPENDIX VI

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
			percentage of
Names of Directors	Nature of interest	Number of Shares	shareholding
		(Note 8)
Zhang Lei	Beneficiary of a trust	1,661,175,700 (L)	66.35%
		(Note 1)
	Beneficial owner	19,497,400 (L)	0.78%
		(Notes 2 & 7)
Zhang Peng	Interest in a controlled	5,438,400 (L)	0.22%
	corporation	(Note 3)
	Beneficial owner	14,900,000 (L)	0.60%
		(Notes 4 & 7)
Chen Yin	Interest in a controlled	6,283,200 (L)	0.25%
	corporation	(Note 5)
Fan Qingguo	Interest in a controlled	5,438,400 (L)	0.22%
	corporation	(Note 6)
Hui Chun Ho, Eric	Beneficial owner	500,000 (L)	0.02%
		(Note 7)

50 -

APPENDIX VI

GENERAL INFORMATION

Notes:

Such 1,661,175,700 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.
8,479,900 Shares out of the 19,497,400 Shares are beneficially held by Mr. Zhang Lei in his own capacity while the remaining 11,017,500 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 5,438,400 Shares out of the issued share capital of the Company. Therefore, Mr. Zhang Peng is deemed to have the same interest in the Company.
2,750,000 Shares out of the 14,900,000 Shares are beneficially held by Mr. Zhang Peng in his own capacity while the remaining 12,150,000 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 6,283,200 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 5,438,400 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 11,017,500 Shares, Mr. Zhang Peng’s interest in 12,150,000 Shares and Mr. Hui Chun Ho, Eric’s interest in 500,000 Shares) is held pursuant to the share options granted under the Share Option Scheme.
“L” stands for a long position in the Shares.
51 -

GENERAL INFORMATION

APPENDIX VI

(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
			percentage of
Names of Shareholders	Nature of interest	Number of Shares	shareholding
		(Note 3)
Super Land	Registered holder	1,661,175,700 (L)	66.35%
		(Note 1)
Fantastic Energy Ltd.	Interest in a controlled	1,661,175,700 (L)	66.35%
	corporation	(Note 1)
TMF (Cayman) Limited	Trustee	1,661,175,700 (L)	66.35%
		(Note 1)
Salum Zheng Lee	Settlor of a	1,661,175,700 (L)	66.35%
	discretionary trust	(Note 1)
Zhang Degui	Interest of a spouse	1,661,175,700 (L)	66.35%
		(Note 2)

Notes:

Such 1,661,175,700 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 1,661,175,700 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 1,661,175,700 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.

52 -

GENERAL INFORMATION

APPENDIX VI

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 should 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. Each of Mr. Fan Qingguo and Mr. Zhong Tianxiang entered into a service contract with the Company, pursuant to which each of them agreed to act as a non-executive Director for a term of three years with effect from 26 August 2014. 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. COMPETITING BUSINESS INTEREST OF DIRECTORS

In order to eliminate competing business with the Group, Mr. Zhang Lei and Mr. Salum Zheng Lee, among others, entered into a non-competition deed 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.

53 -

GENERAL INFORMATION

APPENDIX VI

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, no member of the Enlarged 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 Enlarged Group.

7. MATERIAL CONTRACTS

The following contracts have been entered into by the Enlarged 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 15 July 2015, the Company and Kingston Securities Limited entered into a conditional placing agreement in relation to the placing of up to 320,000,000 Shares at a price of HK$1.05 per Share to not less than six placees;
(2) on 18 August 2015, Shengeng Zhiye Investment (Beijing) Co., Ltd., Shaanxi Hongsheng Industrial Group Company Limited and Shaanxi Hejin Mineral Company Limited entered into an equity transfer agreement whereby Shengeng Zhiye Investment (Beijing) Co., Ltd. agreed to acquire 26% and 25% equity interest in Shaanxi Zhuoli Industrial Company Limited from Shaanxi Hongsheng Industrial Group Company Limited and Shaanxi Hejin Mineral Company Limited, respectively, at an aggregate consideration of RMB10,200,000, and Shengeng Zhiye Investment (Beijing) Co., Ltd. shall provide Shaanxi Zhuoli Industrial Company Limited with a loan in an amount of RMB200,000,000;
(3) four interest transfer agreements dated 16 September 2015, 17 September 2015, 18 September 2015 and 19 September 2015 entered into among Modern Green Development Co., Ltd., San Sheng Hong Ye and Shihezi Hong Rui Rui An Equity Investment Partnership whereby the aggregate interest of RMB200,000,000 in Shanghai Zhong Cheng Can Shuo Investment Centre were transferred by San Sheng Hong Ye (on behalf of Modern Green Development Co., Ltd.) to Shihezi Hong Rui Rui An Equity Investment Partnership at a consideration of RMB200,000,000;
(4) on 12 October 2015, Modern Green Development Co., Ltd. and Tujia Network Technology (Beijing) Company Limited entered into a strategic cooperation framework agreement, pursuant to which the parties agreed to establish a cooperation framework in respect of the management services of community apartments;
54 -

GENERAL INFORMATION

APPENDIX VI

(5) on 20 October 2015, 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 Xinjian Modern Real Estate Development Co., Ltd. at a consideration of RMB80,500,000;
(6) on 8 January 2016, Modern Green Development Co., Ltd. and Huainan Xinyi Real Estate Development Co., Ltd. entered into an equity transfer agreement whereby Modern Green Development Co., Ltd. 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;
(7) 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;
(8) 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;
(9) 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;
(10) 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;

55 -

APPENDIX VI

GENERAL INFORMATION

(11) on 27 June 2016, Modern Green Development Co., Ltd. and Shenzhen Pingan Dahua Huitong Wealth Management Company Limited entered into an equity transfer agreement whereby Modern Green Development Co., Ltd. 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;
(12) 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;
(13) 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;
(14) 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 USD350,000,000 6.875% senior notes due 2019;
(15) on 3 November 2016, the Company entered into the subscription agreement with China Cinda (HK) Asset Management Co., Limited, pursuant to which 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;
(16) 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 (equivalent to approximately HK$145,590,000) ;
(17) on 29 December 2016, the Company, certain subsidiaries of the Company organised outside the PRC, Guotai Junan Securities (Hong Kong) Limited and Zhongtai International Securities Limited entered into a purchase agreement in connection with the issue of the additional US$ denominated senior notes due 2019 in the aggregate principal amount of US$150,000,000 by the Company;
(18) the Equity Transfer Agreement;
56 -

APPENDIX VI

GENERAL INFORMATION

(19) 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 of the transferees’ rights of distribution in Lifeng No.1 and Lifeng No.2;
(20) on 5 April 2017, Hongye Benpao, 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; and
(21) on 5 April 2017, Zhihui Hongye, 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.

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
DTZ Cushman & Wakefield Limited	Property valuer

As at the Latest Practicable Date, KPMG and DTZ Cushman & Wakefield Limited 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 and DTZ Cushman & Wakefield Limited did not have any shareholding in any member of the Enlarged Group and did not have the right to subscribe for or to nominate persons to subscribe for shares in any members of the Enlarged Group.

As at the Latest Practicable Date, KPMG and DTZ Cushman & Wakefield Limited 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 Enlarged Group, or which are proposed to be acquired or disposed of by or leased to any member of the Enlarged Group since 31 December 2016, being the date to which the latest published audited consolidated financial statements of the Company were made up.

57 -

GENERAL INFORMATION

APPENDIX VI

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 Enlarged 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.
(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 Enlarged Group, which was subsisting and was significant in relation to the business of the Enlarged 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 Room 505, ICBC 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 Room 505, ICBC 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 16 May 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;
(c) the accountant’s report on the Target Company, the text of which is set out in Appendix II to this circular;
58 -

GENERAL INFORMATION

APPENDIX VI

(d) the report on the unaudited pro forma financial information of the Enlarged Group upon the completion of the Acquisition, the text of which is set out in Appendix III to this circular;
(e) the property valuation report of the property interests held by the Target Company, the text of which is set out in Appendix V to this circular;
(f) the material contracts as referred to in the section headed “Material Contracts” of this appendix;
(g) the written consents of the experts as referred to in the section headed “Experts and Consents” of this appendix;
(h) the Equity Transfer Agreement; and
(i) this circular.
59 -

AI assistant

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

49690_rns_2017-05-02_af2dd373-9ada-4489-b939-acfa19def8ed.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

MAJOR TRANSACTION IN RELATION TO ACQUISITION OF 100% EQUITY INTEREST IN A PRC COMPANY HOLDING A LAND PARCEL IN WUHAN

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

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

(Stock Code: 1107)

MAJOR TRANSACTION IN RELATION TO ACQUISITION OF 100% EQUITY INTEREST IN A PRC COMPANY HOLDING A LAND PARCEL IN WUHAN

INTRODUCTION

THE ACQUISITION

Equity Transfer Agreement

Date

Parties

Subject assets to be acquired

LETTER FROM THE BOARD

Consideration

LETTER FROM THE BOARD

The first installment

The second installment

The third installment

Completion

INFORMATION ABOUT PARTIES TO THE EQUITY TRANSFER AGREEMENT

The Company and Tengfei Moma

Vendor I

Vendor II

INFORMATION ABOUT THE TARGET COMPANY AND THE LAND

The Target Company

LETTER FROM THE BOARD

The Land

REASONS FOR AND BENEFIT OF ENTERING INTO THE EQUITY TRANSFER AGREEMENT

FINANCIAL EFFECT OF THE ACQUISITION

1. Assets and liabilities

LETTER FROM THE BOARD

2. Earnings

LISTING RULES IMPLICATIONS

RECOMMENDATION

FURTHER INFORMATION

I. FINANCIAL INFORMATION OF THE GROUP FOR THE THREE FINANCIAL YEARS ENDED 31 DECEMBER 2016

II. INDEBTEDNESS

1. Borrowings

2. Contingent liabilities and other guarantees

III. WORKING CAPITAL

IV. MATERIAL ADVERSE CHANGE

V. OUTLOOK AND PROSPECTS

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

VI. OTHER INFORMATION

(a) Liquidity and financial resources

(b) Gearing ratio

(c) Employee and remuneration policy

(d) Material acquisitions by the Group

INTRODUCTION

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL INFORMATION

REPORTING ACCOUNTANTS’ RESPONSIBILITY

OPINION

A FINANCIAL INFORMATION OF THE TARGET COMPANY

2 STATEMENTS OF FINANCIAL POSITION

3 STATEMENTS OF CHANGES IN EQUITY

4 CASH FLOW STATEMENTS

B NOTES TO FINANCIAL INFORMATION

1 BACKGROUND

2 SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance

(b) Basis of presentation and going concern

(c) Basis of measurement

(d) Use of estimates and judgements

(e) Properties under development for sale

(f) Properties held for sale

(g) Financial instruments

(i) Financial assets

(ii) Effective interest method

(iii) Loans and receivables

(iv) Financial liabilities

(v) Effective interest method

(vi) Derecognition

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