Novautek Technologies Group Limited — M&A Activity 2019

Jun 28, 2019

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Kong Sun Holdings Limited, you should at once hand this circular to the purchaser or the transferee or to the bank manager, licensed securities dealer or registered institution in securities or other agent through whom the sale was effected for transmission to the purchaser or the transferee.

Hong Kong Exchange 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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KONG SUN HOLDINGS LIMITED 江 山 控 股 有 限 公 司

(Incorporated in Hong Kong with limited liability)

(Stock Code: 295)

MAJOR TRANSACTION DISPOSAL OF A SUBSIDIARY

28 June 2019

CONTENTS

		Pages
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from	the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Appendix I	— Financial Information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
Appendix II	— Valuation Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
Appendix III — General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		III-1

– i –

DEFINITIONS

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

• ‘‘Agreement’’

• the equity transfer agreement dated 28 March 2019 (as amended and supplemented by the Memorandum) and entered into among the Purchaser, Kong Sun Yongtai and Zhongli Tenghui in relation to the Disposal

• ‘‘Announcement’’ the announcement of the Company dated 28 March 2019 in relation to the Disposal

• ‘‘Board’’ the board of Directors

• ‘‘CGN Group’’ 中國廣核集團有限公司 (CNG Group Co., Ltd.*), a company established in the PRC and the ultimate beneficial owner of which is the SASAC

• ‘‘Company’’ Kong Sun Holdings Limited, a company incorporated in Hong Kong with limited liability, the Shares of which are listed on the main board of the Stock Exchange

• ‘‘Completion’’

• completion of the Disposal

• ‘‘connected person(s)’’ has the meaning ascribed to it under the Listing Rules

• ‘‘Director(s)’’ the director(s) of the Company

• ‘‘Disposal’’

• the sale of the entire equity interest in Zhongli Tenghui by Kong Sun Yongtai to the Purchaser

• ‘‘Equity Transfer Registration’’

• the transfer of the equity interest in Zhongli Tenghui being registered by the relevant administration for industry and commerce bureau

• ‘‘Equity Transfer Registration Date’’

• 17 April 2019, being the date of completion of the Equity Transfer Registration

• ‘‘Group’’

the Company and its subsidiaries

• ‘‘Hong Kong’’

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

• ‘‘Huaxia Finance’’ 華夏金融租賃有限公司 (Huaxia Finance Leasing Co., Ltd.*), a company established in the PRC

– 1 –

DEFINITIONS

• ‘‘Huaxia Finance Lease Agreements’’

• the finance lease agreement dated 10 November 2015 and entered into between Zhongli Tenghui and Huaxia Finance and its supplemental agreement dated 11 April 2016 and entered into among Kong Sun Yongtai, Zhongli Tenghui, the Company and Huaxia Finance

• ‘‘Kong Sun Yongtai’’

• 江山永泰投資控股有限公司 (Kong Sun Yongtai Investment Holdings Limited*), a company established in the PRC and an indirect wholly-owned subsidiary of the Company

• ‘‘Latest Practicable Date’’

• 26 June 2019, being the latest practicable date prior to the printing of this circular for ascertaining certain information for inclusion in this circular

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

• ‘‘Memorandum’’ the legally binding cooperation memorandum dated 16 May 2019 and entered into among the Purchaser, Kong Sun Yongtai and Zhongli Tenghui in relation to the settlement of the consideration of the Disposal

• ‘‘MW’’ mega watts

• ‘‘Pohua JT’’

• Pohua JT Private Equity Fund L.P., a private equity investment fund established in the Cayman Islands

• ‘‘PRC’’

• the People’s Republic of China which, for the purpose of this circular, excludes Hong Kong, the Macao Special Administrative Region of the People’s Republic of China and Taiwan

• ‘‘Purchaser’’ 中 廣 核 太 陽 能 開 發 有 限 公 司 ( C G N S o l a r E n e r g y Development Limited*), a company established in the PRC and a subsidiary of CGN Group

• ‘‘RMB’’ Renminbi, the lawful currency of the PRC

• ‘‘SASAC’’

• 國務院國有資產監督管理委員會 (State-owned Assets Supervision and Administration Commission of the State Council*)

• ‘‘Share(s)’’ ordinary share(s) in the share capital of the Company

• ‘‘Shareholder(s)’’ holders of the Shares

• ‘‘Stock Exchange’’

The Stock Exchange of Hong Kong Limited

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DEFINITIONS

• ‘‘Transition Period’’

the period from 30 June 2018 to the Equity Transfer Registration Date

• ‘‘Transition Period Audit’’

the audit performed by an independent auditor with respect to Zhongli Tenghui for and as at the end of the Transition Period

• ‘‘Zhangshu Project’’

a 30 MW solar power plant owned by Zhongli Tenghui in Zhangshu City, Jiangxi Province

‘‘Zhongli Tenghui’’ 樟樹市中利騰暉光伏有限公司 (Zhangshu Zhongli Tenghui Solar Co., Ltd.*), a company established in the PRC

• ‘‘%’’

per cent.

• For identification purposes only

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LETTER FROM THE BOARD

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KONG SUN HOLDINGS LIMITED 江 山 控 股 有 限 公 司

(Incorporated in Hong Kong with limited liability)

(Stock Code: 295)

Executive Directors：

Mr. Zeng Jianhua (Chief Executive Officer and Chairman) Mr. Hou Yue Mr. Deng Chengli Mr. Jin Yanbing

Registered Office and Principal Place of Business： Unit 1209–10, 12/F, Everbright Centre, 108 Gloucester Road, Wanchai, Hong Kong

Non-Executive Directors：

Mr. Wu Tak Kong Mr. Wang Ke

Independent Non-Executive Directors：

Mr. Miu Hon Kit Mr. Chen Kin Shing

Ms. Wang Fang

28 June 2019

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION DISPOSAL OF A SUBSIDIARY

INTRODUCTION

The Company announced on 28 March 2019 that Kong Sun Yongtai, a wholly-owned subsidiary of the Company, the Purchaser and Zhongli Tenghui entered into the Agreement, pursuant to which Kong Sun Yongtai agreed to sell, and the Purchaser agreed to acquire, the entire equity interest in Zhongli Tenghui for a total consideration of approximately RMB109,715,000, which was subsequently adjusted to approximately RMB137,099,000 based on the Transition Period Audit.

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LETTER FROM THE BOARD

Pursuant to Rule 14.44 of the Listing Rules, in lieu of holding a general meeting, written Shareholders’ approval for approving the major transaction contemplated under the Agreement has been obtained from Pohua JT, holding 9,286,301,000 Shares representing approximately 62.06% of the total voting rights of the Company as at the date of the Announcement.

The purpose of this circular is to provide you with, among other things, further details of the Disposal.

THE DISPOSAL

Principal Terms of the Agreement

Date

28 March 2019

Parties

• (i) the Purchaser;

• (ii) Kong Sun Yongtai, an indirect wholly-owned subsidiary of the Company; and

• (iii) Zhongli Tenghui.

As at the Latest Practicable Date, to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, each of the Purchaser and its ultimate beneficial owner is a third party independent of the Company and connected persons of the Company.

Subject Matter

Pursuant to the Agreement, Kong Sun Yongtai agreed to sell, and the Purchaser agreed to acquire, the entire equity interest in Zhongli Tenghui.

Consideration

The aggregate consideration for the Disposal, prior to adjustment being made pursuant to the Transition Period Audit, was approximately RMB109,715,000, which comprised of：

• (i) approximately RMB34,395,000, for the transfer of the entire equity interest in Zhongli Tenghui (the ‘‘Equity Consideration’’); and

• (ii) approximately RMB75,320,000, being the amount of the outstanding shareholder’s loans from Kong Sun Yongtai to Zhongli Tenghui as at 30 June 2018 (the ‘‘Debt Consideration’’).

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LETTER FROM THE BOARD

Based on the Transition Period Audit, the Debt Consideration was increased by approximately RMB27,384,000, from approximately RMB75,320,000 to approximately RMB102,704,000 (the ‘‘Adjusted Debt Consideration’’). On 16 May 2019, the parties entered into the Memorandum, pursuant to which the aggregate consideration for the Disposal was adjusted to approximately RMB137,099,000 (the ‘‘Adjusted Consideration’’) whilst the Equity Consideration remains unchanged at approximately RMB34,395,000.

Payment of the Equity Consideration

Pursuant to the Memorandum, the Equity Consideration would be payable by the Purchaser to Kong Sun Yongtai on or before 17 May 2019. Kong Sun Yongtai had received the full amount of the Equity Consideration.

Payment of the Adjusted Debt Consideration

Pursuant to the Memorandum, approximately RMB47,932,000 out of the Adjusted Debt Consideration, representing approximately 35.0% of the Adjusted Consideration, would be payable by the Purchaser to Kong Sun Yongtai, on or before 17 May 2019; and the remaining amount of the Adjusted Debt Consideration would be settled as follows:

• (i) within 10 business days upon Zhongli Tenghui having collected the government subsidies in the amount of approximately RMB27,672,000 (the ‘‘Accounts Receivables’’), representing approximately 20.2% of the Adjusted Consideration, Zhongli Tenghui shall pay an equal amount to Kong Sun Yongtai;

• (ii) within 10 business days upon Zhongli Tenghui having collected the deposit in the amount of RMB14,400,000 from Huaxia Finance (the ‘‘Huaxia Finance Deposit’’) under the Huaxia Finance Lease Agreements, representing approximately 10.5% of the Adjusted Consideration, which will be released upon the repayment of loans and borrowings by Zhongli Tenghui to Huaxia Finance (but in any event not later than three months after the Equity Transfer Registration Date), Zhongli Tenghui shall pay such amount to Kong Sun Yongtai; and

• (iii) within 10 business days upon completion of each of certain rectification works items (including (i) assisting Zhongli Tenghui in obtaining all relevant approvals on compliance documents or opinions from the relevant government authorities and (ii) completing rectification of all defects of the Zhangshu Project, such as defects on cables and equipment component connections, and the Purchaser having confirmed that all such defects have been rectified) at the Zhangshu Project on or before 31 August 2019, the Purchaser shall pay Kong Sun Yongtai an amount corresponding to the completion of each rectification works item in the aggregate amount of approximately RMB12,700,000 (the ‘‘Rectification Deposit’’), representing approximately 9.3% of the Adjusted Consideration.

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LETTER FROM THE BOARD

During the Transition Period, (i) Zhongli Tenghui collected part of the Accounts Receivables in the amount of approximately RMB2,786,000 (the ‘‘Collected Accounts Receivables’’) and the outstanding amount of the Accounts Receivables was reduced from approximately RMB27,672,000 to approximately RMB24,886,000 and (ii) the amount of Huaxia Finance Deposit and the amount of the Rectification Deposit remained the same.

According to the Huaxia Finance Lease Agreements, the aggregate principal amount of the loans granted by Huaxia Finance to Zhongli Tenghui was RMB180,000,000, and the loans were guaranteed by Kong Sun Yongtai and the Company in favour of Huaxia Finance (the ‘‘Guarantee’’). As at 30 April 2019, the outstanding loans and accrued interest under the Huaxia Finance Lease Agreements was approximately RMB145,200,000 (the ‘‘Huaxia Finance Loans’’). The Purchaser agreed to assume the Huaxia Finance Loans in accordance with the Agreement. As at the Latest Practicable Date, the Purchaser already repaid, through Zhongli Tenghui, approximately RMB6,400,000 to Huaxia Finance according to the quarterly repayment schedule under the Huaxia Finance Lease Agreements. As such, the outstanding amount of the Huaxia Finance Loans was reduced to approximately RMB138,800,000.

The Company, Kong Sun Yongtai, Zhongli Tenghui and the Purchaser are in active discussion on the repayment arrangement and the release of the Guarantee with Huaxia Finance. To the knowledge of the Directors, the Purchaser is arranging for new bank facilities to repay the Huaxia Finance Loans on or before 17 July 2019.

Based on the above, the Directors are of the view that there is no impediment to repay the outstanding amount of the Huaxia Finance Loans by the Purchaser and release the Guarantee on or before 17 July 2019.

The Huaxia Finance Deposit, representing approximately 10.5% of the Adjusted Consideration, will be paid to Kong Sun Yongtai within 10 business days upon the repayment of the Huaxia Finance Loans. Such amount is expected to be received by Kong Sun Yongtai by the end of July 2019.

Pursuant to the Memorandum, the Purchaser would, on or before 17 May 2019, through Zhongli Tenghui, pay to Kong Sun Yongtai approximately RMB50,718,000 consisting of approximately RMB47,932,000 and the Collected Accounts Receivables. Kong Sun Yongtai had received such payment. As at the Latest Practicable Date, Kong Sun Yongtai has received approximately RMB85,113,000, representing approximately 62.1% of the Adjusted Consideration, which consists of approximately RMB50,718,000, representing approximately 49.4% of the Adjusted Debt Consideration, and approximately RMB34,395,000, representing 100% of the Equity Consideration.

The remaining Adjusted Debt Consideration in the amount of approximately RMB51,986,000 shall be payable to Kong Sun Yongtai in accordance with the payment schedule set out under the paragraph headed ‘‘Payment of the Adjusted Debt Consideration’’ above. Kong Sun Yongtai is expected to receive the Huaxia Finance Deposit and the Rectification Deposit in an aggregate amount of approximately RMB27,100,000 on or before 31 August 2019, representing approximately 19.8% the Adjusted Consideration.

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LETTER FROM THE BOARD

As set forth under the paragraph headed ‘‘Comparable Transactions’’ below, it is not uncommon that a portion of the consideration for transactions similar to the Disposal would be payable after completion and linked to the receipt of government subsidies and completion of rectification works. As for the Disposal, (i) approximately 62.1% of the Adjusted Consideration (i.e. the Equity Consideration and approximately RMB50,718,000 as part of the repayment of the Adjusted Debt Consideration) has been received by Kong Sun Yongtai within one (1) month of Completion; (ii) the Huaxia Finance Deposit is expected to be paid to Kong Sun Yongtai in full by the end of July 2019; (iii) the Rectification Deposit is expected to be paid to Kong Sun Yongtai in full by the end of August 2019 and (iv) the remaining portion of the Adjusted Debt Consideration in the amount of approximately RMB24,886,000, being the government subsidies and representing approximately 18.1% of the Adjusted Consideration, will be paid subject to the receipt of government subsidies.

Taking into consideration of the general market practice in the solar industry as well as other previous transactions undertaken by the Group, the Directors are of the view that the payment schedule for the Adjusted Consideration is fair and reasonable.

The Adjusted Consideration was determined upon arm’s length negotiations between Kong Sun Yongtai and the Purchaser with reference to the unaudited net asset value of Zhongli Tenghui as at 31 December 2018 in the amount of approximately RMB39,558,000, and adjusted by (a) applying a discount of approximately 13.1%, resulting in the amount of approximately RMB34,395,000; and (b) adding the Adjusted Debt Consideration in the amount of approximately RMB102,704,000. The Adjusted Debt Consideration, which represents the capital injected by the shareholder of Zhongli Tenghui, was added back to the net asset value of Zhongli Tenghui in determining the value of Zhongli Tenghui.

In considering the discount applied to the value of the underlying assets of Zhongli Tenghui for the determination of the Adjusted Consideration, the management of the Company took into consideration of the following:

• (i) the rates of discount applied to the net assets value in similar transactions by other publicly listed companies in the same industry of the Group;

• (ii) the unaudited total assets and total liabilities of Zhongli Tenghui as at 31 December 2018 of approximately RMB310,808,000 and approximately RMB271,250,000, respectively;

• (iii) the outstanding shareholder’s loans from Kong Sun Yongtai to Zhongli Tenghui as at the end of the Transition Period of approximately RMB102,704,000; and

• (iv) the financial and cash flow position of Zhongli Tenghui, in particular, the net cash outflow position for the years ended 31 December 2017 and 2018 if the shareholder’s loan were not provided.

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LETTER FROM THE BOARD

Comparable Transactions

The Company selected seven comparable transactions listed below as a reference to the discount rate applied to the net assets value of Zhongli Tenghui based on the following criteria:

• (i) the subject entity is principally engaged in solar power plants operations in the PRC;

• (ii) the underlying power plant is located in the similar resource zone as Zhongli Tenghui;

• (iii) the underlying power plant has been in operation for more than six months and was profit-making in the latest financial year; and

• (iv) the transaction took place in either 2018 or 2019.

Details of the selected comparable transactions are set out below:

Name of the public Transaction Consideration for Net assets of the Discount/ No. Date company description the transaction subject entity Premium rate Payment schedule 1. 18 April Beijing Enterprises BECE announced a RMB378,874,812 for RMB446,000,000 as Discount of Approximately 8.2% of the 2018 Clean Energy potential 100% equity at 31 March approximately consideration was payable Group Limited acquisition of interest 2018 15.1% to the upon completion, (‘‘BECE’’) (stock 響水恆能太陽能發 net assets value approximately 13.6% of code: 1250), 電有限公司 of XSHN the consideration was whose shares are (Xiangshui payable one (1) month listed on the Hengneng after completion, Stock Exchange Photovoltaic approximately 47.9% of Power Co. Ltd.*) the consideration was (‘‘XSHN’’) which payable within one (1) was operating a year of completion, 100MW solar approximately 7.7% of the power plant in consideration was payable Yancheng City, after one (1) year of Jiangsu Province, completion and the PRC. approximately 22.6% of the consideration was payable depending on the receipt of government subsidies and completion of certain rectification work

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LETTER FROM THE BOARD

		Name of the public	Transaction	Consideration for	Net assets of the	Discount/
No.	Date	company	description	the transaction	subject entity	Premium rate	Payment schedule
2.	18 April	BECE	BECE announced a	RMB78,804,286 for	RMB85,000,000 as	Discount of	Approximately 3.2% of the
	2018		potential	100% equity	at 31 March	approximately	consideration was payable
			acquisition of	interest	2018	7.3% of the net	upon completion,
			響水永能太陽能發			assets value of	approximately 19.9% of
			電有限公司			XSYN	the consideration was
			(Xiangshui				payable one (1) month
			Yongneng				after completion,
			Photovoltaic				approximately 45.4% of
			Power Co. Ltd.*)				the consideration was
			(‘‘XSYN’’), which				payable within one (1)
			was operating a				year of completion,
			20MW solar				approximately 8.0% of the
			power plant in				consideration was payable
			Yancheng City,				after one (1) year of
			Jiangsu Province,				completion and
			the PRC.				approximately 23.5% of
							the consideration was
							payable depending on the
							receipt of government
							subsidies and completion
							of certain rectification
							work
3.	13 July 2018	常州亞瑪頓股份有限	Changzhou Almaden	RMB192,896,878 for	RMB204,722,700 as	Discount of	Approximately 20.7% of the
		公司(Changzhou	announced its	100% equity	at 21 June 2018	approximately	consideration was payable
		Almaden Co.,	disposal of 100%	interest		5.8% to the net	upon completion,
		Ltd.*)	equity interest in			assets value of	approximately 36.1% of
		(‘‘Changzhou	a company, which			the disposed	the consideration was
		Almaden’’) (stock	was operating a			entity	payable within one (1)
		code: 002623)),	50MW solar				year after completion,
		whose shares are	power plant in				approximately 19.0% of
		listed on the	Guizhou, the				the consideration was
		Shenzhen Stock	PRC.				payable after one (1) year
		Exchange					of completion and
							approximately 24.2% of
							the consideration was
							payable depending on the
							completion of certain
							rectification work
4.	24 October	GCL New Energy	GCL announced its	RMB119,160,000 for	RMB177,288,000 as	Discount of	Approximately 92.3% of the
	2018	Holdings Ltd	disposal of 80%	80% equity	at 30 June 2018	approximately	consideration was payable
		(‘‘GCL’’) (stock	equity interest in	interest (i.e.		16.0% to the	one (1) month after
		code: 451), whose	a company which	RMB148,950,000		net assets value	completion and
		shares are listed	was operating a	for 100% equity		of the disposed	approximately 7.7% of the
		on the Stock	100MW solar	interest)		entity	consideration was payable
		Exchange	power plant in				within one (1) year after
			Yueyang City,				completion
			Hunan Province,
			the PRC.

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LETTER FROM THE BOARD

		Name of the public	Transaction	Consideration for	Net assets of the	Discount/
No.	Date	company	description	the transaction	subject entity	Premium rate	Payment schedule
5.	24 October	GCL	GCL also announced	RMB93,500,000 for	RMB124,087,000 as	Discount of	Approximately 88.2% of the
	2018		its disposal of	80% equity	at 30 June 2018	approximately	consideration was payable
			80% equity	interest (i.e.		5.8% to the net	within one (1) month after
			interest in a	RMB116,875,000		assets value of	completion and
			company which	for 100% equity		the disposed	approximately 11.8% of
			was operating a	interest)		entity	the consideration was
			60MW solar				payable within one (1)
			power plant in				year after completion
			Yueyang City,
			Hunan Province,
			the PRC.
6.	2 November	珈偉新能源股份有限	Jiawei announced its	RMB323,478,337 for	RMB297,503,100 as	Premium of	Not publicly available
	2018	公司(Jiawei	disposal of 100%	100% equity	at 30 September	approximately	information
		Renewable Energy	equity interest in	interest	2018	8.7% to the net
		Co., Ltd.*)	a company, which			assets value of
		(‘‘Jiawei’’) (stock	was operating a			the disposed
		code: 300317),	100MW solar			entity
		whose shares are	power plant in
		listed on the	Gaoyou City,
		Shenzhen Stock	Jiangsu Province,
		Exchange	the PRC.
7.	28 March	GCL	GCL announced its	RMB246,440,000 for	RMB535,295,000 as	Discount of	Approximately 85.0% of the
	2019		disposal of 55%	55% equity	at 31 December	approximately	consideration was payable
			equity interest in	interest (i.e.	2018	16.3% of the	within one (1) month after
			three solar power	RMB448,072,727		net assets value	completion and
			plants with total	for 100%)		of the disposed	approximately 15.0% of
			capacity of			entities	the consideration was
			280MW located in				payable depending on the
			Hunan Province				receipt of government
			and Hubei				subsidies and completion
			Province, the				of certain rectification
			PRC.				work

Taking into account of the above-mentioned selection criteria, the above list is the exhaustive list of the selected comparable transactions identified by the Directors. Since the information of the sample transactions is publicly available and thus more reliable and based on the selection criteria, they are comparable to the Disposal. The Directors are of the view that they are fair and representative samples to determine the discount rate of approximately 13.1% applied to the net assets value of Zhongli Tenghui.

Penalty

If the Purchaser fails to fulfil its obligations to pay the Adjusted Consideration, the Purchaser shall be liable to pay to Kong Sun Yongtai a daily default payment of 0.05% on the respective amount of the Adjusted Consideration for the first thirty (30) days and thereafter Kong Sun Yangtai is entitled to terminate the Agreement if the default situation continues and request the Purchaser to pay the liquidated damages in the amount of 30% of the Adjusted Consideration. Upon termination of the Agreement, the Purchaser will be obliged to unwind the Disposal by transferring back to Kong Sun Yongtai the entire equity interest in Zhongli Tenghui. In the event that the Purchaser fails to perform its obligation, Kong Sun Yongtai will

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LETTER FROM THE BOARD

be entitled to commence litigation against the Purchaser in the PRC court with competent jurisdiction. If the Purchaser refuses to perform the court decision in favour of Kong Sun Yongtai, Kong Sun Yongtai may seek enforcement by the court. Under this circumstance, the Purchaser will be added into 失信執行人名錄 (the List of Untrustworthy Executors*) (an effective enforcement machinery in the PRC) which, will have a material negative effect on the assessment of the Purchaser’s credit rating and reputation.

Taking into account of the aforesaid penalty mechanism, the background information of the Purchaser, the amount of the received Adjusted Consideration in the amount of approximately RMB85,113,000 as at the Latest Practicable Date, the Purchaser’s confirmation to repay the outstanding amount of the Huaxia Finance Loans on or before 17 July 2019 and the remedies available to Kong Sun Yongtai at law in the event of breach by the Purchaser, the Company takes the view that the payment and completion mechanism as contemplated thereunder the Agreement will be sufficient to safeguard the interests of the Company and its Shareholders as a whole.

As required under Rule 14.71 of the Listing Rules, the full content of the valuation report of Zhongli Tenghui, including details of the assumptions, basis and methodology of the valuation, prepared by the independent valuer is set out in Appendix II to this circular. The Directors are of the view that, with similar business nature and associated risk related to the photovoltaic business, the selected three comparable companies mentioned in Appendix II to this circular are considered fair and representative.

The Directors are of the view that the terms of the Agreement and the Memorandum, including the Adjusted Consideration, were entered into on normal commercial terms and are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

CONDITIONS PRECEDENT

The Equity Transfer Registration shall be completed within 10 business days of the satisfaction of the following conditions (‘‘Conditions’’)：

• (i) the Agreement having been executed, and the Agreement having become effective which is conditional on (i) the Purchaser having obtained board approval or shareholder’s approval and completed filing procedures for asset appraisal reports for Zhongli Tenghui in accordance with relevant state-owned enterprise requirements, (ii) Kong Sun Yongtai having obtained relevant Company’s approvals and completed disclosure procedures as required under the Listing Rules, and (iii) Zhongli Tenghui having completed internal decision procedures to approve the Disposal;

• (ii) no material adverse event having occurred or continuing at Zhongli Tenghui;

• (iii) Kong Sun Yongtai’s and Zhongli Tenghui’s representations and warranties under the Agreement being true, accurate and complete, and Kong Sun Yongtai and Zhongli Tenghui not having violated the terms of the Agreement;

• (iv) Zhongli Tenghui having cancelled the pledge on Zhongli Tenghui’s entire equity interest held by Huaxia Finance;

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LETTER FROM THE BOARD

• (v) Zhongli Tenghui having provided the shareholder’s resolution in relation to the Disposal; and

• (vi) Zhongli Tenghui having provided procurement contracts and other documents for project components, inverters, combiner boxes and transformers.

As at the Latest Practicable Date, all Conditions have been satisfied and the Equity Transfer Registration has been completed.

On the Equity Transfer Registration Date, Kong Sun Yongtai shall complete handover of Zhongli Tenghui’s license, asset lists, tax documents, bank documents and corporate documents. Within 10 business days of the Equity Transfer Registration Date, Kong Sun Yongtai shall complete handover of technical documents and financial documents.

As at the Latest Practicable Date, Zhongli Tenghui ceased to be an indirect wholly-owned subsidiary of the Company and its financial statements is no longer consolidated to the Group’s financial statements.

INFORMATION ON THE PARTIES

Zhongli Tenghui was established in the PRC on 24 March 2015. It is principally engaged in the development, construction and operation of the Zhangshu Project. The construction of Zhangshu Project has been completed and started power generation and the power plant is connected to the power grid.

The unaudited financial results of Zhongli Tenghui for the two years immediately preceding the date of the Agreement are as follows：

			For the year ended 31 December	For the year ended 31 December
			2017	2018
			(Unaudited)	(Unaudited)
			RMB’000	RMB’000
Net	profit	before tax	17,663	12,362
Net	profit	after tax	17,663	12,362

The net assets value and total assets value of Zhongli Tenghui as at 31 December 2018 was approximately RMB39,558,000 and approximately RMB310,808,000, respectively.

Kong Sun Yongtai is a wholly-owned subsidiary of the Company, which is principally engaged in investment holding. As at the Latest Practicable Date, Zhongli Tenghui ceased to be a direct wholly-owned subsidiary of Kong Sun Yongtai.

The Company is principally engaged in the investment in and operation of solar power plants, provision of solar power plant operation and maintenance services, provision of financial services, trading of liquefied natural gas and asset management.

– 13 –

LETTER FROM THE BOARD

The Purchaser is a company established in the PRC and is principally engaged in the development, investment, general contracting, design, procurement, construction, and operation of solar power plants. It is a subsidiary of CGN Group. According to the publicly available information, the registered capital of the Purchaser is approximately RMB5.3 billion. The Purchaser has 84 wholly-owned subsidiaries, 7 subsidiaries with controlling interest and 13 associate entities.

CGN Group is a company established in the PRC and is principal engaged in the development of clean energies such as nuclear power, nuclear fuel, wind power, and solar power. It is the largest nuclear power operator in the PRC. It has over 30 years of experience in research and development and operation of nuclear power projects, such as 大亞灣核電站 (Daya Bay Nuclear Power Plant*) located in Guangdong Province, the PRC.

REASONS FOR AND BENEFITS OF THE DISPOSAL

The Directors consider that it is a good opportunity for the Group to realise its investment in Zhongli Tenghui so as to better allocate the Group’s resources and accelerate its pace in transforming to asset-light model. The Disposal will lower the Group’s gearing ratio for the following reasons: (i) the net proceeds from the Disposal together with the repayment of the shareholder’s loans from Zhongli Tenghui will be applied to repay the debts to reduce the finance costs of the Group; and (ii) Zhongli Tenghui related debts (including the Huaxia Finance Loans) will no longer be consolidated into the Group’s financial statements upon Completion.

The Group will continue to develop its solar power generation business, optimise its operation mode, enhance the efficiency of equipment in solar power plants and accelerate its pace in transforming to asset-light model.

Based on the above and having considered all relevant factors, the Directors are of the view that the Disposal and the terms of the Agreement and the Memorandum, including the Adjusted Consideration, were entered into on normal commercial terms and are fair and reasonable and in the interests of the Company and its Shareholders as a whole.

FINANCIAL EFFECT OF THE DISPOSAL

Upon Completion, Zhongli Tenghui ceased to be a wholly-owned subsidiary of the Company and its financial statements is no longer be consolidated to the Group’s financial statements. Subject to the final audit, it is expected that the Group will realise a net loss on the Disposal of approximately RMB5,036,000, which is calculated by reference to the difference between the Equity Consideration and the net assets value of Zhongli Tenghui of approximately RMB39,431,000 based on the unaudited financial information of Zhongli Tenghui as at 30 April 2019. Despite the net loss on the Disposal, having taking into consideration of the reasons for the Disposal as stated under the paragraph headed ‘‘Reasons for and benefits of the Disposal’’ above, the Company is of the view that the Disposal will be in the interests of the Company and its Shareholders as a whole as it will improve the Group’s cash flow position in a long run.

– 14 –

LETTER FROM THE BOARD

USE OF PROCEEDS

The Company currently intends to apply the net proceeds from the Disposal after deducting the taxation and transaction costs of approximately RMB137,000,000 to repay its debts to reduce the finance costs of the Group, which will lower the Group’s gearing ratio.

The detail of loans to be repaid are as follows:

Identity of lender Outstanding amount of the loan as at 30 April 2019 (RMB’000) China Development Bank Financial Leasing Co., Ltd 1,648,000 China CITIC Bank Corporation Limited (‘‘China CITIC’’) 468,844 China CITIC 177,900

Amount to be repaid from 30 April 2019 to 30 September 2019 Effective interest rate of the loan Grant date of the loan Due date of the loan Expected interest expense for the year ended 31 December 2019 Purpose of the loan (RMB’000) (%) 55,560 8.17 26 December 2018 26 December 2030 97,788 Construction of solar power plant 41,020 8.07 29 March 2019 29 March 2026 26,849 Construction of solar power plant 40,420 7.25 9 June 2017 20 June 2027 8,589 Construction of solar power plant 137,000

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios under Rule 14.07 of the Listing Rules in respect of the Disposal is more than 25% and all the applicable percentage ratios are less than 75%, the entering into the Agreement constitutes a major transaction for the Company under Chapter 14 of the Listing Rules and is therefore subject to the reporting, announcement and Shareholders’ approval requirements under Chapter 14 of the Listing Rules.

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, no Shareholder is required to abstain from voting if the Company was to convene a general meeting for the approval of the entering into the Agreement. As such, the entering into the Agreement may be approved by written Shareholder’s approval in accordance with Rule 14.44 of the Listing Rules. The Company has obtained written confirmation approving the major transaction contemplated under the Agreement from Pohua JT, holding 9,286,301,000 Shares representing approximately 62.06% of the total voting rights of the Company. The written shareholder’s approval of Pohua JT will be accepted in lieu of holding a general meeting pursuant to Rule 14.44 of the Listing Rules.

– 15 –

LETTER FROM THE BOARD

RECOMMENDATION

The Directors (including the independent non-executive Directors) consider that the terms of the Agreement and the transactions contemplated thereunder are on normal commercial terms, fair and reasonable and the entering into the Agreement is in the best interests of the Company and the Shareholders as a whole. As explained above, no general meeting of the Company will be convened for the purpose of approving the Agreement and the transactions thereunder. This circular is despatched to Shareholders for information purpose only. However, the Directors would also recommend the Shareholders to approve the Agreement and the transactions thereunder if a general meeting were convened.

ADDITIONAL INFORMATION

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

Yours faithfully, For and on behalf of the Board Kong Sun Holdings Limited Mr. Zeng Jianhua Executive Director

– 16 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. SUMMARY OF THE FINANCIAL INFORMATION OF THE GROUP

Financial information of the Group for the three years ended 31 December 2016, 2017 and 2018 are set out in the annual reports of the Group for the years ended 31 December 2016 (pages 71 to 174), 2017 (pages 73 to 180) and 2018 (pages 81 to 200), respectively, w h i c h a r e p u b l i s h e d o n b o t h t h e w e b s i t e o f t h e S t o c k E x c h a n g e (http://www.hkex.com.hk) and the website of the Company (www.kongsun.com) respectively.

2. WORKING CAPITAL

The Directors, after due and careful consideration and taking into account the entering into the Agreement, present internal resources, banking and other facilities, the net proceeds from the issuances of bonds and the successful completion of the very substantial disposal of a subsidiary as announced by the Group on 7 May 2019, are of the opinion that the Group would have sufficient working capital for at least 12 months from the date of this circular.

3. STATEMENT OF INDEBTEDNESS

As at the close of business on 30 April 2019, being the latest practicable date for the purpose of this statement of indebtedness, the Group’s indebtedness includes secured loans and borrowings amounted to approximately RMB11,569,720,000 and unsecured corporate bonds amounted to approximately RMB253,750,000 and unpaid contractual lease payments amounted to approximately RMB354,113,000.

The Group’s loans and borrowings were secured by its assets, including solar power plants, trade receivables, lease prepayments, financial assets measured at fair value through other comprehensive income and the equity interests of certain subsidiaries.

In addition, as at 30 April 2019, other than corporate guarantees from the subsidiaries of the Group, an independent third party had provided unlimited corporate guarantees to certain of the Group’s other borrowings amounting to approximately RMB561,093,000.

As at 30 April 2019, the Group had executed a guarantee with respect to a loan of approximately RMB81,080,000 granted by independent third parties to the Company’s joint venture, under which the Group is liable to pay the proportionate share if the independent third parties are unable to recover the loan from the Company’s joint venture.

As at 30 April 2019, the Group, as a lessee, has outstanding unpaid contractual lease payments amounting to RMB354,113,000 in aggregate (excluding contingent rental arrangement) in relation to the remaining lease terms of certain lease contracts, which is unsecured and unguaranteed.

The Directors confirm that, as of 30 April 2019, being the latest practicable date for the purpose of this statement of indebtedness, save as disclosed above, the Group did not have any issued and outstanding, or authorised or otherwise created but unissued debt securities, term loans, other borrowings, indebtedness, mortgages and charges, contingent liabilities and guarantees.

– I-1 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Directors confirm that, save as disclosed above, there have been no material changes in the indebtedness or contingent liabilities of the Group as at the Latest Practicable Date.

4. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

The Group is mainly engaged in investment in and operation of solar power plants, provision of solar power plants operation and maintenance services, provision of financial services, trading of liquefied natural gas and asset management.

The Group will continue to pursue its strategies on the investment and operation of solar power plants, optimise its power asset allocation, actively participate in power trading market, strive to increase its revenue from power generation and expand its liquefied natural gas trading business. Through integration of industry and finance, it will also promote the development of green finance and financial inclusion businesses so as to maximise its asset income and further strengthen the overall competitiveness and influence of the Group in the industry for enhancing and consolidating its position as a leading enterprise in the solar power generation industry in China.

5. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2018, being the date to which the latest audited consolidated financial statements of the Company were made up.

– I-2 –

VALUATION REPORT

APPENDIX II

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28 June 2019

Kong Sun Holdings Limited Unit 1209–10, 12/F, Everbright Centre 108 Gloucester Road, Wanchai Hong Kong

Dear Sirs/Madams,

APPRAISAL SUMMARY LETTER

In accordance with your instructions, we have made an appraisal of the investment value of 100% equity interest in the business enterprise of 樟樹市中利騰暉光伏有限公司 (‘‘Zhongli Tenghui’’) held by Kong Sun Holdings Limited (the ‘‘Company’’). Zhongli Tenghui is principally engaged in the sales of solar electricity and the operation of a solar power plant located in Zhangshu City, Jiangxi Province, the People Republic of China (the ‘‘PRC’’).

This letter identifies the business appraised, describes the premise of value, basis of valuation and assumptions, explains the valuation methodology utilized, and presents our opinion of value.

This appraisal was performed under the premise of value as forced liquidation, which refers to a circumstances where a seller is under compulsion to sell and that, as a consequence, a proper marketing period is not possible and buyers may not be able to undertake adequate due diligence. The price that could be obtained in these circumstances will depend upon the nature if the pressure on the seller and the reasons why proper marketing cannot be undertaken. It may also reflect the consequences for the seller of failing to sell within the period available.

Business enterprise is defined as the combination of all tangible assets (buildings, machinery and equipment), long term investment, net working capital and intangible assets of a continuing business. Alternatively, the business enterprise is equivalent to the investment capital of the business, that is, the combination of the value of shareholder’s equity and longterm debt.

Investment value is the value to a particular investor based on individual investment requirements and expectation.

The purpose of this appraisal is to express an independent opinion of the investment value of 100% equity interest in the business enterprise of Zhongli Tenghui under a forced liquidation premise as at 31 December 2018 (the ‘‘Appraisal Date’’). It is our understanding that this appraisal will only be used for disposal purposes and our report may be incorporated into a public document.

– II-1 –

VALUATION REPORT

APPENDIX II

INTRODUCTION

The Company

The Company’s common shares are listed on the Main Board of The Stock Exchange of Hong Kong Limited (stock code: 295). The Company is an investment holding company with its subsidiaries mainly engaged in operation of solar power plants, provision of solar power plants maintenance services, provision of financial services and asset management.

Zhongli Tenghui

Zhongli Tenghui is principally engaged in operating a grid-connected photovoltaic power plant (the ‘‘Power Plant’’) located in Zhangshu City, Jiangxi Province. The registered capital of Zhongli Tenghui is RMB2 million. The total site area of the Power Plant is about 1300 mu. It consists of twenty two 1.39446MW photovoltaic power generation units, with a total installed capacity of approximately 30MW.

The project site is located in Zhangshu City, on the southern edge of the Poyang Lake Plain. The annual average radiation of the region is 4,750 MJ per year. The average daily total solar radiation is higher from April to October, and the radiation value of which is greater than 3 KWh/m[2] /day. From November to March, the total solar radiation is relatively lower, and the radiation value of which is less than 3 KWh/m[2] /day;

The table below sets forth the financial information of Zhongli Tenghui for the years ended 31 December 2017 and 2018,

	For the	For the
	year ended	year ended
	31 December	31 December
(RMB’000)	2017	2018
Revenue	39,456	35,956
Net Profit (Loss)	17,663	12,362
Total Assets	307,394	310,808
Net Assets	24,445	39,558

– II-2 –

VALUATION REPORT

APPENDIX II

INDUSTRY OVERVIEW

Photovoltaic System

Photovoltaic (‘‘PV’’) is a method of converting solar energy into direct current electricity using semiconducting materials that exhibit the photovoltaic effect. A PV system employs solar panels composed of a number of solar cells to supply usable solar power. The direct conversion of sunlight to electricity occurs without any moving parts or environmental emissions during operation.

Global Photovoltaic Market

The PV market has been expanding over the past decade at an unprecedented rate, even during economic downturn. The International Energy Agency (the ‘‘IEA’’) forecasted that the growth would sustain and solar power would attribute to 16% of global production by 2050.

According to statistics from IEA, the total PV capacity installed worldwide amounted to 403.3 GW by the end of 2017 and new PV installations reached 98.95 GW in 2017, representing a year-on-year (‘‘YOY’’) growth of 33% as compared to 304 GW in 2016.

Annual PV Installation 2007–2017

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

European Union
GW India
China
Japan
USA
Other IEA PVPS countries
Other countries
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
----- End of picture text -----

Source: Trends 2018 in Photovoltaic Applications, IEA 2018

– II-3 –

VALUATION REPORT

APPENDIX II

Annual and cumulative installed PV Power 2017

			Cumulative
	Annual	Installed	Installed
Country		Capacity	Capacity
		(GW)	(GW)
PRC		53.1	131.1
USA		10.7	51.6
INDIA		9.1	18
JAPAN		7.5	49.3
TURKEY		2.6	3.4
GERMANY		1.8	42.5
KOREA		1.4	5.9
AUSTRALIA		1.3	7.3
BRAZIL		1	1.1
UK		0.954	12.7

Source: Trends 2018 in Photovoltaic Applications, IEA 2018

In respect of cost of PV investment, as reported by the National Renewable Energy Laboratory of the U.S. Department of Energy (the ‘‘NREL’’), the per unit cost of utility-scale PV projects remained relatively stable at US$1.06 per watt in 2018, despite the steep price drop from US$4.63 in 2010 to US$1.04 in 2017 per watt. The dramatic reduction in cost was primarily driven by the technological breakthrough which allowed more cost-effective ways of manufacturing silicon photovoltaic modules of higher conversion efficiency.

– II-4 –

VALUATION REPORT

APPENDIX II

PV system cost benchmark summary (inflation adjusted) 2010–2018

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

2018 USD
per Watt DC
Utility-Scale PV, Utility-Scale PV,
Residential PV (6.2 kW) Commercial PV (200 kW) Fixed Tilt (100 MW) One-Axis Tracker (100 MW)
2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018
Soft Costs — Others (PII, Land Acquisition, Sales Tax, Overhead, and Net Profit)
Soft Costs — Install Labor
Hardware BOS — Structural and Electrical Components
Inverter
Module
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Figure ES-1. NREL PV system cost benchmark summary (inflation adjusted), 2010–2018

Source: U.S. Solar Photovoltaic System Cost Benchmark: Q1 2018, NERL September 2018

Photovoltaic Market in the PRC

The PV market in the PRC has retained the top position around the globe for the fifth year in a row with the PV installation topping 53.1 GW in 2017. Total installed capacity in the PRC reached 131.1 GW which covered 32% of the world market.

The PV market in the PRC has been powered by the deployment of support policies. The ‘‘Proposal on Formulating the 13th Five-Year Plan (2016–2020) on National Economic and Social Development’’ in 2015 and the ‘‘Guiding Opinions on the Implementation of the 13th Five-Year Plan for Renewable Energy Development’’ released by National Energy Administration of China (the ‘‘NEA’’) in July 2017 encouraged the photovoltaic enterprises’ investments. The latter stated annual new installation of 21 GW for 2017–2020 was targeted, totaling an addition of 86.5 GW in total PV capacities over the four years.

In order to speed up reduction of subsidies and rein in the expansion of the industry, policy shift has reshaped the industry development. The ‘‘Notice on 2018 PV power project price policy’’ issued by the National Development and Reform Commission in December 2017 announced National PV power generation benchmark tariff (the ‘‘FIT’’) for newly constructed PV plants was lowered by RMB0.10 per kWh to RMB0.55, RMB0.65 and RMB0.75 per KWh for Region I, II and III respectively.

In addition, a joint statement by the National Development and Reform Commission, Ministry of Finance and National Energy Administration on May 2018 further lowered the FIT rates by RMB0.05 per kWh to RMB0.5, RMB0.6 and RMB0.7 per kWh depending on the region. It imposed a limit to PV market development.

– II-5 –

VALUATION REPORT

APPENDIX II

National PV power generation benchmark tariff list

Newly Constructed PV Plant Benchmark Tariff (RMB/kWh)

		June
Region	Area	2018	2018	2017	2016	2013
Type I	Ningxia; Qinghai Haixi; Gansu	0.5	0.55	0.65	0.8	0.9
	Jiayuguan, Wuwei, Zhangye,
	Jiuquan, Dunhuang, Jinchang;
	Xinjiang Hami, Tacheng, Altay,
	Karamay; Inner Mongolia except
	Chifeng, Tongliao, Xing’an Meng
	and Hulun Buir
Type II	Beijing; Tianjin; Heilongjiang; Jilin;	0.6	0.65	0.75	0.88	0.95
	Liaoning; Sichuan; Yunnan; Inner
	Mongolia Chifeng, Tongliao,
	Xing’an League, Hulun Buir; Hebei
	Chengde, Zhangjiakou, Tangshan,
	Qinhuangdao; Shanxi Datong,
	Shuozhou, Xinzhou, Yangquan;
	Shaanxi Yulin, Yan’an; Qinghai,
	Gansu and Xinjiang area other than
	in Type I region
Type III	Areas other than Type I and Type II	0.7	0.75	0.85	0.98	1

Source: National Development and Reform Commission 2013, 2015,2016, 2017 and 2018

Besides, both statements mentioned a cut of FIT on electricity generated from distributed solar farms of RMB0.05 per kWh. Accordingly, the tariff was adjusted to RMB0.32 per kWh and the allocation of quotas for new projects had been halted until further notice.

As a result of PV market reform, only a total of 34.54 GW new photovoltaic capacity was installed in first nine months of 2018 to reach 164.74 GW on aggregate, representing a negative YOY growth of 19.7%, according to New and Renewable Energy Department of NEA.

The national PV power generation amounted to 133.8 billion kWh in the first three quarters of 2018, representing a YOY substantial growth of 56.2%. Due to mismatch of the locations of power generation and electricity consumption, PV generation of 4 billion kWh was abandoned, out of which 1.73 billion kWh and 0.78 billion kWh were recorded in Xinjiang Province and Gansu Province, representing regional curtailment rate of 16% and 10%, compared with 21.4% and 21% during the same period of 2017 respectively.

– II-6 –

VALUATION REPORT

APPENDIX II

With reference to the statement of the National Development and Reform Commission on December 2017, government subsidies remain to be one of main drivers for PV development in the PRC. The reduction of subsidies would be in line with declining costs and technological improvements.

PREMISE OF VALUE, BASIS OF VALUATION AND ASSUMPTIONS

This appraisal was performed under the premise of value as forced liquidation, which refers to a circumstances where a seller is under compulsion to sell and that, as a consequence, a proper marketing period is not possible and buyers may not be able to undertake adequate due diligence. The price that could be obtained in these circumstances will depend upon the nature if the pressure on the seller and the reasons why proper marketing cannot be undertaken. It may also reflect the consequences for the seller of failing to sell within the period available.

We have appraised the business enterprise of Zhongli Tenghui on the basis of investment value under a forced liquidation premise and in conformity with the Uniform Standards of Professional Appraisal Practice. Investment value is the value to a particular investor based on individual investment requirements and expectation. Business enterprise is defined as the combination of all tangible assets (buildings, machinery and equipment), long term investment, net working capital and intangible assets of a continuing business. Alternatively, the business enterprise is equivalent to the investment capital of the business, that is, the combination of the value of shareholder’s equity and long-term debt.

Investment value is the value to a particular investor based on that person’s or entity’s investment requirements and represents an asset’s value as owner-specific value. In accordance with the situation of the Company, it was required to settle and repay its debts to reduce its finance costs in a short period of time. Without adequate time of marketing to search for the best bidder and consequently, this requirement might alter the sale consideration from fair market value of Zhongli Tenghui.

Fair market value is defined as the amount at which a property might be expected to exchange between a willing buyer and a willing seller, neither being under compulsion, each having reasonable knowledge of all relevant facts.

Our investigation included discussions with the management of the Company and Zhongli Tenghui (the ‘‘Management’’) in relation to the history, business nature, operations and prospects of Zhongli Tenghui, a review of its historical financial information, as well as other records and documents provided to us by the Management. Before arriving at our opinion of value, we have considered the following principal factors:

• The nature of the business of Zhongli Tenghui;

• The financial condition of Zhongli Tenghui and its book value;

• The global economic outlook in general and the specific economic and competitive elements affecting Zhongli Tenghui, its industry and its markets;

• The nature, the regulatory framework and prospect of the concerned industry;

– II-7 –

VALUATION REPORT

APPENDIX II

• The potential of the target markets to be served;

• Past operating results;

• The market-derived investment returns of entities engaged in a similar line of business and returns from other similar types of projects;

• The current stage of development of Zhongli Tenghui; and

• The business risks of Zhongli Tenghui and inherent uncertainties in its operations.

Due to the changing environment in which Zhongli Tenghui is operating, a number of assumptions have to be established in order to sufficiently support our opinion of value of the business enterprise of Zhongli Tenghui. The major assumptions adopted in this appraisal are:

• There will be no major changes in the existing political, legal, fiscal and economic conditions in which Zhongli Tenghui carries on its business or to which it sources supplies;

• There will be no major changes in the current taxation law in which Zhongli Tenghui carries on its business, that the rates of tax payable will remain unchanged and that all applicable laws and regulations will be complied with;

• There will be no material deviation or changes in the industry trends and market conditions which would significantly affect the revenues, profits, cash flows attributable to Zhongli Tenghui;

• Effective tax rates, exchange rates and interest rates will not differ materially from those presently prevailing;

• The availability of finance will not be a constraint on the forecasted growth of operations of Zhongli Tenghui;

• Zhongli Tenghui will successfully maintain its competitiveness and market share through optimizing the utilization of its resources and expanding its marketing network;

• Zhongli Tenghui can keep abreast of the latest development of the industry such that its competitiveness and profitability can be sustained;

• Zhongli Tenghui will utilize and maintain its current operational, administrative and technical facilities to expand and increase its sales;

• Zhongli Tenghui has obtained and maintained all necessary licence, certificates and approvals to carry out its business and operations;

– II-8 –

VALUATION REPORT

APPENDIX II

• Additional administrative expense and management fee estimated by the Management have been adopted as an adjustment to Zhongli Tenghui’s operating costs to reflect the profitability when Zhongli Tenghui operates on a stand alone basis without any cost saving that might arise from being a wholly owned subsidiary of the Company;

• Zhongli Tenghui can keep abreast of the latest development of the industry such that its competitiveness and profitability can be sustained; and

• Zhongli Tenghui will retain and have competent management, key personnel and management staff to support the on-going operation.

For the purpose of this valuation, we were furnished with records and documents by the Management. We have reviewed and examined the said information and have no reason to doubt the truth and accuracy of the information contained therein. We have also consulted sources of financial and business information to supplement the information provided by the Management. In arriving at our opinion of value, we have relied to a very considerable extent upon such data, records, documents, financial and business information from other sources, as well as a number of assumptions that are subjective and uncertain in nature. Any variation to these assumptions could seriously affect the investment value of the appraised business enterprise.

VALUATION METHODOLOGY

Methodology for Valuation of the Business Enterprise

To develop our opinion of value for the business enterprise, we considered the three generally accepted approaches to value: the Income Approach, the Market Approach and the Cost Approach.

Income Approach

In the income approach, the discounted cash flow method will be used. In this method, the value depends on the present worth of future economic benefits to be derived from ownership of equity and shareholders’ loans. Thus, an indication of value was developed by discounting future free cash flow available for distribution to shareholders and for servicing shareholders’ loans to their present worth at market-derived rates of return appropriate for the risks and hazards (discount rate) associated with the comparable business.

Market Approach

In the market approach, the guideline publicly traded company (the ‘‘GPTC’’) method and the guideline merged and acquired company method will be applied to estimate the value of Zhongli Tenghui. These two methods consider prices recently paid for similar assets, with adjustments made to the indicated market prices to reflect condition and utility of the appraised assets relative to the market comparable. Assets for which there is an established used market may be appraised by this approach.

– II-9 –

VALUATION REPORT

APPENDIX II

Cost Approach

This approach seeks to measure the future benefits of ownership by quantifying the amount of money that would be required to replace or reproduce the future service capability of the subject asset, less depreciation from physical deterioration, functional and economic/ external obsolescence, if present and measurable. The assumption underlying this approach is that the cost to purchase or develop new asset is commensurate with the economic value of the service that the asset can provide during its lives. The cost approach does not directly consider the amount of economic benefits that can be achieved or the time period over which they might continue. It is an inherent assumption with this approach that economic benefits indeed exist and are of sufficient amount and duration to justify the development expenditures.

The cost approach often serves as a valuation floor to value a liquidated business but it is not the case for Zhongli Tenghui. The enterprise value of Zhongli Tenghui is principally attributable to its future economic benefits to be brought rather than the cost to reproduce or replace the current situation.

Income Approach requires detailed projection of Zhongli Tenghui’s financial performance beyond current year into a distant future and the use of relevant techniques such as discounted cashflow analysis and terminal value multiple, all requiring subjective estimates or judgmental inputs by the Management, makes it a less reliable method than in this valuation.

On the other hand, the Market Approach is simpler to understand and employs more observable market data. In addition, Zhongli Tenghui has historical earnings records and is considered as a mature company with stable cash flows from operations. With a reasonable number of publicly traded companies available in the market, we conclude that the Market approach is the most appropriate method for this valuation. As such, we consider that market approach is an appropriate method in this appraisal.

The investment value of the business enterprise of Zhongli Tenghui is developed through the application of the market approach. In the market approach, we relied on the GPTC method to estimate the value of Zhongli Tenghui. In this method, the investment value is based on prices at which stocks of similar companies are trading in a public market. A ‘‘value measure’’ is usually a multiple computed by dividing the price of the guideline company’s stock as at the valuation date by some relevant economic variable observed or calculated from the guideline company’s financial statements.

– II-10 –

VALUATION REPORT

APPENDIX II

Comparable Company Selection

A major requirement in applying the GPTC method is to identify companies that are comparable to the subject company in terms of business nature and associated risks. We have selected comparable companies based on the following relevant criteria: (1) principally engaged in the operations of PV power plant in the PRC; (2) stable and majority revenue generated from sales of photovoltaic electricity with percentage to total revenue exceeding 50%; and (3) listed on well-recognized exchange. We have shortlisted 23 potential comparable companies that are engaged in the similar business as Zhongli Tenghui. However, only 3 companies conform to the selection criteria that stated above, i.e. revenue generated from sales of photovoltaic electricity with percentage to total revenue exceeding 50%. The selected comparable companies are exhaustive list of the sample and we prefer the quality of comparable companies rather than the quantity. Our selected comparable companies and their respective principal activities are set out as below:

Selected Comparable Ticker Company Symbol Principal Activities

• CECEP Solar Energy Co., Ltd. 000591 CH CECEP Solar Energy Co., Ltd. operates in the solar energy industry. It manages solar power stations, and manufactures photovoltaic components. It markets worldwide.

Panda Green Energy Group Ltd. 686 HK

• Panda Green Energy Group Ltd. operates as an investment company. It runs clean energy investments, resource efficiency investments, environmental protection industry investments, and other businesses. It engage in wind energy and solar energy.

GCL New Energy Holdings Ltd. 451 HK

• GCL New Energy Holdings Ltd., through its subsidiaries, offers solar plant operation and maintenance. It also offers energy storage technology, micro-grid and intelligent integration capabilities.

In applying the GPTC method, different value measures or market multiples of the comparable companies are calculated and analyzed to induce a series of multiples that are considered representative of the industry average. Then, we applied the relevant industry multiples to Zhongli Tenghui to determine a value for Zhongli Tenghui that is on a freelytraded basis.

– II-11 –

VALUATION REPORT

APPENDIX II

We applied three multiples, including the market value of invested capital (‘‘MVIC’’)-torevenue multiple, MVIC-to-earnings before interest, tax, depreciation and amortization (‘‘EBITDA’’) multiple and MVIC-to-total assets multiple in this valuation. MVIC equals to the sum of (1) market capitalization, (2) value of total debt, (3) value of preferred equity, and (4) non-controlling interest. It shows a more comprehensive view for valuing a company.

The investment value of the equity interest of Zhongli Tenghui depends on MVIC-toRevenue multiple, MVIC-to-EBITDA multiple and MVIC-to-total assets multiples of comparable companies generated from the available market figures as at the Appraisal Date and revenue, EBITDA and total assets of Zhongli Tenghui as at Appraisal Date.

In this appraisal, the median of selected multiples are adopted to derive the investment value of Zhongli Tenghui. Given limited samples, both mean and median will have their respective pros and cons. Yet, the median is less affected by outliers and skewed data in the sample set. Comparing to mean, it better reflects the pricing multiples of companies in particular industry by market participants.

Multiples of Comparable Companies

Ticker Symbol	000591 CH	686 HK	451 HK	Median
MVIC/Revenue (x)	4.93	12.65	8.59	8.59
MVIC/EBITDA (x)	9.31	15.05	9.77	9.77
MVIC/Total assets (x)	0.72	0.87	0.79	0.79

Adjustment for Different Capital Markets

A single company’s share prices may be different in two separate capital markets due to differentiation in factors including investor profiles, market sentiment, risk aptitude, etc.

This could be evidenced by the persistent differential between the stock prices of A- shares and H-shares for companies dual-listing in the PRC and Hong Kong.

Of the three comparable companies, one is listed in the PRC and two are listed in Hong Kong. Considering that the PRC should be the primary market in which Zhongli Tenghui being accessible by potential investors, we have adjusted the multiples for the two Hong Kong-listed comparable companies, i.e. 686 HK and 451 HK, with the differences between enterprise value (‘‘EV’’) multiples of major stock indexes in Hong Kong and the PRC as at the Appraisal Date.

	Hang Seng	CSI 300
Multiple	Index	Index	Adjustment
EV/Revenue (x)	2.26	1.64	0.72
EV/EBITDA (x)	7.79	10.61	1.36
EV/EBIT (x)	10.32	12.45	1.21
Overall Adjustment			1.10

– II-12 –

VALUATION REPORT

APPENDIX II

Multiples of Comparable Companies (After Capital Market Adjustments)

Ticker Symbol	000591 CH	686 HK	451 HK	Median
MVIC/Revenue	4.93	13.88	9.43	9.43
MVIC/EBITDA	9.31	16.51	10.71	10.71
MVIC/Total assets	0.72	0.95	0.87	0.87

Based on our analysis, all the above multiples are considered reliable indicators of MVIC and market capitalization, therefore we have assigned equal weighting to these multiples in this appraisal.

ADJUSTMENT FOR EBITDA

Additional administrative expense from holding companies of Zhongli Tenghui, estimated by the Management, have been allocated to Zhongli Tenghui to factor out the cost savings that arise from being a wholly owned subsidiary of the Company. The calculations are stated as follows:

Revenue of Zhongli Tenghui for the year ended 31 December 2018 / total revenue of the group for the year ended 31 December 2018

= RMB35,956,000 / RMB1,881,004,000 = 1.91%

Administrative expense to be allocated = 1.91% x RMB235,776,000 (administrative expense incurred by the holding companies for the year ended 31 December 2018) = RMB4,503,000.

The investment value derived from the above is then subject to a discount to adjust for lack of marketability and control premium of the shares of Zhongli Tenghui.

Discount for Lack of Marketability

The concept of marketability deals with the liquidity of an ownership interest, that is, how quickly and easily it can be converted into cash if the owner chooses to sell. The discount for lack of marketability reflects the fact that there is no ready market for shares in a closely held corporation. Ownership interests in closely held companies are typically not readily marketable compared to similar interests in public companies. Therefore, a share of stock in a privately held company is usually worth less than an otherwise comparable share in a publicly held company.

A number of studies were conducted in the U.S. in an attempt to determine average levels of discounts for lack of marketability. These studies all fall into one of two basic categories, depending on the type of market transaction data on which they are based:

• . Restricted (‘‘letter’’) stock studies

• . Studies of transactions in closely held stocks prior to initial public offerings (IPOs).

– II-13 –

VALUATION REPORT

APPENDIX II

Currently, there is no widely used empirical study conducted on lack of marketability discount for private companies in the PRC. Most studies on lack of marketability were based on transactions or data in the US. In determining the reasonable lack of marketability discount, we have made reference to the ‘‘Mergerstat® Review 2018’’ by FactSet Mergerstat, LLC which included data derived from market transactions involving U.S. companies, including privately held, publicly traded and cross-border transactions. With reference to historical 10 years data from 2008 to 2017, the implied discount for lack of marketability ranged from 9.4% to 51.5%. The unfavorable national policy and further lowered FIT rates are imposing a limited to PV market development and sentiment, thus the liquidity of related enterprises’ transactions. Considering the above and under forced liquidation premise, which refers to a circumstances where a seller is under compulsion to sell, high end of reference range of a lack of marketability discount of 50% is applied to the indicated investment value of the business enterprise derived by the Market Approach which is deemed to be reasonable for a private company like Zhongli Tenghui.

Control Premium

It is widely recognized that an investment which offers an investor control of a business is worth more than a minority stake. In valuation perspective, a shareholder with majority stake normally owns the control power in a company, and thus, a control premium is generally recognized. In contrast, a minority discount is recognized when the holder of a minority interest lacks control over corporate policies like election of directors or selection of management, acquisition or liquidation of assets, control over dividend policy, ability to set corporate strategies, ability to affect future earnings, etc.

Considering the fact that the market multiples derived from our selected comparable companies can only reflect their minority equity values as all their common stocks trading on the market only represent the minority equity shareholders (i.e. public shareholders). In this case, we made reference to statistics published in the ‘‘Mergerstat®Review 2018’’ by FactSet Mergerstat, LLC. in which the median of the implied control premium from historical 10 years data from 2008 to 2017 is 6.6%. In this appraisal, a control premium of 5% is applied to the indicated investment value of the entire interest in Zhongli Tenghui derived by the GPTC method. It is deemed to be a reasonable premium for reflecting the investment value of holding majority interest in Zhongli Tenghui.

– II-14 –

VALUATION REPORT

APPENDIX II

Indicated Value of Zhongli Tenghui

The value figure of Zhongli Tenghui is derived and stated as follows:

			Indicated		Indicated
	Amount		MVIC	Less: Total	Market
	(RMB’000)		(RMB’000)	Debt*	Capitalization
Valuation Parameter	(A)	Multiples (B)	(A) x (B)	(RMB’000)	(RMB’000)
MVIC Multiples:
Revenue	35,956	9.43	338,991
EBITDA	28,816	10.71	308,696
Total Assets	310,808	0.87	269,771
Average			305,819	(240,499)	65,321
Indicated value of 100% interest					65,321
Add: Control Premium		5%			3,266
Less: Lack of Marketability Discount		50%			(34,293)
Indicated Investment Value	of 100% Interest				34,293

• Sourced from the management account of Zhongli Tenghui as at 31 December 2018 provided by the Management:

Total debt

• = Loans and borrowings + Other borrowings, current portion + Amount due to immediate holding company

• = CNY129,871,000 + CNY17,562,000 + CNY93,066,000

• = CNY240,499,000

OPINION OF VALUE

Based upon the investigation and analysis outlined above and on the appraisal method employed, it is our opinion that as at 31 December 2018 the investment value of 100% equity interest in the business enterprise of Zhongli Tenghui under a forced liquidation premise is reasonably stated by the amount of RENMINBI THIRTY FOUR MILLION TWO HUNDRED AND NINETY THREE THOUSAND (RMB34,293,000) only.

– II-15 –

VALUATION REPORT

APPENDIX II

This opinion of value was based on generally accepted valuation procedures and practices that rely extensively on the use of numerous assumptions and the consideration of many uncertainties, not all of which can be easily quantified or ascertained.

We hereby certify that we have neither present nor prospective interest in the Company, Zhongli Tenghui, their subsidiaries, or the value reported.

Respectfully submitted, For and on behalf of GRANT SHERMAN APPRAISAL LIMITED

Keith C.C. Yan Derek T.Y. Wong ASA CFA, CMA, FRM, MIPA Managing Director Director Business and Derivative Valuation

Note: Mr. Keith C.C. Yan is an Accredited Senior Appraiser (Appraisal Review & Management/Business Valuation/Intangible Assets) of the American Society of Appraisers and he has been conducting business valuation of various industries and intangible assets valuation in Hong Kong, the PRC and the Asian region for various purposes since 1988. Mr. Derek T.Y. Wong is a CFA Charterholder, a Certified Management Accountant, a Certified FRM and a Member of the Institute of Public Accountants. He has been working in the financial industry since 2003, with experiences covering the areas of corporate banking, corporate finance, equity analysis and business and derivatives valuation.

Investigation and report by:

Keith C.C. Yan, ASA Derek T.Y. Wong, CFA, CMA, FRM, MIPA Victor W.K. Lam, CFA, FRM

– II-16 –

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

(a) Directors’ and Chief Executive’s Interests and Short Positions

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executive in the Shares, underlying Shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (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 he is taken or deemed to have under such provisions of SFO), or as recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the ‘‘Model Code’’) in the Listing Rules were as follows:

Interest in underlying shares of the Company

Name of Director(s) Nature of interest Date of share options granted (Note 1) Zeng Jianhua (Chairman) Beneficial owner 3 April 2017 Beneficial owner 28 April 2017 Hou Yue Beneficial owner 3 April 2017 Beneficial owner 28 April 2017 Deng Chengli Beneficial owner 8 October 2014 Beneficial owner 3 April 2017 Beneficial owner 28 April 2017 Jin Yanbing Beneficial owner 3 April 2017 Beneficial owner 28 April 2017 Miu Hon Kit Beneficial owner 8 October 2014 Beneficial owner 28 April 2017 Chen Kin Shing Beneficial owner 28 April 2017 Wang Fang Beneficial owner 28 April 2017	Number of share options outstanding as at the Latest Practicable Date 100,000,000 5,670,000 19,000,000 5,670,000 21,000,000 25,000,000 5,670,000 16,000,000 5,670,000 1,000,000 1,000,000 1,000,000 1,000,000	Approximate percentage of shareholding upon fully exercise of share options 0.62% 0.04% 0.11% 0.04% 0.13% 0.15% 0.04% 0.10% 0.04% 0.01% 0.01% 0.01% 0.01%
	207,680,000	1.31%

– III-1 –

GENERAL INFORMATION

APPENDIX III

Note 1：

The share options were granted pursuant to the share option scheme (the ‘‘Share Option Scheme’’) adopted by the Company pursuant to a shareholders’ resolution of the Company passed on 22 July 2009. The periods and the manner in which the granted share options could be exercised under the Share Option Scheme are as follows：

Exercise period Number of options exercisable from 1[st] anniversary of the date of grant to 2[nd] Up to 25% of the total number of granted options anniversary of the date of grant from 2[nd] anniversary of the date of grant to 3[rd] Up to 25% of the total number of granted options anniversary of the date of grant from 3[rd] anniversary of the date of grant to 4[th] Up to 25% of the total number of granted options anniversary of the date of grant from 4[th] anniversary of the date of grant to Up to 25% of the total number of granted options 5[th] anniversary of the date of grant

• The percentage represents the number of underlying shares interested divided by the enlarged issue share capital of the Company as at the Latest Practicable Date, assuming all the outstanding share options are exercised.

Save as disclosed above, as at the Latest Practical Date, none of the Directors and chief executive of the Company, or their respective associate, had any interests or short positions in the Shares, underlying Shares or debentures of the Company or its associated corporations（within the meaning of Part XV of 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 he is taken or deemed to have under such provisions of SFO）, or, as recorded in the register required to be kept by the Company under section 352 of the SFO or required to be notified to the Company or the Stock Exchange under the Model Code.

(b) Substantial Shareholders’ Interests

So far as is known to any Director, as at the Latest Practicable Date, the following persons, other than a Director or chief executive of the Company, had or deemed or taken to have an interest or short position in the Shares or underlying Shares of the Company would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of

– III-2 –

GENERAL INFORMATION

APPENDIX III

Part XV of the SFO, or which were recorded in the register required to be kept by the Company under Section 336 of the SFO：

		Number of
		Shares or
		underlying	Percentage of
Name	Nature of interest	Shares held	shareholding(2)
Poly Longma Asset	Deemed interest	9,286,301,000 (L)	62.06%
Management Co., Ltd.*	in controlled
保利龍馬資產管理有限公司	corporation(1)
Shanghai Lianmi Investment	Deemed interest	9,286,301,000 (L)	62.06%
Management Co., Ltd.*	in controlled
上海聯米投資管理有限公司	corporation(1)
Forever Bright Consultants	Deemed interest	9,286,301,000 (L)	62.06%
Limited	in controlled
	corporation(1)
Golden Port Holdings Limited	Deemed interest	9,286,301,000 (L)	62.06%
	in controlled
	corporation(1)
Pohua JT Capital Partners	Deemed interest	9,286,301,000 (L)	62.06%
Limited	in controlled
	corporation (1)
Pohua JT Private Equity	Beneficial owner(1)	9,286,301,000 (L)	62.06%
Fund L.P.

Notes：

• (1) Pohua JT Capital Partners Limited is the general partner of Pohua JT Private Equity Fund L.P. Pohua JT Capital Partners Limited is owned as to 32% by Golden Port Holdings Limited. Forever Bright Consultants Limited owns 100% equity interest of Golden Port Holdings Limited, which in turn is owned as to 100% by Shanghai Lianmi Investment Management Co., Ltd. Shanghai Lianmi Investment Management Co., Ltd. is 100% owned by Poly Longma Asset Management Co., Ltd. Accordingly, each of Poly Longma Asset Management Co., Ltd., Shanghai Lianmi Investment Management Co., Ltd., Forever Bright Consultants Limited, Golden Port Holdings Limited and Pohua JT Capital Partners Limited is deemed to be interested in a long position of an aggregate of 9,286,301,000 shares held by Pohua JT Private Equity Fund L.P.

• (2) The percentage represents the number of ordinary shares interested divided by the number of the Company’s issued shares as at the Latest Practicable Date, being 14,964,442,519 shares.

• (3) The letter ‘‘L’’ denotes the person’s long position in such securities.

Save as disclosed above and as at the Latest Practicable Date, the Company had not been notified by any person, other than a Director or chief executive of the Company, who had interests or short positions in the Shares or underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company under section 336 of the SFO.

– III-3 –

GENERAL INFORMATION

APPENDIX III

3. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group which will not expire or is not determinable by such member of the Group within one year without payment of compensation (other than statutory compensation).

4. DIRECTORS’ INTEREST IN ASSETS

As at the Latest Practicable Date, as far as the Directors are aware, none of the Directors had any interest, either directly or indirectly, in any asset which has since 31 December 2018 (being the date to which the latest published audited consolidated financial statements of the Group were made up), up to the Latest Practicable Date, been acquired or disposed of by or leased to, any member of the Group or are proposed to be acquired or disposed of by, or leased to, any member of the Group.

5. DIRECTORS’ INTEREST IN CONTRACT OR ARRANGEMENT OF SIGNIFICANCE

As at the Latest Practicable Date, no Director and/or his/her respective close associates had a material interest, either directly or indirectly, in any subsisting contract or arrangement of significance to the business of the Group to which the Company or any of its subsidiaries was a party.

6. COMPETING INTERESTS

As at the Latest Practicable Date, as far as the Directors are aware, none of the Directors nor their respective close associates is and was interested in any business which competes or may compete, either directly or indirectly, with the business of the Group.

7. LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries was involved in any litigation or arbitration of material importance and no litigation or claim of material importance known to the Directors to be pending or threatened by or against the Company or any of its subsidiaries.

– III-4 –

GENERAL INFORMATION

APPENDIX III

8. EXPERT AND CONSENT

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

Name

Qualification

Grant Sherman Appraisal Limited

Professional valuer

As at the Latest Practicable Date, Grant Sherman Appraisal Limited had (i) no shareholding in any member of the Group and did not have any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group; (ii) had no direct or indirect interest in any assets which had been, since 31 December 2018 (the date to which the latest published audited consolidated financial statements of the Group were made up), acquired, disposed of by, or leased to any member of the Group, or were proposed to be acquired, disposed of by, or leased to any member of the Group; and (iii) has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter or report and the reference to its name included herein in the form and context in which it appears.

9. MATERIAL CONTRACTS

The following material contracts (not being contracts in the ordinary course of business) have been entered into by members of the Group within the two years preceding the date of this circular and up to the Latest Practicable Date and are or may be material:

• (a) the equity transfer agreement dated 29 April 2019 and entered into among Yong Sun Yongtai, 國投電力控股股份有限公司 (Guotou Electric Holding Co., Ltd.) (‘‘Guotou’’) and 湖州祥暉光伏發電有限公司 (Huzhou Xianghui Solar Power Co., Ltd.) (‘‘Huzhou Xianghui’’), pursuant to which Yong Sun Yongtai conditionally agreed to sell and Guotou conditionally agreed to purchase the entire equity interest in Huzhou Xianghui for a total consideration of approximately RMB413,213,000;

• (b) the credit confirmation agreement dated 29 April 2019 and entered into among Kong Sun Yongtai, Guotou and Huzhou Xianghui, pursuant to which Huzhou Xianghui agreed to continue to repay the outstanding amount of the shareholder’s loan to Kong Sun Yongtai following completion;

• (c) the Agreement;

• (d) the Memorandum;

• (e) the Guole disposal agreement dated 21 March 2019 between Kong Sun Yongtai as vendor and 新華電力發展投資有限公司 (Xinhua Electricity Development Investment Company Limited) (‘‘Xinhua Electricity’’), pursuant to which Kong Sun Yongtai agreed to sell and Xinhua Electricity agreed to acquire the entire equity interest in 霍林郭勒競日能源有限公司 (Huolin Guole Jingri Energy Company Limited) for a consideration of RMB148,608,800;

– III-5 –

GENERAL INFORMATION

APPENDIX III

• (f) the Kong Sun Baoyuan disposal agreement dated 21 March 2019 between BD Technology Limited as vendor and 深圳市雄韜電源科技股份有限公司 (Shenzhen Xiongtao Electronic Technology Company Limited) (‘‘Shenzhen Xiongtao’’）, pursuant to which the vendor agreed to sell, and Shenzhen Xiongtao agreed to acquire 17.4% equity interest in 江山寶源國際融資租賃有限公司 (Kong Sun Baoyuan International Financial Leasing Company Limited) at a consideration of RMB105,000,000;

• (g) the Guixi disposal agreement dated 24 December 2018 between Kong Sun Yongtai as vendor and 青海新能源（集團）有限公司 (Qinghai New Energy (Group) Limited) (‘‘Qinghai New Energy’’), pursuant to which (i) Kong Sun Yongtai agreed to sell, and Qinghai New Energy agreed to acquire, the entire equity interest in 貴溪市中元 太陽能電力有限公司 (Guixi City Zhongyuan Solar Power Company Limited) (the ‘‘Guixi Project Company’’); and (ii) Qinghai New Energy agreed to assume the outstanding shareholders’ loan from Kong Sun Yongtai to the Guixi Project Company for a total consideration of RMB134,846,100;

• (h) the capital increase, investment and equity transfer agreements dated 10 September 2018 between the Group and 蘇州君盛晶石股權投資合夥企業（有限合夥) (Suzhou Junsheng Jingshi Equity Investment Partnership (Limited Partnership)) (the ‘‘Limited Partnership’’), pursuant to which the Limited Partnership would commit to make capital contributions of RMB280,000,000 to 阿圖什市華光能源有限公司 (Artux Huaguang Energy Company Limited) (‘‘Artux Huaguang ’’), RMB260,000,000 to 阿圖什市興光能源有限公司 (Artux Xingguang Energy Company Limited) (‘‘Artux Xingguang’’) and RMB 260,000,000 to 黃驊市正陽新 能源有限公司 (Huanghua Zhengyang New Energy Limited) (‘‘Huanghua Zhengyang’’);

• (i) the equity repurchase agreement dated 10 September 2018 between Kong Sun Yongtai and the Limited Partnership, pursuant to which the Limited Partnership shall transfer to Kong Sun Yongtai approximately 98.25%, 99.62% and 96.30% equity interests in Artux Huaguang, Artux Xingguang and Huanghua Zhengyang, respectively, held by the Limited Partnership, after payment by Kong Sun Yongtai to the Limited Partnership of all of the consideration for the transfer;

• (j) the partnership agreement dated 21 August 2018 between Kong Sun Yongtai, Tianan Life Insurance Co., Ltd. and 君盛投資管理有限公司 (Junsheng Investment Management Co., Ltd.*) (the ‘‘Partners’’), pursuant to which the Partners agreed to set up the Limited Partnership;

• (k) the subscription agreement dated 14 December 2017 between Kong Sun Yongtai as subscriber and 內蒙古呼和浩特金谷農村商業銀行股份有限公司 (Inner Mongolia Hohhot Jingu Rural Commercial Bank Company Limited*) (‘‘Hohhot Jingu Bank’’), pursuant to which Kong Sun Yongtai agreed to subscribe for 24,875,156 shares of Hohhot Jingu Bank at RMB3 per subscription share and the termination agreement dated 12 June 2018 between Kong Sun Yongtai and Hohhot Jingu Bank, whereby the parties mutually agreed to terminate the subscription agreement;

– III-6 –

GENERAL INFORMATION

APPENDIX III

• (l) the Baoqian acquisition agreement dated 13 December 2017 between Kong Sun Yongtai as purchaser and 中科恒源科技股份有限公司 (Zhongke Hengyuan Technology Co., Ltd.) (the ‘‘Zhongke’’), pursuant to which Kong Sun Yongtai agreed to acquire, and Zhongke agreed to sell 30% of the equity interests in 廣州寶 乾小額貸款有限公司 (Guangzhou Baoqian Microfinance Company Limited) (‘‘Baoqian’’) at a consideration of RMB35,000,000 and the termination agreement dated 24 January 2019 between Kong Sun Yongtai and Zhongke, whereby the parties mutually agreed to terminate the Baoqian acquisition agreement;

• (m) the partnership agreement dated 13 December 2017 between 延安富秦清潔能源有限 公司 (Yanan Fuqin Clean Energy Limited) (‘‘Yanan Fuqin’’), Tianan Life Insurance Co., Ltd. and 珠海久銀股權投資基金管理有限公司 (Zhuhai Jiuyin Equity Investment Fund Management Co., Ltd.) (‘‘Zhuhai Jiuyin’’), pursuant to which the parties entered into 台州久安股權投資合夥企業（有限合夥）(Taizhou Jiuan Equity Investment Partnership (Limited Partnership)*) (‘‘Taizhou Jiuan’’)); and

• (n) the Jiuyin cooperation agreement dated 30 September 2017 between Eagle Investment Holdings Co., Ltd., Zhuhai Jiuyin and Yanan Fuqin, in relation to Taizhou Jiuan for carrying out investments.

• For identification purposes only

10. MISCELLANEOUS

• (a) The company secretary of the Company is Mr. Wong Ying Kit, who is a member of the Hong Kong Institute of Certified Public Accountants, a fellow member of the Association of Chartered Certified Accountants, an associate member of both The Hong Kong Institute of Chartered Secretaries and The Institute of Chartered Secretaries and Administrators;

• (b) The registered office and the principal place of business of the Company is at Unit 1209–10, 12/F, Everbright Centre, 108 Gloucester Road, Wanchai, Hong Kong;

• (c) The share registrar of the Company is Computershare Hong Kong Investor Services Limited, at Room 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong; and

• (d) This circular has been prepared in both English and Chinese. In the case of any discrepancies, the English texts shall prevail over their respective Chinese texts.

– III-7 –

GENERAL INFORMATION

APPENDIX III

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours on any weekday（except for public holidays）at Unit 1209–10, 12/F, Everbright Centre, 108 Gloucester Road, Wanchai, Hong Kong, for a period of 14 days from the date of this circular：

• (a) the articles of association of the Company;

• (b) the annual reports of the Group for the three years ended 31 December 2016, 2017 and 2018;

• (c) the material contracts as referred to in the paragraph headed ‘‘Material contracts’’ in this appendix;

• (d) the valuation report as referred to in Appendix II; and

• (e) this circular.

– III-8 –