Novautek Technologies Group Limited - Proxy Solicitation & Information Statement 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)

(1) VERY SUBSTANTIAL DISPOSAL AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

A letter from the Board is set out on pages 5 to 23 of this circular.

A notice convening the extraordinary general meeting of the Company to be held at Unit 1209–10, 12/F, Everbright Centre, 108 Gloucester Road, Wan Chai, Hong Kong on Friday, 2 August 2019 at 11:00 a.m. (the ‘‘EGM’’) is set out on pages EGM-1 to EGM-2 of this circular. Whether or not you intend to attend the EGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s share registrar, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, as soon as possible and in any event not less than 48 hours before the time fixed for holding the EGM or any adjournment thereof. Completion and return of the form(s) of proxy will not preclude you from attending and voting in person at the EGM should you so wish.

18 July 2019

CONTENTS

			Page
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Letter from	the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		5
Appendix I	—	Financial Information of the Group . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
Appendix II	—	Financial Information of Huzhou Xianghui
		(excluding Xianghui Lvyuan) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
Appendix III —		Unaudited Pro Forma Financial Information
		of the Remaining Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
Appendix IV —		Valuation Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IV-1
Appendix V	—	General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	V-1
Notice of the EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			EGM-1

– i –

DEFINITIONS

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

‘‘Agreement’’ the equity transfer agreement dated 29 April 2019 (as supplemented by the Supplemental Agreement) and entered into among the Purchaser, the Vendor and Huzhou Xianghui in relation to the Disposal
‘‘Board’’ the board of Directors
‘‘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
‘‘Completion Date’’ the date of issuing the new business license of Huzhou Xianghui and other approvals or fillings approving the transfer of the entire equity interest of Huzhou Xianghui from the Vendor to the Purchaser
‘‘connected person(s)’’ has the meaning ascribed to it under the Listing Rules
‘‘Credit Certificate’’ 交易支付資信證明 (the credit certificate*) dated 11 July 2019 and issued by the Purchaser and supported by its bank statement as at 30 June 2019
‘‘Credit Confirmation the credit confirmation agreement dated 29 April 2019 and Agreement’’ entered into among the Purchaser, the Vendor and Huzhou Xianghui, pursuant to which Huzhou Xianghui agreed to continue to repay the outstanding amount of the Shareholder’s Loan to the Vendor following Completion
‘‘Director(s)’’ the director(s) of the Company
‘‘Disposal’’ the sale of the entire equity interest in Huzhou Xianghui by the Vendor to the Purchaser
‘‘EGM’’ the extraordinary general meeting of the Company to be held on Friday, 2 August 2019 at 11:00 a.m. for the purpose of considering and, if thought fit, approving the Agreement and transactions contemplated thereunder
‘‘EPC’’ the engineering, procurement and construction
‘‘EPC Agreement’’
the EPC agreement entered into among the EPC Contractor, the Vendor and Huzhou Xianghui in December 2015, pursuant to which the EPC Contractor agreed to provide EPC services for the Huzhou Project

– 1 –

DEFINITIONS

‘‘EPC Contractor’’
‘‘Feed-in-Tariff’’
‘‘Group’’
‘‘Hong Kong’’
‘‘Huaxia Finance’’
‘‘Huaxia Finance Lease Agreement’’
‘‘Huzhou Project’’
‘‘Huzhou Xianghui’’
‘‘Latest Practicable Date’’
‘‘Listing Rules’’
‘‘Ministry of Finance’’
‘‘MW’’
‘‘NDRC’’
‘‘NEA’’
蘇州騰暉光伏技術有限公司 (Suzhou Tenghui Solar Technology Co., Ltd.) (formerly known as 中利騰暉光伏科技有限公司 (Zhongli Tenghui Solar Technology Co., Ltd.)), a company established in the PRC which is principally engaged in the EPC services of solar power plants
the feed-in-tariff regime currently implemented by the PRC government in relation to the provision of subsidy to the solar power plant operators in the PRC by way of renewable energy subsidies
the Company and its subsidiaries
the Hong Kong Special Administrative Region of the People’s Republic of China
華夏金融租賃有限公司 (Huaxia Finance Leasing Co., Ltd.*), a company incorporated in the PRC
the finance lease agreement dated 23 September 2015 and entered into among Huzhou Xianghui, the Vendor and Huaxia Finance together with its supplemental agreement and other related agreement
a 100 MW solar power plant owned by Huzhou Xianghui in Huzhou City, Zhejiang Province, the PRC
湖州祥暉光伏發電有限公司 (Huzhou Xianghui Solar Power Co., Ltd.*), a company established in the PRC and an indirect wholly-owned subsidiary of the Company as at the date of this circular
16 July 2019, being the latest practicable date prior to the printing of this circular for ascertaining certain information for inclusion in this circular
the Rules Governing the Listing of Securities on the Stock Exchange
中華人民共和國財政部 (Ministry of Finance of the PRC*)
mega watts
中華人民共和國國家發展和改革委員會 ( N a t i o n a l Development and Reform Commission of the PRC*)
國家能源局 (National Energy Administration*)

– 2 –

DEFINITIONS

‘‘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
‘‘Previous Disposals’’ the disposals of (i) 貴溪市中元太陽能電力有限公司 (Guixi City Zhongyuan Solar Power Co., Ltd.) as disclosed in the announcement of the Company dated 24 December 2018, which was completed on 28 December 2018; (ii) 霍林郭勒競日能源有限公司 (Huolin Guole Jingri Energy Co., Ltd.) as disclosed in the announcement of the Company dated 21 March 2019, which was completed on 29 March 2019; and (iii) 樟樹市中利騰暉光伏有限公司 (Zhangshu Zhongli Tenghui Solar Co., Ltd.*) as disclosed in the announcement of the Company dated 28 March 2019, which was completed on 17 April 2019
‘‘Purchaser’’
國投電力控股股份有限公司 (Guotou Electric Holding Co., Ltd.*), a company incorporated in the PRC and listed on Shanghai Stock Exchange
‘‘Remaining Group’’
the Group after completion of the Disposal
‘‘Renewable Energy Fund’’
中國再生能源發展基金 (China Renewable Energy Development Fund*), a fund established by the Ministry of Finance for the provision of subsidy to renewable energy investments by way of renewable energy subsidies
‘‘RMB’’
Renminbi, the lawful currency of the PRC
‘‘Service Agreement’’
the service agreement dated 29 April 2019 and entered into between the Group and Huzhou Xianghui, pursuant to which the Group agreed to provide operation and maintenance services to the Huzhou Project for a term of three years and Huzhou Xianghui agreed to pay the aggregate service fee (included tax) of up to approximately RMB15,100,000 to the Group
‘‘Share(s)’’ ordinary share(s) in the share capital of the Company
‘‘Shareholder(s)’’
shareholder(s) of the Company
‘‘Shareholder’s Loan’’
the outstanding shareholder’s loan provided by the Vendor to Huzhou Xianghui
‘‘State Grid’’
國家電網有限公司 (State Grid Corporation of China*), a state-owned electricity company established in the PRC

– 3 –

DEFINITIONS

‘‘Stock Exchange’’
‘‘Subsidy Catalogue’’
‘‘Supplemental Agreement’’
‘‘Vendor’’ or ‘‘Kong Sun Yongtai’’
‘‘Xianghui Lvyuan’’
‘‘%’’

The Stock Exchange of Hong Kong Limited

可再生能源電價附加資金補助目錄(Renewable Energy Tariff Subsidy Catalogue*)

the supplemental agreement dated 11 July 2019 and entered into among the Purchaser, the Vendor and Huzhou Xianghui in relation to the escrow arrangement of the consideration

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

湖州祥暉綠源生態養殖有限公司 (Huzhou Xianghui Lvyuan Ecological Farming Co., Ltd.*), a company incorporated in the PRC and a direct wholly-owned subsidiary of Huzhou Xianghui as at the date of the Agreement

per cent.

For identification purposes only

– 4 –

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

18 July 2019

To the Shareholders

Dear Sir or Madam,

(1) VERY SUBSTANTIAL DISPOSAL AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Reference is made to the announcement of the Company dated 7 May 2019 in relation to, among other things, the Disposal.

The purpose of this circular is to provide you with, among other things, (i) details of the Disposal; (ii) the financial information of the Group and Huzhou Xianghui (excluding Xianghui Lvyuan); (iii) the unaudited pro forma financial information of the Remaining Group; (iv) the valuation report in relation to Huzhou Xianghui; and (v) the notice of the EGM.

– 5 –

LETTER FROM THE BOARD

THE DISPOSAL

On 29 April 2019 (after trading hours of the Stock Exchange), the Vendor, an indirect wholly-owned subsidiary of the Company, the Purchaser and Huzhou Xianghui entered into the Agreement, pursuant to which the Vendor agreed to sell, and the Purchaser agreed to acquire, the entire equity interest in Huzhou Xianghui for a total consideration of approximately RMB413,213,000.

The principal terms of the Agreement are summarized as follows:

PRINCIPAL TERMS OF THE AGREEMENT

Date

29 April 2019

Parties

(i) the Purchaser;
(ii) the Vendor, an indirect wholly-owned subsidiary of the Company; and
(iii) Huzhou Xianghui.

Subject Matter and Consideration

Pursuant to the Agreement, the Vendor agreed to sell, and the Purchaser agreed to acquire, the entire equity interest in Huzhou Xianghui.

The total consideration for the Disposal (the ‘‘Consideration’’) is approximately RMB413,213,000, which comprises the following:

(a) RMB50,000,000, for the transfer of the entire equity interest in Huzhou Xianghui (the ‘‘Equity Consideration’’), which shall be payable by the Purchaser to the Vendor in the following manner:
(i) RMB45,000,000 shall be payable to the Vendor within five (5) business days of the Completion Date (the ‘‘First Payment’’); and
(ii) RMB5,000,000 shall be payable to the Vendor within five (5) business days after the first anniversary of the Completion Date.
(b) Approximately RMB363,213,000, being the amount of the outstanding Shareholder’s Loan as at the date of the Agreement (the ‘‘Debt Consideration’’), which shall be satisfied in the manner set out in the paragraph headed ‘‘Repayment of Shareholder’s Loan’’ below.

– 6 –

LETTER FROM THE BOARD

Upon the payment of the First Payment, the parties shall coordinate to (i) arrange for the termination of the existing employees of Huzhou Xianghui according to the requirements of the Purchaser, if any; and (ii) arrange the completion of all necessary registration, filings and changes of the constitutional documents of Huzhou Xianghui to reflect the Disposal, upon which, the Vendor will deliver the business license and permits, company chop(s), other corporate and financial documents, material contracts of Huzhou Xianghui as well as other documents necessary for the operation of Huzhou Xianghui to the Purchaser.

In line of the market practice in the solar industry, RMB5,000,000 out of the Equity Consideration (being 10% of the Equity Consideration) shall be payable to the Vendor within five (5) business days after the first anniversary of the Completion Date. Taking into consideration of other previous transactions undertaken by the Group and that typically approximately 10% of the consideration would remain payable after the relevant completion date, the Directors are of the view that such payment schedule is fair and reasonable.

Basis of Consideration

The Consideration was determined upon arm’s length negotiations between the Vendor and the Purchaser with reference to the unaudited total assets of Huzhou Xianghui (excluding Xianghui Lvyuan), being the value of the underlying assets of Huzhou Xianghui (excluding Xianghui Lvyuan) as at 31 December 2018, in the amount of approximately RMB907,955,000, and adjusted by (a) applying a discount of approximately 7.2%, resulting in the amount of approximately RMB842,243,000; and (b) subtracting the total liabilities due to third parties (being total liabilities of Huzhou Xianghui (excluding Xianghui Lvyuan) less the Shareholder’s Loan) as at 31 December 2018 in the amount of approximately RMB429,030,000, which will remain payable by Huzhou Xianghui upon Completion. The Shareholder’s Loan, which represents the capital injected by the shareholder of Huzhou Xianghui, was added back to the net asset value of Huzhou Xianghui (excluding Xianghui Lvyuan) in determining the value of Huzhou Xianghui (excluding Xianghui Lvyuan).

When determining the Consideration, the management of the Company took into consideration of the proportion of the Shareholder’s Loan provided by the Vendor to Huzhou Xianghui being relatively higher (i.e. approximately 37.7% as compared to the total assets of Huzhou Xianghui) as compared to the proportion of shareholder’s loan provided by the Group to its other solar power projects (i.e. typically an average of approximately 17.9% as compared to the total assets of the relevant project company). Given the relatively higher Shareholder’s Loan provided by the Group to Huzhou Xianghui as part of the capital injected by the Vendor to Huzhou Xianghui, the leverage ratio, which was calculated by the total liabilities due to third parties over the total assets, is lower as compared to the other solar power projects of the Group. As 100% of the outstanding Shareholder’s Loan and the total liabilities due to third parties would remain repayable following Completion, the Company considers that it is appropriate to apply the discount of approximately 7.2% to the total assets of Huzhou Xianghui in determining the Consideration. On the other hand, given that 100% of the total liabilities due to third parties would remain payable by Huzhou Xianghui upon Completion, 100% of the total liabilities due to third parties was subtracted for the purpose of determining the consideration. Based on the aforesaid, the Company is of the view that the methodology adopted in determining the Consideration is fair and reasonable.

– 7 –

LETTER FROM THE BOARD

In considering the discount to be applied to the value of the underlying assets of Huzhou Xianghui (excluding Xianghui Lvyuan) for the determination of the Consideration, the management of the Company took into consideration of the following:

(i) the Consideration agreed with the Purchaser being the highest among those offered by other potential purchasers who the Company could identify; and
(ii) the rates of discount applied to the value of total assets in similar transactions by other publicly listed companies in the same industry of the Group.

Comparable Transactions

The Company selected seven comparable transactions (the ‘‘Comparable Transactions’’) listed below as a reference to determine the rate of discount of approximately 7.2% applied to the total assets of Huzhou Xianghui. The Comparable Transactions were selected and were considered as comparable to the Disposal as contemplated under the Agreement as in each of the Comparable Transactions:

(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 the Huzhou Project;
(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 and involved a publicly listed company.

Taking into account of the above-mentioned selection criteria, the list of Comparable Transactions represents an exhaustive list of comparable transactions identified by the Directors. Since the information of the Comparable Transactions is publicly available and thus more reliable and based on the selection criteria, they are comparable to the Disposal. Accordingly, the Directors are of the view that they are fair and representative samples to determine the discount rate of approximately 7.2% being applied to the total assets of Huzhou Xianghui.

– 8 –

LETTER FROM THE BOARD

Details of the Comparable Transactions with the discount/premium to the total assets of the subject entity are set out below:

				Aggregate
		Name of the public	Transaction	consideration for	Total assets of	Discount/
No.	Date	company	description	the transaction	the subject entity	Premium rate	Payment schedule
1.	18 April	Beijing Enterprises	BECE announced a	RMB1,099,682,380	RMB1,123,000,000	Discount of	Approximately 8.2% of the
	2018	Clean Energy	potential	for 100%	as at 31 March	approximately	consideration was
		Group Limited	acquisition of 響	equity interest	2018	2.1% to the	payable upon completion,
		(‘‘BECE’’) (stock	水恆能太陽能發			total assets of	approximately 13.6% of
		code: 1250), whose	電有限公司			XSHN	the consideration was
		shares are listed on	(Xiangshui				payable one (1) month
		the Stock	Hengneng				after completion,
		Exchange	Photovoltaic				approximately 47.9% of
			Power Co. Ltd.*)				the consideration was
			(‘‘XSHN’’),				payable within one (1)
			which was				year of completion,
			operating a				approximately 7.7% of
			100MW solar				the consideration was
			power plant in				payable after one (1)
			Yancheng City,				year of completion and
			Jiangsu Province,				approximately 22.6% of
			the PRC.				the consideration was
							payable depending on
							the receipt of
							government subsidies
							and completion of
							certain rectification work
2.	18 April	BECE	BECE announced a	RMB251,052,605	RMB239,000,000	Premium of	Approximately 3.2% of the
	2018		potential	for 100%	as at 31 March	approximately	consideration was
			acquisition of 響	equity interest	2018	5.0% of the	payable upon completion,
			水永能太陽能發			total assets 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’’),				payable within one (1)
			which was				year of completion,
			operating a				approximately 8.0% of
			20MW solar				the consideration was
			power plant in				payable after one (1)
			Yancheng City,				year of completion and
			Jiangsu Province,				approximately 23.5% of
			the PRC.				the consideration was
							payable depending on
							the receipt of
							government subsidies
							and completion of
							certain rectification work

– 9 –

LETTER FROM THE BOARD

				Aggregate
		Name of the public	Transaction	consideration for	Total assets of	Discount/
No.	Date	company	description	the transaction	the subject entity	Premium rate	Payment schedule
3.	13 July	常州亞瑪頓股份有限公	Changzhou Almaden	RMB366,960,000	RMB400,005,000	Discount of	Approximately 20.7% of the
	2018	司(Changzhou	announced a	for 100%	as at 31 March	approximately	consideration was
		Almaden Co.,	disposal of 100%	equity interest	2018	8.3% to the	payable upon completion,
		Ltd.*)	equity interest in			total assets of	approximately 36.1% of
		(‘‘Changzhou	a company,			the disposed	the consideration was
		Almaden’’) (stock	which was			entity	payable within one (1)
		code: 002623)),	operating a				year of completion,
		whose shares are	50MW solar				approximately 19.0% of
		listed on the	power plant in				the consideration was
		Shenzhen Stock	Guizhou, the				payable after one (1)
		Exchange	PRC.				year of completion and
							approximately 24.2% of
							the consideration was
							payable depending on
							the completion of certain
							rectification work
4.	2 November	珈偉新能源股份有限公	Jiawei announced a	RMB1,029,566,778	RMB975,758,600	Premium of	Not publicly available
	2018	司(Jiawei	disposal of 100%	for 100%	as at 31	approximately	information
		Renewable Energy	equity interest in	equity interest	December	5.5% to the
		Co., Ltd.*)	a company,		2017	total assets of
		(‘‘Jiawei’’) (stock	which was			the disposed
		code: 300317),	operating a			entity
		whose shares are	100MW solar
		listed on the	power plant in
		Shenzhen Stock	Gaoyou City,
		Exchange	Jiangsu Province,
			the PRC.

Based on publicly available information, the discount/premium to the total asset of the four Comparable Transactions above ranged from a discount of approximately 8.3% to a premium of approximately 5.5%, which the Company considers as comparable to the approximately 7.2% discount applied to the value of the underlying assets of Huzhou Xianghui as at 31 December 2018 prior to subtracting the total liabilities due to third parties in reaching the Consideration for the Disposal.

– 10 –

LETTER FROM THE BOARD

On the other hand, as the total assets value of the subject entities for three out of the seven Comparable Transactions are not available from publicly available information, having considered the above-mentioned selection criteria, the Company considered the discount rates applied in those Comparable Transactions with reference to the net assets of the subject entities. Details of the Comparable Transactions with the discount to net assets of the subject entity are set out below:

				Equity
		Name of the public	Transaction	consideration for	Net assets of the	Discount/premium
No.	Date	company	description	the transaction	subject entity	rate	Payment schedule
1.	24 October	GCL New Energy	GCL announced a	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.
2.	24 October	GCL	GCL also announced	RMB93,500,000 for	RMB124,087,000 as	Discount of	Approximately 88.2% of the
	2018		a disposal of 80%	80% equity	at 30 June 2018	approximately	consideration was payable
			equity interest in	interest (i.e.		5.8% to the net	within one (1) month after
			a company which	RMB116,875,000		assets value of	completion and
			was operating a	for 100% equity		the disposed	approximately 11.8% of
			60MW solar	interest)		entity	the consideration was
			power plant in				payable within one (1)
			Yueyang City,				year after completion
			Hunan Province,
			the PRC.
3.	28 March	GCL	GCL announced a	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			entity	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

Whilst each of the above three Comparable Transactions adopted a discount rate based on the net asset value of the subject entity as opposed to a discount rate based on the total assets of Huzhou Xianghui as for the Disposal. However, taking into consideration that the above three Comparable Transactions were of similar nature as the Disposal, the range of discounts to the net assets of the above three Comparable Transactions from approximately 5.8% to approximately 16.3% represents an indicative range of discount for the management of the Company to consider when determining the discount rate to be applied to the Disposal.

– 11 –

LETTER FROM THE BOARD

Further, (i) the Consideration represents a discount of approximately RMB66,787,000 to the fair value of Huzhou Xianghui (excluding Xinaghui Lvyuan) as at 31 March 2019 of RMB480,000,000 as set out in the valuation report in Appendix IV to this circular; and (ii) the Equity Consideration represents a discount of approximately RMB86,909,000 (i.e. approximately 63% discount) to the net asset value of Huzhou Xianghui (excluding Xianghui Lvyuan) as at 31 December 2018 of approximately RMB136,909,000. In considering the reasonableness of the discount rate being applied to the Consideration, the management of the Company also took into consideration of the reasons for the Disposal as set out in the paragraph headed ‘‘Reasons for and Benefits of the Disposal’’ below as well as:

(i) the financial and cash flow position of Huzhou Xianghui (excluding Xianghui Lvyuan), in particular, the net cash outflow position for the years ended 31 December 2017 and 2018 if the Shareholder’s Loan were not provided;
(ii) the saving of annual finance costs of the Group of not less than approximately RMB63,000,000 following completion of the Disposal; and
(iii) the operation and maintenance service fee of up to approximately RMB15,100,000 to be receivable by the Group under the Service Agreement.

As demonstrated above, the aggregated amount of the financial benefit to the Group is approximately RMB78,100,000, being the sum of the saving of annual finance costs of not less than approximately RMB63,000,000 following completion of the Disposal and the operation and maintenance service fee of approximately RMB15,100,000 to be receivable by the Group under the Service Agreement. Accordingly, whilst the Equity Consideration represents a discount of approximately RMB86,909,000 to the net asset value of Huzhou Xianghui (excluding Xianghui Lvyuan), the Company is of the view that the Consideration is fair and reasonable given that the Company will be able to eliminate the continuous commitment as a shareholder of Huzhou Xianghui on one hand whilst continue to benefit and enjoy a stable income to be generated by the service fee payable to the Group under the Service Agreement.

Further, taking into consideration of the delay in collection of the renewable energy subsidies from the State Grid by Huzhou Xianghui (the ‘‘Government Subsidies’’), it is expected that the Group’s cash flow position would be tighter than expected if Completion does not take place. In addition to the finance costs saving and operation and maintenance service fee receivable, the Disposal will also bring in immediate cash flow to the Group to relieve the Group’s short-term cash flow pressure. Accordingly, the Disposal is also one of the measures taken by the Group to prevent the Group’s delay in repayment of principals and interests of relevant loans in the aggregate amount of approximately RMB413,000,000, which will be due in the second half of 2019.

Having taken into consideration of the aforesaid factors and that the Consideration offered by the Purchaser represents the highest offer price as compared to other potential buyer(s) when the Consideration was determined, the Company is of the view that the aforesaid discount is justifiable.

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LETTER FROM THE BOARD

Adjustment to Consideration

Prior to the entering into the Agreement, the Purchaser has appointed an independent accounting firm for the purpose of performing a completion audit of Huzhou Xianghui (the ‘‘Audit’’). The Purchaser shall complete the Audit within one month upon satisfaction of the Conditions (as defined below).

The First Payment shall be adjusted upon occurrence of the followings:

(i) in the event Huzhou Xianghui distributes dividends (the ‘‘Dividends’’) to the Vendor; and
(ii) in the event of any change of net asset value of Huzhou Xianghui as a result of matters occurred in non-ordinary course of business, such change will be considered as a consideration adjustment. The Vendor and the Purchaser shall agree upon the adjusted amount within three (3) business days upon issuance of the report of the Audit (the ‘‘Agreed Adjustment’’).

Upon the occurrence of (i) and (ii) as mentioned-above, the First Payment shall be adjusted downward by the Dividends and the Agreed Adjustment. As at the Latest Practicable Date, none of the situations mentioned in (i) and (ii) above has occurred.

Any consideration adjustment made as a result of the Audit shall be agreed in writing between the Vendor and the Purchaser.

Supplemental Agreement

On 11 July 2019, the Purchaser, the Vendor and Huzhou Xianghui entered into the Supplemental Agreement, pursuant to which the Purchaser and the Vendor agree to open a joint bank account (the ‘‘Joint Account’’) to hold the First Payment. According to the Supplemental Agreement, the Purchaser and the Vendor shall open the Joint Account within five (5) business days upon execution of the Supplemental Agreement and the Purchaser shall pay the First Payment to the Joint Account prior to the Completion Date. The First Payment will be released to the Vendor’s designated bank account within five (5) business days of the Completion Date.

Repayment of Shareholder’s Loans

As at the date of the Agreement, approximately RMB363,213,000 of the Shareholder’s Loan was outstanding. On 29 April 2019, the Purchaser, the Vendor and Huzhou Xianghui entered into the Credit Confirmation Agreement, pursuant to which Huzhou Xianghui agreed to continue to repay the outstanding amount of the Shareholder’s Loan to the Vendor following Completion.

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LETTER FROM THE BOARD

The Shareholder’s Loan shall be repayable by Huzhou Xianghui to the Vendor (a) as to approximately RMB224,692,000 (together with the First Payment, representing approximately 65.3% of the Consideration), including part of the Government Subsidies in the amount of approximately RMB54,633,000, within 10 business days of the Completion Date; and (b) the remaining amounts shall be settled as follows:

(i) within five (5) business days upon Huzhou Xianghui having collected the remaining Government Subsidies incurred up to 30 June 2018 in the amount of approximately RMB77,861,000, Huzhou Xianghui shall pay such amount to the Vendor; and
(ii) within five (5) business days upon the completion of each of certain rectification works items (including (i) assisting Huzhou Xianghui in obtaining all relevant approvals on compliance documents or opinions from the relevant government authorities and (ii) completing the Huzhou Project’s quality rectification and the Purchaser having confirmed that all defects have been rectified) for the Huzhou Project, Huzhou Xianghui shall pay the Vendor an amount corresponding to the completion of each rectification works items in the aggregate amount of approximately RMB60,660,000 (the ‘‘Rectification Deposit’’).

Payment of the Government Subsidies

During the third quarter of 2018, Huzhou Xianghui started to receive the first batch of the Government Subsidies incurred up to June 2017 in the amount of approximately RMB99,892,000. Based on the past payment pattern by the State Grid, the remaining Government Subsidies incurred up to 30 June 2018 in the amount of approximately RMB77,861,000 is expected to be paid or substantially paid to Huzhou Xianghui on or before 31 December 2019.

Payment of the Rectification Deposit

According to the Credit Confirmation Agreement, the Vendor shall complete all rectification works of the Huzhou Project on or before 31 May 2021. As such, the Rectification Deposit shall be payable to the Vendor on or before 7 June 2021. In line with the market practice in the solar industry, final payment of the consideration would typically tie with the satisfaction of necessary rectification work relating to the solar project. Accordingly the Directors are of the view that the payment of the Rectification Deposit on or after the expected completion date of the rectification work of the Huzhou Project is fair and reasonable.

As set forth under the paragraph headed ‘‘Comparable Transactions’’ above, it is not uncommon that a portion of the consideration for transactions similar to the Disposal would be payable one year or more after the completion date and linked with the receipt of government subsidies and completion of rectification works. As for the Disposal, (i) approximately 65.3% of the Consideration (i.e. the First Payment and approximately RMB224,692,000 as part repayment of the Shareholder’s Loan) shall be payable within 10 business days of the Completion Date; (ii) approximately 1.2% of the Consideration (i.e. RMB5,000,000 out of the Equity Consideration) shall be payable after the first anniversary of the Completion Date; and (iii) the remaining portion of the Consideration will be paid subject to the receipt of

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LETTER FROM THE BOARD

Government Subsidies and completion of the rectification works of the Huzhou Project. Taking into consideration of the general market practice in the solar industry as well as other previous transactions underwent by the Group, the Directors are of the view that the payment schedule for the Consideration is fair and reasonable.

Penalty

If the Purchaser and/or Huzhou Xianghui fails to fulfil their obligations to pay the Consideration according to the terms of the Agreement and the Credit Confirmation Agreement (the ‘‘Delay’’), the Purchaser and/or Huzhou Xianghui will be liable to pay to the Vendor a daily default payment of 0.05% on the respective amount of the Consideration for the first 30 days and thereafter and all losses of the Vendor arised from the Delay. The Vendor is entitled to terminate the Agreement and the Credit Confirmation Agreement if the Default situation continues for more than 30 days. Upon the termination of the Agreement, the Vendor is entitled to request the Purchaser to transfer the equity interest and assets of Huzhou Xianghui back to the Vendor.

Failure of the Purchaser to perform its obligation to pay the Consideration or the default interest rate or if the Purchaser refuses to transfer the equity interest and assets of Huzhou Xianghui back to the Vendor pursuant to the Agreement constitutes an event of default on the part of the Purchaser and the Purchaser is liable for losses incurred thereunder. Upon which, the Vendor is entitled to commence litigation against the Purchaser in the PRC court with competent jurisdiction and claim restitution in accordance with the PRC Contract Law. If the Purchaser refuses to perform the court decision in favour of the Vendor, the Vendor 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 consideration of the background of the Purchaser, the Company is of the view that the possibility that the Purchaser would not honour its contractual commitment is relatively low.

Credit Certificate

The Purchaser issued the Credit Certificate to the Vendor, pursuant to which the Purchaser confirms to perform its payment obligation under the Agreement, which is supported by a bank statement evidencing that the Purchaser has sufficient funds to fulfill such obligation.

Taking into consideration of (i) the aforesaid penalty mechanism, (ii) the ultimate beneficial owner of the Purchaser, (iii) the financial status of the Purchaser upon the Company’s background check, (iv) the Credit Certificate and (v) the escrow arrangement under the Supplemental Agreement, 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.

The business valuation report of Huzhou Xianghui, including details of the assumptions, basis and methodology of the valuation, prepared by the independent valuer is set out in Appendix IV to this circular. The Directors are of the view that, with similar business nature

– 15 –

LETTER FROM THE BOARD

and associated risk related to the photovoltaic business, the selected seven Comparable Transactions and three comparable companies mentioned in Appendix IV to this circular are considered fair and representative.

Exclusion of Xianghui Lvyuan

Xianghui Lvyuan is established in the PRC on 21 June 2016 and principally engaged in agricultural eco tourism. As Xianghui Lvyuan’s principal business activities are not in line with the Purchaser’s principal business activities, the parties agreed that Xianghui Lvyuan would be excluded from the Disposal. As at the Latest Practicable Date, Huzhou Xianghui has transferred the entire equity interest in Xianghui Lvyuan to the Group. Upon Completion, Xianghui Lvyuan will remain as a subsidiary of the Group.

Conditions Precedent

Completion is conditional upon the satisfaction of the following conditions (the ‘‘Conditions’’):

(i) each party having obtained all necessary internal approval or fillings regarding the approval of the Agreement and the transaction contemplated thereunder,
(a) in terms of the Vendor, it having obtained the Board’s approval, the Shareholders’ approval at the EGM and other decision making bodies’ approval (if any) approving the Agreement and the transactions contemplated thereunder (including the Shareholder’s Loan) in accordance with the Listing Rules;
(b) in terms of the Purchaser, it having obtained its internal approval regarding the Agreement and the transaction contemplated thereunder; and
(c) in terms of Huzhou Xianghui, it having obtained its internal approval and shareholder’s consent regarding the approval of the Agreement and the transaction contemplated thereunder;
(ii) the Vendor and Huzhou Xianghui having entered into the Credit Confirmation Agreement;
(iii) the Vendor, Huzhou Xianghui and the EPC Contractor having completed the settlement under the EPC Agreement;
(iv) Huzhou Xianghui having entered into the power grids operation agreements pursuant to the requirement of local government;
(v) Huzhou Xianghui having entered into the Service Agreement;
(vi) Huzhou Xianghui having settled the account receivables with Xianghui Lvyuan, the Vendor and other related parties; and Huzhou Xianghui having transferred the entire equity interest in Xianghui Lvyuan to the Group; and

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LETTER FROM THE BOARD

(vii) Huaxia Finance having provided the written consent regarding the approval of the transaction contemplated under the Agreement.

If any of the Conditions is not fulfilled, the Agreement will be terminated with immediate effect.

Save for the approval of the Shareholders in item (i)(a) of the Conditions, other Conditions have been satisfied as at the Latest Practicable Date.

Completion shall take place within five (5) business days of confirming the results of the Audit.

Upon Completion, (i) Huzhou Xianghui will cease to be a subsidiary of the Company and its financial statements will no longer be consolidated into the Group’s financial statements and (ii) Xianghui Lvyuan will continue to be a wholly-owned subsidiary of the Company and its financial results will continue to be consolidated into the Group’s financial statements.

Others

As at 31 December 2018, Huzhou Xianghui shall pay approximately RMB415,946,000 (the ‘‘Huaxia Finance Loans’’) to Huaxia Finance pursuant to the Huaxia Finance Lease Agreement which is guaranteed by the Vendor and the Company. As at the Latest Practicable Date, the outstanding balance of the Huaxia Finance Loans was reduced to approximately RMB400,159,000. According to the Agreement, if Huzhou Xianghui fails to fulfil its payment obligation under the Huaxia Finance Lease Agreement and/or the Purchaser fails to release the guarantee provided by the Vendor or the Company for the benefit of Huzhou Xianghui within six (6) months of Completion, Huzhou Xianghui is liable to pay to the total losses suffered by the Vendor and/or the Company, including but not limited to the amount paid by the Vendor and/or the Company to Huaxia Finance, the litigation costs and property preservation fee, etc. plus a daily default payment of 0.05% calculated based on the total loss suffered by the Vendor and/or the Company. Furthermore, on 29 April 2019, the Purchaser issued a letter of undertaking in favour of the Vendor, pursuant to which the Purchaser undertakes that, upon the Purchaser becoming the shareholder of Huzhou Xianghui on Completion, in the event that Huzhou Xianghui encounter any difficulties in making the lease payment and repaying the borrowings under the Huaxia Finance Lease Agreement, the Purchaser shall coordinate and procure Huzhou Xianghui to actively raise fund to repay the relevant liabilities under the Huaxia Finance Lease Agreement, and coordinate and procure Huzhou Xianghui to put in place alternative measures so as to promptly release all the guarantee provided by the Vendor and the Company.

INFORMATION ON THE PARTIES

Huzhou Xianghui was established in the PRC on 21 April 2015. It is principally engaged in the development, construction and operation of the Huzhou Project. The construction of Huzhou Project has been completed and started power generation and the power plant is connected to the power grid.

– 17 –

LETTER FROM THE BOARD

The unaudited financial results of Huzhou Xianghui (excluding Xianghui Lvyuan) for the two years immediately preceding the date of the Agreement are as follows:

			For the year	ended
			31 December
			2017	2018
			(Unaudited)	(Unaudited)
			RMB’000	RMB’000
Net	profit	before tax	19,712	47,319
Net	profit	after tax	19,712	47,319

The net asset value and total asset value of Huzhou Xianghui (excluding Xianghui Lvyuan) as at 31 December 2018 was approximately RMB136,909,000 and approximately RMB907,955,000, respectively.

The Vendor is an indirect wholly-owned subsidiary of the Company which is principally engaged in investment holding. As at the date of this circular, Huzhou Xianghui is a direct wholly-owned subsidiary of the Vendor.

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.

The Purchaser is a company incorporated in the PRC and whose shares are listed on Shanghai Stock Exchange with the stock code of 600886. It is principally engaged in the investment, construction, operation and management of energy projects with a focus on electricity generation. The largest ultimate beneficial owner of the Purchaser is 國務院國有資產監督管理委員會 (the State-Owned Assets Supervision and Administration Commission of the State Council*). According to the annual report of the Purchaser for the year ended 31 December 2018, the total assets and the net assets attributed to shareholders of the Purchaser are approximately RMB220,708,244,000 and approximately RMB37,691,562,000. The total revenue and the net profit attributed to shareholders of the Purchaser are approximately RMB41,011,373,000 and approximately RMB4,364,098,000. The Company was approached by the Purchaser in September 2018 as the Purchaser was interested in making investment in solar power plant projects.

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, connected persons and senior management of the Company.

REASONS FOR AND BENEFITS OF THE DISPOSAL

The Company has been proactively considering innovative business opportunities, which could strengthen the Group’s core business and reduce its finance costs. The Disposal represents one of the Group’s pilot programme in line with its long-term asset-light strategy. The Directors consider that the Disposal is a good opportunity for the Group to realise its investment in Huzhou Xianghui so as to better allocate the Group’s resources, optimise its

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LETTER FROM THE BOARD

operation model, enhance the efficiency of equipment in solar power plants and accelerate its pace in transforming to asset-light model. Upon Completion, the Group will continue to provide operation and maintenance services to the Huzhou Project pursuant to the Service Agreement, which will generate a stable service fee income to the Group under such asset-light model.

The Disposal will also 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 Loan from Huzhou Xianghui will be applied to repay existing debts to reduce the finance costs of the Group; and (ii) related debts (including the loans and borrowings under Huaxia Finance Lease Agreement) incurred by the Huzhou Project will no longer be consolidated into the Group’s financial statements upon Completion.

In late 2018 and early 2019, the Group made a strategic move towards asset-light model transformation and has achieved a major milestone. The Group successfully completed the Previous Disposals with total installed capacity of 110MW and facilitated inflow of capital, which could promote the progress of transformation and upgrade developments and further boost the asset-light model transformation. The Group will further accelerate the asset-light model transformation with the provision of solar power plant operation and maintenance services. It is expected that, in 2019, by transferring the controlling interests of solar power plant projects, the Group will be able to recycle capital, reduce its debts and finance costs and mitigate the pressure on project financing, while further improve the return on capital and receive stable fees annually by providing solar power plant operation and maintenance services.

Upon Completion, the Company will continue to have 45 completed solar power plants with a total installed capacity of 1,629.3 MW. Accordingly, the Board is of the view that the Remaining Group will remain viable and sustainable and will maintain a sufficient level of operations whilst in the transition to the asset-light strategy. As at the Latest Practicable Date, there was no plan authorised by the Board for disposal of any of the remaining 45 completed solar power plants.

Solar power generating business is a capital intensive industry, which highly relies on external financing in order to fund for the construction of solar power plant while the recovery of capital investment takes a long period of time. Any delay in enlisting of the solar power plants of the Group on the Subsidy Catalogue or any delay in the receipt of renewable energy subsidies for its solar power plants that have been enlisted on the Subsidy Catalogue could have a material adverse effect on the Group’s business, financial condition, cash flow and operating results. For further details, please refer to the paragraph headed ‘‘Financial and Trading Prospects of the Group’’ in Appendix I to this circular. To cope with the gearing risk, the Group will pay close attention to the market dynamics, and to avoid any unfavorable changes to the Group. Additionally, the Group is constantly pursing asset-light model transformation to optimize its finance structure and lower its gearing ratio.

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LETTER FROM THE BOARD

Given the Group highly relies on external financing in order to obtain investment capital for new solar power plants development, any interest rate changes will have impact on the Group’s capital expenditure and finance costs, hence, affecting the Group’s operating results. Transformation into asset-light model is an effective way to reduce debts and interest rate exposure.

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, including the Consideration, were entered into on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

FINANCIAL EFFECT OF THE DISPOSAL

Upon Completion, (i) Huzhou Xianghui will cease to be a subsidiary of the Company and its financial statements will no longer be consolidated into the Group’s financial statements; and (ii) Xianghui Lvyuan will continue to be a wholly-owned subsidiary of the Company and its financial results will continue to be consolidated into the Group’s financial statements.

Upon Completion, the unaudited total assets and the total liabilities of the Group will be decreased by approximately RMB516,939,000, from approximately RMB20,420,116,000 to approximately RMB19,903,177,000; and approximately RMB429,030,000, from approximately RMB13,816,288,000 to approximately RMB13,387,258,000, respectively.

Subject to the final audit, it is expected that the Group will realise a net loss on the Disposal of not more than approximately RMB85,000,000, which is calculated by reference to difference between the Equity Consideration and (i) the net asset value of Huzhou Xianghui (excluding Xianghui Lvyuan) of approximately RMB134,502,000 based on the unaudited financial information of Huzhou Xianghui (excluding Xianghui Lvyuan) as at 31 March 2019; and (ii) the related transaction costs, taxes and expenses of the Disposal. 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.

USE OF PROCEEDS

The net proceeds from the Disposal after deducting the taxation and transaction costs are estimated to be approximately RMB413,000,000. The Group intends to apply the net proceeds from the Disposal to repay its debts to reduce the finance costs of the Group, which will lower the Group’s gearing ratio.

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LETTER FROM THE BOARD

The details of loans to be repayable by the Group on or before 31 December 2019 are as follows:

							Expected
		Amount to					interest
	Outstanding	be repaid					expense for
	amount of	from 1 May	Effective				the year
	the loan as	2019 to	interest				ending
	at 30 April	31 December	rate of the	Grant date		Due date of	31 December
Identity of lender	2019	2019	loan	of the loan		the loan	2019	Purpose of the loan
	(RMB’000)	(RMB’000)	(%)				(RMB’000)
江山寶源國際融資租賃	46,500	13,120	8.94	28 October		1 December	9,386	Construction of solar
有限公司(Kong Sun					2015	2022		power plant
Baoyuan
International
Financial Leasing
Limited*) (‘‘Kong
Sun Baoyuan’’)
Kong Sun Baoyuan	46,800	13,120	10.55	14 October		30 December	3,703	Construction of solar
					2015	2021		power plant
Kong Sun Baoyuan	48,241	19,500	8.94	12 August		17 June 2026	4,007	Construction of solar
					2017			power plant
北銀金融租賃	55,111	14,440	8.39	30 June 2014		30 June 2022	3,751	Construction of solar
有限公司(Beiyin								power plant
Finance Leasing
Limited*)
大唐融資租賃	234,532	18,110	6.74	5	May 2017	12 May 2027	16,319	Construction of solar
有限公司(Datang								power plant
Finance Leasing
Limited*)
China Development	81,000	12,520	8.44	10 November		10 November	4,099	Construction of solar
Bank Financial					2015	2025		power plant
Leasing Co., Ltd.
(‘‘CDB Leasing’’)
CDB Leasing	107,550	14,380	8.58	29 July 2014		31 July 2024	7,459	Construction of solar
								power plant
CDB Leasing	81,000	12,520	8.44	10 November		10 November	4,099	Construction of solar
					2015	2025		power plant
CDB Leasing	227,800	32,130	8.16	28 June 2016		28 June 2026	15,960	Construction of solar
								power plant
哈銀金融租賃有限	217,000	43,280	7.73	23 December		10 July 2024	15,702	Construction of solar
責任公司(Hayin					2016			power plant
Finance Leasing
Limited*)
河北省金融租賃	298,463	13,880	7.05	25 April		2 June 2025	21,824	Construction of solar
有限公司(Hebei					2017			power plant
Finance Leasing
Limited*) (‘‘Hebei
Finance’’)
Hebei Finance	109,600	50,050	7.99	25 October		25 October	8,088	Construction of solar
					2016	2024		power plant
Hebei Finance	55,200	11,870	7.23	27 December		27 December	1,268	Construction of solar
					2016	2024		power plant
Huaxia Finance	400,000	43,100	9.00	1	February	1 February	32,558	Construction of solar
					2019	2029		power plant

– 21 –

LETTER FROM THE BOARD

Identity of lender
Outstanding
amount of
the loan as
at 30 April
2019
(RMB’000)
中國金融租賃
有限公司(China
Finance Leasing
Limited*) (‘‘China
Finance’’)
105,882
China Finance
145,882
China Finance
86,250
China Finance
82,500
China CITIC Bank
Corporation Limited
177,900

Amount to
be repaid
from 1 May
2019 to
31 December
2019
Effective
interest
rate of the
loan
Grant date
of the loan
Due date of
the loan
Expected
interest
expense for
the year
ending
31 December
2019
Purpose of the loan
(RMB’000)
(%)
(RMB’000)
17,870
8.13 22 August
2016
15 September
2026
8,997
Construction of solar
power plant
20,490
8.02 20 February
2017
15 March
2027
9,798
Construction of solar
power plant
15,030
8.78 11 December
2015
15 December
2024
5,132
Construction of solar
power plant
14,850
9.03 18 August
2015
18 September
2024
4,904
Construction of solar
power plant
32,740
7.24 7 July 2017
7 July 2027
12,699
Construction of solar
power plant
413,000

LISTING RULES IMPLICATIONS

As the relevant applicable percentage ratios set forth under Rule 14.07 of the Listing Rules in respect of the Disposal exceed 75% or more, the Disposal constitutes a very substantial disposal 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. The EGM will be convened and held for the Shareholders to consider and, if thought fit, to approve the Agreement and the transactions contemplated thereunder.

EGM

Set out on pages EGM-1 to EGM-2 of this circular is a notice of the EGM to be held at Unit 1209–10, 12/F, Everbright Centre, 108 Gloucester Road, Wan Chai, Hong Kong on Friday, 2 August 2019 at 11:00 a.m., at which an ordinary resolution will be proposed to approve the Agreement and the transactions contemplated therein.

Shareholders and their associates with a material interest in the Agreement and transactions contemplated thereunder shall abstain from voting on the relevant resolution at the EGM. Whether or not you propose to attend the meeting, you are requested to read the notice of EGM and complete the accompanying form of proxy, which are enclosed in this circular in accordance with the instructions printed thereon and return the same to the Company’s share registrar and transfer office, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Center 183 Queen’s Road East Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for holding of the meeting or any adjournment thereof. Completion and return of the proxy form shall not preclude you from attending and voting at the meeting should you so wish.

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LETTER FROM THE BOARD

Pursuant to the Listing Rules, any Shareholder who has a material interest in the Agreement and his/her/its close associates is/are required to abstain from voting on the relevant resolutions at the EGM. As at the Latest Practicable Date, to the best of the Directors’ knowledge after having made all reasonable enquiries, no Shareholder has a material interest in the Disposal and, accordingly, no Shareholder is required to abstain from voting on the ordinary resolution to approve the Agreement and the transactions contemplated thereunder at the EGM.

RECOMMENDATION

The Directors consider that the terms of the Agreement and the transactions contemplated thereunder are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend that the Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the Agreement and the transactions contemplated thereunder.

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

– 23 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. SUMMARY OF THE FINANCIAL INFORMATION OF THE GROUP

Financial information of the Group for each of 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, which are published on both the website of the Stock Exchange (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 major transaction of disposal of a subsidiary as announced by the Group on 28 March 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 31 May 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 RMB11,558,139,000 and unsecured corporate bonds amounted to approximately RMB260,866,000 and unpaid contractual lease payments amounted to approximately RMB355,359,000.

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 31 May 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 RMB558,965,000.

As at 31 May 2019, the Group had executed a guarantee with respect to a loan of approximately RMB69,118,000 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 31 May 2019, the Group, as a lessee, has outstanding unpaid contractual lease payments amounting to RMB355,359,000 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 31 May 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.

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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.

Under the Feed-in-Tariff regime, utility-scale ground-mounted solar power plants constructed under the national quota system in the PRC are in principle entitled to receive the Feed-in-Tariff at the same applicable rate for 20 years on the electricity generated after the solar power plants are grid-connected. As at 31 December 2018, the Group had a total of 1,789.3 MW installed capacity of completed solar power plants, which were developed and constructed under the national quota system in the PRC and connected to the State Grid. The Feed-in-Tariff for utility-scale ground-mounted solar power plant is composed of two components: the sale of electricity at the base tariff rates and the renewable energy subsidies. The sale of electricity at the base tariff rates are equal to the on-grid benchmark tariff rates of local coal-fired power plants in the PRC. The renewable energy subsidies are the difference between the Feed-in-Tariff and the sale of electricity at the base tariff rates. Solar power plant operators receive the revenue from the sale of electricity at the base tariff rates from local grid companies or the State Grid. The sale of electricity at the base tariff rates are paid and settled on a monthly basis. Solar farm operators also receive from the local subsidiaries of the State Grid the renewable energy subsidies, which is funded by the Ministry of Finance utilizing the income of the Renewable Energy Fund. For utility-scale solar power plant operators to receive the renewable energy subsidies, the relevant utility-scale ground-mounted solar power plants must be enlisted on the Subsidy Catalogue. Following the enlisting, the solar farm operators will receive the renewable energy subsidies due prior to enlisting in batches, as well as the renewable energy subsidies due after enlisting, on a regular basis according to the prevalent payment trends under the Feed-in-Tariff regime.

Since 2009, the Renewable Energy Fund started to record a funding shortfall and has continued to experience funding deficit, which has led to the lead time between the grid connection of solar power plants under the national quota system in the PRC and the settlement of the renewable energy subsidies by the Ministry of Finance as well as the delay of the receipt of the renewable energy subsidies. The NDRC, Ministry of Finance, and the NEA have jointly announced a total of seven batches of utility-scale ground-mounted solar power plants under the Subsidy Catalogue since 2012. The fifth batch of the Subsidy Catalogue covers the utility-scale ground-mounted solar power plants constructed under the national quota system in the PRC that were connected to the State Grid prior to the end of August 2013 and not enlisted on previous batches of the Subsidy Catalogue. As at 31 December 2018, 1 solar power plant of the Group have been enlisted on the fifth batch of the Subsidy Catalogue. The sixth batch of the Subsidy Catalogue covers the utility-scale ground-mounted solar power plants constructed under the national quota system in the PRC that were connected to the State Grid during the period between September 2013 and February 2015. During the fourth quarter of 2016, the solar power plants enlisted on the sixth batch of the Subsidy Catalogue started to receive the first batch of the renewable energy subsidies incurred up to April 2015. As at 31

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

December 2018, 5 solar power plants of the Group have been enlisted on the sixth batch of the Subsidy Catalogue. The seventh batch of the Subsidy Catalogue covers the utility-scale ground-mounted solar power plants constructed under the national quota system in the PRC that were connected to the State Grid prior to the end of March 2016 and not enlisted on previous batches of the Subsidy Catalogue. During the third quarter of 2018, the solar power plants enlisted on the seventh batch of the Subsidy Catalogue started to receive the first batch of the renewable energy subsidies incurred up to March 2017. As at 31 December 2018, 18 solar power plants of the Group have been enlisted on the seventh batch of the Subsidy Catalogue. As at 31 December 2018, 24 solar power plants of the Group with an aggregate installed capacity of approximately 769.5MW have been enlisted on the Subsidy Catalogue, 2 solar power plants of the Group with an aggregate installed capacity of approximately 120 MW have been enlisted in the second batch of the Photovoltaic Poverty Alleviation Subsidy Catalogue* (第二批光伏扶貧補助目錄) and 22 solar power plants of the Group with an aggregate installed capacity of approximately 899.8MW, which were connected to the State Grid during the period from April 2016 to December 2017, have yet to be enlisted on the Subsidy Catalogue.

As of December 31, 2016, 2017, and 2018, the renewable energy subsidies receivables relating to the sale of electricity amounted to approximately RMB712,663,000, RMB1,508,620,000, and RMB2,179,498,000, respectively.

Any delay in enlisting of the solar power plants of the Group on the Subsidy Catalogue or any delay in the receipt of renewable energy subsidies for its solar power plants that have been enlisted on the Subsidy Catalogue could have a material adverse effect on the Group’s business, financial condition and operating results.

In the future, by focusing on clean energy and green finance, 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 assetlight model of ‘‘sale of solar power plant projects and provision of solar power plant operation and maintenance services’’. Through integration of industry and finance, it will also improve its operational efficiency, so as to drive the development of green and low-carbon energy in China and make positive contributions to environmental protection.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Solar power generating business is a capital intensive industry, which highly relies on external financing in order to fund for the construction of solar power plant while the recovery of capital investment takes a long period of time. To cope with the gearing risk, the Group will pay close attention to the market dynamics, and to avoid any unfavorable changes to the Group. Additionally, the Group is constantly pursing asset-light model transformation to optimize its finance structure and lower its gearing ratio.

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.

6. MATERIAL ACQUISITION OR DISPOSAL

Save for the Disposal and the Previous Disposals, the Group has not carried out any material acquisition or disposal after 31 December 2018, being the date to which the latest published audited accounts of the Company have been made up, and up to the Latest Practicable Date.

7. SIGNIFICANT INVESTMENTS

Save for the Disposal and the Previous Disposals, the Group did not have any other significant investments, other material acquisition or disposal after 31 December 2018, and there was no plan authorised by the Board for other material investments or additions of capital assets up to the Latest Practicable Date.

8. MANAGEMENT DISCUSSION AND ANALYSIS ON THE REMAINING GROUP

Upon the Disposal and Previous Disposals, the Remaining Group will continue to be principally 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. Set out below is the management discussion and analysis on the Remaining Group for each of the three financial years ended 31 December 2016, 2017 and 2018. The financial data in respect of the Remaining Group, for the purpose of this circular, is derived from the consolidated financial statements of the Company for each of the three years ended 31 December 2016, 2017 and 2018.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the year ended 31 December 2016

Business review

The Remaining Group was mainly engaged in investment in and operation of solar power plants, properties and securities investment and sales of life-like plants.

Revenue

The revenue of the Remaining Group decreased by approximately 70.6% from approximately RMB1,736,278,000 for the year ended 31 December 2015 to approximately RMB511,161,000 for the year ended 31 December 2016. The decrease was primarily due to the decrease in revenue from sales of solar energy related products.

Revenue from sales of electricity

The Remaining Group’s revenue from sales of electricity increased significantly by approximately 327.9% from approximately RMB118,032,000 for the year ended 31 December 2015 to approximately RMB505,006,000 for the year ended 31 December 2016 due to the increased installed capacity of grid-connected solar power plants on hand. As at 31 December 2016, the Remaining Group had a total of 1,050.3MW installed capacity of solar power plants on hand, comparing to the 469.5MW installed capacity of solar power plants on hand as at 31 December 2015.

Revenue from sales of solar energy related products

During the year ended 31 December 2016, the Remaining Group had been exerting most of its investment efforts in its electricity sales segment given that sales of electricity has a relatively higher gross margin. As such, the Remaining Group has lessen its business focus for its sales of solar energy related products which generates relatively lower profit margin and accordingly no revenue was generated from the sales of solar energy related products for the year ended 31 December 2016, as compared with the amount of approximately RMB1,611,711,000 for the year ended 31 December 2015.

Revenue from sales of life-like plants

The Remaining Group’s revenue from sales of life-like plants decreased by approximately 12.4% from approximately RMB4,929,000 for the year ended 31 December 2015 to approximately RMB4,317,000 for the year ended 31 December 2016.

Rental income

The Remaining Group’s rental income decreased by approximately 23.7% from approximately RMB1,606,000 for the year ended 31 December 2015 to approximately RMB1,226,000 for the year ended 31 December 2016, mainly attributable to the disposal of one of the Remaining Group’s investment properties in Hong Kong.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Gross profit and gross profit margin

The gross profit of the Remaining Group increased significantly by approximately 43.0% from approximately RMB191,150,000 for the year ended 31 December 2015 to approximately RMB273,254,000 for the year ended 31 December 2016. The gross margin from sales of electricity is relatively higher than other revenue and hence, notwithstanding the decrease in the overall revenue amount for the year ended 31 December 2016, the gross profit of the Remaining Group increased due to the increase in revenue from sales of electricity during the year under review. As a result, the gross profit margin of the Remaining Group increased from approximately 11.0% for the year ended 31 December 2015 to approximately 53.5% for the year ended 31 December 2016.

(Loss)/gain on fair value changes on investment properties

The Remaining Group holds certain properties for rental income and/or capital appreciation purposes in Hong Kong. The Remaining Group’s investment properties are revaluated at the end of the respective year end on an open market value or existing use basis by an independent property valuer. For the year ended 31 December 2016, the Remaining Group recorded a loss on fair value changes on investment properties of approximately RMB5,563,000 (2015: gain of approximately RMB5,222,000). The decrease in fair value of the Remaining Group’s investment properties during the year ended 31 December 2016 was primarily due to a decrease in the property price of one of the investment properties held by the Remaining Group.

Other revenue

Other revenue of the Remaining Group increased by approximately 823.0% from approximately RMB10,264,000 for the year ended 31 December 2015 to approximately RMB94,741,000 for the year ended 31 December 2016. The increase is mainly due to (i) an increase in interest income of approximately RMB63,730,000 as a result of an increase in bank and other deposits; and (ii) an one-off compensation income of approximately RMB30,822,000 from one of the Remaining Group’s EPC contractors in accordance with the compensation clause of the respective contract.

Other net income (expenses)

The Remaining Group recorded an other net expenses of approximately RMB11,906,000 (2015: other net income of approximately RMB1,071,000). The increase is mainly due to a net foreign exchange loss of approximately RMB11,786,000.

Administrative expenses

Administrative expenses of the Remaining Group increased by approximately 8.1% from approximately RMB190,797,000 for the year ended 31 December 2015 to approximately RMB206,345,000 for the year ended 31 December 2016. The increase was attributable to (i) an increase in salaries, wages and other benefits amounted to approximately RMB27,099,000 due to an increase in head count; (ii) an increase in legal and other professional fees amounted to approximately RMB14,142,000; (iii) an increase

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

in office rental expenses amounted to approximately RMB5,550,000; (iv) an increase in depreciation of property, plant and equipment amounted to approximately RMB3,861,000; and (v) an increase in travelling and transportation expenses amounted to approximately RMB3,287,000.

Gain on disposal of subsidiaries, net

During the year ended 31 December 2016, the Remaining Group disposed of certain of its subsidiaries and recorded a net gain on disposal of subsidiaries of approximately RMB45,591,000 (2015: RMB21,006,000). For details, please refer to note 47 to the financial statements of the 2016 Annual Report.

Gain on disposal/deemed disposal of associates

During the year ended 31 December 2016, the Remaining Group disposed of certain of its associates and recorded a total gain on disposal/deemed disposal of associates of approximately RMB108,918,000 (2015: Nil). For details, please refer to note 20 to the financial statements of the 2016 Annual Report.

Finance costs

Finance costs of the Remaining Group increased by approximately RMB166,065,000 from approximately RMB62,762,000 for the year ended 31 December 2015 to approximately RMB228,827,000 for the year ended 31 December 2016. As the number of and the total installed capacity of the solar power plants held by the Remaining Group increased during the year, the finance costs related to the borrowings of the respective solar power plants also increased significantly during the year under review.

Solar power plants

As at 31 December 2016, the Remaining Group had a net carrying value of approximately RMB6,105,222,000 (2015: RMB2,360,063,000) and approximately RMB2,398,993,000 (2015: RMB1,287,256,000) in completed solar power plants and solar power plants under construction, respectively. During the year ended 31 December 2016, the Remaining Group capitalized on the implementation of the favourable policies by actively investing in and developing solar power plants in China. For details, please refer to note 18 to the financial statements of the 2016 Annual Report. As at 31 December 2016, the Remaining Group had a total of 1,050.3MW installed capacity of completed solar power plants on hand, comparing to the 469.5MW installed capacity of solar power plants on hand as at 31 December 2015.

Interest in a joint venture

As at 31 December 2016, the net carrying value of the joint venture was approximately RMB295,402,000 (2015: RMB286,891,000).

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Investment properties

Investment properties decreased from approximately RMB49,010,000 as of 31 December 2015 to approximately RMB984,000 as of 31 December 2016. The decrease was mainly due to the reclassification of an investment property with a carrying value of approximately RMB47,498,000 (2015: Nil) under the classification of ‘‘Assets of a disposal group classified as held for sale’’ during the year under review.

Goodwill

During the year ended 31 December 2016, the Remaining Group had acquired a number of solar power plants with operations and recorded an additional amount of approximately RMB60,396,000 (2015: RMB51,211,000) in respect of goodwill on the acquisitions. For details, please refer to note 22 to the financial statements of the 2016 Annual Report.

Available-for-sale investments

During the year ended 31 December 2016, the Remaining Group acquired certain available-for-sale investments amounted to approximately RMB352,730,000 (2015: Nil). The unlisted investments are for long-term investment purposes and hence are classified as available-for-sale investments in the consolidated statement of financial position. For details, please refer to note 24 to the financial statements of the 2016 Annual Report.

Financial assets held for trading

As at 31 December 2016, the Remaining Group had financial assets held for trading with market value of approximately RMB236,629,000 (2015: Nil), representing approximately 1.5% (2015: Nil) of the total assets of the Remaining Group as at 31 December 2016. The portfolio of investments managed by the Remaining Group consists of investment in two listed equities in Hong Kong and the PRC (2015: Nil). The Remaining Group held approximately 1.3% (2015: Nil) and 1.7% (2015: Nil) shareholdings in the equity listed in Hong Kong and the PRC respectively as at 31 December 2016. During the year ended 31 December 2016, the Remaining Group had recorded a net unrealised gain on fair value changes through profit or loss which amounted to approximately RMB271,000 (2015: Nil).

Trade, Bills and Other Receivables

Trade, bills and other receivables decreased from approximately RMB3,944,409,000 as of 31 December 2015 to approximately RMB3,016,966,000 as of 31 December 2016. The decrease was mainly due to the repayment of trade and bills receivables and the repayment of loans and advances from 中科恒源科技股份有限公司 (Zhongke Hengyuan Technology Co., Ltd.*) (‘‘Zhongke Hengyuan’’).

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Structured bank deposits

As at 31 December 2016, the Remaining Group had placed RMB1,125,000,000 (2015: RMB700,000,000) bank deposits with a bank in the PRC to earn a guaranteed and capital-protected return by making good use of the idle cash of the Company. The deposits were subsequently withdrawn in January 2017. For details, please refer to note 28 to the financial statements of the 2016 Annual Report’’.

Trade and Other Payables

Trade and other payables increased from approximately RMB2,209,068,000 as of 31 December 2015 to approximately RMB2,621,184,000 as of 31 December 2016. The amount mainly comprised payables to suppliers of solar modules and equipment and EPC contractors for purchase of solar modules and equipment and construction costs of solar power plants. As more solar power plant projects were developed during the year, other payables mainly related to purchase of solar modules and equipment and construction costs of solar power plants have increased from approximately RMB385,701,000 as of 31 December 2015 to approximately RMB1,071,356,000 as of 31 December 2016.

Liquidity and Capital Resources

As at 31 December 2016, the total amount of structured bank deposits, pledged bank deposits and cash and cash equivalents was approximately RMB1,752,614,000 (2015: RMB1,336,323,000). As at 31 December 2016, cash and cash equivalents of the Remaining Group was approximately RMB627,614,000 (2015: RMB636,323,000), which included an amount of bank deposits of approximately RMB512,494,000 (2015: RMB501,044,000) denominated in RMB and approximately RMB35,990,000 (2015: Nil) of bank balances denominated in Hong Kong dollar placed with banks in the PRC. The remaining balance of the Remaining Group’s cash and cash equivalents consisted primarily of cash on hand and bank balances which were primarily held in Hong Kong dollar denominated accounts with banks in Hong Kong.

As at 31 December 2016, the Remaining Group’s net debt ratio, which was calculated by the total loans and other borrowings and corporate bonds minus total bank and cash on hand and structured bank deposits, over the total equity, was 0.62 (2015: 0.41).

Loans and Borrowings

As at 31 December 2016, the Remaining Group’s total loans and borrowings was approximately RMB5,279,049,000, representing an increase of approximately RMB2,904,775,000 over the amount of approximately RMB2,374,274,000 as at 31 December 2015. The increase in the Remaining Group’s total loans and borrowings was mainly due to an increase in the Remaining Group’s investments in solar power plants which lead to an increase in loans and borrowings to finance such investments. All the loans and borrowings of the Remaining Group, except for an equivalent amount of

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

approximately RMB8,945,000 (2015: RMB87,305,000) which were denominated in Hong Kong dollar, were denominated in RMB, the functional currency of the Company’s major subsidiaries in the PRC.

Loan from ultimate holding company

On 19 November 2015, the Company and Pohua JT Private Equity Fund L.P. (‘‘Pohua JT’’), the ultimate holding company of the Company, entered into a loan agreement pursuant to which Pohua JT agreed to grant a loan in the aggregate principal amount of HK$1,500,000,000 (equivalent to approximately RMB1,256,670,000) to the Company. The loan was unsecured, interest bearing at 5.8% per annum and to be matured on the third anniversary of the drawndown date. On 2 March 2016, the loan was capitalised in a subscription of the Company’s shares by Pohua JT. For details, please refer to note 34 to the financial statements of the 2016 Annual Report.

Corporate bonds

During the year ended 31 December 2016, the Company issued Hong Kong dollardenominated corporate bonds due in 2019 (the ‘‘Corporate Bonds’’) with an aggregate principal amount of HK$53,500,000 (equivalent to approximately RMB47,856,000) to certain independent third parties. During the year ended 31 December 2016, the net proceeds of the issued Corporate Bonds received by the Company were approximately HK$47,883,000 (equivalent to approximately RMB42,831,000), with total issue cost amounting to approximately HK$5,617,000 (equivalent to approximately RMB5,025,000). The Corporate Bonds bear an interest of 6% per annum, and will mature on the date immediately following the 36 months after the issue of the Corporate Bonds.

The Corporate Bonds are subsequently measured at amortised cost using effective interest method by applying an effective interest rate of 10.24% per annum. Imputed interest of approximately HK$43,455,000 (equivalent to approximately RMB37,188,000) (note 13 to the financial statements of the 2016 Annual Report) was recognised in the profit or loss during the year under review.

Foreign Exchange Risk

The Remaining Group primarily operates its business in the PRC and during the year ended 31 December 2016, the Remaining Group’s revenue were primarily denominated in RMB, being the functional currency of the Remaining Group’s major operating subsidiaries. Accordingly, the Directors expect any future exchange rate fluctuation will not have any material effect on the Remaining Group’s business. The Remaining Group did not use any financial instruments for hedging purpose, but will continue to monitor foreign exchange changes to best preserve the Remaining Group’s cash value.

Charge on Assets

As at 31 December 2016, the Remaining Group had charged solar power plants, trade receivables, property, plant and equipment and lease prepayments with net book value of approximately RMB4,505,511,000 (2015: RMB1,796,446,000), approximately

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

RMB428,203,000 (2015: RMB106,086,000), approximately RMB1,219,000 (2015: RMB1,041,000) and approximately RMB867,000 (2015: RMB913,000) respectively, to secure general banking and other loans facilities granted to the Remaining Group.

Contingent Liabilities

The Remaining Group acquired equity interests of certain subsidiaries principally engaged in the development of solar power plants projects and the applications for the development of these solar power plant projects were actually carried out by their former shareholders. According to certain notices (the ‘‘Notices’’) issued by the NEA, the Notices prohibit the original applicants who have obtained the approval documents from the relevant government for the solar power plant projects from transferring the equity interests of solar power plant projects before the projects were connected to the power grid. Taking into consideration of the legal opinion sought from the Company’s legal adviser as to PRC law, given that the Remaining Group has obtained the preliminary approval from respective relevant government authorities to continue the remaining development of the solar power plants, the Company’s legal adviser as to PRC law is of the view that it is remote for these subsidiaries to be fined or to have adverse consequences imposed by the relevant government authorities. Accordingly, the Directors consider there is no significant impact on the Remaining Group’s control over these entities and the development of these solar power plants.

The Remaining Group has entered into a guarantee with respect to loans of approximately RMB153,000,000 (2015: RMB120,000,000) granted by 江山寶源國際融資租賃有限公司 (Kong Sun Baoyuan International Financial Leasing Limited*) (‘‘Kong Sun Baoyuan’’) to independent third parties as at 31 December 2016, under which the Remaining Group is liable to pay the proportionate share if Kong Sun Baoyuan is unable to recover the loan from the independent third parties. As at 31 December 2016, no provision for the Remaining Group’s proportionate obligation under the guarantee contracts has been made as the Directors consider that it is not probable that the repayment of the loan will be in default.

Employees and Remuneration Policy

As at 31 December 2016, the Remaining Group had approximately 531 (2015: 236) employees located in Hong Kong and the PRC. Compensation for the employees includes basic wages, variable wages, bonuses and other staff benefits. For the year ended 31 December 2016, the total employees benefit expenses (including directors’ emoluments) were approximately RMB96,219,000 (2015: RMB91,972,000). The remuneration policy of the Remaining Group is to provide remuneration packages, including basic salary, short term bonuses and long term rewards such as options, so as to attract and retain top quality staff. The remuneration committee of the Company reviews such packages annually, or when occasion requires. The Company has also adopted a share option scheme for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Remaining Group’s operations.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Significant investments and material acquisition and disposal

Save as disclosed in the 2016 annual report, the Remaining Group did not have any significant investments, other material acquisition or disposal during the year ended 31 December 2016, and there was no plan authorised by the Board for other material investments or additions of capital assets as at the date of the 2016 annual report.

For the year ended 31 December 2017

Business review

The Remaining Group was mainly engaged in investment in and operation of solar power plants, provision of solar power plants operation and maintenance services, provision of financial services and asset management.

Revenue

The revenue of the Remaining Group increased by approximately 130.7% from approximately RMB511,161,000 for the year ended 31 December 2016 to approximately RMB1,179,013,000 for the year ended 31 December 2017. The increase was primarily due to the increase in revenue from sales of electricity.

Revenue from sales of electricity and provision of solar power plant operation and maintenance services

The Remaining Group’s revenue from sales of electricity increased significantly by approximately 128.7% from approximately RMB505,006,000 for the year ended 31 December 2016 to approximately RMB1,155,010,000 for the year ended 31 December 2017 due to the increased installed capacity of grid-connected solar power plants. As at 31 December 2017, the Remaining Group had a total of 1,719.3 MW installed capacity of solar power plants, comparing to 1,050.3 MW installed capacity of solar power plants as at 31 December 2016.

The Remaining Group had, for the first time, generated revenue from provision of solar power plant operation and maintenance services of approximately RMB6,482,000 (2016: Nil) for the year ended 31 December 2017.

Revenue from provision of financial services

The Remaining Groups’ revenue arising from the provision of financial services increased significantly by approximately 2,132.5% from approximately RMB612,000 for the year ended 31 December 2016 to approximately RMB13,663,000 for the year ended 31 December 2017 due to the scale expansion in provision of microfinance services.

– I-12 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Gross profit and gross profit margin

The gross profit of the Remaining Group increased significantly by approximately 178.6% from approximately RMB273,254,000 for the year ended 31 December 2016 to approximately RMB761,276,000 for the year ended 31 December 2017. The gross profit margin of the Remaining Group increased from approximately 53.5% for the year ended 31 December 2016 to approximately 64.6% for the year ended 31 December 2017.

Other gains and losses

Other gains and losses of the Remaining Group decreased significantly by approximately 98.8% from approximately RMB77,272,000 for the year ended 31 December 2016 to approximately RMB913,000 for the year ended 31 December 2017. The decrease is mainly due to (i) a decrease in interest income of approximately RMB37,114,000 as a result of a decrease in bank and other deposits; (ii) loss on fair value changes of financial assets held for trading of approximately RMB31,619,000 (2016: net gain of approximately RMB271,000); and (iii) impairment loss recognised in respect of other receivables of approximately RMB12,385,000 (2016: Nil).

Administrative expenses

Administrative expenses of the Remaining Group increased by approximately 55.9% from approximately RMB206,345,000 for the year ended 31 December 2016 to approximately RMB321,608,000 for the year ended 31 December 2017. The increase was mainly attributable to an increase in total employee benefit expenses of approximately RMB114,313,000 due to an increase in head count and an increase in office rental expenses of approximately RMB15,932,000.

Gain on bargain purchase on acquisition of subsidiaries

Gain on bargain purchase on acquisition of subsidiaries represents the excess of fair value of consideration transferred at acquisition over the fair value of the identifiable assets acquired and liabilities assumed for the acquisition. The gain on bargain purchase during the year ended 31 December 2017 amounted to approximately RMB53,260,000 (2016: Nil) as a result of acquisition of certain subsidiaries during the year. For details, please refer to note 45 to the financial statements of the 2017 Annual Report.

Gain on disposal/deregistration of subsidiaries, net

During the year ended 31 December 2017, the Remaining Group disposed/ deregistered certain subsidiaries and recorded net gain on disposal/deregistration of subsidiaries of approximately RMB12,031,000 (2016: RMB45,591,000). For details, please refer to note 46 to the financial statements of the 2017 Annual Report.

– I-13 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Finance costs

Finance costs of the Remaining Group increased by approximately 86.5% from approximately RMB228,827,000 for the year ended 31 December 2016 to approximately RMB426,797,000 for the year ended 31 December 2017. As the number of and the total installed capacity of the solar power plants held by the Remaining Group increased during the year, the finance costs related to the borrowings of the respective solar power plants also increased.

Solar power plants

As at 31 December 2017, the Remaining Group had a net carrying value of approximately RMB10,889,567,000 (2016: RMB6,105,222,000) and approximately RMB1,572,080,000 (2016: RMB2,398,993,000) in completed solar power plants and solar power plants under construction, respectively. During the year ended 31 December 2017, the Remaining Group capitalised on the implementation of the favourable policies by actively investing in and developing solar power plants in the PRC. For details, please refer to note 18 to the financial statements of the 2017 Annual Report. As at 31 December 2017, the Remaining Group had a total of 1,719.3 MW installed capacity of completed solar power plants, comparing to the 1,050.3 MW installed capacity of solar power plants as at 31 December 2016.

Interest in a joint venture

As at 31 December 2017, the net carrying value of the joint venture was approximately RMB321,421,000 (2016: RMB295,402,000).

Goodwill

During the year ended 31 December 2017, the Remaining Group had acquired a number of solar power plants with operations and recognised approximately RMB1,794,000 (2016: RMB60,396,000) in respect of goodwill on the acquisition.

Available-for-sale investments

Available-for-sale investments increased by approximately 346.9% from approximately RMB352,730,000 as at 31 December 2016 to approximately RMB1,576,206,000 as at 31 December 2017. The increase is mainly due to (i) the acquisition of unlisted equity investment in Bank of Jinzhou Co., Ltd.; (ii) the increase in unlisted equity investment in 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 Limited Company); and (iii) the investment in 19.99% of the total capital contribution in 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’’). The investments are for long-term investment purpose and hence are classified as available-for-sale investments in the consolidated statement of financial position. For details, please refer to note 24 to the financial statements in this report.

– I-14 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Financial assets held for trading

As at 31 December 2017, the Remaining Group had financial assets held for trading with market value of approximately RMB200,281,000 (2016: RMB236,629,000), representing approximately 1.0% (2016: 1.5%) of the total assets of the Remaining Group as at 31 December 2017. The portfolio of investments managed by the Remaining Group consists of investment in two listed equities in Hong Kong and the PRC (2016: two). The Remaining Group held approximately 1.3% (2016: 1.3%) and 1.7% (2016: 1.7%) shareholdings in the equity listed in Hong Kong and the PRC respectively as at 31 December 2017. During the year ended 31 December 2017, the Remaining Group had recorded a net unrealised loss on fair value changes through profit or loss which amounted to approximately RMB31,619,000 (2016: net unrealised gain of approximately RMB271,000).

Trade, bills and other receivables

Trade, bills and other receivables increased by approximately 17.7% from approximately RMB3,016,966,000 as at 31 December 2016 to approximately RMB3,551,138,000 as at 31 December 2017. The increase was mainly due to an increase in trade and bills receivables from approximately RMB851,527,000 as at 31 December 2016 to approximately RMB1,833,534,000 as at 31 December 2017 which arose from the increase in sales of electricity.

Structured bank deposits

As at 31 December 2016, the Remaining Group placed RMB1,125,000,000 structured bank deposits with a bank in the PRC to earn a guaranteed and capital-protected return by making good use of the idle cash of the Remaining Group. The deposits were withdrawn in January 2017.

Trade and Other Payables

Trade and other payables increased by approximately 35.6% from approximately RMB2,621,184,000 as at 31 December 2016 to approximately RMB3,553,968,000 as at 31 December 2017. The balance mainly comprised payables to suppliers of solar modules and equipment and EPC contractors for purchase of solar modules and equipment and construction costs of solar power plants. As more solar power plant projects were constructing during the year, trade payables, which was mainly related to construction costs of solar power plants, have increased by approximately 104.6% from approximately RMB1,549,828,000 as at 31 December 2016 to approximately RMB3,170,748,000 as at 31 December 2017.

Liquidity and Capital Resources

As at 31 December 2017, cash and cash equivalents of the Remaining Group was approximately RMB441,900,000 (2016: RMB627,614,000), which included an amount of bank balances of approximately RMB422,671,000 (2016: RMB512,494,000) denominated in RMB placed with banks in the PRC. As at 31 December 2016, structured bank deposits

– I-15 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

of approximately RMB1,125,000,000 was denominated in RMB and placed with banks in the PRC. The remaining balance of the Remaining Group’s cash and cash equivalents consisted primarily of cash on hand and bank balances which were primarily denominated in Hong Kong dollar and placed with banks in Hong Kong.

As at 31 December 2017, the Remaining Group’s net debt ratio, which was calculated by the total loans and borrowings and corporate bonds minus total cash and cash equivalents and structured bank deposits, over total equity, was approximately 1.36 (2016: 0.62).

Loans and Borrowings

As at 31 December 2017, the Remaining Group’s total loans and borrowings was approximately RMB8,812,653,000, representing an increase of approximately RMB3,533,604,000, compared to approximately RMB5,279,049,000 as at 31 December 2016. The increase in the Remaining Group’s total loans and borrowings was mainly due to an increase in the Remaining Group’s investments in solar power plants which lead to an increase in loans and borrowings to finance such investments. All the loans and borrowings of the Remaining Group, except for an equivalent amount of approximately RMB8,359,000 (2016: RMB8,945,000) which were denominated in Hong Kong dollar, were denominated in RMB, the functional currency of the Company’s major subsidiaries in the PRC. As at 31 December 2017, loans and borrowings of approximately RMB3,652,000,000 (2016: RMB222,000,000) and approximately RMB5,160,653,000 (2016: RMB5,057,049,000) bear fixed interest rate and floating interest rate, respectively.

As at 31 December 2017, out of the total borrowings, approximately RMB518,190,000 (2016: RMB976,719,000) was repayable within one year and approximately RMB8,294,463,000 (2016: RMB4,302,330,000) was repayable after one year.

Corporate bonds

As at 31 December 2017 and 2016, corporate bonds denominated in Hong Kong dollar amounting to HK$423,500,000 (equivalent to approximately RMB354,800,000) in aggregate principal amount due in 2018 and HK$53,500,000 (equivalent to approximately RMB47,856,000) in aggregate principal amount due in 2019 remained outstanding with certain independent third parties. The Corporate Bonds bear an interest of 6% per annum, and will mature on the date immediately following 36 months after the issuance of the Corporate Bonds.

The Corporate Bonds are measured at amortised cost using effective interest method by applying an effective interest rate of 10.24% per annum. Imputed interest of approximately HK$43,523,000 (equivalent to approximately RMB37,710,000) (2016: HK$43,455,000 (equivalent to approximately RMB37,188,000)) (note 13 to the financial statements of the 2017 Annual Report) was recognised in profit or loss during the year ended 31 December 2017.

– I-16 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Foreign Exchange Risk

The Remaining Group primarily operates its business in the PRC and during the year ended 31 December 2017, the Remaining Group’s revenue were primarily denominated in RMB, being the functional currency of the Remaining Group’s major operating subsidiaries. Accordingly, the Directors expect any future exchange rate fluctuation will not have any material effect on the Remaining Group’s business. The Remaining Group did not use any financial instruments for hedging purpose, but will continue to monitor foreign exchange changes to best preserve the Remaining Group’s cash value.

Charge on Assets

As at 31 December 2017, the Remaining Group had charged solar power plants, trade receivables, property, plant and equipment, lease prepayments and unlisted equity investments with net book value of approximately RMB6,710,259,000 (2016: RMB4,505,511,000), approximately RMB806,270,000 (2016: RMB428,203,000), approximately RMB688,000 (2016: RMB1,219,000), approximately RMB821,000 (2016: RMB867,000) and approximately RMB830,269,000 (2016: Nil), respectively, to secure bank loans and other loans facilities granted to the Remaining Group.

Contingent Liabilities

The Remaining Group acquired equity interests of certain subsidiaries principally engaged in the development of solar power plant projects and the applications for the development of these solar power plant projects were actually made by their former shareholders. According to the Notices issued by the NEA, the Notices prohibit the original applicants who have obtained the approval documents from the government authorities for the solar power plants projects from transferring the equity interests of solar power plant projects before such solar power plants were connected to the power grid. Taking into consideration the legal opinion obtained from the Company’s legal adviser as to PRC law, and given that the Remaining Group has obtained the preliminary approval from respective relevant government authorities to continue with the development of the solar power plants, the Company’s legal adviser as to PRC law is of the view that the possibility for these subsidiaries to be fined or to face other adverse consequences imposed by the relevant government authorities is remote. Accordingly, the Directors consider there is no significant impact on the Remaining Group’s control over these subsidiaries and the development of these solar power plants.

The Remaining Group executes a guarantee with respect to a loan of approximately RMB138,211,000 (2016: Nil) granted by independent third parties to Kong Sun Baoyuan as at 31 December 2017, under which the Remaining Group is liable to pay the proportionate share if the independent third parties are unable to recover the loan from Kong Sun Baoyuan. As at the reporting date of the 2017 Annual Report, no provision for the Remaining Group’s proportionate obligation under the guarantee contracts has been made as the Directors consider that it is not probable that the repayment of the loan will be in default.

– I-17 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Employees and Remuneration Policy

As at 31 December 2017, the Remaining Group had approximately 829 employees (2016: 531) in Hong Kong and the PRC. Compensation for the employees includes basic wages, variable wages, bonuses and other staff benefits. For the year ended 31 December 2017, the total employee benefit expenses (including directors’ emoluments) were approximately RMB210,033,000 (2016: RMB96,219,000). The remuneration policy of the Remaining Group is to provide remuneration packages, including basic salary, short-term bonuses and long-term rewards such as share options, so as to attract and retain top quality staff. The remuneration committee of the Company reviews such packages annually, or when occasion requires.

The Company has also adopted a share option scheme on 22 July 2009 for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Remaining Group’s operations. Pursuant to the share option scheme, 730,350,000 share options were granted to Directors, selected employees and consultants of the Remaining Group in April 2017.

Connected Transaction

During the year ended 31 December 2017, the Remaining Group entered into the following connected transactions, details of which are disclosed in compliance with the requirements of Chapter 14 and Chapter 14A of the Listing Rules.

On 13 December 2017, a wholly-owned subsidiary of the Company (the ‘‘Baoqian Purchaser’’), entered into the acquisition agreement (the ‘‘Baoqian Acquisition Agreement’’) with Zhongke Hengyuan, a company established in the PRC, pursuant to which the Baoqian Purchaser agreed to acquire, and Zhongke Hengyuan agreed to sell 30% of the equity interests in 廣州寶乾小額貸款有限公司 (Guangzhou Baoqian Microfinance Limited*) (‘‘Guangzhou Baoqian’’) at a consideration of RMB35,000,000, which shall be settled in full by the Baoqian Purchaser by way of one-off payment within thirty (30) days from the date of transfer of 30% of the equity interests in Guangzhou Baoqian to the name of the Baoqian Purchaser. Immediately before the above acquisition, the equity interests in Guangzhou Baoqian was held as to 65% by the Baoqian Purchaser, 30% by Zhongke Hengyuan and 5% by an independent third party. Upon completion of the above acquisition, Guangzhou Baoqian will continue to be a non-wholly-owned subsidiary of the Company and its financial results will continue to be consolidated into the consolidated financial statements of the Remaining Group. As at 31 December 2017, the above acquisition has not been completed.

As at the date of the Baoqian Acquisition Agreement, Zhongke Hengyuan was interested in 30% of the equity interests in Guangzhou Baoqian, a non-wholly-owned subsidiary of the Company. Therefore, Zhongke Hengyuan is a substantial shareholder of Guangzhou Baoqian, and is a connected person of the Company at the subsidiary level under Rule 14A.06(9) of the Listing Rules. Accordingly, the Baoqian Acquisition Agreement and the transactions contemplated thereunder constitute a connected transaction of the Company under Chapter 14A of the Listing Rules.

– I-18 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Company intends to hold the equity interests in Guangzhou Baoqian as longterm investment with an objective to improve the capital usage efficiency and earn reasonable investment return. Based on the above, the Directors (including the independent non-executive Directors) consider that the Baoqian Acquisition Agreement has been entered into on normal commercial terms and is fair and reasonable, and in the interests of the Company and its shareholders as a whole.

After further negotiation and discussion, the Baoqian Purchaser and Zhongke Hengyuan decided not to proceed with the Baoqian Acquisition Agreement and entered into a termination agreement to terminate the Baoqian Acquisition Agreement on 24 January 2019.

For details, please refer to the announcements of the Company dated 13 December 2017 and 24 January 2019.

Significant Investments And Material Acquisition And Disposal

Save as disclosed in the 2017 Annual Report, the Remaining Group did not have any other significant investments, other material acquisition or disposal during the year ended 31 December 2017, and there was no plan authorised by the Board for other material investments or additions of capital assets up to the date of the 2017 Annual Report.

For the year ended 31 December 2018

Business review

Revenue

The revenue of the Remaining Group increased by approximately 49.3% from approximately RMB1,179,013,000 for the year ended 31 December 2017 to approximately RMB1,760,083,000 for the year ended 31 December 2018. The increase was primarily due to the increase in revenue from sales of electricity.

Revenue from sales of electricity and provision of solar power plant operation and maintenance services

The Remaining Group’s revenue from sales of electricity increased by approximately 39.7% from approximately RMB1,155,010,000 for the year ended 31 December 2017 to approximately RMB1,613,266,000 for the year ended 31 December 2018 due to the increased in aggregate volume of electricity generated by the Remaining Group’s gridconnected solar power plants during the year. The solar power plants owned by the Remaining Group have generated electricity in an aggregate volume of approximately

– I-19 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2,079,988 megawatt-hour (‘‘MWh’’) for the year ended 31 December 2018, representing a substantial increase of approximately 43.4% as compared to approximately 1,450,248 MWh for year ended 31 December 2017.

The Remaining Group’s revenue from provision of solar power plant operation and maintenance services decreased by approximately 70.0% from approximately RMB6,482,000 for the year ended 31 December 2017 to approximately RMB1,943,000 for the year ended 31 December 2018 mainly due to the expiry of certain solar power plant operation and maintenance services contracts.

Revenue from provision of financial services

The Remaining Groups’ revenue arising from the provision of financial services decreased by approximately 5.7% from approximately RMB13,663,000 for the year ended 31 December 2017 to approximately RMB12,891,000 for the year ended 31 December 2018.

Revenue from trading of liquefied natural gas

The Remaining Group had, for the first time, generated revenue from trading of liquefied natural gas of approximately RMB131,659,000 (2017: Nil) for the year ended 31 December 2018.

Gross profit and gross profit margin

The gross profit of the Remaining Group increased significantly by approximately 36.5% from approximately RMB761,276,000 for the year ended 31 December 2017 to approximately RMB1,038,788,000 for the year ended 31 December 2018. The gross profit margin of the Remaining Group decreased from approximately 64.6% for the year ended 31 December 2017 to approximately 59.0% for the year ended 31 December 2018 mainly due to the new business segment of trading of liquefied natural gas in 2018, which has a lower gross profit margin than the business segment of solar power plants.

Other gains and losses

Other gains of the Remaining Group increased significantly by approximately 4,434.5% from approximately RMB913,000 for the year ended 31 December 2017 to approximately RMB41,400,000 for the year ended 31 December 2018. The increase is mainly due to (i) the increase in dividend income amounted to approximately RMB21,232,000; (ii) the net unrealised gain on fair values changes on financial assets measured at fair value through profit or loss of approximately RMB5,864,000 (2017: Net unrealised loss of approximately RMB31,619,000); and (iii) the office sublease income of approximately RMB33,782,000 (2017: Nil). The increase in other gains of the Remaining Group is partially netted off by the net realised loss on disposal on financial assets measured at fair value through profit or loss amounted to approximately RMB53,613,000 as a result of the disposal of the listed equity investment in the PRC during the year ended 31 December 2018.

– I-20 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Administrative expenses

Administrative expenses of the Remaining Group increased by approximately 27.9% from approximately RMB321,608,000 for the year ended 31 December 2017 to approximately RMB411,251,000 for the year ended 31 December 2018. The increase was mainly attributable to (i) an increase in total employee benefit expenses of approximately RMB42,944,000 due to salary increment of top management with effect from 1 January 2018 and an increase in head count; and (ii) an increase in office rental expenses of approximately RMB22,891,000.

Gain on bargain purchase on acquisition of subsidiaries

Gain on bargain purchase on acquisition of subsidiaries represents the excess of the fair value of the identifiable assets acquired and liabilities assumed for the acquisition over fair value of consideration transferred at acquisition. The gain on bargain purchase during the year ended 31 December 2018 amounted to approximately RMB2,504,000 (2017: RMB53,260,000) as a result of acquisition of certain subsidiaries during the year. For details, please refer to note 46 to the financial statements of the 2018 Annual Report.

Gain on disposal/deregistration of subsidiaries, net

During the year ended 31 December 2018, the Remaining Group disposed/ deregistered certain subsidiaries and recorded net gain on disposal/deregistration of subsidiaries of approximately RMB2,693,000 (2017: RMB12,031,000). For details, please refer to note 47 to the financial statements of the 2018 Annual Report.

Finance costs

Finance costs of the Remaining Group increased by approximately 66.8% from approximately RMB426,797,000 for the year ended 31 December 2017 to approximately RMB711,954,000 for the year ended 31 December 2018. As the average number of and the average total installed capacity of the solar power plants held by the Remaining Group increased during the year, the finance costs related to the borrowings of the respective solar power plants also increased.

Solar power plants

As at 31 December 2018, the Remaining Group had a net carrying amount of approximately RMB11,447,577,000 (2017: RMB10,889,567,000) and approximately RMB433,798,000 (2017: RMB1,572,080,000) in completed solar power plants and solar power plants under construction, respectively. As at 31 December 2018, the Remaining Group had a total of 1,689.3 MW installed capacity of completed solar power plants, comparing to the 1,719.3 MW installed capacity of solar power plants as at 31 December 2017.

– I-21 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Interest in a joint venture

As at 31 December 2018, the net carrying amount of the joint venture was approximately RMB331,922,000 (2017: RMB321,421,000).

The Remaining Group executes a guarantee with respect to a loan of approximately RMB92,873,000 (2017: RMB138,211,000) granted by independent third parties to Kong Sun Baoyuan as at 31 December 2018, under which the Remaining Group is liable to pay the proportionate share if the independent third parties are unable to recover the loan from Kong Sun Baoyuan. As at the reporting date of the 2018 Annual Report, no provision for the Remaining Group’s proportionate obligation under the guarantee contracts has been made as the Directors consider that it is not probable that the repayment of the loan will be in default.

Goodwill

As at 31 December 2018, the Remaining Group had a total amount of approximately RMB149,197,000 (2017: RMB148,451,000) in respect of goodwill on the acquisition of subsidiaries.

Financial assets measured at fair value through other comprehensive income/Availablefor-sale investments

Financial assets measured at fair value through other comprehensive Income/ Available-for-sale investments increased by approximately 29.9% from approximately RMB1,576,206,000 as at 31 December 2017 to approximately RMB2,047,434,000 as at 31 December 2018. The increase is mainly due to (i) the capital contribution paid in 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)) amounted to RMB400,000,000; (ii) the additional capital contribution paid in Taizhou Jiuan amounted to RMB100,000,000; and (iii) the additional capital contribution paid in 霍爾果斯鑫和優美股權投資合夥企業(有限合夥) (Huoerguosi Xinheyoumei Equity Investment Limited Partnership) amounted to approximately RMB59,227,000. The increase is partially netted off by the fair value loss on financial assets measured at fair value through other comprehensive income amounted to approximately RMB71,452,000. The investments are held for long-term investment purpose and hence are classified as financial assets measured at fair value through other comprehensive income in the consolidated statement of financial position. For details, please refer to note 24 to the financial statements of the 2018 Annual Report.

Financial assets measured at fair value through profit or loss/Financial assets held for trading

As at 31 December 2018, the Remaining Group had financial assets measured at fair value through profit or loss/financial assets held for trading with market value of approximately RMB81,143,000 (2017: RMB200,281,000), representing approximately 0.4% (2017: 1.0%) of the total assets of the Remaining Group as at 31 December 2018. The portfolio of investments managed by the Remaining Group consists of investment in one listed equity in Hong Kong (2017: two listed equities in Hong Kong and in the PRC).

– I-22 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Remaining Group held approximately 1.3% (2017: 1.3%) shareholding in the equity listed in Hong Kong as at 31 December 2018. During the year ended 31 December 2018, the Remaining Group had recorded a net unrealised gain on fair value changes of financial assets measured at fair value through profit or loss which amounted to approximately RMB5,864,000 (2017: net unrealised loss of approximately RMB31,619,000). During the year ended 31 December 2018, the Remaining Group disposed of all of its listed equity investment in the PRC at a cash consideration of approximately RMB75,062,000 and resulting in a net realised loss on disposal of financial assets measured at fair value through profit or loss amounted to approximately RMB53,613,000 (2017: Nil).

Trade, bills and other receivables

Trade, bills and other receivables increased by approximately 25.4% from approximately RMB3,551,138,000 as at 31 December 2017 to approximately RMB4,454,067,000 as at 31 December 2018. The increase was mainly due to an increase in trade and bills receivables from approximately RMB1,833,534,000 as at 31 December 2017 to approximately RMB2,345,345,000 as at 31 December 2018 which mainly arose from the increase in sales of electricity.

Structured bank deposits

As at 31 December 2018, the Remaining Group placed approximately RMB9,230,000 structured bank deposits with a bank in the PRC to earn a guaranteed and capitalprotected return by making good use of the idle cash of the Remaining Group. The deposits were withdrawn in January 2019.

Trade and Other Payables

Trade and other payables decreased by approximately 46.8% from approximately RMB3,553,968,000 as at 31 December 2017 to approximately RMB1,890,462,000 as at 31 December 2018. The balance mainly comprised payables to suppliers of solar modules and EPC contractors for purchase of solar modules and equipment and construction costs of solar power plants. Due to the settlement of construction costs after the completion of substantial solar power plants construction work during the year ended 31 December 2018, trade payables, which was mainly related to construction costs of solar power plants, have decreased by approximately 53.1% from approximately RMB3,170,748,000 as at 31 December 2017 to approximately RMB1,487,862,000 as at 31 December 2018.

Liquidity and Capital Resources

As at 31 December 2018, cash and cash equivalents of the Remaining Group was approximately RMB256,110,000 (2017: RMB441,900,000), which included an amount of bank balances of approximately RMB245,590,000 (2017: RMB422,611,000) denominated in RMB placed with banks in the PRC. The remaining balance of the Remaining Group’s cash and cash equivalents consisted primarily of cash on hand and bank balances which were primarily denominated in Hong Kong dollar and placed with banks in Hong Kong.

– I-23 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

As at 31 December 2018, the Remaining Group’s net debt ratio, which was calculated by the total loans and borrowings and corporate bonds minus total cash and cash equivalents and structured bank deposits, over total equity, was approximately 1.74 (2017: 1.36).

Loans and Borrowings

As at 31 December 2018, the Remaining Group’s total loans and borrowings was approximately RMB11,201,290,000, representing an increase of approximately RMB2,388,637,000, compared to approximately RMB8,812,653,000 as at 31 December 2017. The increase in the Remaining Group’s total loans and borrowings was mainly due to an increase in the Remaining Group’s investments in solar power plants which lead to an increase in loans and borrowings to finance such investments. All the loans and borrowings of the Remaining Group, except for an equivalent amount of approximately RMB5,283,000 (2017: RMB8,359,000) which were denominated in Hong Kong dollar, were denominated in RMB, the functional currency of the Company’s major subsidiaries in the PRC. As at 31 December 2018, loans and borrowings of approximately RMB4,918,000,000 (2017: RMB3,652,000,000) and approximately RMB6,283,290,000 (2017: RMB5,160,653,000) bear fixed interest rate and floating interest rate, respectively.

As at 31 December 2018, out of the total borrowings, approximately RMB831,050,000 (2017: RMB518,190,000) was repayable within one year and approximately RMB10,370,240,000 (2017: RMB8,294,463,000) was repayable after one year.

Corporate bonds

As at 31 December 2018, corporate bonds denominated in Hong Kong dollar with an aggregate principal amount of HK$344,000,000 (equivalent to approximately RMB301,413,000) (2017 : HK$477,000,000 (equivalent to approximately RMB402,656,000)) remained outstanding with certain independent third parties. The corporate bonds bear interest rates ranging from 3% to 9% (2017: 6%) per annum, and will mature on the date immediately following 3 to 96 months (2017: 36 months) after their issuance.

During the year ended 31 December 2018, the Remaining Group issued corporate bonds with an aggregate principal amount of HK$290,500,000 (equivalent to approximately RMB254,536,000) (2017: Nil) to certain independent third parties, the net proceeds of the issued corporate bonds received by the Company were approximately HK$257,727,000 (equivalent to approximately RMB225,820,000) (2017: Nil), with total issue cost amounting to approximately HK$32,773,000 (equivalent to approximately RMB28,716,000) (2017: Nil).

During the year ended 31 December 2018, the Remaining Group repaid HK$423,500,000 (equivalent to approximately RMB371,071,000) (2017: Nil) in aggregate principal amount of the corporate bonds.

– I-24 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The corporate bonds are measured at amortised cost using effective interest method by applying an effective interest rate ranging from 10.24% to 12.00% (2017: 10.24%) per annum. Imputed interest of approximately HK$44,200,000 (equivalent to approximately RMB37,318,000) (2017: HK$43,523,000 (equivalent to approximately RMB37,710,000)) (note 13 to the financial statements of the 2018 Annual Report) in respect of the corporate bonds was recognised in profit or loss during the year ended 31 December 2018.

Foreign Exchange Risk

The Remaining Group primarily operates its business in the PRC and during the year ended 31 December 2018, the Remaining Group’s revenue were primarily denominated in RMB, being the functional currency of the Remaining Group’s major operating subsidiaries. Accordingly, the Directors expect any future exchange rate fluctuation will not have any material effect on the Remaining Group’s business. The Remaining Group did not use any financial instruments for hedging purpose, but will continue to monitor foreign exchange changes to best preserve the Remaining Group’s cash value.

Charge on Assets

As at 31 December 2018, the Remaining Group had charged solar power plants, trade receivables, lease prepayments and unlisted equity investments with net book value of approximately RMB7,314,386,000 (2017: RMB6,710,259,000), approximately RMB1,580,608,000 (2017: RMB806,270,000), approximately RMB774,000 (2017: RMB821,000) and approximately RMB813,158,000 (2017: RMB830,269,000), respectively, to secure bank loans and other loans facilities granted to the Remaining Group.

Contingent Liabilities

– I-25 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Employees and Remuneration Policy

As at 31 December 2018, the Remaining Group had approximately 849 employees (2017: 829) in Hong Kong and the PRC. Compensation for the employees includes basic wages, variable wages, bonuses and other staff benefits. For the year ended 31 December 2018, the total employee benefit expenses (including directors’ emoluments) were approximately RMB253,765,000 (2017: RMB210,033,000). The remuneration policy of the Remaining Group is to provide remuneration packages, including basic salary, shortterm bonuses and long-term rewards such as share options, so as to attract and retain top quality staff. The remuneration committee of the Company reviews such packages annually, or when occasion requires.

Connected Transaction

On 13 December 2017, the Baoqian Purchaser, entered into the Baoqian Acquisition Agreement with Zhongke Hengyuan, a company established in the PRC, pursuant to which the Baoqian Purchaser agreed to acquire, and Zhongke Hengyuan agreed to sell 30% of the equity interests in Guangzhou Baoqian at a consideration of RMB35,000,000, which shall be settled in full by the Baoqian Purchaser by way of one-off payment within thirty (30) days from the date of transfer of 30% of the equity interests in Guangzhou Baoqian to the name of the Baoqian Purchaser. Immediately before the above acquisition, the equity interests in Guangzhou Baoqian was held as to 65% by the Baoqian Purchaser, 30% by Zhongke Hengyuan and 5% by an independent third party to the Remaining Group. Upon completion of the above acquisition, Guangzhou Baoqian will continue to be a non-wholly-owned subsidiary of the Company and its financial results will continue to be consolidated into the consolidated financial statements of the Remaining Group. As at 31 December 2018 and 2017, the above acquisition has not been completed.

– I-26 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

independent non-executive Directors) consider that the Baoqian Acquisition Agreement has been entered into on normal commercial terms and is fair and reasonable, and in the interests of the Company and its shareholders as a whole.

For details, please refer to the announcements of the Company dated 13 December 2017 and 24 January 2019.

Significant Investments And Material Acquisition And Disposal

Save as disclosed in the 2018 Annual Report, the Remaining Group did not have any other significant investments, other material acquisition or disposal during the year ended 31 December 2018, and there was no plan authorised by the Board for other material investments or additions of capital assets up to the date of the 2018 Annual Report.

– I-27 –

FINANCIAL INFORMATION OF HUZHOU XIANGHUI (EXCLUDING XIANGHUI LVYUAN)

APPENDIX II

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REPORT ON REVIEW OF FINANCIAL INFORMATION OF HUZHOU XIANGHUI SOLAR POWER CO., LTD.

TO THE BOARD OF DIRECTORS OF KONG SUN HOLDINGS LIMITED

INTRODUCTION

We have reviewed the unaudited financial information set out on pages II-3 to II-13 which comprises the statements of financial position as at 31 December 2016, 2017 and 2018 and 30 June 2019 of 湖州祥暉光伏發電有限公司 (Huzhou Xianghui Solar Power Co., Ltd.*) (‘‘Huzhou Xianghui’’) and the statements of profit or loss and other comprehensive income, the statements of cash flows and the statements of changes in equity for each of the years ended 31 December 2016, 2017 and 2018 and the six months ended 30 June 2018 and 2019 and explanatory notes (the ‘‘Financial Information’’). The Financial Information has been prepared solely for the purpose of inclusion in the circular to be issued by Kong Sun Holdings Limited (the ‘‘Company’’) in connection with the proposed disposal of entire equity interest in Huzhou Xianghui in accordance with paragraph 14.68(2)(a)(i)(A) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’).

The directors of the Company are responsible for the preparation and presentation of the Financial Information of Huzhou Xianghui in accordance with the basis of preparation set out in note 2 to the Financial Information and paragraph 14.68(2)(a)(i) of the Listing Rules. The directors are also responsible for such internal control as management determines is necessary to enable the preparation of Financial Information that is free from material misstatement, whether due to fraud or error. The Financial Information does not contain sufficient information to constitute a complete set of financial statements as defined in Hong Kong Accounting Standard 1 (Revised) ‘‘Presentation of Financial Statements’’ or an interim financial report as defined in Hong Kong Accounting Standard 34 ‘‘Interim Financial Reporting’’ issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’). Our responsibility is to express a conclusion on this Financial Information based on our review. This report is made solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

– II-1 –

FINANCIAL INFORMATION OF HUZHOU XIANGHUI (EXCLUDING XIANGHUI LVYUAN)

APPENDIX II

SCOPE OF REVIEW

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’ and with reference to Practice Note 750 ‘‘Review of Financial Information under the Hong Kong Listing Rules for a Very Substantial Disposal’’ issued by the HKICPA. A review of the financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the Financial Information is not prepared, in all material respects, in accordance with the basis of preparation set out in note 2 to the Financial Information.

BDO Limited

Certified Public Accountants

Hong Kong, 18 July 2019

– II-2 –

FINANCIAL INFORMATION OF HUZHOU XIANGHUI (EXCLUDING XIANGHUI LVYUAN)

APPENDIX II

Set out below is the unaudited financial information of Huzhou Xianghui which comprises the unaudited statements of financial position of Huzhou Xianghui as at 31 December 2016, 2017 and 2018 and 30 June 2019 and the unaudited statements of profit or loss and other comprehensive income, unaudited statements of cash flows and unaudited statements of changes in equity for the years ended 31 December 2016, 2017 and 2018 and the six months ended 30 June 2018 and 2019 and certain explanatory notes (altogether referred to as ‘‘Unaudited Financial Information’’).

The Unaudited Financial Information has been prepared in accordance with paragraph 14.68(2)(a)(i) of the Listing Rules and the basis of preparation as set out in note 2 to the Unaudited Financial Information.

The Unaudited Financial Information is prepared by the directors solely for the purpose of inclusion in this circular in connection with the proposed disposal of the entire equity interest in Huzhou Xianghui. The Company’s auditor, BDO Limited, has reviewed the Unaudited Financial Information of Huzhou Xianghui in accordance with Hong Kong Standard on Review Engagements 2410 ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’ and with reference to Practice Note 750 ‘‘Review of Financial Information under the Hong Kong Listing Rules for a Very Substantial Disposal’’ issued by the Hong Kong Institute of Certified Public Accountants.

A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable the Company’s auditor to obtain assurance that the Company’s auditor would become aware of all significant matters that might be identified in an audit. Accordingly, the Company’s auditor does not express an audit opinion. The Company’s auditor has issued an unmodified review report.

– II-3 –

APPENDIX II

FINANCIAL INFORMATION OF HUZHOU XIANGHUI (EXCLUDING XIANGHUI LVYUAN)

UNAUDITED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME OF HUZHOU XIANGHUI

Note Revenue 4 Cost of sales Gross profit Other income Administrative expenses Finance costs Profit before income tax Income tax expense Profit for the year/ period	For the year ended 31 December 2016 2017 2018 RMB’000 RMB’000 RMB’000 49,410 99,691 120,921 (22,305) (39,294) (39,097) 27,105 60,397 81,824 15,043 7 13 (114) (3,941) (927) (22,156) (36,751) (33,591) 19,878 19,712 47,319 — — — 19,878 19,712 47,319	For the six months ended 30 June 2018 2019 RMB’000 RMB’000 76,395 48,649 (20,038) (21,455) 56,357 27,194 3 3,577 (74) (121) (17,266) (16,920) 39,020 13,730 — (2,251) 39,020 11,479

– II-4 –

APPENDIX II

FINANCIAL INFORMATION OF HUZHOU XIANGHUI (EXCLUDING XIANGHUI LVYUAN)

UNAUDITED STATEMENTS OF FINANCIAL POSITION OF HUZHOU XIANGHUI

Notes ASSETS AND LIABILITIES Non-current assets Property, plant and equipment Solar power plant 5 Right-of-use asset Lease prepayments Current assets Trade and other receivables 6 Cash and cash equivalents Total current assets Current liabilities Trade and other payables Lease liabilities Loans and borrowings 7 Shareholder’s loan Total current liabilities Net current liabilities Total assets less current liabilities Non-current liabilities Lease liabilities Loans and borrowings 7 Total non-current liabilities Net assets Equity Share capital Reserves Total equity	As 2016 RMB’000 386 774,759 — 2,535 777,680 188,615 513 189,128 179,592 — 53,898 135,431 368,921 (179,793) 597,887 — 528,009 528,009 69,878 50,000 19,878 69,878	at 31 December 2017 2018 RMB’000 RMB’000 427 320 744,838 713,081 — — 2,441 2,345 747,706 715,746 246,594 192,009 3,738 200 250,332 192,209 179,840 13,085 — — 77,281 59,560 201,323 342,016 458,444 414,661 (208,112) (222,452) 539,594 493,294 — — 450,004 356,385 450,004 356,385 89,590 136,909 50,000 50,000 39,590 86,909 89,590 136,909	As at 30 June 2019 RMB’000 261 708,385 42,824 — 751,470 204,973 164 205,137 7,726 4,999 54,179 370,918 437,822 (232,685) 518,785 33,735 336,662 370,397 148,388 50,000 98,388 148,388

– II-5 –

APPENDIX II

FINANCIAL INFORMATION OF HUZHOU XIANGHUI (EXCLUDING XIANGHUI LVYUAN)

UNAUDITED STATEMENTS OF CASH FLOWS OF HUZHOU XIANGHUI

Cash flows from operating activities Profit before income tax Adjustments for: Depreciation of property, plant and equipment Depreciation of solar power plant Depreciation of right-of-use asset Amortisation of lease prepayments Write-off of solar power plant Interest expense Interest income Operating profit before working capital changes Increase in trade and other receivables (Decrease)/Increase in trade and other payables Cash (used in)/generated from operating activities Cash flows from investing activities Payments for purchase of property, plant and equipment Payments for construction cost in respect of solar power plant Payments for the purchase of lease prepayments Interest received Net cash (used in)/generated from investing activities Cash flows from financing activities Repayment of loans and borrowings Payment of lease liabilities Interest on lease liabilities Interest paid Proceeds from Shareholder’s loan, net Net cash generated from/(used in) financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year/ period Cash and cash equivalents at end of year/period	For the year ended 31 December 2016 2017 2018 RMB’000 RMB’000 RMB’000 19,878 19,712 47,319 92 94 117 18,796 29,921 30,001 — — — 5,103 94 5,095 — — 1,756 22,156 36,751 33,591 (5) (7) (13) 66,020 86,565 117,866 (91,965) (57,979) (10,802) (32) 548 2,339 (25,977) 29,134 109,403 (90) (135) (10) (67,071) (300) (169,094) (7,197) — (4,999) 5 7 13 (74,353) (428) (174,090) (12,433) (54,622) (45,953) — — — — — — (22,156) (36,751) (33,591) 135,431 65,892 140,693 100,842 (25,481) 61,149 512 3,225 (3,538) 1 513 3,738 513 3,738 200	For the six months ended 30 June 2018 2019 RMB’000 RMB’000 39,020 13,730 56 59 14,971 14,995 — 2,181 2,547 — — — 17,266 16,920 (3) (1) 73,857 47,884 (59,149) (12,964) (3,711) (16,836) 10,997 18,084 (9) — (5,709) — (4,999) — 3 1 (10,714) 1 (21,431) (25,104) — (4,999) — (1,073) (17,266) (15,847) 34,872 28,902 (3,825) (18,121) (3,542) (36) 3,738 200 196 164

– II-6 –

APPENDIX II

FINANCIAL INFORMATION OF HUZHOU XIANGHUI (EXCLUDING XIANGHUI LVYUAN)

UNAUDITED STATEMENTS OF CHANGES IN EQUITY OF HUZHOU XIANGHUI

Balance at 1 January 2016 Profit for the year Appropriation to PRC statutory reserve Balance at 31 December 2016 and 1 January 2017 Profit for the year Appropriation to PRC statutory reserve Balance at 31 December 2017 and 1 January 2018 Profit for the year Appropriation to PRC statutory reserve Balance at 31 December 2018 and 1 January 2019 Profit for the period Appropriation to PRC statutory reserve Balance at 30 June 2019 Balance at 1 January 2018 Profit for the period Appropriation to PRC statutory reserve Balance at 30 June 2018	Share capital RMB’000 50,000 — — 50,000 — — 50,000 — — 50,000 — — 50,000 50,000 — — 50,000	PRC statutory reserve RMB’000 — — 1,988 1,988 — 1,971 3,959 — 4,732 8,691 — 1,148 9,839 3,959 — 3,902 7,861	Retained profits RMB’000 — 19,878 (1,988) 17,890 19,712 (1,971) 35,631 47,319 (4,732) 78,218 11,479 (1,148) 88,549 35,631 39,020 (3,902) 70,749	Total RMB’000 50,000 19,878 —
				69,878 19,712 —
				89,590 47,319 —
				136,909 11,479 —
				148,388
				89,590 39,020 —
				128,610

– II-7 –

FINANCIAL INFORMATION OF HUZHOU XIANGHUI (EXCLUDING XIANGHUI LVYUAN)

APPENDIX II

NOTES TO THE UNAUDITED FINANCIAL INFORMATION

1. GENERAL INFORMATION

Huzhou Xianghui is a limited liability company incorporated in the PRC. The principal activity of Huzhou Xianghui is operation of solar power plant.

On 29 April 2019, the Vendor, an indirect wholly-owned subsidiary of the Company, the Purchaser and Huzhou Xianghui entered into the Agreement, pursuant to which the Vendor agreed to sell, and the Purchaser agreed to acquire, the entire equity interest in Huzhou Xianghui for a total consideration of approximately RMB413,213,000. Upon completion of the Disposal, Huzhou Xianghui will cease to be a subsidiary of the Company.

2. BASIS OF PREPARATION OF THE UNAUDITED FINANCIAL INFORMATION

The Unaudited Financial Information of Huzhou Xianghui for the years ended 31 December 2016, 2017 and 2018 and the six months ended 30 June 2018 and 2019 has been prepared in accordance with paragraph 14.68(2)(a)(i) of the Listing Rules, and solely for the purposes of inclusion in this circular issued by the Company in connection with the Disposal.

The Unaudited Financial Information has been prepared in accordance with the same accounting policies as those adopted by the Group in preparation of the consolidated financial statements of the Group for those respective year, which conform with Hong Kong Financial Reporting Standards (‘‘HKFRSs’’) (which include all HKFRSs, Hong Kong Accounting Standards (‘‘HKASs’’) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’) and accounting principles generally accepted in Hong Kong. The Unaudited Financial Information has been prepared under the historical cost convention. The Unaudited Financial Information is presented in RMB and all values are rounded to the nearest thousand (RMB’000) except when otherwise indicated.

The Unaudited Financial Information does not contain sufficient information to constitute a complete set of financial statements as defined in HKAS 1 (Revised) ‘‘Presentation of Financial Statements’’ nor a set of condensed financial statements as defined in HKAS 34 ‘‘Interim Financial Reporting’’ issued by the HKICPA and that it should be read in conjunction with the relevant published annual reports of the Company.

The Unaudited Financial Information of Huzhou Xianghui has been prepared on the going concern basis which assumes the realisation of assets and satisfaction of liabilities in the ordinary course of business notwithstanding Huzhou Xianghui had net current liabilities of approximately RMB179,793,000, approximately RMB208,112,000, approximately RMB222,452,000 and approximately RMB232,685,000 as at 31 December 2016, 2017 and 2018 and 30 June 2019 respectively. The directors are of the opinion that the Group will have sufficient cash resources to satisfy its future working capital and other financing requirements in the next twelve months after taking into account the followings:

(i) having reviewed the cash flow projection of Huzhou Xianghui for the next twelve months from the reporting date, the directors are of the opinion that Huzhou Xianghui is able to generate positive cash flows from its operation. In preparing the cash flow projection by the management, it was assumed that proceeds of renewable energy subsidy receivables in respect of sale of electricity will be received with reference to prevalent payment trend after successfully enlisted in the renewable energy tariff subsidy catalogue;
(ii) the Company has confirmed not to demand repayment of debt due from Huzhou Xianghui until such time when the repayment will not affect Huzhou Xianghui’s ability to repay other creditors in the normal course of business; and
(iii) the Company has confirmed to provide sufficient financial support to Huzhou Xianghui so as to enable Huzhou Xianghui to meet its liabilities and obligations as and when they fall due and to enable Huzhou Xianghui to continue their business for twelve months after 30 June 2019 if the Disposal is not completed, and to the completion date if the Disposal is completed.

– II-8 –

FINANCIAL INFORMATION OF HUZHOU XIANGHUI (EXCLUDING XIANGHUI LVYUAN)

APPENDIX II

3. CHANGES IN ACCOUNTING POLICIES

Huzhou Xianghui adopted HKFRS 16 — Leases (‘‘HKFRS 16’’) using the modified retrospective approach with a date of initial application of 1 January 2019, under which the cumulative effect of initial application is recognised as at 1 January 2019. As a result, the Unaudited Financial Information presented for the years ended 31 December 2016, 2017 and 2018 have not been restated. HKFRS 16 introduces new or amended requirements with respect to lease accounting. It introduces significant changes to the lessee accounting by removing the distinction between operating and finance leases and requiring the recognition of a right-of-use asset and a lease liability at the lease commencement for all leases, except for short-term leases and leases of low value assets. In contrast to lessee accounting, the requirements for lessor accounting have remained largely unchanged. The impact of the adoption of HKFRS 16 on the Unaudited Financial Information is described below.

Impact of the new definition of a lease

Huzhou Xianghui has made use of the practical expedient available on transition to HKFRS 16 not to reassess whether a contract is or contains a lease. Accordingly, the definition of a lease in accordance with HKAS 17 — Leases (‘‘HKAS 17’’) and HK(IFRIC)-Int 4 — Determining whether an Arrangement contains a Lease will continue to be applied to leases entered or modified before 1 January 2019.

The change in definition of a lease mainly relates to the concept of control. HKFRS 16 determines whether a contract contains a lease on the basis of whether the customer has the right to control the use of an identified asset for a period of time in exchange for consideration.

In preparation for the first-time application of HKFRS 16, Huzhou Xianghui assessed that the new definition in HKFRS 16 will not change significantly the scope of contracts that meet the definition of a lease for Huzhou Xianghui.

Impact on lessee accounting

HKFRS 16 changes how Huzhou Xianghui accounts for leases previously classified as operating leases under HKAS 17, which were off-balance-sheet. Upon initial application of HKFRS 16, for all leases (except for short-term leases and leases of low value assets), Huzhou Xianghui (a) recognises right-of-use assets and lease liabilities in the statements of financial position, initially measured at the present value of future lease payments; (b) recognises depreciation of right-of-use assets and interest on lease liabilities in the statements of profit or loss and other comprehensive income; and (c) separately presented the total amount of cash paid into a principal portion and interest within financing activities and investing activities in the statements of cash flows.

Under HKFRS 16, right-of-use assets are tested for impairment in accordance with HKAS 36 — Impairment of Assets. This replaces the previous requirement to recognise a provision for onerous lease contracts.

As at 31 December 2018, Huzhou Xianghui had operating lease commitment of approximately RMB54,486,000. On transition to HKFRS 16, Huzhou Xianghui has taken advantage of the following practical expedients to leases previously classified as operating leases under HKAS 17 and recognised rightof-use assets measured at the amount equal to the lease liability, adjusted by the amount of any prepayments relating to that lease recognised in the statements of financial position.

– II-9 –

APPENDIX II

FINANCIAL INFORMATION OF HUZHOU XIANGHUI (EXCLUDING XIANGHUI LVYUAN)

The aggregate lease liability recognised in the statements of financial position as at 1 January 2019 and Huzhou Xianghui’s operating lease commitment as at 31 December 2018 is reconciled as follows:

Operating lease commitment as at 31 December 2018 Discounting effect Lease liabilities recognised as at 1 January 2019	RMB’000 54,486 (11,826
	42,660

Prepaid lease payment in respect of the land use right in the PRC is reclassified and recognised as rightof-use assets under HKFRS 16.

The adjustment of the opening balances (affected items only) resulting from the initial application of the HKFRS 16 as at 1 January 2019 is set out in the table below. The prior-year amounts were not adjusted.

Assets: — Lease prepayments — Right-of-use assets Liabilities: — Lease liabilities	As at 31 December 2018 RMB’000 (Originally stated) 2,345 — —	Reclassification RMB’000 (2,345) 2,345 —	Contract capitalisation RMB’000 — 42,660 42,660	As at 1 January 2019 RMB’000 (Restated) — 45,005
				42,660

4. REVENUE

Revenue represents income from sales of electricity (including renewable energy subsidies). During the years ended 31 December 2016, 2017 and 2018 and the six months ended 30 June 2018 and 2019, sales of electricity includes renewable energy subsidies amounting to approximately RMB28,890,000, approximately RMB54,534,000, approximately RMB81,612,000, approximately RMB53,823,000 and approximately RMB30,185,000 respectively.

– II-10 –

APPENDIX II

FINANCIAL INFORMATION OF HUZHOU XIANGHUI (EXCLUDING XIANGHUI LVYUAN)

5. SOLAR POWER PLANT

Cost At 1 January 2016 Additions Reclassification upon completion At 31 December 2016 and 1 January 2017 Additions At 31 December 2017 and 1 January 2018 Write-off At 31 December 2018 and 1 January 2019 Additions At 30 June 2019 Accumulated depreciation At 1 January 2016 Charged for the year At 31 December 2016 and 1 January 2017 Charged for the year At 31 December 2017 and 1 January 2018 Charged for the year At 31 December 2018 and 1 January 2019 Charged for the period At 30 June 2019 Net carrying amount At 31 December 2016 At 31 December 2017 At 31 December 2018 At 30 June 2019	Solar power plant RMB’000 — — 793,555 793,555 — 793,555 (1,756) 791,799 10,299 802,098 — (18,796) (18,796) (29,921) (48,717) (30,001) (78,718) (14,995) (93,713) 774,759 744,838 713,081 708,385	Solar power plant under construction RMB’000 770,699 22,856 (793,555) — — — — — — — — — — — — — — — — — — — —	Total RMB’000 770,699 22,856 — 793,555 — 793,555 (1,756) 791,799 10,299 802,098 — (18,796) (18,796) (29,921) (48,717) (30,001) (78,718) (14,995) (93,713) 774,759 744,838 713,081 708,385

Solar power plant under construction would be transferred to solar power plant when the solar power plant completes its trial operations and is connected to provincial power grid and generate electricity.

As at 31 December 2016, 2017 and 2018 and 30 June 2019, solar plant with net carrying amount of approximately RMB774,759,000, approximately RMB744,838,000, approximately RMB713,081,000 and approximately RMB708,385,000 respectively was pledged as securities for the Huzhou Xianghui’s loans and borrowings (note 7).

– II-11 –

APPENDIX II

FINANCIAL INFORMATION OF HUZHOU XIANGHUI (EXCLUDING XIANGHUI LVYUAN)

6. TRADE AND OTHER RECEIVABLES

Trade receivables Other receivables, prepayments and deposits	As at 31 December 2016 2017 2018 RMB’000 RMB’000 RMB’000 48,606 115,581 132,494 140,009 131,013 59,515 188,615 246,594 192,009	As at 30 June 2019 RMB’000 149,642 55,331
		204,973

Ageing analysis of trade receivables, based on invoice dates, are as follows:

Less than 3 months Over 3 months but less than 6 months Over 6 months but less than 12 months Over 12 months but less than 24 months More than 24 months	As at 31 December 2016 2017 2018 RMB’000 RMB’000 RMB’000 12,513 14,944 13,464 19,149 15,335 19,123 16,944 36,696 31,396 — 48,606 68,511 — — — 48,606 115,581 132,494	As at 30 June 2019 RMB’000 25,742 12,613 32,587 61,675 17,025
		149,642

Ageing analysis of trade receivables, based on due dates, are as follows:

Neither past due nor impaired Less than 3 months past due Over 3 months but less than 6 months past due Over 6 months but less than 12 months past due Over 12 months but less than 24 months past due More than 24 months	As at 31 December 2016 2017 2018 RMB’000 RMB’000 RMB’000 6,201 5,000 229 11,721 14,652 24,055 17,095 16,473 20,471 13,589 36,037 22,152 — 43,419 65,587 — — — 48,606 115,581 132,494	As at 30 June 2019 RMB’000 13,079 19,846 5,659 32,358 61,675 17,025
		149,642

Huzhou Xianghui’s trade receivables are mainly receivables from sales of electricity. Generally, the receivables are due within 30 to 180 days from the date of billing, except for the renewable energy subsidy.

Renewable energy subsidy receivables represent PRC government subsidies on solar power plants to be received from the State Grid Company based on the respective electricity sale and purchase agreements for each of the solar power plants and the prevailing nationwide government policies. As at 31 December 2016, 2017 and 2018 and 30 June 2019, the outstanding renewable energy subsidy amounted to approximately RMB48,606,000, approximately RMB115,581,000, approximately RMB132,494,000 and approximately RMB149,542,000 respectively.

As at 31 December 2016, 2017 and 2018 and 30 June 2019, trade receivables arising from the sales of electricity including renewable energy subsidies amounting to approximately RMB48,606,000, approximately RMB115,581,000, approximately RMB132,494,000 and approximately RMB149,542,000 respectively were pledged as securities for Huzhou Xianghui’s loans and borrowings (note 7).

– II-12 –

APPENDIX II

FINANCIAL INFORMATION OF HUZHOU XIANGHUI (EXCLUDING XIANGHUI LVYUAN)

7. LOANS AND BORROWINGS

Current Secured — other borrowings Non-current Secured — other borrowings Total loans and borrowings	As at 31 December 2016 2017 2018 RMB’000 RMB’000 RMB’000 53,898 77,281 59,560 528,009 450,004 356,385 581,907 527,285 415,945	As at 30 June 2019 RMB’000 54,179
		336,662
		390,841

Huzhou Xianghui’s loans and borrowings are repayable as follows:

Within 1 year After 1 year but within 2 years After 2 years but within 5 years Over 5 years	As at 31 December 2016 2017 2018 RMB’000 RMB’000 RMB’000 53,898 77,281 59,560 47,274 52,907 63,009 188,752 185,432 212,464 291,983 211,665 80,912 581,907 527,285 415,945	As at 30 June 2019 RMB’000 54,179 68,440 216,663 51,559
		390,841

As at 31 December 2016, 2017 and 2018 and 30 June 2019, loans and other borrowings bear interest at approximately 7.62% per annum and is subject to floating-rate.

The loans and borrowings were secured by the following assets:

Solar power plant (note 5) Trade receivables (note 6)	As at 31 December 2016 2017 2018 RMB’000 RMB’000 RMB’000 774,759 744,838 713,081 48,606 115,581 132,494 823,365 860,419 845,575	As at 30 June 2019 RMB’000 708,385 149,542
		857,927

As at 31 December 2016, 2017 and 2018 and 30 June 2019, the amount of trade receivables pledged for loans and borrowings included the outstanding renewable energy subsidies.

– II-13 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

INTRODUCTION

The unaudited pro forma financial information of the Remaining Group (the ‘‘Unaudited Pro Forma Financial Information’’) presented below is prepared to illustrate (a) the financial position of the Remaining Group as if the Disposal had been completed on 31 December 2018; and (b) the results and cash flows of the Remaining Group for the year ended 31 December 2018 as if the Disposal had been completed on 1 January 2018. This Unaudited Pro Forma Financial Information has been prepared for illustrative purpose only, and because of its hypothetical nature, it may not purport to present the true picture of (i) the financial position of the Remaining Group as at 31 December 2018 or at any future date had the Disposal been completed on 31 December 2018; or (ii) the results and cash flows of the Remaining Group for the year ended 31 December 2018 or for any future period had the Disposal been completed on 1 January 2018.

The Unaudited Pro Forma Financial Information is prepared based on the consolidated statement of financial position of the Group as at 31 December 2018, the consolidated statement of profit or loss and other comprehensive income and consolidated statement of cash flows of the Group for the year ended 31 December 2018 as extracted from the consolidated financial statements of the Group for the year ended 31 December 2018 as set out in the published annual report of the Company for the year ended 31 December 2018, after giving effect to the pro forma adjustments described in the notes to the Unaudited Pro Forma Financial Information. The Unaudited Pro Forma Financial Information is prepared in accordance with Rules 4.29 and 14.68(2)(a)(ii) of the Listing Rules and with reference to Accounting Guideline 7 ‘‘Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars’’ issued by the Hong Kong Institute of Certified Public Accountants.

– III-1 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

(A) UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE REMAINING GROUP

Non-current assets Property, plant and equipment Solar power plants Interest in a joint venture Interests in associates Goodwill Lease prepayments Financial assets measured at fair value through other comprehensive income Deferred tax assets Current assets Financial assets measured at fair value through profit or loss Inventories Trade, bills and other receivables Structured bank deposits Cash and cash equivalents Assets of a disposal group classified as held for sale Total current assets	Consolidated statement of financial position of the Group as at 31 December 2018 Pro forma adjustments RMB’000 RMB’000 RMB’000 (Note 1) (Note 2) (Note 3) 33,034 (320) 12,594,456 (713,081) 331,922 13,290 149,197 245,928 (2,345) 2,047,434 2,360 15,417,621 81,143 3,058 4,646,076 (192,009) 392,016 9,230 256,310 (200) (1,000) 4,995,817 6,678 5,002,495	Unaudited pro forma consolidated statement of financial position of the Remaining Group as at 31 December 2018 RMB’000 32,714 11,881,375 331,922 13,290 149,197 243,583 2,047,434 2,360
		14,701,875
		81,143 3,058 4,846,083 9,230 255,110
		5,194,624 6,678
		5,201,302

– III-2 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

Current liabilities Trade and other payables Contract liabilities Loans and borrowings Corporate bonds Tax payable Liabilities of a disposal group classified as held for sale Total current liabilities Net current assets Total assets less current liabilities Non-current liabilities Loans and borrowings Corporate bonds Net assets CAPITAL AND RESERVES Share capital Reserves Equity attributable to the owners of the Company Non-controlling interests Total equity	Consolidated statement of financial position of the Group as at 31 December 2018 Pro forma adjustments RMB’000 RMB’000 RMB’000 (Note 1) (Note 2) (Note 3) 1,903,547 (13,085) 8,038 890,610 (59,560) 55,870 5,221 2,863,286 6,864 2,870,150 2,132,345 17,549,966 10,726,625 (356,385) 219,513 10,946,138 6,603,828 6,486,588 34,670 (87,909) 6,521,258 82,570 6,603,828	Unaudited pro forma consolidated statement of financial position of the Remaining Group as at 31 December 2018 RMB’000 1,890,462 8,038 831,050 55,870 5,221 2,790,641 6,864 2,797,505 2,403,797 17,105,672 10,370,240 219,513 10,589,753 6,515,919 6,486,588 (53,239) 6,433,349 82,570 6,515,919

– III-3 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

(B) UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME OF THE REMAINING GROUP

Revenue Cost of sales Gross profit Other gains and losses Administrative expenses Gain on bargain purchase on acquisition of subsidiaries Gain on disposal/deregistration of subsidiaries, net Loss on disposal of Huzhou Xianghui Gain on disposal of an associate Finance costs Share of profit of a joint venture Share of loss of associates Profit/(Loss) before income tax Income tax expense Profit/(Loss) for the year Profit/(Loss) for the year attributable to: Owners of the Company Non-controlling interests	Consolidated statement of profit or loss and other comprehensive income of the Group for the year ended 31 December 2018 Pro forma adjustments RMB’000 RMB’000 RMB’000 (Note 1) (Note 4) (Note 5) 1,881,004 (120,921) (760,392) 39,097 1,120,612 41,413 (13) (412,178) 927 2,504 2,693 — (40,590) 5,661 (745,545) 33,591 10,501 (837) 24,824 (8,547) 16,277 15,415 (47,319) (40,590) 862 16,277	Unaudited pro forma consolidated statement of profit or loss and other comprehensive income of the Remaining Group for the year ended 31 December 2018 RMB’000 1,760,083 (721,295) 1,038,788 41,400 (411,251) 2,504 2,693 (40,590) 5,661 (711,954) 10,501 (837) (63,085) (8,547) (71,632) (72,494) 862 (71,632)

– III-4 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

Profit/(Loss) for the year Other comprehensive income, net of tax Items that will not be reclassified to profit or loss: Fair value changes in financial assets measured at fair value through other comprehensive income Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of financial statements of foreign operations Release of exchange reserve upon disposal of subsidiaries Other comprehensive income for the year, net of tax Total comprehensive income for the year Total comprehensive income for the year attributable to: Owners of the Company Non-controlling interests	Consolidated statement of profit or loss and other comprehensive income of the Group for the year ended 31 December 2018 Pro forma adjustments RMB’000 RMB’000 RMB’000 (Note 1) (Note 4) (Note 5) 16,277 (71,452) (1,732) (19) (73,203) (56,926) (57,788) (47,319) (40,590) 862 (56,926)	Unaudited pro forma consolidated statement of profit or loss and other comprehensive income of the Remaining Group for the year ended 31 December 2018 RMB’000 (71,632) (71,452) (1,732) (19) (73,203) (144,835) (145,697) 862 (144,835)

– III-5 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

(C) UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS OF THE REMAINING GROUP

Cash flows from operating activities Profit/(Loss) before income tax Adjustments for: Depreciation of property, plant and equipment Depreciation of solar power plants Amortisation of lease prepayments Equity-settled share-based payment expenses Foreign exchange gain, net Gain on bargain purchase on acquisition of subsidiaries Gain on disposal/deregistration of a subsidiaries, net Loss on disposal of Huzhou Xianghui Gain on disposal of associates Write-off/loss on disposal of property, plant and equipment Write-off of solar power plant Net unrealised gain on fair value changes of financial assets measured at fair value through profit or loss Net realised loss on disposal of financial assets measured at fair value through profit or loss Share of profit of a joint venture Share of loss of associates Interest expense Interest income Dividend income Reversal of impairment loss recognised in respect of other receivables, net Write-back of other payables Operating profit before working capital changes	Consolidated statement of cash flows of the Group for the year ended 31 December 2018 Pro forma adjustments RMB’000 RMB’000 RMB’000 RMB’000 (Note 1) (Note 5) (Note 6) (Note 7) 24,824 (40,590) (47,319) 8,788 (117) 492,452 (30,001) 26,587 (5,095) 33,850 (2,826) (2,504) (2,693) — 40,590 (5,661) 471 16,103 (1,756) (5,864) 53,613 (10,501) 837 745,545 (33,591) (9,555) 13 (23,492) (963) (9,421) 1,329,590	Unaudited pro forma consolidated statement of cash flows of the Remaining Group for the year ended 31 December 2018 RMB’000 (63,085 8,671 462,451 21,492 33,850 (2,826 (2,504 (2,693 40,590 (5,661 471 14,347 (5,864 53,613 (10,501 837 711,954 (9,542 (23,492 (963 (9,421
		1,211,724

– III-6 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

Decrease in inventories, net Increase in trade, bills and other receivables Increase in trade and other payables Cash generated from operations Tax paid Net cash generated from operating activities Cash flows from investing activities Payments for purchase of property, plant and equipment Dividend income received Payments for construction cost of in respect of solar power plants Payments for purchase of financial assets measured at fair value through other comprehensive income Receipt from disposal of financial assets measured at fair value through profit or loss Receipt from disposal of financial assets measured at fair value through other comprehensive income Payments for purchase of lease prepayments Interests received Proceeds from disposal of subsidiaries, net of cash disposed Proceeds from disposal of Huzhou Xianghui Proceeds from disposal of associates Increase in structured bank deposits, net Receipts from acquisition of subsidiaries, net of cash acquired Payments for acquisition of associates, net of cash acquired Payment for acquisition of additional interest in subsidiaries Net cash used in investing activities	Consolidated statement of cash flows of the Group for the year ended 31 December 2018 Pro forma adjustments RMB’000 RMB’000 RMB’000 RMB’000 (Note 1) (Note 5) (Note 6) (Note 7) 1,823 (913,806) 10,802 365,766 (143,032) 783,373 (7,656) 775,717 (7,192) 10 23,492 (2,396,889) 169,094 (561,070) 75,062 47,000 (16,274) 4,999 9,555 (13) 71,840 — 106,802 22,000 (9,230) 22,896 (13,431) (8,485) (2,740,726)	Unaudited pro forma consolidated statement of cash flows of the Remaining Group for the year ended 31 December 2018 RMB’000 1,823 (903,004 222,734
		533,277 (7,656
		525,621 (7,182 23,492 (2,227,795 (561,070 75,062 47,000 (11,275 9,542 71,840 106,802 22,000 (9,230 22,896 (13,431 (8,485
		(2,459,834

– III-7 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

Cash flows from financing activities Capital element of finance lease rentals paid Proceed from new loans and borrowings Repayment of loans and borrowings Interest paid Net proceeds from issue of corporate bonds Repayment of corporate bonds Net cash generated from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of foreign exchange rate changes, net Cash and cash equivalents at end of year	Consolidated statement of cash flows of the Group for the year ended 31 December 2018 Pro forma adjustments RMB’000 RMB’000 RMB’000 RMB’000 (Note 1) (Note 5) (Note 6) (Note 7) (220) 3,319,000 (792,180) 45,953 (615,837) 33,591 225,820 (371,071) 1,765,512 (199,497) 445,638 (3,738) 10,504 256,645	Unaudited pro forma consolidated statement of cash flows of the Remaining Group for the year ended 31 December 2018 RMB’000 (220 3,319,000 (746,227 (582,246 225,820 (371,071
		1,845,056
		(89,157 441,900 10,504
		363,247

– III-8 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

(D) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

(1) The consolidated statement of financial position of the Group as at 31 December 2018, the consolidated statement of profit or loss and other comprehensive income and the consolidated statement of cash flows of the Group for the year ended 31 December 2018 are extracted without adjustment from the published annual report of the Company for the year ended 31 December 2018.
(2) The adjustment reflects the exclusion of assets and liabilities of Huzhou Xianghui as at 31 December 2018 as if the Disposal had been completed on 31 December 2018. The amounts are extracted from the unaudited financial information of Huzhou Xianghui set out in Appendix II to this circular.
(3) The adjustment represents the pro forma loss on Disposal as if the Disposal had been completed on 31 December 2018, which is calculated as follows:

Notes Total consideration (a) Share of net assets in Huzhou Xianghui as at 31 December 2018 (b) Assignment of shareholder’s loan to the Purchaser (c) Estimated professional fees directly attributable to the Disposal (d) Estimated loss on Disposal of Huzhou Xianghui	RMB’000 392,016 (136,909) (342,016) (1,000) (87,909)

(a) In accordance with the Agreement, the Group agreed to dispose of its 100% equity interest in Huzhou Xianghui, together with the shareholder’s loan owing by Huzhou Xianghui to the Group, to the Purchaser. The total consideration for the Disposal is approximately RMB392,016,000, which is comprised of RMB50,000,000 for the transfer of the entire equity interest in Huzhou Xianghui and approximately RMB342,016,000 for the amount of the outstanding Shareholder’s Loans as at 31 December 2018.
(b) The amount represents the net assets of Huzhou Xianghui of approximately RMB136,909,000 as at 31 December 2018 as extracted from the Unaudited Financial Information in Appendix II.
(c) The amount represents the loans owing by Huzhou Xianghui to the Group of approximately RMB342,016,000 as at 31 December 2018. Pursuant to the terms of the Agreement, the Company would assign these loans from Huzhou Xianghui to the Purchaser upon the Disposal.

– III-9 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

(d) The amount represents certain professional fees in relation to the Disposal, such as fee incurred for legal and professional service and valuation service, amounting to approximately RMB1,000,000 and assumed to be fully settled by cash on 31 December 2018.
(4) The adjustment is to exclude each line item of Huzhou Xianghui that has been incorporated in the consolidated statement of profit or loss and other comprehensive income of the Group for the year ended 31 December 2018 as if the Disposal had been completed on 1 January 2018.
(5) The adjustments reflect the recognition of the pro forma loss on Disposal as if the Disposal had been completed on 1 January 2018:

Notes Total consideration (a) Share of net assets in Huzhou Xianghui as at 1 January 2018 (b) Assignment of shareholder’s loan to the Purchaser (c) Estimated professional fees directly attributable to the Disposal (d) Estimated Loss on Disposal of Huzhou Xianghui	RMB’000 251,323 (89,590) (201,323) (1,000) (40,590)

(a) In accordance with the Agreement, the Group agreed to dispose of its 100% equity interest in Huzhou Xianghui, together with the shareholder’s loan owing by Huzhou Xianghui to the Group, to the Purchaser. The total consideration for the Disposal is approximately RMB251,323,000, which is comprised of RMB50,000,000 for the transfer of the entire equity interest in Huzhou Xianghui and approximately RMB201,323,000 for the amount of the outstanding Shareholder’s Loans as at 1 January 2018.
(b) The amount represents the net assets of Huzhou Xianghui of approximately RMB89,590,000 as at 1 January 2018 as extracted from the Unaudited Financial Information in Appendix II.
(c) The amount represents the loans owing by Huzhou Xianghui to the Group of approximately RMB201,323,000 as at 1 January 2018. Pursuant to the terms of the Agreement, the Company would assign these loans from Huzhou Xianghui to the Purchaser upon the Disposal.
(d) The amount represents certain professional fees in relation to the Disposal, such as fee incurred for legal and professional service and valuation service, amounting to approximately RMB1,000,000 and assumed to be fully settled by cash on 1 January 2018.

– III-10 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

(6) The adjustment is to exclude the cash flows from Huzhou Xianghui incorporated in the consolidated statement of cash flows of the Group for the year ended 31 December 2018 as if the Disposal had been completed on 1 January 2018.
(7) This adjustment represents the net cash inflow of approximately RMB106,802,000 represents the consideration will be received immediately for the amount of approximately RMB107,802,000 (comprised of items (a)(i) and (b)(i) as explained immediately below) less the estimated professional fee and other expenses directly attributable to the Disposal of RMB1,000,000 (note 5(d)) as if the Disposal had been completed on 1 January 2018.

Pursuant to the Agreement, the total consideration for the Disposal is comprised of the following:

(a) RMB50,000,000, for the transfer of the entire equity interest in Huzhou Xianghui which shall be settled as the following manner:
- (i) RMB45,000,000 shall be payable to the Group within five (5) business days of the Completion Date; and (ii) RMB5,000,000 shall be payable to the Group within five (5) business days after the first anniversary of the Completion Date.
(b) Approximately RMB201,323,000, being the amount of the outstanding Shareholder’s Loans as at 1 January 2018, which shall be settled in the following manner:
- (i) approximately RMB62,802,000 shall be payable to the Group within 10 business days of the Completion Date;
- (ii) within five (5) business days of Huzhou Xianghui having collected the remaining Government Subsidies incurred up to 30 June 2018 in the amount of approximately RMB77,861,000, Huzhou Xianghui shall pay such amount to the Group; and
- (iii) within five (5) business days of the completion of each of certain rectification works items at Huzhou Project, Huzhou Xianghui shall pay the Group an amount corresponding to such rectification works items in the aggregate amount of approximately RMB60,660,000.
(8) The above adjustments are not expected to have a continuing effect on the unaudited pro forma consolidated statement of profit or loss and other comprehensive income and the unaudited pro forma consolidated statement of cash flows of the Remaining Group.

– III-11 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

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

TO THE DIRECTORS OF KONG SUN HOLDINGS LIMITED

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of Kong Sun Holdings Limited (the ‘‘Company’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’) prepared by the directors of the Company for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma consolidated statement of financial position as at 31 December 2018, the unaudited pro forma consolidated statement of profit or loss and other comprehensive income and the unaudited pro forma consolidated statement of cash flows for the year ended 31 December 2018 and related notes as set out on pages III-1 to III-11 of Appendix III of the circular dated 18 July 2019 (the ‘‘Circular’’) in connection to the proposed disposal of entire issued share capital of 湖州祥暉光伏發電有限公司 (Huzhou Xianghui Solar Power Co., Ltd.*) (‘‘Huzhou Xianghui’’) (the ‘‘Disposal’’). The applicable criteria on the basis of which the directors of the Company have compiled the unaudited pro forma financial information are described on pages III-1 to III-11 of Appendix III of the Circular.

The unaudited pro forma financial information has been compiled by the directors of the Company to illustrate the impact of the Disposal on the Group’s financial position as at 31 December 2018 and the Group’s financial performance and cash flows for the year ended 31 December 2018 as if the Disposal had taken place at 31 December 2018 and 1 January 2018, respectively. As part of this process, information about the Group’s financial position, financial performance and cash flows has been extracted by the directors of the Company from the Company’s consolidated financial statements for the year ended 31 December 2018, on which an independent auditor’s report has been published.

DIRECTORS’ RESPONSIBILITY FOR THE UNAUDITED PRO FORMA FINANCIAL INFORMATION

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

– III-12 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

OUR INDEPENDENCE AND QUALITY CONTROL

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

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

REPORTING ACCOUNTANT’S RESPONSIBILITIES

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

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

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

The purpose of unaudited pro forma financial information included in a circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the entity as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the Disposal at 31 December 2018 or 1 January 2018 would have been as presented.

– III-13 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

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

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

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

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

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

OPINION

In our opinion:

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

BDO Limited Certified Public Accountants Hong Kong

18 July 2019

– III-14 –

VALUATION REPORT

APPENDIX IV

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Royson Valuation Advisory Limited Unit 1806, 18/F, The L. Plaza 367–375 Queen’s Road Central Hong Kong

18 July 2019

Kong Sun Holdings Limited

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

Dear Sirs or Madams,

RE: VALUATION OF 100% EQUITY INTEREST IN HUZHOU XIANGHUI SOLAR POWER CO., LTD

We have been instructed by Kong Sun Holdings Limited (the ‘‘Company’’, together with its subsidiaries as the ‘‘Group’’) to perform an appraisal of the fair value of a 100% equity interest in the business enterprise of 湖州祥暉光伏發電有限公司 (Huzhou Xianghui Solar Power Co., Ltd or ‘‘Huzhou Xianghui’’) as at 31 March 2019 (the ‘‘Appraisal Date’’) for transaction purpose and our valuation will also be used in connection with a public document of the Company.

Huzhou Xianghui was established in the People’s Republic of China (the ‘‘PRC’’) with limited liability on 21 April 2015. It is principally engaged in the development, construction and operation of 100 mega watts (‘‘MW’’) solar power plant in Huzhou City, Zhejiang Province, the PRC (the ‘‘Huzhou Project’’). 湖州祥暉綠源生態養殖有限公司 (Huzhou Xianghui Lvyuan Ecological Farming Co., Ltd. or ‘‘Xianghui Lvyuan’’) is its direct whollyowned subsidiary. As advised by the Company, Xianghui Lvyuan will not be disposed and thus, is excluded in our valuation.

In this appraisal, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The fair value of the equity interest in Huzhou Xianghui (excluding Xianghui Lvyuan) is principally derived by the application of the Comparable Transactions Method and the Guideline Publicly-traded Comparable Method under the market approach. In this valuation, the shareholders’ loan is considered as part of equity. Our opinion of value relies on a goingconcern premise. This premise assumes that Huzhou Xianghui is an ongoing business enterprise with management operating in a rational way with a goal of maximising shareholder value.

– IV-1 –

VALUATION REPORT

APPENDIX IV

I. DESCRIPTION OF THE APPRAISAL

On 29 April 2019, 江山永泰投資控股有限公司 (the ‘‘Vendor’’) which is an indirect wholly-owned subsidiary of the Company and 國投電力控股股份有限公司 (the ‘‘Purchaser’’) entered into an equity transfer agreement (the ‘‘Agreement’’), pursuant to which the Vendor agreed to sell and the Purchaser agreed to acquire a 100% equity interest in Huzhou Xianghui at a total consideration of approximately RMB413,213,000.

The objective of this valuation is to provide an independent opinion on the fair value of a 100% equity interest in Huzhou Xianghui (excluding Xianghui Lvyuan) for transaction purpose. We understand that our valuation will also be used in connection with a public document of the Company.

The appraisal is conducted in conformity with Hong Kong Generally Accepted Accounting Principles and the International Valuation Standards (2017 Edition) published by International Valuation Standards Council. These standards contain guideline on the basis and valuation approaches used.

II. BASIS OF VALUE

The valuation has been performed based on fair value. As defined in Hong Kong Financial Reporting Standard 13 — Fair Value Measurement (HKFRS 13), fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

III. PREMISE OF VALUE

Our opinion of value relies on a going-concern premise. This premise assumes that Huzhou Xianghui is an ongoing business enterprise with management operating in a rational way with a goal of maximising shareholder value.

IV. SCOPE OF WORK

This appraisal reflects facts and conditions existing at the Appraisal Date. Subsequent events have not been considered and we are not required to update our report for such events and conditions.

Our appraisal opinion is based on the assumptions stated herein and on information provided by the management of the Company (the ‘‘Management’’). In the course of our valuation, we have conducted the following processes and procedures:

Collected and analysed the relevant historical financial statements and other financial and operational information of Huzhou Xianghui from the Management;
Conducted interviews with the Management in relation to Huzhou Xianghui’s history, operations and prospects of its business;
Researched the general economic outlook and the outlook for the specific industry affecting the business of Huzhou Xianghui, its industry and its markets;

– IV-2 –

VALUATION REPORT

APPENDIX IV

Examined the reasonableness of the information as well as other records and documents provided by the Management, in light of our research and analysis on the industry and economic data;
Determined the most appropriate valuation method for the valuation;
Identified the comparable transaction and the comparable companies of Huzhou Xianghui; and
Developed the business enterprise value of Huzhou Xianghui based on the assumptions and valuation method stated in the report.

V. INFORMATION SOURCES

To aid us in our analysis, we have consulted, reviewed and relied on the following key information which is publicly available or provided by the Management:

Financial database empowered by Bloomberg;
Relevant industry report and economic data;
Unaudited and/or audited historical financial and operational information of Huzhou Xianghui;
Public announcements on the website of The Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’) and The Shenzhen Stock Exchange; and
Discussions with the Management.

VI. LIMITING CONDITIONS

This appraisal relies upon the following contingent and limiting conditions:

Public, industry, statistical, and other information furnished by others, upon which all or portions of this analysis is based, is believed to be reliable. However, we make no representation as to the accuracy or completeness of such information and have performed no procedures to corroborate the information.
The Company and its representatives warranted to us that the information they supplied is complete and accurate to the best of their knowledge and that the financial statement information reflects Huzhou Xianghui’s results of operations and financial and business condition in accordance with generally accepted accounting principles, unless otherwise noted. The financial statements and other related information supplied by management has been accepted as correct without further verification. We have not audited, reviewed, or compiled the financial information provided to us and, accordingly, we express no audit opinion or any other form of assurance on this information. We also have no reason to believe that any material facts have been withheld from us.

– IV-3 –

VALUATION REPORT

APPENDIX IV

This report is to be used for the specific purposes stated herein and any other use is invalid. No one should rely on our report as a substitute for their own due diligence. No reference to our name or our report, in whole or in part, in any document to be prepared or distributed to third parties may be made without our written consent and approval.
The opinion of value is valid only for the stated purpose as of the valuation date indicated. We take no responsibility for changes in market conditions and assume no obligation to revise our conclusion of value to reflect events or conditions which occur subsequent to the valuation date.
For the prospective financial information approved by management that is used in our engagement, we have not examined or compiled the prospective financial information and therefore, do not express an audit opinion or any other form of assurance on the prospective financial information or the related assumptions. Events and circumstances frequently do not occur as expected and there will usually be differences between prospective financial information and actual results, and those differences may be material.
In arriving at our opinion of value, we have relied to a very considerable extent on the above-mentioned information. Any variation to the assumptions in the valuation could seriously affect our opinion of value.

VII. INFORMATION ABOUT THE COMPANY

The Company is an investment holding company and its shares are listed on the Main Board of the Stock Exchange (stock code: 295). 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.

The Company acquired Huzhou Xianghui in 2015 after the construction work of the Huzhou Project had been completed and the power plant connected to power grid. Since then, Huzhou Xianghui has become a wholly-owned subsidiary of the Company.

VIII. INFORMATION ABOUT HUZHOU XIANGHUI AND HUZHOU PROJECT

Huzhou Xianghui was established in the PRC with limited liability on 21 April 2015. It is principally engaged in the development, construction and operation of the Huzhou Project. Xianghui Lvyuan is its direct wholly-owned subsidiary.

As per the management accounts of Huzhou Xianghui (excluding Xianghui Lvyuan) for the period from 1 April 2018 to 31 March 2019 (the ‘‘Period’’), the unaudited revenue and the profit before taxation of Huzhou Xianghui for the Period were approximately RMB119,781,000 and approximately RMB45,720,000 respectively. Depreciation and amortisation expenses and finance costs for the Period amounted to approximately RMB35,193,000 and approximately

– IV-4 –

VALUATION REPORT

APPENDIX IV

RMB32,739,000 respectively. The earnings before interest, tax, depreciation and amortization of Huzhou Xianghui for the Period (the ‘‘T12 EBITDA’’) amount to approximately RMB113,653,000.

As at the Appraisal Date, the net assets value of Huzhou Xianghui (excluding Xianghui Lvyuan) was approximately RMB134,502,000. Its total assets amounted to approximately RMB897,224,000 which included a cash balance of approximately RMB20,000 and a deposit for finance lease of RMB48,000,000. Its total liabilities amounted to approximately RMB762,722,000 which mainly consisted of the finance lease payables and interest payable of approximately RMB395,554,000 in aggregate and the net amount due to the Group of approximately RMB355,647,000 (the ‘‘Shareholders’ Loan’’). The net debts of Huzhou Xianghui as at the Appraisal Date which was the deduction of cash balance and deposit for finance lease from the finance lease payables and interest payable amounted to approximately RMB347,534,000. With the capitalisation of the Shareholders’ Loan, total equity of Huzhou Xianghui as at the Appraisal Date amounted to approximately RMB490,149,000.

IX. INDUSTRY OVERVIEW

Solar photovoltaic (‘‘PV’’) industry has developed rapidly in the PRC since the promulgation of a series of incentive policies that covered both national and sub-national levels in 2013. As a result, the annual installation capacity has soared from 3.58 gigawatts (‘‘GW’’) in 2012 to 53.06 GW in 2017 while the total installed photovoltaic capacity jumped from 6.50 GW at the end of 2012 to 130.25 GW by 2017.

On 31 May 2018, the PRC government announced subsidy reductions for photovoltaic power generation, widely known as the ‘‘531 Policy’’. The move led to the sudden contraction of the country’s PV market and has had a great impact on the local PV industry. As a result, the photovoltaic installation capacity dropped to 44.26 GW in 2018. The 531 Policy also limits the construction of new large-scale solar power stations.

The solar photovoltaic sector has been heavily relied on government’s subsidy for survival. Tariff on electricity is regulated by government. The business is capital intensive and the construction costs have been higher than the income to be generated in the market. The most influential part of the supportive policies is the subsidy rates in electricity price that turning the operations of a PV power plant into profitable. As a result, the supportive policy has attracted great capital investment pouring into the sector, resulting in sharp growth in the accumulated installation capacity in the past 5 years.

Back to August 2013, the subsidy rates for large-scale solar power stations and distributed solar power stations were in the range of RMB0.9/kWh and RMB1.0/kWh depending on regions and RMB0.42/kWh respectively. Due to technological advance, the production cost of a new plant has been falling. The government subsidy rates have also been adjusting downward year-by-year. According to the 531 Policy, the subsidy rates for large-scale solar power stations and distributed solar power stations have been cut to the range between RMB0.5/kWh and RMB0.7/kWh and RMB0.32/kWh respectively.

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VALUATION REPORT

APPENDIX IV

The operations of a power plant are straightforward. Its customer is the local electricity company while the supply mainly depends on the weather (i.e. solar insolation for the year). The government subsidy and incentive provide the solar power plant operations with a stable income once the power plant is on-grid. Once the power plant has been connected to electricity and admitted into the government subsidy scheme, the subsidy rate will be fixed for a period of time (generally 20 years). Government subsidy is expected to be received by the power plant in 1–2 years after sale of electricity. With relatively stable income stream and the power plant itself as collateral, it is common to fund the construction cost with debt financing, such as financial leases, in the market.

However, in recent years, the situation had been worse and the average aging of the receivable on subsidy was extended to 2–3 years. As many of the power plant have high financial leverage, such delay in payment impose pressure on their liquidity for loan repayment. The larger the scale, the more capital tighten up in the working capital and the less liquidity the business is.

According to the research report published by TUV Rheinland Great China and PricewaterhouseCoopers China, the 531 Policy has simulated the merger and acquisition activities on solar plant assets. The aggregated capacity traded after the 531 policy is about 3 times larger than the total traded in the three years from 2015 to 2017. Previously, the M&A market was dominated by the trade of newly established plant that just connected to electricity. Due to the 531 Policy, there are now more deals on plants with 1–3 years of operating history and large market player acquiring plants from small or medium competitors which have weaker financial strength.

It is also expected that the future growth of the PV industry would be driven by the increase in distributed solar power stations and the subsidy would gradually be withdrawn. Operational efficiency would be enhanced and entities that are financially weak would be eliminated. The market could sustain growth in long run.

X. VALUATION METHODOLOGY

Overview of the Three Main Valuation Approaches

In this valuation, we have considered the three generally recognised valuation approaches, namely the market approach, income approach and cost approach. The approach or approaches deemed most relevant will then be selected for use.

Market Approach

The market approach provides an indication of value by comparing the asset with identical or comparable (that is similar) assets for which price information is available. Third-party transactions in the equity of an enterprise generally represent the best estimate of fair value if they are done at arm’s length.

In using transactions from similar enterprises, there are two primary methods. The first, often referred to as the Comparable Transactions Method, involves determining valuation multiples from sales of enterprises with similar financial and operating

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VALUATION REPORT

APPENDIX IV

characteristics and applying those multiples to the subject enterprise. The second, often referred to as the Guideline Publicly-traded Comparable Method, involves identifying and selecting publicly-traded enterprises with financial and operating characteristics similar to the enterprise being valued. Once publicly traded enterprises are identified, valuation multiples can be derived, adjusted for comparability, and then applied to the subject enterprise to estimate the value of its equity or enterprise value.

Income Approach

The income approach provides an indication of value by converting future cash flow to a single current value. Under the income approach, the value of an asset/the business entity is determined by reference to the value of income, cash flow or cost savings generated by the asset/the business entity. A fundamental basis for the income approach is that investors expect to receive a return on their investments and that such a return should reflect the perceived level of risk in the investment. A commonly used methodology under the income approach is a discounted cash flow analysis. A discounted cash flow analysis involves forecasting the appropriate cash flow stream over an appropriate period and then discounting it back to a present value at an appropriate discount rate. This discount rate should consider the time value of money, inflation, and the risk inherent in ownership of the asset or security interest being valued.

Cost Approach

The cost approach provides an indication of value using the economic principle that a buyer will pay no more for an asset than the cost to obtain an asset of equal utility, whether by purchase or by construction, unless undue time, inconvenience, risk or other factors are involved. The approach provides an indication of value by calculating the current replacement or reproduction cost of an asset and making deductions for physical deterioration and all other relevant forms of obsolescence.

Selected Approach

We have relied primarily on the Comparable Transactions Method and the Guideline Publicly-traded Comparable Method under the market approach because there are some closely comparable transactions publicly available and some closely comparable publicly traded entities with financial and operating characteristics similar to that of Huzhou Xianghui can be identified. The market approach is simple to understand and employs more observable market data. To form a more comprehensive view, our opinion of value is the average of the results from these two methods.

From design to connection to power grid and to revenue generating, it undergoes a series of approvals, process and procedures. A purely cost approach cannot fairly reflect the value of Huzhou Xianghui which has survived through the uncertainty. For the income approach, it relies on explicit financial forecasts which require many assumptions. It is considered as inferior to the market approach in this valuation and thus, not being selected.

– IV-7 –

VALUATION REPORT

APPENDIX IV

Comparable Transactions Method

The Comparable Transactions Method utilises information on transactions involving assets that are the same or similar to the subject asset to arrive at an indication of value. A major requirement in applying the Comparable Transactions Method is to identify transactions that are comparable to the subject company in terms of business nature and associated risks.

The 531 Policy had cooled down the pace of new investment in large-scale PV power plants, but simulated the merger and acquisition activities on the operating solar power plants in the PRC.

We have selected comparable transactions we think fit for this valuation primarily based on the following criteria: (1) the subject entity is principally engaged in solar power plants operations in the PRC; (2) the underlying power plant is located in the same resource zone as Huzhou Project (i.e. Zone 3); (3) the underlying power plant is operating for more than 6 months and profit-making in the latest financial year; and (4) the transaction was taken place either in 2018 and 2019.

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VALUATION REPORT

APPENDIX IV

Based on the above criteria, we conducted a comprehensive research and came up with below exhaustive list of 7 comparable transactions which are conducted by 5 different pairs of buyers and sellers. As such, the below list of comparable transactions is considered as fair and representative for the purpose of this valuation. A description of the selected comparable transactions is summarised below:

			Consideration for	Net Assets of	Ratio of
	Date	Description	equity interest	the Subject Entity	Price-to-Book Value
			(‘‘Price’’)	(‘‘Book Value’’)	(rounded to
					2 decimal places)
1.	18–04–18	Beijing Enterprises Clean	RMB378,874,812 for	RMB446,000,000	0.85
		Energy Group Limited	100% equity interest	as at 31 March 2018
		(‘‘BECE’’) (stock code:
		1250, listed in Hong Kong)
		announced a potential
		acquisition of a company
		which was operating a 100MW
		solar power plant in Yancheng
		City, Jiangsu Province, the
		PRC. The acquisition was
		completed in May 2018.
		The subject power plant
		recorded a profit after taxation
		of RMB14,491,792 in 2017. Its
		total asset value as at
		31 March 2018 was
		RMB1,123,000,000.

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VALUATION REPORT

APPENDIX IV

			Consideration for	Net Assets of	Ratio of
	Date	Description	equity interest	the Subject Entity	Price-to-Book Value
			(‘‘Price’’)	(‘‘Book Value’’)	(rounded to
					2 decimal places)
2.	18–04–18	BECE announced a potential	RMB78,804,286 for	RMB85,000,000	0.93
		acquisition of a company	100% equity interest	as at 31 March 2018
		which was operating a 20MW
		solar power plant in Yancheng
		City, Jiangsu Province, the
		PRC. The acquisition was
		completed in May 2018.
		The subject power plant
		recorded a profit after taxation
		of RMB3,515,173 in 2017. Its
		total asset value as at 31
		March 2018 was
		RMB239,000,000.
3.	13–07–18	Changzhou Almaden Stock Co	RMB192,896,878 for	RMB204,722,700	0.94
		Ltd (stock code: 002623, listed	100% equity interest	as at 21 June 2018
		in the PRC) announced its
		disposal of a 100% equity
		interest in a company which
		was operating a 50MW solar
		power plant in Guizhou, the
		PRC.
		The subject power plant
		recorded the net revenue and
		net profits attributable to the
		vendor of RMB17,782,600 and
		RMB2,784,600 respectively for
		the three months ended 31
		March 2018. Its total asset
		value and total liabilities as at
		31 March 2018 amounted to
		RMB400,047,000 and
		RMB291,074,300 respectively.
		The subject entity completed a
		capital injection of
		RMB95,750,000 on
		21 June 2018.

– IV-10 –

VALUATION REPORT

APPENDIX IV

			Consideration for	Net Assets of	Ratio of
	Date	Description	equity interest	the Subject Entity	Price-to-Book Value
			(‘‘Price’’)	(‘‘Book Value’’)	(rounded to
					2 decimal places)
4.	24–10–18	GCL New Energy Holdings	RMB119,160,000 for	RMB177,288,000	0.84
		Ltd (‘‘GCL’’) (stock code:	80% equity interest	as at 30 June 2018
		451, listed in Hong Kong)
		announced to dispose an 80%	(i.e. RMB148,950,000
		equity interest in a company	for 100% equity
		which was operating a 100MW	interest)
		solar power plant in Yueyang
		City, Hunan Province, the
		PRC.
		The subject power plant
		recorded a net profit of
		RMB23,980,000 in 2017. Its
		total asset value as at 30 June
		2018 amounted to
		RMB736,473,000.
5.	24–10–18	GCL also announced to	RMB93,500,000 for	RMB124,087,000	0.94
		dispose an 80% equity interest	80% equity interest	as at 30 June 2018
		in a company which was
		operating a 60MW solar power	(i.e. RMB116,875,000
		plant in Yueyang City, Hunan	for 100% equity
		Province, the PRC.	interest)
		The subject power plant
		recorded a net profit of
		RMB25,131,000 in 2017. Its
		total asset value as at 30 June
		2018 amounted to
		RMB644,654,000.

– IV-11 –

VALUATION REPORT

APPENDIX IV

Consideration for Net Assets of Ratio of Date Description equity interest the Subject Entity Price-to-Book Value (‘‘Price’’) (‘‘Book Value’’) (rounded to 2 decimal places) 6. 02–11–18 Jiawei Renewable Energy Co RMB323,478,337 for RMB297,503,100 1.42 (based on the Ltd (stock code: 300317, listed 100% equity interest as at 30 September adjusted Book Value) in the PRC) announced its 2018 disposal of a 100% equity interest in a company which RMB 227,708,300 as was operating a 100MW solar at 30 September 2018, power plant in Gaoyou, after downward Jiangsu, the PRC. adjustment for the value of current assets The subject power plant to be retained by the recorded the net revenue and vendor. net profits of RMB85,495,800 and RMB31,800,600 respectively for the nine months ended 30 September 2018. Its total asset value and total liabilities as at 30 September 2018 amounted to RMB892,499,100 and RMB594,995,900 respectively.

– IV-12 –

VALUATION REPORT

APPENDIX IV

			Consideration for	Net Assets of	Ratio of
	Date	Description	equity interest	the Subject Entity	Price-to-Book Value
			(‘‘Price’’)	(‘‘Book Value’’)	(rounded to
					2 decimal places)
7.	28–03–19	GCL announced to dispose an	RMB246,440,000 for	RMB535,295,000	0.84
		55% equity interest in three	55% equity interest	as at 31 December
		solar power plants with total		2018
		capacity of 280MW located in	(i.e. RMB448,072,727
		Hunan Province and Hubei	for 100%)
		Province, the PRC.
		The subject power plants
		recorded a total revenue of
		RMB237,130,000 and the net
		profit of RMB57,283,000 in
		2018.

As the business model of a PV power plant is straightforward, and similar across different capacity and different regions. The comparable transactions share many common properties, such as on material characteristics (i.e. size, specifications, etc.), ownership characteristics (i.e. highly leveraged via finance leases and/or shareholders’ loans). Common units of comparison can be formed as the basis of the comparison to derive the key valuation metrics.

Given that there is evidence of several transactions of very similar assets from reliable and trusted source, the respective transaction dates are within 15 months from the Appraisal Date, and each of those transactions is disclosed in similar format, we considered that the Comparable Transactions Method allow a meaning comparison.

Huzhou Project is capital intensive and the asset size is considered as one of the common and important value ratios considered by market participants. After considering the information available from the selected comparable transactions, we consider that the book value multiple (ie. the Price-to-Book Value ratio) is the most appropriate in this valuation.

The Price-to-Book Value ratio of the comparable transactions ranged from 0.84 time to 1.42 times with an average of 0.97 time and a median of 0.93 time.

The fair value of Huzhou Xianghui is the sum of Shareholders’ Loan and the product of the median of the Price-to-Book Value ratio generated from the available market information as shown above and Huzhou Xianghui’s net assets value as at the Appraisal Date (i.e. approximately RMB134,502,000). This method generally yields valuation information at the non-marketable controlling level of value, no valuation premium and discount are applicable in this case.

– IV-13 –

VALUATION REPORT

APPENDIX IV

Guideline Publicly-traded Comparable Method

In the Guideline Publicly-traded Comparable method, the fair 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.

Selection of Comparable Companies

A major requirement in applying the Guideline Publicly-traded Comparable 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 we think fit for this valuation primarily based on the following criteria: (1) principally engaged in similar business (i.e. owners and operators of solar power plant in the PRC); (2) profit-making in the last two financial years; and (3) listed in a recognisable exchange for over two years.

Based on the above criteria, we conducted a comprehensive research and came up with below exhaustive list of 3 comparable companies. There are no comparable companies that are perfectly comparable with Huzhou Xianghui in terms of business. Nevertheless, the comparable companies selected have a major portion of revenue contributed by the solar power generation business. The inclusion of 3 comparable companies also accommodate the fact of not perfectly comparable business. As such, the below list of comparable companies is considered as fair and representative for the purpose of this valuation. A description of their business operation is summarized below:

1. GCL New Energy Holdings Ltd (stock code: 451, listed in Hong Kong)

GCL New Energy Holdings Ltd, through its subsidiaries, offers solar plant operation and maintenance. The company also offers energy storage technology, micro-grid and intelligent integration capabilities. As at the Appraisal Date, its market capitalisation was approximately HK$6,485 million.

Panda Green Energy Group Limited (stock code: 686, listed in Hong Kong)

Panda Green Energy Group Limited, operates solar power plant construction businesses. The company provides solar energy projects development, solar energy projects investment, solar power plant management, and other services. Panda Green Energy Group also operates wind power station development, hydroelectric power generation, and other businesses. As at the Appraisal Date, its market capitalisation was approximately HK$5,567 million.

CECEP Solar Energy Co., Ltd. (stock code: 000591, listed in the PRC)

CECEP Solar Energy Co., Ltd. operates in the solar energy industry. The Company manages solar power stations, and manufactures photovoltaic components. CECEP Solar Energy markets worldwide. As at the Appraisal Date, its market capitalisation was approximately RMB12,449 million.

– IV-14 –

VALUATION REPORT

APPENDIX IV

Market Multiple

In applying the Guideline Publicly-traded Comparable method, different value measures or market multiples of the comparable companies are calculated and analysed to induce a series of multiples that are considered representative of the industry average. Then, we applied the relevant industry multiples to the subject company to determine a value for the subject company that is on a freely-traded basis.

We applied the market value of enterprise value (‘‘EV’’) multiple in this valuation. EV equals to the sum of (1) market capitalisation; (2) value of total debt; (3) value of preferred equity and non-controlling interest and less (4) value of cash and cash equivalents. EV is a measure of a company’s total value, often used as a more comprehensive alternative to equity market capitalization. It is used as the basis for many financial ratios that measure the performance of a company.

Specifically, we have applied the multiples of EV-to-EBITDA (‘‘EV/EBITDA’’) and the EV-to-total assets (‘‘EV/Assets’’) of comparable companies for this appraisal. EV/EBITDA metric is used as a valuation tool to compare the value of a company, debt included, to the company’s cash earnings less non-cash expenses. The advantage is that it is capital structure-neutral, and, therefore, this multiple can be used to directly compare companies with different levels of debt. It is useful for transnational comparisons because it ignores the distorting effects of individual countries taxation policies. It is also useful for valuing capital-intensive business with high levels of depreciation and amortisation. EBITDA is usually positive even when earnings per share is not.

Another commonly used multiple for determining the relative value of businesses which are asset-driven and with more or less constant return on assets is the EV/Assets ratio. This would also make assets the prefect indicator of future cash flows.

The following table summarises the ratios of EV/EBITDA and EV/Assets (rounded to 2 decimal places) of the selected comparable companies as at the Appraisal Date:

	Average	Median
EV/EBITDA ratio	11.50	11.18
EV/Assets ratio	0.80	0.81

After considering its financial results, we consider that the historical earnings records and the book value of the total assets of Huzhou Xianghui can form a meaningful and relevant basis for this valuation and the following value ratios applied are considered as appropriate for this valuation.

	Selected	Weighting
Valuation Parameter	Multiple	Factor
EV/EBITDA ratio	11.50	50%
EV/Assets ratio	0.80	50%

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VALUATION REPORT

APPENDIX IV

The fair value of Huzhou Xianghui is mainly derived from the product of the selected value ratios of comparable companies generated from the available market figures as at the Appraisal Date and the historical financial information of Huzhou Xianghui (i.e. the T12 EBITDA of approximately RMB113,653,000) and the total assets as at the Appraisal Date of approximately RMB897,224,000), and then minus the results by the net debt as at the Appraisal Date of approximately RMB347,534,000). The calculated value is then subject to the adjustments for the control premium and the discount for lack of marketability.

Valuation Premium and Discount

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.

According to the Control Premium Study for the 2nd Quarter 2018 published by FactSet Mergerstat, LLC, the average and median of the control premium (including negative premiums and for international transactions) are 36.6% and 16.4% respectively. Such range is concurred with our findings on other relevant research papers (both formal and informal) and valuation journals on valuation premiums and discounts which are publicly available.

Considering the current capital structure of Huzhou Xianghui, the business model of a typical solar power plant and the government policies and regulations over the industry, we consider that a 20.0% control premium is appropriate in this valuation.

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 to 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.

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VALUATION REPORT

APPENDIX IV

The discount for lack of marketability generally falls into a range from 0% to 40% with an average of 20.7% and a medium of 15.8%, according to the Stout Restricted Stock Study Company Guide published by Stout Risins Ross LLC. Such range is concurred with our findings on other relevant research papers (both formal and informal) and valuation journals on valuation premiums and discounts which are publicly available.

The shares of Huzhou Xianghui are not publicly traded and an active market for its shares does not exist. Delay in receipt of government subsidies increases cash flow pressure of the owners, especially for those with high financial leverage. In view of the market range of marketability discount, we conclude that it is reasonable to apply a 40.0% discount to appraise the value of equity interest of a private company with high financial leverage and capital intensive like Huzhou Xianghui.

Overall Conclusion

The fair value of the equity interest in Huzhou Xianghui is considered as the average of:

RMB

Indicated fair value derived under the Comparable Transactions
Method	480,700,000
Indicated fair value derived under the Guideline Publicly-traded
Comparable Method	478,700,000
Average (rounded to the nearest million):	480,000,000

XI. VALUATION ASSUMPTIONS

A number of assumptions have to be established in order to sufficiently support our opinion of value. 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 Huzhou Xianghui carries on its business;
There will be no major changes in the current taxation law in the country where Huzhou Xianghui operates, 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 changes in the industry in which Huzhou Xianghui involves that would materially affect the revenues, profits, cash flows attributable to Huzhou Xianghui;
Huzhou Xianghui and/or its partners will obtain the necessary licenses and approvals to provide its service;
Exchange rates and interest rates will not differ materially from those presently prevailing;

– IV-17 –

VALUATION REPORT

APPENDIX IV

The availability of finance will not be a constraint on the forecasted growth of operations of Huzhou Xianghui;
Huzhou Xianghui will successfully maintain its competitiveness and market share through optimising the utilization of its resources and expanding its marketing network;
Huzhou Xianghui can keep abreast of the latest development of the industry such that its competitiveness and profitability can be sustained;
Huzhou Xianghui will utilize and maintain its current operational, administrative and technical facilities to expand and increase its sales;
Huzhou Xianghui will be able to secure funds to repay its debts when they fall due;
Huzhou Xianghui will retain and have competent management, key personnel, and technical staff to support its ongoing operations;
Industry trends and market conditions for related industries will not deviate materially from economic forecasts;
Huzhou Xianghui has no material contingent liability as at the Appraisal Date; and
Huzhou Xianghui does not own any equity interest in Xianghui Lvyuan as at the Appraisal Date.

XII. OPINION OF VALUE

Based upon the investigation and analysis outlined above and on the appraisal method employed, it is our opinion that the fair value of a 100% equity interest (with the capitalisation of the Shareholders’ Loan) in Huzhou Xianghui as at 31 March 2019 is reasonably stated by the amount of RENMINBI FOUR HUNDRED AND EIGHTY MILLION ONLY (RMB480,000,000).

This opinion of value has been 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. Any variation to the assumptions and limiting conditions presented in the following report could seriously affect our opinion of value.

Although our valuation is intended to estimate fair value, we assume no responsibility for the inability of a seller or buyer to obtain a sale or purchase contract at that price.

We have no obligation to update this report or our opinion of value for information that comes to our attention after the date of this report.

– IV-18 –

VALUATION REPORT

APPENDIX IV

We hereby certify that we have neither present nor prospective interests in the Group, including Huzhou Xianghui, or the values reported.

Respectfully submitted, For and on behalf of Royson Valuation Advisory Limited

Amy W.S. Chan, CPA

Director

Ms. Chan is a member of the Hong Kong Institute of Certified Public Accountants. She has been working in the valuation field since 2010 and has participated in over 700 assignments regarding business valuation, derivatives valuation, intangible assets valuation and purchase price allocation for numerous listed companies and private entities in different industries. She is experienced in handling valuations for transaction purpose and used in connection with the public documents.

– IV-19 –

GENERAL INFORMATION

APPENDIX V

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

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

– V-1 –

GENERAL INFORMATION

APPENDIX V

Name of Director(s) Nature of interest Date of share options granted (Note 1) Wang Fang Beneficial owner 28 April 2017	Number of share options outstanding as at the Latest Practicable Date 1,000,000 207,680,000	Approximate percentage of shareholding upon fully exercise of share options 0.01%
		1.31%

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 1st anniversary of the date of grant to 2nd anniversary of the date of grant
Up to 25% of the total number of granted options
from 2nd anniversary of the date of grant to 3rd anniversary of the date of grant
Up to 25% of the total number of granted options
from 3rd anniversary of the date of grant to 4th anniversary of the date of grant
Up to 25% of the total number of granted options
from 4th anniversary of the date of grant Up to 25% of the total number of granted options to 5th 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

– V-2 –

GENERAL INFORMATION

APPENDIX V

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:

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

– V-3 –

GENERAL INFORMATION

APPENDIX V

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, so 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.

8. EXPERTS AND CONSENTS

The followings are the qualifications of the experts who have given opinion or advice which are contained in this circular:

Name	Qualification
Royson Valuation Advisory Limited	Independent valuer
(‘‘Royson’’)
BDO Limited (‘‘BDO’’)	Certified Public Accountants

– V-4 –

GENERAL INFORMATION

APPENDIX V

Ms Amy W.S. Chan, the Director of Royson, holds her bachelor’s degree in Business Administration (major in Financial Engineering) with Honours from The Chinese University of Hong Kong. She is also a member of the Hong Kong Institute of Certified Public Accountants.

As at the Latest Practicable Date, Royson and BDO 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) have given and have not withdrawn their written consents to the issue of this circular with the inclusion of their letter or report and the reference to their names included herein in the form and context in which they appear.

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 Agreement;
(b) the Credit Confirmation Agreement;
(c) the Supplemental Agreement;
(d) the disposal agreement dated 28 March 2019 between the Vendor and 中廣核太陽能開發有限公司 (CGN Solar Energy Development Co., Ltd.) (‘‘CGN’’), pursuant to which the Vendor agreed to sell and CGN agreed to acquire the entire equity interest in 樟樹市中利騰暉光伏有限公司 (Zhangshu Zhongli Tenghui Solar Co., Ltd.) (‘‘Zhangshu Zhongli’’) for a consideration of RMB109,715,000 (the ‘‘Zhangshu Zhongli Disposal’’);
(e) the legally binding cooperation memorandum dated 16 May 2019 and entered into among the Vendor, CGN and Zhangshu Zhongli in relation to the settlement of the consideration of the Zhangshu Zhongli Disposal;
(f) the disposal agreement dated 21 March 2019 between the Vendor and 新華電力發展投資有限公司 (Xinhua Electricity Development Investment Co., Ltd.) (‘‘Xinhua Electricity’’), pursuant to which the Vendor 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 Co., Ltd.) for a consideration of RMB148,608,800;
(g) the 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 Co., Ltd.*) (‘‘Shenzhen Xiongtao’’), pursuant to which BD

– V-5 –

GENERAL INFORMATION

APPENDIX V

Technology Limited 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 Co., Ltd.*) at a consideration of RMB105,000,000;

(h) the disposal agreement dated 24 December 2018 between the Vendor and 青海新能源(集團)有限公司 (Qinghai New Energy (Group) Co., Ltd.) (‘‘Qinghai New Energy’’), pursuant to which (i) the Vendor 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 Co., Ltd.) (‘‘Guixi Zhongyuan’’); and (ii) Qinghai New Energy agreed to assume the outstanding shareholder’s loan from the Vendor to Guixi Zhongyuan for a total consideration of RMB134,846,100;
(i) 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 Co., Ltd.) (‘‘Artux Huaguang’’), RMB260,000,000 to 阿圖什市興光能源有限公司 (Artux Xingguang Energy Company Co., Ltd.) (‘‘Artux Xingguang’’) and RMB260,000,000 to 黃驊市正陽新能源有限公司 (Huanghua Zhengyang New Energy Co., Ltd.) (‘‘Huanghua Zhengyang’’);
(j) 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;
(k) 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;
(l) 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 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 have mutually agreed to terminate the subscription agreement;
(m) 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.) (‘‘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 Co., Ltd.) at a consideration of

– V-6 –

GENERAL INFORMATION

APPENDIX V

RMB35,000,000 and the termination agreement dated 24 January 2019 between Kong Sun Yongtai and Zhongke, whereby the parties have mutually agreed to terminate the Baoqian acquisition agreement;

(n) the partnership agreement dated 13 December 2017 among 延安富秦清潔能源有限公司 (Yanan Fuqin Clean Energy Co., Ltd.) (‘‘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’’), in relation to 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
(o) the Jiuyin cooperation agreement dated 30 September 2017 among 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.

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 unaudited financial information of Huzhou Xianghui (excluding Xianghui Lvyuan), the text of which is set out in Appendix II to this circular;

– V-7 –

GENERAL INFORMATION

APPENDIX V

(d) the letter on the unaudited pro forma financial information of the Remaining Group issued by BDO Limited, the text of which is set out in Appendix III to this circular;
(e) the valuation report issued by Royson, the text of which is set out in Appendix IV to this circular;
(f) a copy of the material contracts as referred to in the paragraph headed ‘‘Material contracts’’ in this appendix;
(g) the written consents referred to in the paragraph headed ‘‘Experts and consents’’ in this appendix; and
(h) this circular.

– V-8 –

NOTICE OF THE EGM

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==> picture [31 x 38] intentionally omitted <==

KONG SUN HOLDINGS LIMITED 江山控股有限公司

(Incorporated in Hong Kong with limited liability)

(Stock Code: 295)

NOTICE IS HEREBY GIVEN THAT an extraordinary general meeting (the ‘‘EGM’’) of Kong Sun Holdings Limited (the ‘‘Company’’) will be held at Unit 1209–10, 12/F, Everbright Centre, 108 Gloucester Road, Wan Chai, Hong Kong on Friday, 2 August 2019 at 11:00 a.m. for the purposes of considering and, if thought fit, passing, with or without amendments, the following resolution as the ordinary resolution of the Company:

ORDINARY RESOLUTION

Words and expressions that are not expressly defined in this notice shall bear the same meaning as that defined in the circular dated 18 July 2019 of the Company.

‘‘THAT:

(i) the Agreement (a copy of which has been tabled at the meeting marked ‘‘A’’ and signed by the chairman of the meeting for identification purpose) and the transaction contemplated thereunder, be and are hereby approved, ratified and confirmed; and
(ii) any one Director be and is authorised to do all such things and take all such actions as he may consider necessary or desirable to implement and/or give effect to the Agreement and the transaction contemplated thereunder.’’

By Order of the Board Kong Sun Holdings Limited Mr. Zeng Jianhua Executive Director

Hong Kong, 18 July 2019

Notes:

Any member of the Company entitled to attend and vote at the meeting is entitled to appoint one or more proxies (who must be an individual) to attend and, on a poll, vote in his/her stead. A proxy need not be a member of the Company.
To be valid, the form of proxy, together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy thereof must be lodged with the Company’s share registrar, Computershare Hong Kong Investors Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road

– EGM-1 –

NOTICE OF THE EGM

East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude a member from attending and voting in person at the meeting.

Where there are joint registered holders of any share, any one of such persons may vote at any meeting, either personally or by proxy, in respect of such share as if he/she were solely entitled thereto; but if more than one of such joint holders are present at any meeting personally or by proxy, that one of the said persons so present being the most or, as the case may be, the more senior shall alone be entitled to vote in respect of the relevant joint holding and, for this purpose, seniority shall be determined by reference to the order in which the names of the joint holders stand on the register of members in respect of the relevant joint holding.

As of the date of this notice, the Board comprises four executive Directors, Mr. Zeng Jianhua, Mr. Hou Yue, Mr. Deng Chengli and Mr. Jin Yanbing, two non-executive Directors, Mr. Wu Tak Kong and Mr. Wang Ke, and three independent non-executive Directors, Mr. Miu Hon Kit, Mr. Chen Kin Shing and Ms. Wang Fang.

– EGM-2 –

AI assistant

Novautek Technologies Group Limited — Proxy Solicitation & Information Statement 2019

49267_rns_2019-07-18_4239a20c-de9f-481e-bf1c-7323ed98d239.pdf

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

(1) VERY SUBSTANTIAL DISPOSAL AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

DEFINITIONS

DEFINITIONS

‘‘PRC’’

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

(1) VERY SUBSTANTIAL DISPOSAL AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

THE DISPOSAL

PRINCIPAL TERMS OF THE AGREEMENT

Date

Parties

Subject Matter and Consideration

LETTER FROM THE BOARD

Basis of Consideration

Comparable Transactions

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Adjustment to Consideration

Supplemental Agreement

Repayment of Shareholder’s Loans

Payment of the Government Subsidies

Payment of the Rectification Deposit

Penalty

Credit Certificate

Exclusion of Xianghui Lvyuan

Conditions Precedent

Others

INFORMATION ON THE PARTIES

LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE DISPOSAL

LETTER FROM THE BOARD

LETTER FROM THE BOARD

FINANCIAL EFFECT OF THE DISPOSAL

USE OF PROCEEDS

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

EGM

LETTER FROM THE BOARD

RECOMMENDATION

ADDITIONAL INFORMATION

1. SUMMARY OF THE FINANCIAL INFORMATION OF THE GROUP

2. WORKING CAPITAL

3. STATEMENT OF INDEBTEDNESS

4. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

5. MATERIAL ADVERSE CHANGE

6. MATERIAL ACQUISITION OR DISPOSAL

7. SIGNIFICANT INVESTMENTS

8. MANAGEMENT DISCUSSION AND ANALYSIS ON THE REMAINING GROUP

For the year ended 31 December 2016

Business review

Revenue

Revenue from sales of electricity

Revenue from sales of solar energy related products

Revenue from sales of life-like plants

Rental income

Gross profit and gross profit margin

(Loss)/gain on fair value changes on investment properties

Other revenue

Other net income (expenses)

Administrative expenses

Gain on disposal of subsidiaries, net

Gain on disposal/deemed disposal of associates

Finance costs

Solar power plants

Interest in a joint venture

Investment properties

Goodwill

Available-for-sale investments

Financial assets held for trading

Trade, Bills and Other Receivables

Structured bank deposits

Novautek Technologies Group Limited Proxy Solicitation & Information Statement 2019

KONG SUN HOLDINGS LIMITED 江山控股有限公司

KONG SUN HOLDINGS LIMITED 江山控股有限公司