Novautek Technologies Group Limited - Proxy Solicitation & Information Statement 2021

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 6 to 15 of this circular.

A notice convening the extraordinary general meeting of the Company to be held at Unit 803–4, 8/F, Everbright Centre, 108 Gloucester Road, Wanchai, Hong Kong on Monday, 15 March 2021 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.

PRECAUTIONARY MEASURES AND SPECIAL ARRANGEMENTS FOR THE EGM

Please refer to page 1 of this circular for measures being implemented at the EGM to try to prevent and control the spread of the novel coronavirus (‘‘COVID-19’’), including, without limitation:

all attendees being required to (a) undergo body temperature screening; and (b) wear surgical masks prior to admission to the EGM venue;
all attendees who are subject to health quarantine prescribed by the Hong Kong Government not being admitted to the EGM venue;
all attendees being required to wear surgical masks throughout the EGM;
appropriate seating arrangement being implemented; and
no distribution of corporate gift or refreshment.

The Company reminds attendees that they should carefully consider the risks of attending the EGM, taking into account their own personal circumstances. Furthermore, the Company would like to remind the Shareholders that physical attendance in person at the EGM is not necessary for the purpose of exercising their voting rights and strongly recommends that Shareholders appoint the chairman of the EGM as their proxy and submit their form of proxy as early as possible. Subject to the development of COVID-19, the Company may implement further changes and precautionary measures and may issue further announcement on such measures as appropriate.

26 February 2021

CONTENTS

	Pages
Precautionary Measures for the EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Appendix I — Financial Information of the Group . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
Appendix II-A — Financial Information of Weixian Tianhai . . . . . . . . . . . . . . . . . . .	II-A-1
Appendix II-B — Financial Information of Pingshan Tianhui . . . . . . . . . . . . . . . . . .	II-B-1
Appendix II-C — Financial Information of Shandong Xintailou . . . . . . . . . . . . . . . .	II-C-1
Appendix II-D — Financial Information of Qianchao Brothers . . . . . . . . . . . . . . . .	II-D-1
Appendix II-E — Financial Information of Yongchen . . . . . . . . . . . . . . . . . . . . . . . . . .	II-E-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 –

PRECAUTIONARY MEASURES FOR THE EGM

The health of our Shareholders, staff and stakeholders is of paramount importance to us. In view of the ongoing COVID-19 pandemic, the Company will implement the following precautionary measures at the EGM to protect attending Shareholders, staff and stakeholders from the risk of infection:

(i) Compulsory body temperature checks will be conducted for every Shareholder, proxy or other attendee at each entrance of the meeting venue. Any person with a body temperature of over 37.4 degrees Celsius may be denied entry into the meeting venue or be required to leave the meeting venue;
(ii) Each attendee may be asked whether (a) he/she has travelled outside of Hong Kong within the 14-day period immediately before the EGM; and (b) he/she is subject to any Hong Kong Government prescribed quarantine. Anyone who responds positively to any of these questions may be denied entry into the meeting venue or be required to leave the meeting venue;
(iii) All attendees are required to wear a surgical face mask throughout the meeting and inside the meeting venue, and to maintain a safe distance between seats; and
(iv) No refreshment will be served, and there will be no corporate gift.

Pursuant to the Prevention and Control of Disease (Prohibition on Group Gathering) Regulation (Cap. 599G) (the ‘‘Regulation’’), group gatherings of more than 20 persons for shareholders’ meetings are required to be accommodated in separate rooms or partitioned areas of not more than 20 persons each.

In addition, the Company reminds all Shareholders that physical attendance in person at the meeting is not necessary for the purpose of exercising voting rights. Shareholders may appoint the chairman of the meeting as their proxy to vote on the relevant resolutions at the meeting instead of attending the meeting in person, by completing and return the proxy form attached to this circular.

The Company will keep the Shareholders informed by way of further announcement if there are any material updates on the Regulation which would affect the EGM.

If any Shareholder chooses not to attend the meeting in person but has any question about any resolution or about the Company, or has any matter for communication with the Board, he/ she is welcome to send such question or matter in writing to our head office and principal place of business in Hong Kong.

If any Shareholder has any question relating to the meeting, please contact Computershare Hong Kong Investor Services Limited, the Company’s share registrar in Hong Kong as follow:

Computershare Hong Kong Investor Services Limited 17M Floor, Hopewell Centre 183 Queen’s Road East Wanchai, Hong Kong Tel: +852 28628555

– 1 –

DEFINITIONS

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

‘‘Angli Disposal’’
the disposal of the entire equity interest of 定邊縣昂立光伏科技有限公司 (Dingbian Angli Solar Power Technology Co., Ltd.)* by Kong Sun Yongtai to Guotou, details of which can be found in the circular of the Company dated 6 January 2020
‘‘Announcement’’
the announcement of the Company dated 4 December 2020 in relation to the Disposal
‘‘Beijing Energy International’’
北京能源國際控股有限公司 (Beijing Energy International Holding Co., Ltd.*), a company incorporated in Bermuda with limited liability, the shares of which are listed on the main board of the Stock Exchange (stock code: 686) and the controlling shareholder of the Purchaser as at the Latest Practicable Date
‘‘Board’’
the board of Directors
‘‘CDB Finance Lease’’
the finance lease agreement dated 25 December 2018 entered into between Yongchen and CDB Leasing
‘‘CDB Leasing’’
國銀金融租賃股份有限公司 (China Development Bank Financial Leasing Co., Ltd.*), a company established in the PRC with limited liability, the H-shares of which are listed on the Stock Exchange (stock code: 1606)
‘‘CNNP Disposals’’
the disposal of the entire equity interests of 9 target companies by Kong Sun Yongtai to CNNP Shandong, details of which can be found in the circular of the Company dated 6 January 2020
‘‘CNNP Shandong’’
中核山東能源有限公司 (CNNP Shandong Energy Co., Ltd.*), a company established under the laws of the PRC with limited liability
‘‘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 (stock code: 295)
‘‘connected person(s)’’
has the meaning ascribed to it under the Listing Rules
‘‘Debts’’
the outstanding loans, advances, interests (if any) and other sums owed by Yongchen to Jiangshan Fengrong which is the net-off amount between the Yongchen’s Inter-company Debts and the Subsidiaries’ Inter-company Debts
‘‘Director(s)’’
director(s) of the Company

– 2 –

DEFINITIONS

‘‘Disposal’’

the disposal of the Sale Equity Interest

‘‘Disposal Agreement’’
the equity transfer agreement dated 4 December 2020 entered into by and among the Purchaser, Jiangshan Fengrong and Yongchen in relation to the Disposal
‘‘EGM’’
the extraordinary general meeting of the Company to be convened for the purpose of considering and, if thought fit, approve, among other things, the Disposal and the Guarantee
‘‘Equity Consideration’’ the consideration for the Disposal
‘‘Escrow Account’’
the bank account to be jointly established and operated by Jiangshan Fengrong and the Purchaser for holding the relevant deposit pursuant to the terms of the Disposal Agreement
‘‘Group’’ the Company and its subsidiaries
‘‘Guarantee’’
the guarantee provided by Jiangshan Fengrong and its related companies which are subsidiaries of the Company for securing the existing borrowings of Yongchen
‘‘Guotou’’
國投電力控股股份有限公司 (Guotou Electric Holding Co., Ltd.*), a company established in the PRC with limited liability, the shares of which were listed on Shanghai Stock Exchange (stock code: 600886)
‘‘Hong Kong’’
the Hong Kong Special Administrative Region of the PRC
‘‘Kong Sun Yongtai’’
江山永泰投資控股有限公司 (Kong Sun Yongtai Investment Holdings Limited*), a company established in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company
‘‘Jiangshan Fengrong’’ 江山豐融投資有限公司 (Jiangshan Fengrong Investment Company Limited*), a company established in the PRC with limited liability and is an indirect wholly-owned subsidiary of the Company
‘‘Jinan Tianguan’’
‘‘Latest Practicable Date’’
濟南天冠能源科技有限公司 (Jinan Tianguan Energy Technology Co., Ltd.*), a company established in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company 23 February 2021, being the latest practicable date prior to the printing of this circular for ascertaining certain information for inclusion in this circular

– 3 –

DEFINITIONS

‘‘Listing Rules’’
the Rules Governing the Listing of Securities on the Stock Exchange
‘‘Long Stop Date’’ 30 April 2021
‘‘MW’’ mega watts
‘‘PRC’’ the People’s Republic of China
‘‘Previous Disposals’’
the disposals of the Project Companies, details of which can be found in the Company’s announcement dated 22 October 2020
‘‘Project’’
a 300 MW solar power plant owned by Yongchen in Shaanxi Province, PRC
‘‘Project Companies’’ 威縣天海光伏發電有限公司 (Weixian Tianhai Photovoltaic Power Generation Co., Ltd.), 平山縣天匯能源科技有限公司 (Pingshan Tianhui Energy Technology Co., Ltd.), 山東新泰樓德佳陽光伏發電有限公司 (Shandong Xintailou Dejia Solar Power Co., Ltd.) and 德州市陵城區乾超兄弟能源科技有限公司 (Dezhou City Lingcheng District Qianchao Brothers Energy Technology Co., Ltd.), all of which are companies established in the PRC with limited liability
‘‘Purchaser’’ 北京聯合榮邦新能源科技有限公司 (Beijing United Rongbang New Energy Technology Co., Ltd.*), a company established in the PRC with limited liability
‘‘Reference Date’’
30 April 2020
‘‘RMB’’ Renminbi, the lawful currency of the PRC
‘‘Sale Equity Interest’’

the entire equity interests of Yongchen

‘‘SFO’’
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
‘‘Share(s)’’
ordinary shares of the Company
‘‘Shareholders’’
holders of the Shares
‘‘Stock Exchange’’

The Stock Exchange of Hong Kong Limited

‘‘Subsidiaries’ Inter-company Debts’’
the outstanding net amount of RMB192,767,000 due by certain subsidiaries of the Company to Yongchen as at the Reference Date
‘‘Transition Period’’

the period from (but excluding) the Reference Date to (and not including) the date of completion of the Disposal

– 4 –

DEFINITIONS

‘‘Transition Period Audit’’
an audit to be performed by an auditor engaged by the Purchaser with respect to Yongchen for the Transition Period
‘‘Yongchen’’ 榆林市江山永宸新能源有限公司 (Yulin City Jiangshan Yongchen New Energy Limited*), a company established in the PRC with limited liability and an indirect subsidiary of the Company as at the Latest Practicable Date
‘‘Yongchen’s Inter-company Debts’’
the outstanding net amount of RMB287,747,000 due by Yongchen to Jiangshan Fengrong as at the Reference Date
‘‘Yonglian Disposal’’ the disposal of the entire equity interest of 玉門市永聯科技新能源有限公司 (Yumen Yonglian Technology New Energy Co., Ltd.*) by Kong Sun Yongtai to CNNP Shandong, details of which can be found in the announcement of the Company dated 14 December 2020
‘‘ZhiguangZhiguang Disposal’’’’ the disposal of the entire equity interest of 靖邊縣智光新能源開發有限公司 (Jingbian Zhiguang New Energy Development Co., Ltd.*) by Kong Sun Yongtai to Guotou, details of which can be found in the announcement of the Company dated 21 September 2020
‘‘ZhiguangZhiguang Disposal’’’’
‘‘%’’ per cent.

– 5 –

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. Jin Yanbing (Chief Executive Officer and Chairman) Mr. Qin Hongfu

Non-Executive Director:

Registered Office and Principal Place of Business: Unit 803 – 4, 8/F, Everbright Centre, 108 Gloucester Road, Wanchai, Hong Kong

Mr. Jiang Hengwen

Independent Non-Executive Directors:

Mr. Lang Wangkai Ms. Wang Fang

Ms. Wu Wennan

26 February 2021

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.

The purpose of this circular is to provide you with, among other things, further details of the Disposal and the Guarantee, the financial information of the Group, the financial information and the valuation report of the Project Companies and Yongchen, the notice convening the EGM and other information as required under the Listing Rules.

– 6 –

LETTER FROM THE BOARD

THE DISPOSAL

On 4 December 2020, Jiangshan Fengrong, an indirect wholly-owned subsidiary of the Company, the Purchaser and Yongchen, entered into the Disposal Agreement, pursuant to which Jiangshan Fengrong conditionally agreed to sell the Sale Equity Interest to the Purchaser for a total consideration of approximately RMB1,177,829,000. The Company agreed to guarantee the obligations of Jiangshan Fengrong in favour of the Purchaser under the Disposal Agreement.

The principal terms of the Disposal Agreement are summarized as follows:

PRINCIPAL TERMS OF THE DISPOSAL AGREEMENT

Subject matter

On 4 December 2020, Jiangshan Fengrong, the Purchaser and Yongchen entered into the Disposal Agreement, pursuant to which Jiangshan Fengrong conditionally agreed to sell, and the Purchaser conditionally agreed to acquire, the Sale Equity Interest.

Consideration

The Equity Consideration is approximately RMB1,177,829,000, which shall be payable by the Purchaser in cash in accordance with the following manner:

(i) an amount of RMB36,500,000, representing approximately 3.1% of the Equity Consideration, shall be paid to Jiangshan Fengrong within ten (10) business days upon execution of the Disposal Agreement and upon satisfaction of items (e) and (f) of the conditions precedent (the ‘‘Earnest Money’’);
(ii) an amount of approximately RMB670,197,000 (the ‘‘First Deposit’’), representing approximately 56.9% of the Equity Consideration, shall be paid into the Escrow Account before completion of the Disposal and shall be transferred to Jiangshan Fengrong within ten (10) business days after completion of the Disposal;
(iii) an amount of approximately RMB301,495,000, representing approximately 25.6% of the Equity Consideration, shall be paid to Jiangshan Fengrong within ten (10) business days after completion of the Disposal;
(iv) a total amount of up to RMB95,800,000, representing approximately 8.1% of the Equity Consideration, shall be paid to Jiangshan Fengrong within ten (10) business days upon the completion of each of certain rectification works items of the Project by Jiangshan Fengrong required by the Purchaser, which in any event, within one (1) year after completion of the Disposal. The estimated cost of such rectification works items of the Project is approximately RMB95,800,000; and

– 7 –

LETTER FROM THE BOARD

(v) an amount equal to 15% of the amount of the state renewable energy subsidies received by Yongchen from the State Grid Corporation of China, which shall be paid in batches, within ten (10) business days of each receipt, up to a total amount of approximately RMB73,837,000, representing approximately 6.3% of the Equity Consideration. By this time Jiangshan Fengrong should have already received 85% of the projected amount of such subsidies. The remaining 15% of such subsidies pending to be received by Jiangshan Fengrong would only constitute 6.3% of the Equity Consideration. Jiangshan Fengrong is able to know when Yongchen will receive each batch of subsidies as such information is available in public website.

Repayment of the Debts

As at the Reference Date, Yongchen had the outstanding Debts in the amount of approximately RMB94,980,000. The Debts, subject to adjustment for any net increase or decrease thereof during the Transition Period as determined under the Transition Period Audit, shall be settled by Yongchen within ten (10) business days after completion of the Transition Period Audit.

The Transition Period Audit report will be issued within ten (10) business days of the completion of the Disposal. In the event of any change of net assets value of Yongchen as a result of matters occurred in non-ordinary course of business during the Transition Period, such change will be considered as a consideration adjustment. The Purchaser has the right to request compensation from Jiangshan Fengrong.

Default

If the Purchaser fails to pay the Equity Consideration pursuant to the terms of the Disposal Agreement or Yongchen fails to repay the Debts pursuant to the terms of the Disposal Agreement, Jiangshan Fengrong has the right to request the Purchaser and Yongchen to pay to it a default payment, which is calculated based on the relevant unpaid amounts due and a penalty at 0.05% of the relevant amounts due on a daily basis. If the default continues for more than ninety (90) calendar days from the relevant due date, Jiangshan Fengrong will be entitled to terminate the Disposal Agreement, refund all the payments made by the Purchaser after deducting a default payment of RMB30,000,000 and request the Purchaser to compensate for all losses incurred by Jiangshan Fengrong. Jiangshan Fengrong will also be entitled to commence litigation against the Purchaser in the PRC court with competent jurisdiction and claim restitution in accordance with the PRC law. If the Purchaser refuses to perform the court decision in favour of Jiangshan Fengrong, Jiangshan Fengrong may seek enforcement by the court. Under this circumstance, the Purchaser may be added into 失信執行人名錄 (the List of Untrustworthy Executors*) (an effective enforcement machinery in the PRC), which may have a material adverse effect on the assessment of the Purchaser’s credit rating and reputation. Taking into consideration of the general market practice in the solar industry as well as the background of the Purchaser, the Directors are of the view that the settlement and completion mechanism is sufficient to safeguard the Company’s right to receive the full consideration and the possibility of the Purchaser would not honour its contractual commitment is relatively low.

– 8 –

LETTER FROM THE BOARD

Conditions Precedent

Completion of the Disposal is subject to the satisfaction of the following conditions precedent:

(a) each party having obtained all necessary internal approvals regarding the Disposal and the Guarantee:
(i) with respect to Yongchen, the approval from Jiangshan Fengrong as its sole shareholder;
(ii) with respect to Jiangshan Fengrong, the approval from its shareholders, the approval from the Board and the approval from the Shareholders at the EGM in accordance with the Listing Rules; and
(iii) with respect to the Purchaser, the approval from its shareholders, the approvals from the board of directors and the shareholders of Beijing Energy International in accordance with the Listing Rules; and
(b) the written consent from CDB Leasing in respect of the Disposal regarding the CDB Finance Lease;
(c) Jiangshan Fengrong, its related parties and Yongchen having agreed and completed the debt restructuring under which, the Yongchen’s Inter-company Debts and the Subsidiaries’ Inter-company Debts will be netted off;
(d) the Purchaser having paid the Earnest Money and deposited the First Deposit into the Escrow Account;
(e) 榆林隆源光伏電力有限公司(Yulin Longyuan Solar Energy Limited*), a limited liability company established in the PRC, having issued a written consent to confirm the sharing of the booster station with Yongchen, the granting of project use rights and the allocation of costs; and
(f) the Purchaser having confirmed in writing its acknowledgement and agreement that the photovoltaic power generation is classified as the ‘‘encouraged’’ industry under the ‘‘Industrial Structure Adjustment Guidance Catalog (2019)’’ issued by the Shaanxi Provincial Development and Reform Commission.

As at the Latest Practicable Date, save for (e) and (f), the above conditions have not been satisfied.

The parties shall use their best efforts to procure satisfaction of the above conditions precedent on or before the Long Stop Date:

(i) If Jiangshan Fengrong or Yongchen fails to fulfil its obligation under the conditions precedent on or before the Long Stop Date pursuant to the terms of the Disposal Agreement, Jiangshan Fengrong will be liable to pay to the Purchaser a default payment, to be calculated at an annual percentage rate of 8% of the Earnest Money

– 9 –

LETTER FROM THE BOARD

paid by the Purchaser, and the Purchaser will be entitled to, among other things, terminate the Disposal Agreement and seek for damages from Jiangshan Fengrong for all fees and costs incurred by third parties arised from the Disposal; and

(ii) If the Purchaser fails to fulfil its obligation under the conditions precedent on or before the Long Stop Date pursuant to the terms of the Disposal Agreement, Jiangshan Fengrong will be entitled to terminate the Disposal Agreement and seek for damages from the Purchaser for all fees and costs incurred by Jiangshan Fengrong, Yongchen or third parties arised from this transaction. Jiangshan Fengrong shall refund all the payment made by the Purchaser.

BASIS OF THE CONSIDERATION FOR THE DISPOSAL

The consideration for the Disposal was determined upon arm’s length negotiations between Jiangshan Fengrong and the Purchaser with reference to the unaudited net assets of Yongchen as at 31 October 2020 in the amount of approximately RMB1,276,547,000, and adjusted by applying a discount of approximately 7.7% and the weak financial position of Yongchen with poor refinancing ability. Without the Debts as the shareholder’s loan which provide imminent funding for Yongchen, Yongchen will not have sufficient cash to maintain and operate its businesses. The Equity Consideration covers the estimated cost of the outstanding rectification works items of the Project to be paid by Jiangshan Fengrong in the amount of approximately RMB95,800,000.

In determining the discount to be applied to the net asset value of Yongchen for the determination of the consideration for the Disposal, the Directors took into consideration account the following factors:

(i) the Disposal represents an opportunity for the Group to recoup its capital investment in Yongchen given the Debts will be repaid in full to the Group within twenty (20) business days after completion of the Disposal, which will relieve the Group from its funding commitment to Yongchen in the form of shareholder’s loan which is costly to maintain;
(ii) Yongchen recorded a significant amount of accounts receivables, being the state renewable energy subsidies to be received from the State Grid Corporation of China, of approximately RMB492,244,000 as at the Reference Date, the receipt of which depends on the decision of the relevant government authority;
(iii) the discount of approximately 7.7% to the net asset value of Yongchen is much lower than the average discount rate (i.e. 20.2%) to the net asset value of the project companies disposed by the Group since the end of the year 2018; and
(iv) the Group is expected to save an annual finance costs of approximately RMB101,600,000 upon completion of the Disposal.

– 10 –

LETTER FROM THE BOARD

Arrangements during the Transition Period

Any profits generated and any losses incurred and any changes to the net assets of Yongchen during the Transition Period, subject to the Transition Period Audit, shall be borne by Yongchen.

During the Transition Period, Jiangshan Fengrong shall ensure that, among other things, Yongchen will continue its normal business operations in accordance with its past practices and, save for the equity pledge over the Sale Equity Interest in favour of CDB Leasing to secure the CDB Finance Lease as permitted under the Disposal Agreement, no encumbrances or other third party rights will be created with respect to the equity interest in Yongchen without the prior written consent of the Purchaser.

Termination of the Guarantee

Pursuant to the Disposal Agreement, by no later than 90 (ninety) days after the completion of the Disposal, the Purchaser shall provide necessary financing facilities to Yongchen for its repayment of the outstanding amount under the CDB Finance Lease and procure the release of the Guarantee. In the event that the Purchaser does not procure completion of the release of the Guarantee within ninety (90) days after completion of the Disposal, Jiangshan Fengrong shall have the right to seek for damages from the Purchaser and default penalty incurred thereunder calculated at an annual percentage rate of 0.2% based on the principal of guarantee amount. If the Purchaser fails to procure completion of the release of the Guarantee within the agreed time, Jiangshan Fengrong shall have the right to rescind the Disposal Agreement, and seek for damages from the Purchaser in the maximum amount of RMB30,000,000 and the Purchaser shall bear all the costs and expenses in connection with the transactions contemplated thereunder. The Company will then make assessment on the possible implications under the Listing Rules and make further disclosure as and when appropriate to comply with it.

The continuation of the Guarantee was agreed after an arm’s length negotiation between the parties and was one of the key commercial terms for the Purchaser to agree to the transactions contemplated under the Disposal Agreement. In view of the financial stress that the Group is encountering though the terms and conditions of the Guarantee may not be ideal, the Directors consider that the Disposal and the Guarantee are still the best available option under the circumstances for the Company to cut losses and streamline its operation at an appropriate timing after identifying the Purchaser which is subsidiary of another listed company in Hong Kong. The Guarantee would also facilitate CDB Leasing to provide its written consent regarding the Disposal in respect of the CDB Finance Lease, which is a condition precedent under the Disposal Agreement. In the worst scenario if the Purchaser fails to procure release of the Guarantee within an agreed time, Jiangshan Fengrong shall have the right to rescind the Disposal Agreement.

COMPLETION OF THE DISPOSAL

Completion of the Disposal shall take place on the date when the transfer of the Sale Equity Interest has been registered with the relevant administration for industry and commerce and a new business license has been issued to Yongchen.

– 11 –

LETTER FROM THE BOARD

Completion of the Disposal and the provision of the Guarantee are inter-conditional upon each other.

INFORMATION ON YONGCHEN

Yongchen is a company established in the PRC with limited liability. It is principally engaged in the development, construction and operation of the Project. The construction of the Project has been completed, and the power plant has been connected to the power grid.

The unaudited financial results of Yongchen for the two financial years immediately preceding the Latest Practicable Date are as follows:

			For the year	ended
			31 December
			2018	2019
			(Unaudited)	(Unaudited)
			RMB’000	RMB’000
Net	profit	before tax	146,489	44,991
Net	profit	after tax	146,489	44,991

The unaudited net asset value of Yongchen as at 31 October 2020 was approximately RMB1,276,547,000.

INFORMATION ON THE PARTIES

Jiangshan Fengrong

Jiangshan Fengrong is an indirect wholly-owned subsidiary of the Company and is principally engaged in investment holding. As at the Latest Practicable Date, Yongchen is a direct subsidiary of Jiangshan Fengrong.

The Company

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

The Purchaser is a company established in the PRC and is principally engaged in the development and operation of clean energy such as solar energy. As at the Latest Practicable Date, the Purchaser is an indirect wholly-owned subsidiary of Beijing Energy International.

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

– 12 –

LETTER FROM THE BOARD

REASONS AND BENEFITS FOR THE DISPOSAL

The Directors consider that the Disposal represents a good opportunity for the Group to realise its investment in Yongchen so as to better allocate the Group’s resources and optimize its operation model. The Disposal is consistent with the Group’s strategy to reduce debts and interest rate exposure given it was agreed between the parties that the Debts will be repaid in full to the Group within twenty (20) business days after completion of the Disposal, which will relieve the Group’s funding commitment as a shareholder to Yongchen. The net proceeds of the Disposal will be applied towards the repayment of the Company’s existing indebtedness, the Company will be expected to save an annual finance cost of approximately RMB101,600,000, which is calculated from a formula of the net proceeds of the Disposal of approximately RMB1,270,000,000 multiplied by the average interest rate of the Group’s existing indebtedness of approximately 8% per annum.

Based on the foregoing, the Directors are of the view that the Disposal and the terms of the Disposal Agreement 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. As at the Latest Practicable Date, none of the Directors had a material interest in the Disposal and the Guarantee and was required to abstain from the relevant Board’s resolutions to approve the Disposal Agreement, the Guarantee and the transactions contemplated thereunder.

FINANCIAL EFFECT OF THE DISPOSAL AND INTENDED USE OF PROCEEDS

As at the Latest Practicable Date, Yongchen is an indirect subsidiary of the Company. With effect from completion of the Disposal Agreement, Yongchen will cease to be a subsidiary of the Company and its financial statement will cease to be consolidated in the financial statements of the Company. Jiangshan Fengrong will not hold any equity interest in Yongchen after completion of the Disposal.

Subject to final audit, it is expected that the Group will realise a net loss on the Disposal of not more than approximately RMB102,000,000, which is calculated by reference to the difference between (i) the consideration for the Disposal and net asset value of Yongchen as at 31 October 2020 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 and Benefits for the Disposal’’ above, the Company is of the view that the Disposal will be in the interests of the Company and the Shareholders as a whole as it will lower the Group’s gearing ratio.

The net proceeds from the Disposal after deducting the taxation and transaction costs are estimated to be approximately RMB1,270,000,000. The Group intends to apply the net proceeds from the Disposal to repay its existing indebtedness.

– 13 –

LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

The Disposal

As one of the applicable percentage ratios (as defined in the Listing Rules) in respect of the Disposal is 75% or more, the transaction contemplated under the Disposal Agreement 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 Guarantee

As certain of the applicable percentage ratios (as defined in the Listing Rules) in respect of the Guarantee are 25% or more, the Guarantee constitutes a major transaction for the Company under Chapter 14 of the Listing Rules and is therefore subject to the reporting, announcement and Shareholders’ approval requirements under Chapter 14 of the Listing Rules.

EGM

Set out on pages EGM-1 to EGM-2 of this circular is a notice of the EGM to be held at Unit 803–4, 8/F, Everbright Centre, 108 Gloucester Road, Wanchai, Hong Kong on Monday, 15 March 2021 at 11:00 a.m., at which ordinary resolutions will be proposed to approve the Disposal Agreement, the Guarantee and the transactions contemplated thereunder.

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, Wanchai, 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.

Pursuant to the Listing Rules, any Shareholder who has a material interest in the Disposal and the Guarantee 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 the Guarantee and, accordingly, no Shareholder is required to abstain from voting on the ordinary resolutions to approve the Disposal Agreement, the Guarantee and the transactions contemplated thereunder at the EGM.

RECOMMENDATION

The Directors consider that the terms of the Disposal Agreement, the Guarantee 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 resolutions to be proposed at the EGM to approve the Disposal Agreement, the Guarantee and the transactions contemplated thereunder.

– 14 –

LETTER FROM THE BOARD

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. Jin Yanbing Executive Director

– 15 –

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 2017, 2018 and 2019 and the six months ended 30 June 2020 are set out in the annual reports of the Group for the years ended 31 December 2017 (pages 73 to 180), 2018 (pages 81 to 200) and 2019 (pages 81 to 196) and the interim report of the Group for the six months ended 30 June 2020 (pages 40 to 84), 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 proceeds from the Disposal, the timely settlement of the Group’s certain renewable energy subsidy receivables from the State Grid Companies as expected, present internal resources and banking and other facilities, 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 December 2020, 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 RMB8,201,511,000 and unsecured corporate bonds amounted to approximately RMB273,632,000 and lease liabilities amounted to approximately RMB193,896,000.

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 December 2020, 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 RMB1,590,041,000.

As at 31 December 2020, the Group had executed a guarantee with respect to a loan of approximately RMB205,168,000 granted by independent third parties to 靖邊縣智光新能源開發有限公司 (Jingbian Zhiguang New Energy Development Co., Ltd.) (‘‘Zhiguang’’), an indirect wholly-owned subsidiary of the Company before disposal as at 12 October 2020.

As at 31 December 2020, the Group’s lease liabilities amounted to approximately RMB193,896,000 in relation to the remaining lease terms of certain lease contracts, which is unsecured and unguaranteed.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Directors confirm that, as of 31 December 2020, 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.

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 the 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.

In the long run, by focusing on clean energy and green finance, the Group will continue to develop its solar power generation business, optimise its operation mode and enhance the efficiency of equipment in solar power plants. Through integration of industry and finance, it will also improve its operational efficiency, so as to drive the development of green and lowcarbon energy in China and make positive contributions to environmental protection.

It is expected that 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.

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.

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.

5. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, save as disclosed in the profit warning announcement of the Company dated 31 July 2020, there has been no material adverse change in the financial or trading position of the Group since 31 December 2019, being the date to which the latest audited consolidated financial statements of the Company were made up.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. MATERIAL ACQUISITION OR DISPOSAL

Save for the CNNP Disposals, the Angli Disposal, the Zhiguang Disposal, the Yonglian Disposal, the Previous Disposals and the Disposal, the Group had not carried out any material acquisition or disposal after 31 December 2019, 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 as disclosed above in this circular, the Group did not have any other significant investments after 31 December 2019, 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 completion of the Disposal, the Remaining Group will continue to be principally engaged in investment in and the operation of solar power plants, provision of solar power plants operation and maintenance services, provision of financial services, trading of liquefied nature 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 2017, 2018 and 2019 and the six months ended 30 June 2020. 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 2017, 2018 and 2019 and the six months ended 30 June 2020.

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 113.6% from approximately RMB507,309,000 for the year ended 31 December 2016 to approximately RMB1,083,597,000 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 111.4% from approximately RMB501,154,000 for the year ended 31 December 2016 to approximately RMB1,059,594,000 for the year ended 31 December 2017 due to the increased installed capacity of grid-connected solar power plants. As at

– I-3 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

31 December 2017, the Remaining Group had a total of 1,429.3 MW installed capacity of solar power plants, comparing to 800.3 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.

Gross profit and gross profit margin

The gross profit of the Remaining Group increased significantly by approximately 167.5% from approximately RMB264,459,000 for the year ended 31 December 2016 to approximately RMB707,459,000 for the year ended 31 December 2017. The gross profit margin of the Remaining Group increased from approximately 52.1% for the year ended 31 December 2016 to approximately 65.3% for the year ended 31 December 2017.

Other gains and losses

Other gains and losses of the Remaining Group decreased significantly by approximately 83.3% from approximately RMB182,765,000 for the year ended 31 December 2016 to approximately RMB30,504,000 for the year ended 31 December 2017. The decrease is mainly due to (i) a decrease in interest income of approximately RMB37,692,000 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 56.6% from approximately RMB204,165,000 for the year ended 31 December 2016 to approximately RMB319,625,000 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

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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.

Finance costs

Finance costs of the Remaining Group increased by approximately 85.1% from approximately RMB236,660,000 for the year ended 31 December 2016 to approximately RMB438,067,000 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 RMB8,844,305,000 (2016: RMB6,475,404,000) and approximately RMB1,572,080,000 (2016: RMB1,878,729,000) 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 1,429.3 MW installed capacity of completed solar power plants, comparing to the 800.3 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

As at 31 December 2017, the Remaining Group had a total amount of approximately RMB148,451,000 (2016: RMB146,657,000) in respect of goodwill on the acquisition of subsidiaries.

– I-5 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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 of the 2017 Annual Report.

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 9.3% from approximately RMB3,103,967,000 as at 31 December 2016 to approximately RMB3,392,338,000 as at 31 December 2017. The increase was mainly due to an increase in trade and bills receivables from approximately RMB858,921,000 as at 31 December 2016 to approximately RMB1,712,094,000 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.

– I-6 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Trade and Other Payables

Trade and other payables decreased by approximately 14.4% from approximately RMB2,709,625,000 as at 31 December 2016 to approximately RMB2,319,859,000 as at 31 December 2017. The balance mainly comprised payables to suppliers of solar modules and equipment and Engineering Procurement Construction (‘‘EPC’’) contractors for purchase of solar modules and equipment and construction costs of solar power plants.

Liquidity and Capital Resources

As at 31 December 2017, cash and cash equivalents of the Remaining Group was approximately RMB420,812,000 (2016: RMB565,905,000), which included an amount of bank balances of approximately RMB401,583,000 (2016: RMB450,785,000) denominated in RMB placed with banks in the PRC. As at 31 December 2016, structured bank deposits 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 1.73 (2016: 0.84).

Loans and Borrowings

As at 31 December 2017, the Remaining Group’s total loans and borrowings was approximately RMB8,874,397,000, representing an increase of approximately RMB3,272,629,000, compared to approximately RMB5,601,768,000 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 RMB5,222,397,000 (2016: RMB5,379,768,000) bear fixed interest rate and floating interest rate, respectively.

As at 31 December 2017, out of the total borrowings, approximately RMB523,855,000 (2016: RMB1,008,968,000) was repayable within one year and approximately RMB8,350,542,000 (2016: RMB4,592,800,000) was repayable after one year.

– I-7 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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’’). 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.

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 RMB6,927,113,000 (2016: RMB4,875,693,000), approximately RMB879,253,000 (2016: RMB476,809,000), 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

– I-8 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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 executed a guarantee with respect to a loan of approximately RMB138,211,000 (2016: Nil) granted by independent third parties to 江山寶源國際融資租賃有限公司 (Kong Sun Baoyuan International Financial Leasing Limited*) (‘‘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.

Employees and Remuneration Policy

As at 31 December 2017, the Remaining Group had approximately 722 employees (2016: 460) 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 RMB210,454,000 (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 (the ‘‘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. 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

– I-9 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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.

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 nonexecutive 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

– I-10 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Revenue

The revenue of the Remaining Group increased by approximately 42.8% from approximately RMB1,083,597,000 for the year ended 31 December 2017 to approximately RMB1,547,749,000 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 32.2% from approximately RMB1,059,594,000 for the year ended 31 December 2017 to approximately RMB1,400,932,000 for the year ended 31 December 2018 due to the increased in aggregate volume of electricity generated by the Remaining Group’s grid connected solar power plants during the year. The solar power plants owned by the Remaining Group have generated electricity in an aggregate volume of approximately 1,712,534 megawatt-hour (‘‘MWh’’) for the year ended 31 December 2018, representing a substantial increase of approximately 29.4% as compared to approximately 1,323,621 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 Group’s 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 30.8% from approximately RMB707,459,000 for the year ended 31 December 2017 to approximately RMB925,542,000 for the year ended 31 December 2018. The gross profit margin of the Remaining Group decreased from approximately 65.3% for the year ended 31 December 2017 to approximately 59.8% for the year ended 31 December 2018 mainly due to the business segment of trading of liquefied natural gas in which has a lower gross profit margin than the business segment of solar power plants.

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APPENDIX I

Other gains and losses

Other gains of the Remaining Group increased by approximately 18.3% from approximately RMB30,504,000 for the year ended 31 December 2017 to approximately RMB36,094,000 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.

Administrative expenses

Administrative expenses of the Remaining Group increased by approximately 27.3% from approximately RMB319,625,000 for the year ended 31 December 2017 to approximately RMB407,016,000 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 63.4% from approximately RMB438,067,000 for the year ended 31 December 2017 to approximately RMB715,750,000 for the year ended 31 December 2018. As the average number of and

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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 RMB9,452,169,000 (2017: RMB8,844,305,000) 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 1,399.3 MW installed capacity of completed solar power plants, comparing to the 1,429.3 MW installed capacity of solar power plants as at 31 December 2017.

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 12.8% from approximately RMB1,576,206,000 as at 31 December 2017 to approximately RMB1,777,434,000 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 RMB130,000,000; (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

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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). 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 12.4% from approximately RMB3,392,338,000 as at 31 December 2017 to approximately RMB3,812,887,000 as at 31 December 2018. The increase was mainly due to an increase in trade and bills receivables from approximately RMB1,712,094,000 as at 31 December 2017 to approximately RMB2,130,581,000 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 25.5% from approximately RMB2,319,859,000 as at 31 December 2017 to approximately RMB1,727,353,000 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

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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 31.8% from approximately RMB1,939,020,000 as at 31 December 2017 to approximately RMB1,322,854,000 as at 31 December 2018.

Liquidity and Capital Resources

As at 31 December 2018, cash and cash equivalents of the Remaining Group was approximately RMB166,291,000 (2017: RMB420,812,000), which included an amount of bank balances of approximately RMB155,771,000 (2017: RMB401,583,000) denominated in RMB placed with banks in the PRC. The 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 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 1.93 (2017: 1.73).

Loans and Borrowings

As at 31 December 2018, the Remaining Group’s total loans and borrowings was approximately RMB9,649,151,000, representing an increase of approximately RMB774,754,000, compared to approximately RMB8,874,397,000 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 RMB4,731,151,000 (2017: RMB5,222,397,000) bear fixed interest rate and floating interest rate, respectively.

As at 31 December 2018, out of the total borrowings, approximately RMB798,961,000 (2017: RMB523,855,000) was repayable within one year and approximately RMB8,850,190,000 (2017: RMB8,350,542,000) 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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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.

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 RMB7,303,687,000 (2017: RMB6,927,113,000), approximately RMB1,613,923,000 (2017: RMB879,253,000), 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

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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.

Employees and Remuneration Policy

As at 31 December 2018, the Remaining Group had approximately 756 employees (2017: 722) 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 RMB252,432,000 (2017: RMB210,454,000). 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.

The Company has also adopted the 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.

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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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.

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.

For the year ended 31 December 2019

Business review

The Remaining Group was mainly engaged in investment in and the 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.

Revenue

The revenue of the Remaining Group increased by approximately 9.9% from approximately RMB1,547,749,000 for the year ended 31 December 2018 to approximately RMB1,700,579,000 for the year ended 31 December 2019. The increase was primarily due to the increase in revenue from trading of liquefied natural gas.

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

The Remaining Group’s revenue from sales of electricity decreased slightly by approximately 6.1% from approximately RMB1,400,932,000 for the year ended 31 December 2018 to approximately RMB1,314,791,000 for the year ended 31 December

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2019 due to the increased in aggregate volume of electricity generated by the Remaining Group’s grid-connected solar power plants with lower selling price during the year. The solar power plants owned by the Remaining Group have generated electricity in an aggregate volume of approximately 1,668,259 MWh for the year ended 31 December 2019, representing a slight decrease of approximately 2.6% as compared to approximately 1,712,534 MWh for year ended 31 December 2018.

The Remaining Group’s revenue from provision of solar power plant operation and maintenance services increased by approximately 932.9% from approximately RMB1,943,000 for the year ended 31 December 2018 to approximately RMB20,070,000 for the year ended 31 December 2019 mainly due to the start 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 increased by approximately 205.5% from approximately RMB12,891,000 for the year ended 31 December 2018 to approximately RMB39,385,000 for the year ended 31 December 2019.

Revenue from trading of liquefied natural gas

The Remaining Group’s revenue arising from trading of liquefied natural gas increased by approximately 147.9% from approximately RMB131,659,000 for the year ended 31 December 2018 to approximately RMB326,333,000 for the year ended 31 December 2019.

Gross profit and gross profit margin

The gross profit of the Remaining Group decreased by approximately 15.7% from approximately RMB925,542,000 for the year ended 31 December 2018 to approximately RMB780,145,000 for the year ended 31 December 2019. The gross profit margin of the Remaining Group decreased from approximately 59.8% for the year ended 31 December 2018 to approximately 45.9% for the year ended 31 December 2019 mainly due to increase in revenue from trading of liquefied natural gas, which has a lower gross profit margin than the business segment of solar power plants.

Other gains and losses

The Remaining Group recorded other losses of approximately RMB72,024,000 for the year ended 31 December 2019 compared with other gains of approximately RMB36,094,000 for the year ended 31 December 2018. The losses are mainly due to (i) the recognition of impairment loss in respect of trade and other receivables amounted to approximately RMB77,113,000 (2018: reversal of RMB963,000); (ii) the decrease of office sublease income of approximately RMB33,782,000; (iii) the decrease in dividend income of approximately RMB12,522,000; and (iv) the net unrealised loss on fair values changes on financial assets measured at fair value through profit or loss of approximately RMB9,239,000 (2018: gain of RMB5,864,000). The other losses of the Remaining Group

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

is partially netted off by the (i) decrease in net realised loss on disposal on financial assets measured at fair value through profit or loss amounted to approximately RMB52,060,000 as a result of the disposal of the listed equity investment during the year ended 31 December 2019; and (ii) decrease in write off of solar power plant of approximately RMB16,103,000.

Administrative expenses

Administrative expenses of the Remaining Group decreased by approximately 2.0% from approximately RMB407,016,000 for the year ended 31 December 2018 to approximately RMB398,967,000 for the year ended 31 December 2019. The decrease was mainly attributable to a decrease in total employee benefit expenses of approximately RMB31,254,000 as a result of the decrease in number of head count for the year ended 31 December 2019.

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. There was no gain on bargain purchase on acquisition of subsidiaries during the year ended 31 December 2019 (2018: RMB2,504,000) For details, please refer to note 45 to the financial statements of the 2019 Annual Report.

Loss/gain on disposal/deregistration of subsidiaries, net

During the year ended 31 December 2019, the Remaining Group disposed/ deregistered certain subsidiaries and recorded net loss on disposal/deregistration of subsidiaries of approximately RMB66,618,000 (2018: gain of RMB2,693,000). For details, please refer to note 46 to the financial statements of the 2019 Annual Report.

Impairment loss on a disposal group classified as held for sale

On 15 November 2019, the Remaining Group entered into sale and purchase agreements with an independent third party to dispose the entire equity interests in 千陽縣寶源光伏電力開發有限公司 Qianyang Baoyuan Photovoltaic Power Development Limited, 阿圖什市華光能源有限公司 Artux Huaguang Energy Limited, 巨鹿縣明暉太陽能發電有限公司Julu Minghui Photovoltaic Power Limited, 蘭州太科光伏電力有限公司 Lanzhou Taike Photovoltaic Power Limited, 阿圖什市興光能源有限公司 Artux Xingguang Energy Limited, 溧陽新暉光伏發電有限公司 Liyang Xinhui Photovoltaic Power Generation Limited, 和靜旭雙太陽能科技有限公司 Hejing Xushuang Photovoltaic Technology Limited, 宿州市雲陽新能源發電有限公司 Suzhou Yunyang New Energy Electricity Co., Ltd. and 哈密朝翔新能源科技有限公司 Hami Zhaoxiang New Energy Technology Limited (together the ‘‘Nine Project Companies’’) for a total equity consideration of approximately RMB760,314,000. On 5 December 2019, the Remaining Group entered into a sale and purchase agreement with an independent third party to dispose the entire equity interest in 定邊縣昂立光伏科技有限公司 (Dingbian Angli Solar Power Technology Co., Limited*) (‘‘Angli’’) for an equity consideration of approximately

– I-20 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

RMB59,000,000. An impairment loss of approximately RMB327,729,000, representing the sale proceeds less the carrying amount of the net assets of the Nine Project Companies and Angli as at 31 December 2019, was charged to profit or loss during the year ended 31 December 2019.

Impairment loss on solar power plants

During the year ended 31 December 2019, the Remaining Group has made an impairment loss of certain solar power plants of approximately RMB43,735,000 (2018: Nil).

Finance costs

Finance costs of the Remaining Group decreased by approximately 18.8% from approximately RMB715,750,000 for the year ended 31 December 2018 to approximately RMB581,091,000 for the year ended 31 December 2019. As the Remaining Group’s average total loans and borrowings decreased as compared to the corresponding period of last year, the finance costs related to the borrowings also decreased.

Solar power plants

As at 31 December 2019, the Remaining Group had a net carrying amount of approximately RMB6,047,389,000 (2018: RMB9,542,169,000) and approximately RMB433,798,000 (2018: RMB433,798,000) in completed solar power plants and solar power plants under construction, respectively. As at 31 December 2019, the Remaining Group had a total of 1,239.3 MW installed capacity of completed solar power plants, comparing to the 1,399.3 MW installed capacity of solar power plants as at 31 December 2018.

Interest in associates

As at 31 December 2019, the net carrying amount of associates was approximately RMB226,691,000 (2018: RMB13,290,000). The increase was mainly due to the reclassification of Kong Sun Baoyuan from interest in a joint venture to interest in associates upon the disposal of 17.4% of its equity interest.

During the year ended 31 December 2019, the Remaining Group disposed of 17.4% equity interests in Kong Sun Baoyuan for a consideration of RMB105,000,000 to a connected person of the Company at the subsidiary level. Upon completion, the Remaining Group’s equity interest in Kong Sun Baoyuan decreased from 55% to 37.6%, Kong Sun Baoyuan ceased to be a joint venture of the Company and become an associate of the Company under HKAS 28. For details, please refer to the announcement of the Company dated 21 March 2019.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Remaining Group executes a guarantee with respect to a loan of approximately RMB44,621,000 (2018: RMB92,873,000) granted by independent third parties to Kong Sun Baoyuan as at 31 December 2019, 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, 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 2019, the Remaining Group had a total amount of approximately RMB96,930,000 (2018: RMB149,197,000) in respect of goodwill on the acquisition of subsidiaries. The decrease is mainly contributed by the reclassification of an amount of approximately RMB52,221,000 to disposal group classified as held for sale upon the entering into the sale and purchase agreements with an independent third party for the disposal of the Nine Project Companies on 15 November 2019.

Right-of-use Assets and Lease Liabilities

The Remaining Group has applied HKFRS 16 and recognised right-of-use assets and lease liabilities since 1 January 2019. As at 31 December 2019, the right-of-use assets and lease liabilities amounted to approximately RMB273,524,000 (2018: Nil) and approximately RMB199,005,000 (2018: Nil).

Financial assets measured of fair value through other comprehensive income

Financial assets measured of fair value through other comprehensive income decreased by approximately 15.5% from approximately RMB2,047,434,000 as at 31 December 2018 to approximately RMB1,729,091,000 as at 31 December 2019. The decrease is mainly due to the fair value loss on financial assets measured at fair value through other comprehensive income amounted to approximately RMB422,893,000 during the year ended 31 December 2019. The decrease is partially netted off by (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 RMB92,500,000; and (ii) the 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 RMB12,050,000 during the year ended 31 December 2019. 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 23 to the financial statements of the 2019 Annual Report.

– I-22 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Financial assets measured of fair value through profit or loss

As at 31 December 2019, the Remaining Group had financial assets measured at fair value through profit or loss with market value of approximately RMB28,198,000 (2018: RMB81,143,000), representing approximately 0.2% (2018: 0.4%) of the total assets of the Remaining Group as at 31 December 2019. The portfolio of investments managed by the Remaining Group consists of investment in one (2018: one) listed equity in Hong Kong. The Remaining Group held approximately 0.8% (2018: 1.3%) shareholding in the listed equity as at 31 December 2019. During the year ended 31 December 2019, the Remaining Group had recorded an unrealised loss on fair value changes of financial assets measured at fair value through profit or loss which amounted to approximately RMB9,239,000 (2018: gain of RMB5,864,000). During the year ended 31 December 2019, the Remaining Group disposed of approximately 54.7% of its listed equity investment at a cash consideration of approximately RMB43,034,000 and resulting in a net realised loss on disposal of financial assets measured at fair value through profit or loss amounted to approximately RMB1,553,000 (2018: RMB53,613,000).

Trade, bills and other receivables

Trade, bills and other receivables decreased by approximately 14.3% from approximately RMB3,812,887,000 as at 31 December 2018 to approximately RMB3,268,817,000 as at 31 December 2019. The decrease was mainly due to the reclassification of approximately RMB798,264,000 to disposal group classified as held for sale upon the entering into the sale and purchase agreements with independent third parties for the disposals of the Nine Project Companies and Angli on 15 November 2019 and 5 December 2019, respectively.

Structured bank deposits

As at 31 December 2019, the Remaining Group placed approximately RMB4,230,000 (2018: RMB9,230,000) 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.

Trade and Other Payables

Trade and other payables increased by approximately 3.8% from approximately RMB1,727,353,000 as at 31 December 2018 to approximately RMB1,792,449,000 as at 31 December 2019. 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.

– I-23 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Liquidity and Capital Resources

As at 31 December 2019, cash and cash equivalents of the Remaining Group was approximately RMB102,106,000 (2018: RMB166,291,000), which included an amount of bank balances of approximately RMB98,909,000 (2018: RMB155,771,000) 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.

As at 31 December 2019, 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 2.01 (2018: 1.93).

Capital Expenditure

During the year ended 31 December 2019, the Remaining Group’s total expenditure in respect of property, plant and equipment and solar power plants amounted to approximately RMB19,333,000 (2018: RMB7,192,000) and approximately RMB67,807,000 (2018: RMB222,743,000), respectively.

Loans and Borrowings

As at 31 December 2019, the Remaining Group’s total loans and borrowings was approximately RMB7,648,326,000, representing a decrease of approximately 20.7% compared to approximately RMB9,649,151,000 as at 31 December 2018. The decrease in the Remaining Group’s total loans and borrowings was mainly due to a decrease in the Remaining Group’s investments in solar power plants upon the entering into the sale and purchase agreements with independent third parties for the disposals of the Nine Project Companies and Angli on 15 November 2019 and 5 December 2019, respectively, which lead to a decrease in loans and borrowings to finance such investments. All the loans and borrowings of the Remaining Group were denominated in RMB, the functional currency of the Company’s major subsidiaries in the PRC. As at 31 December 2019, loans and borrowings of approximately RMB5,033,500,000 (2018: RMB4,918,000,000) and approximately RMB2,614,826,000 (2018: RMB4,731,151,000) bear fixed interest rate and floating interest rate, respectively.

As at 31 December 2019, out of the total borrowings, approximately RMB1,272,732,000 (2018: RMB798,961,000) was repayable within one year and approximately RMB5,907,382,000 (2018: RMB8,850,190,000) was repayable after one year. For details, please refer to note 32 to the financial statements of the 2019 Annual Report.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Corporate bonds

As at 31 December 2019, corporate bonds denominated in Hong Kong dollar with an aggregate principal amount of HK$343,500,000 (equivalent to approximately RMB307,700,000) (2018 : HK$344,000,000 (equivalent to approximately RMB301,413,000)) remained outstanding with certain independent third parties. The corporate bonds bear interest rates ranging from 3% to 7% (2018: 3% to 9%) per annum, and will mature on the date immediately following 6 to 96 months (2018: 3 to 96 months) after their issuance.

During the year ended 31 December 2019, the Remaining Group issued corporate bonds with an aggregate principal amount of HK$64,000,000 (equivalent to approximately RMB56,353,000) (2018 : HK$290,500,000 (equivalent to approximately RMB254,536,000)) to certain independent third parties, the net proceeds of the issued corporate bonds received by the Company were approximately HK$57,761,000 (equivalent to approximately RMB50,860,000) (2018: HK$257,727,000 (equivalent to approximately RMB225,820,000)), with total issue cost amounting to approximately HK$6,239,000 (equivalent to approximately RMB5,493,000) (2018: HK$32,773,000 (equivalent to approximately RMB28,716,000)).

During the year ended 31 December 2019, the Remaining Group repaid HK$64,500,000 (equivalent to approximately RMB56,794,000) (2018: HK$423,500,000 (equivalent to approximately RMB371,071,000)) in aggregate principal amount of the corporate bonds.

The corporate bonds are measured at amortised cost using effective interest method by applying an effective interest rate ranging from 10.40% to 14.56% (2018: 10.24% to 12.00%) per annum. Imputed interest of approximately HK$31,013,000 (equivalent to approximately RMB27,308,000) (2018: HK$44,200,000 (equivalent to approximately RMB37,318,000)) (note 13 to the financial statements of the 2019 Annual Report) in respect of the corporate bonds was recognised in profit or loss during the year ended 31 December 2019.

Foreign Exchange Risk

The Remaining Group primarily operates its business in the PRC and during the year ended 31 December 2019, 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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Charge on Assets

As at 31 December 2019, the Remaining Group had charged solar power plants, trade receivables, right-of-use assets/lease prepayments and unlisted equity investments with net book value of approximately RMB5,813,165,000 (2018: RMB7,303,687,000), approximately RMB1,490,891,000 (2018: RMB1,613,923,000), approximately RMB756,000 (2018: RMB774,000) and approximately RMB438,840,000 (2018: RMB813,158,000), respectively, to secure bank loans and other loans facilities granted to the Remaining Group.

Save as disclosed above and in note 32 to the financial statements of the 2019 Annual Report, during the year ended 31 December 2019, the Remaining Group has no other charges on assets.

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 State Energy Administration (國家能源局), 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.

Save as disclosed above, during the year ended 31 December 2019, the Group has no other significant contingent liabilities.

Employees and Remuneration Policy

As at 31 December 2019, the Remaining Group had approximately 614 employees (2018: 849) 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 2019, the total employee benefit expenses (including directors’ emoluments) were approximately RMB183,208,000 (2018: RMB252,432,000). For details, please refer to note 10 to the financial statements of the 2019 Annual Report. The remuneration policy of the Remaining Group is to provide remuneration packages, including basic salary and short-term bonuses, so as to attract and retain top quality staff. The remuneration committee of the Company reviews such packages annually, or when occasion requires.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Company has also adopted the 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. The Share Option Scheme expired on 21 July 2019 and no further options could thereafter be granted. Notwithstanding the expiry of the Share Option Scheme, the share options which had been granted during the life of the scheme shall continue to be valid and exercisable in accordance with their terms of issue and in all other respects its provisions shall remain in full force and effect.

Connected Transaction

On 13 December 2017, the Baoqian Purchaser, entered into the Baoqian Acquisition Agreement with the Vendor, pursuant to which the Baoqian Purchaser agreed to acquire, and the Vendor 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 the Vendor 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.

As at the date of the Baoqian Acquisition Agreement, the Vendor was interested in 30% of the equity interests in Guangzhou Baoqian, a non-wholly-owned subsidiary of the Company. Therefore, the Vendor 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.

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 the Vendor 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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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

On 21 March 2019, BD Technology Limited (‘‘BD Technology’’), an indirect wholly-owned subsidiary of the Company, entered into a sale and purchase agreement as vendor with 深圳市雄韜電源科技股份有限公司 (Shenzhen Xiongtao Electronic Technology Company Limited*) (‘‘Shenzhen Xiongtao’’) as purchaser pursuant to which BD Technology agreed to sell and Shenzhen Xiongtao agreed to acquire 17.4% equity interest in Kong Sun Baoyuan for a total consideration of RMB105,000,000. As at the date of the transaction, Kong Sun Baoyuan was owned as to 55% by BD Technology, and as to 45% by Shenzhen Xiongtao. Accordingly, Shenzhen Xiongtao is a connected person of the Company at the subsidiary level under Rule 14A.06(9) of the Listing Rules and the transaction constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. Upon completion, the Remaining Group’s equity interest in Kong Sun Baoyuan decreased from 55% to 37.6%, Kong Sun Baoyuan ceased to be a joint venture of the Company and become an associate of the Company. For details, please refer to the announcement of the Company dated 21 March 2019.

Significant Investments and Material Acquisition and Disposal

Save as disclosed in the 2019 Annual Report, the Remaining Group did not have any other significant investments, did not hold any significant investments in an investee company with a value of 5% more of the Company’s total assets, other material acquisition or disposal during the year ended 31 December 2019, and there was no plan authorised by the Board for other material investments or additions of capital assets up to the date of the 2019 Annual Report.

For the six months ended 30 June 2020

Business review

Revenue

The revenue of the Remaining Group decreased by approximately 39.4% from approximately RMB969,781,000 for the six months ended 30 June 2019 to approximately RMB587,710,000 for the six months ended 30 June 2020. The decrease was due to the decrease in revenue from sales of electricity and trading of liquefied natural gas during the period.

– I-28 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Revenue from Sales of Electricity and Provision of Solar Power Plant Operation and Maintenance Services

The Remaining Group’s revenue from sales of electricity decreased by approximately 22.3% from approximately RMB722,111,000 for the six months ended 30 June 2019 to approximately RMB561,419,000 for the six months ended 30 June 2020. As at 30 June 2020, the Remaining Group had a total of 888.8 MW (31 December 2019: 1,239.3 MW) installed capacity of solar power plants. The solar power plants owned by the Remaining Group have generated electricity in an aggregate volume of approximately 679,408 MWh for the six months ended 30 June 2020, representing a decrease of approximately 2.0% as compared to approximately 693,128 MWh for the six months ended 30 June 2019.

The Remaining Group’s revenue from provision of solar power plant operation and maintenance services increased by approximately 2,293.4% from approximately RMB545,000 for the six months ended 30 June 2019 to approximately RMB13,044,000 for the six months ended 30 June 2020.

Revenue from Provision of Financial Services

The Remaining Group’s revenue arising from the provision of financial services decreased by approximately 22.4% from approximately RMB17,650,000 for the six months ended 30 June 2019 to approximately RMB13,701,000 for the six months ended 30 June 2020.

Revenue from Trading of Liquefied Natural Gas

The Remaining Group’s revenue arising from the trading of liquefied natural gas decreased significantly by approximately 94.5% from approximately RMB230,020,000 for the six months ended 30 June 2019 to approximately RMB12,590,000 for the six months ended 30 June 2020. The decrease is mainly due to city lockdowns and suspension of work, production and transportation in most regions in the PRC due to the outbreak of the novel coronavirus pneumonia starting in late January 2020.

Gross Profit and Gross Profit Margin

The gross profit of the Remaining Group decreased by approximately 18.0% from approximately RMB539,857,000 for the six months ended 30 June 2019 to approximately RMB442,470,000 for the six months ended 30 June 2020. The gross profit margin of the Remaining Group increased from approximately 55.7% for the six months ended 30 June 2019 to approximately 75.3% for the six months ended 30 June 2020 mainly due to decrease in revenue from trading of liquefied natural gas, which has a lower gross profit margin than the business segment of solar power plants.

– I-29 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Other Gains and Losses

The Remaining Group recorded other gains of approximately RMB19,218,000 (six months ended 30 June 2019: other losses of approximately RMB5,362,000) for the six months ended 30 June 2020. The change was mainly due to (i) the decrease in office sublease income of approximately RMB13,656,000; and (ii) the decrease in government allowances of approximately RMB3,576,000.

Administrative Expenses

Administrative expenses of the Remaining Group decreased by approximately 37.8% from approximately RMB172,477,000 for the six months ended 30 June 2019 to approximately RMB107,209,000 for the six months ended 30 June 2020. The decrease was mainly attributable to (i) the decrease in employee benefit expenses (including directors’ emoluments) amounted to approximately RMB37,945,000 as a result of the decrease in number of head count of high grade employee of the Remaining Group during the six months ended 30 June 2020; and (ii) the decrease in operating lease expenses in respect of short-term leases of approximately RMB8,621,000.

(Loss)/Gain on Disposal of Subsidiaries, Net

During the six months ended 30 June 2020, the Remaining Group disposed of ten subsidiaries, and recorded net loss on such disposals of approximately RMB4,613,000 (six months ended 30 June 2019: gain of approximately RMB37,488,000). For details, please refer to note 21 to the ‘‘Notes to the Condensed Consolidated Interim Financial Statements’’ of the 2020 Interim Report.

Impairment loss on a disposal group classified as held for sale

On 29 April 2019, the Remaining Group entered into a sale and purchase agreement with an independent third party to dispose the entire equity interest in 湖州祥暉光伏發電有限公司 (Huzhou Xianghui Solar Power Co., Ltd.*) (‘‘Huzhou Xianghui’’) for a total consideration of approximately RMB413,213,000. An impairment loss of approximately RMB98,388,000, representing the sale proceeds less the carrying amount of the net assets of Huzhou Xianghui as at 30 June 2019, was charged to profit or loss during the six months ended 30 June 2019. No such amount was recorded for the six months ended 30 June 2020.

Finance Costs

Finance costs of the Remaining Group decreased by approximately 16.7% from approximately RMB363,905,000 for the six months ended 30 June 2019 to approximately RMB303,203,000 for the six months ended 30 June 2020. As the Remaining Group’s total loans and borrowings decreased as compared to the corresponding period last year, the finance costs related to these borrowings also decreased.

– I-30 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Solar Power Plants

As at 30 June 2020, the Remaining Group had a net carrying value of approximately RMB5,783,496,000 (31 December 2019: RMB6,047,389,000) and approximately RMB105,927,000 (31 December 2019: RMB433,798,000) in completed solar power plants and solar power plants under construction, respectively. For details, please refer to note 10 to the ‘‘Notes to the Condensed Consolidated Interim Financial Statements’’ of the 2020 Interim Report. During the six months ended 30 June 2020, the Remaining Group successfully completed the disposals of solar power plants in ten subsidiaries with total installed capacity of 350.5 MW. As at 30 June 2020, the Remaining Group had a total of 888.8 MW (31 December 2019: 1,239.3 MW) installed capacity of completed solar power plants.

Interest in associates

As at 30 June 2020, the net carrying amount of associates was approximately RMB229,325,000 (31 December 2019: RMB226,691,000).

The Remaining Group executed a guarantee with respect to a loan of approximately RMB12,947,000 (31 December 2019: RMB44,621,000) granted by independent third parties to Kong Sun Baoyuan as at 30 June 2020, 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.

Goodwill

As at 30 June 2020, the Remaining Group had a total amount of approximately RMB96,930,000 (31 December 2019: RMB96,930,000) in respect of goodwill on the previous acquisitions of subsidiaries.

Right-of-use Assets and Lease Liabilities

As at 30 June 2020, the right-of-use assets and lease liabilities amounted to approximately RMB266,300,000 (31 December 2019: RMB273,524,000) and approximately RMB226,341,000 (31 December 2019: RMB199,005,000).

Financial Assets Measured at Fair Value through Other Comprehensive Income

Financial assets measured at fair value through other comprehensive income decreased by approximately 23.3% from approximately RMB1,729,091,000 as at 31 December 2019 to approximately RMB1,327,070,000 as at 30 June 2020. The decrease is mainly due to (i) fair value loss on the unlisted equity investments of approximately RMB132,450,000; and (ii) the decrease in investment of 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 RMB270,000,000. The investments are held for long-term investment purpose and hence are classified as financial assets measured at fair value

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

through other comprehensive income in the condensed consolidated statement of financial position. For details, please refer to note 12 to the ‘‘Notes to the Condensed Consolidated Interim Financial Statements’’ of the 2020 Interim Report.

Financial Assets Measured at Fair Value through Profit or Loss

As at 30 June 2020, the Remaining Group had financial assets measured at fair value through profit or loss with market value of approximately RMB19,936,000 (31 December 2019: RMB28,198,000), representing approximately 0.1% (31 December 2019: 0.2%) of the total assets of the Remaining Group as at 30 June 2020. As at 30 June 2020 and 31 December 2019, the portfolio of investments managed by the Remaining Group consists of investment in one listed equity in Hong Kong. The Remaining Group held approximately 0.8% (31 December 2019: 0.8%) shareholding in the equity listed in Hong Kong as at 30 June 2020. During the six months ended 30 June 2020, the Remaining Group had recorded an unrealised loss on fair value changes of financial assets measured at fair value through profit or loss which amounted to approximately RMB8,746,000 (six months ended 30 June 2019: RMB6,011,000). During the six months ended 30 June 2020, the Remaining Group did not dispose any of its listed equity investment. During the six months ended 30 June 2019, the Remaining Group disposed of approximately 49.0% of its listed equity investment in Hong Kong at a cash consideration of approximately RMB38,838,000 and resulting in a net realised loss on disposal on financial assets measured at fair value through profit or loss amounted to approximately RMB1,154,000.

Trade, Bills and Other Receivables

Trade, bills and other receivables increased by approximately 30.8% from approximately RMB3,268,817,000 as at 31 December 2019 to approximately RMB4,276,612,000 as at 30 June 2020. The increase was mainly due to an increase in trade and bills receivables by approximately 8.2% from approximately RMB2,144,855,000 as at 31 December 2019 to approximately RMB2,321,575,000 as at 30 June 2020 and increase in other receivables upon the disposals of ten subsidiaries during the six months ended 30 June 2020.

Structured bank deposits

As at 30 June 2020, the Remaining Group placed approximately RMB24,230,000 (31 December 2019: RMB4,230,000) 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.

– I-32 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Trade and Other Payables

Trade and other payables decreased by approximately 57.7% from approximately RMB1,792,449,000 as at 31 December 2019 to approximately RMB757,945,000 as at 30 June 2020. 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. Due to settlement of construction costs after the completion of substantial solar power plants construction work during the six months ended 30 June 2020, trade payables, which was mainly related to construction costs of solar power plants, have decreased by approximately 32.6% from approximately RMB1,390,599,000 as at 31 December 2019 to approximately RMB702,081,000 as at 30 June 2020.

Liquidity and Capital Resources

As at 30 June 2020, cash and cash equivalents of the Remaining Group was approximately RMB94,499,000 (31 December 2019: RMB102,106,000), which included an amount of bank balances of approximately RMB90,451,000 (31 December 2019: RMB98,909,000) 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.

As at 30 June 2020, the Remaining Group’s net debt ratio, which was calculated by the total loans and other borrowings and corporate bonds minus total cash and cash equivalents and structured bank deposits, over total equity, was approximately 1.86 (31 December 2019: 2.01).

Capital Expenditure

During the six months ended 30 June 2020, the Remaining Group’s total expenditure in respect of property, plant and equipment and solar power plants amounted to approximately RMB3,221,000 (six months ended 30 June 2019: RMB3,516,000) and approximately RMB5,671,000 (six months ended 30 June 2019: RMB30,794,000), respectively.

Loans and Borrowings

As at 30 June 2020, the Remaining Group’s total loans and borrowings was approximately RMB6,822,873,000, representing a decrease of approximately 10.8% as compared to approximately RMB7,648,326,000 as at 31 December 2019. All loans and borrowings of the Remaining Group were denominated in RMB, the functional currency of the Company’s major subsidiaries in the PRC. As at 30 June 2020, loans and borrowings of approximately RMB4,516,577,000 (31 December 2019: RMB5,033,500,000) and approximately RMB2,306,296,000 (31 December 2019: RMB2,614,826,000) bear fixed interest rate and floating interest rate, respectively.

– I-33 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

As at 30 June 2020, out of the total borrowings, approximately RMB915,490,000 (31 December 2019: RMB1,272,732,000) was repayable within one year and approximately RMB5,907,382,000 (31 December 2019: RMB6,375,594,000) was repayable after one year. For details, please refer to note 18 to the ‘‘Notes to the Condensed Consolidated Interim Financial Statements’’ of the 2020 Interim Report.

Corporate Bonds

As at 30 June 2020, corporate bonds denominated in Hong Kong dollar with an aggregate principal amount of HK$338,500,000 (equivalent to approximately RMB309,199,000) (31 December 2019: HK$343,500,000 (equivalent to approximately RMB307,700,000)) remained outstanding with certain independent third parties. The corporate bonds bear interest rates ranging from 3% to 7% (31 December 2019: 3% to 7%) per annum, and will mature on the date immediately following 6 to 96 months (31 December 2019: 6 to 96 months) after their issuance. During the six months ended 30 June 2020, the Remaining Group did not issue any corporate bonds.

During the six months ended 30 June 2019, the Remaining Group issued corporate bonds with an aggregate principal amount of HK$44,000,000 (equivalent to approximately RMB38,705,000) to certain independent third parties, the net proceeds of the issued corporate bonds received by the Company were approximately HK$38,909,000 (equivalent to approximately RMB34,227,000), with total issue cost amounting to approximately HK$5,091,000 (equivalent to approximately RMB4,478,000).

During the six months ended 30 June 2020, the Remaining Group repaid HK$5,000,000 (equivalent to approximately RMB4,567,000) (six months ended 30 June 2019: HK$61,500,000 (equivalent to approximately RMB54,099,000)) in aggregate principal amount of the corporate bonds.

The corporate bonds are measured at amortised cost using effective interest method by applying an effective interest rate ranging from 10.40% to 14.56% (six months ended 30 June 2019: 10.24% to 14.56%) per annum. Imputed interest of approximately HK$16,558,000 (equivalent to approximately RMB15,002,000) (six months ended 30 June 2019: HK$14,710,000 (equivalent to approximately RMB12,607,000)) (note 5 to the ‘‘Notes to the Condensed Consolidated Interim Financial Statements’’ of the 2020 Interim Report) in respect of the corporate bonds was recognised in profit or loss during the six months ended 30 June 2020.

Foreign Exchange Rate Risk

The Remaining Group primarily operates its business in the PRC and during the six months ended 30 June 2020, 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 that any future exchange rate fluctuation

– I-34 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

will not have any material effect on the Remaining Group’s business. The Remaining Group did not use any financial instruments for hedging purposes, but will continue to monitor foreign exchange changes to best preserve the Remaining Group’s cash value.

Charge on Assets

As at 30 June 2020, the Remaining Group had charged solar power plants, trade receivables, right-of-use assets and unlisted equity investments with net book value of approximately RMB4,006,070,000 (31 December 2019: RMB5,813,165,000), approximately RMB2,223,620,000 (31 December 2019: RMB1,490,891,000), approximately RMB2,738,000 (31 December 2019: RMB756,000) and approximately RMB356,000,000 (31 December 2019: RMB438,840,000), respectively, to secure bank loans and other loans facilities granted to the Remaining Group.

Save as disclosed above and in note 18 to the ‘‘Notes to the Condensed Consolidated Interim Financial Statements’’ of the 2020 Interim Report, during the six months ended 30 June 2020, the Remaining Group has no other charges on assets.

Litigation

On 21 April 2020, Kong Sun Yongtai, a wholly-owned subsidiary of the Company, received a notice to respond to action (應訴通知書) from Beijing No. 1 Intermediated People’s Court (北京市第一中級人民法院) (the ‘‘Court’’) regarding the dispute (the ‘‘Dispute’’) among Beijing Sifang Jibao Projects Technology Co., Ltd. (北京四方繼保工程技術有限公司) (‘‘Beijing Sifang’’) as plaintiff and Zhongke Hengyuan Technology Co., Ltd. (中科恒源科技股份有限公司) (‘‘Zhongke’’), Inner Mongolia Zhongke Hengyuan Energy Technology Co., Ltd.* (內蒙古中科恒源能源科技有限公司) (the ‘‘Inner Mongolia Zhongke’’) and Kong Sun Yongtai as defendants. Beijing Sifang filed claims to the Court for demanding Zhongke to repay the outstanding equipment purchase price in the amount of approximately RMB52,900,000 and the aggregate liquidated damages in the amount of approximately RMB20,900,000, Inner Mongolia Zhongke to sell its land under the land mortgage agreement dated in April 2019 entered into by and among Beijing Sifang, Zhongke and Inner Mongolia Zhongke (the ‘‘Land Mortgage Agreement’’) for the repayment of the aforesaid amount and Kong Sun Yongtai to undertake the joint liabilities under the guarantee agreements dated in August 2016 entered into by and among Beijing Sifang, Zhongke and Kong Sun Yongtai (the ‘‘Guarantee Agreements’’).

The Dispute was related to the performance of certain agreements dated in August 2016 entered into between Zhongke and Beijing Sifang in relation to the purchase of the solar cell module of 31.8MW at the consideration of approximately RMB104,843,000. The land mortgage value of approximately RMB53,700,000 as indicated in the Land Mortgage Agreement was higher than the outstanding equipment purchase price due to Beijing Sifang in the amount of approximately RMB52,900,000. In March 2020, Beijing Sifang obtained the Court order to freeze the account receivables of Zhongke for up to approximately RMB74,036,000, which exceeded the outstanding equipment purchase price in the amount of approximately RMB52,900,000 and the aggregate liquidated damages in the amount of approximately RMB20,900,000 claimed by Beijing Sifang.

– I-35 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Guarantee Agreements were approved by the management of Kong Sun Yongtai. In the event that the Court decides that Kong Sun Yongtai should be liable for the guarantee obligation under the Guarantee Agreements, Kong Sun Yongtai is entitled to recover its losses from Zhongke and Inner Mongolia Zhongke. As Beijing Sifang did not agree to terminate the Guarantee Agreements, Kong Sun Yongtai has urged Zhongke to perform its payment obligation and actively discuss with Inner Mongolia Zhongke and Beijing Sifang to resolve the Dispute. A hearing of the Dispute took place on 11 August 2020 whereby the parties exchanged the evidence. The Court considered the evidence adduced by the parties and approved the withdrawal of the claim against Kong Sun Yongtai by Beijing Sifang on 27 August 2020. Accordingly, Kong Sun Yongtai has no liability under the Dispute and the Guarantee Agreements. Details of the Dispute can be referenced to the announcements of the Company dated 29 April 2020, 21 May 2020 and 2 September 2020.

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 State Energy Administration (國家能源局), the Notices prohibit the original applicants who have obtained the approval documents from the government authorities for the solar power plant projects from transferring the equity interests of solar power plant projects before such solar power plants were connected to the power grid. 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 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.

In August 2016, Kong Sun Yongtai entered into the Guarantee Agreements for an amount of approximately RMB210,017,000 in favour of Beijing Sifang with respect to the obligations of Zhongke under certain purchase agreements. In the event that Zhongke failed to perform its payment obligations under the equipment purchase agreements and the Remaining Group was held liable for the guarantee obligations, the Remaining Group was entitled to recover its loss in full from Zhongke and Inner Mongolia Zhongke. As at 30 June 2020, the trial of the Dispute has not yet commenced and no judgement has been made on the part of Kong Sun Yongtai in relation to its obligations under the Guarantee Agreements. The Directors considered that the guarantee amount did not have any material impact on the Remaining Group’s financial position and it was not probable that actual loss would be incurred in view of the undertakings and counter guarantee agreement provided by Zhongke and Inner Mongolia Zhongke in favour of Kong Sun Yongtai.

– I-36 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Court considered the evidence adduced by the parties and held that Kong Sun Yongtai is not liable to Beijing Sifang and accordingly approved the withdrawal of the claim against Kong Sun Yongtai on 27 August 2020. For further details, please refer to the paragraph headed ‘‘Litigation’’ of the 2020 Interim Report.

Save as disclosed above, during the six months ended 30 June 2020, the Remaining Group has no other significant contingent liabilities.

Employees and Remuneration Policy

As at 30 June 2020, the Remaining Group had approximately 654 employees (31 December 2019: 614) in Hong Kong and in the PRC. Compensation for the employees includes basic wages, variable wages, bonuses and other staff benefits. For the six months ended 30 June 2020, the total employee benefit expenses (including directors’ emoluments) were approximately RMB80,752,000 (six months ended 30 June 2019: RMB108,755,000). For details, please refer to note 6(a) to the ‘‘Notes to the Condensed Consolidated Interim Financial Statements’’ of the 2020 Interim Report. The remuneration policy of the Remaining Group is to provide remuneration packages, including basic salary, short-term bonuses and long-term rewards, 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 the 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. The Share Option Scheme expired on 21 July 2019 and no further options could thereafter be granted. Notwithstanding the expiry of the Share Option Scheme, the share options which had been granted during the life of the scheme shall continue to be valid and exercisable in accordance with their terms of issue and in all other respects its provisions shall remain in full force and effect.

Significant Investments and Material Acquisition and Disposal

Save as disclosed above, the Remaining Group did not have any other significant investments, other material acquisition or disposal during the six months ended 30 June 2020, and there was no plan authorised by the Board for other material investments or additions of capital assets up to the date of the 2020 Interim Report.

– I-37 –

FINANCIAL INFORMATION OF WEIXIAN TIANHAI

APPENDIX II-A

REPORT ON REVIEW OF FINANCIAL INFORMATION OF WEIXIAN TIHEIN PHOTOVOLTAIC ENERGY LIMITED

TO THE BOARD OF DIRECTORS OF KONG SUN HOLDINGS LIMITED

Introduction

We have reviewed the unaudited financial information set out on pages II-A-3 to II-A-16 which comprises the statements of financial position as at 31 December 2017, 2018 and 2019 and 30 September 2020 of Weixian Tianhai Photovoltaic Energy Limited (‘‘Weixian Tianhai’’) 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 2017, 2018 and 2019 and 30 September 2019 and 2020 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 share of Weixian Tianhai 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 the Disposal Company 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.

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.

– II-A-1 –

FINANCIAL INFORMATION OF WEIXIAN TIANHAI

APPENDIX II-A

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, 26 February 2021

– II-A-2 –

FINANCIAL INFORMATION OF WEIXIAN TIANHAI

APPENDIX II-A

Set out below is the unaudited financial information of Weixian Tianhai which comprises the unaudited statements of financial position of Weixian Tianhai as at 31 December 2017, 2018 and 2019 and 30 September 2020 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 2017, 2018 and 2019 and for the nine months ended 30 September 2019 and 2020 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 the Weixian Tianhai. The Company’s auditor, BDO Limited, has reviewed the Unaudited Financial Information of Weixian Tianhai 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-A-3 –

FINANCIAL INFORMATION OF WEIXIAN TIANHAI

APPENDIX II-A

UNAUDITED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME OF WEIXIAN TIANHAI

Notes Revenue 4 Cost of sales Gross profit Other income Administrative expenses Finance costs Profit before income tax Income tax expense 5 Profit for the year/period	For the year ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 37,062 38,365 34,175 (10,644) (14,409) (11,709) 26,418 23,956 22,466 7 5 46 (2,923) (1,172) (2,335) (8,892) (8,779) (8,651) 14,610 14,010 11,526 — (1,886) (1,603) 14,610 12,124 9,923	For the nine months ended 30 September 2019 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 27,675 27,316 (8,972) (8,907) 18,703 18,409 15 14 (821) (601) (6,363) (6,479) 11,534 11,343 (201) (185) 11,333 11,158

– II-A-4 –

FINANCIAL INFORMATION OF WEIXIAN TIANHAI

APPENDIX II-A

UNAUDITED STATEMENTS OF FINANCIAL POSITION OF WEIXIAN TIANHAI

Notes ASSETS AND LIABILITIES Non-current assets Property, plant and equipment Solar power plants 6 Right-of-use assets Lease prepayments Current assets Trade and other receivables 7 Amounts due from intermediate holding company 9 Amounts due from fellow subsidiaries 9 Cash and cash equivalents Total current assets Current liabilities Trade and other payables Tax payable Loans and borrowings 8 Amounts due to intermediate holding company 9 Amounts due to immediate holding company 9 Amounts due to fellow subsidiaries 9 Total current liabilities Net current liabilities Total assets less current liabilities	2017 RMB’000 (Unaudited) 89 214,900 — — 214,989 80,658 — — 3,145 83,803 39,166 — 47,616 — 55,055 — 141,837 (58,034) 156,955	As at 31 December 2018 2019 RMB’000 RMB’000 (Unaudited) (Unaudited) 62 36 205,774 197,210 — 11,736 626 — 206,462 208,982 66,258 67,703 24,897 — — — 2,378 10,409 93,533 78,112 41,160 15,009 39 1,383 13,492 10,918 — 7,164 89,533 95,855 — 326 144,224 130,655 (50,691) (52,543) 155,771 156,439	As at 30 September 2020 RMB’000 (Unaudited) 1 190,538 11,288 — 201,827 73,961 — 13,698 6,967 94,626 13,245 — 16,004 9,744 145,269 1,475 185,737 (91,111) 110,716

– II-A-5 –

APPENDIX II-A

FINANCIAL INFORMATION OF WEIXIAN TIANHAI

Notes Non-current liabilities Lease liabilities Loans and borrowings 8 Total non-current liabilities Net assets Equity Registered capital Reserves Total equity	2017 RMB’000 (Unaudited) — 123,249 123,249 33,706 1,000 32,706 33,706	As at 31 December 2018 2019 RMB’000 RMB’000 (Unaudited) (Unaudited) — 8,192 109,941 92,494 109,941 100,686 45,830 55,753 1,000 1,000 44,830 54,753 45,830 55,753	As at 30 September 2020 RMB’000 (Unaudited) 8,498 84,125
			92,623
			18,093
			1,000 17,093
			18,093

– II-A-6 –

FINANCIAL INFORMATION OF WEIXIAN TIANHAI

APPENDIX II-A

UNAUDITED STATEMENTS OF CASH FLOWS OF WEIXIAN TIANHAI

Cash flows from operating activities Profit before income tax Adjustments for: Depreciation of property, plant and equipment Depreciation of solar power plants Depreciation of right-of-use assets Amortization of lease prepayments Write-off of property, plant and equipment Interest expense Interest income Operating profit before working capital changes (Increase)/Decrease in trade and other receivables (Decrease)/Increase in trade and other payables Cash generated from/(used in) operating activities Tax paid Net cash generated from/(used in) operating activities	For the year ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 14,610 14,010 11,526 23 27 26 9,126 9,126 9,126 — — 583 — 582 — — — — 8,892 8,779 8,651 (7) (5) (46) 32,644 32,519 29,866 (19,294) 14,400 (1,445) (836) 1,994 (26,151) 12,514 48,913 2,270 — (1,847) (259) 12,514 47,066 2,011	For the nine months ended 30 September 2019 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 11,534 11,343 20 10 6,845 6,672 431 448 — — — 25 6,363 6,479 (15) (14) 25,178 24,963 (4,995) (6,258) (29,338) (1,764) (9,155) 16,941 (195) (1,568) (9,350) 15,373

– II-A-7 –

FINANCIAL INFORMATION OF WEIXIAN TIANHAI

APPENDIX II-A

Cash flows from investing activities Purchase of property, plant and equipment Payments for construction cost of in respect of solar power plants Payments purchase of right-of-use assets Payments for purchase of lease prepayments Interests received Net cash (used in)/generated from investing activities Cash flows from financing activities Proceeds from loans and borrowings Repayments of loans and borrowings Interest paid Payments of lease liabilities Dividend paid to immediate holding company Advances from intermediate holding company Advances from immediate holding company Advances from fellow subsidiaries Repayments to intermediate holding company Repayments to immediate holding company Repayments to fellow subsidiaries Net cash (used in)/generated from financing activities Net (decrease)/increase 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 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) (17) — — — — (562) — — (471) — (1,208) — 7 5 46 (10) (1,203) (987) 1,921 — — — (47,432) (20,021) (8,892) (8,779) (8,140) — — (3,541) — — — — — 32,061 — 34,478 6,322 — — 326 — (24,897) — (6,645) — — — — — (13,616) (46,630) 7,007 (1,112) (767) 8,031 4,257 3,145 2,378 3,145 2,378 10,409	For the nine months ended 30 September 2019 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) — — — — (69) — — — 15 14 (54) 14 — — (18,336) (3,283) (5,954) (6,173) (3,541) — — (48,818) 41,021 2,580 634 49,414 5,464 — — — — — — (12,549) 19,288 (18,829) 9,884 (3,442) 2,378 10,409 12,262 6,967

– II-A-8 –

FINANCIAL INFORMATION OF WEIXIAN TIANHAI

APPENDIX II-A

UNAUDITED STATEMENTS OF CHANGES IN EQUITY OF WEIXIAN TIANHAI

Balance at 1 January 2017 Profit for the year Appropriation to statutory reserves Balance at 31 December 2017 and 1 January 2018 Profit for the year Appropriation to statutory reserves Balance at 31 December 2018 and 1 January 2019 Profit for the year Appropriation to statutory reserves Balance at 31 December 2019 and 1 January 2020 Profit for the period Appropriation to statutory reserves Proposed dividend Balance at 30 September 2020 Balance at 31 December 2018 and 1 January 2019 Profit for the period Appropriation to statutory reserves Balance at 30 September 2019	Registered capital RMB’000 (Unaudited) 1,000 — — 1,000 — — 1,000 — — 1,000 — — — 1,000 1,000 — — 1,000	Statutory reserves RMB’000 (Unaudited) 1,488 — 1,461 2,949 — 1,212 4,161 — 992 5,153 — 1,116 — 6,269 4,161 — 1,133 5,294	Retained profits RMB’000 (Unaudited) 16,608 14,610 (1,461) 29,757 12,124 (1,212) 40,669 9,923 (992) 49,600 11,158 (1,116) (48,818) 10,824 40,669 11,333 (1,133) 50,869	Total RMB’000 (Unaudited) 19,096 14,610 — 33,706 12,124 — 45,830 9,923 — 55,753 11,158 — (48,818) 18,093 45,830 11,333 — 57,163

– II-A-9 –

FINANCIAL INFORMATION OF WEIXIAN TIANHAI

APPENDIX II-A

NOTES TO THE UNAUDITED FINANCIAL INFORMATION

1. General Information

Weixian Tianhai is a limited liability company incorporated in PRC. The principal activity of Weixian Tianhai is operation of solar power plants.

On 22 October 2020, the Vendor, an indirect wholly-owned subsidiary of the Company, the Purchaser and Weixian Tianhai entered into the Agreement, pursuant to which the Vendor agreed to sell, and the Purchaser agreed to acquire, the entire equity interest in Weixian Tianhai at a total consideration of approximately RMB22,393,000. Upon completion of the Disposal, Weixian Tianhai will cease to be the subsidiary of the Company.

2. Basis of Preparation of the Unaudited Financial Information

The Unaudited Financial Information of, Weixian Tianhai for the years ended 31 December 2017, 2018 and 2019 and for the nine months ended 30 September 2019 and 2020 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 Weixian Tianhai 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 Weixian Tianhai had net current liabilities of RMB58,034,000, RMB50,691,000, RMB52,543,000 and RMB91,111,000 as at 31 December 2017, 2018 and 2019 and 30 September 2020 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 Weixian Tianhai for the next twelve months from the reporting date, the directors are of the opinion that Weixian Tianhai 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 Weixian Tianhai till the completion date of disposal until such time when the repayment will not affect Weixian Tianhai’s ability to repay other creditors in the normal course of business.

– II-A-10 –

FINANCIAL INFORMATION OF WEIXIAN TIANHAI

APPENDIX II-A

3. Changes in accounting policies

The HKICPA has issued a number of new or revised HKFRSs which are relevant to the Group and became effective during the respective year. The impact of these new or revised HKFRSs in respective year is summarised as follows:

HKFRS 9 — Financial Instruments

HKFRS 9 is effective for the accounting period beginning on or after 1 January 2018. HKFRS 9 replaces HKAS 39, Financial instruments: recognition and measurement (‘‘HKAS 39’’). It sets out the requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. The new impairment model in HKFRS 9 replaces the ‘‘incurred loss’’ model in HKAS 39 with an expected credit loss (‘‘ECL’’) model. Under the ECL model, it will no longer be necessary for a loss event to occur before an impairment loss is recognised. Instead, an entity is required to recognise and measure either a 12-month ECL or a lifetime ECL, depending on the asset and the facts and circumstances. As a consequence of adopting HKFRS 9, Weixian Tianhai’s trade and other receivables amounting to RMB80,658,000 as at 1 January 2018 was reclassified from ‘‘loans and receivables’’ as ‘‘amortised cost financial assets’’. Applying ECL model does not result in further provision for ECL as the settlement of these receivables is regulated by the Central Government of the PRC, and periodic payments have been received with no history of default in the past. As such, the Directors consider that the ECL in renewable energy subsidies receivables as at 1 January 2018 is immaterial.

As at 1 January 2018, the Company’s amounts due from intermediate holding company, amounts due from fellow subsidiaries and cash and cash equivalents were reclassified from the original classification of ‘‘Loan and receivables’’ under HKAS 39 to the new classification of ‘‘Amortised cost’’ under HKFRS 9. As at 1 January 2018, the directors consider that there is no material difference between the previous carrying amounts and that under new classification.

HKFRS 15 — Revenue from Contracts with Customers

HKFRS 15 is effective for the accounting period beginning on or after 1 January 2018. HKFRS 15 establishes a comprehensive framework for recognising revenue and some costs from contracts with customers. HKFRS 15 replaces HKAS 18, Revenue, which covered revenue arising from sale of goods and rendering of services, and HKAS 11, Construction Contracts, which specified the accounting for construction contracts, and related interpretations.

Weixian Tianhai has adopted HKFRS 15 using cumulative effect method without practical expedients. Weixian Tianhai has recognised the cumulative effect of initially applying HKFRS 15 as an adjustment to the opening balance of accumulated losses at the date of initial application (that is, 1 January 2018). As a result, the unaudited financial information presented for 2017 has not been restated.

Weixian Tianhai sells electricity to the power grid company. Revenue from sales of electricity is recognised over time when the electricity generated and transmitted is simultaneously received and consumed by the power grid companies. Weixian Tianhai has elected the practical expedient to recognise revenue in the amount to which Weixian Tianhai has a right to invoice as the amount represents and corresponds directly with the value of performance completed and transferred to the power grid company. Weixian Tianhai has no unsatisfied performance obligations at each reporting date. In the opinion of the Directors, the adoption of HKFRS 15 did not result in significant impact on Weixian Tianhai’s accounting policies on revenue.

HKFRS 16 — Lease

HKFRS 16 is effective for the accounting period beginning on or after 1 January 2019. The adoption of HKFRS 16 primarily affects Weixian Tianhai’s accounting as a lessee of leases which are classified as operating leases under HKAS 17, Leases. Upon the adoption of HKFRS 16, at the lease commencement date, Weixian Tianhai as a lessee recognises a right-of-use asset and a lease liability, except for short-term leases with a lease term of 12 months or less and leases of low-value assets. The application of HKFRS 16 has impact on the recognition of right-of-use assets and lease liabilities as well as the recognition of depreciation charges of right-of-use assets and the interest expense on lease liabilities.

– II-A-11 –

APPENDIX II-A

FINANCIAL INFORMATION OF WEIXIAN TIANHAI

Weixian Tianhai has applied 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 comparative information presented in 2018 and 2017 has not been restated and continues to be reported under HKAS 17, as permitted under the simplified transition approach in the standard. The reclassifications and the adjustments arising from HKFRS 16 are therefore recognised in the opening balances on 1 January 2019. In the opinion of our Directors, the adoption of HKFRS 16 resulted in reclassification of Weixian Tianhai’s ‘‘Lease prepayments’’ as ‘‘Right-of-use assets’’ and did not have significant impact on Weixian Tianhai’s net assets and net profits when compared with those that would have been presented under HKAS 17.

4. Revenue

Revenue represents income from sales of electricity (including renewable energy subsidies). During the years ended 31 December 2017, 2018 and 2019 and the nine months ended 30 September 2019 and 2020, sales of electricity includes renewable energy subsidies amounting to RMB19,890,000, RMB21,536,000, RMB21,669,000, RMB17,597,000 and RMB17,453,000 respectively.

5. Income tax expense

Pursuant to CaiShui 2008 No. 46 Notice on the Execution of the Catalogue of Public Infrastructure Projects Entitled for Preferential Tax Treatment* (財政部、國家稅務總局關於執行公共基礎設施項目企業所得稅優惠目錄有關問題的通知), Weixian Tianhai has been approved to entitle a tax holiday of a 3-year full exemption followed by a 3-year 50% exemption commencing from their respective years in which their first operating income is derived.

6. Solar power plants

Cost At 1 January 2017 Written off At 31 December 2017 and 2018 and 1 January 2019 Additions At 31 December 2019 and 30 September 2020 Accumulated depreciation At 1 January 2017 Charge for the year At 31 December 2017 and 1 January 2018 Charge for the year At 31 December 2018 and 1 January 2019 Charge for the year At 31 December 2019 and 1 January 2020 Charge for the period At 30 September 2020	Solar power plants RMB’000 (Unaudited) 244,057 (6,659) 237,398 562 237,960 (13,372) (9,126) (22,498) (9,126) (31,624) (9,126) (40,750) (6,672) (47,422)

– II-A-12 –

FINANCIAL INFORMATION OF WEIXIAN TIANHAI

APPENDIX II-A

Net carrying amount At 31 December 2017 At 31 December 2018 At 31 December 2019 At September 2020	Solar power plants RMB’000 (Unaudited) 214,900
	205,774
	197,210
	190,538

As at 31 December 2017, 2018 and 2019 and 30 September 2020, solar plants were all pledged as securities for Weixian Tianhai’s loans and borrowings (note 8).

7. Trade and other receivables

Trade receivables Other receivables, prepayments and deposits	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 53,586 44,380 49,562 27,072 21,878 18,141 80,658 66,258 67,703	As at 30 September 2020 RMB’000 (Unaudited) 58,527 15,434
		73,961

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 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 6,601 6,585 5,557 4,796 6,776 6,797 12,436 12,582 13,229 22,111 17,647 23,189 7,642 790 790 53,586 44,380 49,562	As at 30 September 2020 RMB’000 (Unaudited) 7,953 7,855 10,088 25,720 6,911
		58,527

– II-A-13 –

FINANCIAL INFORMATION OF WEIXIAN TIANHAI

APPENDIX II-A

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 past due	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 3,272 2,480 2,096 3,991 6,352 5,656 6,618 7,001 7,126 12,088 10,110 12,296 19,975 17,647 21,598 7,642 790 790 53,586 44,380 49,562	As at 30 September 2020 RMB’000 (Unaudited) 3,756 6,457 8,316 9,561 25,773 4,664
		58,527

Weixian Tianhai’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 2017, 2018 and 2019 and 30 September 2020, the outstanding renewable energy subsidy amounted to RMB11,640,000, RMB24,774,000, RMB38,874,000 and RMB49,600,000 respectively.

Expected loss rate of these renewable energy subsidy receivables are assessed to be low, because the debtor is state-owned and have good repayment history. In addition, the directors of the Weixian Tianhai are confident that the renewable energy subsidy receivables are fully recoverable but only subject to timing of allocation of funds from the PRC government. Accordingly, the credit risk regarding contract assets of tariff income receivables is limited.

8. Loans and borrowings

Current Secured — other borrowings Non-current Secured — other borrowings Total loans and borrowings	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 47,616 13,492 10,918 123,249 109,941 92,494 170,865 123,433 103,412	As at 30 September 2020 RMB’000 (Unaudited) 16,004 84,125
		100,129

– II-A-14 –

FINANCIAL INFORMATION OF WEIXIAN TIANHAI

APPENDIX II-A

Weixian Tianhai’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 Effective Interest rates	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 47,616 13,492 10,918 13,308 14,325 15,446 46,384 49,907 42,691 63,557 45,709 34,357 170,865 123,433 103,412 5.73% 5.73% 5.73%	As at 30 September 2020 RMB’000 (Unaudited) 16,004 16,312 56,527 11,286
		100,129
		5.73%

As at 31 December 2017, 2018 and 2019 and 30 September 2020, loans and other borrowings bear interest at 117% of the People’s Bank of China RMB benchmark loan interest rates annum for 5-year loans.

Loans and borrowings were all secured by solar power plants.

As at 31 December 2017, 2018 and 2019 and 30 September 2020, loans and other borrowings were pledged by 100% equity interests of Weixian Tianhai’s immediate holding company, Kong Sun Yongtai.

9. Amounts due from/to intermediate holding company/immediate holding company/fellow subsidiaries

Amounts due from/to intermediate holding company/immediate holding company/fellow subsidiaries are interest-free, unsecured and repayable on demand.

10. Related party transactions

In addition to the transactions detailed elsewhere in the Unaudited Financial Information, Weixian Tianhai entered into the following transactions with related parties:

	Related party						For the nine months	For the nine months
Name of related party	relationship	Type of transaction	For the year		ended 31	December	ended 30	September
			2017		2018	2019	2019	2020
			RMB’000		RMB’000	RMB’000	RMB’000	RMB’000
			(Unaudited)	(Unaudited)		(Unaudited)	(Unaudited)	(Unaudited)
Kong Sun Yongtai	Immediate holding	Operation and	377		755	794	596	596
	company	maintenance fee
北京鑫泰綠能科技有限公司(Beijing	Fellow subsidiary	Operation and	472		—	94	—	849
Xintai Green Energy Technology		maintenance fee
Co., Ltd.)

– II-A-15 –

FINANCIAL INFORMATION OF WEIXIAN TIANHAI

APPENDIX II-A

11. The impact of COVID-19 in the current reporting period

The outbreak of COVID-19 has developed rapidly in 2020 and impacted entities and economic activities in varying scales in the PRC. While there have been more immediate and pronounced disruptions in certain industries, its impact on the energy industry in the PRC has been rather modest during the current reporting period. Nevertheless, as the outbreak of COVID-19 continues to evolve, it is challenging at this juncture to predict the full extent and duration of its impact to the business and the economy. The management of Weixian Tianhai has assessed the impact of COVID-19, and up to the date of approval of this Unaudited Financial Information, the management has not identified any areas that could have a material impact on the financial performance or position of Weixian Tianhai as at 30 September 2020.

– II-A-16 –

FINANCIAL INFORMATION OF PINGSHAN TIANHUI

APPENDIX II-B

REPORT ON REVIEW OF FINANCIAL INFORMATION OF PINGSHAN TIANHUI ENERGY TECHNOLOGY LIMITED

TO THE BOARD OF DIRECTORS OF KONG SUN HOLDINGS LIMITED

Introduction

We have reviewed the unaudited financial information set out on pages II-B-3 to II-B-16 which comprises the statements of financial position as at 31 December 2017, 2018 and 2019 and 30 September 2020 of Pingshan Tianhui Energy Technology Limited. (‘‘Pingshan Tianhui’’) 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 2017, 2018 and 2019 and 30 September 2019 and 2020 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 share of PingShan Tianhui 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’’).

Scope of Review

– II-B-1 –

FINANCIAL INFORMATION OF PINGSHAN TIANHUI

APPENDIX II-B

Conclusion

BDO Limited

Certified Public Accountants

Hong Kong, 26 February 2021

– II-B-2 –

FINANCIAL INFORMATION OF PINGSHAN TIANHUI

APPENDIX II-B

Set out below is the unaudited financial information of Pingshan Tianhui which comprises the unaudited statements of financial position of Pingshan Tianhui as at 31 December 2017, 2018 and 2019 and 30 September 2020 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 2017, 2018 and 2019 and for the nine months ended 30 September 2019 and 2020 and certain explanatory notes (altogether referred to as ‘‘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 Pingshan Tianhui. The Company’s auditor, BDO Limited, has reviewed the Unaudited Financial Information of Pingshan Tianhui 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.

– II-B-3 –

FINANCIAL INFORMATION OF PINGSHAN TIANHUI

APPENDIX II-B

UNAUDITED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME OF PINGSHAN TIANHUI

Notes Revenue 4 Cost of sales Gross profit Other income Administrative expenses Finance costs Profit before income tax Income tax expense 5 Profit for the year/period	For the year ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 17,990 21,191 23,276 (6,719) (8,018) (9,281) 11,271 13,173 13,995 — 1 4 (128) (191) (1,000) (3,474) (7,423) (8,300) 7,669 5,560 4,699 — — — 7,669 5,560 4,699	For the nine months ended 30 September 2019 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 18,213 16,285 (7,387) (5,558) 10,826 10,727 3 5 (688) (506) (5,626) (5,408) 4,515 4,818 — (238) 4,515 4,580

– II-B-4 –

FINANCIAL INFORMATION OF PINGSHAN TIANHUI

APPENDIX II-B

UNAUDITED STATEMENTS OF FINANCIAL POSITION OF PINGSHAN TIANHUI

Notes ASSETS AND LIABILITIES Non-current assets Property, plant and equipment Solar power plants 6 Right-of-use assets Lease prepayments Current assets Trade and other receivables 7 Amounts due from intermediate holding company 9 Amounts due from immediate holding company 9 Amounts due from fellow subsidiaries 9 Cash and cash equivalents Total current assets Current liabilities Trade and other payables Loans and borrowings 8 Amounts due to intermediate holding company 9 Amounts due to immediate holding company 9 Amounts due to fellow subsidiaries 9 Total current liabilities Net current assets/(liabilities) Total assets less current liabilities	2017 RMB’000 (Unaudited) 99 139,819 — 16,080 155,998 26,521 — 4,689 20 1,472 32,702 26,766 — — — — 26,766 5,936 161,934	As at 31 December 2018 2019 RMB’000 RMB’000 (Unaudited) (Unaudited) 80 61 133,610 128,797 — 14,640 15,360 — 149,050 143,498 37,054 47,453 3,808 — — — 5 — 827 3,309 41,694 50,762 24,447 15,714 10,326 14,735 180 5,640 — 908 — 345 34,953 37,342 6,741 13,420 155,791 156,918	As at 30 September 2020 RMB’000 (Unaudited) — 125,100 14,100 — 139,200 50,931 — — 268 1,299 52,498 15,293 15,247 20,180 9,294 1,112 61,126 (8,628) 130,572

– II-B-5 –

APPENDIX II-B

FINANCIAL INFORMATION OF PINGSHAN TIANHUI

Notes Non-current liabilities Loans and borrowings 8 Total non-current liabilities Net assets Equity Registered capital Reserves Total equity	2017 RMB’000 (Unaudited) 111,265 111,265 50,669 43,000 7,669 50,669	As at 31 December 2018 2019 RMB’000 RMB’000 (Unaudited) (Unaudited) 99,562 95,990 99,562 95,990 56,229 60,928 43,000 43,000 13,229 17,928 56,229 60,928	As at 30 September 2020 RMB’000 (Unaudited) 81,545
			81,545
			49,027
			43,000 6,027
			49,027

– II-B-6 –

FINANCIAL INFORMATION OF PINGSHAN TIANHUI

APPENDIX II-B

UNAUDITED STATEMENTS OF CASH FLOWS OF PINGSHAN TIANHUI

Cash flows from operating activities Profit before income tax Adjustments for: Depreciation of property, plant and equipment Depreciation of solar power plants Depreciation of right-of-use assets Amortization of lease prepayments Write-off of property, plant and equipment Write-off of solar power plants Interest expense Interest income Operating profit before working capital changes Increase in trade and other receivables Increase/(Decrease) in trade and other payables Cash generated from operating activities Tax paid Net cash generated from operating activities	For the year ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 7,669 5,560 4,699 — 19 19 3,104 5,514 5,512 — — 720 360 720 — — — — — 695 — 3,474 7,423 8,300 — (1) (4) 14,607 19,930 19,246 (26,521) (10,533) (10,399) 26,766 (2,319) (8,733) 14,852 7,078 114 — — — 14,852 7,078 114	For the nine months ended 30 September 2019 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 4,515 4,818 14 6 4,133 3,997 540 540 — — — 55 — — 5,626 5,408 (3) (5) 14,825 14,819 (9,065) (3,478) (3,332) (421) 2,428 10,920 — (238) 2,428 10,682

– II-B-7 –

FINANCIAL INFORMATION OF PINGSHAN TIANHUI

APPENDIX II-B

Cash flows from investing activities Purchase of property, plant and equipment Payments for construction cost of in respect of solar power plants Payments for purchase of lease prepayments Interests received Net cash (used in)/generated from investing activities Cash flows from financing activities Proceed from capital injection Proceed from loans and borrowings Repayment of loans and borrowings Interest paid Dividend paid to immediate holding company Advances from intermediate holding company Advances from immediate holding company Advances from fellow subsidiaries Repayments to intermediate holding company Repayments to immediate holding company Repayments to fellow subsidiaries 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 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) (99) — — (142,923) — (699) (16,440) — — — 1 4 (159,462) 1 (695) 43,000 — — 111,265 — 837 — (1,377) — (3,474) (7,423) (8,300) — — — — — 9,268 — 4,689 908 — 15 350 — (3,628) — (4,689) — — (20) — — 146,082 (7,724) 3,063 1,472 (645) 2,482 — 1,472 827 1,472 827 3,309	For the nine months ended 30 September 2019 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) — — (300) (300) — — 3 5 (297) (295) — — — — (698) (12,283) (5,626) (7,058) — (16,481) 8,468 14,540 — 8,386 1 499 — — (3,277) — — (1,132) (12,397) 999 (2,010) 827 3,309 1,826 1,299

– II-B-8 –

FINANCIAL INFORMATION OF PINGSHAN TIANHUI

APPENDIX II-B

UNAUDITED STATEMENTS OF CHANGES IN EQUITY OF PINGSHAN TIANHUI

Balance at 1 January 2017 Issue of shares Profit for the year Appropriation to statutory reserves Balance at 31 December 2017 and 1 January 2018 Profit for the year Appropriation to statutory reserves Balance at 31 December 2018 and 1 January 2019 Profit for the year Appropriation to statutory reserves Balance at 31 December 2019 and 1 January 2020 Profit for the period Appropriation to statutory reserves Proposed dividend Balance at 30 September 2020 Balance at 31 December 2018 and 1 January 2019 Profit for the period Appropriation to statutory reserves Balance at 30 September 2019	Registered capital RMB’000 (Unaudited) 200 42,800 — — 43,000 — — 43,000 — — 43,000 — — — 43,000 43,000 — — 43,000	Statutory reserves RMB’000 (Unaudited) — — — 767 767 — 556 1,323 — 470 1,793 — 458 — 2,251 1,323 — 452 1,775	Retained profits RMB’000 (Unaudited) — — 7,669 (767) 6,902 5,560 (556) 11,906 4,699 (470) 16,135 4,580 (458) (16,481) 3,776 11,906 4,515 (452) 15,969	Total RMB’000 (Unaudited) 200 42,800 7,669 — 50,669 5,560 — 56,229 4,699 — 60,928 4,580 — (16,481) 49,027 56,229 4,515 — 60,744

– II-B-9 –

FINANCIAL INFORMATION OF PINGSHAN TIANHUI

APPENDIX II-B

NOTES TO THE UNAUDITED FINANCIAL INFORMATION

1. General Information

Pingshan Tianhui is a limited liability company incorporated in PRC. The principal activity of Pingshan Tianhui is operation of solar power plants.

On 22 October 2020, the Vendor, an indirect wholly-owned subsidiary of the Company, the Purchaser and Pingshan Tianhui entered into the Agreement, pursuant to which the Vendor agreed to sell, and the Purchaser agreed to acquire, the entire equity interest in Pingshan Tianhui at a total consideration of approximately RMB34,229,000. Upon completion of the Disposal, Pingshan Tianhui will cease to be the subsidiary of the Company.

2. Basis of Preparation of the Unaudited Financial Information

The Unaudited Financial Information of, Pingshan Tianhui for the years ended 31 December 2017, 2018 and 2019 and the nine months ended 30 September 2019 and 2020 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 of Pingshan Tianhui 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 Pingshan Tianhui had net current liabilities of RMB8,628,000 as at 30 September 2020 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 Pingshan Tianhui for the next twelve months from the reporting date, the directors are of the opinion that Pingshan Tianhui 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 Pingshan Tianhui till the completion date of disposal until such time when the repayment will not affect Pingshan Tianhui’s ability to repay other creditors in the normal course of business.

– II-B-10 –

FINANCIAL INFORMATION OF PINGSHAN TIANHUI

APPENDIX II-B

3. Changes in accounting policies

HKFRS 9 — Financial Instruments

HKFRS 9 is effective for the accounting period beginning on or after 1 January 2018. HKFRS 9 replaces HKAS 39, Financial instruments: recognition and measurement (‘‘HKAS 39’’). It sets out the requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. The new impairment model in HKFRS 9 replaces the ‘‘incurred loss’’ model in HKAS 39 with an expected credit loss (‘‘ECL’’) model. Under the ECL model, it will no longer be necessary for a loss event to occur before an impairment loss is recognised. Instead, an entity is required to recognise and measure either a 12-month ECL or a lifetime ECL, depending on the asset and the facts and circumstances. As a consequence of adopting HKFRS 9, Pingshan Tianhui’s trade and other receivables amounting to RMB26,521,000 as at 1 January 2018 was reclassified from ‘‘loans and receivables’’ as ‘‘amortised cost financial assets’’. Applying ECL model does not result in further provision for ECL as the settlement of these receivables is regulated by the Central Government of the PRC, and periodic payments have been received with no history of default in the past. As such, the Directors consider that the ECL in renewable energy subsidies receivables as at 1 January 2018 is immaterial.

As at 1 January 2018, the Company’s amounts due from intermediate holding company, amounts due from immediate holding company, amounts due from fellow subsidiaries and cash and cash equivalents were reclassified from the original classification of ‘‘Loan and receivables’’ under HKAS 39 to the new classification of ‘‘Amortised cost’’ under HKFRS 9. As at 1 January 2018, the directors consider that there is no material difference between the previous carrying amounts and that under new classification.

HKFRS 15 — Revenue from Contracts with Customers

Pingshan Tianhui has adopted HKFRS 15 using cumulative effect method without practical expedients. Pingshan Tianhui has recognised the cumulative effect of initially applying HKFRS 15 as an adjustment to the opening balance of accumulated losses at the date of initial application (that is, 1 January 2018). As a result, the unaudited financial information presented for 2017 has not been restated.

Pingshan Tianhui sells electricity to the power grid company. Revenue from sales of electricity is recognised over time when the electricity generated and transmitted is simultaneously received and consumed by the power grid companies. Pingshan Tianhui has elected the practical expedient to recognise revenue in the amount to which Pingshan Tianhui has a right to invoice as the amount represents and corresponds directly with the value of performance completed and transferred to the power grid company. Pingshan Tianhui has no unsatisfied performance obligations at each reporting date. In the opinion of the Directors, the adoption of HKFRS 15 did not result in significant impact on Pingshan Tianhui’s accounting policies on revenue.

HKFRS 16 — Lease

HKFRS 16 is effective for the accounting period beginning on or after 1 January 2019. The adoption of HKFRS 16 primarily affects Pingshan Tianhui’s accounting as a lessee of leases which are classified as operating leases under HKAS 17, Leases. Upon the adoption of HKFRS 16, at the lease commencement date, Pingshan Tianhui as a lessee recognises a right-of-use asset and a lease liability, except for short-term leases with a lease term of 12 months or less and leases of low-value assets. The application of HKFRS 16 has impact on the recognition of right-of-use assets and lease liabilities as well as the recognition of depreciation charges of right-of-use assets and the interest expense on lease liabilities.

Pingshan Tianhui has applied 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 comparative information presented in 2018 and 2017 has not been restated

– II-B-11 –

APPENDIX II-B

FINANCIAL INFORMATION OF PINGSHAN TIANHUI

and continues to be reported under HKAS 17, as permitted under the simplified transition approach in the standard. The reclassifications and the adjustments arising from HKFRS 16 are therefore recognised in the opening balances on 1 January 2019. In the opinion of our Directors, the adoption of HKFRS 16 resulted in reclassification of Pingshan Tianhui’s ‘‘Lease prepayments’’ as ‘‘Right-of-use assets’’ and did not have significant impact on Pingshan Tianhui’s net assets and net profits when compared with those that would have been presented under HKAS 17.

4. Revenue

Revenue represents income from sales of electricity (including renewable energy subsidies). During the years ended 31 December 2017, 2018 and 2019 and the nine months ended 30 September 2019 and 2020, sales of electricity includes renewable energy subsidies amounting to RMB9,716,000, RMB11,291,000, RMB12,405,000, RMB9,708,000 and RMB9,645,000 respectively.

5. Income tax expense

Pursuant to CaiShui 2008 No. 46 Notice on the Execution of the Catalogue of Public Infrastructure Projects Entitled for Preferential Tax Treatment* (財政部、國家稅務總局關於執行公共基礎設施項目企業所得稅優惠目錄有關問題的通知), Pingshan Tianhui has been approved to entitle a tax holiday of a 3-year full exemption followed by a 3-year 50% exemption commencing from their respective years in which their first operating income is derived.

6. Solar power plants

Cost
At 1 January 2017
Additions
At 31 December 2017 and 1 January 2018
Written off
At 31 December 2018 and 1 January 2019
Additions
At 31 December 2019 and 1 January 2020
Additions
At 30 September 2020
Accumulated depreciation
At 1 January 2017
Charge for the year
At 31 December 2017 and 1 January 2018
Charge for the year
At 31 December 2018 and 1 January 2019
Charge for the year
At 31 December 2019 and 1 January 2020
Charge for the period
At 30 September 2020

Solar power
plants
RMB’000
(Unaudited)
142,415
508
142,923
(695)
142,228
699
142,927
300
143,227
—
(3,104)
(3,104)
(5,514)
(8,618)
(5,512)
(14,130)
(3,997)
(18,127)

– II-B-12 –

FINANCIAL INFORMATION OF PINGSHAN TIANHUI

APPENDIX II-B

Net carrying amount At 31 December 2017 At 31 December 2018 At 31 December 2019 At 30 September 2020	Solar power plants RMB’000 (Unaudited) 139,819
	133,610
	128,797
	125,100

As at 31 December 2017, 2018 and 2019 and 30 September 2020, solar plants were all pledged as securities for Pingshan Tianhui’s loans and borrowings (note 8).

7. Trade and other receivables

Trade receivables Other receivables, prepayments and deposits	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 12,505 25,567 39,818 14,016 11,487 7,635 26,521 37,054 47,453	As at 30 September 2020 RMB’000 (Unaudited) 44,124 6,807
		50,931

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 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 3,619 3,926 3,992 2,924 3,155 3,785 5,962 6,846 7,267 — 11,640 13,134 — — 11,640 12,505 25,567 39,818	As at 30 September 2020 RMB’000 (Unaudited) 4,187 4,205 6,406 14,185 15,141
		44,124

– II-B-13 –

FINANCIAL INFORMATION OF PINGSHAN TIANHUI

APPENDIX II-B

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 past due	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 1,848 1,691 2,018 2,828 3,412 3,275 3,059 3,230 3,778 4,770 5,595 6,874 — 11,639 13,218 — — 10,655 12,505 25,567 39,818	As at 30 September 2020 RMB’000 (Unaudited) 2,050 3,413 4,458 6,178 14,060 13,965
		44,124

Pingshan Tianhui’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 2017, 2018 and 2019 and 30 September 2020, the outstanding renewable energy subsidy amounted to RMB11,639,000, RMB24,774,000, RMB38,874,000 and RMB43,100,000 respectively.

Expected loss rate of these renewable energy subsidy receivables are assessed to be low, because the debtor is state-owned and have good repayment history. In addition, the directors of the Pingshan Tianhui are confident that the renewable energy subsidy receivables are fully recoverable but only subject to timing of allocation of funds from the PRC government. Accordingly, the credit risk regarding contract assets of tariff income receivables is limited.

As at 31 December 2017, 2018 and 2019 and 30 September 2020, trade receivables arising from the sales of electricity including renewable energy subsidies amounting to RMB12,505,000, RMB25,567,000, RMB39,818,000 and RMB44,124,000 respectively were pledged as securities for Pingshan Tianhui’s loans and borrowings (note 8).

8. Loans and borrowings

Current Secured — other borrowings Non-current Secured — other borrowings Total loans and borrowings	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) — 10,326 14,735 111,265 99,562 95,990 111,265 109,888 110,725	As at 30 September 2020 RMB’000 (Unaudited) 15,247 81,545
		96,792

– II-B-14 –

FINANCIAL INFORMATION OF PINGSHAN TIANHUI

APPENDIX II-B

Pingshan Tianhui’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 Effective Interest rates	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) — 10,326 14,735 11,610 14,641 26,298 47,388 50,704 54,225 52,267 34,217 15,467 111,265 109,888 110,725 6.03% 6.03% 6.03%	As at 30 September 2020 RMB’000 (Unaudited) 15,247 16,318 56,066 9,161
		96,792
		6.03%

As at 31 December 2017, 2018 and 2019 and 30 September 2020, loans and other borrowings bear interest at 123% of the People’s Bank of China RMB benchmark loan interest rates per annum for 5-year loans.

Loans and borrowings were secured by the following assets:

Solar power plants (note 6) Trade receivables* (note 7)	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 139,819 133,610 128,797 12,505 25,567 39,818 152,324 159,177 168,615	As at 30 September 2020 RMB’000 (Unaudited) 125,100 44,124
		169,224

As at 31 December 2017, 2018 and 2019 and 30 September 2020, the amount of trade receivables pledged for loans and borrowings included the outstanding renewable energy subsidies.

As at 31 December 2017, 2018 and 2019 and 30 September 2020, loans and other borrowings were pledged by 100% equity interests of Pingshan Tianhui’s immediate holding company, 江山永泰投資控股有限公司 (Kong Sun Yongtai Investment Holdings Limited).

9. Amounts due from/to intermediate holding company/immediate holding company/fellow subsidiaries

Amounts due from/to intermediate holding company/immediate holding company/fellow subsidiaries are interest-free, unsecured and repayable on demand.

– II-B-15 –

FINANCIAL INFORMATION OF PINGSHAN TIANHUI

APPENDIX II-B

10. Related party transactions

In addition to the transactions detailed elsewhere in the Unaudited Financial Information, Pingshan Tianhui entered into the following transactions with related parties:

	Related party						For the nine months	For the nine months
Name of related party	relationship	Type of transaction	For the year		ended 31	December	ended 30	September
			2017		2018	2019	2019	2020
			RMB’000		RMB’000	RMB’000	RMB’000	RMB’000
			(Unaudited)	(Unaudited)		(Unaudited)	(Unaudited)	(Unaudited)
Kong Sun Yongtai	Immediate holding	Operation and	252		503	670	502	502
	company	maintenance fee
北京鑫泰綠能科技有限公司(Beijing	Fellow subsidiary	Operation and	314		—	63	—	566
Xintai Green Energy Technology		maintenance fee
Co., Ltd.)

11. The impact of COVID-19 in the current reporting period

The outbreak of COVID-19 has developed rapidly in 2020 and impacted entities and economic activities in varying scales in the PRC. While there have been more immediate and pronounced disruptions in certain industries, its impact on the energy industry in the PRC has been rather modest during the current reporting period. Nevertheless, as the outbreak of COVID-19 continues to evolve, it is challenging at this juncture to predict the full extent and duration of its impact to the business and the economy. The management of Pingshan Tianhui has assessed the impact of COVID-19, and up to the date of approval of this Unaudited Financial Information, the management has not identified any areas that could have a material impact on the financial performance or position of Pingshan Tianhui as at 30 September 2020.

– II-B-16 –

FINANCIAL INFORMATION OF SHANDONG XINTAILOU

APPENDIX II-C

REPORT ON REVIEW OF FINANCIAL INFORMATION OF SHANDONG XINTAILOU DEJIA 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-C-3 to II-C-16 which comprises the statements of financial position as at 31 December 2017, 2018 and 2019 and 30 September 2020 of Shandong Xintailou Dejia Solar Power Co., Ltd. (‘‘Shandong Xintailou’’) 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 2017, 2018 and 2019 and 30 September 2019 and 2020 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 share of Shandong Xintailou 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’’).

Scope of Review

– II-C-1 –

FINANCIAL INFORMATION OF SHANDONG XINTAILOU

APPENDIX II-C

Conclusion

BDO Limited

Certified Public Accountants

Hong Kong, 26 February 2021

– II-C-2 –

FINANCIAL INFORMATION OF SHANDONG XINTAILOU

APPENDIX II-C

Set out below is the unaudited financial information of Shandong Xintailou which comprises the unaudited statements of financial position of Shandong Xintailou as at 31 December 2017, 2018 and 2019 and 30 September 2020 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 2017, 2018 and 2019 and for the nine months ended 30 September 2019 and 2020 and certain explanatory notes (altogether referred to as ‘‘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 Shandong Xintailou. The Company’s auditor, BDO Limited, has reviewed the Unaudited Financial Information of Shandong Xintailou 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.

– II-C-3 –

FINANCIAL INFORMATION OF SHANDONG XINTAILOU

APPENDIX II-C

UNAUDITED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME OF SHANDONG XINTAILOU

Notes Revenue 4 Cost of sales Gross profit Other income Administrative expenses Finance costs Profit before income tax Income tax expense 5 Profit for the year/period	For the year ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 27,409 21,722 22,536 (8,423) (8,804) (9,177) 18,986 12,918 13,359 — 3 35 (117) (759) (1,122) (7,091) (5,253) (10,343) 11,778 6,909 1,929 — — (168) 11,778 6,909 1,761	For the nine months ended 30 September 2019 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 17,876 17,599 (6,390) (7,580) 11,486 10,019 4 10 (821) (838) (9,777) (6,568) 892 2,623 (111) (322) 781 2,301

– II-C-4 –

FINANCIAL INFORMATION OF SHANDONG XINTAILOU

APPENDIX II-C

UNAUDITED STATEMENTS OF FINANCIAL POSITION OF SHANDONG XINTAILOU

Notes ASSETS AND LIABILITIES Non-current assets Property, plant and equipment Solar power plants 6 Right-of-use assets Lease prepayments Current assets Trade and other receivables 7 Amounts due from intermediate holding companies 9 Amounts due from immediate holding company 9 Amounts due from fellow subsidiaries 9 Cash and cash equivalents Total current assets Current liabilities Trade and other payables Tax payable Loans and borrowings 8 Amounts due to intermediate holding companies 9 Amounts due to immediate holding company 9 Amounts due to fellow subsidiaries 9 Total current liabilities Net current (liabilities)/assets Total assets less current liabilities	2017 RMB’000 (Unaudited) 137 167,628 — 6,459 174,224 47,983 — — — 347 48,330 20,617 — 24,000 — 82,493 — 127,110 (78,780) 95,444	As at 31 December 2018 2019 RMB’000 RMB’000 (Unaudited) (Unaudited) 107 70 164,170 149,757 — 5,901 6,173 — 170,450 155,728 40,607 49,497 6,110 — — 20,441 — — 137 7,677 46,854 77,615 20,409 7,502 — 56 24,000 9,128 1,869 48,634 90,964 — 6 469 137,248 65,789 (90,394) 11,826 80,056 167,554	As at 30 September 2020 RMB’000 (Unaudited) 28 145,213 5,687 — 150,928 51,532 — 4,605 5 5,004 61,146 11,291 102 9,941 46,754 — 1,264 69,352 (8,206) 142,722

– II-C-5 –

FINANCIAL INFORMATION OF SHANDONG XINTAILOU

APPENDIX II-C

Notes Non-current liabilities Loans and borrowings 8 Total non-current liabilities Net assets Equity Registered capital Reserves Total equity	2017 RMB’000 (Unaudited) 43,235 43,235 52,209 36,000 16,209 52,209	As at 31 December 2018 2019 RMB’000 RMB’000 (Unaudited) (Unaudited) 20,938 106,675 20,938 106,675 59,118 60,879 36,000 36,000 23,118 24,879 59,118 60,879	As at 30 September 2020 RMB’000 (Unaudited) 98,699
			98,699
			44,023
			36,000 8,023
			44,023

– II-C-6 –

FINANCIAL INFORMATION OF SHANDONG XINTAILOU

APPENDIX II-C

UNAUDITED STATEMENTS OF CASH FLOWS OF SHANDONG XINTAILOU

Cash flows from operating activities Profit before income tax Adjustments for: Depreciation of property, plant and equipment Depreciation of solar power plants Depreciation of right-of-use assets Amortization of lease prepayments Loss on disposal of property, plant and equipment Interest expense Interest income Operating profit before working capital changes (Increase)/Decrease in trade and other receivables (Decrease)/Increase in trade and other payables Cash generated from operating activities Tax paid Net cash generated from operating activities	For the year ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 11,778 6,909 1,929 35 34 37 6,718 6,743 6,525 — — 272 272 286 — — — — 7,091 5,253 10,343 — (3) (35) 25,894 19,222 19,071 (15,553) 7,376 (8,890) (7,030) (208) (4,294) 3,311 26,390 5,887 — — (112) 3,311 26,390 5,775	For the nine months ended 30 September 2019 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 892 2,623 26 35 5,058 4,891 204 214 — — — 7 9,777 6,568 (4) (10) 15,953 14,328 (10,730) (2,035) 1,011 3,789 6,234 16,082 (64) (276) 6,170 15,806

– II-C-7 –

FINANCIAL INFORMATION OF SHANDONG XINTAILOU

APPENDIX II-C

Cash flows from investing activities Purchase of property, plant and equipment Payments for construction cost of in respect of solar power plants Payments for purchase of lease prepayments Interests received Net cash used in investing activities Cash flows from financing activities Proceed from loans and borrowings Repayment of loans and borrowings Interest paid Dividend paid to immediate holding company Advances from intermediate holding companies Advances from immediate holding company Advances from fellow subsidiaries Repayments to intermediate holding companies Repayments to immediate holding company Repayments to fellow subsidiaries Net cash (used in)/generated from financing activities Net (decrease)/increase 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 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) (64) (4) — (453) (3,285) (725) (65) — — — 3 35 (582) (3,286) (690) — — 70,865 (23,008) (22,297) — (7,091) (5,253) (10,343) — — — — — 52,875 25,892 8,471 — — 6 463 — (4,241) — — — (111,405) — — — (4,207) (23,314) 2,455 (1,478) (210) 7,540 1,825 347 137 347 137 7,677	For the nine months ended 30 September 2019 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) — — (533) (347) — — 4 10 (529) (337) 72,712 — — (7,163) (9,777) (6,568) — (19,157) 51,735 — — 15,836 — 790 — (1,880) (115,510) — — — (840) (18,142) 4,801 (2,673) 137 7,677 4,938 5,004

– II-C-8 –

FINANCIAL INFORMATION OF SHANDONG XINTAILOU

APPENDIX II-C

UNAUDITED STATEMENTS OF CHANGES IN EQUITY OF SHANDONG XINTAILOU

Balance at 1 January 2017 Profit for the year Appropriation to statutory reserves Balance at 31 December 2017 and 1 January 2018 Profit for the year Appropriation to statutory reserves Balance at 31 December 2018 and 1 January 2019 Profit for the year Appropriation to statutory reserves Balance at 31 December 2019 and 1 January 2020 Profit for the period Appropriation to statutory reserves Proposed dividend Balance at 30 September 2020 Balance at 31 December 2018 and 1 January 2019 Profit for the period Appropriation to statutory reserves Balance at 30 September 2019	Registered capital RMB’000 (Unaudited) 36,000 — — 36,000 — — 36,000 — — 36,000 — — — 36,000 36,000 — — 36,000	Statutory reserves RMB’000 (Unaudited) 443 — 1,178 1,621 — 691 2,312 — 176 2,488 — 230 — 2,718 2,312 — 78 2,390	Retained profits RMB’000 (Unaudited) 3,988 11,778 (1,178) 14,588 6,909 (691) 20,806 1,761 (176) 22,391 2,301 (230) (19,157) 5,305 20,806 781 (78) 21,509	Total RMB’000 (Unaudited) 40,431 11,778 — 52,209 6,909 — 59,118 1,761 — 60,879 2,301 — (19,157) 44,023 59,118 781 — 59,899

– II-C-9 –

FINANCIAL INFORMATION OF SHANDONG XINTAILOU

APPENDIX II-C

NOTES TO THE UNAUDITED FINANCIAL INFORMATION

1. General Information

Shandong Xintailou is a limited liability company incorporated in PRC. The principal activity of Shandong Xintailou is operation of solar power plants.

On 22 October 2020, the Vendor, an indirect wholly-owned subsidiary of the Company, the Purchaser and Shandong Xintailou entered into the Agreement, pursuant to which the Vendor agreed to sell, and the Purchaser agreed to acquire, the entire equity interest in Shandong Xintailou at a total consideration of approximately RMB17,641,000. Upon completion of the Disposal, Shandong Xintailou will cease to be the subsidiary of the Company.

2. Basis of Preparation of the Unaudited Financial Information

The Unaudited Financial Information of, Shandong Xintailou for the years ended 31 December 2017, 2018 and 2019 and the nine months ended 30 September 2019 and 2020 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 of Shandong Xintailou 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 Shandong Xintailou had net current liabilities of RMB78,780,000, RMB90,394,000 and RMB8,206,000 as at 31 December 2017 and 2018 and 30 September 2020 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 Shandong Xintailou for the next twelve months from the reporting date, the directors are of the opinion that Shandong Xintailou 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 Shandong Xintailou till the completion date of disposal until such time when the repayment will not affect Shandong Xintailou’s ability to repay other creditors in the normal course of business.

– II-C-10 –

FINANCIAL INFORMATION OF SHANDONG XINTAILOU

APPENDIX II-C

3. Changes in accounting policies

HKFRS 9 — Financial Instruments

HKFRS 9 is effective for the accounting period beginning on or after 1 January 2018. HKFRS 9 replaces HKAS 39, Financial instruments: recognition and measurement (‘‘HKAS 39’’). It sets out the requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. The new impairment model in HKFRS 9 replaces the ‘‘incurred loss’’ model in HKAS 39 with an expected credit loss (‘‘ECL’’) model. Under the ECL model, it will no longer be necessary for a loss event to occur before an impairment loss is recognised. Instead, an entity is required to recognise and measure either a 12-month ECL or a lifetime ECL, depending on the asset and the facts and circumstances. As a consequence of adopting HKFRS 9, Shandong Xintailou’s trade and other receivables amounting to RMB47,983,000 as at 1 January 2018 was reclassified from ‘‘loans and receivables’’ as ‘‘amortised cost financial assets’’. Applying ECL model does not result in further provision for ECL as the settlement of these receivables is regulated by the Central Government of the PRC, and periodic payments have been received with no history of default in the past. As such, the Directors consider that the ECL in renewable energy subsidies receivables as at 1 January 2018 is immaterial.

As at 1 January 2018, the Company’s amounts due from intermediate holding companies, amounts due from immediate holding company, amounts due from fellow subsidiaries and cash and cash equivalents were reclassified from the original classification of ‘‘Loan and receivables’’ under HKAS 39 to the new classification of ‘‘Amortised cost’’ under HKFRS 9. As at 1 January 2018, the directors consider that there is no material difference between the previous carrying amounts and that under new classification.

HKFRS 15 — Revenue from Contracts with Customers

Shandong Xintailou has adopted HKFRS 15 using cumulative effect method without practical expedients. Shandong Xintailou has recognised the cumulative effect of initially applying HKFRS 15 as an adjustment to the opening balance of accumulated losses at the date of initial application (that is, 1 January 2018). As a result, the unaudited financial information presented for 2017 has not been restated.

Shandong Xintailou sells electricity to the power grid company. Revenue from sales of electricity is recognised over time when the electricity generated and transmitted is simultaneously received and consumed by the power grid companies. Shandong Xintailou has elected the practical expedient to recognise revenue in the amount to which Shandong Xintailou has a right to invoice as the amount represents and corresponds directly with the value of performance completed and transferred to the power grid company. Shandong Xintailou has no unsatisfied performance obligations at each reporting date. In the opinion of the Directors, the adoption of HKFRS 15 did not result in significant impact on Shandong Xintailou’s accounting policies on revenue.

HKFRS 16 — Lease

HKFRS 16 is effective for the accounting period beginning on or after 1 January 2019. The adoption of HKFRS 16 primarily affects Shandong Xintailou’s accounting as a lessee of leases which are classified as operating leases under HKAS 17, Leases. Upon the adoption of HKFRS 16, at the lease commencement date, Shandong Xintailou as a lessee recognises a right-of-use asset and a lease liability, except for short-term leases with a lease term of 12 months or less and leases of low-value assets. The application of HKFRS 16 has impact on the recognition of right-of-use assets and lease liabilities as well as the recognition of depreciation charges of right-of-use assets and the interest expense on lease liabilities.

– II-C-11 –

FINANCIAL INFORMATION OF SHANDONG XINTAILOU

APPENDIX II-C

Shandong Xintailou has applied 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 comparative information presented in 2018 and 2017 has not been restated and continues to be reported under HKAS 17, as permitted under the simplified transition approach in the standard. The reclassifications and the adjustments arising from HKFRS 16 are therefore recognised in the opening balances on 1 January 2019. In the opinion of our Directors, the adoption of HKFRS 16 resulted in reclassification of Shandong Xintailou’s ‘‘Lease prepayments’’ as ‘‘Right-of-use assets’’ and did not have significant impact on Shandong Xintailou’s net assets and net profits when compared with those that would have been presented under HKAS 17.

4. Revenue

Revenue represents income from sales of electricity (including renewable energy subsidies). During the years ended 31 December 2017, 2018 and 2019 and the nine months ended 30 September 2019 and 2020, sales of electricity includes renewable energy subsidies amounting to RMB19,291,000, RMB13,144,000, RMB13,682,000, RMB10,837,000 and RMB10,760,000 respectively.

5. Income tax expense

Pursuant to CaiShui 2008 No. 46 Notice on the Execution of the Catalogue of Public Infrastructure Projects Entitled for Preferential Tax Treatment* (財政部、國家稅務總局關於執行公共基礎設施項目企業所得稅優惠目錄有關問題的通知), Shandong Xintailou has been approved to entitled a tax holiday of a 3-year full exemption followed by a 3-year 50% exemption commencing from their respective years in which their first operating income is derived.

6. Solar power plants

Cost At 1 January 2017 Additions At 31 December 2017 and 1 January 2018 Additions At 31 December 2018 and 1 January 2019 Additions Written off At 31 December 2019 and 1 January 2020 Additions At 30 September 2020 Accumulated depreciation At 1 January 2017 Charge for the year At 31 December 2017 and 1 January 2018 Charge for the year At 31 December 2018 and 1 January 2019 Charge for the year	Solar power plants RMB’000 (Unaudited) 178,787 453 179,240 3,285 182,525 725 (8,613) 174,637 347 174,984 (4,894) (6,718) (11,612) (6,743) (18,355) (6,525)

– II-C-12 –

FINANCIAL INFORMATION OF SHANDONG XINTAILOU

APPENDIX II-C

At 31 December 2019 and 1 January 2020 Charge for the period At 30 September 2020 Net carrying amount At 31 December 2017 At 31 December 2018 At 31 December 2019 At 30 September 2020	Solar power plants RMB’000 (Unaudited) (24,880 (4,891
	(29,771
	167,628
	164,170
	149,757
	145,213

As at 31 December 2017, 2018 and 2019 and 30 September 2020, solar plants were all pledged as securities for Shandong Xintailou’s loans and borrowings (note 8).

7. Trade and other receivables

Trade receivables Other receivables, prepayments and deposits	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 29,425 24,729 31,808 18,558 15,878 17,689 47,983 40,607 49,497	As at 30 September 2020 RMB’000 (Unaudited) 36,174 15,358
		51,532

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 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 5,515 3,558 3,738 3,905 4,174 4,218 8,242 8,035 8,108 11,763 8,962 15,744 — — — 29,425 24,729 31,808	As at 30 September 2020 RMB’000 (Unaudited) 4,939 5,696 5,656 15,404 4,479
		36,174

– II-C-13 –

FINANCIAL INFORMATION OF SHANDONG XINTAILOU

APPENDIX II-C

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 past due	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 3,360 1,213 1,379 3,401 3,689 3,683 4,463 4,541 4,635 6,439 6,324 7,101 11,762 8,962 15,010 — — — 29,425 24,729 31,808	As at 30 September 2020 RMB’000 (Unaudited) 2,340 3,990 5,439 5,846 15,425 3,134
		36,174

Shandong Xintailou’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 2017, 2018 and 2019 and 30 September 2020, the outstanding renewable energy subsidy amounted to RMB29,425,000, RMB24,729,000, RMB31,808,000 and RMB36,174,000 respectively.

Expected loss rate of these renewable energy subsidy receivables are assessed to be low, because the debtor is state-owned and have good repayment history. In addition, the directors of the Shandong Xintailou are confident that the renewable energy subsidy receivables are fully recoverable but only subject to timing of allocation of funds from the PRC government. Accordingly, the credit risk regarding contract assets of tariff income receivables is limited.

As at 31 December 2017, 2018 and 2019 and 30 September 2020, trade receivables arising from the sales of electricity including renewable energy subsidies amounting to RMB29,425,000, RMB24,729,000, RMB31,808,000 and RMB36,174,000 respectively were pledged as securities for Shandong Xintailou’s loans and borrowings (note 8).

8. Loans and borrowings

Current Secured — other borrowings Non-current Secured — other borrowings Total loans and borrowings	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 24,000 24,000 9,128 43,235 20,938 106,675 67,235 44,938 115,803	As at 30 September 2020 RMB’000 (Unaudited) 9,941 98,699
		108,640

– II-C-14 –

FINANCIAL INFORMATION OF SHANDONG XINTAILOU

APPENDIX II-C

Shandong Xintailou’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 Effective Interest rates	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 24,000 24,000 9,128 24,000 20,938 26,415 19,235 — 56,260 — — 24,000 67,235 44,938 115,803 6.13% 6.13% 6.13%–6.65%	As at 30 September 2020 RMB’000 (Unaudited) 9,941 24,781 61,874 12,044
		108,640
		6.65%

As at 31 December 2017, 2018 and 2019 and 30 September 2020, loans and other borrowings bear interest ranging from 125% to 140% of the People’s Bank of China RMB benchmark loan interest rates annum for 5-year loans.

Loans and borrowings were secured by the following assets:

Solar power plants (note 6) Trade receivables* (note 7)	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 167,628 164,170 149,757 29,475 24,729 31,808 197,103 188,899 181,565	As at 30 September 2020 RMB’000 (Unaudited) 145,213 36,174
		181,387

As at 31 December 2017, 2018 and 2019 and 30 September 2020, the amount of trade receivables pledged for loans and borrowings included the outstanding renewable energy subsidies.

As at 31 December 2019 and 30 September 2020, loans and other borrowings were pledged by 100% equity interests of Shandong Xintailou respectively.

9. Amounts due from/to intermediate holding companies/immediate holding company/fellow subsidiaries

Amounts due from/to intermediate holding companies/fellow subsidiaries are interest-free, unsecured and repayable on demand.

As at 31 December 2017 and 2018, amounts due to immediate holding company was interest-free, unsecured and repayable on demand. As at 31 December 2019 and 30 September 2020, amounts due to immediate holding company was carried interest at rate 8.00% per annum, unsecured and repayable on demand.

– II-C-15 –

FINANCIAL INFORMATION OF SHANDONG XINTAILOU

APPENDIX II-C

10. Related party transactions

In addition to the transactions detailed elsewhere in the Unaudited Financial Information, Shandong Xintailou entered into the following transactions with related parties:

	Related party						For the nine months	For the nine months
Name of related party	relationship	Type of transaction	For the year		ended 31	December	ended 30	September
			2017		2018	2019	2019	2020
			RMB’000		RMB’000	RMB’000	RMB’000	RMB’000
			(Unaudited)	(Unaudited)		(Unaudited)	(Unaudited)	(Unaudited)
Kong Sun Yongtai	Immediate holding	Operation and	252		503	670	502	502
	company	maintenance fee
		Finance cost	—		—	3,898	3,898	—
北京鑫泰綠能科技有限公司(Beijing	Fellow subsidiary	Operation and	314		—	63	—	566
Xintai Green Energy Technology		maintenance fee
Co., Ltd.)

11. The impact of COVID-19 in the current reporting period

The outbreak of COVID-19 has developed rapidly in 2020 and impacted entities and economic activities in varying scales in the PRC. While there have been more immediate and pronounced disruptions in certain industries, its impact on the energy industry in the PRC has been rather modest during the current reporting period. Nevertheless, as the outbreak of COVID-19 continues to evolve, it is challenging at this juncture to predict the full extent and duration of its impact to the business and the economy. The management of Shandong Xintailou has assessed the impact of COVID-19, and up to the date of approval of this Unaudited Financial Information, the management has not identified any areas that could have a material impact on the financial performance or position of Shandong Xintailou as at 30 September 2020.

– II-C-16 –

FINANCIAL INFORMATION OF QIANCHAO BROTHERS

APPENDIX II-D

REPORT ON REVIEW OF FINANCIAL INFORMATION OF DEZHOU CITY LINGCHENG DISTRICT QIANCHAO BROTHERS ENERGY TECHNOLOGY 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-D-3 to II-D-16 which comprises the statements of financial position as at 31 December 2017, 2018 and 2019 and 30 September 2020 of Dezhou City Lingcheng District Qianchao Brothers Energy Technology Co., Ltd. (‘‘Qianchao Brothers’’) 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 2017, 2018 and 2019 and 30 September 2019 and 2020 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 share of Qianchao Brothers 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’’).

Scope of Review

– II-D-1 –

FINANCIAL INFORMATION OF QIANCHAO BROTHERS

APPENDIX II-D

Conclusion

BDO Limited

Certified Public Accountants

Hong Kong, 26 February 2021

– II-D-2 –

FINANCIAL INFORMATION OF QIANCHAO BROTHERS

APPENDIX II-D

Set out below is the unaudited financial information of Qianchao Brothers which comprises the unaudited statements of financial position of Qianchao Brothers as at 31 December 2017, 2018 and 2019 and 30 September 2020 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 2017, 2018 and 2019 and for the nine months ended 30 September 2019 and 2020 and certain explanatory notes (altogether referred to as ‘‘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 Qianchao Brothers. The Company’s auditor, BDO Limited, has reviewed the Unaudited Financial Information of Qianchao Brothers 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.

– II-D-3 –

FINANCIAL INFORMATION OF QIANCHAO BROTHERS

APPENDIX II-D

UNAUDITED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME OF QIANCHAO BROTHERS

Notes Revenue 4 Cost of sales Gross profit Other income Administrative expenses Finance costs Profit/(Loss) before income tax Income tax expense 5 Profit/(Loss) for the year/ period	For the year ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 15,516 6,849 21,937 (5,496) (5,335) (8,491) 10,020 1,514 13,446 — 47 17 (2,754) (764) (3,250) (6,024) (8,341) (12,187) 1,242 (7,544) (1,974) — — — 1,242 (7,544) (1,974)	For the nine months ended 30 September 2019 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 17,205 16,963 (5,790) (6,247) 11,415 10,716 10 9 (2,964) (2,275) (6,834) (7,690) 1,627 760 — — 1,627 760

– II-D-4 –

FINANCIAL INFORMATION OF QIANCHAO BROTHERS

APPENDIX II-D

UNAUDITED STATEMENTS OF FINANCIAL POSITION OF QIANCHAO BROTHERS

Notes ASSETS AND LIABILITIES Non-current assets Property, plant and equipment Solar power plants 6 Right-of-use assets Lease prepayments Current assets Trade and other receivables 7 Amounts due from fellow subsidiaries 9 Cash and cash equivalents Total current assets Current liabilities Trade and other payables Loans and borrowings 8 Amounts due to intermediate holding companies 9 Amounts due to immediate holding company 9 Amounts due to fellow subsidiaries 9 Total current liabilities Net current assets/(liabilities) Total assets less current liabilities	2017 RMB’000 (Unaudited) 3,125 133,206 — 417 136,748 41,559 — 19,855 61,414 25,932 — — 9,922 5,384 41,238 20,176 156,924	As at 31 December 2018 2019 RMB’000 RMB’000 (Unaudited) (Unaudited) 2,764 2,065 125,722 123,865 — 7,932 1,583 — 130,069 133,862 48,584 56,486 — — 5,430 5,484 54,014 61,970 8,725 5,944 35,832 44,858 10,770 15,975 11,918 13,486 5,390 8,060 72,635 88,323 (18,621) (26,353) 111,448 107,509	As at 30 September 2020 RMB’000 (Unaudited) 1,941 122,268 7,691 — 131,900 65,871 60 4,289 70,220 6,988 42,001 19,645 13,355 9,217 91,206 (20,986) 110,914

– II-D-5 –

FINANCIAL INFORMATION OF QIANCHAO BROTHERS

APPENDIX II-D

Notes Non-current liabilities Lease liabilities Loans and borrowings 8 Total non-current liabilities Net assets Equity Registered capital Reserves Total equity	2017 RMB’000 (Unaudited) — 116,175 116,175 40,749 34,000 6,749 40,749	As at 31 December 2018 2019 RMB’000 RMB’000 (Unaudited) (Unaudited) — 7,133 78,243 69,145 78,243 76,278 33,205 31,231 34,000 34,000 (795) (2,769) 33,205 31,231	As at 30 September 2020 RMB’000 (Unaudited) 7,431 71,492 78,923 31,991 34,000 (2,009) 31,991

– II-D-6 –

FINANCIAL INFORMATION OF QIANCHAO BROTHERS

APPENDIX II-D

UNAUDITED STATEMENTS OF CASH FLOWS OF QIANCHAO BROTHERS

Cash flows from operating activities Profit/(Loss) before income tax Adjustments for: Depreciation of property, plant and equipment Depreciation of solar power plants Depreciation of right-of-use assets Amortization of lease prepayments Interest expense Interest income Operating profit before working capital changes Increase in trade and other receivables Increase/(Decrease) in trade and other payables Net cash generated from operating activities	For the year ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 1,242 (7,544) (1,974) 1,070 361 701 4,012 2,113 5,349 — — 384 1,250 556 — 6,024 8,341 12,187 — (47) (17) 13,598 3,780 16,630 (41,559) (7,025) (7,902) 31,316 4,785 (2,781) 3,355 1,540 5,947	For the nine months ended 30 September 2019 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 1,627 760 526 518 4,012 4,543 288 241 — — 6,834 7,690 (10) (9) 13,277 13,743 (8,678) (9,385) (1,052) 1,044 3,547 5,402

– II-D-7 –

FINANCIAL INFORMATION OF QIANCHAO BROTHERS

APPENDIX II-D

Cash flows from investing activities Purchase of property, plant and equipment Payments for construction cost of in respect of solar power plants Payments for purchase of lease prepayments Interests received Net cash used in investing activities Cash flows from financing activities Proceed from loans and borrowings Repayment of loans and borrowings Interest paid Proceed from intermediate holding companies Proceed from immediate holding company Proceed from fellow subsidiaries Repayment to immediate holding company Repayment to fellow subsidiaries 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 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) (2,679) — (2) (104,611) (16,621) (3,492) (1,667) (1,722) — — 47 17 (108,957) (18,296) (3,477) 116,175 — — — (2,100) (72) (6,024) (8,341) (11,787) — 10,770 5,205 9,922 1,996 1,568 5,384 6 2,670 — — — — — — 125,457 2,331 (2,416) 19,855 (14,425) 54 — 19,855 5,430 19,855 5,430 5,484	For the nine months ended 30 September 2019 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) (3) (394) (1,431) (2,946) — — 10 9 (1,424) (3,331) — — (1,463) (510) (6,537) (7,392) 5,015 3,670 507 — — 1,097 — (131) (1) — (2,479) (3,266) (356) (1,195) 5,430 5,484 5,074 4,289

– II-D-8 –

FINANCIAL INFORMATION OF QIANCHAO BROTHERS

APPENDIX II-D

UNAUDITED STATEMENTS OF CHANGES IN EQUITY OF QIANCHAO BROTHERS

Balance at 1 January 2017 Profit for the year Appropriation to statutory reserves Balance at 31 December 2017 and 1 January 2018 Loss for the year Balance at 31 December 2018 and 1 January 2019 Loss for the year Balance at 31 December 2019 and 1 January 2020 Profit for the period Appropriation to statutory reserves Balance at 30 September 2020 Balance at 31 December 2018 and 1 January 2019 Profit for the period Appropriation to statutory reserves Balance at 30 September 2019	Registered capital RMB’000 34,000 — — 34,000 — 34,000 — 34,000 — — 34,000 34,000 — — 34,000	Statutory reserves RMB’000 — — 663 663 — 663 — 663 — 76 739 663 — 163 826	Retained profits/ (Accumulated losses) RMB’000 5,507 1,242 (663) 6,086 (7,544) (1,458) (1,974) (3,432) 760 (76) (2,748) (1,458) 1,627 (163) 6	Total RMB’000 39,507 1,242 — 40,749 (7,544) 33,205 (1,974) 31,231 760 — 31,991 33,205 1,627 — 34,832

– II-D-9 –

FINANCIAL INFORMATION OF QIANCHAO BROTHERS

APPENDIX II-D

NOTES TO THE UNAUDITED FINANCIAL INFORMATION

1. General Information

Qianchao Brothers is a limited liability company incorporated in PRC. The principal activity of Qianchao Brothers is operation of solar power plants.

On 22 October 2020, the Vendor, an indirect wholly-owned subsidiary of the Company, the Purchaser and Qianchao Brothers entered into the Agreement, pursuant to which the Vendor agreed to sell, and the Purchaser agreed to acquire, the entire equity interest in Qianchao Brothers at a total consideration of approximately RMB25,947,000. Upon completion of the Disposal, Qianchao Brothers will cease to be the subsidiary of the Company.

2. Basis of Preparation of the Unaudited Financial Information

The Unaudited Financial Information of, Qianchao Brothers for the years ended 31 December 2017, 2018 and 2019 and the nine months ended 30 September 2019 and 2020 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 of Qianchao Brothers 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 Qianchao Brothers had net current liabilities of RMB18,621,000, RMB26,353,000 and RMB20,986,000 as at 31 December 2018 and 2019 and 30 September 2020 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 Qianchao Brothers for the next twelve months from the reporting date, the directors are of the opinion that Qianchao Brothers 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 Qianchao Brothers till the completion date of disposal until such time when the repayment will not affect Qianchao Brothers’ s ability to repay other creditors in the normal course of business.

– II-D-10 –

FINANCIAL INFORMATION OF QIANCHAO BROTHERS

APPENDIX II-D

3. Changes in accounting policies

HKFRS 9 — Financial Instruments

HKFRS 9 is effective for the accounting period beginning on or after 1 January 2018. HKFRS 9 replaces HKAS 39, Financial instruments: recognition and measurement (‘‘HKAS 39’’). It sets out the requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. The new impairment model in HKFRS 9 replaces the ‘‘incurred loss’’ model in HKAS 39 with an expected credit loss (‘‘ECL’’) model. Under the ECL model, it will no longer be necessary for a loss event to occur before an impairment loss is recognised. Instead, an entity is required to recognise and measure either a 12-month ECL or a lifetime ECL, depending on the asset and the facts and circumstances. As a consequence of adopting HKFRS 9, Qianchao Brothers’s trade and other receivables amounting to RMB41,559,000 as at 1 January 2018 was reclassified from ‘‘loans and receivables’’ as ‘‘amortised cost financial assets’’. Applying ECL model does not result in further provision for ECL as the settlement of these receivables is regulated by the Central Government of the PRC, and periodic payments have been received with no history of default in the past. As such, the Directors consider that the ECL in renewable energy subsidies receivables as at 1 January 2018 is immaterial.

As at 1 January 2018, the Company’s amounts due from fellow subsidiaries and cash and cash equivalents were reclassified from the original classification of ‘‘Loan and receivables’’ under HKAS 39 to the new classification of ‘‘Amortised cost’’ under HKFRS 9. As at 1 January 2018, the directors consider that there is no material difference between the previous carrying amounts and that under new classification.

HKFRS 15 — Revenue from Contracts with Customers

Qianchao Brothers has adopted HKFRS 15 using cumulative effect method without practical expedients. Qianchao Brothers has recognised the cumulative effect of initially applying HKFRS 15 as an adjustment to the opening balance of accumulated losses at the date of initial application (that is, 1 January 2018). As a result, the unaudited financial information presented for 2017 has not been restated.

Qianchao Brothers sells electricity to the power grid company. Revenue from sales of electricity is recognised over time when the electricity generated and transmitted is simultaneously received and consumed by the power grid companies. Qianchao Brothers has elected the practical expedient to recognise revenue in the amount to which Qianchao Brothers has a right to invoice as the amount represents and corresponds directly with the value of performance completed and transferred to the power grid company. Qianchao Brothers has no unsatisfied performance obligations at each reporting date. In the opinion of the Directors, the adoption of HKFRS 15 did not result in significant impact on Qianchao Brothers’s accounting policies on revenue.

HKFRS 16 — Lease

HKFRS 16 is effective for the accounting period beginning on or after 1 January 2019. The adoption of HKFRS 16 primarily affects Qianchao Brothers’s accounting as a lessee of leases which are classified as operating leases under HKAS 17, Leases. Upon the adoption of HKFRS 16, at the lease commencement date, Qianchao Brothers as a lessee recognises a right-of-use asset and a lease liability, except for short-term leases with a lease term of 12 months or less and leases of low-value assets. The application of HKFRS 16 has impact on the recognition of right-of-use assets and lease liabilities as well as the recognition of depreciation charges of right-of-use assets and the interest expense on lease liabilities.

Qianchao Brothers has applied 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 comparative information presented in 2018 and 2017 has not been restated and continues to be reported under HKAS 17, as permitted under the simplified transition approach in the

– II-D-11 –

FINANCIAL INFORMATION OF QIANCHAO BROTHERS

APPENDIX II-D

standard. The reclassifications and the adjustments arising from HKFRS 16 are therefore recognised in the opening balances on 1 January 2019. In the opinion of our Directors, the adoption of HKFRS 16 resulted in reclassification of Qianchao Brothers’s ‘‘Lease prepayments’’ as ‘‘Right-of-use assets’’ and did not have significant impact on Qianchao Brothers’s net assets and net profits when compared with those that would have been presented under HKAS 17.

4. Revenue

Revenue represents income from sales of electricity (including renewable energy subsidies). During the years ended 31 December 2017, 2018 and 2019 and the nine months ended 30 September 2019 and 2020, sales of electricity includes renewable energy subsidies amounting to RMB8,786,000, RMB3,810,000, RMB12,251,000, RMB9,571,000 and RMB9,535,000 respectively.

5. Income tax expense

Pursuant to CaiShui 2008 No. 46 Notice on the Execution of the Catalogue of Public Infrastructure Projects Entitled for Preferential Tax Treatment* (財政部、國家稅務總局關於執行公共基礎設施項目企業所得稅優惠目錄有關問題的通知), Qianchao Brothers has been approved to entitled a tax holiday of a 3-year full exemption followed by a 3-year 50% exemption commencing from their respective years in which their first operating income is derived.

6. Solar power plants

Cost At 1 January 2017 Additions Transfer upon completion At 31 December 2017 and 1 January 2018 Additions Written off At 31 December 2018 and 1 January 2019 Additions At 31 December 2019 Additions At 30 September 2020 Accumulated depreciation At 1 January 2017 Charge for the year At 31 December 2017 and 1 January 2018 Charge for the year At 31 December 2018 and 1 January 2019 Charge for the year At 31 December 2019 and 1 January 2020 Charge for the period At 30 September 2020	Solar power plants RMB’000 (Unaudited) — 137,173 45 137,218 16,621 (21,992) 131,847 3,492 135,339 2,946 138,285 — (4,012) (4,012) (2,113) (6,125) (5,349) (11,474) (4,543) (16,017)	Solar power plants under construction RMB’000 (Unaudited) — 45 (45) — — — — — — — — — — — — — — — — —	Total RMB’000 (Unaudited) — 137,218 — 137,218 16,621 (21,992) 131,847 3,492 135,339 2,946 138,285 — (4,012) (4,012) (2,113) (6,125) (5,349) (11,474) (4,543) (16,017)

– II-D-12 –

FINANCIAL INFORMATION OF QIANCHAO BROTHERS

APPENDIX II-D

Net carrying amount At 31 December 2017 At 31 December 2018 At 31 December 2019 At 30 September 2020	Solar power plants RMB’000 (Unaudited) 133,206 125,722 123,865 122,268	Solar power plants under construction RMB’000 (Unaudited) — — — —	Total RMB’000 (Unaudited) 133,206
			125,722
			123,865
			122,268

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

As at 31 December 2017, 2018 and 2019 and 30 September 2020, solar plants were all pledged as securities for Qianchao Brothers’s loans and borrowings (note 8).

7. Trade and other receivables

Trade receivables Other receivables, prepayments and deposits	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 19,872 24,169 38,008 21,687 24,415 18,478 41,559 48,584 56,486	As at 30 September 2020 RMB’000 (Unaudited) 49,252 16,619
		65,871

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 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 1,822 2,281 3,610 3,153 — 3,639 3,797 2,824 7,251 5,193 19,064 4,444 5,907 — 19,064 19,872 24,169 38,008	As at 30 September 2020 RMB’000 (Unaudited) 4,670 4,680 5,504 12,509 21,889
		49,252

– II-D-13 –

FINANCIAL INFORMATION OF QIANCHAO BROTHERS

APPENDIX II-D

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 past due	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 3,837 1,490 1,368 3,393 790 3,435 6,735 — 3,958 5,907 3,837 6,567 — 18,052 4,628 — — 18,052 19,872 24,169 38,008	As at 30 September 2020 RMB’000 (Unaudited) 2,369 3,518 4,575 5,586 11,316 21,888
		49,252

Qianchao Brothers’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 2017, 2018 and 2019 and 30 September 2020, the outstanding renewable energy subsidy amounted to RMB19,064,000, RMB23,507,000, RMB37,426,000 and RMB48,201,000 respectively.

Expected loss rate of these renewable energy subsidy receivables are assessed to be low, because the debtor is state-owned and have good repayment history. In addition, the directors of the Qianchao Brothers are confident that the renewable energy subsidy receivables are fully recoverable but only subject to timing of allocation of funds from the PRC government. Accordingly, the credit risk regarding contract assets of tariff income receivables is limited.

As at 31 December 2017, 2018 and 2019 and 30 September 2020, trade receivables arising from the sales of electricity including renewable energy subsidies amounting to RMB19,872,000, RMB24,169,000, RMB38,008,000 and RMB49,252,000 respectively were pledged as securities for Qianchao Brothers’s loans and borrowings (note 8).

8. Loans and borrowings

Current Secured — other borrowings Non-current Secured — other borrowings Total loans and borrowings	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) — 35,832 44,858 116,175 78,243 69,145 116,175 114,075 114,003	As at 30 September 2020 RMB’000 (Unaudited) 42,001 71,492
		113,493

– II-D-14 –

FINANCIAL INFORMATION OF QIANCHAO BROTHERS

APPENDIX II-D

Qianchao Brothers’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 Effective Interest rates	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) — 35,832 44,858 37,932 9,097 9,884 29,700 32,207 34,869 48,543 36,939 24,392 116,175 114,075 114,003 5.90% 5.90% 5.90%–7.00%	As at 30 September 2020 RMB’000 (Unaudited) 42,001 9,683 34,188 27,621
		113,493
		7.00%

As at 31 December 2017, 2018 and 2019 and 30 September 2020, loans and other borrowings bear interest ranging from 120% to 150% of the People’s Bank of China RMB benchmark loan interest rates annum for 5-year loans.

Loans and borrowings were secured by the following assets:

Solar power plants (note 6) Trade receivables* (note 7)	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 133,206 125,722 123,865 19,872 24,169 38,008 153,078 149,891 161,873	As at 30 September 2020 RMB’000 (Unaudited) 122,268 49,252
		171,520

As at 31 December 2017, 2018 and 2019 and 30 September 2020, the amount of trade receivables pledged for loans and borrowings included the outstanding renewable energy subsidies.

As at 31 December 2017, 2018 and 2019 and 30 September 2020, loans and other borrowings were pledged by 100% equity interests of Qianchao Brother’s fellow subsidiary, 濟南天冠能源科技有限公司 (Jinan Tianguan Energy Technology Limited Company).

9. Amounts due from/to intermediate holding companies/immediate holding company/fellow subsidiaries

Amounts due from/to intermediate holding companies/fellow subsidiaries are interest-free, unsecured and repayable on demand.

As at 31 December 2017 and 2018, amounts due to immediate holding company was interest-free, unsecured and repayable on demand. As at 31 December 2019 and 30 September 2020, amounts due to immediate holding company was interest-bearing of 8.00% per annum, unsecured and repayable on demand.

– II-D-15 –

FINANCIAL INFORMATION OF QIANCHAO BROTHERS

APPENDIX II-D

10. Related party transactions

In addition to the transactions detailed elsewhere in the Unaudited Financial Information, Qianchao Brothers entered into the following transactions with related parties:

	Related party						For the nine months	For the nine months
Name of related party	relationship	Type of transaction	For the year		ended 31	December	ended 30	September
			2017		2018	2019	2019	2020
			RMB’000		RMB’000	RMB’000	RMB’000	RMB’000
			(Unaudited)	(Unaudited)		(Unaudited)	(Unaudited)	(Unaudited)
Kong Sun Yongtai	Immediate holding	Operation and	252		503	670	502	502
	company	maintenance fee
		Finance cost	—		—	854	634	666
北京鑫泰綠能科技有限公司(Beijing	Fellow subsidiary	Operation and	314		—	63	—	566
Xintai Green Energy Technology		maintenance fee
Co., Ltd.)

11. The impact of COVID-19 in the current reporting period

The outbreak of COVID-19 has developed rapidly in 2020 and impacted entities and economic activities in varying scales in the PRC. While there have been more immediate and pronounced disruptions in certain industries, its impact on the energy industry in the PRC has been rather modest during the current reporting period. Nevertheless, as the outbreak of COVID-19 continues to evolve, it is challenging at this juncture to predict the full extent and duration of its impact to the business and the economy. The management of Qianchao Brothers has assessed the impact of COVID-19, and up to the date of approval of this Unaudited Financial Information, the management has not identified any areas that could have a material impact on the financial performance or position of Qianchao Brothers as at 30 September 2020.

– II-D-16 –

FINANCIAL INFORMATION OF YONGCHEN

APPENDIX II-E

REPORT ON REVIEW OF FINANCIAL INFORMATION OF YULIN CITY JIANGSHAN YONGCHEN NEW ENERGY LIMITED

TO THE BOARD OF DIRECTORS OF KONG SUN HOLDINGS LIMITED

Introduction

We have reviewed the unaudited financial information set out on pages II-E-3 to II-E-15 which comprises the statements of financial position as at 31 December 2017, 2018 and 2019 and 30 September 2020 of Yulin City Jiangshan Yongchen New Energy Limited (‘‘Yongchen’’) 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 2017, 2018 and 2019 and 30 September 2019 and 2020 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 share of Yongchen 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’’).

Scope of Review

– II-E-1 –

FINANCIAL INFORMATION OF YONGCHEN

APPENDIX II-E

Conclusion

BDO Limited

Certified Public Accountants

Hong Kong, 26 February 2021

– II-E-2 –

FINANCIAL INFORMATION OF YONGCHEN

APPENDIX II-E

Set out below is the unaudited financial information of Yongchen which comprises the unaudited statements of financial position of Yongchen as at 31 December 2017, 2018 and 2019 and 30 September 2020 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 2017, 2018 and 2019 and for the nine months ended 30 September 2019 and 2020 and certain explanatory notes (altogether referred to as ‘‘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 Yongchen. The Company’s auditor, BDO Limited, has reviewed the Unaudited Financial Information of Yongchen 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.

– II-E-3 –

FINANCIAL INFORMATION OF YONGCHEN

APPENDIX II-E

UNAUDITED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME OF YONGCHEN

Notes Revenue 4 Cost of sales Gross profit Other income Administrative expenses Finance costs Profit before income tax Income tax expense 5 Profit for the year/period	For the year ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 97,131 245,129 277,202 (49,611) (101,620) (102,053) 47,520 143,509 175,149 — 5,263 319 (4) (2,274) (5,504) — — (124,973) 47,516 146,498 44,991 — — — 47,516 146,498 44,991	For the nine months ended 30 September 2019 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 225,581 251,655 (73,639) (84,301) 151,942 167,354 165 196 (4,107) (3,736) (92,728) (97,087) 55,272 66,727 — (4,619) 55,272 62,108

– II-E-4 –

FINANCIAL INFORMATION OF YONGCHEN

APPENDIX II-E

UNAUDITED STATEMENTS OF FINANCIAL POSITION OF YONGCHEN

Notes ASSETS AND LIABILITIES Non-current assets Property, plant and equipment Solar power plants 6 Right-of-use assets Lease prepayments Current assets Trade and other receivables 7 Amounts due from intermediate holding company 9 Cash and cash equivalents Current liabilities Trade and other payables Tax payable Loans and borrowings 8 Amounts due to intermediate holding companies 9 Amounts due to immediate holding company 9 Amounts due to fellow subsidiaries 9 Net current (liabilities)/assets Total assets less current liabilities	2017 RMB’000 (Unaudited) 248 2,128,911 — 97,533 2,226,692 208,672 150,071 7 358,750 1,295,831 — — 37,095 5,000 — 1,337,926 (979,176) 1,247,516	As at 31 December 2018 2019 RMB’000 RMB’000 (Unaudited) (Unaudited) 207 153 2,060,401 1,978,650 — 95,401 93,853 — 2,154,461 2,074,204 640,687 802,176 198,495 171,446 81,246 65,171 920,428 1,038,793 62,638 66,337 — — 8,000 18,057 37,487 23,905 47,764 47,764 — 943 155,889 157,006 764,539 881,787 2,919,000 2,955,991	As at 30 September 2020 RMB’000 (Unaudited) 7 1,916,586 92,480 —
			2,009,073
			818,438 173,205 187,425
			1,179,068
			67,473 2,160 25,568 26,865 237,530 11,349
			370,945
			808,123
			2,817,196

– II-E-5 –

FINANCIAL INFORMATION OF YONGCHEN

APPENDIX II-E

Notes Non-current liabilities Loans and borrowings 8 Net assets Equity Registered capital Reserves Total equity	2017 RMB’000 (Unaudited) — — 1,247,516 1,200,000 47,516 1,247,516	As at 31 December 2018 2019 RMB’000 RMB’000 (Unaudited) (Unaudited) 1,567,750 1,559,750 1,567,750 1,559,750 1,351,250 1,396,241 1,200,000 1,200,000 151,250 196,241 1,351,250 1,396,241	As at 30 September 2020 RMB’000 (Unaudited) 1,548,613
			1,548,613
			1,268,583
			1,200,000 68,583
			1,268,583

– II-E-6 –

FINANCIAL INFORMATION OF YONGCHEN

APPENDIX II-E

UNAUDITED STATEMENTS OF CASH FLOWS OF YONGCHEN

Cash flows from operating activities Profit before income tax Adjustments for: Depreciation of property, plant and equipment Depreciation of solar power plants Depreciation of right-of-use assets Amortisation of lease prepayments Loss on disposal of property, plant and equipment Write-off of property, plant and equipment Interest expense Interest income Operating profit before working capital changes Increase in trade and other receivables Increase/(Decrease) in trade and other payables Cash (used in)/generated from operating activities Tax paid Net cash (used in)/generated from operating activities	For the year ended 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 47,516 146,498 44,991 50 58 54 34,233 82,348 82,751 — — 3,787 2,822 3,680 — — 83 — — — — — — 124,973 — (60) (219) 84,621 232,607 256,337 (200,852) (432,015) (161,489) 27,048 (1,233,193) 3,699 (89,183) (1,432,601) 98,547 — — — (89,183) (1,432,601) 98,547	For the nine months ended 30 September 2019 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) 55,272 66,727 41 25 62,063 62,064 2,814 2,921 — — — — — 121 92,728 97,087 (165) (170) 212,753 228,775 (135,998) (16,262) 2,013 1,136 78,768 213,649 — (2,459) 78,768 211,190

– II-E-7 –

FINANCIAL INFORMATION OF YONGCHEN

APPENDIX II-E

Cash flows from investing activities Purchase of property, plant and equipment Payments for construction cost of in respect of solar power plants Payments for purchase of right-of- use assets Payments for purchase of lease prepayments Interests received Net cash (used in)/generated from investing activities Cash flows from financing activities Proceed from loans and borrowings Repayments of loans and borrowings Interest paid Advances from intermediate holding companies Advances from fellow subsidiaries Repayments to intermediate holding companies Net cash generated from/(used in) financing activities Net (decrease)/increase 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 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) (99) (100) — (390,941) (13,838) (1,000) — — (5,335) (73,356) — — — 60 219 (464,396) (13,878) (6,116) — 1,575,750 2,057 — — — — — (111,506) 497,446 — — — — 943 — (48,032) — 497,446 1,527,718 (108,506) (56,133) 81,239 (16,075) 56,140 7 81,246 7 81,246 65,171	For the nine months ended 30 September 2019 2020 RMB’000 RMB’000 (Unaudited) (Unaudited) — — — — (5,335) — — — 165 170 (5,170) 170 1,547 — — (3,626) (92,728) (97,087) 1,843 1,201 4 10,406 — — (89,334) (89,106) (15,736) 122,254 81,246 65,171 65,510 187,425

– II-E-8 –

FINANCIAL INFORMATION OF YONGCHEN

APPENDIX II-E

UNAUDITED STATEMENTS OF CHANGES IN EQUITY OF YONGCHEN

Balance at 1 January 2017 Profit for the year Appropriation to statutory reserves Balance at 31 December 2017 and 1 January 2018 Profit for the year Appropriation to statutory reserves Proposed dividend Balance at 31 December 2018 and 1 January 2019 Profit for the year Appropriation to statutory reserves Balance at 31 December 2019 and 1 January 2020 Profit for the period Appropriation to statutory reserves Proposed dividend Balance at 30 September 2020 Balance at 31 December 2018 and 1 January 2019 Profit for the period Appropriation to statutory reserves Balance at 30 September 2019	Registered capital RMB’000 (Unaudited) 1,200,000 — — 1,200,000 — — — 1,200,000 — — 1,200,000 — — — 1,200,000 1,200,000 — — 1,200,000	Statutory reserves RMB’000 (Unaudited) — — 4,752 4,752 — 14,650 — 19,402 — 4,499 23,901 — 6,211 — 30,112 19,402 — 5,527 24,929	Retained profits RMB’000 (Unaudited) — 47,516 (4,752) 42,764 146,498 (14,650) (42,764) 131,848 44,991 (4,499) 172,340 62,108 (6,211) (189,766) 38,471 131,848 55,272 (5,527) 181,593	Total RMB’000 (Unaudited) 1,200,000 47,516 — 1,247,516 146,498 — (42,764) 1,351,250 44,991 — 1,396,241 62,108 — (189,766) 1,268,583 1,351,250 55,272 — 1,406,522

– II-E-9 –

FINANCIAL INFORMATION OF YONGCHEN

APPENDIX II-E

NOTES TO THE UNAUDITED FINANCIAL INFORMATION

1. General Information

Yongchen is a limited liability company incorporated in PRC. The principal activity of Yongchen is operation of solar power plants.

On 22 October 2020, the Vendor, an indirect wholly-owned subsidiary of the Company, the Purchaser and Yongchen entered into the Agreement, pursuant to which the Vendor agreed to sell, and the Purchaser agreed to acquire, the entire equity interest in Yongchen at a total consideration of approximately RMB1,177,829,000. Upon completion of the Disposal, Yongchen will cease to be the subsidiary of the Company.

2. Basis of Preparation of the Unaudited Financial Information

The Unaudited Financial Information of Yongchen for the years ended 31 December 2017, 2018 and 2019 and for the nine months ended 30 September 2019 and 2020 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.

3. Changes in accounting policies

HKFRS 9 — Financial Instruments

HKFRS 9 is effective for the accounting period beginning on or after 1 January 2018. HKFRS 9 replaces HKAS 39, Financial instruments: recognition and measurement (‘‘HKAS 39’’). It sets out the requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. The new impairment model in HKFRS 9 replaces the ‘‘incurred loss’’ model in HKAS 39 with an expected credit loss (‘‘ECL’’) model. Under the ECL model, it will no longer be necessary for a loss event to occur before an impairment loss is recognised. Instead, an entity is required to recognise and measure either a 12-month ECL or a lifetime ECL, depending on the asset and the facts and circumstances. As a consequence of adopting HKFRS 9, Yongchen’s trade and other receivables amounting to RMB208,672,000 as at 1 January 2018 was reclassified from ‘‘loans and receivables’’ as ‘‘amortised cost financial assets’’. Applying ECL model does not result in further provision for ECL as the settlement of these receivables is regulated by the Central Government of the PRC, and periodic payments have been received with no history of default in the past. As such, the Directors consider that the ECL in renewable energy subsidies receivables as at 1 January 2018 is immaterial.

– II-E-10 –

FINANCIAL INFORMATION OF YONGCHEN

APPENDIX II-E

HKFRS 15 — Revenue from Contracts with Customers

Yongchen has adopted HKFRS 15 using cumulative effect method without practical expedients. Yongchen has recognised the cumulative effect of initially applying HKFRS 15 as an adjustment to the opening balance of accumulated losses at the date of initial application (that is, 1 January 2018). As a result, the unaudited financial information presented for 2017 has not been restated.

Yongchen sells electricity to the power grid company. Revenue from sales of electricity is recognised over time when the electricity generated and transmitted is simultaneously received and consumed by the power grid companies. Yongchen has elected the practical expedient to recognise revenue in the amount to which Yongchen has a right to invoice as the amount represents and corresponds directly with the value of performance completed and transferred to the power grid company. Yongchen has no unsatisfied performance obligations at each reporting date. In the opinion of the Directors, the adoption of HKFRS 15 did not result in significant impact on Yongchen’s accounting policies on revenue.

As at 1 January 2018, the Company’s amounts due from intermediate holding company and cash and cash equivalents were reclassified from the original classification of ‘‘Loan and receivables’’ under HKAS 39 to the new classification of ‘‘Amortised cost’’ under HKFRS 9. As at 1 January 2018, the directors consider that there is no material difference between the previous carrying amounts and that under new classification.

HKFRS 16 — Lease

HKFRS 16 is effective for the accounting period beginning on or after 1 January 2019. The adoption of HKFRS 16 primarily affects Yongchen’s accounting as a lessee of leases which are classified as operating leases under HKAS 17, Leases. Upon the adoption of HKFRS 16, at the lease commencement date, Yongchen as a lessee recognises a right-of-use asset and a lease liability, except for short-term leases with a lease term of 12 months or less and leases of low-value assets. The application of HKFRS 16 has impact on the recognition of right-of-use assets and lease liabilities as well as the recognition of depreciation charges of right-of-use assets and the interest expense on lease liabilities.

Yongchen has applied 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 comparative information presented in 2018 and 2017 has not been restated and continues to be reported under HKAS 17, as permitted under the simplified transition approach in the standard. The reclassifications and the adjustments arising from HKFRS 16 are therefore recognised in the opening balances on 1 January 2019. In the opinion of our Directors, the adoption of HKFRS 16 resulted in reclassification of Yongchen’s ‘‘Lease prepayments’’ as ‘‘Right-of-use assets’’ and did not have significant impact on Yongchen’s net assets and net profits when compared with those that would have been presented under HKAS 17.

4. Revenue

Revenue represents income from sales of electricity (including renewable energy subsidies). During the years ended 31 December 2017, 2018 and 2019 and for the nine months ended 30 September 2019 and 2020, sales of electricity includes renewable energy subsidies amounting to approximately RMB54,090,000, RMB147,796,000, RMB161,807,000 and RMB131,357,000 and RMB147,834,000 respectively.

5. Income tax expense

Pursuant to CaiShui 2008 No. 46 Notice on the Execution of the Catalogue of Public Infrastructure Projects Entitled for Preferential Tax Treatment* (財政部、國家稅務總局關於執行公共基礎設施項目企業所得稅優惠目錄有關問題的通知), Yongchen has been approved to entitled a tax holiday of a 3-year full exemption followed by a 3- year 50% exemption commencing from their respective years in which their first operating income is derived.

– II-E-11 –

FINANCIAL INFORMATION OF YONGCHEN

APPENDIX II-E

6. Solar power plants

Cost At 1 January 2017 Additions Transfer upon completion At 31 December 2017 and 1 January 2018 Additions At 31 December 2018 and 1 January 2019 Additions At 31 December 2019 and 30 September 2020 Accumulated depreciation At 1 January 2017 Charge for the year At 31 December 2017 and 1 January 2018 Charge for the year At 31 December 2018 and 1 January 2019 Charge for the year At 31 December 2019 and 1 January 2020 Charge for the period At 30 September 2020 Net carrying amount At 31 December 2017 At 31 December 2018 At 31 December 2019 At September 2020	Solar power plants RMB’000 (Unaudited) — 2,163,144 2,163,144 13,838 2,176,982 1,000 2,177,982 — (34,233) (34,233) (82,348) (116,581) (82,751) (199,332) (62,064) (261,396) 2,128,911 2,060,401 1,978,650 1,916,586	Solar power plants under construction RMB’000 (Unaudited) 520,264 1,642,880 (2,163,144) — — — — — — — — — — — — — — — — — —	Total RMB’000 (Unaudited) 520,264 1,642,880 — 2,163,144 13,838 2,176,982 1,000 2,177,982 — (34,233) (34,233) (82,348) (116,581) (82,751) (199,332) (62,064) (261,396) 2,128,911 2,060,401 1,978,650 1,916,586

Solar power plant under construction was transferred to solar power plant when the solar power plant completed its trial operations and is connected to provincial power grid and generate electricity in 2017.

As at 31 December 2017, 2018 and 2019 and 30 September 2020, solar plants were all pledged as securities for Yongchen’s loans and borrowings (note 8).

– II-E-12 –

FINANCIAL INFORMATION OF YONGCHEN

APPENDIX II-E

7. Trade and other receivables

Trade receivables Other receivables, prepayments and deposits	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 120,965 228,413 428,954 87,707 412,274 373,222 208,672 640,687 802,176	As at 30 September 2020 RMB’000 (Unaudited) 503,329 315,109
		818,438

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 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 34,372 38,929 77,697 79,270 39,331 42,074 7,323 82,609 89,100 — 67,544 152,539 — — 67,544 120,965 228,413 428,954	As at 30 September 2020 RMB’000 (Unaudited) 71,828 62,643 117,853 161,773 89,232
		503,329

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 past due	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 13,640 15,238 13,390 44,334 33,560 74,756 62,991 46,072 47,354 — 73,594 81,907 — 59,949 151,598 — — 59,949 120,965 228,413 428,954	As at 30 September 2020 RMB’000 (Unaudited) 34,754 56,918 62,696 108,405 161,194 79,362
		503,329

Yongchen’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.

– II-E-13 –

FINANCIAL INFORMATION OF YONGCHEN

APPENDIX II-E

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 2017, 2018 and 2019 and 30 September 2020, the outstanding renewable energy subsidy amounted to approximately RMB120,965,000, RMB220,084,000, RMB422,886,000 and RMB488,545,000 respectively.

Expected loss rate of these renewable energy subsidy receivables are assessed to be low, because the debtor is state-owned and have good repayment history. In addition, the directors of the Yongchen are confident that the renewable energy subsidy receivables are fully recoverable but only subject to timing of allocation of funds from the PRC government. Accordingly, the credit risk regarding contract assets of tariff income receivables is limited.

As at 31 December 2017, 2018 and 2019 and 30 September 2020, trade receivables arising from the sales of electricity including renewable energy subsidies amounting to approximately RMB120,965,000, RMB228,413,000, RMB428,954,000 and RMB503,329,000 respectively were pledged as securities for Yongchen’s loans and borrowings (note 6).

8. Loans and borrowings

Current Secured — other borrowings Non-current Secured — other borrowings Total loans and borrowings	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) — 8,000 18,057 — 1,567,750 1,559,750 — 1,575,750 1,577,807	As at 30 September 2020 RMB’000 (Unaudited) 25,568 1,548,613
		1,574,181

Yongchen’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 Effective Interest rates	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) — 8,000 18,057 — 8,000 8,000 — 346,000 522,000 — 1,213,750 1,029,750 — 1,575,750 1,577,807 N/A 6.13% 6.13%	As at 30 September 2020 RMB’000 (Unaudited) 17,568 8,000 478,000 1,070,613
		1,574,181
		6.13%

As at 31 December 2017, 2018 and 2019 and 30 September 2020, loans and other borrowings bear interest at 125% of the People’s Bank of China RMB benchmark loan interest rates annum for 5-year loans.

– II-E-14 –

FINANCIAL INFORMATION OF YONGCHEN

APPENDIX II-E

Loans and borrowings were secured by the following assets:

Solar power plant (note 6) Trade receivables* (note 7)	As at 31 December 2017 2018 2019 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) 2,128,911 2,060,401 1,978,650 120,965 228,413 428,954 2,249,876 2,288,814 2,407,604	As at 30 September 2020 RMB’000 (Unaudited) 1,916,586 503,329
		2,419,915

As at 31 December 2017, 2018 and 2019 and 30 September 2020, the amount of trade receivables pledged for loans and borrowings also included the outstanding renewable energy subsidies.

As at 31 December 2017, 2018 and 2019 and 30 September 2020, loans and other borrowings were pledged by 99.99% equity interests of Yongchen’s immediate holding company, Jiangshan Fengrong.

9. Amounts due from/to intermediate holding companies/immediate holding company/fellow subsidiaries

Amounts due from/to intermediate holding companies/immediate holding company/fellow subsidiaries are interest-free, unsecured and repayable on demand.

10. Related party transactions

In addition to the transactions detailed elsewhere in the Unaudited Financial Information, Jiangshan Yongchen entered into the following transactions with related parties:

	Related party					For the nine months	For the nine months
Name of related party	relationship	Type of transaction	For the year	ended 31	December	ended 30 September
			2017	2018	2019	2019	2020
			RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Kong Sun Yongtai	Immediate holding	Operation and	3,774	7,547	4,155	3,116	3,116
	company	maintenance fee
北京鑫泰綠能科技有限公司	Fellow subsidiary	Operation and	1,887	—	943	—	8,491
(Beijing Xintai Green		maintenance fee
Energy Technology Co., Ltd.)

11. The impact of COVID-19 in the current reporting period

The outbreak of COVID-19 has developed rapidly in 2020 and impacted entities and economic activities in varying scales in the PRC. While there have been more immediate and pronounced disruptions in certain industries, its impact on the energy industry in the PRC has been rather modest during the current reporting period. Nevertheless, as the outbreak of COVID-19 continues to evolve, it is challenging at this juncture to predict the full extent and duration of its impact to the business and the economy. The management of Yongchen has assessed the impact of COVID-19, and up to the date of approval of this Unaudited Financial Information, the management has not identified any areas that could have a material impact on the financial performance or position of Jiangshan Yongchen as at 30 September 2020.

– II-E-15 –

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 30 June 2020; and (b) the results and cash flows of the Remaining Group for the year ended 31 December 2019 as if the Disposal had been completed on 1 January 2019. 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 30 June 2020 or at any future date had the Disposal been completed on 30 June 2020; or (ii) the results and cash flows of the Remaining Group for the year ended 31 December 2019 or for any future period had the Disposal been completed on 1 January 2019.

The Unaudited Pro Forma Financial Information is prepared based on the consolidated statement of financial position of the Group as at 30 June 2020 extracted from the unaudited consolidated financial statements of the Group for the six months ended 30 June 2020 as set out in the published interim report of the Company for the six months ended 30 June 2020, 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 2019 as extracted from the consolidated financial statements of the Group for the year ended 31 December 2019 as set out in the published annual report of the Company for the year ended 31 December 2019, 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 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

(A) Unaudited Pro Forma Consolidated Statement of Financial Position of the Remaining Group

Non-current assets Property, plant and equipment Solar power plants Interests in associates Goodwill Right-of-use assets 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 Current liabilities Trade and other payables Lease liabilities Loans and borrowings Corporate bonds Tax payable Net current assets Total assets less current liabilities	Unaudited condensed consolidated statement of financial position of the Group as at 30 June 2020 Pro forma adjustments RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note 1(a)) (Note 2(i)) (Note 2(ii)) (Note 2(iii)) (Note 2(iv)) (Note 2(v)) (Note 3) (Note 8) 30,080 (1) (28) (1,941) (7) 8,414,251 (190,538) (125,100) (145,213) (122,268) (1,916,586) 229,325 96,930 (1,795) 397,546 (11,288) (14,100) (5,687) (7,691) (92,480) 1,327,070 4,048 10,499,250 19,936 1,625 5,253,400 68,829 (20,613) (8,124) (23,714) (715,899) (369,989) 24,230 181,936 (6,967) (1,299) (5,004) (4,289) (187,425) 1,648,028 (1,000) 5,481,127 1,276,715 (13,245) (15,293) (11,291) (6,988) (67,473) 50,631 957,533 (16,004) (15,247) (9,941) (42,001) (25,568) 109,128 4,221 (102) (2,160) 2,398,228 3,082,899 13,582,149	Unaudited pro forma consolidated statement of financial position of the Remaining Group as at 30 June 2020 RMB’000 28,103 5,914,546 229,325 95,135 266,300 1,327,070 4,048
		7,864,527
		19,936 1,625 4,183,890 24,230 1,623,980
		5,853,661
		1,162,425 50,631 848,772 109,128 1,959
		2,172,915
		3,680,746
		11,545,273

– III-2 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Non-current liabilities Lease liabilities Loans and borrowings Corporate bonds Net assets EQUITY Share capital Reserves Equity attributable to the owners of the Company Non-controlling interests Net assets	Unaudited condensed consolidated statement of financial position of the Group as at 30 June 2020 Pro forma adjustments RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note 1(a)) (Note 2(i)) (Note 2(ii)) (Note 2(iii)) (Note 2(iv)) (Note 2(v)) (Note 3) (Note 8) 191,639 (8,498) (7,431) 7,875,044 (84,125) (81,545) (98,699) (71,492) (1,548,613) 184,384 8,251,067 5,331,082 6,486,588 (1,238,230) (4,842) (1,256) (1,592) (616) (24,177) (102,990) (1,000) 5,248,358 82,724 5,331,082	Unaudited pro forma consolidated statement of financial position of the Remaining Group as at 30 June 2020 RMB’000 175,710 5,990,570 184,384
		6,350,664
		5,196,609
		6,486,588 (1,374,703
		5,111,885 82,724
		5,194,609

– 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 Other interest income Administrative expenses Loss on disposal/deregistration of subsidiaries, net Impairment loss on a disposal group classified as held for sale Impairment loss/write-off on solar power plants under construction Loss on disposal of a joint venture Finance costs Share of profit of a joint venture Share of loss of associates Loss before income tax Income tax expense Loss for the year 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 2019 Pro forma adjustments RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note 1(b)) (Note 4(i)) (Note 4(ii)) (Note 4(iii)) (Note 4(iv)) (Note 4(v)) (Note 5) (Note 7) (Note 8) 2,079,704 (34,175) (23,276) (22,536) (21,937) (277,202) 8,185 (981,965) 11,709 9,281 9,177 8,491 102,053 (1,226) 1,097,739 (72,457) (46) (4) (35) (17) (319) — 4,752 (366,869) 2,335 1,000 1,122 3,250 5,504 (6,959) (1,000) (66,618) (269,388) (327,729) (43,735) (3,918) (892,236) 8,651 8,300 10,343 12,187 124,973 (4,752) 12,308 (21,928) (685,443) (13,278) 1,603 168 (698,721) (698,629) (9,923) (4,699) (1,761) 1,974 (44,991) (269,388) (1,000) (92) (698,721)	Unaudited pro forma consolidated statement of profit or loss and other comprehensive income of the Remaining Group for the year ended 31 December 2019 RMB’000 1,708,763 (842,480
		866,283 (72,878 4,752 (361,617 (336,006 (327,729 (43,735 (3,918 (732,534 12,308 (21,928
		(1,017,002 (11,507
		(1,028,509
		(1,028,417 (92
		(1,028,509

– III-4 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

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, net 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 2019 Pro forma adjustments RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note 1(b)) (Note 4(i)) (Note 4(ii)) (Note 4(iii)) (Note 4(iv)) (Note 4(v)) (Note 5) (Note 7) (Note 8) (698,721) (9,923) (4,699) (1,761) 1,974 (44,991) (269,388) (1,000) (422,893) (2,293) 431 (424,755) (1,123,476) (1,123,384) (9,923) (4,699) (1,761) 1,974 (44,991) (269,388) (1,000) (92) (1,123,476)	Unaudited pro forma consolidated statement of profit or loss and other comprehensive income of the Remaining Group for the year ended 31 December 2019 RMB’000 (1,028,509 (422,893 (2,293 431
		(424,755
		(1,453,264
		(1,453,172 (92
		(1,453,264

– III-5 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Cash flows from operating activities Loss before income tax Adjustments for: Depreciation of property, plant and equipment Depreciation of solar power plants Depreciation of right-of-use assets Equity-settled share-based payment expenses Foreign exchange losses, net Loss on disposal/deregistration of subsidiaries, net Loss on disposal of a joint venture Write-off/loss on disposal of property, plant and equipment Impairment loss/write-off on solar power plants under construction Net unrealised losses 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 Recognition of impairment loss recognised in respect of other receivables, net Impairment loss on disposal group classified as held for sale Write-back of other payables Operating profit before working capital changes Decrease in inventories, net (Increase)/Decrease in trade, bills and other receivables Increase in trade and other payables Cash generated from operations Tax paid Net cash generated from operating activities	Consolidated statement of cash flows of the Group for the year ended 31 December 2019 Pro forma adjustments RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note 1(b)) (Note 6(i)) (Note 6(ii)) (Note 6(iii)) (Note 6(iv)) (Note 6(v)) (Note 5) (Note 8) (Note 9) (Note 10) (685,443) (11,526) (4,699) (1,929) 1,974 (44,991) (269,388) (1,000) 10,820 (26) (19) (37) (701) (54) 504,705 (9,126) (5,512) (6,525) (5,349) (82,751) 30,371 (583) (720) (272) (384) (3,787) 12,947 6,480 66,618 269,388 3,918 5 43,735 9,239 1,553 (12,308) 21,928 892,236 (8,651) (8,300) (10,343) (12,187) (124,973) (854) 46 4 35 17 219 (10,970) 77,113 327,729 (1,112) 1,298,710 (29,866) (19,246) (19,071) (16,630) (256,337) 1,815 (907,776) (37,264) (127) 66,957 (1,541) 160,546 62,566 245,751 26,151 8,733 4,294 2,781 (3,699) 638,500 (11,415) 259 112 627,085	Unaudited pro forma consolidated statement of cash flows of the Remaining Group for the year ended 31 December 2019 RMB’000 (1,017,002 9,983 395,442 24,625 12,947 6,480 336,006 3,918 5 43,735 9,239 1,553 (12,308 21,928 727,782 (533 (10,970 77,113 327,729 (1,112
		956,560 1,815 (656,639 284,011
		585,747 (11,044
		574,703

– III-6 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

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 Payments for purchase of right-of-use assets Interests received Proceeds from disposal of a joint venture Proceeds from disposal of subsidiaries, net of cash disposed Decrease in structured bank deposits, net Payments for acquisition of subsidiaries, net of cash acquired Net cash (used in)/generated from investing activities Cash flows from financing activities 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 used in financing activities Net (decrease)/increase 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 2019 Pro forma adjustments RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note 1(b)) (Note 6(i)) (Note 6(ii)) (Note 6(iii)) (Note 6(iv)) (Note 6(v)) (Note 5) (Note 8) (Note 9) (Note 10) (19,333) 10,970 (215,090) 562 699 725 2 1,000 (104,550) 43,034 (46,176) 471 3,492 5,335 854 (46) (4) (35) (17) (219) 105,000 211,594 1,278,039 5,000 (1,765) (10,462) 750,000 (837) (70,865) (2,057) (807,824) 20,021 72 (555,857) 11,681 8,300 10,343 11,787 111,506 50,860 (56,794) (619,615) (2,992) (8,031) (2,482) (7,540) (54) 16,075 (1,000) 62,566 1,278,039 256,645 (2,378) (827) (137) (5,430) (81,246) 103 253,756 (10,409) (3,309) (7,677) (5,484) (65,171) (1,000) 62,566 1,278,039	Unaudited pro forma consolidated statement of cash flows of the Remaining Group for the year ended 31 December 2019 RMB’000 (19,333 10,970 (212,102 (104,550 43,034 (36,878 533 105,000 1,489,633 5,000 (1,765
		1,279,542
		676,241 (787,731 (402,240 50,860 (56,794
		(519,664
		1,334,581
		166,627 103
		1,501,311

– III-7 –

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) (a) The amounts are extracted from the unaudited condensed consolidated statement of financial position of the Group as at 30 June 2020 as set out in the published interim report of the Group for the six months ended 30 June 2020.
(b) The amounts are extracted from the consolidated statement of profit or loss, consolidated statement of other comprehensive income and consolidated statement of cash flows of the Group for the year ended 31 December 2019 as set out in the published annual report of the Group for the year ended 31 December 2019.
(2) (i) The adjustment reflects the exclusion of assets and liabilities of Weixian Tianhai as at 30 September 2020 as if the Disposal had been completed on 30 June 2020. The amounts except adjustments on reserves are extracted from the unaudited financial information of Weixian Tianhai set out in Appendix II-A to this circular. The adjustments on reserves can be referred to note 3(b) set out in Appendix III to this circular.
(ii) The adjustment reflects the exclusion of assets and liabilities of Pingshan Tianhui as at 30 September 2020 as if the Disposal had been completed on 30 June 2020. The amounts except adjustments on reserves are extracted from the unaudited financial information of Pingshan Tianhui set out in Appendix II-B to this circular. The adjustments on reserves can be referred to note 3(b) set out in Appendix III to this circular.
(iii) The adjustment reflects the exclusion of assets and liabilities of Shandong Xintailou as at 30 September 2020 as if the Disposal had been completed on 30 June 2020. The amounts except adjustments on reserves are extracted from the unaudited financial information of Shandong Xintailou set out in Appendix II-C to this circular. The adjustments on reserves can be referred to note 3(b) set out in Appendix III to this circular.
(iv) The adjustment reflects the exclusion of assets and liabilities of Qianchao Brothers as at 30 September 2020 as if the Disposal had been completed on 30 June 2020. The amounts except adjustments on reserves are extracted from the unaudited financial information of Qianchao Brothers set out in Appendix II-D to this circular. The adjustments on reserves can be referred to note 3(b) set out in Appendix III to this circular.
(v) The adjustment reflects the exclusion of assets and liabilities of Yongchen as at 30 September 2020 as if the Disposal had been completed on 30 June 2020. The amounts except adjustments on reserves are extracted from the unaudited financial information of Jiangshan Yongchen set out in Appendix II-E to this circular. The adjustments on reserves can be referred to note 3(b) set out in Appendix III to this circular.

– III-8 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

(3) The adjustment represents the pro forma loss on Disposal as if the Disposal had been completed on 30 June 2020, which is calculated as follows:

Notes Total consideration (a) Less: Share of net assets of the Disposal Companies as at 30 June 2020 (b) Less: Assignment of amounts due to group companies to the Purchaser (c) Less: Goodwill of the Disposal as at 30 June 2020 (d) Estimated loss on Disposal	Total RMB’000 1,648,028 (1,379,234) (369,989) (1,795) (102,990)

(a) In accordance with the Agreement, the Group agreed to dispose of its 100% equity interest in the Disposal Companies, together with the amounts due to group companies by the Disposal Companies to the Group, to the Purchaser, which is an independent third party. The total consideration for the Disposal amounts to RMB1,648,028,000, which is comprised of RMB1,278,039,000 for the transfer of the entire equity interest in Disposal Companies and RMB369,989,000 (note 3(c)) for amounts due to group companies as at 30 June 2020.

Amounts due to group companies of the Disposal Companies as at 30 June 2020 is as follows:

— Weixian Tianhai (note 10(b)) — Pingshan Tianhui (note 10(d)) — Shandong Xintailou (note 10(f)) — Qianchao Brothers (note 10(h)) — Yongchen (note 10(j))	RMB’000 151,126 33,104 48,948 41,831 94,980
	369,989

(b) This amount represents the net assets of the Disposal Companies amounting to approximately RMB1,379,234,000 as at 30 June 2020.

– III-9 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

Net assets of the Disposal Companies as at 30 June 2020 is determined as follows:

Carrying amount of net assets of the Disposal Companies as at 30 September 2020 attributable to: — Weixian Tianhai — Pingshan Tianhui — Shandong Xintailou — Qianchao Brothers — Yongchen	RMB’000 18,093 49,027 44,023 31,991 1,268,583
	1,411,717

Less: Profits incurred by the Disposal Companies for the period from 1 July 2020 to 30 September 2020 attributable to: — Weixian Tianhai — Pingshan Tianhui — Shandong Xintailou — Qianchao Brothers — Yongchen	(4,842) (1,256) (1,592) (616) (24,177) (32,483) 1,379,234

(c) The amount represents amounts due by the Disposal Companies to the Group of approximately RMB369,989,000 (note 3(a)) including the dividends declared by the Disposal Companies to the Group of approximately RMB316,986,000 as at 30 June 2020. Pursuant to the terms of the Agreement, the Company would assign these amounts from Disposal Companies the Purchaser upon the completion of the Disposal.

Dividends declared of the Disposal Companies as at 30 June 2020 is as follows:

— Weixian Tianhai — Pingshan Tianhui — Shandong Xintailou — Yongchen	RMB’000 48,818 16,481 19,157 232,530
	316,986

– III-10 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

(d) This amount represents goodwill of Qianchao Brothers amounting to approximately RMB1,795,000 as at 30 June 2020.
(4) The below adjustments are not expected to have a continuing effect on the unaudited pro forma consolidated statement of profit or loss and comprehensive income of the Remaining Group.
(i) The adjustment is to exclude each line item of Weixian Tianhai 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 2019 as if the Disposal had been completed on 1 January 2019.
(ii) The adjustment is to exclude each line item of Pingshan Tianhui 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 2019 as if the Disposal had been completed on 1 January 2019.
(iii) The adjustment is to exclude each line item of Shandong Xintailou 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 2019 as if the Disposal had been completed on 1 January 2019.
(iv) The adjustment is to exclude each line item of Qianchao Brothers 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 2019 as if the Disposal had been completed on 1 January 2019.
(v) The adjustment is to exclude each line item of Yongchen 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 2019 as if the Disposal had been completed on 1 January 2019.
(5) The adjustments represents the pro forma loss on Disposal as if the Disposal had been completed on 1 January 2019, which is calculated as follows:

Notes Total consideration (a) Less: Share of net assets in the Disposal Companies as at 1 January 2019 (b) Less: Assignment of amounts due to group companies to the Purchaser (c) Less: Goodwill of the Disposal as at 1 January 2019 (d) Estimated loss on Disposal	Total RMB’000 1,340,605 (1,545,632) (62,566) (1,795) (269,388)

– III-11 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

(a) In accordance with the Agreement, the Group agreed to dispose of its 100% equity interest in the Disposal Companies, together with the amounts due to group companies by Disposal Companies to the Group, to the Purchaser, which is an independent third party. The total consideration for the Disposal amounts to RMB1,340,605,000, which is comprised of RMB1,278,039,000 for the transfer of the entire equity interest in the Disposal Companies and RMB62,566,000 (note 5(c) and 9) amounts due to group companies as at 1 January 2019.

Amounts due to/(from) group companies of the Disposal Companies as at 1 January 2019 as extracted from the Unaudited Financial Information in Appendix II is as follows:

— Weixian Tianhai — Pingshan Tianhui — Shandong Xintailou — Qianchao Brothers — Yongchen	RMB’000 64,636 (3,633) 86,729 28,078 (113,244) 62,566

(b) This amount represents the net assets of the Disposal Companies amounting to approximately RMB1,545,632,000 as at 1 January 2019 as extracted from the Unaudited Financial Information in Appendix II.

Net assets of the Disposal Companies as at 1 January 2019 is determined as follows:

Carrying amount of net assets of the Disposal Companies as at 31 December 2018 attributable to: — Weixian Tianhai — Pingshan Tianhui — Shandong Xintailou — Qianchao Brothers — Yongchen	RMB’000 45,830 56,229 59,118 33,205 1,351,250
	1,545,632

– III-12 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

(c) The amount represents the loans owed by the Disposal Companies to the Group of RMB62,566,000 (note 5(a)) including the dividends declared by Yongchen to the Group of approximately RMB42,764,000 as at 1 January 2019. Pursuant to the terms of the Agreement, the Company would assign these amounts from Disposal Companies to the Purchaser upon the completion of the Disposal.
(d) This amount represents goodwill of Qianchao Brothers amounting to approximately RMB1,795,000 as at 1 January 2019.
(6) The below adjustments are not expected to have a continuing effect on the unaudited pro forma consolidated statement of the cash flow of the Remaining Group.
(i) The adjustment is to exclude the cash flows from Weixian Tianhai incorporated in the consolidated statement of cash flows of the Group for the year ended 31 December 2019 as if the Disposal had been completed on 1 January 2019.
(ii) The adjustment is to exclude the cash flows from Pingshan Tianhui incorporated in the consolidated statement of cash flows of the Group for the year ended 31 December 2019 as if the Disposal had been completed on 1 January 2019.
(iii) The adjustment is to exclude the cash flows from Shandong Xintailou incorporated in the consolidated statement of cash flows of the Group for the year ended 31 December 2019 as if the Disposal had been completed on 1 January 2019.
(iv) The adjustment is to exclude the cash flows from Qianchao Brothers incorporated in the consolidated statement of cash flows of the Group for the year ended 31 December 2019 as if the Disposal had been completed on 1 January 2019.
(v) The adjustment is to exclude the cash flows from Yongchen incorporated in the consolidated statement of cash flows of the Group for the year ended 31 December 2019 as if the Disposal had been completed on 1 January 2019.
(7) The adjustment represents the reversal of elimination of the intercompany transactions between the Disposal Companies and the Remaining Group, which were reflected in the consolidated financial statements of the Group for the year ended 31 December 2019, as if the Disposal had been completed on 1 January 2019 for the purpose of the financial performance of the Remaining Group.

– III-13 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

Reversal of elimination of the intercompany transactions are extracted from the Unaudited Financial Information in Appendix II as follows:

Operation and maintenance fee charged by Kong Sun Yongtai Investment Holdings Limited, an immediate holding company during the year ended 31 December 2019 attributable to: — Weixian Tianhai — Pingshan Tianhui — Shandong Xintailou — Qianchao Brothers — Yongchen Operation and maintenance fee charged by Beijing Xintai Green Energy Technology Co.,Ltd, a fellow subsidiary during the year ended 31 December 2019 attributable to: — Weixian Tianhai — Pingshan Tianhui — Shandong Xintailou — Qianchao Brothers — Yongchen Finance cost charged by Kong Sun Yongtai Investment Holdings Limited, an immediate holding company during the year ended 31 December 2019 attributable to: — Shandong Xintailou — Qianchao Brothers	RMB’000 794 670 670 670 4,155
	6,959
	RMB’000 94 63 63 63 943
	1,226
	RMB’000 3,898 854
	4,752

(8) The amount represents the professional fees in connection with 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.

– III-14 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

(9) The amount represents the receipt of amounts due to group companies, amounting to approximately RMB62,566,000 (note 5(a)).
(10) This adjustment represents the estimated net cash inflow from the Disposal as if the Disposal had been completed on 1 January 2019 calculated as follows:

Total RMB’000

Consideration for transfer to equity interest in Sum of Disposal Companies expected to be received (a)(i)(ii)(iii), within a year (c)(i)(ii)(iii), (e)(i)(ii)(iii), (g)(i)(ii)(iii), (i)((i)(ii)(iii) 1,278,039

Pursuant to the Agreement, the total consideration for the Disposal comprises of the followings:

Disposal of Weixian Tianhai

(a) RMB22,393,000, being the cash consideration for the transfer of the entire equity interest in Weixian Tianhai, shall be settled in the following manner:
(i) RMB3,500,000 shall be payable to the Group within ten (10) business days upon execution of the First Agreement;
(ii) RMB9,936,000 shall be payable to the Group within ten (10) business days after the fulfilment of the First Payment Conditions; and
(iii) RMB8,957,000 shall be payable to the Group within ten (10) business days after the fulfilment of the Second Payment Conditions.
(b) Approximately RMB151,126,000, being the amounts due to group companies as at Reference Date, shall be settled in the following manner:
(i) RMB130,505,000 shall be payable to the Group within ten (10) business days after the First Completion Date;
(ii) RMB12,200,000 shall be payable to the Group after the Weixian Tianhai settled (b)(i) above and within twelve (12) months after completion of the First Disposal, by no later than ten (10) business days after the completion of certain rectifications stipulated in the First Agreement; and
(iii) RMB8,421,000 shall be payable to the Group within ten (10) business days after each time Weixian Tianhai receives payment of state renewable energy subsidy granted to it prior to the Reference Date.

– III-15 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Disposal of Pingshan Tianhui

(c) RMB34,229,000, being the cash consideration for the transfer of the entire equity interest in Pingshan Tianhui, shall be settled in the following manner:
(i) RMB2,500,000 shall be payable to the Group within ten (10) business days upon execution of the Second Agreement;
(ii) RMB18,037,000 shall be payable to the Group within ten (10) business days after the fulfilment of the First Payment Conditions; and
(iii) RMB13,692,000 shall be payable to the Group within ten (10) business days after the fulfilment of the Second Payment Conditions.
(d) Approximately RMB33,104,000, being the amounts due to group companies as at Reference Date, shall be settled in the following manner:
(i) RMB11,966,000 shall be payable to the Group within ten (10) business days after the Second Completion Date; and
(ii) RMB14,570,000 shall be payable to the Group after Pingshan Tianhui settled (d)(i) above and within twelve (12) months after completion of the Second Disposal, by no later than ten (10) business days after the completion of certain rectifications stipulated in the Second Agreement; and
(iii) RMB6,568,000 shall be payable to the Group within ten (10) business days after each time Pingshan Tianhui receives payment of state renewable energy subsidy granted to it prior to the Reference Date.

Disposal of Shandong Xintailou

(e) RMB17,641,000, being the cash consideration for the transfer of the entire equity interest in Shandong Xintailou, shall be settled in the following manner:
(i) RMB2,500,000 shall be payable to the Group within ten (10) business days upon execution of the Third Agreement;
(ii) RMB8,085,000 shall be payable to the Group within ten (10) business days after the fulfilment of the First Payment Conditions; and
(iii) RMB7,056,000 shall be payable to the Group within ten (10) business days after the fulfilment of the Second Payment Conditions.

– III-16 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

(f) Approximately RMB48,948,000, being the amounts due to group companies as at Reference Date, shall be settled in the following manner:
(i) RMB32,903,000 shall be payable to the Group within ten (10) business days after the Third Completion Date;
(ii) RMB11,100,000 shall be payable to the Group after Shandong Xintailou settled (f)(i) above and within twelve (12) months after completion of the Third Disposal, by no later than ten (10) business days after the completion of certain rectifications stipulated in the Third Agreement; and
(iii) RMB4,945,000 shall be payable to the Group within ten (10) business days after each time Shandong Xintailou receives payment of state renewable energy subsidy granted to it prior to the Reference Date.

Disposal of Qianchao Brothers

(g) RMB25,947,000, being the cash consideration for the transfer of the entire equity interest in Qianchao Brothers, shall be settled in the following manner:
(i) RMB2,500,000 shall be payable to the Group within ten (10) business days upon execution of the Fourth Agreement;
(ii) RMB13,068,000 shall be payable to the Group within ten (10) business days after the fulfilment of the First Payment Conditions; and
(iii) RMB10,379,000 shall be payable to the Group within ten (10) business days after the fulfilment of the Second Payment Conditions.
(h) Approximately RMB41,831,000, being the amounts due to group companies as at Reference Date, shall be settled in the following manner:
(i) RMB24,029,000 shall be payable to the Group within ten (10) business days after the Fourth Completion Date; and
(ii) RMB11,600,000 shall be payable to the Group after Qianchao Brothers settled (h)(i) above and within twelve (12) months after completion of the Fourth Disposal, by no later than ten (10) business days after the completion of certain rectifications stipulated in the Fourth Agreement; and
(iii) RMB6,202,000 shall be payable to the Group within ten (10) business days after each time Qianchao Brothers receives payment of state renewable energy subsidy granted to it prior to the Reference Date.

– III-17 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

Disposal of Yongchen

(i) RMB1,177,829,000, being the cash consideration for the transfer of the entire equity interest in Yongchen, shall be settled in the following manner:
(i) RMB36,500,000 shall be payable to the Group within ten (10) business days upon execution of the Fifth Agreement;
(ii) RMB670,198,000 shall be payable to the Group within ten (10) business days after the fulfilment of the First Payment Conditions;
(iii) RMB301,495,000 shall be payable to the Group within ten (10) business days after the fulfilment of the Second Payment Conditions;
(iv) RMB95,800,000 shall be payable to the Group within ten (10) business days after obtaining each outstanding regulatory approval or completing each rectification work (as the case may be) as set out in the relevant schedule to the Fifth Agreement; and
(v) RMB73,836,000 shall be payable to the Group within ten (10) business days after each time Jiangshan Yongchen receives payment of state renewable energy subsidy granted.
(j) Approximately RMB94,980,000, being the amounts due to group companies as at Reference Date, shall be payable to the Group within ten (10) business days after an audit has been performed by an auditor engaged by the Purchaser with respect to Yongchen for the period from (but excluding) the Reference Date to (and including) the date of completion of the disposal.

– III-18 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

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 30 June 2020, 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 2019 and related notes as set out on pages III-1 to III-18 of Appendix III of the circular dated 26 February 2021 (the ‘‘Circular’’) in connection to the proposed disposal of entire equity interests in 威 縣 天海光伏發電有限公司 (Weixian Tianhai Photovoltaic Energy Limited) (‘‘Weixian Tianhai’’), 平山 縣 天匯 能 源科技有限公司 (Pingshan Tianhui Energy Technology Limited) (‘‘Pingshan Tianhui’’), 山東新泰樓 德 佳陽光伏發電有限公司 (Shandong Xintailou Dejia Solar Power Co., Ltd.) (‘‘Shandong Xintailou’’), 德 州市陵城區乾 超 兄 弟能 源科技有限公司 (Dezhou City Lingcheng District Qianchao Brothers Energy Technology Co., Ltd.) (‘‘Qianchao Brothers’’) and 榆 林市江山永宸新 能 源有限公司 (Yulin City Jiangshan Yongchen New Energy Limited) (‘‘Yongchen’’) (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-18 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 30 June 2020 and the Group’s financial performance and cash flows for the year ended 31 December 2019 as if the Disposal had taken place at 30 June 2020 and 1 January 2019, 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 2019, on which an independent auditor’s report for the year ended 31 December 2019 has been published and the Company’s consolidated financial statements for the six months ended 30 June 2020, on which no auditor review 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

– III-19 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

reference to Accounting Guideline 7 ‘‘Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars’’ (‘‘AG 7’’) issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’).

OUR INDEPENDENCE AND QUALITY CONTROL

We have complied with the independence and other ethical 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 ACCOUNTANTS’ 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 as at 30 June 2020 or 1 January 2019 would have been as presented.

– III-20 –

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

26 February 2021

– III-21 –

VALUATION REPORT

APPENDIX IV

The Company prepared a valuation report for the Shareholders’ reference only. The following is the text of a valuation report prepared for the purpose of incorporation in this circular received from Valor Appraisal & Advisory Limited, an independent valuer, in connection with their valuation of 100% equity interest in 德州市陵城區 乾 超兄弟 能源科 技有限公司，平山縣天匯 能源科 技有限公司，山東新泰 樓 德佳陽光伏發電有限公司 and 威縣天 海 光伏發電有限公司 as at 31 August 2020.

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Date: 20 October 2020

The Board of Directors Kong Sun Holdings Limited Unit 803–4, 8/F, Everbright Centre, 108 Gloucester Road, Wanchai, Hong Kong

Dear Sir/Madam,

RE: Valuation Report of 德州市陵城區 乾 超兄弟 能源科 技有限公司，平山縣天匯 能源科 技有限公司，山東新泰 樓 德佳陽光伏發電有限公司 and 威縣天 海 光伏發電有限公司 for Internal Reference for Kong Sun Holdings Limited

In accordance with the instruction of Kong Sun Holdings Limited (‘‘Kong Sun’’), we have made an appraisal of the equitable values of 100% equity interests in 德州市陵城區 乾 超兄弟 能源科 技有限公司，平山縣天匯 能源科 技有限公司，山東新泰 樓 德佳陽光伏發電有限公司 and 威縣天 海 光伏發電有限公司 for internal reference as at the valuation date (31 August 2020).

The details and conclusion of the valuation are presented in the attached valuation report, which outlines the factors considered, valuation methodology, basis and assumptions employed in formulating our opinion of values.

Valor Appraisal & Advisory Limited (‘‘Valor’’) is an independent firm providing full range of valuation and advisory services. This report has been prepared independently. Neither Valor nor any authors of this report hold any interest in Kong Sun or its related parties. The fee for providing this report is based on Valor’s normal professional rates, whilst expenses (if incurred) are being reimbursed at cost. Payment of fees and reimbursements are not contingent upon the conclusions drawn in the report.

Yours faithfully,

Valor Appraisal & Advisory Limited

– IV-1 –

VALUATION REPORT

APPENDIX IV

1. INTRODUCTION & PURPOSE OF VALUATION

In accordance with the instruction of Kong Sun Holdings Limited (‘‘Kong Sun’’ or the ‘‘Company’’), Valor Appraisal & Advisory Limited (‘‘Valor’’) is required to provide an independent valuation report (the ‘‘Valuation Report’’) to assess the equitable values (the ‘‘Equitable Values’’) of 100% equity interests (the ‘‘Equity Interests’’) in 德州市陵城區乾超兄弟能源科技有限公司 (translated as Dezhou City Lingcheng District Qianchao Brothers Energy Technology Co., Ltd. and hereinafter referred to as ‘‘Qianchao Brothers’’), 平山縣天匯能源科技有限公司 (translated as Pingshan Tianhui Energy Technology Co., Ltd. and hereinafter referred to as ‘‘Pingshan Tianhui’’), 山東新泰樓德佳陽光伏發電有限公司(translated as Shandong Xintailou Dejia Solar Power Co., Ltd. and hereinafter referred to as ‘‘Shandong Xintailou’’) and 威縣天海光伏發電有限公司 (translated as Weixian Tianhai Photovoltaic Power Generation Co., Ltd. and hereinafter referred to as ‘‘Weixian Tianhai’’) for internal reference as at 31 August 2020 (the ‘‘Valuation Date’’). Qianchao Brothers, Pingshan Tianhui, Shangdong Xintailou and Weixian Tianhai are hereinafter collectively referred to as the ‘‘Project Companies’’.

Relevant enquiries have been made and required information have been obtained that Valor considers to be necessary in forming an independent opinion of the Equitable Values of the Equity Interests, as at the Valuation Date.

This Valuation Report states valuation methodology and approach adopted in assessing the Equitable Values of the Equity Interests, as well as outlines Valor’s latest findings and valuation conclusion, which is prepared solely for the purpose of internal reference for Kong Sun or its subsidiaries (collectively referred to as the ‘‘Group’’).

In this Valuation Report, words in the singular number include the plural and vice versa; the words asset or assets are deemed to include liability or liabilities, except where it is expressly stated otherwise, or is clear from the context that liabilities are excluded; headings are inserted for convenient reference only and have no effect in limiting or extending the language to which they refer.

2. BACKGROUND INFORMATION OF THE PROJECT COMPANIES

The following background information of the Solar Power Plant Project Companies has been complied with reference to the documents received from and representation by the management of the Group and the Project Companies (the ‘‘Management’’), which are assumed to be accurate and relied upon when conducting this valuation exercise.

Qianchao Brothers is a company established in the People’s Republic of China (the ‘‘PRC’’). It is principally engaged in the development, construction and operation of a 20 mega watts (‘‘MW’’) solar power plant in Lingcheng District, Dezhou City, Shandong Province, the PRC (the ‘‘Lingcheng Project’’). The construction of the Lingcheng Project has been completed and the power plant is connected to the power grid.

– IV-2 –

VALUATION REPORT

APPENDIX IV

Pingshan Tianhui is a company established on 28 November 2014 in the PRC. It is principally engaged in the development, construction and operation of a 20 MW solar power plant in Pingshan County, Hebei Province, the PRC (the ‘‘Pingshan Project’’). The construction of the Pingshan Project has been completed and the power plant is connected to the power grid.

Shandong Xintailou is a company established in the PRC. It is principally engaged in the development, construction and operation of a 20 MW solar power plant in Xintai City, Shandong Province, the PRC (the ‘‘Xintai Project’’). The construction of the Xintai Project has been completed and the power plant is connected to the power grid.

Weixian Tianhai is a company established in Weixian County, Hebei Province, the PRC and is principally engaged in the development, construction and operation of a 30 MW solar power plant in Weixian County, Hebei Province, the PRC (the ‘‘Weixian Project’’). The construction of the Weixian Project has been completed and the power plant is connected to the power grid.

3. SCOPE OF WORK

In conducting this valuation exercise, Valor’s appraisers have:

. gathered all relevant information;
. discussed with the Management;
. collected market data from reliable sources;
. investigated into the information, and considered the basis and assumptions of the opinion of values;
. analysed the financial information of companies in a similar industry; and
. designed an appropriate valuation model to derive the Equitable Values of the Equity Interests.

4. BASIS OF VALUATION

The valuation was carried out on an Equitable Value basis. According to International Valuation Standards 2020 (‘‘IVS 2020’’) issued by International Valuation Standards Council (‘‘IVSC’’), Equitable Value is defined as ‘‘the estimated price for the transfer of an asset or liability between identified knowledgeable and willing parties that reflects the respective interests of those parties’’. In particular, the Equitable Values of the Equity Interests in this valuation exercise refer to the equity value, which is defined as ‘‘the value of a business to all of its equity shareholders’’ in accordance with International Valuation Standard 200 Businesses and Business Interests in IVS 2020.

– IV-3 –

VALUATION REPORT

APPENDIX IV

5. BASIS OF OPINION

The valuation was conducted in accordance with IVS 2020 issued by IVSC. The valuation procedure includes review of the financial and economic conditions of the subject business interests, an assessment of key assumptions, estimates, and representations made by the Management. All matters essential to the proper understanding of the valuation are disclosed in the valuation report. Opinion of values included in the valuation report is impartial, independent and unbiased.

The following factors also form a considerable part of the basis of opinion:

. assumptions on the market and on the subject business interests that are considered to be fair and reasonable;
. financial performance that shows a consistent trend of the operations of the subject business interests;
. consideration and analysis on the micro and macro economic factors; and
. analytical review of the subject business interests.

In the course of conducting the valuation, all the information and explanations considered necessary have been obtained so that there are sufficient evidences and reasonable basis in forming the opinion of values on the subject business interests.

6. SOURCES OF INFORMATION

In conducting the valuation of the subject business interests, the following key information, including but not limited to those provided by the Management and derived from the public have been considered, reviewed, and relied upon:

. Draft equity transfer agreement among 北京聯合榮邦新能源科技有限公司 (the ‘‘Purchaser’’), 濟南天冠能源科技有限公司 (translated as Jinan Tianguan Energy Technology Co., Ltd. and hereinafter referred to as ‘‘Jinan Tianguan’’) and Qianchao Brothers in relation to the proposed disposal of 100% equity interest in Qianchao Brothers by Jinan Tianguan to the Purchaser;
. Draft equity transfer agreement among the Purchaser, 江山永泰投資控股有限公司 (translated as Kong Sun Yongtai Investment Holdings Limited and hereinafter referred to as ‘‘Kong Sun Yongtai’’) and Pingshan Tianhui in relation to the proposed disposal of 100% equity interest in Pingshan Tianhui by Kong Sun Yongtai to the Purchaser;
. Draft equity transfer agreement among the Purchaser, Kong Sun Yongtai and Shandong Xintailou in relation to the proposed disposal of 100% equity interest in Shandong Xintailou by Kong Sun Yongtai to the Purchaser;

– IV-4 –

VALUATION REPORT

APPENDIX IV

. Draft equity transfer agreement among the Purchaser, Kong Sun Yongtai and Weixian Tianhai in relation to the proposed disposal of 100% equity interest in Weixian Tianhai by Kong Sun Yongtai to the Purchaser;
. Unaudited management accounts of the Project Companies as at 31 August 2020;
. IVS 2020 issued by IVSC;
. Overview of the nature of the subject business interests;
. Discussions with the Management;
. Discount for Lack of Marketability — Job Aid for IRS Valuation Professional issued by Internal Revenue Service (the ‘‘IRS DLOM Job Aid’’);
. 2020 Edition of the Stout Restricted Stock Study Companion Guide;
. Navigating Valuations in the World of COVID-19 compiled by PwC China;
. Annual reports, interim reports, announcements and circulars of GCL New Energy Holdings Limited (451:HK), Beijing Energy International Holding Co Ltd (686:HK), Shunfeng International Clean Energy Limited (1165:HK), CECEP Solar Energy Co., Ltd. (000591:CH) and Jiawei Renewable Energy Co., Ltd. (300317:CH); and
. Hong Kong Exchanges and Clearing Limited (‘‘HKEX’’), Hong Kong Monetary Authority, Shenzhen Stock Exchange, Google, Yahoo, Bloomberg, Reuters, and other reliable sources of market data.

In arriving at the opinion of the Equitable Values, the accuracy and completeness of the information reviewed for the purpose of this valuation have been assumed and relied on. In addition, the statements, information, opinion and representations provided by Kong Sun and the Project Companies have been relied upon.

Research was conducted using various sources including government statistical releases and other publications to assess the reasonableness and fairness of information provided.

The opinion is based upon economic, market, financial and other conditions as exist and can be evaluated on the date of this report and no responsibility is assumed to update or revise the opinion based on events or circumstances occurring after the date of this report. In reaching the opinion, assumptions have been made with respect to such economic, market, financial and other conditions and other matters, many of which are beyond the control of Valor or any party involved in this valuation exercise.

– IV-5 –

VALUATION REPORT

APPENDIX IV

7. VALUATION APPROACH AND METHODOLOGY

In carrying out this valuation exercise, the following approaches and methodologies have been considered:

Cost Approach — The cost approach provides an indication of value using the economic principal 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. This approach is based on the principle that the price that a buyer in the market would pay for the asset being valued would, unless undue time, inconvenience, risk or other factors are involved, be not more than the cost to purchase or construct an equivalent asset. Often the asset being valued will be less attractive than the alternative that could be purchased or constructed because of age or obsolescence. Where this is the case, adjustments may need to be made to the cost of the alternative asset depending on the required basis of value.

The cost approach cannot normally be applied to the valuation of a business or business interest except in the case of early stage or start-up businesses where profits and/or cash flow cannot be reliably determined and adequate market information is available on the entity’s assets.

Unlike market and income approaches which either incorporate market sentiments or future earnings capacity of an asset as a function to determine its current value, cost approach considers the fundamental cost it takes to form the asset. In our opinion this approach is inapplicable to the current analysis as there is no convincing association of the values of the subject business interests with their costs.

Income Approach — The income approach provides an indication of value by converting future cash flows to a single current capital value. This approach considers the income that an asset will generate over its useful life and indicates value through a capitalisation process. Capitalisation involves the conversion of income into a capital sum through the application of an appropriate discount rate. The income stream may be derived under a contract or contracts, or be non-contractual, for example the anticipated profit generated from either the use of or holding of the asset.

Enterprise value is typically derived through the capitalisation of profits or cash flows through the application of a capitalisation rate or discount rate before debt servicing costs. The capitalisation or discount rate applied is the weighted average cost of capital of an appropriate mix of debt and equity. The market value of the interest bearing debt is deducted from the enterprise value to determine the overall equity value. Redundant, ie non-operating, assets need to be considered when calculating enterprise or equity value.

This approach is not preferred in this exercise because the Project Companies has limited operating history and reliable projections of the amounts and timing of future income streams are not available for the subject business interests as at the Valuation Date.

– IV-6 –

VALUATION REPORT

APPENDIX IV

Market Approach — The market approach provides an indication of value by comparing the subject asset with identical or similar assets for which price information is available. Under this approach the first step is to consider the prices for transactions of identical or similar assets that have occurred recently in the market. If few recent transactions have occurred, it may also be appropriate to consider the prices of identical or similar assets that are listed or offered for sale provided the relevance of this information is clearly established and critically analysed. It may be necessary to adjust the price information from other transactions to reflect any differences in the terms of the actual transaction and the basis of value and any assumptions to be adopted in the valuation being undertaken. There may also be differences in the legal, economic or physical characteristics of the assets in other transactions and the asset being valued.

The market approach compares the subject business to similar businesses, business ownership interests and securities that have been exchanged in the market and any relevant transactions of shares in the same business. Prior transactions or offers for any component of the business may be also indicative of value.

In this valuation exercise, the values of the subject business interests were developed through the application of the market approach techniques known as guideline transactions method and guideline publicly-traded comparable method. The guideline transaction method utilizes information on transactions involving assets that are the same or similar to the subject asset to arrive at an indication of value, whereas the guideline publicly-traded method utilizes information on publicly-traded comparables that are similar to the subject asset to arrive at an indication of value.

The guideline transactions method and guideline publicly-traded method require the proper selection of a valuation metrics/comparable evidence and calculation of the selected valuation metrics of comparable transactions and companies to derive the values of the subject business interests. The valuation metrics adopted in this exercise is price-to-book ratio (‘‘PB Ratio’’).

8. KEY ASSUMPTIONS

Key Assumptions

The assumptions considered having significant sensitivity effects in this valuation have been evaluated in arriving at the assessed values with key assumptions listed as follows:

. there will be no material change in the existing political, legal, technological, fiscal or economic conditions which might adversely affect the economy in general and the operations of the Project Companies;
. there will be no major changes in the current taxation laws in the PRC;
. there will be no material fluctuation of the finance costs and availability of finance in the PRC;

– IV-7 –

VALUATION REPORT

APPENDIX IV

. The Project Companies will fulfil all legal and regulatory requirements for the principal operations;
. the development of the subject business interests will not be constrained by the availability of finance and there will be no material fluctuation of the finance costs;
. there will not be any adverse events beyond the control of the management of the Project Companies, including natural disasters, catastrophes, fire, explosion, flooding, riots, acts of terrorism and epidemics that may adversely affect the operations of the subject business interests;
. the future movement of exchange rates and interest rates will not differ materially from prevailing market rates; and
. The Project Companies will retain competent management, key personnel and technical staff for its operation and the relevant shareholders will support its ongoing operation.

9. GUIDELINE TRANSACTIONS METHOD

Comparable Transactions

Since the subject entities are principally engaged in operations of solar power plants in the PRC, with a view to selecting appropriate comparable transactions, we focus on those transactions of solar power plants which are located in the PRC and are in operation (instead of in development and construction).

Selection criteria of comparable transactions are listed as follows:

Solar power plant transactions undertaken by listed companies in Hong Kong and the PRC;
Transactions of solar power plants which are located in the PRC and are in operation (instead of in development and construction);
Connected transactions and sale and leaseback transactions are excluded; and
The announcement dates of transactions are within the period from 1 January 2020 to 31 August 2020.

– IV-8 –

VALUATION REPORT

APPENDIX IV

Based on the above selection criteria, we have selected the following comparable transactions:

Transaction:	1
Announcement Date:	29 June 2020
Completion Date:	July 2020
Target Company:	金湖正輝太陽能電力有限公司
Installed Capacity:	100MW
Consideration:	RMB136,624,000
Equity Interest:	75%
Net Asset:	RMB180,433,000 (31 May 2010)
Net Profit After Income Tax:	RMB38,346,000 (2019)
PB Ratio:	1.01
Transaction:	2
Announcement Date:	21 January 2020
Target Companies:	余干縣協鑫新能源有限責任公司,寧夏金信光伏電
	力有限公司，寧夏綠昊光伏發電有限公司，哈密
	歐瑞光伏發電有限公司，哈密耀輝光伏電力有限
	公司，寧夏金禮光伏電力有限公司
Installed Capacity:	294MW
Consideration:	RMB850,500,000
Equity Interest:	100%
Net Asset:	RMB944,531,000 (31 December 2019)
Net Profit After Income Tax:	RMB106,533,000 (2019)
PB Ratio:	0.90

– IV-9 –

VALUATION REPORT

APPENDIX IV

Transaction: 3 Announcement Date: 9 July 2020 Target Company: 金昌國源電力有限公司 Installed Capacity: 100MW Consideration: RMB226,595,000 Equity Interest: 70% Net Asset: RMB322,159,200 (31 May 2020) Net Profit After Income Tax: RMB39,624,200 (2019) PB Ratio: 1.00 Transaction: 4 Announcement Date: 18 March 2020 Completion Date: July 2020 Target Company: 阿克蘇大唐新能源有限公司 Installed Capacity: 20MW Consideration: RMB28,508,322 Equity Interest: 100% Net Asset: RMB47,479,000 (31 December 2019) Net Profit After Income Tax: RMB3,298,000 (2019) PB Ratio: 0.60

– IV-10 –

VALUATION REPORT

APPENDIX IV

Transaction: 5 Announcement Date: 18 March 2020 Completion Date: July 2020 Target Company: 岳普湖高科新能源發電有限公司 Installed Capacity: 20MW Consideration: RMB8,193,632 Equity Interest: 100% Net Asset: RMB38,711,000 (31 December 2019) Net Profit After Income Tax: –RMB2,332,000 (2019) PB Ratio: 0.21 Transaction: 6 Announcement Date: 18 March 2020 Completion Date: July 2020 Target Company: 和碩恒鑫新能源科技有限公司 Installed Capacity: 30MW Consideration: RMB61,435,356 Equity Interest: 100% Net Asset: RMB100,105,000 (31 December 2019) Net Profit After Income Tax: RMB4,064,000 (2019) PB Ratio: 0.61

– IV-11 –

VALUATION REPORT

APPENDIX IV

Transaction: 7 Announcement Date: 18 March 2020 Completion Date: July 2020 Target Company: 吐魯番聯星新能源有限公司 Installed Capacity: 20MW Consideration: RMB14,939,872 Equity Interest: 100% Net Asset: RMB61,629,000 (31 December 2019) Net Profit After Income Tax: –RMB2,122,000 (2019) PB Ratio: 0.24 Transaction: 8 Announcement Date: 18 March 2020 Completion Date: July 2020 Target Company: 溫宿縣日月輝新能源有限公司 Installed Capacity: 20MW Consideration: RMB19,730,341 Equity Interest: 100% Net Asset: RMB41,705,000 (31 December 2019) Net Profit After Income Tax: RMB2,308,000 (2019) PB Ratio: 0.47

– IV-12 –

VALUATION REPORT

APPENDIX IV

Valuation Metrics for Guideline Transactions Method

The valuation metrics adopted in this exercise is PB Ratio.
Consideration of comparable transactions was taken as numerators in calculating the PB Ratio of comparable transactions.
Net asset of comparable transactions was taken as denominator in calculating the PB Ratio of comparable transactions.
Installed capacity of comparable transactions was taken as the weighting factor in calculating the weighted PB Ratio of comparable transactions.
The weighted average PB Ratio of comparable transactions was calculated as 0.83.
Net asset of Qianchao Brothers as at 31 August 2020 is RMB31,156,780, as per unaudited management accounts of Qianchao Brothers as at 31 August 2020.
The value of the 100% equity interest in Qianchao Brothers calculated by applying PB Ratio under guideline transactions method is RMB25,858,489.
Net asset of Pingshan Tianhui as at 31 August 2020 is RMB48,755,999, as per unaudited management accounts of Pingshan Tianhui as at 31 August 2020.
The value of the 100% equity interest in Pingshan Tianhui calculated by applying PB Ratio under guideline transactions method is RMB40,464,916.
Net asset of Shandong Xintailou as at 31 August 2020 is RMB40,219,860, as per unaudited management accounts of Shandong Xintailou as at 31 August 2020.

– IV-13 –

VALUATION REPORT

APPENDIX IV

The value of the 100% equity interest in Shandong Xintailou calculated by applying PB Ratio under guideline transactions method is RMB33,380,370.
Net asset of Weixian Tianhai as at 31 August 2020 is RMB17,338,099, as per unaudited management accounts of Weixian Tianhai as at 31 August 2020.
The value of the 100% equity interest in Weixian Tianhai calculated by applying PB Ratio under guideline transactions method is RMB14,389,711.

10. GUIDELINE PUBLICLY-TRADED METHOD

Selection of Comparable Listed Companies

With a view to selecting appropriate comparable listed companies, we focus on those companies listed in Hong Kong and the PRC which are principally engaged in operation of solar power plants in the PRC.

Selection criteria of comparable companies are listed as follows:

Companies listed in Hong Kong and the PRC; and
Companies principally engaged in operation of solar power plants in the PRC.

The following searching procedures have been adopted in order to obtain a full and exhaustive list of potential comparable companies:

. Using search engine to search comparable companies based on the above criteria; and
. Cross checking the list of comparable companies with financial websites.

Upon procuring the list of potential comparable companies, the following review procedures have been adopted in order to select the appropriate comparable companies:

. Reviewing the potential comparable companies’ annual reports, news and announcements; and
. Cross checking the potential comparable companies’ segment revenue in their annual reports to ensure relevancy and comparability.

– IV-14 –

VALUATION REPORT

APPENDIX IV

Based on the above selection criteria, searching and review procedures, we have selected the following comparable companies:

Stock Code Company Name Company Description

451:HK GCL New Energy ‘‘GCL New Energy Holdings Limited is a Hong Holdings Limited Kong-based investment holding company principally engaged in energy and printed circuit board (PCB) businesses. The Company operates through two segments. Solar Energy segment is engaged in the sales of electricity and the construction, operation and management of solar power plants. PCB segment is mainly engaged in the manufacture and sales of PCBs. The Company is also involved in the holding of properties.’’ (Source: HKEX)

686:HK Beijing Energy ‘‘Beijing Energy International Holding Co Ltd, International formerly Panda Green Energy Group Ltd, is an Holding Co Ltd, investment holding company principally engaged in solar power plants businesses. The Company is principally engaged in development, investment, operation and management of solar power plants and other renewable energy projects. The renewable energy projects include photovoltaic, wind power, hydropower and other clean energy investment operations. The Company’s new energy projects cover China and some overseas regions, including Inner Mongolia, Qinghai, Ningxia, Shanxi, Hubei, Xinjiang, Gansu, Yunnan, Shandong, Jiangsu, Hebei, Guangdong and other places.’’ (Source: HKEX)
000591:CN CECEP Solar ‘‘CECEP Solar Energy Co., Ltd., formerly Energy Co., Ltd. CHONGQING TONG JUN GE CO.,LTD., is a China-based company principally engaged in the investment and operation of solar photovoltaic power stations, as well as the production and sale of solar cell modules. The Company operates through three segments: solar power, solar products and others. The Company’s main products include electric power and photovoltaic components. The Company principally operates its businesses within the domestic market.’’ (Source: Reuters)

– IV-15 –

VALUATION REPORT

APPENDIX IV

Valuation Metrics for Guideline Publicly-Traded Method

The valuation metrics adopted in this exercise is PB Ratio.
Market capitalization of comparable companies as at 31 August 2020 was taken as numerator in calculating the PB Ratio of comparable companies.
Latest equity attributable to equity holders of comparable companies was taken as denominator in calculating the PB Ratio of comparable companies.
Market capitalization of comparable companies was taken as the weighting factor in calculating the weighted PB Ratio of comparable companies.
The weighted average PB Ratio of comparable companies was calculated as 0.90.

Control Premium

Control Premiums are applied to reflect differences between the comparables and the subject asset with regard to the ability to make decisions and the changes that can be made as a result of exercising control. All else being equal, participants would generally prefer to have a control over an asset than not. Circumstances where control premiums should be considered include where shares of public companies generally do not have the ability to make decisions related to the operations of the company (they lack control). As such, when applying the guideline public comparable method to value a subject asset that reflects a controlling interest, a control premium may be appropriate.

Since the Equity Interests of the Project Companies are controlling interests whereas shares of the comparable listed companies are minority interests, a control premium has been applied to reflect the difference of the ability to make decisions as a result of exercising control. According to Navigating Valuations in the World of COVID-19 compiled by PwC China, there has been a gradual decline in value and count in global merger and acquisition quarterly activity since second quarter of 2018 with a significant drop in first quarter of 2020 in both volume and deal value. Average control premiums have followed a similar trend with a drop to around 10% in first quarter of 2020 versus an average premium of around 20% in 2018 and 2019. With reference to such study, a control premium of 10% has been applied in this valuation exercise.

Discount for Lack of Marketability

According to the IRS DLOM Job Aid, marketability is defined as ‘‘the ability to quickly convert property to cash at minimal cost with…… a high degree of certainty of realizing the anticipated amount of proceeds’’ and a discount for lack of marketability (‘‘DLOM’’) is defined as ‘‘an amount or percentage deducted from the value of an ownership interest to reflect the relative absence of marketability’’. It is expected that a higher price will be paid by investors for business interest with high marketability and a lesser price will be paid by investors for business interest with low marketability.

– IV-16 –

VALUATION REPORT

APPENDIX IV

In this valuation exercise, a DLOM has been applied to reflect that Project Companies are private companies, hence having lower marketability than the comparable listed companies. With reference to the 2020 Edition of the Stout Restricted Stock Study Companion Guide, the Stout Restrict Stock Study have examined 759 private placement transactions of unregistered common stock, with and without registration rights, issued by publicly traded companies from July 1980 through December 2019. A DLOM of 40% has been adopted in this valuation exercise, which is with reference to 43.15% median discount for the 5th quintile of these 759 transactions. The median discount in the 5th quintile has been with reference to because the median book equity value of transactions in the 5th quintile is US$6.8 million, which is comparable to the book equity values of the Project Companies.

Values Estimated by Guideline Publicly-Traded Method

Values of the Project Companies under the guideline publicly-traded method were calculated by multiplying the weighted average PB Ratio of comparable companies by the respective net asset value of the individual Project Companies as at 31 August 2020, then adjusting for the control premium and DLOM.
The value of the 100% equity interest in Qianchao Brothers calculated by applying PB Ratio under guideline publicly-traded method is RMB18,571,489.
The value of the 100% equity interest in Pingshan Tianhui calculated by applying PB Ratio under guideline publicly-traded method is RMB29,061,781.
The value of the 100% equity interest in Shandong Xintailou calculated by applying PB Ratio under guideline publicly-traded method is RMB23,973,681.
The value of the 100% equity interest in Weixian Tianhai calculated by applying PB Ratio under guideline publicly-traded method is RMB10,334,647.

11. WEIGHTING FACTOR

An equal weighting factor, viz 50/50, has been given to the guideline transactions method and guideline publicly-traded method. PB Ratio has been applied in both methods and an equal weighting factor will give a more balanced result considering the pros and cons of both methods.
The final result is calculated by taking the average of values calculated using PB Ratios under guideline transactions method and guideline publicly-traded method.
The average values of Qianchao Brothers, Pingshan Tianhui, Shandong Xintailou and Weixian Tianhai were calculated to be RMB22,214,989, RMB34,763,349, RMB28,677,026 and RMB12,362,179 respectively.

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12. VALUATION COMMENTS

As part of the analysis, the information and documents provided by the Management, the financial and business information from public sources with such available financial information, client representation, project documentation and other pertinent data concerning the Equity Interests have been reviewed. The accuracy of such information have been assumed and relied on to a considerable extent in arriving at the opinion of values.

Relevant searches and enquiries have been made and such further information as considered necessary has been obtained for the purpose of this valuation exercise.

The opinion of values is based on accepted valuation procedures and practices that rely substantially on the use of numerous assumptions and the consideration of many uncertainties, not all of which can be easily quantified or ascertained. Further, while the assumptions and consideration of such matters are regarded to be reasonable, they are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of Kong Sun, the Project Companies and Valor. No assurance is provided on the achievability of any financial results estimated by Kong Sun and/or the Project Companies because events and circumstances frequently do not occur as expected; differences between actual and expected results may be material; and achievement of the financial results is dependent on actions, plans and assumptions of the management. In addition, the other limiting and general service conditions are attached in Appendix I.

13. RISK FACTORS

The recent outbreak of COVID-19 coronavirus worldwide may result in the slowdown of economy

The recent outbreak of COVID-19 since December 2019 has increased uncertainties to the global economy in 2020. If the development of COVID-19 persists or intensifies, the global economy may be adversely affected. In such event, the resultant unfavourable global economic conditions, dampened market sentiment and decreased purchasing power of the global economy could be adversely impact business operations and financial performances of the Project Companies.

Economic, political and social considerations

Any unfavourable global and regional economic condition such as the trade war between the United States and its key trading partners like China and the decision by the United Kingdom to exit the European Union, may have a detrimental impact on the businesses of the Project Companies. Due to the uncertainties in economic situation, there is no guarantee that the expected financial performance will materialize. Any changes in global political, economic and social conditions, laws, regulations and policies may have significant impacts on the projections of the future incomes of the Project Companies. In view of the current situation, the possibility of trade protectionism cannot be ruled out. None of these changes can be foreseen with certainty.

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Technological changes

Any change in the technological developments and advancements may have significant impacts on the future financial results of the Project Companies. To remain competitive in the industry, the Project Companies may be required to make substantial capital expenditures to keep up with technological changes.

Company specific risk

The operation of the Project Companies may perform better or worse than the expectation, and the resulting earnings and cash flows will be very different from the estimates. The possibility of severe operational incidence, whether it is exogenous or endogenous, cannot be precluded.

14. OPINION OF VALUES

Based on the investigation and analysis outlined in this report, we are of the opinion that as at the Valuation Date, which is 31 August 2020, the total Equitable Value of 100% equity interests in the Project Companies is RMB98,017,542 (RENMINBI NINETY EIGHT MILLION SEVENTEEN THOUSAND FIVE HUNDRED AND FORTY TWO), with breakdown of Equitable Values of individual Project Companies stated as follows:

Company Qianchao Brothers Pingshan Tianhui Shandong Xintailou Weixian Tianhai Total	Guideline Transactions Method RMB25,858,489 RMB40,464,916 RMB33,380,370 RMB14,389,711 RMB114,093,486	Guideline Publicly-traded Comparable Method RMB18,571,489 RMB29,061,781 RMB23,973,681 RMB10,334,647 RMB81,941,598	Equitable Value of 100% Equity Interest RMB22,214,989 RMB34,763,349 RMB28,677,026 RMB12,362,179
			RMB98,017,542

Yours faithfully,

Valor Appraisal & Advisory Limited

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APPENDIX IV

APPENDIX I — LIMITING AND GENERAL SERVICE CONDITIONS

As part of the analysis, Valor’s appraisers have reviewed financial and business information from public sources together with such financial information, client representation, project documentation and other pertinent data concerning the project made available to Valor during the course of the valuation. Valor’s appraisers have assumed the accuracy of, and have relied on the information and client representations provided in arriving at the opinion of values.
It is assumed that the Management is responsible to ensure proper books of accounts are maintained, and the financial statements give a true and fair view and have been prepared in accordance with the relevant companies’ ordinance.
Valor shall not be required to give testimony or attendance in court or to any government agency by reason of this valuation and with reference to the project described herein unless prior arrangements have been made.
No opinion is intended to be expressed for matters which require legal or other specialised expertise or knowledge, beyond what is customarily employed by Valor’s appraisers.
The conclusions assume continuation of prudent client policies over whatever period of time that is considered to be necessary in order to maintain the character and integrity of the assets valued.
It is assumed that there are no hidden or unexpected conditions associated with the assets valued that might adversely affect the reported values. Further, it is assumed that no responsibility for changes in market conditions after the date of this report.
This valuation report has been prepared solely for the use of the designated parties. The valuation report should not be otherwise referred to, in whole or in part, or quoted in any document, circular or statement in any manner, or distributed in whole or in part or copied to any third party without prior written consent from Valor.
This report is confidential to the client for the specific purpose to which it refers. In accordance with Valor’s standard practice, it is stated that this report and valuation is for the use only of the party to whom it is addressed and no responsibility is accepted with respect to any third party for the whole or any part of its contents.
Valor have made no investigation of and assumed no responsibility for the title to or any liabilities against the assets appraised.

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APPENDIX IV

The following is the text of a valuation report prepared for the purpose of incorporation in this circular received from Valor Appraisal & Advisory Limited, an independent valuer, in connection with their valuation of 100% equity interest in 榆林市江山永宸 新 能源有 限 公 司 as at 31 October 2020.

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Date: 26 February 2021

The Board of Directors Kong Sun Holdings Limited Unit 803–4, 8/F, Everbright Centre, 108 Gloucester Road, Wanchai, Hong Kong

Dear Sir/Madam,

RE: Valuation Report of 榆林市江山永宸 `新` 能源有 `限公司` for Circular Reference for Kong Sun Holdings Limited

In accordance with the instruction of Kong Sun Holdings Limited (‘‘Kong Sun’’), we have made an appraisal of the equitable value of 100% equity interest in 榆林市江山永宸 新 能源有 限 公 司 for circular reference as at the valuation date (31 October 2020).

Yours faithfully, For and on behalf of Valor Appraisal & Advisory Limited Haydn Y.C. Lee CFA Director

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APPENDIX IV

1. INTRODUCTION & PURPOSE OF VALUATION

Relevant enquiries have been made and required information have been obtained that Valor considers to be necessary in forming an independent opinion of the Equitable Value of the Equity Interest, as at the Valuation Date.

This Valuation Report states valuation methodology and approach adopted in assessing the Equitable Value of the Equity Interest, as well as outlines Valor’s latest findings and valuation conclusion, which is prepared solely for the purpose of circular reference for Kong Sun or its subsidiaries (collectively referred to as the ‘‘Group’’).

2. BACKGROUND INFORMATION OF YONGCHEN

The following background information of Yongchen has been complied with reference to the documents received from and representation by the management of the Group and Yongchen (the ‘‘Management’’), which are assumed to be accurate and relied upon when conducting this valuation exercise.

Yongchen is a company established in the People’s Republic of China (the ‘‘PRC’’) with limited liability. It is principally engaged in the development, construction and operation of a 300 mega watts (‘‘MW’’) solar power plant in Shaanxi Province, the PRC (the ‘‘Project’’). The construction of the Project has been completed, and the power plant has been connected to the power grid.

3. SCOPE OF WORK

In conducting this valuation exercise, Valor’s appraisers have:

. gathered all relevant information;
. discussed with the Management;
. collected market data from reliable sources;

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. investigated into the information, and considered the basis and assumptions of the opinion of value;
. analysed the financial information of companies in a similar industry; and
. designed an appropriate valuation model to derive the Equitable Value of the Equity Interest.

4. BASIS OF VALUATION

The valuation was carried out on an Equitable Value basis. According to International Valuation Standards 2020 (‘‘IVS 2020’’) issued by International Valuation Standards Council (‘‘IVSC’’), Equitable Value is defined as ‘‘the estimated price for the transfer of an asset or liability between identified knowledgeable and willing parties that reflects the respective interests of those parties’’. In particular, the Equitable Value of the Equity Interest in this valuation exercise refers to the equity value, which is defined as ‘‘the value of a business to all of its equity shareholders’’ in accordance with International Valuation Standard 200 Businesses and Business Interests in IVS 2020.

5. BASIS OF OPINION

The valuation was conducted in accordance with IVS 2020 issued by IVSC. The valuation procedure includes review of the financial and economic condition of the subject business interest, an assessment of key assumptions, estimates, and representations made by the Management. All matters essential to the proper understanding of the valuation are disclosed in the valuation report. Opinion of value included in the valuation report is impartial, independent and unbiased.

The following factors also form a considerable part of the basis of opinion:

. assumptions on the market and on the subject business interest that are considered to be fair and reasonable;
. financial performance that shows a consistent trend of the operations of the subject business interest;
. consideration and analysis on the micro and macro economic factors; and
. analytical review of the subject business interest.

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APPENDIX IV

6. SOURCES OF INFORMATION

In conducting the valuation of the subject business interest, the following key information, including but not limited to those provided by the Management and derived from the public have been considered, reviewed, and relied upon:

. Draft equity transfer agreement among 北京聯合榮邦新能源科技有限公司 (the ‘‘Purchaser’’), 江山豐融投資有限公司 (translated as Jiangshan Fengrong Investment Company Limited and hereinafter referred to as ‘‘Jiangshan Fengrong’’) and Yongchen in relation to the proposed disposal of 100% equity interest in Yongchen by Jiangshan Fengrong to the Purchaser;
. Unaudited management accounts of Yongchen as at 31 December 2019 and 31 October 2020;
. IVS 2020 issued by IVSC;
. Overview of the nature of the subject business interest;
. Discussion with the Management;
. Discount for Lack of Marketability — Job Aid for IRS Valuation Professional issued by Internal Revenue Service (the ‘‘IRS DLOM Job Aid’’);
. 2020 Edition of the Stout Restricted Stock Study Companion Guide;
. Navigating Valuations in the World of COVID-19 compiled by PwC China;
. Control Premium Study, 2nd Quarter 2018, FactSet Mergerstat, LLC;
. Annual reports, interim reports, quarterly reports, announcements and circulars of Concord New Energy Group Limited (182:HK), GCL New Energy Holdings Limited (451:HK), Beijing Energy International Holding Co Ltd (686:HK), Shunfeng International Clean Energy Limited (1165:HK), Beijing Enterprises Clean Energy Group Limited (1250:HK), Xinyi Energy Holdings Limited (3868:HK), CECEP Solar Energy Co., Ltd. (000591:CH) and Jiawei Renewable Energy Co., Ltd. (300317:CH); and
. Hong Kong Exchanges and Clearing Limited (‘‘HKEX’’), Hong Kong Monetary Authority, Shenzhen Stock Exchange, Google, Yahoo, Bloomberg, Reuters, and other reliable sources of market data.

In arriving at the opinion of the Equitable Value, the accuracy and completeness of the information reviewed for the purpose of this valuation have been assumed and relied on. In addition, the statements, information, opinion and representations provided by Kong Sun and Yongchen have been relied upon.

Research was conducted using various sources including government statistical releases and other publications to assess the reasonableness and fairness of information provided.

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APPENDIX IV

7. VALUATION APPROACH AND METHODOLOGY

In carrying out this valuation exercise, the following approaches and methodologies have been considered:

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APPENDIX IV

This approach is not preferred in this exercise because there are relevant market comparables to the subject business interest and reliable projections of the amounts and timing of future income streams are not available for the subject business interest as at the Valuation Date.

In this valuation exercise, the value of the subject business interest was developed through the application of the market approach techniques known as guideline transactions method and guideline publicly-traded comparable method. The guideline transaction method utilizes information on transactions involving assets that are the same or similar to the subject asset to arrive at an indication of value, whereas the guideline publicly-traded method utilizes information on publicly-traded comparables that are similar to the subject asset to arrive at an indication of value.

The guideline transactions method and guideline publicly-traded method require the proper selection of a valuation metrics/comparable evidence and calculation of the selected valuation metrics of comparable transactions and companies to derive the value of the subject business interest. The valuation metrics adopted in this exercise is price-to-book ratio (‘‘PB Ratio’’).

8. KEY ASSUMPTIONS

Key Assumptions

The assumptions considered having significant sensitivity effects in this valuation have been evaluated in arriving at the assessed value with key assumptions listed as follows:

. there will be no material change in the existing political, legal, technological, fiscal or economic conditions which might adversely affect the economy in general and the operation of Yongchen;

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. there will be no major changes in the current taxation laws in the PRC;
. there will be no material fluctuation of the finance costs and availability of finance in the PRC;
. Yongchen will fulfil all legal and regulatory requirements for the principal operation;
. the development of the subject business interest will not be constrained by the availability of finance and there will be no material fluctuation of the finance costs;
. there will not be any adverse events beyond the control of the management of Yongchen, including natural disasters, catastrophes, fire, explosion, flooding, riots, acts of terrorism and epidemics that may adversely affect the operation of the subject business interest;
. the future movement of exchange rates and interest rates will not differ materially from prevailing market rates; and
. Yongchen will retain competent management, key personnel and technical staff for its operation and the relevant shareholders will support its ongoing operation.

9. GUIDELINE TRANSACTIONS METHOD

Comparable Transactions

Since the subject entity is principally engaged in operation of a solar power plant in the PRC, with a view to selecting appropriate comparable transactions, we focus on those transactions of solar power plants which are located in the PRC and are in operation (instead of in development and construction).

Selection criteria of comparable transactions are listed as follows:

Solar power plant transactions undertaken by listed companies in Hong Kong and the PRC;
Transactions of solar power plants which are located in the PRC and are in operation (instead of in development and construction);
Connected transactions and sale and leaseback transactions are excluded; and
The announcement dates of transactions are within the period from 1 January 2020 to 2 November 2020.

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APPENDIX IV

Based on the above selection criteria, we have selected the following exhaustive comparable transactions:

Transaction:	1
Announcement Date:	29 June 2020
Completion Date:	July 2020
Target Company:	金湖正輝太陽能電力有限公司
Installed Capacity:	100MW
Consideration:	RMB136,624,000
Equity Interest:	75%
Net Asset:	RMB180,433,000 (31 May 2010)
Net Profit After Income Tax:	RMB38,346,000 (2019)
PB Ratio:	1.01
Transaction:	2
Announcement Date:	21 January 2020
Target Companies:	余干縣協鑫新能源有限責任公司,寧夏金信光伏
	電力有限公司,寧夏綠昊光伏發電有限公司,哈密
	歐瑞光伏發電有限公司,哈密耀輝光伏電力有限
	公司,寧夏金禮光伏電力有限公司
Installed Capacity:	294MW
Consideration:	RMB850,500,000
Equity Interest:	100%
Net Asset:	RMB944,531,000 (31 December 2019)
Net Profit After Income Tax:	RMB106,533,000 (2019)
PB Ratio:	0.90

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APPENDIX IV

Transaction: 9 Announcement Date: 18 March 2020 Completion Date: July 2020 Target Company: 和靜益鑫新能源科技有限公司 Installed Capacity: 30MW Consideration: RMB35,825,766 Equity Interest: 100% Net Asset: RMB97,254,000 (31 December 2019) Net Profit After Income Tax: RMB5,276,000 (2019) PB Ratio: 0.37 Transaction: 10 Announcement Date: 29 September 2020 Target Companies: 包頭市中利騰暉光伏發電有限公司,淇縣協鑫新能源有限公司,寧夏中衛協鑫光伏電力有限公司, 輝縣市協鑫光伏電力有限公司,汝陽協鑫新能源有限公司,湖北省麻城市金伏太陽能電力有限公司 Installed Capacity: 403MW Consideration: RMB576,001,213 Equity Interest: 100% Net Asset: RMB717,307,000 (30 September 2019) Net Profit After Income Tax: RMB178,527,000 (2019) PB Ratio: 0.80

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Transaction: 11 Announcement Date: 8 May 2020 Completion Date: 28 May 2020 Target Company: 響水恒能太陽能發電有限公司 Installed Capacity: 100MW Consideration: RMB438,000,000 Equity Interest: 100% Net Asset: RMB437,620,000 (30 April 2020) Net Profit After Income Tax: RMB35,144,000 (2019) PB Ratio: 1.00 Transaction: 12 Announcement Date: 8 May 2020 Completion Date: 28 May 2020 Target Company: 響水永能太陽能發電有限公司 Installed Capacity: 20MW Consideration: RMB100,000,000 Equity Interest: 100% Net Asset: RMB98,730,000 (30 April 2020) Net Profit After Income Tax: RMB11,364,000 (2019) PB Ratio: 1.01

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APPENDIX IV

Transaction: 13 Announcement Date: 2 November 2020 Target Companies: 永仁協合太陽能發電有限公司,華坪協合太陽能發電有限公司 Installed Capacity: 100MW Consideration: RMB174,700,000 Equity Interest: 100% Net Asset: RMB210,380,000 (30 September 2020) Net Profit After Income Tax: RMB35,410,000 (2019) PB Ratio: 0.83

Valuation Metrics for Guideline Transactions Method

The valuation metrics adopted in this exercise is PB Ratio.
Consideration of comparable transactions was taken as numerators in calculating the PB Ratio of comparable transactions.
Net asset of comparable transactions was taken as denominator in calculating the PB Ratio of comparable transactions.
Installed capacity of comparable transactions was taken as the weighting factor in calculating the weighted PB Ratio of comparable transactions.
The weighted average PB Ratio of comparable transactions was calculated as 0.84.
Net asset of Yongchen as at 31 October 2020 is RMB1,276,547,393, as per unaudited management accounts of Yongchen as at 31 October 2020.
The value of the 100% equity interest in Yongchen calculated by applying PB Ratio under guideline transactions method is RMB1,069,559,915.

10. GUIDELINE PUBLICLY-TRADED METHOD

Selection of Comparable Listed Companies

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APPENDIX IV

Selection criteria of comparable companies are listed as follows:

Companies listed in Hong Kong and the PRC; and
Companies principally engaged in operation of solar power plants in the PRC.

The following searching procedures have been adopted in order to obtain a full and exhaustive list of potential comparable companies:

. Using search engine to search comparable companies based on the above criteria; and
. Cross checking the list of comparable companies with financial websites.

Upon procuring the list of potential comparable companies, the following review procedures have been adopted in order to select the appropriate comparable companies:

. Reviewing the potential comparable companies’ annual reports, news and announcements; and
. Cross checking the potential comparable companies’ segment revenue in their annual reports to ensure relevancy and comparability.

Based on the above selection criteria, searching and review procedures, we have selected the following exhaustive comparable companies:

Stock Code Company Name Company Description

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APPENDIX IV

Stock

Code Company Name Company Description 686:HK Beijing Energy ‘‘Beijing Energy International Holding Co Ltd, International formerly Panda Green Energy Group Ltd, is an Holding Co Ltd investment holding company principally engaged in solar power plants businesses. The Company is principally engaged in development, investment, operation and management of solar power plants and other renewable energy projects. The renewable energy projects include photovoltaic, wind power, hydropower and other clean energy investment operations. The Company’s new energy projects cover China and some overseas regions, including Inner Mongolia, Qinghai, Ningxia, Shanxi, Hubei, Xinjiang, Gansu, Yunnan, Shandong, Jiangsu, Hebei, Guangdong and other places.’’ (Source: HKEX)

3868:HK Xinyi Energy ‘‘Xinyi Energy Holdings Limited is a China-based Holdings Limited investment holding company. The Company is principally engaged in the management and operation of solar farms through its subsidiaries, and generates revenue by selling the electricity to subsidiaries of the State Grid. The Company operates Jinzhai Solar Farm, Sanshan Solar Farm, Nanping Solar Farm, Lixin Solar Farm, Binhai Solar Farm, HongAn Solar Farm and Wuwei Solar Farm, among others. These solar farms are mainly located in Anhui, Tianjin, Fujian and Hubei Provinces in China. The Company mainly conducts its businesses in domestic market.’’ (Source: HKEX)

000591: CECEP Solar ‘‘CECEP Solar Energy Co., Ltd., formerly CN Energy Co., Ltd. CHONGQING TONG JUN GE CO.,LTD., is a China-based company principally engaged in the investment and operation of solar photovoltaic power stations, as well as the production and sale of solar cell modules. The Company operates through three segments: solar power, solar products and others. The Company’s main products include electric power and photovoltaic components. The Company principally operates its businesses within the domestic market.’’ (Source: Reuters)

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APPENDIX IV

Valuation Metrics for Guideline Publicly-Traded Method

The valuation metrics adopted in this exercise is PB Ratio.
Market capitalization of comparable companies as at 30 October 2020 was taken as numerator in calculating the PB Ratio of comparable companies.
Latest equity attributable to equity holders of comparable companies was taken as denominator in calculating the PB Ratio of comparable companies.
The PB Ratio of GCL New Energy Holdings Limited, Beijing Energy International Holding Co Ltd, Xinyi Energy Holdings Limited and CECEP Solar Energy Co., Ltd. were calculated to be 0.29, 0.87, 2.89 and 0.84 respectively as at the Valuation Date.
The median PB Ratio of comparable companies was calculated to be 0.85. Median value has been adopted because the PB Ratios of GCL New Energy Holdings Limited and Xinyi Energy Holdings Limited are 0.29 and 2.89 respectively which are regarded as outliers to the data set. Also the 0.85 median PB Ratio calculated using guideline publicly-traded method is in line with the 0.84 weighted average PB Ratio calculated using guideline transactions method.

Control Premium

Since the Equity Interest of Yongchen is controlling interest whereas shares of the comparable listed companies are minority interests, a control premium has been applied to reflect the difference of the ability to make decisions as a result of exercising control. According to Navigating Valuations in the World of COVID-19 compiled by PwC China, there has been a gradual decline in value and count in global merger and acquisition quarterly activity since second quarter of 2018 with a significant drop in first quarter of 2020 in both volume and deal value. Average control premiums have followed a similar trend with a drop to around 10% in first quarter of 2020 versus an average premium of around 20% in 2018 and 2019. However, with the introduction of potential COVID-19 vaccines on the horizon and the Dow and the S&P 500 both notched new record highs in November of 2020, the control premium is expected to be reverted to the normal. A control premium of 20% has been applied in this valuation exercise.

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APPENDIX IV

Discount for Lack of Marketability

According to the IRS DLOM Job Aid, marketability is defined as ‘‘the ability to quickly convert property to cash at minimal cost with a high degree of certainty of realizing the anticipated amount of proceeds’’ and a discount for lack of marketability (‘‘DLOM’’) is defined as ‘‘an amount or percentage deducted from the value of an ownership interest to reflect the relative absence of marketability’’. It is expected that a higher price will be paid by investors for business interest with high marketability and a lesser price will be paid by investors for business interest with low marketability.

In this valuation exercise, a DLOM has been applied to reflect that Yongchen is private company, hence having lower marketability than the comparable listed companies. With reference to the 2020 Edition of the Stout Restricted Stock Study Companion Guide, the Stout Restrict Stock Study have examined 751 private placement transactions of unregistered common stock, with and without registration rights, issued by publicly traded companies from July 1980 through December 2019. A DLOM of 10% has been adopted in this valuation exercise, which is with reference to 9.9% median discount for the 2nd quintile and 3.9% median discount for the 1st quintile of these 751 transactions. The median discounts in the 1st and 2nd quintiles have been with reference to because the median book equity values of transactions in the 1st and 2nd quintiles are US$52.1 million and US$45.0 million respectively, which are comparable to the book equity value of Yongchen.

Value Estimated by Guideline Publicly-Traded Method

Value of Yongchen under the guideline publicly-traded method was calculated by multiplying the median PB Ratio of comparable companies by net asset value of Yongchen as at 31 October 2020, then adjusting for the control premium and DLOM.
The value of the 100% equity interest in Yongchen calculated by applying PB Ratio under guideline publicly-traded method is RMB1,173,831,158.

11. WEIGHTING FACTOR

An equal weighting factor, viz 50/50, has been given to the guideline transactions method and guideline publicly-traded method. PB Ratio has been applied in both methods and an equal weighting factor will give a more balanced result considering the pros and cons of both methods.
The final result is calculated by taking the average of values calculated using PB Ratios under guideline transactions method and guideline publicly-traded method.
The average value of Yongchen was calculated to be RMB1,121,695,537.

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APPENDIX IV

12. VALUATION COMMENTS

As part of the analysis, the information and documents provided by the Management, the financial and business information from public sources with such available financial information, client representation, project documentation and other pertinent data concerning the Equity Interest have been reviewed. The accuracy of such information have been assumed and relied on to a considerable extent in arriving at the opinion of value.

Relevant searches and enquiries have been made and such further information as considered necessary has been obtained for the purpose of this valuation exercise.

The opinion of value is based on accepted valuation procedures and practices that rely substantially on the use of numerous assumptions and the consideration of many uncertainties, not all of which can be easily quantified or ascertained. Further, while the assumptions and consideration of such matters are regarded to be reasonable, they are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of Kong Sun, Yongchen and Valor. No assurance is provided on the achievability of any financial results estimated by Kong Sun and/or Yongchen because events and circumstances frequently do not occur as expected; differences between actual and expected results may be material; and achievement of the financial results is dependent on actions, plans and assumptions of the management. In addition, the other limiting and general service conditions are attached in Appendix I.

13. RISK FACTORS

The recent outbreak of COVID-19 coronavirus worldwide may result in the slowdown of economy

Economic, political and social considerations

Any unfavourable global and regional economic condition such as the trade war between the United States and its key trading partners like China and the decision by the United Kingdom to exit the European Union, may have a detrimental impact on the business of Yongchen. Due to the uncertainties in economic situation, there is no guarantee that the expected financial performance will materialize. Any changes in global political, economic and social conditions, laws, regulations and policies may have significant impacts on the projections of the future incomes of Yongchen. In view of the current situation, the possibility of trade protectionism cannot be ruled out. None of these changes can be foreseen with certainty.

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Technological changes

Any change in the technological developments and advancements may have significant impacts on the future financial results of Yongchen. To remain competitive in the industry, Yongchen may be required to make substantial capital expenditures to keep up with technological changes.

Company specific risk

The operation of Yongchen may perform better or worse than the expectation, and the resulting earnings and cash flows will be very different from the estimates. The possibility of severe operational incidence, whether it is exogenous or endogenous, cannot be precluded.

14. OPINION OF VALUE

Based on the investigation and analysis outlined in this report, we are of the opinion that as at the Valuation Date, which is 31 October 2020, the total Equitable Value of 100% equity interest in Yongchen is RMB1,121,695,537 (RENMINBI ONE BILLION ONE HUNDED TWENTY ONE MILLION SIX HUNDRED NINETY FIVE THOUSAND FIVE HUNDRED AND THIRTY SEVEN).

Yours faithfully, For and on behalf of Valor Appraisal & Advisory Limited Haydn Y.C. Lee CFA Director

Mr. Haydn Y.C. Lee is a Chartered Financial Analyst charterholder and has over 12 years’ experience in business valuation. He oversees the business valuation services of Valor and has provided a wide range of valuation services to listed companies and private entities in different industries in the PRC, Hong Kong and Singapore.

– IV-40 –

VALUATION REPORT

APPENDIX IV

APPENDIX I — LIMITING AND GENERAL SERVICE CONDITIONS

As part of the analysis, Valor’s appraisers have reviewed financial and business information from public sources together with such financial information, client representation, project documentation and other pertinent data concerning the project made available to Valor during the course of the valuation. Valor’s appraisers have assumed the accuracy of, and have relied on the information and client representations provided in arriving at the opinion of value. 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.
Our report was used as part of the analysis of the Group in reaching their conclusion of value and the ultimate responsibility of the determination of value of the subject asset rests solely with the Group.
It is assumed that the Management is responsible to ensure proper books of accounts are maintained, and the financial statements give a true and fair view and have been prepared in accordance with the relevant companies’ ordinance.
Valor shall not be required to give testimony or attendance in court or to any government agency by reason of this valuation and with reference to the project described herein unless prior arrangements have been made.
No opinion is intended to be expressed for matters which require legal or other specialised expertise or knowledge, beyond what is customarily employed by Valor’s appraisers.
The conclusions assume continuation of prudent client policies over whatever period of time that is considered to be necessary in order to maintain the character and integrity of the asset valued.
It is assumed that there are no hidden or unexpected conditions associated with the asset valued that might adversely affect the reported value. Further, it is assumed that no responsibility for changes in market conditions after the date of this report.
This valuation report has been prepared solely for the use of the designated parties. The valuation report should not be otherwise referred to, in whole or in part, or quoted in any document, circular or statement in any manner, or distributed in whole or in part or copied to any third party without prior written consent from Valor.
This report is confidential to the client for the specific purpose to which it refers. In accordance with Valor’s standard practice, it is stated that this report and valuation is for the use only of the party to whom it is addressed and no responsibility is accepted with respect to any third party for the whole or any part of its contents.
Valor have made no investigation of and assumed no responsibility for the title to or any liabilities against the asset appraised.

– IV-41 –

VALUATION REPORT

APPENDIX IV

In the event that Valor becomes involved in any capacity in any action, proceedings or investigation brought by or against any person, in connection with or as a result of either the Valor’s engagement or any matter referred to in the service engagement, the Group will reimburse the Valor for all legal and other expenses incurred in connection therewith. Except where it is determined by final judgement of a court to have resulted from wilful default or gross negligence of Valor or its officers, the Group will fully indemnify and hold Valor harmless against any and all losses, claims, damages or liabilities to any such person in connection with or as a result of either the Valor’s engagement or any matter referred to in the service engagement. The reimbursement, indemnity and contributions to each of its associates shall ensure to the benefit of the Valor’s successors, assigns, heirs and personal representatives of the Valor, any such affiliate and any such persons. In the event the Valor is subject to any liability in connection with this service engagement, such liability will be limited to the amount of fees received for this engagement.
The Group agrees that itself or any of its associates will make no claim against Valor or any of its associates in connection with the engagement of the Valor except as a result of the Valor’s wilful default or gross negligence, and that neither Valor nor any of its associates will have any direct or indirect liability to the Group or except where it is determined by final judgement of a court to have resulted from wilful default or gross negligence of Valor or its officers.

– IV-42 –

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 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/she is taken or deemed to have under such provisions of SFO), or as recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the ‘‘Model Code’’) in the Listing Rules were as follows:

Interest in underlying shares of the Company

Name of Director(s) Nature of interest Date of share options granted (Note 1) Executive Director Jin Yanbing (Chairman) Beneficial owner 3 April 2017 Beneficial owner 28 April 2017 Independent non-executive Director Wang Fang Beneficial owner 28 April 2017 Total:	Number of share options outstanding as at the Latest Practicable Date 16,000,000 5,670,000 1,000,000 22,670,000	Approximate percentage of shareholding upon fully exercise of share options 0.10% 0.04% 0.01%
		0.15%

– V-1 –

GENERAL INFORMATION

APPENDIX V

Note 1:

The share options were granted pursuant to 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 Up to 25% of the total number of granted options anniversary of the date of grant From 2nd anniversary of the date of grant to 3rd Up to 25% of the total number of granted options anniversary of the date of grant From 3rd anniversary of the date of grant to 4th Up to 25% of the total number of granted options anniversary of the date of grant From 4th anniversary of the date of grant to 5th Up to 25% of the total number of granted options 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.

– V-2 –

GENERAL INFORMATION

APPENDIX V

(b) Substantial Shareholders’ Interests

So far as is known to any Director, as at the Latest Practicable Date, the following persons, other than a Director or chief executive of the Company, had or deemed or taken to have an interest or short position in the Shares or underlying Shares of the Company would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of 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)
Miao Yu	Deemed interest in	4,169,300,000 (L)	27.86%
	controlled corporation(1)
Prospect Ace Limited	Beneficial owner(1)	4,169,300,000 (L)	27.86%
Xiang Jun	Beneficial owner	756,831,000 (L)	5.06%

Notes:

(1) Miao Yu owns 100% equity interest of Prospect Ace Limited. Accordingly, Miao Yu is deemed to be interested in a long position of an aggregate of 4,169,300,000 shares held by Prospect Ace Limited.
(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.

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 2019 (being the date to which the latest published audited consolidated financial statements of the

– V-3 –

GENERAL INFORMATION

APPENDIX V

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 following is the qualification of the experts who have given opinion or advice which is contained in this circular:

Name Qualification Valor Appraisal & Advisory Limited Professional valuer BDO Limited Certified Public Accountants

As at the Latest Practicable Date, each of the experts above (i) had 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 2019 (the date to which the latest published audited consolidated financial statements of the Group were made up), acquired, disposed of by, or leased to any member of the Group, or were proposed to be acquired, disposed of by, or leased to any member of the Group; and (iii) has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter or report and the reference to its name included herein in the form and context in which it appears.

– V-4 –

GENERAL INFORMATION

APPENDIX V

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 disposal agreement dated 14 December 2020 entered into between Kong Sun Yongtai and CNNP Shandong in relation to the Yonglian Disposal for a total consideration of RMB33,580,000;
(b) the Disposal Agreement;
(c) the disposal agreements dated 22 October 2020 entered into between Kong Sun Yongtai and Jinan Tianguan (as the case may be) and the Purchaser in relation to the Previous Disposals for a total consideration of RMB100,210,000;
(d) the disposal agreement dated 21 September 2020 entered into between Kong Sun Yongtai and Guotou in relation to the Zhiguang Disposal for a total consideration of RMB82,000,000 subject to adjustment;
(e) the disposal agreement dated 5 December 2019 entered into between Kong Sun Yongtai and Guotou in relation to the Angli Disposal for a total consideration of RMB446,355,000 subject to adjustment;
(f) the disposal agreements dated 15 November 2019 entered into between Kong Sun Yongtai and CNNP Shandong in relation to the CNNP Disposals for a total consideration of RMB1,166,400,000;
(g) the disposal agreement dated 29 April 2019 between Kong Sun Yongtai, Guotou and Huzhou Xianghui pursuant to which Kong Sun Yongtai agreed to sell and Guotou agreed to acquire the entire equity interest in Huzhou Xianghui for a total consideration of approximately RMB413,213,000 (the ‘‘Huzhou Xianghui Disposal’’);
(h) the supplemental agreement dated 11 July 2019 and entered into among Guotou, Kong Sun Yongtai and Huzhou Xianghui in relation to the escrow arrangement of the consideration for the Huzhou Xianghui Disposal;
(i) the credit confirmation agreement dated 29 April 2019 and entered into among Guotou, Kong Sun Yongtai and Huzhou Xianghui, pursuant to which Huzhou Xianghui agreed to continue to repay the outstanding amount of the outstanding shareholder’s loan provided by Kong Sun Yongtai to Huzhou Xianghui in the amount of approximately RMB363,213,000;
(j) the disposal agreement dated 28 March 2019 between Kong Sun Yongtai 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

– V-5 –

GENERAL INFORMATION

APPENDIX V

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’’);

(k) the legally binding cooperation memorandum dated 16 May 2019 and entered into among Kong Sun Yongtai, CGN and Zhangshu Zhongli in relation to the settlement of the consideration of the Zhangshu Zhongli Disposal;
(l) 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; and
(m) 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 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.
For identification purposes only

10. MISCELLANEOUS

(a) The company secretary of the Company is Mr. Ching Kin Wai, who has been a member of the Hong Kong Institute of Certified Public Accountants since July 2013.
(b) The registered office and the principal place of business of the Company is at Unit 803–4, 8/F, Everbright Centre, 108 Gloucester Road, Wanchai, Hong Kong;
(c) The share registrar of the Company is Computershare Hong Kong Investor Services Limited, at Shops 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 803–4, 8/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 2017, 2018 and 2019 and the interim report of the Group for the six months ended 30 June 2020;

– V-6 –

GENERAL INFORMATION

APPENDIX V

(c) the unaudited consolidated financial information of Yongchen, the text of which is set out in Appendix II-E to this circular;
(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 Valor Appraisal & Advisory Limited, the text of which is set out in Appendix IV to this circular;
(f) 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;
(h) the circular dated 6 January 2020 issued by the Company in relation to the CNNP Disposals; and
(i) this circular.

– V-7 –

NOTICE OF THE EGM

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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)

NOTICE IS HEREBY GIVEN THAT an extraordinary general meeting (the ‘‘EGM’’) of Kong Sun Holdings Limited (the ‘‘Company’’) will be held at Unit 803–4, 8/F, Everbright Centre, 108 Gloucester Road, Wanchai, Hong Kong on Monday, 15 March 2021 at 11:00 a.m. for the purposes of considering and, if thought fit, passing, with or without amendments, the following resolutions as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

Words and expressions that are not expressly defined in this notice shall bear the same meaning as that defined in the circular dated 26 February 2021 of the Company.

‘‘THAT:
(i) the Disposal 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 transactions 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 or she may consider necessary or desirable to implement and/or give effect to the Disposal Agreement and the transactions contemplated thereunder.’’
‘‘THAT:
(i) the Guarantee (a copy of which has been tabled at the meeting marked ‘‘B’’ and signed by the chairman of the meeting for identification purpose) be and is 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 or she may consider necessary or desirable to implement and/or give effect to the Guarantee.’’

By Order of the Board Kong Sun Holdings Limited Mr. Jin Yanbing Executive Director

Hong Kong, 26 February 2021

– EGM-1 –

NOTICE OF THE EGM

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 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 two executive Directors, Mr. Jin Yanbing and Mr. Qin Hongfu, one non-executive Director, Mr. Jiang Hengwen and three independent non-executive Directors, Mr. Lang Wangkai, Ms. Wang Fang and Ms. Wu Wennan.

– EGM-2 –

AI assistant

Novautek Technologies Group Limited — Proxy Solicitation & Information Statement 2021

49267_rns_2021-02-26_31fa7c9a-ea05-4248-8a6c-a4ebfd2e3631.pdf

KONG SUN HOLDINGS LIMITED 江山控股有限公司

(1) VERY SUBSTANTIAL DISPOSAL AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

PRECAUTIONARY MEASURES AND SPECIAL ARRANGEMENTS FOR THE EGM

DEFINITIONS

DEFINITIONS

KONG SUN HOLDINGS LIMITED 江山控股有限公司

(Stock Code: 295)

(1) VERY SUBSTANTIAL DISPOSAL AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

THE DISPOSAL

PRINCIPAL TERMS OF THE DISPOSAL AGREEMENT

Subject matter

Consideration

Repayment of the Debts

Default

Conditions Precedent

BASIS OF THE CONSIDERATION FOR THE DISPOSAL

Arrangements during the Transition Period

Termination of the Guarantee

COMPLETION OF THE DISPOSAL

INFORMATION ON YONGCHEN

INFORMATION ON THE PARTIES

Jiangshan Fengrong

The Company

The Purchaser

REASONS AND BENEFITS FOR THE DISPOSAL

FINANCIAL EFFECT OF THE DISPOSAL AND INTENDED USE OF PROCEEDS

LISTING RULES IMPLICATIONS

The Disposal

The Guarantee

EGM

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 2017

Business review

Revenue

Revenue from provision of financial services

Gross profit and gross profit margin

Other gains and losses

Administrative expenses

Gain on bargain purchase on acquisition of subsidiaries

Gain on disposal/deregistration of subsidiaries, net

Finance costs

Solar power plants

Interest in a joint venture

Goodwill

Available-for-sale investments

Financial assets held for trading

Trade, bills and other receivables

Structured bank deposits

Trade and Other Payables

Liquidity and Capital Resources

Loans and Borrowings

Corporate bonds

Foreign Exchange Risk

Charge on Assets

Contingent Liabilities

Employees and Remuneration Policy

Connected Transaction

Significant Investments And Material Acquisition And Disposal

For the year ended 31 December 2018

Business review

Revenue

Revenue from provision of financial services

Revenue from trading of liquefied natural gas

Gross profit and gross profit margin

Other gains and losses

Novautek Technologies Group Limited Proxy Solicitation & Information Statement 2021

KONG SUN HOLDINGS LIMITED `江山控股有限公司`

KONG SUN HOLDINGS LIMITED `江山控股有限公司`