RemeGen Co., Ltd. - Proxy Solicitation & Information Statement 2012

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 to be taken, you should consult a licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Overseas Chinese Town (Asia) Holdings Limited (the “Company”), you should at once hand this circular with the accompanying form of proxy to the purchaser or transferee, or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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Overseas Chinese Town (Asia) Holdings Limited 華僑城（亞洲）控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 03366)

VERY SUBSTANTIAL ACQUISITION

A notice convening the extraordinary general meeting of the Company to be held at 11 a.m. on Tuesday, 11 December 2012 at Ming Room II, 4/F, Sheraton Hong Kong Hotel, 20 Nathan Road, Kowloon, Hong Kong is set out on pages EGM-1 to EGM-2 of this circular. Whether or not you are able to attend the meeting in person, please complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the Company’s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong, as soon as practicable but in any event not less than 48 hours before the time appointed for the holding of the meeting. Completion and return of the accompanying form of proxy will not preclude you from attending and voting at the meeting should you so wish.

26 November 2012

			Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			4
Appendix I	–	Accountants’ report of Tianjin Tianxiao . . . . . . . . . . . . . . . . . . . . . . .	I-1
Appendix II	–	Financial information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
Appendix III	–	Management discussion and analysis of the Group . . . . . . . . . . . . . . . .	III-1
Appendix IV	–	Management discussion and analysis of Tianjin Tianxiao . . . . . . . . . . .	IV-1
Appendix V	–	Unaudited pro forma financial information of the Enlarged Group . . . .	V-1
Appendix VI	–	Property valuation of Tianjin Tianxiao . . . . . . . . . . . . . . . . . . . . . . . .	VI-1
Appendix VII	–	Summary of PRC Laws in relation to property sector . . . . . . . . . . . . .	VII-1
Appendix VIII	–	General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VIII-1
Notice of EGM	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		EGM-1

DEFINITIONS

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

“Acquisition”	the acquisition of the entire equity interest in Tianjin Tianxiao
	pursuant to the Agreement (as supplemented by the Supplemental
	Agreement) and the Undertaking
“Agreement”	the conditional agreement entered into between Excel Founder and
	the Vendor on 2 November 2012 in relation to the Acquisition
“associate(s)”	has the meaning ascribed thereto in the Listing Rules
“Board”	the board of Directors
“Company”	Overseas Chinese Town (Asia) Holdings Limited (華僑城（亞洲）控
	股有限公司), a company incorporated in the Cayman Islands with
	limited liability, the shares of which are listed on the main board of
	the Stock Exchange
“Completion”	completion of the Acquisition
“connected person(s)”	has the meaning ascribed to it in the Listing Rules
“controlling shareholder(s)”	has the meaning ascribed thereto in the Listing Rules
“Director(s)”	director(s) of the Company
“EGM”	the extraordinary general meeting of the Company to be convened
	on 11 December 2012 for considering and, if thought fit, approving,
	among other things, the Acquisition
“Enlarged Group”	the Group as enlarged by the Acquisition
“Excel Founder”	Excel Founder Limited (銳振有限公司), a limited company
	incorporated in Hong Kong and an indirectly wholly-owned
	subsidiary of the Company
“Group”	the Company and its subsidiaries
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Land”	a piece of land with an aggregate area of 131,768.8 square meters
	located in the area of Jintang Road (津塘路), Hedong District (河東
	區), Tianjin, the PRC owned by Tianjin Tianxiao

DEFINITIONS

“Latest Practicable Date”	21 November 2012, being the latest practicable date prior to the	21 November 2012, being the latest practicable date prior to the
	printing of this circular for ascertaining certain information
	contained in this circular
“Listing Rules”	the Rules Governing the Listing of Securities	on the Stock
	Exchange
“PRC”	the People’s Republic of China, excluding, for the	purpose of this
	circular only, Hong Kong, the Macau Special Administrative Region
	of the People’s Republic of China and Taiwan
“RMB”	Renminbi, the lawful currency of the PRC
“Share(s)”	existing ordinary share(s) of HK$0.10 each in the issued share
	capital of the Company
“Shareholder(s)”	holder(s) of the Shares
“sq.ft.”	Square feet
“sq.m.” or “m2”	Square meter
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Supplemental Agreement”	the supplemental agreement to the Agreement entered into between
	Excel Founder and the Vendor on 2 November 2012 in relation to
	the Acquisition
“Tianjin Tianxiao”	天津天瀟投資發展有限公司 (Tianjin Tianxiao Investment
	Development Company Limited), a company established in the
	PRC with limited liability
“Undertaking”	the Undertaking given by the Company to the	Vendor on 2
	November 2012 in relation to the Acquisition
“US Dollar”	the lawful currency of United States of America
“Vendor”	天津津濱發展股份有限公司 (Tianjin Jinbin	Development
	Company Limited), a company established in the PRC, whose
	shares are listed on the Shenzhen Stock Exchange
“V&T”	V&T (Shenzhen) Law Firm (萬商天勤深圳律師事務所), the
	Company’s PRC legal adviser

DEFINITIONS

“%” per cent.

In this circular, the English names of the PRC entities or enterprises are translation of their Chinese names solely for the purpose of illustration. In the event of any inconsistency, the Chinese names shall prevail.

For the purpose of this circular and solely for the purpose of illustration, all amounts in RMB are translated into HK$ at an exchange rate of RMB0.81: HK$1.

LETTER FROM THE BOARD

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Overseas Chinese Town (Asia) Holdings Limited 華僑城（亞洲）控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 03366)

Executive Directors: Ms. Wang Xiaowen (Chairman) Ms. Xie Mei (Chief Executive Officer) Mr. Yang Jie

Registered Office: PO Box 1350 GT 75 Fort Street Grand Cayman Cayman Islands

Non-executive Director:

Mr. He Haibin

Independent Non-executive Directors:

Ms. Wong Wai Ling Mr. Xu Jian Mr. Lam Sing Kwong Simon

Head Office and Principal Place of Business: Suites 3203-3204, Tower 6 The Gateway, Harbour City Canton Road Tsim Sha Tsui Kowloon Hong Kong

26 November 2012

To the Shareholders,

Dear Sir or Madam,

VERY SUBSTANTIAL ACQUISITION

INTRODUCTION

References are made to the announcement of the Company dated 6 November 2012.

On 2 November 2012, Excel Founder (as purchaser), an indirectly wholly-owned subsidiary of the Company, and the Vendor entered into the Agreement, pursuant to which, Excel Founder has conditionally agreed to acquire and the Vendor has conditionally agreed to dispose of the entire equity interest in Tianjin Tianxiao and all rights attached thereto for the consideration of RMB384,995,400.

The Supplemental Agreement was also entered into between Excel Founder and the Vendor on 2 November 2012, setting out further arrangement concerning the Land and the financial position of Tianjin Tianxiao.

LETTER FROM THE BOARD

The Company has also given the Undertaking to the Vendor on 2 November 2012, pursuant to which the Company guarantees the due performance of Excel Founder’s obligations under the Agreement and the Supplemental Agreement and undertakes that the Company will assume joint liability with Excel Founder in relation to the aforesaid performance of obligations.

The purpose of this circular is to provide Shareholders with (i) further details of the Acquisition; and (ii) such other information as required by the Listing Rules.

THE AGREEMENT

Date:

2 November 2012

Parties:

Purchaser: Excel Founder, it is principally engaged in investment holding.

Vendor: 天津津濱發展股份有限公司 (Tianjin Jinbin Development Company Limited), it is principally engaged in property development.

To the best of the knowledge, information and belief of the Board, having made all reasonable enquiries, the Vendor and its ultimate beneficial owner(s) are third parties independent of the Company and its connected persons.

Assets to be acquired

The entire equity interest in Tianjin Tianxiao held by the Vendor, together with all rights attached thereto.

Details of Tianjin Tianxiao are set out below in the paragraph headed “Information of Tianjin Tianxiao and its Development Plans”.

Conditions Precedent to the Agreement

The Completion is conditional upon, among other things, fulfillment of the following conditions:

the Company having obtained all necessary or appropriate approval, authorisation, consent and licence as a company whose shares are listed on the Stock Exchange (including without limitation, approval from Shareholders at general meeting);
the Vendor, Excel Founder and Tianjin Tianxiao having obtained all necessary or appropriate approval, authorisation, consent and licence;
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LETTER FROM THE BOARD

the Agreement having obtained approval from the Ministry of Commerce of the PRC or its authorised approval authorities, and all necessary or appropriate approval, consent, authorisation and licences and having fulfilled all statutory requirements (if any); and
the Agreement having completed all relevant approval matters pursuant to the relevant requirements of the laws and regulations of the PRC.

According to the Agreement, there is no long stop date for the completion of the above conditions precedent.

Consideration

The consideration of RMB384,995,400 (equivalent to approximately HK$475,302,963) is to be satisfied by the Company in the following manners upon Completion and completion of the procedures for the amendment of the industry and commerce registration, the filing to the Ministry of the Commerce of the PRC, and the filing modification with the foreign exchange administration in relation to the Acquisition:–

(a) as to RMB196,347,700 (equivalent to approximately HK$242,404,568) in cash within three business days; and
(b) as to RMB188,647,700 (equivalent to approximately HK$232,898,395) in cash within three months.

Basis of determination of the consideration

The consideration was determined based on normal commercial terms and arrived at after arm’s length negotiation between Excel Founder and the Vendor, taking into consideration, (i) the preliminary estimate of the value of the Land conducted by an independent valuer (the market value of the Land as at 31 October 2012 based on the valuation by an independent valuer, Savills Valuation and Professional Services Limited, was RMB1,450,000,000 on the assumption that the proposed development had been approved for a construction scale of a total gross floor area of approximately 316,230 sq.m. including residential area 286,230 sq.m., retail area 19,000 sq.m. and ancillary facility area 11,000 sq.m., further details are particularized in Appendix VI – Property Valuation of Tianjin Tianxiao of this circular); (ii) the assets and liabilities of Tianjin Tianxiao in its unaudited management accounts prepared in accordance with Hong Kong Financial Reporting Standards as at 31 October 2012; and (iii) the development potential of the Land.

Management of Tianjin Tianxiao during the transitional period before Completion

From the entering into of the Agreement to the completion of the amendment of the industry and commerce registration in relation to the Acquisition, Excel Founder shall be entitled to appoint its representatives to participate in the operation and management of Tianjin Tianxiao and appoint two directors to Tianjin Tianxiao’s board of directors.

LETTER FROM THE BOARD

Land use right certificate

After the signing of the Agreement, the Vendor is obliged to assist Excel Founder and Tianjin Tianxiao in obtaining the land use right certificate.

THE SUPPLEMENTAL AGREEMENT

Excel Founder and the Vendor also entered into the Supplemental Agreement on 2 November 2012, principal terms of which are summarised as follows:

Adjustment of the Land

The Vendor shall be responsible for the application to adjust the terms of use of the Land (the “Adjustment”) as follows:

(1) permitted land use shall be changed from residential only, to residential and commercial use;
(2) term of land use right shall be changed from 70 years for residential use, to 70 years for portion of Land for residential use and 40 years for portion of Land for commercial use; and
(3) the Land shall have a construction plot ratio of 2.4 and thus a total construction area of 316,230 square meters, out of which commercial area (including facilities and public buildings of not more than 11,000 square meters, while the remaining area as saleable commercial area) shall be not less than 30,000 square meters and not more than 40,000 square meters.

Compensation in relation to Adjustment

Pursuant to the Supplemental Agreement, the Vendor shall pay Excel Founder (i) RMB8,000 for every 1 square meter deficient where the portion of Land for commercial use is less than 30,000 square meters (but subject to a maximum of RMB150,000,000), and (ii) RMB5,000 for every 1 square meter excess where the portion of Land for commercial use is more than 40,000 square meters, based on the total construction area.

The Adjustment shall be completed prior to 30 June 2013 (or another date as agreed by Excel Founder in writing), failure of which the Vendor agreed to pay Excel Founder a sum of RMB150,000,000 as compensation before 30 August 2013. Interest shall be payable at a rate representing 4 times of the one-year benchmark lending rate published by the People’s Bank of China upon default.

Tianjin Tianxiao shall be responsible for all fees and expenses for the application for the Adjustment. Where the final fee incurred exceeds RMB9,000,000, the Vendor shall be responsible for such additional fee.

Delivery of the Land

The Vendor shall complete all removal, demolition and site formation works in relation to the Land before 31 December 2012 and, shall there exist any requirements for resettlement and compensation of workers in relation to the Land pursuant to the relevant laws and regulations of the PRC, the same shall be completed before 31 December 2012. The Land shall be handed over to Tianjin Tianxiao for its

LETTER FROM THE BOARD

commencement of business before 31 December 2012. All costs to be incurred for the removal, demolition and site formation works and the hand-over shall be borne by the Vendor. Shall the Vendor be unable to hand-over the Land to Tianjin Tianxiao before 31 December 2012 according to the terms of the Supplemental Agreement due to the Vendor’s failure to complete the removal, demolition, site formation, resettlement and compensation works in relation to the Land, the Vendor agreed to pay Excel Founder a daily compensation equivalent to 0.1% of the part of consideration already paid by Excel Founder and the amount of debt already repaid by Tianjin Tianxiao. If the Vendor fails to hand-over the Land to Tianjin Tianxiao for over 30 days from 31 December 2012, Excel Founder is entitled to terminate the Supplemental Agreement and the Agreement and claim for its loss from the Vendor.

Repayment of debt

The Vendor undertakes that the costs of the Land (including land transfer fee, taxes and reserve costs for land consolidation) (the “Land Costs”) shall be acknowledged by the tax authority of Tianjin City (天津市級稅務機關) as RMB1,068,000,000. The Land Costs have been fully paid by the Vendor, its associated company and Tianjin Tianxiao, among which, the amount paid by the Vendor and its associated company in the amount of approximately RMB1,047,812,159 has been converted into a debt owed by Tianjin Tianxiao to the Vendor and its associated company. The Vendor guarantees that (1) Tianjin Tianxiao has no outstanding debt or contingent debt other than the aforesaid debt of approximately RMB1,047,812,159 as at 31 October 2012, which shall otherwise be repaid by the Vendor, and (2) Tianjin Tianxiao will be provided all invoices and in the amount of not less than RMB1,068,000,000 before 30 June 2013 that are approved by the tax authority and can be counted as the costs of the Land, failure of which the Vendor will be responsible for any consequential additional taxes to be borne by Tianjin Tianxiao.

Where the invoices provided to Tianjin Tianxiao exceed RMB535,000,000 on the date of payment of the first part of the consideration pursuant to the Agreement, Tianjin Tianxiao shall repay RMB535,000,000 to the Vendor and its associated company (the “First Installment”). The remaining debt owed by Tianjin Tianxiao to the Vendor and its associated company (the “Remaining Balance”) shall be repaid by Tianjin Tianxiao upon Excel Founder acknowledging Tianjin Tianxiao has been provided the invoices pursuant to the terms of the Supplemental Agreement, and (1) on 30 June 2013 or (2) upon the completion of the Adjustment or within five business days after the payment of the compensation payable by the Vendor to Excel Founder pursuant to the terms of the Supplemental Agreement, if any, as detailed in the paragraph headed “Compensation in relation to Adjustment” above and upon acknowledgement by Excel Founder in relation to the same; whichever the later. Default in repayment by Tianjin Tianxiao pursuant to the terms of the Supplemental Agreement shall be subject to interest at a rate representing 4 times of the one-year benchmark lending rate published by the People’s Bank of China.

The First Installment shall be interest-free. Interest shall be payable on the Remaining Balance from the date of repayment of the First Installment by Tianjin Tianxiao, or the date the invoices that shall be provided to Tianjin Tianxiao pursuant to the Supplemental Agreement have been provided to Tianjin Tianxiao, whichever the later, until full settlement of the same at a rate same as the one-year benchmark lending rate published by the People’s Bank of China. Excel Founder has guaranteed for the said repayment of debt by Tianjin Tianxiao, and will assume joint liability for repayment with Tianjin Tianxiao.

LETTER FROM THE BOARD

Total Commitment of the Group and Source of Funding

In relation to the Acquisition, the total commitment of the Group are the consideration of RMB384,995,400 pursuant to the Agreement and the repayment of debt of approximately RMB1,047,812,159 owed by Tianjin Tianxiao to the Vendor and its associated company pursuant to the Supplemental Agreement.

The Group intends to satisfy the aforesaid amount by internal resources, shareholder’s loans and/or bank borrowings.

UNDERTAKING BY THE COMPANY

The Company is principally engaged in investment holding and the Group is principally engaged in comprehensive development business and the manufacture and sale of paper carton and products.

INFORMATION OF TIANJIN TIANXIAO AND ITS DEVELOPMENT PLANS

Tianjin Tianxiao was established in the PRC with limited liability in July 2012. It is principally engaged in investment, property development, sale agency of commercial property, design and construction of indoor and outdoor decoration, hotel management, property services, property leasing, the development and sale of construction material and technology, construction engineering, landscape construction.

The major assets of Tianjin Tianxiao is the Land located in the area of Jintang Road (津塘路), Hedong District (河東區), Tianjin, the PRC. The Land has a total site area of approximately 131,763.8 square meters. The costs of the Land was RMB1,068,000,000 and the latest status of the Land is vacant and it is in the process of site formation. As at the Latest Practicable Date, the Land has not yet commenced development, but it is planned to be developed as residential and commercial properties with a total maximum gross floor area of approximately 316,230 square meters. Tianjin Tianxiao will start to develop high-rise residential flats, multi-storeyed residential flats and shops on the Land after hand-over (the “Tianjin Tianxiao Project”). It is expected that part of the construction will commence in 2013 and be completed in 2016.

Tianjin Tianxiao has entered into an agreement (天津市國有土地使用權出讓合同) with the Land Resources and Housing Administration Bureau of Tianjin City (天津市國土資源與房屋管理局) of the PRC on 17 October 2012, pursuant to which the Land Resources and Housing Administration Bureau of Tianjin City agreed to grant the Land to Tianjin Tianxiao through land swap. As the agreement was only entered for about a month, Tianjin Tianxiao is still in the course of applying for the relevant land use right certificate.

Tianjin Tianxiao is applying for the land use right certificate in accordance with the normal procedures stipulated by the relevant authorities of the PRC. As advised by the Company’s PRC legal advisers, there are no legal obstacles for Tianjin Tianxiao to apply for the land use right certificate. It is expected that Tianjin Tianxiao will obtain the land use right certificate in 2013.

LETTER FROM THE BOARD

According to the audited accountants’ report of Tianjin Tianxiao prepared in accordance with the Hong Kong Financial Reporting Standards, the net assets value of Tianjin Tianxiao as at 31 October 2012 was RMB30,000,000. As Tianjin Tianxiao was newly established in the PRC in 2012 and it has not actually started its operation given the relatively short period of time, the profit before and after tax attributable to owners of Tianjin Tianxiao for the two financial years preceding to the signing of the Agreement and the Supplemental Agreement are not available. There was no profit before and after tax for the period from 19 July 2012 (date of incorporation) to 31 October 2012.

REASONS FOR AND BENEFIT OF ENTERING INTO THE ACQUISITION

The Land owned by Tianjin Tianxiao is in a location with a convenient transportation network, comprehensive amenities in the surrounding areas. In view of the development potential of the Land, it is expected that the Acquisition can bring positive return and enhance the overall profitability of the Company.

The Directors consider that the terms of the Acquisition are fair and reasonable, and that the Acquisition is in the interest of the Company and the Shareholders as a whole.

FINANCIAL EFFECT OF THE ACQUISITION

Upon Completion, Tianjin Tianxiao will become a wholly-owned subsidiary of the Company and their results would be consolidated into the consolidated financial statements of the Company. Based on the unaudited pro forma financial information of the Enlarged Group as set out in Appendix V of this circular, as at 30 June 2012, (i) the unaudited pro forma total assets would be increased from approximately RMB17.78 billion to approximately RMB19.21 billion; (ii) the unaudited pro forma total liabilities would be increased from approximately RMB13.28 billion to approximately RMB14.71 billion; (iii) the unaudited pro forma adjusted net asset value attributable to the owners of the Company would remain unchanged; and (iv) the unaudited pro forma consolidated profit for the year ended 31 December 2011 of the Enlarged Group would remain unchanged.

Given the positive prospect of the Tianjin Tianxiao Project which is further elaborated in the paragraph headed “Information of Tianjin Tianxiao and its Development Plans” above, the Directors consider that the earnings of the Enlarged Group will be improved in the near future. However, the overall effects of the Acquisition on the future earnings of the Enlarged Group will depend on, amongst other matters, the performance of Tianjin Tianxiao.

FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

For the year ended 31 December 2011, the Group’s turnover was approximately RMB2,559 million, representing an increase of approximately 34.3% over 2010. Profit attributable to the Shareholders for the year was approximately RMB159 million, representing an increase of approximately 138.7% over 2010. Gross profit margin was approximately 30.2%, representing an increase of approximately 16.6% over 2010. Total assets and total equity amounted to approximately RMB6.2 billion and approximately RMB2.3 billion, representing an increase of approximately 2.9% and approximately 12.0% over 2010 respectively.

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LETTER FROM THE BOARD

For the comprehensive development business, the Suhewan project in Shanghai commenced pre-sale of its first office apartment units located at 41 Jiefang in September 2012, and will generate revenue for the Group this year. The Suhewan project will continue to launch new products in the future, including multistory residential properties by the shore, luxury apartments, office apartment, grand hotel, boutique business premises and art studios, and will provide the Group with a strong profit driver. The Suhewan project will gradually transform the Group into a developer and operator of commercial complex, while maintaining a continuous and steady growth in profits in coming years. The Suhewan project, as a riverside city comprehensive project featuring a fusion of cultural heritage, art, fashion, commercial and residential properties as well as urban recreational facilities, will be transformed into a brand new landmark in Shanghai.

Chengdu Happy Valley will take various measures to enhance its capabilities to attract visitors on a “24 hours a day, 7 days a week” basis and expand the “family” consumer group in 2012. Phase II of Chengdu Happy Valley, which comprises large scale hi-tech indoor entertainment projects, is scheduled to complete its major structure in the end of 2012, aiming to open to public in May 2013. For residential property projects, Chengdu Tianfu OCT Industry Development Company Limited (“Chengdu OCT”) will take advantage of its comprehensive development business to fully present an image of high quality projects through various marketing measures. Meanwhile, Chengdu OCT plans to improve the general planning of the commercial sector so as to speed up commercial development. The Group is confident about the future prospect of Chengdu OCT and believes that it will strive for growth while maintaining stability and once again deliver impressive results.

For the paper packaging business, the Group aims to speed up its efforts to expand sales through building a strategic alliance with important customers. At the same time, the Group will promote product diversification, further strengthen the creative elements of the Group’s products, and maintain a steady development of its paper packaging business.

The Group will continue to create quality products in the future, seeking to enhance the market competitiveness of the Group through pro-active innovations.

By virtue of its unique overall planning and advantageous accurate market positioning, the Group is confident to capitalise on the “OCT” brand and resources to adjust its sales policy timely with market changes and project operations and speed up its capital turnover. The Group is positioned to aggressively secure project reserve by developing at least one project in the economically developed cities each year to expand its business scale and growth potential, with an aim to become an outstanding developer and operator of commercial complex and develop into a sizable Hong Kong-listed Group within five years.

INDUSTRY OVERVIEW

The Overview of the PRC Property Market

Driven by (i) increasing urbanization; (ii) increasing per capita disposal income for urban household; and (iii) robust economic development, the PRC property market has undergone a remarkable growth in recent years. According to the statistics published by National Bureau of Statistic of China, the PRC’s urbanization increased from approximately 41.8% in 2004 to approximately 50.0% in 2010, and the per

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LETTER FROM THE BOARD

capita disposable income for urban household rose from approximately RMB9,421.6 in 2004 to approximately RMB19,109 in 2010, representing a compound annual growth rate (“CAGR”) of approximately 12.51%.

The table below illustrates selected statistics in respect of the PRC’s urbanization rate and per capita disposal income for urban household:

								CAGR
	2004	2005	2006	2007	2008	2009	2010	(2004-2010)
Urban year-end population
(in million)	542.8	562.1	582.9	606.3	624.0	645.1	669.8	3.57%
Total year-end population
(in million)	1,299.9	1,307.6	1,314.5	1,321.3	1,328.0	1,334.5	1,340.9	0.52%
Urbanization rate (%) (Note)	41.8	43.0	44.3	45.9	47.0	48.3	50.0	3.03%
Per capita disposable income for
urban household	9,421.6	10,493.0	11,759.5	13,785.8	15,780.8	17,175.0	19,109.0	12.51%

Sources: China Statistical Yearbook 2011

Note: It is determined by dividing the urban year-end population by the total year-end population.

Demand for real estates in the PRC has been, in general, on an upward trend over the years. According to the statistics published by National Bureau of Statistic of China, the gross floor area (“GFA”) of commodity properties, comprising (i) residential buildings; (ii) office buildings; (iii) houses for business use; and (iv) others, sold in 2004 was approximately 382.3 million sq.m. in 2004 to approximately 1,047.6 million sq.m. in 2010. The average selling price of commodity properties in 2010 was approximately RMB5,032 per sq.m., increasing from approximately RMB2,778.0 per sq.m. in 2004, representing a CAGR of approximately 10.41% during the period.

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LETTER FROM THE BOARD

The followings are the PRC’s properties sales in terms of GFA and the average selling prices from 2004 to 2010:

								CAGR
	2004	2005	2006	2007	2008	2009	2010	(2004-2010)
GFA of commodity properties sold
(sq.m. in million)	382.3	554.9	618.6	773.5	659.7	947.6	1,047.6	18.29%
GFA of residential properties sold
(sq.m. in million)	338.2	495.9	554.2	701.4	592.8	861.8	933.8	18.44%
GFA of villas, high-grade apartment
sold (sq.m. in million)	23.2	28.2	36.7	45.8	28.7	46.3	42.2	10.49%
GFA of office building sold (sq.m.
in million)	6.9	11.0	12.3	14.7	11.6	15.4	18.9	18.29%
Average selling price of commodity
properties (in RMB per sq.m.)	2,778.0	3,168.0	3,367.0	3,864.0	3,800.0	4,681.0	5,032.0	10.41%
Average selling price of residential
properties (in RMB per sq.m.)	2,608.0	2,937.0	3,119.0	3,645.0	35,760.0	4,459.0	4,725.0	10.41%
Average selling price of villas,
high-grade apartment (in RMB
per sq.m.)	5,576.0	5,834.0	6,585.0	7,471.0	7,801.0	9,662.0	10,934.0	11.88%
Average selling price of office
building (in RMB per sq.m.)	5,744.0	6,923.0	8,053.0	8,667.0	8,378.0	10,608.0	11,406.0	12.11%

Sources: China Statistical Yearbook 2011

The prosperous development in the PRC has been reflected by a rapid growth in total revenue for the property developers with a CAGR of approximately 21.58% during the period from 2004 to 2010. In the corresponding period, the total operating profit for the property developer advanced from approximately RMB85.8 billion in 2004 to approximately RMB611.1 billion in 2010, representing an increase of approximately 38.71% in CAGR.

Total revenue and operating profit for property developers in the PRC from 2004 to 2010:

								CAGR
	2004	2005	2006	2007	2008	2009	2010	(2004-2010)
Total revenue for the property
developers (in RMB billion)	1,331.4	1,476.9	1,804.7	2,339.7	2,669.7	3,460.6	4,299.6	21.58%
Total operating profit for the
property developers
(in RMB billion)	85.8	110.9	167.0	243.7	343.2	472.9	611.1	38.71%

Sources: China Statistical Yearbook 2011

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Major property markets

Tianjin

Overview

Tianjin is one of the four major municipalities directly under the central government of the PRC and is the most important integrated industrial base and commercial and trading centre in the PRC. Its economic development and integrated strength grew at a record high pace from 2007 to 2011, with an average growth rate of 16.5% in total annual production value to rank the first in the PRC. Following the inclusion of the Tianjin Binhai New Area in the National Development Strategic Plan and the gradual emergence of the Beijing-Tianjin-Hebei Metropolitan Region and the Bohai Rim Region in 2005, Tianjin encountered a historical development opportunity and its position of being a central city is becoming more and more outstanding. According to the data released by the statistics bureau of various provinces and cities, Tianjin recorded a national top GDP growth rate of 14.1% in the first half of 2012, which was way beyond the national average. The total production value, growth rate and key statistical data of Tianjin from 2007 to 2011 are stated as follows:

Table 1 Total production value and growth rate of Tianjin from 2007 to 2011

RMB100 million	RMB100 million														%	%
12000												11190.99				18
		Total production				value of Tianjin			9224.46
10000		year-on-year			growth					17.4
8000			6719.01			7521.85										17
5252.76 6000				16.5			16.5						16.4			16
4000	15.5
																15
2000
0																14
	2007			2008			2009			2010			2011	(year)
					2007			2008			2009				2010		2011
GDP (RMB100 million)				5,252.76			6,719.01			7,521.85					9,224.46		11,190.99
GDP growth rate					15.5%			16.5%			16.5%				17.4%		16.4%
Per capita GDP (RMB)					47,109			57,134			61,244				70,996		82,615
Permanent resident population by
year-end (10,000)					1,115			1,176		1,228.16					1,299.29		1,354.58
Per capita disposable	income of
urban residents (RMB)					16,357			19,423			21,430				24,293		26,921

Source: Tianjin Statistical Yearbook and Tianjin Statistical Bulletin (天津統計公報), 2007 to 2011

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Tianjin Property Market

According to the data of Tianjin Statistics Bureau, the performance of Tianjin residential property market was stable over the past few years. The total amount invested in properties in Tianjin increased 2.2 times from RMB40.232 billion in 2006 to RMB86.664 billion in 2010, while the average selling price of local residential properties increased 1.7 times from RMB4,649.25/m[2] in 2006 to RMB7,912.63/m[2] in 2010. According to market data for the first half of 2012 released by Savills Valuation and Professional Services Limited, the average property transaction price in Tianjin rose 1.3% to RMB9,840/m[2] as compared with the corresponding period of last year and surged 2.1 times as compared with the property price in 2006.

Selected statistical data of Tianjin property market for the indicated years are stated as follows:

	2006	2007	2008	2009	2010
Property Investment
(RMB100 million)	402.32	505.29	653.72	735.18	866.64
Floor area of completed
residential property
(10,000 m2)	1,308.95	1,398.61	1,492.54	1,580.82	1,603.65
Floor area of residential
properties sold
(10,000 m2)	1,332.49	1,401.85	1,135.35	1,461.47	1,352.61
Income generated from sale
of residential properties
(RMB10,000)	6,195,083	7,816,306	6,355,728	9,653,564	10,702,706
Average selling price of
residential properties
(RMB/m2)	4,649.25	5,575.71	5,598.03	6,605.38	7,912.63
Source: Tianjin Statistical Yearbook,	Tianjin Statistical Bulletin and		Tianjin Statistics	Bureau, 2007	to 2011

Under the stringent policy of the PRC government on restricting property purchase, potential buyers are hesitant to purchase new flats. According to the data from the National Bureau of Statistic of China, from January 2012 to September 2012, the total area of land acquired by property developers was 260.33 million square meters, representing a year-on-year decrease of 16.5%, and the land transaction price declined by 11.0% to RMB530.9 billion. During the first nine months of the year, the total area of commodity premises sold was 684.41 million square meters, representing a year-on-year decrease of 4.0%, of which the area of residential properties sold declined by 4.3%. The sales of commodity premises amounted to RMB4,035.4 billion, representing a growth of 2.7%, of which the amount generated from the sales of residential properties increased by 3.3%. According to the data released by Centaline Property (Tianjin), for the first half of the year, the total number of newly completed commodity premises purchased was 34,306 with a gross area of 3.5783 million square meters, and the total number of second-hand residential properties purchased was 23,085 with a gross area of 1.779 million square meters. Based on an analysis of the above data, during the first half of 2012, the average growth of turnover of Tianjin residential property market ranged from 20% to 25%. On 17 October 2012, the executive meeting of the State Council requested a stringent execution of differential mortgage policy, tax policy and property purchase restriction policy. To facilitate a stable and

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sustainable development of the property market in the long run, the meeting suggested focusing on research of setting up scientific, effective, stable and predictable policies on property market control. In view of the decisions made at the meeting, despite achieving preliminary success in property market control, the government is expected to continue tightening control on property market in the future. Tianjin government also indicated that it would continue to implement tightening policies on property market including restrictions on purchase of property. In the meantime, as the process of urbanization is still proceeding and the property sector is making significant contribution to the economy, it is expected that provincial governments including Tianjin government will adjust some of the existing policies to meet certain inelastic demand. Moreover, with a view to prevent a sharp fall of the domestic economy, it is estimated that the central government will enhance the current property policies gradually next year to further adjust to and promote the healthy development of the property market.

On 18 February 2011, Tianjin government announced its new property purchasing policy. Tianjin registered residents and non-registered residents who can provide evidence on payment of income tax or social insurance fee for one year can purchase an additional flat. However, purchase of an additional flat is prohibited for be purchased by those non-registered residents who cannot provide evidence on tax payment or who possess more than one flat, as well as those registered residents who possess two or more flats.

On 1 February 2012, Tianjin government revised the guiding price for ordinary housing up, leading to an expansion on the coverage of ordinary housing. There will be a significant decline in related transaction taxes. The move was viewed as a refinement in property market policy by the Tianjin government.

On 24 October 2012, Tianjin Property Market Transaction Capital Supervision Center (天津房地產交易資金監管中心) issued an announcement stating that the down payment of property purchase in Tianjin can be paid in two instalments, which was known as the once payment and the twice payment. For the property purchase in lump sum, the first payment of down payment should not be less than 30% of the property price; for the property purchase paid by credit or instalments, the total amount of first payment and the second payment for down payment should not be less than 30% of the property price. China Real Estate Information Corporation opined that such move loosened the requirement on down payment and would stimulate inelastic demand for property purchase to a certain extent. To the residential property developers, the policy that allows down payment to be settled in two instalments can deliver a signal of loosening of policy to the market.

With the global economy continuing to be bleak, China’s economic growth demonstrated a decline to a certain extent. However, the country still maintained a growth of 7.7% in GDP for the first three quarters of 2012, with a year-on-year growth of 7.4% and quarter-on-quarter growth of 2.2% for the third quarter. The decline in economy has slowed down. The Directors consider that the pace of growth of economy stabilising in the PRC will help the stable development in residential property market. With the speedy development in Binhai New Region, which is a national-grade development zone, Tianjin will probably continue to be the leader in economic growth in the PRC in the future and its property market will have greater development potential. Regarding the property policies, as the increase in national residential property prices is under control, the possibility of the government to introduce further tightening policy is low. It is expected the policy restrictions on purchase and credit will not be loosened within 2012. As local governments fine-tune policies and some property developers adjust the price to sell the inventory, the residential property prices will continue to be slightly adjusted in 2013. Although the amount of transactions of residential properties in Tianjin has declined, it is expected that rentals and prices will remain stable.

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RISK FACTORS

The investment in Tianjin Tianxiao is subject to a number of risks.

Tianjin Tianxiao is subject to legal and business risks if the Land fails to obtain the land use right certificate

The Directors were aware that the land use right certificate of the Land is under application and has not yet been issued as at the Latest Practicable Date. The PRC legal advisers of the Company is of the opinion that there will be no legal impediment for Tianjin Tianxiao to obtain the land use right certificate of the Land as Tianjin Tianxiao has entered into the an agreement (天津市國有土地使用權出讓合同) with the Land Resources and Housing Administration Bureau of Tianjin City (天津市國土資源與房屋管理局) of the PRC on 17 October 2012, pursuant to which the Land Resources and Housing Administration Bureau of Tianjin City agreed to grant the Land to the Tianjin Tianxiao through land swap. Shall the government and the land and resources bureau adjust land use planning, there would be uncertainties as to whether Tianjin Tianxiao will eventually obtain the land use right certificate of the Land. The Directors will closely monitor the progress of obtaining land use right certificate of the Land. Nevertheless, there is no assurance that the land use right certificate of the Land will be successfully obtained as planned.

Risk of a delay or failure in transferring the Land

The latest status of the Land is vacant and it is in the process of site formation. According to the Supplemental Agreement, the Vendor shall complete relocation, demolition and site formation works before the deadline 31 December 2012. There are still uncertainties as to whether the Land could be handed-over as scheduled as there might be a delay in the removal, demolition, site formation, resettlement and compensation works in relation to the Land and force majeure. There is also a risk of a delay or failure in hand-over of the Land.

Risk of a failure of Adjustment

Pursuant to the Supplemental Agreement, the Vendor shall be responsible for the application to adjust the terms of use of the Land (the “Adjustment”) including, inter alia, permitted land use shall be changed from residential only, to residential and commercial use and the Land shall have a construction plot ratio of 2.4 and thus a total construction area of 316,230 square meters, out of which commercial area (including facilities and public buildings of not more than 11,000 square meters, while the remaining area as saleable commercial area) shall be not less than 30,000 square meters. There is a risk that the relevant government authorities may not grant approval for the Adjustment.

Delay in completion of the Tianjin Tianxiao Project

The completion of the Tianjin Tianxiao Project could be delayed due to development and construction risks, such that it would delay the opening or otherwise affect the commencement of business of Tianjin Tianxiao. As such, there is no assurance that such new businesses can generate revenue and cashflow as scheduled. In addition, delays in generating revenues could affect the financial and business performance of Tianjin Tianxiao and the Group.

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Volatility in the price of construction materials

The results of operations and financial performance of the Enlarged Group will be affected by volatility in the price of construction materials. The costs of construction materials constitute the most substantial item among the construction costs of the Tianjin Tianxiao Project, thus any rise in the costs of construction materials may result in higher fees charged by the construction contractors of the Enlarged Group. Given that the costs of the aforesaid construction materials have been fluctuating in the PRC, it is challenging for the Enlarged Group to maintain a consistent gross profit margin for the properties of the Enlarged Group. In the event that the Enlarged Group is not able to (i) source the same construction materials at competitive cost level or (ii) pass any or all of the increased costs to the customers of the Enlarged Group without affecting the quantity demanded, the profitability of the Enlarged Group may be adversely affected.

Fluctuation of interest rates

The Enlarged Group relied on interest bearing debt as one of the important financing sources to fund its operations and most of the loans are RMB denominated, thus any changes in interest rate in the PRC will affect the financing costs of the Enlarged Group. There is no assurance that the People’s Bank of China (the “PBOC”) will not further increase the lending rate in the future, thereby escalating the financing costs of the Enlarged Group. In the event that the PBOC increases the lending rate in the future, the business, financial condition or results of operations of the Enlarged Group may be materially and adversely affected.

Natural disaster or bad weather that may disrupt operations and damage the properties in Tianjin Tianxiao Project

In the event of any natural disaster or bad weather in Tianjin, the Tianjin Tianxiao Project may be disrupted and the Enlarged Group’s results of operations could be adversely affected. There is no assurance that the insurance coverage will be sufficient to fully indemnify us against all direct and indirect costs, including loss of business, that could result from substantial damage to, or partial or complete destruction of, properties in the Tianjin Tianxiao Project or other damage to the infrastructure or economy of Tianjin as a result of such events.

The Enlarged Group may have insufficient financing to fund its property development

Property development is capital intensive and may require a high level of debt financing. The Enlarged Group finances most of its property projects primarily through combination of pre-sale, sale proceeds, borrowings from financial institutions and internal funding. There is no assurance that there will not be restrictions from new PRC laws and regulations on the eligibility to pre-sell the properties of the Enlarged Group and the usage of pre-sale proceeds, such as possible increase in the amount of initial expenditures incurred before reaching the level to obtain a pre-sale permit or not all of the pre-sale proceeds can be applied towards the development of certain properties. The occurrence of the aforesaid events would extend the timeframe to recover the capital outlay and force the Enlarged Group to seek for other means of financing to complete the relevant property projects, which, in turn, could have a material adverse effect on the cashflow, operation, financial position of the Enlarged Group. There is no assurance that the Enlarged Group will be able to raise sufficient capital in the future to meet its funding requirement in a timely manner and on acceptable terms or at all, particularly if the property market is depressed.

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The ability of the Enlarged Group to arrange adequate financing for land acquisitions and property development depends on a number of factors that are beyond control of the Enlarged Group. The PRC government has in recent years introduced a variety of policy initiatives to the financial sector to further regulate the grant of financial assistance to property developers. These initiatives may limit the flexibility and ability of the Enlarged Group to use bank loans to finance the property development of the Enlarged Group and therefore may require the Enlarged Group to maintain a relatively high level of internally generated cash. As a result, the Enlarged Group may not have adequate resources to fund land acquisitions or property developments, or to service the financing obligations of the Enlarged Group and the business, financial condition and results of operations of the Enlarged Group may be materially and adversely affected.

Upon completion of the Acquisition, the Enlarged Group will depend heavily on the performance of the property market in the PRC, particularly in Tianjin

The Tianjin Tianxiao Project is located in Tianjin, the PRC. Its success is largely dependent on the performance of the property market in the PRC, particularly in Tianjin. Any property market downturn in the PRC in general or particularly in Tianjin could adversely affect Tianjin Tianxiao’s business, results of operations and financial condition. The property market in the PRC is considered to be a volatile market. It cannot be assured that the property market in the PRC, in particular Tianjin, will grow at historical rates, or at all, or that Tianjin Tianxiao, will be able to benefit from the future growth, if any, of the property market in the PRC in general or in Tianjin. It is not possible to predict with certainty whether property demand in the PRC will continue to grow in the future, as many social, political, economic, legal and other factors may affect the development of the property market.

Also, the property market of the PRC (including Tianjin) is easily affected by the policies of the PRC government. Market demand for properties in the PRC (including Tianjin) has been affected and will continue to be affected by the macro-economic austerity measures of the PRC government from time to time. These measures may reduce market demand for properties as well as the demand for furnishing products in complying with such measures. The Group cannot assure that the PRC government will not adopt additional or more stringent measures which could further slow down the property market in the PRC and/or Tianjin, thereby affecting the Enlarged Group’s business and prospects.

Risks Relating to the Enlarged Group

The Enlarged Group relies on the performance of external contractors and suppliers to deliver its projects on time and up to its specified quality standards.

Neither the Group nor Tianjin Tianxiao carries out construction work on its projects. They engage external construction contractors, certified engineering supervisory companies, service providers and suppliers to provide them with construction and related services and various types of construction materials as well as other services such as design and interior decoration which the Group and Tianjin Tianxiao monitors through their construction department in each project company. In general, contractors are selected through tender by invitation.

There is no assurance that the services rendered or materials supplied by any of these external contractors and suppliers will always be satisfactory or meet the quality requirements of the Enlarged Group. In the event that the performance of the external contractors and suppliers falls short of the standards, or any

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of such contractors or suppliers encounters financial, operational or managerial difficulties and/or results in any actual or potential dispute, this may disrupt the construction progress of the Enlarged Group’s property developments and the Enlarged Group may incur additional costs in respect of remedial actions to be taken (including the replacement of such contractors or suppliers) as well as potential compensation payable to the customers for delay in completion and delivery of property developments. Moreover, the Enlarged Group may suffer damage to reputation and additional financial costs as a result of such delay to its property developments. Please also refer to the risk factor headed “Risks Relating to the Property Development in the PRC” below.

Risks Relating to Property Development in the PRC

The Enlarged Group’s business is subject to extensive governmental regulation.

The Enlarged Group is engaged in property development in the PRC. Property development in the PRC is subject to extensive governmental regulation. As with other PRC property developers, the Enlarged Group must comply with various requirements mandated by the PRC laws and regulations, including the policies and procedures established by local authorities designed to implement such laws and regulations. Should the Enlarged Group be involved in any incidents of non-compliance, the Enlarged Group could be subject to various regulatory or administrative penalties and such incidents may have material adverse impacts on the Enlarged Group’s business, results of operations and financial condition.

In particular, the PRC government exerts considerable direct and indirect influence on the development of the PRC property sector by imposing industry policies and other economic measures, such as control over the supply of land for property development and restriction or other regulation of foreign exchange, property financing, taxation and foreign investment. Through these policies and measures, the PRC government may restrict or reduce land available for property development, raise benchmark interest rates of commercial banks, place additional limitations on the ability of commercial banks to make loans to property developers and property purchasers, impose additional taxes, such as property tax, and levies on property sales, and restrict foreign investment in the PRC property sector. Many of the policies in the property industry carried out by the PRC government are unprecedented and are expected to be refined and improved over time. Changes in political, economic and social factors may also lead to further adjustments of such policies. This refining and adjustment process may not necessarily have a positive effect on the Enlarged Group’s operations or future business development. There is no assurance that the PRC government will not adopt additional and more stringent industry policies, regulations and measures in the future. If the Enlarged Group fails to adapt its operations to new policies, regulations and measures that may come into effect from time to time with respect to the property industry, such policy changes may disrupt the Enlarged Group’s business or cause it to incur additional costs, and the Enlarged Group’s business prospects, results of operations and financial condition may be materially and adversely affected.

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PRC government policies, regulations and measures intended to discourage property speculation may affect the business of the Enlarged Group. Furthermore, the PRC government may in the future adopt other measures to slow down the rate of growth in the property development sector.

As a property developer, the Enlarged Group is subject to extensive government regulation in virtually every aspect of its operations and is highly susceptible to changes in regulatory measures and policy initiatives implemented by the PRC government. In the past, the PRC government has introduced an array of policies and measures intended to curtail the overheating of property development and discourage speculation in the residential property market. These measures include, among others, the following:

tightening lending requirements for property developers;
requiring at least 70% of the land supply approved by a local government for residential property development in any given year to be used for developing low to medium-cost and small to medium-size units and low-cost rental properties;
adopting the “70/90 rule” which requires at least 70% of the total GFA of a residential project approved or constructed on or after 1 June 2006 to consist of units with a GFA of less than 90 sq.m. per unit;
increasing the minimum down payment to 30% of the purchase price of the underlying property for primary residence buyers, which may make the Enlarged Group’s properties less affordable to its customers;
increasing (i) the minimum amount of down payment to 60% of the purchase price of the underlying property; and (ii) the minimum mortgage loan interest rate to 110% of the relevant PBOC benchmark lending interest rate for secondary residence buyers; if a member of a family (including the buyer, and his/her spouse and their children under 18) has financed the purchase of a residential unit with loans from banks, any member of the family that buys another residential unit will be regarded as a secondary residence buyer;
suspending loans for the purchase of third or subsequent residences;
suspending loans for purchase of local residences for non-local residents who are unable to provide certificates evidencing their payment of local taxes or social insurance for more than one year;
for a commercial property buyer, (i) prohibiting banks from financing any purchase of pre-sold properties, (ii) increasing the minimum amount of down payment to 50% of the purchase price of the underlying property, (iii) increasing the minimum mortgage loan interest rate to 110% of the relevant PBOC benchmark lending interest rate, and (iv) limiting the terms of such bank loans to no more than 10 years, although commercial banks are allowed flexibility based on their risk assessment;
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for a buyer of commercial/residential dual-purpose properties, increasing the minimum amount of down payment to 45% of the purchase price of the underlying property, with the other terms similar to those for commercial properties;
requiring property developers to provide a down payment of no less than 50% of the land grant fee and, generally, requiring them to pay the remaining balance in instalments within one year;
imposing a business tax levy on the entire sales proceeds from re-sale of properties if the holding period is shorter than five years;
imposing a ban on onward transfer of uncompleted properties;
limiting the monthly mortgage payment to 50% of an individual borrower’s monthly income and limiting all monthly debt service payments of an individual borrower to 55% of his or her monthly income;
imposing an idle land fee for land which has not been developed for one year starting from the commencement date stipulated in the land use rights grant contract and cancelling the land use rights for land being idle for two years or more;
revoking the approvals for projects not in compliance with the planning permits; and
banning the land grant for villa construction and restricting the land provision for high-end residential property construction.

On 26 January 2011, the State Council issued《國務院辦公廳關於進一步做好關於房地產市場調控工作有關問題的通知》(Notice of the State Council on Further Regulating the Real Estate Market), which provides for stricter management of housing land supply. On 28 January 2011, Tianjin and Chongqing commenced trials in levying property tax. 34 cities, including Beijing, Tianjin, Chengdu and Wuxi, have promulgated local measures to restrict housing purchases.

The Enlarged Group faces intense competition from other real estate developers.

In recent years, a large number of property developers, including a number of leading Hong Kong property developers and other overseas developers, have begun undertaking property development and investment projects primarily in the first and second tier cities in the PRC. Some of these developers may have better track records and greater financial, land and other resources, broader name recognition and greater economies of scale than the Enlarged Group. In the past, the PRC government has introduced various policies and measures in order to limit the growth and to prevent the overheating of the property development sector, which has further increased competition for land amongst property developers.

Competition among property developers may result in an increase in land acquisition costs, an increase in construction costs, an oversupply of properties, a decrease in property prices in certain parts of the PRC or an inability to sell such properties, a slow down in the rate at which new property developments are approved or reviewed by the relevant PRC government authorities and an increase in administrative costs for hiring or retaining qualified personnel, any of which may adversely affect the Enlarged Group’s business, financial

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position and results of operations. If the Enlarged Group cannot respond to changes in market conditions in the markets in which it operates more effectively than its competitors, the Enlarged Group’s business, financial position and results of operations may be materially and adversely affected.

The recent deterioration of the PRC’s economic growth and the global financial crisis may affect the Enlarged Group’s business. It could limit the Enlarged Group’s ability to continue to finance its working capital and to meet its liquidity requirements and materially and adversely affect its financial position and results of operations.

The Group operate in a capital intensive industry and have historically financed, and expect to continue to finance in the future, their working capital and liquidity requirements primarily through proceeds from the pre-sale and sale of properties, rental income, borrowings from financial institutions and capital contributions and advances from shareholders. However, the PRC property market has experienced significant volatility in recent years as a result of market conditions and fluctuations in property sales volumes and prices, especially as a result of the recent deterioration in PRC’s economic growth, the PRC credit environment and the global economic and financial crisis, which has reduced demand for the properties that the Enlarged Group sell. These factors have also resulted in banks and other financial institutions becoming less willing to make credit available to property purchasers and companies in the property development industry. In particular, during economic downturns or market slowdown’s as has been the case for the PRC property market recently, potential purchasers or purchasers of properties tend to become more prudent and act more cautiously out of concern for further declines of property prices and may even terminate or defer their decisions to purchase property.

The outbreak of any severe communicable disease in the PRC, if uncontrolled, may materially and adversely affect the Enlarged Group’s results of operations.

The outbreak of any severe communicable disease in the PRC, if uncontrolled, could have an adverse effect on the overall business sentiment and environment in the PRC, which in turn may have an adverse impact on domestic consumption and, possibly, on the overall GDP growth of the PRC. As all of the Enlarged Group’s revenue is derived from its operations in the PRC, any contraction or slowdown in the growth of domestic consumption or slowdown in the growth of GDP of the PRC may materially and adversely affect the financial condition, results of operations and future growth of the Enlarged Group. In addition, if the employees are affected by a severe communicable disease, the Enlarged Group may be required to institute measures to prevent the spread of the disease, which may materially and adversely affect or disrupt its operations, resulting in an adverse effect on the Enlarged Group’s results of operations. The spread of any severe communicable disease in the PRC may also affect the operations of the Enlarged Group’s general contractors and construction companies, which again, may potentially have an adverse effect on the progress of the Enlarged Group’s projects and thus the business and results of operations of the Enlarged Group.

Government control in foreign currency conversion may materially and adversely affect the financial condition, results of operations and ability to meet foreign exchange requirements of the Enlarged Group.

RMB is not a freely convertible currency. The Company receives all of its revenue in RMB and will need to convert RMB into foreign currencies for payment of dividends to the Shareholders and to service its debts. The exchange rates of the RMB against the US dollar and other foreign currencies fluctuate and are

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affected by, among other things, the policies of the PRC government and changes in the PRC’s and international political and economic conditions. There are significant international pressure on the PRC government to adopt a more flexible currency policy, which, together with domestic policy considerations, could result in a further and more significant appreciation of RMB against the US dollar or other foreign currencies. As the Enlarged Group needs to convert future financing into RMB for the Enlarged Group’s operations, the continued appreciation of RMB against the relevant foreign currencies would reduce the RMB amount the Enlarged Group would receive from the conversion. On the other hand, dividends on the Shares, if any, and debts payment of the Enlarged Group are paid in foreign currencies, any devaluation of RMB against the relevant foreign currencies would adversely affect the Enlarged Group’s results of operations and financial condition, which may reduce the amount of any cash dividends on the Shares in terms of such other relevant foreign currencies. In addition, the conversion of RMB into other currencies is subject to a number of foreign exchange control rules, regulations and notices issued by the PRC government. In general, foreign investment enterprises are permitted to convert RMB to foreign currencies for current account transactions (including, for example, distribution of profits and payment of dividends to foreign investors) through designated foreign exchange banks following prescribed procedural requirements. Control over conversion of RMB to foreign currencies for capital account transactions (including, for example, direct investment, loan and investment in securities) is more stringent and such conversion is subject to a number of limitations. The requirement for the Company to pay dividends in a currency other than RMB to the Shareholders may expose the Company to foreign exchange risk. Under the current foreign exchange control system, there is no assurance that the Company will be able to obtain sufficient foreign currency to pay dividends or satisfy other foreign exchange requirements in the future.

Risk relating to this circular

Certain statistics and other information relating to the economy and the PRC property development industry contained in this circular were derived from various official sources and government publications and have not been independently verified and may not be reliable.

Statistics, industry data and other information relating to the economy and the PRC property development industry contained in this circular have been derived from various official government publications with information provided by the PRC and other government agencies. Although the Company believes that the sources of the information and statistics are appropriate sources for such information and statistics and have taken reasonable care in extracting and reproducing such information and statistics, and has no reason to believe that such information and statistics is false or misleading or that any fact has been omitted that would render such information and statistics false or misleading, the Company or its Directors, agents and advisers cannot assure you or make any representation as to the accuracy or completeness of such information and statistics. Shareholders should give careful consideration as to how much weight or importance the Shareholders should attach or place on such statistics, projected industry data and other information relating to the economy and the industry.

Any of the above factors could have a material adverse effect on the business, financial condition and results of operations of the Enlarged Group.

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IMPLICATION UNDER THE LISTING RULES

As the relevant applicable percentage ratios calculated pursuant to the Listing Rules in respect of the Acquisition exceed 100%, the Acquisition constitutes a very substantial acquisition of the Company for the purpose of the Listing Rules and is subject to, among other things, the shareholders’ approval requirement under Chapter 14 of the Listing Rules.

EGM

A notice convening the EGM at which resolution will be proposed to consider, and if thought fit, to approve the Agreement, the Supplemental Agreement and the Undertaking and the transactions contemplated thereunder, to be held at 11 a.m. on Tuesday, 11 December 2012 at Ming Room II, 4/F, Sheraton Hong Kong Hotel, 20 Nathan Road, Kowloon, Hong Kong is set out on pages EGM-1 to EGM-2 of this circular. Whether or not you are able to attend the meeting in person, please complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the Company’s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as practicable but in any event not less than 48 hours before the time appointed for the holding of the meeting. Completion and return of the accompanying form of proxy will not preclude you from attending and voting at the EGM should you so wish.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, no other Shareholders are required to abstain from voting on the said resolution at the EGM.

Shareholders and potential investors are reminded that the Agreement is subject to, among other things, fulfillment of certain conditions set out in the paragraph headed “Conditions Precedent to the Agreement” in this circular. There is no assurance by the Company that any of the conditions will be fulfilled. Shareholders and potential investors should exercise caution when dealing in the Shares.

RECOMMENDATION

The Directors (including the independent non-executive Directors) consider that the terms of the Agreement, the Supplemental Agreement and the Undertaking are fair and reasonable and that the Acquisition is in the best interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favour of the resolution to be proposed at the EGM.

ADDITIONAL INFORMATION

Your attention is also drown to the additional information contained in the appendices to this circular.

By order of the Board Overseas Chinese Town (Asia) Holdings Limited Wang Xiaowen Chairman

25 -

ACCOUNTANTS’ REPORT OF TIANJIN TIANXIAO

APPENDIX I

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, from the independent reporting accountants, RSM Nelson Wheeler, Certified Public Accountants, Hong Kong.

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29th Floor, Caroline Centre, Lee Gardens Two, 28 Yun Ping Road, Hong Kong

26 November 2012

The Board of Directors Overseas Chinese Town (Asia) Holdings Limited Suites 3203-3204, Tower 6, The Gateway, Harbour City, Canton Road, Tsim Sha Tsui Kowloon, Hong Kong

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) of 天津天瀟投資發展有限公司 (Tianjin Tianxiao Investment Development Company Limited) (“Tianjin Tianxiao”) for the period from 19 July 2012 (date of incorporation) to 31 October 2012 (the “Relevant Period”) for inclusion in the circular dated 26 November 2012 (the “Circular”) issued by Overseas Chinese Town (Asia) Holdings Limited (the “Company”) in connection with the proposed acquisition of the entire equity interest in Tianjin Tianxiao.

Tianjin Tianxiao was incorporated on 19 July 2012 in the People’s Republic of China (the “PRC”) as a limited liability company and acts as a property development company.

Tianjin Tianxiao will adopt 31 December as its financial year end date.

No audited financial statements have been prepared for Tianjin Tianxiao for the Relevant Period as Tianjin Tianxiao was incorporated on 19 July 2012. For the purpose of this report, the directors of Tianjin Tianxiao have prepared the management accounts of Tianjin Tianxiao for the Relevant Period in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

For the purpose of this report, we have examined the unaudited management accounts of Tianjin Tianxiao (the “Underlying Financial Statements”) for the Relevant Period and carried out such additional procedures as are necessary in accordance with Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA.

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ACCOUNTANTS’ REPORT OF TIANJIN TIANXIAO

APPENDIX I

The Financial Information has been prepared from the Underlying Financial Statements in accordance with HKFRSs. No adjustments were considered necessary for the purpose of preparing our report for inclusion in the Circular.

The directors of Tianjin Tianxiao are responsible for the preparation of the Underlying Financial Statements. The directors of the Company are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information set out in this report from the Underlying Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you.

In our opinion, for the purpose of this report, the Financial Information gives a true and fair view of the state of affairs of Tianjin Tianxiao as at 31 October 2012 and of its results and cash flows for the Relevant Period.

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ACCOUNTANTS’ REPORT OF TIANJIN TIANXIAO

APPENDIX I

FINANCIAL INFORMATION

A. STATEMENT OF COMPREHENSIVE INCOME

Note Turnover 5 Cost of sales Administrative expenses Profit before tax Income tax expense 7 Profit for the period and total comprehensive income for the period attributable to owner of Tianjin Tianxiao 8	Period from 19 July 2012 (date of incorporation) to 31 October 2012 RMB’000 – –
	– –
	– –
	–

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APPENDIX I

ACCOUNTANTS’ REPORT OF TIANJIN TIANXIAO

B. STATEMENT OF FINANCIAL POSITION

Note Current assets Prepayment 9 Cash and cash equivalents Current liabilities Due to a fellow subsidiary 10 Due to ultimate parent 10 NET ASSETS Capital and reserves Equity capital 11 Reserves EQUITY	As at 31 October 2012 RMB’000 1,068,039 9,773
	1,077,812
	197,812 850,000
	1,047,812
	30,000
	30,000 –
	30,000

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APPENDIX I

ACCOUNTANTS’ REPORT OF TIANJIN TIANXIAO

C. STATEMENT OF CHANGES IN EQUITY

	Equity capital	Retained profits	Equity
	RMB’000	RMB’000	RMB’000
Capital injection by owner	30,000	–	30,000
Total comprehensive income
for the period	–	–	–
At 31 October 2012	30,000	–	30,000

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ACCOUNTANTS’ REPORT OF TIANJIN TIANXIAO

APPENDIX I

D. STATEMENT OF CASH FLOWS

CASH FLOWS FROM OPERATING ACTIVITIES
Operating profit before working capital changes
Increase in prepayment
Net cash used in operating activities
CASH FLOWS FROM FINANCING ACTIVITIES
Capital injection
Increase in due to ultimate parent
Net cash generated from financing activities
NET INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS AT END OF PERIOD
ANALYSIS OF CASH AND CASH EQUIVALENTS
Bank and cash balances

Period from
19 July 2012
(date of
incorporation) to
31 October 2012
RMB’000
–
(870,227)
(870,227)
30,000
850,000
880,000
9,773
–
9,773
9,773

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ACCOUNTANTS’ REPORT OF TIANJIN TIANXIAO

APPENDIX I

E. NOTES TO FINANCIAL INFORMATION

1. GENERAL INFORMATION

Tianjin Tianxiao was incorporated in the PRC as a limited liability company. The address of its registered office is 天津市河東區六經路11號樓第3層346室.

Tianjin Tianxiao is engaged in property development.

In the opinion of the directors of Tianjin Tianxiao, as at 31 October 2012, 天津津濱發展股份有限公司 (Tianjin Jinbin Development Company Limited), a company incorporated in the People’s Republic of China, is the ultimate parent of Tianjin Tianxiao.

2. ADOPTION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

Tianjin Tianxiao has adopted all the new and revised HKFRSs issued by HKICPA that are relevant to its operations and effective for its accounting period beginning on or after 19 July 2012. HKFRSs comprise Hong Kong Financial Reporting Standards; Hong Kong Accounting Standards; and Interpretations.

Tianjin Tianxiao has not applied the new HKFRSs that have been issued but are not yet effective. Tianjin Tianxiao has already commenced an assessment of the impact of these new HKFRSs but is not yet in a position to state whether these new HKFRSs would have a material impact on its results of operations and financial position.

3. SIGNIFICANT ACCOUNTING POLICIES

The Financial Information has been prepared in accordance with HKFRSs issued by the HKICPA, accounting principles generally accepted in Hong Kong and the applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the Hong Kong Companies Ordinance.

The Financial Information has been prepared under the historical cost convention.

The preparation of Financial Information in conformity with HKFRSs requires the use of certain key assumptions and estimates. It also requires the directors of Tianjin Tianxiao to exercise its judgements in the process of applying the accounting policies.

The significant accounting policies applied in the preparation of the Financial Information are set out below.

3.1 Foreign currency translation

(a) Functional and presentation currency

Items included in the Financial Information are measured using the currency of the primary economic environment in which Tianjin Tianxiao operates (the “functional currency”). The Financial Information is presented in Renminbi, which is the functional and presentation currency of Tianjin Tianxiao.

(b) Transactions and balances in Financial Information

Transactions in foreign currencies are translated into the functional currency on initial recognition using the exchange rates prevailing on the transaction dates. Monetary assets and liabilities in foreign currencies are translated at the exchange rates at the end of each reporting period. Gains and losses resulting from this translation policy are recognised in profit or loss.

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ACCOUNTANTS’ REPORT OF TIANJIN TIANXIAO

APPENDIX I

Non-monetary items that are measured at fair values in foreign currencies are translated using the exchange rates at the dates when the fair values are determined.

3.2 Recognition and derecognition of financial instruments

Financial assets and financial liabilities are recognised in the statement of financial position when Tianjin Tianxiao becomes a party to the contractual provisions of the instruments.

Financial assets are derecognised when the contractual rights to receive cash flows from the assets expire; Tianjin Tianxiao transfers substantially all the risks and rewards of ownership of the assets; or Tianjin Tianxiao neither transfers nor retains substantially all the risks and rewards of ownership of the assets but has not retained control on the assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and the cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognised and the consideration paid is recognised in profit or loss.

3.3 Cash and cash equivalents

For the purpose of the statement of cash flows, cash and cash equivalents represent cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term highly liquid investments which are readily convertible into known amounts of cash and subject to an insignificant risk of change in value, having been within three months of maturity at acquisition. Bank overdrafts which are repayable on demand and form an integral part of Tianjin Tianxiao’s cash management are also included as a component of cash and cash equivalents.

3.4 Financial liabilities and equity instruments

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument under HKFRSs. An equity instrument is any contract that evidences a residual interest in the assets of Tianjin Tianxiao after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.

(a) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently stated at amortised cost with any difference between the amount initially recognised and redemption value being recognised in profit or loss over the period of borrowings, together with any interest and fee payable, using the effective interest method.

Borrowings are classified as current liabilities unless Tianjin Tianxiao has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

(b) Other payables

Other payables are stated initially at their fair value and subsequently measured at amortised cost using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost.

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ACCOUNTANTS’ REPORT OF TIANJIN TIANXIAO

APPENDIX I

(c) Equity instruments

Equity instruments issued by Tianjin Tianxiao are recorded at the proceeds received, net of direct issue costs.

3.5 Taxation

Income tax represents the sum of the current tax and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit recognised in profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Tianjin Tianxiao’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the Financial Information and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences, unused tax losses or unused tax credits can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, based on tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax is recognised in profit or loss, except when it relates to items recognised in other comprehensive income or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and Tianjin Tianxiao intends to settle its current tax assets and liabilities on a net basis.

3.6 Related parties

A related party is a person or entity that is related to Tianjin Tianxiao.

(A) A person or a close member of that person’s family is related to Tianjin Tianxiao if that person:
(i) has control or joint control over Tianjin Tianxiao;
(ii) has significant influence over Tianjin Tianxiao; or
(iii) is a member of the key management personnel of Tianjin Tianxiao or of a parent of Tianjin Tianxiao.
(B) An entity is related to Tianjin Tianxiao if any of the following conditions applies:
(i) The entity and Tianjin Tianxiao are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).
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ACCOUNTANTS’ REPORT OF TIANJIN TIANXIAO

APPENDIX I

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).
(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
(v) The entity is a post-employment benefit plan for the benefit of employees of either Tianjin Tianxiao or an entity related to Tianjin Tianxiao. If Tianjin Tianxiao is itself such a plan, the sponsoring employers are also related to Tianjin Tianxiao.
(vi) The entity is controlled or jointly controlled by a person identified in (A).
(vii) A person identified in (A)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

3.7 Impairment of assets

At the end of each reporting period, Tianjin Tianxiao reviews the carrying amounts of its tangible and intangible assets except inventories to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of any impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, Tianjin Tianxiao estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

3.8 Provisions and contingent liabilities

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

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

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ACCOUNTANTS’ REPORT OF TIANJIN TIANXIAO

APPENDIX I

3.9 Events after the reporting period

Events after the reporting period that provide additional information about Tianjin Tianxiao’s position at the end of the reporting period or those that indicate the going concern assumption is not appropriate are adjusting events and are reflected in the Financial Information. Events after the reporting period that are not adjusting events are disclosed in the notes to the Financial Information when material.

4. FINANCIAL RISK MANAGEMENT

Tianjin Tianxiao’s activities expose it to a variety of financial risks: foreign currency risk, credit risk, liquidity risk and interest rate risk. Tianjin Tianxiao’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on Tianjin Tianxiao’s financial performance.

4.1 Foreign currency risk

Tianjin Tianxiao has minimal exposure to foreign currency risk as most of its business transactions, assets and liabilities are principally denominated in Renminbi. Tianjin Tianxiao currently does not have a foreign currency hedging policy in respect of foreign currency transactions, assets and liabilities. Tianjin Tianxiao will monitor its foreign currency exposure closely and will consider hedging significant foreign currency exposure should the need arise.

4.2 Credit risk

The carrying amount of the cash and cash equivalents included in the statement of financial position represents Tianjin Tianxiao’s maximum exposure to credit risk in relation to Tianjin Tianxiao’s financial assets.

The credit risk on cash and cash equivalents is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

4.3 Liquidity risk

Tianjin Tianxiao’s policy is to regularly monitor current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term.

The maturity analysis of Tianjin Tianxiao’s financial liabilities is as follows:

	Less than	Between	Between
	1 year	1 and 2 years	2 and 5 years	Over 5 years
	RMB’000	RMB’000	RMB’000	RMB’000
At 31 October 2012
Due to a fellow
subsidiary	197,812	–	–	–
Due to ultimate parent	865,384	–	–	–

4.4 Interest rate risk

As Tianjin Tianxiao has no significant interest-bearing assets and liabilities, Tianjin Tianxiao’s operating cash flows are substantially independent of changes in market interest rates.

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ACCOUNTANTS’ REPORT OF TIANJIN TIANXIAO

APPENDIX I

4.5 Categories of financial instruments as at 31 October 2012

		As at
		31 October
		2012
		RMB’000
	Financial assets:
	Loans and receivables (including cash and cash equivalents)	9,773
	Financial liabilities:
	Financial liabilities at amoritsed cost	1,047,812
4.6	Fair value

The carrying amounts of Tianjin Tianxiao’s financial assets and financial liabilities as reflected in the statement of financial position approximate their respective fair values.

TURNOVER

Tianjin Tianxiao has no turnover during the Relevant Period.

6. SEGMENT INFORMATION

Tianjin Tianxiao has a sole reportable segment which is property development.

Tianjin Tianxiao’s reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies.

No segment information has been disclosed as Tianjin Tianxiao has not yet commenced the business during the Relevant Period and all the assets of Tianjin Tianxiao are situated in the PRC.

7. INCOME TAX EXPENSE

(a) Taxation in the income statement represents:

No provision for Hong Kong Profits Tax is required since Tianjin Tianxiao has no assessable profit subject to Hong Kong Profits Tax for the Relevant Period.

Pursuant to the income tax rules and regulations of the PRC, taxation of Tianjin Tianxiao is charged at the current rate of taxation ruling at 25%. No provision of taxation in the PRC is required since Tianjin Tianxiao has no assessable profit subject to taxation in the PRC for the Relevant Period.

I-12 -

APPENDIX I

ACCOUNTANTS’ REPORT OF TIANJIN TIANXIAO

(b) Reconciliation between tax expense and accounting profit at applicable tax rate:

Period from 19 July 2012 (date of incorporation) to 31 October 2012 RMB’000

Profit before tax –

Notional tax on profit before tax, calculated at the rates applicable to profit in the tax jurisdictions concerned – Tax effect of unused tax losses not recognised – Actual tax expense –

8. PROFIT FOR THE PERIOD

Period from 19 July 2012 (date of incorporation) to 31 October 2012 RMB’000

Directors’ remuneration
– As director	–
– For management	–
Staff costs	–

9. PREPAYMENT

Prepayment represents prepayment on the costs for the acquisition of a parcel of land and other related costs on site dismantlement and removal for future development and is paid or payable to two fellow subsidiaries of Tianjin Tianxiao.

10. DUE TO A FELLOW SUBSIDIARY/ULTIMATE PARENT

Amount due to a fellow subsidiary/ultimate parent is unsecured, interest-free and has no fixed term of repayment.

11. EQUITY CAPITAL

As at 31 October 2012 RMB’000 Registered capital 30,000

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ACCOUNTANTS’ REPORT OF TIANJIN TIANXIAO

APPENDIX I

Tianjin Tianxiao was incorporated on 19 July 2012 and the registered capital has been injected by the owner during the Relevant Period as the initial working capital.

Tianjin Tianxiao’s objectives when managing capital are to safeguard Tianjin Tianxiao’s ability to continue as a going concern and to maximise the return to the shareholder through the optimisation of the debt and equity balance.

Tianjin Tianxiao sets the amount of capital in proportion to risk. Tianjin Tianxiao manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, Tianjin Tianxiao may adjust the payment of dividends, increased the registered capital, raise new debts, redeem existing debts or sell assets to reduce debts.

Tianjin Tianxiao is not subject to any externally imposed capital requirements.

12. NOTES TO THE STATEMENT OF CASH FLOWS

Major non-cash transaction

Increase in prepayment during the Relevant Period of RMB197,812,000 were paid by a fellow subsidiary of Tianjin Tianxiao.

13. EVENTS AFTER THE REPORTING PERIOD

On 2 November 2012, the ultimate parent of Tianjin Tianxiao has entered into an agreement with Excel Founder Limited (“Excel Founder”), an indirectly wholly owned subsidiary of the Company, pursuant to which, Excel Founder has conditionally agreed to acquire and the ultimate parent of Tianjin Tianxiao has conditionally agreed to dispose the entire equity interest in Tianjin Tianxiao and all rights attached thereto for the consideration of RMB384,995,400.

A supplemental agreement was also entered into between Excel Founder and the ultimate parent of Tianjin Tianxiao on 2 November 2012 (“Supplemental Agreement”), setting out further arrangement concerning the other matters.

According to the Supplemental Agreement, after RMB337,187,841 of the amount due to ultimate parent of Tianjin Tianxiao being repaid, the remaining balance of RMB512,812,159 would be interest bearing at the one-year benchmark lending rate as published by the People’s Bank of China.

As at the date of this report, the amount due to ultimate parent of Tianjin Tianxiao amounted to RMB850,000,000 has not yet been repaid.

14. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by Tianjin Tianxiao in respect of any period subsequent to 31 October 2012.

Yours faithfully, RSM Nelson Wheeler Certified Public Accountants Hong Kong

I-14 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

1. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP

The Company is required to set out in this circular the financial information for the last three financial years with respect to the profits and losses, financial record and position, set out as a comparative table and the latest published audited statement of financial position together with the notes on the annual accounts for the last financial year for the Group.

The audited consolidated financial statements of the Group for the year ended 31 December 2011 has been set out in pages 43 to 124 of the annual report 2011 of the Company which was posted on 7 March 2012 on the Stock Exchange’s website (http://www.hkexnews.hk).

The audited consolidated financial statements of the Group for the year ended 31 December 2010 has been set out in pages 42 to 122 of the annual report 2010 of the Company which was posted on 4 March 2011 on the Stock Exchange’s website (http://www.hkexnews.hk).

The audited consolidated financial statements of the Group for the year ended 31 December 2009 has been set out in pages 39 to 106 of the annual report 2009 of the Company which was posted on 23 April 2010 on the Stock Exchange’s website (http://www.hkexnews.hk).

2. INDEBTEDNESS STATEMENT

At the close of business on 22 October 2012, being the latest practicable date for the purpose of ascertaining the indebtedness of the Enlarged Group prior to the printing of this circular, the Enlarged Group had total borrowings amounted to RMB11,012 million comprising, loans from related party of the Company of approximately RMB8,978 million, amount due to the ultimate parent of Tianjin Tianxiao of approximately RMB710 million, amount due to a fellow subsidiary of Tianjin Tianxiao of approximately RMB198 million and bank loans of approximately RMB1,126 million (the “Bank Loans”). The Bank Loans were secured by charge on two bank accounts of a subsidiary of the Company, guarantees provided by the Company and certain subsidiaries of the Company and the guarantee issued by the Government of the Hong Kong Special Administrative Region. Other than the said Bank Loans, loans from related party of the Company, amount due to the ultimate parent of Tianjin Tianxiao and amount due to a fellow subsidiary of Tianjin Tianxiao are unsecured.

As at the close of business on 22 October 2012, the contingent liability of the Company was the corporate guarantee for the Bank Loans as described above to the extent of approximately RMB8 million and which were also secured by the guarantee issued by the Government of the Hong Kong Special Administrative Region.

Save as aforesaid and apart from intra-group liabilities and normal trade payables in the ordinary course of business, at the close of business on 22 October 2012, the Enlarged Group did not have any other outstanding mortgages, charges, debentures or other loan capital, bank overdrafts or loans, other similar indebtedness, finance lease or hire purchase lease commitments, liabilities under acceptance or acceptance credit, guarantees or other material contingent liabilities.

II-1 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

3. WORKING CAPITAL

The Directors are of the opinion that, following the Acquisition, taking into account the financial resources available to the Enlarged Group, including the internally generated funds and the present available bank facilities, and in the absence of unforeseen circumstances, the Enlarged Group will have sufficient working capital for its requirements for at least the next 12 months from the date of this circular.

4. INFORMATION FOR COMPANY ACQUIRED

Pursuant to paragraph 31(3)(b) of Appendix 1B to the Listing Rules, the Company is required to set out in this circular the financial information for any company acquired since the date of the last published audited accounts of the Group in respect of which an accountant’s report has already been submitted to the shareholders.

On 5 January 2012, Great Tec Investment Limited (“Great Tec”), an indirect wholly-owned subsidiary of the Company, entered into the capital investment agreement (the “Capital Investment Agreement”) with 深圳華僑城房地產有限公司 (Overseas Chinese Town Real Estate Company Limited) (“OCT Properties”), pursuant to which Great Tec agreed to make capital contribution of RMB2,232,000,000 (the “Capital Injection”) to 華僑城（上海）置地有限公司 (Overseas Chinese Town (Shanghai) Land Company Limited) (“OCT Shanghai Land”).

The Capital Injection was contributed by Great Tec by phases within 2 years from the date of the approval of the joint venture contract pursuant to the Capital Investment Agreement, and the first phase of RMB900,000,000 (equivalent to approximately HK$1,111,111,111) was contributed by Great Tec within 30 days from the date of the approval of the joint venture contract pursuant to the Capital Investment Agreement. The Group financed the capital contribution through internal resources, the advance under the loan agreement entered into between Overseas Chinese Town (HK) Company Limited (as lender) and the Company (as borrower) on 5 January 2012, bank borrowing and/or external financing.

OCT Shanghai Land was established in the PRC with limited liability on 1 March 2010. It is principally engaged in the development, operation, leasing, property management of commercial properties, residential properties, office premises, and culture and entertainment projects of land pieces in Shanghai, together with the management of related parking lots. OCT Shanghai Land is currently engaged in the Suhewan project in Shanghai and held three pieces of land with a total site area of approximately 70,979.60 sq. m. (764,024 sq.ft.) in the north coast of Suzhou River, Shanghai, the PRC.

The said acquisition since the last published audited accounts has been set out in a circular of the Company which was published on 23 March 2012. The circular has also been posted on the Company’s website http://www.oct-asia.com/hasia/english/index.aspx. Please also see below quick link to the circular: http://www.oct-asia.com/UploadFile/2012323933362655808.pdf.

II-2 -

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX III

The following is the management discussion and analysis of the Group’s financial conditions and results of operations for each of the three years ended 31 December 2011:

FOR THE YEAR ENDED 31 DECEMBER 2011

OPERATION RESULTS

During the period under review, the Group achieved satisfactory operating results leveraging on its extensive experience and quality products under sluggish economic environment and weak market demand. As of 31 December 2011, the Group recorded a turnover of approximately RMB2,559 million, representing an increase of approximately 34.3% over the same period of 2010; profits attributable to the Shareholders were approximately RMB159 million, representing an increase of approximately 138.7% over the same period of 2010.

SEGMENT INFORMATION

Comprehensive development Business

The equity interests of Chengdu OCT and Xi’an OCT were held as to 51% and 25% respectively by the Group. Chengdu OCT Project is located in Jinniu District, Chengdu City, Sichuan Province, the PRC which is to be developed into a composite project, comprising a theme park, residential and commercial properties, occupying a gross floor area of approximately 2,250,000 sq.m. During the period under review, Chengdu OCT recorded a turnover of approximately RMB1,740 million, representing an increase of approximately 5.5% over the same period of 2010. The residential property project of Chengdu OCT has a gross saleable floor area of approximately 1,260,000 sq.m. The high-level portion of Phase III and Phase IV of the residential property project is currently on sale. In 2011, the contract sales area and revenue of the residential property project reached approximately 132,000 sq.m. and approximately RMB1,652 million respectively, while the settled area and revenue recorded were approximately 140,000 sq.m. and approximately RMB1,595 million respectively. By the end of 2011, the contracted but not settled area and revenue amounted to approximately 82,000 sq.m. and approximately RMB860 million respectively. In February 2011, the government of Chengdu Municipality promulgated a series of house purchase limit policies. In response to the new market condition, Chengdu OCT had expanded promotion network and adjusted its sales policy in a timely manner which resulted in an increase of approximately 13% in contract sales volume over the same period of 2010. The current rentable area of the commercial properties of Chengdu OCT is approximately 47,000 sq.m., of which 99% have been occupied. Chengdu Happy Valley, a theme park of Chengdu OCT, is one of the most influential theme parks in the southwestern part of China. It has attracted approximately 2.44 million visitors throughout the period under review, representing an increase of approximately 10% over the same period of 2010. With the adjustment to the entrance fee of Chengdu Happy Valley from May 2011, it recorded a turnover of approximately RMB218 million during the period under review, representing an increase of approximately 8% over the same period of 2010.

Xi’an OCT Project is located in Qujiang New District, Xi’an City, Shanxi Province. It adjoins several famous scenic spots and comprises mainly low-density residential properties. This project began to bring in positive contributions to the Group’s investment income in 2011. During the period under review, part of the project has been launched, including duplex, compound and detached buildings, and the market reaction to

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the pre-sale was very positive. The contract sales area and revenue reached approximately 41,800 sq.m. and approximately RMB810 million respectively. The settled area and revenue were approximately 40,600 sq.m. and approximately RMB776 million respectively, while the contracted but not settled area and revenue amounted to approximately 1,200 sq.m. and approximately RMB34 million respectively. At the end of June 2011, Xi’an OCT acquired two more parcels of land neighbouring the original land, adding the total site area to approximately 137,000 sq.m.

Paper Packaging Business

The Group has over 20 years of experience in the packaging and printing industry. It has set up four manufacturing bases and several branches in Pearl River Delta and Yangtze River Delta, the most developed areas in the PRC, and has created the brand of “Huali” with solid customer base and good market reputation. During the period under review, our paper packaging business recorded a turnover of RMB815 million, representing an increase of approximately 4.9% over the same period of 2010. Profits attributable to the Shareholders amounted to approximately RMB29.64 million, representing an increase of approximately 23.4% over the same period of 2010.

During the period under review, despite the earthquake in Japan and the fluctuation in the economy of Europe and the United States of America, the Group still achieved an annual production of approximately 152,000 tonnes by adopting a number of strategies. The average selling price for the products had been stable throughout the year. Our manufacturing base in Huizhou city, the PRC continued to explore famous brand clients and had rapidly achieved relatively stable sales volume. Meanwhile, the two new branches located in Wuhan city, Hubei Province and Kunshan city, Jiangsu Province also sped up their efforts in exploring markets in the neighbouring regions, actively expanding our business reach. At the same time of launching new products, the Group had enhanced the integration with the creative culture sector to strengthen the creative elements of our products, and our paper culture creative products were elected as one of the key projects under the “12th Five Year Plan” for the culture sector of Guangdong Province. In addition, the Group launched trial run for the VMI (Vendor Managed Inventory) management model in some plants to improve its customer services and enhance its competitiveness.

SIGNIFICANT INVESTMENT, MATERIAL ACQUISITION AND DISPOSAL

The Group did not have any significant investment and material acquisition and disposal for the year ended 31 December 2011.

PROSPECTIVE AND FUTURE PLANS

Looking forward to 2012, the outlook of the global economy remains uncertain. The Group will continue to improve its operational management and strengthen its leading position in all its businesses through constantly innovating and actively exploring markets.

For the comprehensive development business, the Company is confident about the future prospect of Chengdu OCT and Xi’an OCT and believe that they will strive for growth while maintaining stability and once again deliver impressive results in 2012. For the paper packaging business, the Group aims to maintain a steady development of its paper packaging business.

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APPENDIX III

The Group expects that the PRC government will continue to implement control measures on the real estate industry adopted last year. However, leveraging on our unique overall planning and market positioning, and benefiting from the advantages of the brand image of “OCT” and its abundant resources, we will make active moves to expand our projects and the scale of the Company and enhance our growth potential, with an aim to become an outstanding developer and operator of commercial complex and develop into a sizable Hong Kong-listed company within five years.

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

The total equity of the Group as at 31 December 2011 was RMB2,290 million (31 December 2010: RMB2,044 million). As at 31 December 2011, the Group had current assets of RMB3,064 million (31 December 2010: RMB2,953 million) and current liabilities of RMB2,736 million (31 December 2010: RMB2,799 million). The current ratio was 1.12 times as at 31 December 2011 as compared to 1.06 times as at 31 December 2010. The Group generally finances its operations with internally generated funds and credit facilities provided by banks.

As at 31 December 2011, the Group had outstanding bank loans of RMB173 million, without any fixed-rate loans (31 December 2010: outstanding bank loans of RMB72.67 million; without any fixed-rate loans). As at 31 December 2011, the bank loan interest rates of the Group ranged from 0.99% to 2.33% per annum (while for the year ended 31 December 2010, the bank loan interest rates of the Group ranged from 0.95% to 1.52% per annum). Some of those bank loans were secured by corporate guarantees provided by certain subsidiaries of the Company. The Group’s gearing ratio (being the total borrowings including bills payable and loans divided by total assets) was approximately 20% as at 31 December 2011, which decreased by approximately 7% as compared with 27% as at 31 December 2010.

As at 31 December 2011, 100% of the total amount of outstanding bank loans of the Group was in Hong Kong Dollars (31 December 2010: approximately 100% in Hong Kong Dollars). As at 31 December 2011, approximately 91% of the total amount of cash and cash equivalents of the Group was in Renminbi (31 December 2010: 98%), approximately 8% of its cash and cash equivalents was in Hong Kong Dollars (31 December 2010: 2%) and approximately 1% of its cash and cash equivalents was in United States Dollars (31 December 2010: 0%).

The Group’s liquidity position remains stable and the Group possesses sufficient cash and available banking facilities to meet its commitments and working capital requirements. The Group’s transactions and monetary assets are principally denominated in Renminbi, Hong Kong Dollars or United States Dollars. The Group has not experienced any material difficulties in or effects on its operations or liquidity as a result of fluctuations in currency exchange rates during the year ended 31 December 2011. During the year ended 31 December 2011, except for certain foreign exchange forward contracts to mitigate its foreign exchange risk, the Group did not employ any material financial instrument for hedging purposes.

Treasury policies and foreign currency exposure

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APPENDIX III

December 2011. During the year ended 31 December 2011, except for certain foreign exchange forward contracts to mitigate its foreign exchange risk, the Group did not employ any material financial instrument for hedging purposes.

Charge on assets

As at 31 December 2011, the bank loans of the Group were guaranteed by its subsidiaries, namely Huali Holdings Company Limited, Wantex Investment Limited, Excel Founder Limited, Hanmax Investment Limited, Barwin Development Limited, Forever Galaxies Limited, Fortune Crown International Limited and Miracle Stone Development Limited of an aggregate amount of RMB124,874,000 to the Group.

Capital commitment

As at 31 December 2011, the Group had capital commitments outstanding but not provided for in the consolidated financial statements of approximately RMB2,276,485,000 which represented the capital commitment contracted for and authorised but not contracted for.

EMPLOYEES AND REMUNERATION POLICY

As at 31 December 2011, the Group employed approximately 2,800 full-time staff members. The basic remunerations of the employees are determined with reference to the industry’s remuneration benchmark, the employees’ experience and their performance, and equal opportunities will be offered to all staff. Salaries of employees are maintained at a competitive level and are reviewed annually, with reference to the relevant labour market and economic situation. Directors’ remuneration is determined based on a variety of factors such as market conditions and responsibilities assumed by each Director. Apart from the basic remuneration and statutory benefits required by laws, the Group also provides discretionary bonuses based upon the Group’s results and the individual performance of the staff.

The Group has not experienced any significant problems with its employees or disruption to its operations due to labour disputes nor has it experienced any difficulty in the recruitment and retention of experienced staff. The Group maintains a good relationship with its employees. Most members of senior management have been working for the Group for many years.

CONTINGENT LIABILITIES

The Group has no contingent liabilities as at 31 December 2011.

INTEREST EXPENSES

The interest expenses of the Group were approximately RMB55.49 million for the year ended 31 December 2011 (2010: approximately RMB26.26 million), representing an increase of approximately 111.3% over the same period in 2010. Of them, the interest expenses of the comprehensive development business were approximately RMB53.56 million, representing an increase of approximately 118.8% over the same period in 2010, mainly because Chengdu OCT became a non-wholly-owned subsidiary of the Group on 21

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APPENDIX III

September 2010 and only about three months’ expenses were included in the consolidated financial statements for last year; and the interest expenses of the paper packaging business were approximately RMB1.93 million, representing an increase of approximately RMB150,000 over the same period in 2010.

DIVIDENDS

The Board has resolved to recommend the payment of a final dividend of HK$7.30 cents per Share for the year ended 31 December 2011 (2010: HK$3.00 cents per Share).

FOR THE YEAR ENDED 31 DECEMBER 2010

OPERATING RESULTS

As at 31 December 2010, the Group’s total assets amounted to RMB6,028 million. Total equity amounted to RMB2,044 million, representing an increase of approximately 194.1% over that as at 31 December 2009. The Group realized sales of RMB1,906 million in 2010, representing an increase of approximately 206.4% over 2009. Profits attributable to the Shareholders were RMB66.71 million, representing an increase of approximately 180.2% over 2009. The basic earnings per Share for the year were RMB0.15, as compared to RMB0.08 for 2009.

During the period under review, gross profit margin of the Group was approximately 13.6% (2009: approximately 13.8%), representing a decrease of 0.2% over the same period in 2009. The gross profit margin of Chengdu OCT was approximately 14.2%. Excluding such factor, the gross profit margin of the paper packaging business was approximately 12.7%, representing a decrease of 1.1% over the same period in 2009. The decrease was mainly attributable to the increase in the average price of raw materials compared to that in the same period in 2009, resulting in an increase in the cost of sales. Net profit margin attributable to the Shareholders was approximately 3.5% (2009: approximately 3.8%). Net profit margin attributable to equity holders of the Company decreased by 0.3% over 2009.

SEGMENT INFORMATION

Travel, property and its related business

For the year ended 31 December 2010, the development and operation of tourism theme park, developed and sold residential properties, and development and management of properties brought the Group revenue of RMB1,128,377,000 with segment net profit of RMB42,693,000. The increase in revenue and profit was mainly due to the capital increase in Chengdu OCT and Xi’an OCT.

Manufacture and sale of paper carton and products

Revenue and profit from the manufacture and sale of paper cartons and products amounted to RMB777,415,000 and RMB24,020,000 respectively during the year ended 31 December 2010. The revenue grew steadily was due to the increase in demand for packaging business in the PRC and the rising selling price of products.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX III

SIGNIFICANT INVESTMENT, MATERIAL ACQUISITION AND DISPOSAL

The Group did not have any significant investment and material acquisition and disposal for the year ended 31 December 2010.

PROSPECTIVE AND FUTURE PLANS

Looking forward, the Directors expect that the global economy will continue to recover at a steady pace, alongside with growing demand for packaging products amid certain uncertainties in the global economic landscape. The Group will continue to strengthen the market share and competitiveness of the Group in the paper packaging industry through enhancing internal control, stepping up the development of high-value products and sales strategies as well as actively expanding customer base.

In 2011, Chengdu OCT will continue to advance various business segments. For residential property projects, the low-density residentials of Phase III will be launched successively; whereas Phase II of the theme park of Chengdu OCT, which is under active preparation, is expected to be opened for sale in 2012. In view of rising disposable income and increasing consumption, the Group is also considering to raise the entrance fee for the tickets of the theme park. The Company is very positive about the long-term prospects of the projects of Chengdu OCT, and believes that such project is able to generate promising returns to the Company. Meanwhile, Xi’an OCT will also commence construction on the parcel of land as scheduled and completion is expected to be in 2011, therefore generating investment gain to the Group.

The Company will endeavour to seek for other projects that are in line with the strategic planning of the Company while maintaining steady growth of its paper packaging business. The management believes that, leveraging on the extensive experience of the Company, brand image of “OCT” and its abundant resources, the Group can effectively strengthen its market competitiveness, which in turn can steadily increase the Company’s value and bring long-term and stable returns to its Shareholders.

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

The total equity of the Group as at 31 December 2010 was RMB2,044 million (31 December 2009: RMB695 million). As at 31 December 2010, the Group had current assets of RMB2,953 million (31 December 2009: RMB546 million) and current liabilities of RMB2,799 million (31 December 2009: RMB349 million). The current ratio was 1.06 times as at 31 December 2010 as compared to 1.56 times as at 31 December 2009. Of which Chengdu OCT’s current ratio was 1.07 times. Excluding such factor, the current ratio of the paper packaging business was 1.46 times.

The decrease in current ratio was mainly due to the increase in investing activities during the period. The Group generally finances its operations with internally generated funds and credit facilities provided by banks. As at 31 December 2010, the Group had outstanding bank loans of RMB72.67 million, without any fixed-rate loans (31 December 2009: outstanding bank loans of RMB127 million; of which fixed-rate loan amounted to RMB6.40 million). As at 31 December 2010, the bank loan interest rates of the Group ranged from 0.95% to 1.52% per annum (while for the year ended 31 December 2009, the bank loan interest rates of the Group ranged from 0.95% to 5.4% per annum). Some of those bank loans were secured by corporate

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX III

guarantees provided by certain subsidiaries of the Company. The Group’s gearing ratio (being the total borrowings including bills payable and loans divided by total assets) was approximately 27% as at 31 December 2010, which was basically the same as approximately 27% as at 31 December 2009.

As at 31 December 2010, 100% of the total amount of outstanding bank loans of the Group was in Hong Kong Dollars (31 December 2009: approximately 95% in Hong Kong Dollars and approximately 5% in Renminbi). As at 31 December 2010, approximately 98% of the total amount of cash and cash equivalents of the Group was in Renminbi (31 December 2009: 40%), approximately 2% of its cash and cash equivalents was in Hong Kong Dollars (31 December 2009: 56%) and approximately 0% of its cash and cash equivalents was in United States Dollars (31 December 2009: 4%).

The Group’s liquidity position remains stable and the Group possesses sufficient cash and available banking facilities to meet its commitments and working capital requirements.

Treasury policies and foreign currency exposure

The Group’s transactions and monetary assets are principally denominated in Renminbi, Hong Kong Dollars or United States Dollars. The Group has not experienced any material difficulties in or effects on its operations or liquidity as a result of fluctuations in currency exchange rates during the year ended 31 December 2010. During the year ended 31 December 2010, except for certain foreign exchange forward contracts to mitigate its foreign exchange risk, the Group did not employ any material financial instrument for hedging purposes.

Charge on assets

As at 31 December 2010, the bank loans of the Group were guaranteed by its subsidiaries, namely Huali Holdings Company Limited, Wantex Investment Limited, Excel Founder Limited, Hanmax Investment Limited, Barwin Development Limited, Forever Galaxies Limited, Fortune Crown International Limited and Miracle Stone Development Limited of an aggregate amount of RMB1,534,299,000 to the Group.

Capital commitment

As at 31 December 2010, the Group had capital commitments outstanding but not provided for in the consolidated financial statements of RMB2,286,299,000 which represented the capital commitment contracted for and authorised but not contracted for.

EMPLOYEES AND REMUNERATION POLICY

As at 31 December 2010, the Group employed approximately 2,900 full-time staff members. The basic remunerations of the employees are determined with reference to the industry’s remuneration benchmark, the employees’ experience and their performance, and equal opportunities will be offered to all staff. Salaries of employees are maintained at a competitive level and are reviewed annually, with close reference to the relevant labour market and economic situation. Directors’ remuneration is determined based on a variety of factors such as market conditions and responsibilities assumed by each Director. Apart from the basic remuneration and statutory benefits required by laws, the Group also provides discretionary bonuses based

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX III

upon the Group’s results and the individual performance of the staff. The Group has not experienced any significant problems with its employees or disruption to its operations due to labour disputes nor has it experienced any difficulty in the recruitment and retention of experienced staff. The Group maintains a good relationship with its employees. Most members of senior management have been working for the Group for many years. The Group adopted a share option scheme at the time of its initial public offering. As at 1 March 2011, the Company granted a total of 19,300,000 share options under the scheme, of which 6,810,000 share options had been exercised during 2010.

CONTINGENT LIABILITIES

The Group had no contingent liabilities as at 31 December 2010.

INTEREST EXPENSES

The interest expenses of the Group were approximately RMB26.26 million for the year ended 31 December 2010, as compared to RMB3.20 million for the year ended 31 December 2009. Of which, the interest expenses of Chengdu OCT amounted to approximately RMB24.48 million. Excluding such expenses, the interest expenses of the paper packaging business decreased by approximately RMB1.42 million, mainly due to the decrease in the balance of average loan during the period.

DIVIDENDS

The Board has resolved to recommend the payment of a final dividend of HK$3 cents per Share for the year ended 31 December 2010 (2009: HK$2.36 cents per Share).

FOR THE YEAR ENDED 31 DECEMBER 2009

OPERATING RESULTS

As at 31 December 2009, the Group’s total assets amounted to RMB1.177 billion. Total equity amounted to RMB695 million, representing an increase of 29.4% over that as at 31 December 2008. The Group realized sales of RMB622 million in 2009, representing a decrease of 18.5% over 2008. Profits attributable to the Shareholders were RMB23.81 million, representing an increase of 43.5% over 2008. The basic earnings per share for the year were RMB0.08, as compared to RMB0.07 for 2008.

During the period under review, gross profit margin was approximately 13.8% (2008: approximately 11.7%), representing an increase of 2.1% over the same period in 2008. The increase was mainly attributable to the decrease in the average price of raw materials compared to that in the same period in 2008, resulting in a decrease in the cost of sales. Net profit margin attributable to equity holders of the Company was approximately 3.8% (2008: approximately 2.2%). Net profit margin attributable to equity holders of the Company increased by 1.6% over 2008.

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APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

SEGMENT INFORMATION

The principal activity of the Group is the manufacture and sale of paper boxes and products. As the Group operates within a single business and geographical segment no segment information is provided.

THE PLACING AND SUBSCRIPTION

In November 2009, the Company issued an aggregate of 57,000,000 ordinary shares of HK$0.10 each in the Company at the price of HK$2.80 per Share to Pacific Climax Limited (“Pacific Climax”). The same number of the Company’s ordinary shares owned by Pacific Climax were placed at a price of HK$2.80 per Share to independent investors. The placing price represented a discount of approximately 17.65% to the closing price of HK$3.40 per Share as quoted on the Stock Exchange on the day before the date of the placing and subscription agreement. The net proceeds from the Placing amounted to approximately HK$155 million, which was intended to be used as general working capital of the Group.

As a result of the above and the exercise of certain share options by the grantees during the year, the Company’s total issued share capital increased to 346,750,000 Shares as at 31 December 2009.

SIGNIFICANT INVESTMENT, MATERIAL ACQUISITION AND DISPOSAL

Acquisition and Disposal

Capital Increase of Xi’an OCT – On 7 December 2009, Bantix International Limited (“Bantix”), a wholly-owned subsidiary of the Company, entered into a capital increase agreement with OCT Properties, whereby each of Bantix and OCT Properties conditionally agreed to contribute RMB50 million in cash to Xi’an OCT. After completion of the increase of the capital, the equity interest of Xi’an OCT will be owned as to 75% and 25% by OCT Properties and Bantix, respectively. The details of the transaction are disclosed in the announcement of the Company dated 7 December 2009 and the circular of the Company dated 22 December 2009.

Capital Increase and Termination of OCT Wuhan – The Group had also committed to increase the capital of 武漢華僑城實業發展有限公司 (Wuhan OCT Industrial Development Ltd.). However, in order to give priority to investments with existing projects so that the Board would be in a better position to estimate the growth potential of the investments, the said investment in OCT Wuhan was terminated on 14 December 2009.

Joint Venture of OCT Xi’an

On 14 September 2009, OCT Properties and Bantix, a wholly-owned subsidiary of the Company, entered into a joint venture agreement to establish Limited OCT Xi’an, a Sino-foreign equity joint venture enterprise. It was intended that OCT Xi’an will be principally engaged in property development business in Xi’an, the PRC. OCT Properties would hold 75% of the equity interest of OCT Xi’an, and Bantix would hold the remaining 25% equity interest of OCT Xi’an. The total registered capital of OCT Xi’an would be RMB100,000,000, to which OCT Properties and Bantix would contribute RMB75,000,000 and RMB25,000,000 in cash, respectively. OCT Properties is a connected person of the Company within the

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX III

meaning of the Listing Rules. Therefore, the arrangements under the above transaction constitute connected transactions under the Listing Rules. The above transaction was terminated on 7 December 2009. Details of the above transaction are disclosed in the announcements of the Company dated 15 September 2009 and 7 December 2009 and the circular of the Company dated 28 September 2009 in compliance with the requirements under Chapter 14A of the Listing Rules.

PROSPECTIVE AND FUTURE PLANS

In spite of the nascent recovery of the global economy and the intensification of industry competition, as the economic development in the PRC progresses steadily and the domestic consumption power picks up rapidly, the Directors are still optimistic about the prospects of the paper packaging industry in the PRC and abroad. Looking into 2010, product demand is expected to increase progressively, and overall paper packaging business will continue to sustain a healthy growth. Therefore, the Company will adhere to its past strategies to augment its market competitiveness through maintaining and reinforcing high level of internal management and production process control, exploring new customers, developing new products and expanding the market share of high profit margin products.

In 2010, Phase I of the theme park of Chengdu OCT will launch a number of entertainment projects, while Phase II of the theme park of Chengdu OCT will complete its project planning and designing stage. As for property projects, the high-rise apartments of Phase II will be launched in the first half of 2010, while some of the buildings of Phase III are expected to be launched in the second half of 2010. The Company is confident about the long-term prospects of Chengdu OCT, which the Directors believe is likely to generate attractive returns for the Company. Bantix International Limited, the Company’s wholly owned subsidiary, intended to increase its investment in Chengdu OCT by solely contributing, in cash, RMB588,000,000 into Chengdu OCT. After completion of the capital injection, Bantix International Limited’s interest in Chengdu OCT will increase from 25% to 51%, and Chengdu OCT will become a non-wholly owned subsidiary of the Company. Meanwhile, the construction of Xi’an OCT will also gradually unfold. Overseas Chinese Town Enterprises Company (“OCT Group”), the ultimate controlling shareholder of the Company, is one of the sixteen Central State Owned Enterprises engaging in real estate development and operation as its main business. Looking forward, the Company will work with OCT Group to seek for more suitable investment opportunities and increase the investment in comprehensive development projects.

Meanwhile, the Company will continue to maintain steady development of the paper packaging business. The management believes that, leveraging on the extensive experience of the Company and the established brand image of “OCT”, the Group can effectively strengthen its market competitiveness, which in turn can steadily increase the Company’s value and bring long-term satisfactory results to its Shareholders.

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

The total equity of the Group as at 31 December 2009 was RMB695 million (31 December 2008: RMB537 million). As at 31 December 2009, the Group had current assets of RMB546 million (31 December 2008: RMB380 million) and current liabilities of RMB349 million (31 December 2008: RMB255 million). The liquidity ratio was 1.56 times as at 31 December 2009 as compared to 1.49 times as at 31 December

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX III

The increase in liquidity ratio was mainly due to the increase in the working capital during the period. The Group generally finances its operations with internally generated funds and credit facilities provided by banks.

As at 31 December 2009, the Group had outstanding bank loans of RMB127 million, of which fixedrate loans amounted to RMB6 million (31 December 2008: outstanding bank loans of RMB99.48 million of which there was no fixed-rate loan). As at 31 December 2009, the bank loan interest rates of the Group ranged from 0.93% to 5.40% per annum (while for the year ended 31 December 2008, the bank loan interest rates of the Group ranged from 1.33% to 6.56% per annum). Some of those bank loans were secured by corporate guarantees provided by certain subsidiaries of the Company. The Group’s gearing ratio (being the total borrowings including bills payable and loans divided by total assets) increased from approximately 25% as at 31 December 2008 to approximately 27% as at 31 December 2009.

As at 31 December 2009, approximately 95% of the total amount of outstanding bank loans of the Group was in Hong Kong Dollars, and approximately 5% of its outstanding bank loans was in Renminbi (31 December 2008: 100% in Hong Kong Dollars). As at 31 December 2009, approximately 40% of the total amount of cash and cash equivalents of the Group was in Renminbi (31 December 2008: 47%), approximately 56% of its cash and cash equivalents was in Hong Kong Dollars (31 December 2008: 33%) and approximately 4% of its cash and cash equivalents was in United States Dollars (31 December 2008: 20%).

The Group’s liquidity position remains stable and the Group possesses sufficient cash and available banking facilities to meet its commitments and working capital requirements.

Treasury policies and foreign currency exposure

The Group’s transactions and monetary assets are principally denominated in Renminbi, Hong Kong Dollars or United States Dollars. The Group has not experienced any material difficulties in or effects on its operations or liquidity as a result of fluctuations in currency exchange rates during the year ended 31 December 2009. During the year ended 31 December 2009, except for certain foreign exchange forward contracts to mitigate its foreign exchange risk, the Group did not employ any material financial instrument for hedging purposes.

Charge on assets

As at 31 December 2009, the bank loans of the Group were guaranteed by its subsidiaries, namely Forever Galaxies Limited, Fortune Crown International Limited and Miracle Stone Development Limited of an aggregate amount of RMB126,670,000 to the Group.

Capital commitment

As at 31 December 2009, the Group had capital commitments outstanding but not provided for in the consolidated financial statements of RMB128,768,000 which represented the capital commitment contracted for and authorised but not contracted for.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX III

EMPLOYEES AND REMUNERATION POLICY

As at 31 December 2009, the Group employed nearly 1,800 full-time staff members. The basic remunerations of the employees are determined with reference to the industry’s remuneration benchmark, the employees’ experience and their performance, and equal opportunities will be offered to all staff. Salaries of employees are maintained at a competitive level and are reviewed annually, with close reference to the relevant labour market and economic situation. Directors’ remuneration is determined based on a variety of factors such as market conditions and responsibilities assumed by each Director. Apart from the basic remuneration and statutory benefits required by laws, the Group also provides discretionary bonuses based upon the Group’s results and the individual performance of the staff. The Group has not experienced any significant problems with its employees or disruption to its operations due to labour disputes nor has it experienced any difficulty in the recruitment and retention of experienced staff. The Group maintains a good relationship with its employees. Most members of senior management have been working for the Group for many years. The Group adopted a share option scheme at the time of its initial public offering. As at 30 March 2010, the Company granted a total of 19,300,000 share options under the scheme, of which 1,710,000 share options had been exercised during 2009.

CONTINGENT LIABILITIES

The Group had no contingent liabilities as at 31 December 2009.

INTEREST EXPENSES

The interest expenses of the Group were approximately RMB3.20 million for the year ended 31 December 2009, as compared to RMB3.30 million for the year ended 31 December 2008. The decrease was mainly attributable to the decrease of loan interest rates during the year.

DIVIDENDS

The Board has resolved to recommend the payment of a final dividend of HK$2.36 cents per Share for the year ended 31 December 2009 (2008: HK$2.0 cents per Share).

III-12 -

MANAGEMENT DISCUSSION AND ANALYSIS OF TIANJIN TIANXIAO

APPENDIX IV

Set out below is the management discussion and analysis on Tianjin Tianxiao for the period from 19 July 2012 (date of incorporation) to 31 October 2012:

FINANCIAL HIGHLIGHTS

As Tianjin Tianxiao was incorporated in the PRC in 2012, no profits were recorded for the period from 19 July 2012 (date of incorporation) to 31 October 2012. As at 31 October 2012, the audited net assets of Tianjin Tianxiao were RMB30,000,000.

The Directors confirm that the accounting policies applied in the accountants’ report of Tianjin Tianxiao are consistent with those adopted by the Group in all material respects. Set out below are selected financial information data derived from the accountants’ report of Tianjin Tianxiao for the period from 19 July 2012 (date of incorporation) to 31 October 2012, the full text of which is set out in Appendix I to this circular:

Period from 19 July 2012 (date of incorporation) to 31 October 2012 RMB’000

Turnover Gross profit Profit before tax Profit for the period and total comprehensive income for the period attributable to owners of Tianjin Tianxiao	– –
	– –

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APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF TIANJIN TIANXIAO

Current assets Prepayment Cash and cash equivalents Current liabilities Due to a fellow subsidiary Due to ultimate parent NET ASSETS Capital and reserves Equity capital Reserves EQUITY Current ratio (based on current assets over current liabilities) Gearing ratio (based on total liabilities over total assets)	As at 31 October 2012 RMB’000 1,068,039 9,773
	1,077,812
	197,812 850,000
	1,047,812
	30,000
	30,000 –
	30,000
	1.03
	0.97

SEGMENT INFORMATION

As Tianjin Tianxiao is still in its early stage of development, there is no turnover classified by business segments.

SIGNIFICANT INVESTMENT, MATERIAL ACQUISITION AND DISPOSAL

Tianjin Tianxiao did not have any significant investment, material acquisition and disposal for the period from 19 July 2012 (date of incorporation) to 31 October 2012.

IV-2 -

MANAGEMENT DISCUSSION AND ANALYSIS OF TIANJIN TIANXIAO

APPENDIX IV

PROSPECTS AND FUTURE PLANS

Tianjin Tianxiao have a piece of land with an aggregate area of 131,763.8 square meters located in the area of Jintang Road (津塘路), Hedong District (河東區), Tianjin, the PRC. As at the Latest Practicable Date, the Land has not yet commenced development, it is planned to be developed as residential and commercial properties with a total maximum gross floor area of approximately 316,230 square meters. Details of the Land are set out in the above paragraph headed “Information of Tianjin Tianxiao and its development plans” in the Letter from the Board of this circular.

LIQUIDITY, FINANCIAL RESOURCES, GEARING RATIO AND CAPITAL STRUCTURE

Tianjin Tianxiao generally finances its operations with related party debts.

As at 31 October 2012, Tianjin Tianxiao had no bank loan but had debts owed to related parties of approximately RMB1,047,812,000.

Please refer to the table as set out on page IV-2 in Appendix IV to this circular for the information of the nature of major assets and liabilities, gearing ratio (based on total liabilities over total assets) and liquidity of Tianjin Tianxiao for the period from 19 July 2012 (date of incorporation) to 31 October 2012.

CHARGE ON ASSETS

Tianjin Tianxiao did not pledge any assets as at 31 October 2012.

TREASURY POLICIES AND FOREIGN CURRENCY EXPOSURE

For the period from 19 July 2012 (date of incorporation) to 31 October 2012, there were no formal treasury policies for Tianjin Tianxiao. The transactions and monetary assets of Tianjin Tianxiao are principally denominated in RMB. Tianjin Tianxiao has not experienced any material difficulties or effects on its operations or liquidity as a result of fluctuations in currency exchange rates during the period from 19 July 2012 (date of incorporation) to 31 October 2012. Tianjin Tianxiao did not employ any material financial instrument for hedging purposes.

CAPITAL COMMITMENT

For the construction of projects, Tianjin Tianxiao had no capital commitment as at 31 October 2012.

EMPLOYEES AND REMUNERATION POLICY

As Tianjin Tianxiao was incorporated on 19 July 2012, it has not actually started its operation given the relatively short period of time. Therefore, as at 31 October 2012, Tianjin Tianxiao did not have any fulltime employee and did not sign any employment contract. After the Completion, the basic remuneration of the employees will be determined with reference to the industry’s remuneration benchmark, the individual

IV-3 -

MANAGEMENT DISCUSSION AND ANALYSIS OF TIANJIN TIANXIAO

APPENDIX IV

experience and performance of employees; Tianjin Tianxiao will maintain salaries of employees at a competitive level and review salaries annually, with close reference to the relevant conditions of the labour market and economic situation.

For the period from 19 July 2012 (date of incorporation) to 31 October 2012 and as at the Latest Practicable Date, Tianjin Tianxiao has not experienced any significant problems with its employees or disruption to its operations due to labour disputes nor has it experienced any difficulty in the recruitment and retention of experienced staff.

CONTINGENT LIABILITIES

Tianjin Tianxiao did not have any contingent liabilities as at 31 October 2012. To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, as at the Latest Practicable Date, Tianjin Tianxiao was not involved in any litigation or arbitration of material importance and no litigation or arbitration of material importance was known to the Directors to be pending or threatened against Tianjin Tianxiao.

IV-4 -

APPENDIX V

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

A. INTRODUCTION TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The accompanying unaudited pro forma financial information of the Enlarged Group has been prepared to illustrate the effect of the proposed acquisition of the entire equity interest in 天津天瀟投資發展有限公司 (Tianjin Tianxiao Investment Development Company Limited) (“Tianjin Tianxiao”) (the “Acquisition”) might have affected the financial information of the Group.

The unaudited pro forma consolidated income statement and consolidated statement of cash flows of the Enlarged Group for the year ended 31 December 2011 are prepared based on the audited consolidated income statement and consolidated statement of cash flows of the Group for the year ended 31 December 2011 as extracted from the annual report of the Company for the year ended 31 December 2011 and the audited statement of comprehensive income and statement of cash flows of Tianjin Tianxiao for the period from 19 July 2012 (date of incorporation) to 31 October 2012 as extracted from the accountants’ report set out in Appendix I to this circular as if the Acquisition had been completed on 1 January 2011.

The unaudited pro forma consolidated statement of financial position of the Enlarged Group as at 30 June 2012 is prepared based on the unaudited consolidated statement of financial position of the Group as at 30 June 2012 as extracted from the interim report of the Company for the six month ended 30 June 2012 and the audited statement of financial position of Tianjin Tianxiao as at 31 October 2012 as extracted from the accountants’ report set out in Appendix I to this circular as if the Acquisition had been completed on 30 June 2012.

The unaudited pro forma financial information of the Enlarged Group is prepared based on a number of assumptions, estimates, uncertainties and currently available information, and is provided for illustrative purposes only. Accordingly, as a result of the nature of the unaudited pro forma financial information of the Enlarged Group, it may not give a true picture of the actual financial position, results of operation or cash flows of the Enlarged Group that would have been attained had the Acquisition actually occurred on the dates indicated herein. Furthermore, the unaudited pro forma financial information of the Enlarged Group does not purport to predict the Enlarged Group’s future financial position, results of operation or cash flows.

The unaudited pro forma financial information of the Enlarged Group should be read in conjunction with the financial information of the Group as set out in the annual report of the Company for the year ended 31 December 2011, the interim report of the Company for the six months ended 30 June 2012, the financial information of Tianjin Tianxiao as set out in Appendix I and other financial information included elsewhere in this circular.

V-1 -

APPENDIX V

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

B. UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT OF THE ENLARGED GROUP FOR THE YEAR ENDED 31 DECEMBER 2011

						The
		Tianjin		Pro forma		Enlarged
	The Group	Tianxiao	Subtotal	adjustments	Note	Group
	RMB’000	RMB’000	RMB’000	RMB’000		RMB’000
Turnover	2,558,860	–	2,558,860			2,558,860
Cost of sales	(1,786,190)	–	(1,786,190)			(1,786,190)
Gross profit	772,670	–	772,670			772,670
Other revenue	11,676	–	11,676			11,676
Other net income	24,057	–	24,057			24,057
Distribution costs	(160,648)	–	(160,648)			(160,648)
Administrative expenses	(126,268)	–	(126,268)			(126,268)
Other operating expenses	(1,832)	–	(1,832)			(1,832)
Profit from operations	519,655	–	519,655			519,655
Finance costs	(55,486)	–	(55,486)			(55,486)
Share of profit less loss
of associates	36,366	–	36,366			36,366
Profit before taxation	500,535	–	500,535			500,535
Income tax	(231,582)	–	(231,582)			(231,582)
Profit for the year	268,953	–	268,953			268,953
Attributable to:
Equity shareholders of
the Company	159,236	–	159,236			159,236
Non-controlling interests	109,717	–	109,717			109,717
	268,953	–	268,953			268,953

V-2 -

APPENDIX V

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

C. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE ENLARGED GROUP AS AT 30 JUNE 2012

	The Group RMB’000	Tianjin Tianxiao RMB’000	Subtotal RMB’000	Pro forma adjustments RMB’000	Note	The Enlarged Group RMB’000
Non-current assets
Fixed assets
– Investment properties – Other property, plant and equipment – Interests in leasehold land held for	554,713 1,396,889	– –	554,713 1,396,889			554,713 1,396,889
own use under operating lease Intangible assets Goodwill	715,892 441 267,193	– – –	715,892 441 267,193			715,892 441 267,193
Interest in an associate	82,538	–	82,538			82,538
Other financial assets	4,320	–	4,320			4,320
Deferred tax assets	83,169	–	83,169			83,169
	3,105,155	–	3,105,155			3,105,155
Current assets
Inventories	13,400,519	–	13,400,519			13,400,519
Trade and other receivables and prepayment Cash and cash equivalents	301,835 969,982	1,068,039 9,773	1,369,874 979,755	384,995 (30,000)	(i) (iii)	1,724,869 979,755
	14,672,336	1,077,812	15,750,148			16,105,143
Current liabilities
Trade and other payables Receipts in advance Bank loans	2,100,432 1,014,120 102,114	– – –	2,100,432 1,014,120 102,114	188,647 1,047,812	(i) (ii)	3,336,891 1,014,120 102,114
Related party loans Due to a fellow subsidiary Due to ultimate parent Current taxation	4,358,000 – – 20,792	– 197,812 850,000 –	4,358,000 197,812 850,000 20,792	(197,812) (850,000)	(ii) (ii)	4,358,000 – – 20,792
	7,595,458	1,047,812	8,643,270			8,831,917
Net current assets	7,076,878	30,000	7,106,878			7,273,226
Total assets less current liabilities	10,182,033	30,000	10,212,033			10,378,381
Non-current liabilities
Bank loans	61,140	–	61,140			61,140
Related party loans Deferred tax liabilities	5,325,676 298,761	– –	5,325,676 298,761	196,348	(i)	5,522,024 298,761
	5,685,577	–	5,685,577			5,881,925
NET ASSETS	4,496,456	30,000	4,526,456			4,496,456
CAPITAL AND RESERVES
Share capital Reserves	48,332 1,526,644	30,000 –	78,332 1,526,644	(30,000)	(iii)	48,332 1,526,644
Total equity attributable to equity shareholders of the Company Non-controlling interests	1,574,976 2,921,480	30,000 –	1,604,976 2,921,480			1,574,976 2,921,480
TOTAL EQUITY	4,496,456	30,000	4,526,456			4,496,456

V-3 -

APPENDIX V

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

D. UNAUDITED PRO FORMA CONSOLDIATED STATEMENT OF CASH FLOWS OF THE ENLARGED GROUP FOR THE YEAR ENDED 31 DECEMBER 2011

Operating activities Profit before taxation Adjustments for: Depreciation and amortisation Interest income Gain on disposal of fixed assets Interest expense Share of profit less loss of associates Equity settled share-based payment expenses Operating profit before changes in working capital Changes in working capital: Increase in inventories Increase in trade and other receivables and prepayment Decrease in receipts in advance Increase in trade and other payables Cash generated from/(used in) operations PRC tax paid Interest paid Net cash generated from/(used in) operating activities	The Group RMB’000 500,535 167,710 (10,885) (3,431) 55,486 (36,366) 9,241 682,290 (396,631) (33,661) (66,436) 451,526 637,088 (241,358) (55,675) 340,055	Tianjin Tianxiao RMB’000 – – – – – – – – – (870,227) – – (870,227) – – (870,227)	Subtotal Pro forma adjustments Note RMB’000 RMB’000 500,535 167,710 (10,885) (3,431) 55,486 (36,366) 9,241 682,290 (396,631) (903,888) (354,995) (15,384) (iv) (vii) (66,436) 451,526 (233,139) (241,358) (55,675) (530,172)	The Enlarged Group RMB’000 500,535 167,710 (10,885 (3,431 55,486 (36,366 9,241
				682,290 (396,631 (1,274,267 (66,436 451,526
				(603,518 (241,358 (55,675
				(900,551

V-4 -

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

						The
		Tianjin		Pro forma		Enlarged
	The Group	Tianxiao	Subtotal	adjustments	Note	Group
	RMB’000	RMB’000	RMB’000	RMB’000		RMB’000
Investing activities
Payment for purchase of fixed
assets	(290,318)	–	(290,318)			(290,318)
Proceeds from disposal of fixed
assets	10,071	–	10,071			10,071
Interest received	10,885	–	10,885			10,885
Net cash used in investing
activities	(269,362)	–	(269,362)			(269,362)
Financing activities
Capital injection	–	30,000	30,000	(30,000)	(vi)	–
Net proceeds from issuance of
shares	4,374	–	4,374			4,374
Proceeds from new bank loans,
related party loans, other
borrowings and amount due to
ultimate parent of Tianjin
Tianxiao	145,926	850,000	995,926	1,432,807	(v)	2,444,117
				15,384	(vii)
Dividends paid to the equity
shareholders of the Company	(13,190)	–	(13,190)			(13,190)
Dividends paid to the non-
controlling interests	(21,990)	–	(21,990)			(21,990)
Repayment of borrowings and
amount dues	(442,022)	–	(442,022)	(1,047,812)	(v)	(1,489,834)
Net cash (used in)/generated
from financing activities	(326,902)	880,000	553,098			923,477
Net (decrease)/increase in cash
and cash equivalents	(256,209)	9,773	(246,436)			(246,436)
Cash and cash equivalents at 1
January	1,005,358	–	1,005,358			1,005,358
Effect of foreign exchange rate
changes	(756)	–	(756)			(756)
Cash and cash equivalents at 31
December	748,393	9,773	758,166			758,166

V-5 -

APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

E. NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(i) As the assets acquired and liabilities assumed related to the Acquisition do not constitute a business under the definition as stated in HKFRS 3 (Revised) “Business Combinations”, the Acquisition is accounted for as an asset acquisition.

This pro forma adjustment records the payment of consideration for the Acquisition amounted to RMB384,995,000 (the “Payment”) according to the conditional agreement entered by the vendor and the Group in relation to the Acquisition (the “Agreement”).

According to the Agreement, 51% of the Payment amounted to approximately RMB196,348,000 to be paid within 3 days when the Agreement effective and registration with the local authority completed (the “Completion”) and the remaining 49% of the Payment amounted to approximately RMB188,647,000 to be paid within 3 months after Completion. For the purpose of preparing this pro forma consolidated statement of financial position, 51% of the Payment assumed to be paid on the 30 June 2012 and which is financed by related party loans of the Company and the remaining 49% of the Payment recorded in trade and other payables.

(ii) According to the supplemental agreement to the Agreement (“Supplemental Agreement”), the amount due to a fellow subsidiary of Tianjin Tianxiao and the amount due to ultimate parent of Tianjin Tianxiao (the “Amount Dues”) would be repaid in two instalments. The first instalment amounted to RMB535,000,000 to be payable upon Tianjin Tianxiao obtained the invoices amounted to RMB535,000,000 and the second instalment amounted to approximately RMB512,812,000 to be payable upon Tianjin Tianxiao obtained the invoices amounted to RMB1,068,000,000 and certain terms of the Supplemental Agreement satisfied or on 30 June 2013 whichever the latest. For the purpose of preparing this pro forma consolidated statement of financial position, it is assumed that the criteria for payment of Amount Dues has not been satisfied on 30 June 2012 and this adjustment records the re-allocation of amount due to a fellow subsidiary of Tianjin Tianxiao amounted to approximately RMB197,812,000 and amount due to ultimate parent of Tianjin Tianxiao amounted to approximately RMB850,000,000 to trade and other payables.
(iii) This adjustment represents set off the equity capital of Tianjin Tianxiao which included in the Payment.
(iv) The adjustment represents the Payment net of capital injection in Tianjian Tianxiao.
V-6 -

APPENDIX V

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(v) The adjustments represent the Payment and repayment of the Amount Dues in according to the Agreement and the Supplemental Agreement financed by the related party loans of the Company. For preparing the pro forma consolidated statement of cash flows, it is assumed that all the criteria set out in the Agreement and Supplemental Agreement prior the Payment and repayment of the Amount Dues are satisfied and to be paid in the year ended 31 December 2011.

Payment Add: Repayment of Amount Dues Proceeds from related party loans of the Company	RMB’000 384,995 1,047,812
	1,432,807

(vi) The adjustment represents the capital injection in Tianjin Tianxiao paid on 1 January 2011 by the Group.
(vii) The adjustment represents the interest of the Amount Dues amounted to approximately RMB15,384,000 capitalised as prepayment and financed by the related party loans of the Company. According to the Supplemental Agreement, the second instalment of the Amount Dues is interest bearing at the one-year benchmark lending rate as published by the People’s Bank of China (the “Interest Rate”) since the first instalment of the Amount Dues repaid. For the purpose of preparing this pro forma consolidated statement of cash flows, it is assumed that the first instalment of the Amount Dues repaid on 1 January 2011, the second instalment of the Amount Dues repaid on 30 June 2011 and the Interest Rate is at 6% per annum.
V-7 -

APPENDIX V

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

F. ACCOUNTANT’S REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

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==> picture [56 x 45] intentionally omitted <==

29th Floor Caroline Centre Lee Gardens Two 28 Yun Ping Road Hong Kong

26 November 2012

The Board of Directors

Overseas Chinese Town (Asia) Holdings Limited

Dear Sirs,

We report on the unaudited pro forma financial information of Overseas Chinese Town (Asia) Holdings Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”), which has been prepared by the directors of the Company, for illustrative purposes only, to provide information about how the proposed acquisition of the entire equity interest in 天津天瀟投資發展有限公司 (Tianjin Tianxiao Investment Development Company Limited) (“Tianjin Tianxiao”) might have affected the financial information of the Group presented, for inclusion in Appendix V to the circular of the Company dated 26 November 2012 (the “Circular”). The basis of preparation of the unaudited pro forma financial information is set out on page V-1 to the Circular.

Respective Responsibilities of Directors of the Company and Reporting Accountants

It is the responsibilities solely of the directors of the Company to prepare the unaudited pro forma financial information in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange Hong Kong Limited (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 (the “HKICPA”).

It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 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.

V-8 -

APPENDIX V

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Basis of opinion

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the HKICPA. Our work consisted primarily of comparing the unadjusted financial information with source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma financial information with the directors of the Company. The engagement did not involve independent examination of any of the underlying financial information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the unaudited pro forma financial information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 29(l) of Chapter 4 of the Listing Rules.

The unaudited pro forma financial information is for illustrative purposes only, based on the judgements and assumptions of the directors of the Company, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of:

the financial position of the Group as at 30 June 2012 or any future date; or
the results and cash flows of the Group for the year ended 31 December 2011 or any future periods.

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 Group; and
(c) the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

Yours faithfully,

RSM Nelson Wheeler

Certified Public Accountants Hong Kong

V-9 -

APPENDIX VI

PROPERTY VALUATION OF TIANJIN TIANXIAO

The following is the text of a letter and valuation certificate, prepared for the purpose of incorporation in this circular and received from Savills Valuation and Professional Services Limited, an independent property valuer, in connection with the valuation as at 31 October 2012 of the Property.

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Savills Valuation and The Directors Professional Services Limited Overseas Chinese Town (Asia) Holdings Limited 23/F Two Exchange Square Suite 3203-4, Tower 6 Central, Hong Kong The Gateway, Harbour City Canton Road, Tsimshatsui T: (852) 2801 6100 Kowloon F: (852) 2530 0756 Hong Kong EA Licence: C-023750 26 November 2012 savills.com

Dear Sirs,

Re: A parcel of land located at No. 178 Jintang Road, Hedong District, Tianjin, the People’s Republic of China (the “Property”)

In accordance with the instruction from Overseas Chinese Town (Asia) Holdings Limited (hereinafter referred to as the “Company”) for us to value the Property held by 天津天瀟投資發展有限公司 (Tianjin Tianxiao Investment Development Company Limited) (hereinafter referred to as “Tianjin Tianxiao”) situated in Tianjin, the People’s Republic of China (the “PRC”), we confirm that we have carried out an inspection, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of value of the Property as at 31 October 2012 (“Date of Valuation”) for public circular purpose.

Our valuation of the Property is our opinion of its market which we would define as intended to mean “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion”.

The market value is the best price reasonably obtainable in the market by the seller and the most advantageous price reasonably obtainable in the market by the buyer. This estimate specifically excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, leaseback arrangements, joint ventures, management agreements, special considerations or concessions granted by anyone associated with the sale, or any element of special value. The market value of a property is also estimated without regard to costs of sale and purchase, and without offset for any associated taxes.

VI-1 -

PROPERTY VALUATION OF TIANJIN TIANXIAO

APPENDIX VI

The Property is currently a vacant site which is held for future development by Tianjin Tianxiao. In valuing the Property, we have adopted the Direct Comparison Approach by making reference to the comparable sales transactions as available in the market.

We have been provided with copies of the State-owned Construction Land Use Rights Grant Contract and its supplementary agreements relating to the Property. However, we have not searched the original documents to verify ownership or to ascertain the existence of any amendments which do not appear on the copies handed to us. We have relied to a considerable extent on information given by the Company and its PRC’s legal adviser, V&T Law Firm regarding the title and other legal matters to the Property. We have also accepted advice given by the Company to us on such matters as planning approvals or statutory notices, easements, tenure, particulars of occupancy, site and floor areas and all other relevant matters. Dimensions, measurements and areas included in the valuation certificate are based on information contained in the documents provided to us and are therefore only approximations. No on-site measurements have been taken. We have had no reason to doubt the truth and accuracy of the information provided to us by the Company, which is material to our valuation. We were also advised by the Company that no material facts have been omitted from the information supplied.

We have inspected the Property. We have not carried out investigations on site to determine the suitability of the ground conditions and the services for any future development. Our valuation is prepared on the assumption that these aspects are satisfactory and that no extraordinary expense or delays will be incurred during the construction period.

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

The site inspection was carried out on 24 October 2012 by our Qiumei Zhang, who is a member of RICS and a registered China Real Estate Appraiser and China Land Valuer.

In valuing the Property, we have complied with the requirements set out in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited and the Valuation Standards on Properties (First Edition 2005) published by The Hong Kong Institute of Surveyors.

VI-2 -

PROPERTY VALUATION OF TIANJIN TIANXIAO

APPENDIX VI

Unless otherwise stated, all monetary amounts stated in this report are stated in Renminbi (“RMB”).

We enclose herewith our valuation certificate.

Yours faithfully,

for and on behalf of

Savills Valuation and Professional Services Limited Anthony C.K. Lau MRICS MHKIS RPS(GP) Director

Note: Mr. Anthony C K Lau is a qualified surveyor and has over 19 years’ post qualification experience of valuing properties in both Hong Kong and the PRC.

VI-3 -

PROPERTY VALUATION OF TIANJIN TIANXIAO

APPENDIX VI

VALUATION CERTIFICATE

Market value in existing state as Particulars of at 31 October Property Description and tenure occupancy 2012 A parcel of land The Property comprises a parcel of land with a site The Property is a RMB1,450,000,000 located at No. 178 area of approximately 131,763.8 sq. m. (1,418,306 vacant site. (see Note 12) of Jintang Road, sq ft). Hedong District, Tianjin, PRC The permissible gross floor area (“GFA”) of the Property is approximately 316,230 sq.m. (3,403,900 sq ft). As instructed by the Company and according to the Supplemental Agreement to the Equity Transfer Agreement of Tianjin Tianxiao provided by the Company mentioned in Note 10, the proposed development of the Property is being applied for adjustment (the “Adjustment”) for residential and commercial uses, the breakdown of which is as follows:

Use Residential Retail Ancillary facility Total	Approximate GFA (sq.m.) (sq ft) 286,230 3,080,980 19,000 204,516 11,000 118,404 316,230 3,403,900	Approximate GFA (sq.m.) (sq ft) 286,230 3,080,980 19,000 204,516 11,000 118,404 316,230 3,403,900
		3,403,900

The land use rights of the Property have been granted for a term of 70 years commencing on 17 October 2012 for residential use. Upon the completion of the Adjustment, the land use terms would be 70 and 40 years for residential and commercial uses respectively.

Notes:

Pursuant to the State-owned Construction Land Use Rights Grant Contract No. Jin Xi You (Zhao) 2004-059 (hereinafter referred to as the “Land Grant Contract”) entered into between Land Resources and Housing Administration Bureau of Tianjin City (“Party A”) and Tianjin Wanlong Group Co., Ltd. (天津萬隆集團有限公司) (“Tianjin Wanlong”) on 25 October 2004, Party A agreed to grant the land use rights of a parcel of land with a site area of approximately 1,503,120 sq.m.to Tianjin Wanlong for residential and public ancillary facilities, commercial and financial uses.
Pursuant to the Supplemental Agreement 2 to the Land Grant Contract entered into between Party A, Tianjing Wanlong, and 天津萬寧置業有限公司 (Tianjin Wanning Property Co., Ltd (“Tianjin Wanning”) on 28 April 2005, the grantee for the site as stated in Note 1 above had been changed to Tianjin Wanning.
VI-4 -

APPENDIX VI

PROPERTY VALUATION OF TIANJIN TIANXIAO

Pursuant to the Supplemental Agreement 2-1 to the Land Grant Contract entered into between Party A and Tianjing Wanning on 18 December 2006, portion of the land as stated in Note 1 above for commercial and financial uses was divided into 9 plots of land with a total site area of approximately 658,700 sq. m.
Pursuant to the Supplemental Agreement 2-2 to the Land Grant Contract entered into between Party A and 天津津濱時代置業投資有限公司 (Tianjin Jinbin Shidai Property Investment Co., Ltd) (“Tianjin Jinbin”) on 10 August 2007, Tianjin Wanning was renamed as Tianjin Jinbin.
Pursuant to the Supplemental Agreement 2-3 to the Land Grant Contract entered into between Party A and Tianjin Jinbin on 20 April 2010, the site as stated in Note 3 above was divided into 10 plots of land. Lots H1-H5 were entitled for residential use, Lots P1-P4 were entitled for public facilities use, and Lot P5 was entitled for municipal infrastructure use.
Pursuant to the Supplemental Agreement 2-4 to the Land Grant Contract entered into between Party A and Tianjin Jinbin on 2 July 2010, the land use of Lots P1-P4 had been changed to commercial and financial uses.
Pursuant to the Supplemental Agreement 2-5 to the Land Grant Contract entered into between Party A and Tianjin Jinbin on 18 April 2012, due to Lots P2-P4 were occupied by Phase 2 of Meijiang Exhibition Center, Party A agreed to grant the land use rights of Lot H6 of Meijian Scenic Spot in Xiqing District (西青區梅江風景區H6地塊) with a site area of approximately 32,763.1 sq.m. to Tianjin Jinbin for the exchange of portion of Lots P2-P4.
Pursuant to the Supplemental Agreement 2-6 to the Land Grant Contract entered into between Party A and the Tianjin Tianxiao on 17 October 2012, Party A agreed to grant the land use rights of the property with a site area of approximately 131,763.8 sq.m. to Tianjin Tianxiao for the exchange of the remaining portion of Lots P2-P4. Details of the said agreement are summarized as follows:

Site area	:	131,763.8 sq.m.
Land use	:	residential
GFA (aboveground)	:	no more than 316,230 sq.m.
Land use term	:	70 years commencing on 17 October 2012
Building density	:	no more than 30%
Greenery ratio	:	no less than 40%
Building covenant	:	completion in 4 years from the signatory of the Supplemental Agreement 2-6

Pursuant to the Equity Transfer Agreement of Tianjin Tianxiao (天津天瀟股權轉讓協議) (“Equity Transfer Agreement”) entered into between Tianjin Jinbin Development Co., Limited (天津津濱發展股份有限公司) (“Vendor”) and Excel Founder Limited (銳振有限公司) (“Excel Founder”) on 2 November 2012, the Vendor agreed to transfer the entire equity interest in the Tianjin Tianxiao to Excel Founder.
Pursuant to the Supplemental Agreement to the Equity Transfer Agreement entered into between the Vendor and Excel Founder on 2 November 2012, Tianjin Jinbin Development has agreed to apply to adjust the terms of use of the Property as follows:
(i)
permitted land use shall be changed from residential only, to residential and commercial uses;
(ii) term of land use rights shall be changed from 70 years for residential use, to 70 years for portion of the Property for residential use and 40 years for portion of the Property for commercial use; and
(iii) the Property shall have a total GFA of 316,230 sq.m., out of which commercial area (including facilities and public buildings of not more than 11,000 sq.m., while the remaining area as saleable commercial area) shall be not less than 30,000 sq.m. and not more than 40,000 sq.m..
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APPENDIX VI

Pursuant to the Supplemental Agreement, the Vendor shall pay Excel Founder (i) RMB8,000 for every 1 sq.m. deficient where the portion of Land for commercial use is less than 30,000 sq.m. (but subject to a maximum of RMB150,000,000), and (ii) RMB5,000 for every 1 sq.m. excess where the portion of Land for commercial use is more than 40,000 sq.m., based on the total construction area.

We have been provided with a legal opinion on the title to the Property issued by V&T dated 2 November 2012, which contains, inter alia, the following information:
i. Tianjin Tianxiao is a 100% owned subsidiary of Tianjin Jinbin;
ii. Tianjin Tianxiao has fully paid the land premium and is entitled to obtain the land use rights of the Property. There will be no legal impediment for the Tianjin Tianxiao to obtain the Stateowned Land Use Certificate; and
iii. Tianjin Tianxiao is entitled to use, occupy, lease, mortgage or dispose of by other legal means of the land use rights of the Property within the residual land use term after obtaining the Stateowned Land Use Certificate.
As if the development condition of the Property remained the same as that stated in Note 8, the market value of the Property as at the Date of Valuation was RMB1,360,000,000.
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APPENDIX VII

SUMMARY OF PRC LAWS IN RELATION TO PROPERTY SECTOR

I. LEGAL SUPERVISION RELATING TO PROPERTY SECTOR IN THE PRC

A. Establishment of a property development enterprise

Pursuant to the “Law of the People’s Republic of China on Administration of Urban Property” (the “Urban Property Law”) enacted by the Standing Committee of the National People’s Congress on 5 July 1994 enforced on 1 January 1995 and revised on 30 August 2007, a property developer is defined as “an enterprise which engages in the development and operation of property for the purposes of making profits”. Under the “Regulations on Administration of Development of Urban Property” (the “Development Regulations”) enacted by the State Council and enforced on 20 July 1998, a property development enterprise must satisfy the following requirements: (1) has a registered capital of not less than RMB1 million and (2) have four or more full-time professional property/construction technicians and two or more full-time accounting officers, each of whom shall hold the relevant qualifications. The Development Regulations also stipulated that people’s governments of the provinces, autonomous regions and/or municipalities directly under the central government may impose more stringent requirements regarding the registered capital and qualifications of professional personnel of a property development enterprise according to the local circumstances.

Pursuant to the Development Regulations, application for registration has to be submitted to the department of administration of industry and commerce above county level for the establishment of property development enterprise. The property development enterprise must file for record with the property development authority in the location of the registration authority, within 30 days of the receipt of its Business License.

Under the “Notice on Adjusting the Portion of Capital Fund for Fixed Assets Investment of Certain Industries” issued by the State Council on 26 April 2004, the portion of capital fund of property projects (excluding economically-affordable housing projects) has been increased from 20% or above to 35% or above. Pursuant to the “Notice of the State Council on Adjusting the Portion of Capital for Fixed Assets Investment”《( 國務院關於調整固定資產投資項目資本金比例的通知》) issued by the State Council on 25 May 2009, the minimum capital ratio for affordable housing and ordinary commodity housing is adjusted to 20%, and the minimum capital ratio for other real estate development projects is adjusted to 30%.

B. Foreign-invested property development enterprises

Foreign-invested property development enterprises can be established in the form of sinoforeign equity joint venture, sino-foreign co-operative joint venture or wholly-owned foreign enterprise according to the Industrial Guidance Catalogue and other laws and administrative regulations relating to foreign investment enterprises. Prior to the application for registration to the department of administration of industry and commerce, the enterprise must be approved by the authorities of commerce and obtain an Approval Certificate for a Foreign Investment Enterprise.

On 31 October 2007, China’s National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) promulgated the new Industrial Guidance Catalogue of Foreign Investments (2007 Revision) (“the 2007 Catalogue”). The 2007 Catalogue has taken effect on 1

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SUMMARY OF PRC LAWS IN RELATION TO PROPERTY SECTOR

December, 2007. The major changes on Real Estate industry in the 2007 Catalogue are the followings: (1) the development and construction of ordinary residential houses has been removed from the encouraged category; (2) the restricted category has been adjusted as the followings: (i) the development of a whole land lot which shall be operated only by sino-foreign equity joint venture or sino-foreign co-operate joint venture; (ii) the construction and operation of up-market hotels, villas, premium office buildings, international conference centres; (iii) housing agents, brokerages and the second-tier real estate market; (3) the construction and operation of large scale theme park has been removed from the Real Estate industry to the Culture, Sports and Entertainment Industries which is still in the restricted category. It means that the enterprise investing in such projects will not be regarded as a real estate development company; (4) the construction and operation of golf courts has been removed from the restricted category to the prohibited category.

On 24 December 2011, the National Development and Reform Commission and the Ministry of Commerce issued the Catalogue of Industries for Guiding Foreign Investment (Revised 2011)《外商投資產業指導目錄（二零一一年修訂）》 which became effective on 30 January 2012. Its major difference with the 2007 edition is that villa construction and management was re-categorised from the Restricted Category to the Prohibited Category for foreign investment.

On 11 July 2006, the PRC Ministry of Construction, the Ministry of Commerce, the National Development and Reform Commission, the People’s Bank of China, the State Administration of Industry and Commerce and the State Administration for Foreign Exchange jointly enacted the “Circular on Standardising the Admittance and Administration of Foreign Capital in the Property Market” (Jianzhufang [2006] 171). According to the Circular, foreign investment in the property sector shall comply with certain admittance requirements, including among others, the principle of commercial existence, registered capital requirement, and the Approval Certificate for a Foreign Investment Enterprise and the Business License; foreign-invested property enterprises shall not commence development and operation until obtaining the Approval Certificate for a Foreign Investment Enterprise and the Business License; the foreign exchange of the registered capital of foreign-invested property enterprise shall be more strictly regulated; Chinese and foreign investors shall not reach an agreement including any clause which promises a fixed return; property purchase by foreign institutions and individuals shall be more strictly regulated; foreign institutions and individuals shall not purchase any commodity housing not for their own use or living.

On 23 May 2007, MOFCOM and SAFE jointly issued the “Notice Concerning Further Strengthening and Regulating the Examination, Approval and Supervision of Direct Foreign Investment in Real Estate” (關於進一步加强、規範外商直接投資房地產業審批和監管的通知) (Shang Zi Han [2007] No. 50). The Notice provides stricter controlling measures including, among others:

(a) Where the application is filed for establishment of a property company, the land use right, the ownership of the property should be obtained first, or the pre-assignment/ purchase agreement has already been concluded with the land administration authority, land developer/owner of the property. If the above requirements have not been satisfied, the approval authority shall not approve the application.
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SUMMARY OF PRC LAWS IN RELATION TO PROPERTY SECTOR

(b) Acquisition of or investment in domestic property enterprises by way of return investment (including the same actual controlling person) shall be strictly controlled. Oversea investors may not avoid approval for foreign investment in property by way of changing the actual controlling person of the domestic real estate enterprise. Once the foreign exchange authority has found the foreign-invested property enterprise established by way of deliberately avoiding and false representation, it shall take action against the enterprise’s conduct of remittance of capital and interest accrued without approval, and the enterprise shall bear the liability for cheated purchase and evasion of foreign exchange.
(c) Agreement as to any fixed return or of the same effect for either party of a foreigninvested real property enterprise is prohibited.
(d) Local examination and approval authorities must make a filing with MOFCOM for recording their approvals of establishment of foreign-invested real estate enterprises.
(e) Local SAFE administrative authorities and designated foreign exchange banks shall not conduct foreign exchange purchase and settlement process in respect of capital projects for any foreign-invested real property enterprises who fail to satisfy the MOFCOM for filing requirement or annual review procedure.

On 10 July 2007, the SAFE promulgated “Notice of the list of first batch of foreign-invested real estate projects that have been filed with the MOFCOM” (國家外匯管理局綜合司關於下發第一批通過商務部備案的外商投資房地產項目名單的通知) (Hui Zhong Fa [2007] No. 130), ceasing to conduct any foreign debt registration and foreign debt settlement process filed subsequent to 1 June 2007 for all foreign-invested property enterprises. The Notice provides that:

(a) For a foreign-invested property enterprise (both newly-established and through capital increase, same below) which has obtained the approval certificate from the competent authorities of the MOFCOM and filed with the MOFCOM after and including (same below) 1 June 2007, the branch institutes will not conduct the foreign debt registration and foreign debts settlement approval process.
(b) For a foreign-invested property enterprise which has obtained the approval certificate from the local competent authorities of the MOFCOM but has not filed with the MOFCOM after and including 1 June 2007, the branch institutes will not conduct foreign exchange registration (or change the registration) and the purchase and settlement process for capital projects.
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SUMMARY OF PRC LAWS IN RELATION TO PROPERTY SECTOR

APPENDIX VII

C. Qualifications of a property developer

(a) Classifications and assessment of a property development enterprises’ qualification

Under the “Regulations on Administration of Development of Urban Property”, a property developer must file for record of its establishment to the property development authority in the location of the registration authority within 30 days after receiving its business license. The property development authority shall assess the qualification classification of the property developer, which is filing for record by considering its assets, professional personnel and development and operation records. A property development enterprise shall only engage in property development projects in compliance with its approved qualification.

Under the “Provisions on Administration of Qualifications of Property Developers” (the “Provisions on Administration of Qualifications”) enacted by the Ministry of Construction and entered into force on 29 March 2000, a property developer shall apply for registration of its qualifications according to the Provisions on Administration of Qualifications. An enterprise may not engage in the development and sale of property without a qualification classification certificate for property development.

In accordance with the Provisions on Administration of Qualifications, qualifications of a property development enterprise are classified into four classes: class 1, class 2, class 3 and class 4. Different classes of qualification should be examined and approved by the corresponding authorities. The class 1 qualification shall be subject to preliminary examination by the construction authority under the people’s government of the relevant province, autonomous region or municipality directly under the central government and final approval by the construction authority under the State Council. Procedures for assessing class 2 or lower qualifications developers shall be formulated by the construction authority under the people’s government of the relevant province, autonomous region or municipality directly under the central government. A developer, which passes the qualification examination will be issued with a qualification certificate of the relevant class by the qualification assessment authority. After a newly established property developer reports its establishment to the property development authority, the latter shall issue a provisional qualification certificate to the eligible developer within 30 days of receipt of the report. The provisional qualification certificate shall be effective for one year from the date of its issuance. The property development authority can extend the validity period for not more than two years after considering the actual business situation of the enterprise. The property developer shall apply for qualification classification by the property development authority within one month before the expiry of the provisional qualification certificate. Any enterprise engages in the operation of property development without obtaining a qualification certificate will be ordered by the property development authority to rectify the irregularity within a certain period of time, and will be imposed a fine between RMB50,000 and RMB100,000. A property development enterprise failing to rectify the irregularity within the required period of time will have its qualification certificate suspended and a proposal will be sent to the industrial and commercial administration authority for the suspension of business license of such property development enterprise.

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SUMMARY OF PRC LAWS IN RELATION TO PROPERTY SECTOR

(b) The business scope of a property developer

Under the “Provisions on Administration of Qualifications”, a developer of any qualification classification may engage in the development and sale of property within its approved scope of business and is not allowed to engage in business which exceeded the approved scope of its qualification classification. A class 1 property developer may undertake a property development project anywhere in the country without any limit of the scale of property project. A property developer of class 2 or lower may undertake a project with a gross floor area of less than 250,000 sq.m. and the specific scope of business shall be determined by the construction authority under the people’s government of the relevant province, autonomous region or municipality.

(c) The annual inspection of a property developer’s qualification

Pursuant to “Provisions on Administration of Qualifications”, the qualification of a property developer should be annually inspected. The construction authority under the State Council or the entrusted institution is responsible for carrying out the annual inspection of class 1 property developer’s qualification. Procedures for annual inspection of developers of class 2 or lower qualifications shall be formulated by the construction authority under the people’s government of the relevant province, autonomous region or municipality. Any enterprise fails to comply with the qualification requirement or operation requirements will have its qualification classification down-graded or qualification certificate cancelled.

D. Development of a property project

(a) Land for property development

Under the “Interim Regulations of the People’s Republic of China on Assignment and Transfer of the Right to Use State-owned Land in Urban Areas” (the “Interim Regulations on Assignment and Transfer”) promulgated and enforced by the State Council on 19 May 1990, a system of assignment and transfer of the right to use State-owned land is adopted. A land user shall pay a premium to the State as consideration for the assignment of the land use rights within certain terms, and a land user may transfer, lease, mortgage or otherwise commercially exploit the land use right within his terms of use. Under the Interim Regulations on Assignment and Transfer and the Urban Property law, the land administration authority under the local government of the relevant city or county shall enter into an assignment contract with the land user for an assignment of land use right. The land user shall pay the assignment price as stipulated in the assignment contract. After paying the assignment price in full, the land user shall register with the land administration authority and obtain a Land Use Right Certificate. The Certificate is an evidence of the acquisition of land use rights. The “Regulations on Administration of Development of Urban Property” provide that the land use rights for a site intended for property development shall be obtained by way of an assignment except for those land use rights, which may be obtained by way of allocation pursuant to the PRC laws or the stipulations of the State Council.

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APPENDIX VII

SUMMARY OF PRC LAWS IN RELATION TO PROPERTY SECTOR

Under the “Regulations on the Assignment of State-Owned Land Use Right through Competitive bidding, Auction and Listing-for-Sale” (“2002 Regulations”), as amended by the 2007 Regulations on 28 September 2007 enacted by the Ministry of Land and Resources on 9 May 2002 and enforced on 1 July 2002, land for commercial use, tourism, entertainment and commodity housing development shall be assigned by way of competitive bidding, public auction or listing-for-sale. The procedures are as follows:

i. The land authority under the people’s government of the city and county (the “assignor”) shall make an announcement at least 20 days prior to the date of the proposed competitive bidding, public auction or listing-for-sale. The announcement should include basic particulars such as land parcel, qualification requirement of the bidder and auction applicants, methods and criteria on confirming the winning tender or winning bidder, and other conditions such as the deposit of the bid.
ii. The assignor shall conduct a qualification verification of the bidding applicants and auction applicants, inform the applicants who satisfy the requirements set out in the announcement and invite them to attend the competitive bidding, public auction or listing-for-sale.
iii. After determining the winning tender or the winning bidder by the competitive bidding, public auction or listing-for-sale, the assignor and the winning tender or winning bidder shall then enter into a confirmation. The assignor should return the bidding or tender deposit to other bidding or auction applicants.
iv. The assignor and the winning tender or winning bidder shall enter into a contract for State-owned land use right assignment according to the time and venue set out in the confirmation. The deposit of the bid paid by the winning tender or winning bidder will be used to set off part of the assignment price of the state-owned land use rights.
v. The winning tender or winning bidder should apply for the land registration after paying off the assignment price in accordance with the State-owned land use right assignment contract. The people’s government above the city and county level should issue the “Land Use Permit for State-Owned Land”.

According to the “Notice of the Ministry of Land and Resources on Relevant Issues Concerning the Strengthening of Examination and Approval of Land Use in Urban Construction” enacted by the Ministry of Land and Resources on 4 September 2003 (the “Notice”). Commencing from the day of distribution of the Notice, land use for luxurious commodity houses shall be stringently controlled, and applications for land use for building villas shall be stopped. On 21 March 2004, the Ministry of Land and Resources together with the Ministry of Supervision promulgated the “Notice in Respect of Enforcing and Supervising The Transfer of Operative Land Use Rights Through Tenders, Bidding and Public Auction (關於繼續開展經營性土地使用權招標拍賣掛牌出讓情況執法監察工作的通知)”, which

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APPENDIX VII

SUMMARY OF PRC LAWS IN RELATION TO PROPERTY SECTOR

expressively required that after 31 August 2004, no land use rights transfer in the form of agreement by the excuse of historical difficulties will be allowed. On 30 May 2006, the Ministry of Land and Resources issued the “Urgent Notice of Further Strengthening the Administration of the Land”. It is expressly prescribed in this Notice that land for property development must be assigned by way of competitive bidding, public auction or Listing-forsale; the rules of stopping the development project for villas should be strictly enforced; and all supply of land for such purpose and handling of related land use procedure will be ceased from the day of the Notice’s issuance.

Under the “Urgent Notice of Further Strengthening the Administration of the Land”, the land authority should rigidly execute the “Model Text of the State-owned Land Use Right Assignment Contract” and “Model Text of the State-owned Land Use Right Assignment Supplementary Agreement (for Trial Implementation)” jointly enacted by the Ministry of Land Resources and SAIC. The document of the land assignment should ascertain the requirement of planning, construction and land use such as the restriction of the dwelling size, plot ratio and the time limit of starting and completion. All these should be agreed in the Land Use Right Assignment Contract.

On 28 September 2007, the Ministry of Land Resources promulgated the Regulation on Bidding, Auction and Listing Required for Assignment of State Owned Construction Land 《( 招標拍賣掛牌出讓國有建設用地使用權規定》) (“this Regulation”) (“2007 Regulations”). This Regulation specifies that the assignee of state owned construction land use right shall fully pay up the premium for the land use right in accordance with the state owned land assignment agreement before it could proceed with the relevant procedures for land use right registration and apply for a state owned construction land use right certificate. No assignee could be granted a state owned construction land use right certificate for the land in proportion to the partial payment of the premium that the assignee has paid up. In 2007, it is provided in detail that operative lands for properties to be used for industrial, commercial, tourism, entertainment and commodity residential purposes as well as lands with two or more prospective users must be granted only through competitive bidding.

On 2 January 2007, the National People’s Congress promulgated the “Laws on Urban and Rural Planning (城鄉規劃法)” which provided that for construction projects having obtained rights to use State-owned lands by way of grant, after the rights to use State-owned lands grant contract have been verified, the construction entity shall apply for a permit for construction site planning from the relevant municipal or county or city or rural planning authority.

(b) Development of a property project

i. Commencement of a property project and the idle land

Under the Urban Property Law, those who have obtained the land use right through an assignment must develop the land in accordance with the terms of use and within the period of commencement prescribed in the contract for the land use rights

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SUMMARY OF PRC LAWS IN RELATION TO PROPERTY SECTOR

assignment. The amendment to the Measures on Disposing Idle Land which was promulgated by the Ministry of Land and Resources on 28 April 1999 was passed at the first meeting on ministry affairs of the Ministry of Land and Resources on 22 May 2012 and came into force on 1 July 2012. Pursuant to the amendment, the land can be defined as idle land if the development and construction of the state-owned land for construction are not commenced by those who own the land use right of the state-owned land for construction at the expiry of one year from the commencing date of development and construction stated or prescribed in the Contract on Paid Use of the Right to Use StateOwned Land for Construction or the Written Decision of Allocation. The state-owned land for construction shall also be deemed as idle land if the development and construction of the land have been commenced but the area of the development and construction that has been commenced is less than one-third of the total area to be developed and constructed or the invested amount is less than 25% of the total amount of investment, and the development and construction have been continuously suspended for one year or more.

The Contract on Paid Use of the Right to Use State-Owned Land for Construction or the Written Decision of Allocation shall explicitly state or prescribe the date of the commencement of development and construction and the date of completion as well as the liabilities for breach of contract. The stated or prescribed date of the commencement of development and construction shall be determined after taking into full consideration of the time limits of the relevant formalities for the development and construction and the actual situation so as to allow reasonable time before the commencement of development and construction.

Where the date of the commencement of development and construction is not stated or prescribed, or the stated or prescribed date is not explicit, such date shall fall on the expiry of one year from the date of actual land delivery. And the date stipulated in the written confirmation of land delivery shall be taken as the actual date of land delivery.

ii. Planning of a property project

According to the “Measures for Control and Administration of Assignment and Transfer of Right to Use Urban State-owned Land” enacted by the Ministry of Construction on 4 December 1992 and enforced on 1 January 1993 and the “Notice of the Ministry of Construction on Strengthening the Planning Administration of Assignment and Transferring Right to Use State-owned Land” enacted and enforced by the Ministry of Construction on 26 December 2002, after signing an assignment contract, a property developer shall apply for a Opinion on Construction Project’s Site Selection and a Permit for Construction Site Planning from the city and county planning authority with the assignment contract. After obtaining a Permit for Construction Site Planning, a property developer shall organise the necessary planning and the design

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APPENDIX VII

SUMMARY OF PRC LAWS IN RELATION TO PROPERTY SECTOR

work with regard to planning and design requirements; and apply for a Permit for Construction Work Planning from city planning authority with the relevant approval documents.

iii. Construction of a property project

After obtaining the Permit for Construction Work Planning, a property developer shall apply for a Construction Permit from the construction authority under the local people’s government above the county level according to the “Measures for the Administration of Construction Permits for Construction Projects” enacted by the Ministry of Construction on 15 October 1999 and revised and enforced on 4 July 2001.

iv. Completion of a property project

According to the “Regulations on Administration of Development of Urban Property”, the “Regulation on the Quality Management of Construction Projects” enacted and enforced by the State Council on 30 January 2000, the “Interim Measures for Reporting Details Regarding Acceptance Examination Upon Completion of Buildings and Municipal Infrastructure” enacted by the Ministry of Construction in April 2000 and the “Interim Provisions on Acceptance Examination Upon Completion of Buildings and Municipal Infrastructure” enacted and enforced by the Ministry of Construction on 30 June 2000, after completion of work for a project, a property developer shall apply for the acceptance examination upon completion to the property development authority under the people’s government on or above the county level and report details of the acceptance examination, upon which the “Record of acceptance examination upon project completion”. For a housing estate or other building complex project, an acceptance examination shall be conducted upon completion of the whole project and where such a project is developed in phases, separate acceptance examination may be carried out for each completed phase.

E. Property Construction

Under the Bid and Tender Law of the People’s Republic of China《中華人民共和國招標投標法》promulgated by the Standing Committee of the National People’s Congress dated 30 August 1999 and implemented on 1 January 2000, tender is compulsory with respect to construction projects within the territory of the PRC such as large-scale infrastructure and public utilities relating to social public interests or public security, including the investigation, design, construction, construction supervision thereof as well as procurements pertaining to important equipment and materials in connection with project construction. The tender is divided into open tender and invited tender. Any entity or individual shall not nullify related projects that must be offered to tender as statutory required or circumvent tender through any other means. The successful tenderer, on the basis of contractual covenant or upon the tenderee’s consent, may contract to others the non-principal non-critical works in the tender project. The individual accepting such contracting shall be equipped with appropriate qualifications and shall not subcontract his portion of works. The successful tenderer shall be

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SUMMARY OF PRC LAWS IN RELATION TO PROPERTY SECTOR

APPENDIX VII

accountable to the tenderee for the subcontracted project while the subcontractor shall bear joint liability for the same. To conduct bidding and tendering activities within the PRC territory, relevant entity or individual shall comply with the above regulation.

On 30 November 2011, the State Council issued Implementation Regulations of the Tendering and Bidding Law, which will become effective on 1 February 2012. The implementation regulations further detailed the operations of various processes during tendering and bidding.

F. Property Transactions

(a) Transfer of property

According to the “Urban Property Law” and the “Provisions on Administration of Transfer of Urban Property” enacted by the Ministry of Construction on 7 August 1995 and revised on 15 August 2001, a property owner may sell, give or otherwise legally transfer a property to another person or legal entity. When transferring a building, the ownership of the building and the land use rights attached to the site on which the building is situated are transferred simultaneously. The parties to a transfer shall enter into a property transfer contract in writing and register the transfer with the property administration authority having jurisdiction over the location of the property within 90 days of the execution of the transfer contract.

Where the land use rights were originally obtained by assignment, the real property may only be transferred on the condition that: (a) the assignment price has been paid in full for the assignment of the land use rights as provided by the assignment contract and a land use right certificate has been obtained; (b) the development has been carried out according to the assignment contract; and with respect to a project in which buildings are being developed, development representing more than 25% of the total investment has been completed.

If the land use rights were originally obtained by assignment, the term of the land use rights after transfer of the property shall be the remaining portion of the original term provided by the land use right assignment contract after deducting the time that has been used by the former land users. In the event that the transferee intends to change the use of the land provided in the original assignment contract, consent shall first be obtained from the original assignor and the planning administration authority under the local government of the relevant city or county and an agreement to amend the land use right assignment contract or a new land use right assignment contract shall be signed in order to, inter alia, adjust the land use right assignment price accordingly.

If the land rights were originally obtained by allocation, transfer of the real property shall be subject to the approval of the government vested with the necessary approval power as required under the regulations of the State Council. If the people’s government vested with the necessary approval power approves such a transfer, the transferee shall complete the formalities for transfer of the land use rights, unless the relevant statutes require no transfer formalities, and pay the transfer price according to the relevant statutes.

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SUMMARY OF PRC LAWS IN RELATION TO PROPERTY SECTOR

(b) Sale of commodity properties

Under the “Regulatory Measures on the Sale of Commodity Properties” enacted by the Ministry of Construction on 4 April 2001 and enforced on 1 June 2001, sale of commodity properties can include both pre-completion and post-completion sales.

i. Permit of pre-completion sale of commodity properties

According to the “Regulations on Administration of Development of Urban Property” and the “Measures for Administration of Pre-completion Sale of Commodity Properties” (the “Pre-completion Sale Measures”) enacted by the Ministry of Construction on 15 November 1994 and revised on 15 August 2001 and 20 July 2004 respectively, the pre-completion sale of commodity properties shall be subject to a permit system, under which a property developer intending to sell a commodity building before its completion shall make the necessary pre-completion sale registration with the property development authority of the relevant city or county to obtain a permit of precompletion sale of commodity properties. A commodity building may only be sold before completion provided that: (a) the assignment price has been paid in full for the assignment of the concerned land use rights and a land use rights certificate has been issued; (b) a Permit for Construction Work Planning and a Permit for Construction of Work have been obtained; (c) the funds invested in the development of the commodity properties put to pre-completion sale represent 25% or more of the total investment in the project and the progress of work and the completion and delivery dates have been ascertained; and (d) the pre-completion sale has been registered and a Permit for Precompletion Sale of Commodity Properties has been obtained.

In addition, according to the “Regulations on Administration of Pre-completion Sale of Commodity Properties of Guangdong Province” enacted by the Standing Committee of Guangdong Provincial People’s Congress on 22 August 1998 and revised on 14 October 2000, and the “Notice on Adjusting Conditions of Image and Progress for Commodity Building Pre-sale Project in Guangdong Province” issued by the Guangdong Provincial Construction Bureau in January 2001, the following conditions shall be fulfilled for pre-completion sale of commodity properties in Guangdong: (a) the property developer has obtained a real property development qualification certificate and a business license; (b) the construction quality and safety monitoring procedures have been performed; (c) the structural construction and the toping-out must have been completed in respect of properties of not more than seven stories (including seven stories), and at least two-third of the structural construction must have been completed in respect of properties of more than seven stories; (d) a special property pre-completion sale account with a commercial bank in the place where the project is located has been opened; and (e) the properties pre-completion sale project and its land use rights are free from any third party rights.

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ii. Management of pre-completion sale proceeds of commodity properties

According to the Pre-completion Sale Measures, the proceeds obtained by a property developer from the advance sale of commercial houses must be used for the construction of the relevant projects. The specific measures for the supervision on proceeds from the advance sale of commodity properties shall be formulated by the property administrative departments.

iii. Conditions of the sale of post-completion commodity properties

Under the “Measures for Administration of Sale of Commodity Properties”, commodity properties may be put to post-completion sale only when the following preconditions have been satisfied: (a) The property development enterprise offering to sell the post-completion properties shall have a enterprise legal person business license and a qualification certificate of a property developer; (b) The enterprise has obtained a land use right certificate or other approval documents of land use; (c) The enterprise has the permit for construction project planning and the permit for construction; (d) The commodity commodities have been completed and been inspected and accepted as qualified; (e) The relocation of the original residents has been well settled; (f) The supplementary essential facilities for supplying water, electricity, heating, gas, communication, etc. have been made ready for use, and other supplementary essential facilities and public facilities have been made ready for use, or the schedule of construction and delivery date of have been specified; (g) The property management plan has been completed.

Before the post-completion sale of a commodity building, a property developer shall submit the Property Development Project Manual and other documents showing that the preconditions for post-completion sale have been fulfilled to the property development authority for making a record.

iv. Regulations on sale of commodity properties

According to the “Regulations on Administration of Development of Urban Property” and the Pre-completion Sale Measures, for the pre-completion sale of a commodity building, the developer shall sign a contract on the pre-sale of the commodity building with the purchaser. The developer shall, within 30 days upon signing the contract, apply for registration and record of contract for pre-completion sale commodity building to the relevant administrative departments governing the property and land administration department of the city or country governments. Property administrative department shall take the initiative to apply network information technology to gradually implement web-based registration of pre-sale contracts.

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Pursuant to the “Circular of the General Office of the State Council on Forwarding the Opinion of the Ministry of Construction and Other Department on Doing a Good Job of Stabilising House Prices” on 9 May 2005, there are several regulations concerning commodity properties sale:

The buyer of a commodity building is prohibited from conducting any transfer of the pre-sale of the commodity building that he has bought but is still under construction.
Before completion and delivery of an advance sale commodity building to the advance buyer, and before the advance buyer obtains the individual property ownership certificate, the administrative department of property shall not handle any transfer of the commodity building. If there is discrepancy in the name of the applicant for property ownership and the name of the advance buyer in the advance sales contract, the property ownership registration administration shall not records the application of property ownership;
Apply a real name system for house purchase; carry out an immediate archival filing network system for pre-sale contracts of commodity properties.

On 6 July 2006, the Ministry of Construction, NDRC, and the SAIC jointly enacted a Notice on Reorganising and Regulating Order in the Property Transactions, the details of which are as follows:

The developer should start to sell the commodity properties within 10 days after receiving “Permit for Pre-completion Sale of commodity properties”. Without this permit, the pre-completion sale of commodity properties, as well as subscription (including reservation, registration and numberselecting) and acceptance of the any kind of pre-sale payments, is forbidden;
The property administration authority should establish an immediate network system for advance sales contracts of commodity properties and a system for the publication of property transaction information. The basic situation of the commodity building, the schedule of the sale and the rights status should be duly, truly and fully published in the network system and on the locale of sale. The advance buyer of a commodity building is prohibited from conducting any transfer of the advance sale of the commodity building that he has bought but is still under construction;
Without the “Permit for Pre-completion Sale of commodity properties”, no advertisement of the pre-completion sale of commodity properties can be allowed to publish;
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Property development enterprises with a record of serious irregularity or enterprises which do not satisfy the requirements of pre-completion sale of commodity properties is not allowed to take part in sale activities;
The property administration authority should strictly carry out the regulations of the pre-completion sale contract registration and records and apply the real name system for property purchase.

(c) Mortgages of Property

Under the “Real Rights Law of the People’s Republic of China” enacted by the National People’s Congress on 16 March 2007 and enforced on 1 October 2007, the “Urban Property Law” and the “The Security Law of the People’s Republic of China” enacted by the Standing Committee of the National People’s Congress on 30 June 1995 and enforced on 1 October 1995, and the “Measures on the Administration of Mortgage of Buildings in Urban Areas” enacted by the Ministry of Construction in May 1997 and revised on 15 August 2001, mortgage refers to the act of a debtor, or a third party, who, without transferring the occupancy of the properties, charge those properties as security for the creditor’s rights; when the debtor fails to pay his debt, the creditor has a right to obtain compensation, in accordance with the stipulations of this law, by converting the properties into money or seek preferential payments from the proceeds from the auction or sale of the concerned properties. The creditor’s rights that the mortgagor mortgaged shall not exceed the value of the properties mortgaged. After being mortgaged, the balance of value of the properties that exceeded the creditor’s rights can be mortgaged for a second time, but the sum of the mortgage shall not exceed the value of the balance. When a mortgage is created on the ownership of a building on state-owned land legally obtained, a mortgage shall be simultaneously created on the land use right of the land on which the building is erected. When the land use rights of State-owned lands acquired through means of assignment is mortgaged, the buildings on the land shall also be mortgaged at the same time. The land use rights of town and village enterprises cannot be mortgaged individually. When the buildings of the town and village enterprises are mortgaged, the land use rights occupied by the buildings shall also be mortgaged at the same time. The mortgager and the mortgagee shall sign a mortgage contract in writing. Within 30 days after a property mortgage contract has been signed, the parties to the mortgage shall register the mortgage with the property administration authority at the location where the property is situated. A property mortgage contract shall become effective on the date of registration of the mortgage. If a mortgage is created on the property in respect of which a property ownership certificate has been obtained legally, the registration authority shall make an entry under the “third party rights” item on the original property ownership certificate and then issue a Certificate of Third Party Rights to Property to the mortgagee. If a mortgage is created on the commodity building put to pre-completion sale or under construction, the registration authority shall record the details on the mortgage contract. If construction of a real property is completed during the term of a mortgage, the parties involved shall re-register the mortgage of the real property after issuance of the certificates evidencing the ownership of the property.

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(d) Lease of buildings

Under the “Urban Property Law” and the “Measures for Administration of Leases of Buildings in Urban Areas” enacted by the Ministry of Construction on 28 April 1995 and enforced on 1 June 1995, the parties to a lease of a building shall enter into a lease contract in writing which shall be effective upon signing by both parties. A system which has been adopted for registering leases of buildings. When a lease contract is signed, amended or terminated, the parties shall register the details with the property administration authority under the local government of the city or county in which the building is situated. The term of a leased building and the related land shall not be more than 20 years. The Administrative Measures for Commodity House Leasing further strengthen the administration of leasing by stipulating more specific procedural rules of lease registration with local real estate administration authority.

G. Property financing

According to the “Notice of the People’s Bank of China on Regulating Home Financing Business” enacted by the People’s Bank of China (the “PBOC”) on 19 June 2001, all banks must comply with the following requirements before granting residential development loans, individual home mortgage loans and individual commercial flat loans:

(a) Housing development loans from banks shall only be granted to property development enterprises with approved development qualifications and high credit ratings. Such loans shall be offered to residential projects with good market potential. While the borrowing enterprise must have an amount of own capital no less than 30% of the total investment required of the project, the project itself must have been issued with a Land Use Rights Certificates, Construction Land Planning Permit, Construction Work Planning Permit and Permit of Construction Work.
(b) In respect of the grant of individual home mortgage loans, the ratio between the loan amount and actual value of the security (the “Mortgage Ratio”) shall never exceed 80%. Where an individual applies for a home purchase loan to buy a pre-completion house, the said property must have achieved the stage of “topping-out of the main structure completed” for multi-story buildings or “two-thirds of the total investment completed” for high-rise buildings.
(c) In respect of the grant of individual commercial flat loans, the Mortgage Ratio under the application for commercial flat loans shall not exceed 60% with a maximum loan period of 10 years and the subject commercial properties have already been completed.
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The PBOC issued the Circular on Further Strengthening the Management of Loans for Property Business on 5 June 2003 to specify the requirements for banks to provide loans for the purposes of property development and individual home mortgage as follows:

(a) The property loan by commercial banks to property development enterprises shall be granted only under the title of property development loan and it is strictly forbidden to extent such loans as current capital loan for property development project or other loan item. No lending of any type shall be granted for projects which have not obtained the Land Use Right Certificates, Construction Land Permit, Construction Planning Permit and Construction Work Permit.
(b) Commercial banks shall not grant loans to property developers to pay off land premium; and
(c) Commercial banks may only provide mortgage loans to individual buyers when the main structural buildings have been topped out. When a borrower applies for individual home loans for his first residential unit, the down payment remains to be 20%. In respect of his loan application for additional purchase of residential unit(s), the percentage of the first instalment shall be increased.

Pursuant to the Guidance on Risk Management of Property Loans of Commercial Banks issued by China Banking Regulatory Commission on 2 September 2004, any property developer applying for property development loans shall have at least 35% of capital funds required for the development.

According to the “Notice of the People’s Bank of China on the Adjustment of Commercial Bank Housing Loan Policies and the Interest Rate of Excess Reserve Deposit”, enacted by PBOC on 16 March 2005, starting from 17 March 2005, the down payment of individual home increased from 20% to 30% in cities and areas where property prices grow too quickly. The commercial banks can independently determine scope of such property price rise according to specific situations in different cities or areas.

On 24 May 2006, the State Council forwarded the “Opinion of the Ministry of Construction and Other Departments on Adjusting the Housing Supply Control Structure and Stabilising the Property Prices. The regulations provide the following:

(a) Tightening the control of advancing loan facilities. The commercial banks are not allowed to advance their loan facilities to property developers who do not have the required 35% or more of the total capital for the construction projects. The commercial banks should be prudent in granting loan facilities and/or revolving credit facilities in any form to the property developers who have a large number of idle lands and unsold commodity properties. The commercial banks shall not accept mortgages of commodity properties remaining unsold for three years or longer, and the commercial banks shall not accept such commodity building as collateral for loans.
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(b) From 1 June 2006 and onward, purchasers need to pay a minimum of 30% of the purchase price as down payment. However, if purchasers purchase apartments with a floor area of 90 sq.m. or less for residential purposes, the existing requirement of 20% of the purchase price as down payment remains unchanged.

According to “Circular on Standardising the Admittance and Administration of Foreign Capital in Property Market” enforced on 11 July 2006, foreign-invested property development enterprises which have not paid up their registered capital fully, or failed to obtain a Land Use Right Certificate, or with under 35% of the capital for the project, will not be allowed to obtain a loan in or outside China, and foreign exchange administration departments shall not approve any settlement of foreign loans by such enterprises.

On 27 September 2007, the PBOC, CBRC jointly issued the “Notice on Strengthening the Administration of Commercial Real Estate Credit Loans” 《( 關於加强商業性房地產信貸管理的通知》), which further stipulates stringent requirements to the grant of loans in respect to the second and subsequent purchases of housing by individuals. For those who has used credit loans to purchase a housing and applied for purchasing the second (inclusive) or more housing, the down payment shall not be less than 40% of the total purchase price, while the interest rate of such loan shall not be lower than 1.1 times of the benchmark interest rate of the same grade for the same period as announced by the PBOC. Moreover, the ratio of the down payment and the level of the interest rate of the loan shall be substantially adjusted upwards according to the number of purchases. The specific increase range will be determined by commercial banks at their own discretion based on the relevant principles of credit risk management.

H. Insurance of a property project

There are no mandatory provisions in the PRC laws, regulations and government rules which require a property developer to take out insurance policies for its property projects.

In light of the “Construction Law of the People’s Republic of China” enacted by the Standing Committee of the National People’s Congress on 1 November 1997 and enforced on 1 March 1998, construction enterprises must take out accident and casualty insurance for workers engaged in dangerous operations and pay insurance premium. In the “Opinions of the Ministry of Construction on Strengthening the Insurance of Accidental Injury in the Construction Work” by the Ministry of Construction on 23 May 2003, the Ministry of Construction further emphasises the importance of the insurance of accidental injury in the construction work and put forward the detailed opinions of guidance. The “Guidance on the Insurance of Accidental Injury in the Construction Work of Guangdong Province” enacted by construction department of Guangdong Province on 8 September 2004 prescribes the scope, object, term, coverage, amount and premium of insurance for accidental injury. Besides, the Guidance especially emphasises that the persons who have been already insured of work-related injury insurances still need to be insured of accidental injury insurance when he or she takes part in the on-site construction work. According to the common practice of the property industry in Guangdong, except for the accidental injury insurance, construction companies are usually required to submit insurance proposals in the course of tendering and bidding for construction projects. Construction companies shall pay for the insurance premium at their own costs and take out various

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types of insurance to cover their liabilities, such as property risks, third party’s liability risk, performance guarantee in the course of construction and all-risks associated with the construction and installation work throughout the construction period. The insurance cover for all the aforementioned risks shall cease immediately after the completion and acceptance upon inspection of construction.

I. Measures on Adjusting the Structure of Housing Supply and Stabilising Housing Price

The General Office of the State Council enacted the “Circular on Stabilising Housing Price” on 26 March 2005, requiring measures to be taken to restrain the housing price from increasing too fast and to promote the healthy development of the property market. On 9 May 2005, the General Office of the State Council issued the Opinion of the Ministry of Construction and other Departments on Doing a Good Job of Stabilising House Prices, the opinion provides that:

(a) Intensifying the planning and control and improving the supply structure of houses

Where the housing price is in excessive growth and where the supply of ordinary commodity houses with medium or low price and economical houses is insufficient, construction of residential properties should mainly involve projects of ordinary commodity houses with medium or low price and economical houses. The construction of low-density, upmarket houses shall be strictly controlled. With respect to construction projects of medium-or low-price ordinary commodity houses, before any grant of land, the municipal planning authority shall, according to the level of control required, set out conditions for planning and design such as height of buildings, plot ratio and green space. The property authority shall, in collaboration with other relevant authorities, set forth such controlling requirements as sale price, type and apartment sizes. Such conditions and requirements will be set out as preconditions of land assignment to ensure an effective supply of small or medium-sized houses at moderate and low prices. The local government must intensify the supervision of planning permit for property development projects. Housing projects that have not been commenced within two years must be examined again, and those that turn out to be not in compliance with the planning permits will be revoked.

(b) Intensifying the control over the supply of land and rigorously enforcing the administration of land

Where the price of land for residential use and residential properties grows too fast, the proportion of land for residential use to the total land supply should be appropriately raised, and the land supply for the construction of ordinary commodity houses with medium or low price and economical house should be emphatically increased. Land supply for villa construction shall continue to be suspended, and land supply for up-market housing property construction shall be strictly restricted.

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(c) Adjusting the policies of business tax on residential property house transfer and strictly regulating the collection and administration of tax

From 1 June 2005, business tax on transfer of a residential property by an individual within two years from purchase will be levied on the basis of the full amount of the sale proceeds. Transfer of an ordinary residential property by an individual two years or more after purchase shall be exempted for business tax. For transfer of a house other than ordinary residential property by an individual two years or more after purchase, the business tax will be levied on the basis of the balance between the proceeds from selling the property and the purchase price.

(d) Strictly Rectifying and Regulating the Market Order and Seriously Investigating into and Punishing Any Irregular and Rule-breaking Sales

The buyer of a pre-completion commodity property is prohibited from conducting any transfer of the pre-sale commodity property that he has bought but is still under construction. A real name system for property purchase should be applied, and an immediate archival filing network system for advance sales contracts of commodity properties should be carried out.

On 24 May 2006, the State Council forwarded the “Opinion on Adjusting the Housing Supply Structure and Stabilising Property Prices《關於調整住房供應結構穩定住房價格的意見》(the “Opinion”) of the Ministry of Construction and other relevant government authorities. The Opinion provides the following:

i. Adjusting the Housing Supply Structure

Developers must focus on providing small to medium sized ordinary commodity properties at low to mid-level prices to cater to the demands of local residents;
As of 1 June 2006, newly approved and newly commenced building construction projects must have at least 70% of the total construction work area designated for small apartments with floor areas of 90 sq.m. or below (including economically affordable apartments). If municipalities directly under the Central Government, cities listed on state plans (省會城市) and provincial capital cities (計劃單列市) have special reasons to adjust such prescribed ratio, they must obtain special approval from the Ministry of Construction. Construction projects that have been approved but have not yet obtained a construction permit must follow the prescribed ratio.

ii. Further adjustments by tax, loan and land policies

From 1 June 2006, business tax will be levied on the full amount of the sale proceeds on conveyance of residential properties within a period of five years from the date of purchase. If an individual sells his ordinary
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standard apartment after five or more years from the date of purchase, business tax will normally be exempted. If an individual sells his nonordinary apartment after five or more years from the date of purchase, business tax will be levied on the balance between the selling price and the purchase price;

Commercial banks are not allowed to advance loan facilities to property developers who do not have the required 35% or more of the total capital for the construction projects. The commercial banks should be prudent in granting loan facilities and/or revolving credit facilities in any form to the property developers who have a large number of idle lands and unsold commodity apartments. Banks shall not accept mortgages of commodity apartments remaining unsold for three years or more;
From 1 June 2006 and onward, purchasers need to pay a minimum of 30% of the purchase price as down payment. However, if purchasers buy apartments of 90 sq.m. or less for residential purposes, the existing requirement of 20% of the purchase price as down payment remains unchanged;
At least 70% of the total land supply for residential property development must be used for developing small-to-medium-sized low-cost public housing. Based on the restrictions of residential property size ratio and residential property price, land supply will be granted by way of auction to the property developer who offers the highest bid. Land supply for villa construction shall continue to be suspended, and land supply for lowdensity and large-area housing property construction shall be strictly restricted;
The relevant authorities will levy a higher surcharge against those property developers who have not commenced the construction work for longer than one year from the commencement date stipulated in the construction contract and will order them to set a date for commencing the construction work and a date of completion. The relevant authorities will confiscate without compensation the land from those property developers who have not commenced the construction work beyond two years from the commencement date stipulated in the construction contract without proper reasons. The relevant authorities will dispose of the idle land of those property developers who have suspended the construction work consecutively for one year without an approval, have invested less than one-fourth of the total proposed investment and have developed less than one-third of the total proposed construction area.
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iii. Reasonably Monitoring the Scope and Progress of Demolition of Urban Housing

The management and reasonable control of the scope and progress of the demolition of urban housing should be strengthened to halter the excessive property growth triggered by passive means.

iv. Further Rectifying and Regulating the Order of Property Properties Market
In order to ensure that the prescribed ratio regarding types and sizes is followed, the relevant authorities will need to re-examine the approval of those construction projects which have been granted planning permit but have not been commenced. The relevant authorities will ensure that no Planning Permit (規劃許可證), Construction Permit (施工許可證) or Permit for Pre-Sale of Commodity Properties (商品房預售許可證) is issued to those construction projects which do not satisfy the controlling requirements, in particular, the prescribed ratio requirement. If the property developers, without an approval, alter the architectural design, the construction items, and exceed the prescribed ratio, the relevant authorities have the power to dispose of the property and to confiscate the property in accordance with the law;
The property administration authority and the administration of industry and commerce will investigate illegal dealings such as contract fraud cases in accordance with the law. The illegal conduct of pre-completion sale of commodity apartments without satisfying all the conditions will be ordered to stop and be imposed a proper administrative penalty in accordance with the law. For those property developers who maliciously manipulate the supply of commodity housing, the relevant authorities will imposed a proper administrative penalty including revoking the business licenses of those serious offenders and will pursue personal liability for those concerned.

v. Gradually relieving the housing demands for low-income families

To expedite the establishment of low-cost public housing supply system in various cities and counties; to monitor and regulate the construction of economically affordable apartments; to aggressively develop the second-hand property market and property rental market.

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vi. Improving information disclosure system and system for collecting property statistics

On 6 July 2006, the Ministry of Construction promulgated a supplemental Opinion on Carrying Out the Residential Property Size Ratio in Newly-Built Residential Buildings (Jianzhufang [2006] No. 165)《關於落實新建住房結構比例要求的若干意見》(“the Supplemental Opinion”). The Supplemental Opinion provides the following:

As of 1 June 2006, of the newly approved and newly commenced construction projects in different cities including town and counties (from 1 June 2006 and onward), at least 70% of the total construction area must be used for building small apartments with unit floor area of 90 sq.m. or below (including economically affordable apartments);
The relevant authorities in different localities must strictly follow the prescribed ratio requirement in their respective locality. The relevant authorities must ensure the conditions of newly built commodity apartments including the planning and the design, and must ensure that the property size ratio is adhered to. If a property developer has not followed the ratio requirement without providing proper reasons, the town planning authorities will not issue a Planning Permit. If the property developer has not followed the requirements of the Planning Permit, the relevant authority censoring the planning documents will not issue a certification, the construction authority will not issue a Construction Permit, and the property authority will not issue a Permit for precompletion sale of the commodity apartments.

In the case of construction projects that were granted approval before 1 June 2006 but that were not granted a construction work permit by that date, the relevant local governments in different localities should ascertain the details of the projects and ensure that the prescribed residential property size ratio requirement is complied with.

J. Circular on Facilitating the Stable and Healthy Development of Property Market

In January 2010, the General Office of the State Council issued a Circular on Facilitating the Stable and Healthy Development of Property Market《關於促進房地產市場平穩健康發展的通知》, which adopted a series of measures to strengthen and improve the regulation of the property market, stabilize market expectation and facilitate the stable and healthy development of the property market. These include, among others, measures to increase the supply of affordable housing and ordinary commodity housing, provide guidance for the purchase of property, restrain speculation of properties, and strengthen risk prevention and market supervision. Additionally, it explicitly requires each family (including a borrower, his or her spouse and children under 18), that has already purchased a residence through mortgage financing and have applied to purchase a second or more residences through mortgage financing, to pay a minimum down-payment of 40% of the purchase price on the second of more residences.

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K. Notification on Issues Relating to Strengthening the Supply and Regulation of the Land for Real Estate Development

On March 8, 2010, the Ministry of Land and Resources promulgated the Notification on Issues Relating to Strengthening the Supply and Regulation of the Land for Real Estate Development《關於加強房地產用地供應和監管的有關問題的通知》 to introduce new measures on land supply, including:

Implement the PRC government’s latest land supply plans and prioritize land supply;
The local governments must allocate 70% of new land supply to the construction of “supportive housing and self-use small-to-medium size housing”; and
Local governments must closely monitor developers’ implementation of the terms regarding the date for commencement of construction and completion of construction in land transaction contracts, and in the case of any violations, local governments must investigate and punish them.
L. Circular on Facilitating the Stable and Healthy Development of Property Market

In January 2010, the General Office of the State Council issued a Circular on Facilitating the Stable and Healthy Development of Property Market《關於促進房地產市場平穩健康發展的通知》, which adopted a series of measures to strengthen and improve the regulation of the property market, stabilize market expectation and facilitate the stable and healthy development of the property market. These include, among others, measures to increase the supply of affordable housing and ordinary commodity housing, provide reasonable guidance for the purchase of property, restrain speculation of properties, and strengthen risk prevention and market supervision. Additionally, it explicitly requires a family (including a borrower, his or her spouse and children under 18), who have already purchased a house by mortgage and have applied to purchase a second or more houses, to pay a minimum down payment of 40% of the purchase price.

M. Notification on the Determination to Restrain the Overly Rapid Increase in Real Estate Price in Some Cities

The State Council has promulgated the Notification on the Determination to Contain the Overly Rapid Increase in Real Estate Price in Some Cities (Guo Fa [2010] No.10) on 17 April 2010 with requirements as follows:

All regions and relevant departments must be fully aware of the hazardous nature of the overly rapid increase in real estate prices; consciously implement real estate market control policies as determined by the central government; and adopt resolute measures to restrain the overly rapid increase in real estate prices to promote livelihood improvement and economic development;
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A more stringent differentiation housing credit policies shall be implemented. For families (which includes the loan borrower, his/her spouse and minor children”) purchasing their first housing unit with a total floor area of 90 square meters or above for own living purpose, the proportion of downpayment for housing loans shall not be less than 30%. For families purchasing their second housing unit on borrowed loans, the proportion of downpayment for the loans shall not be less than 50% and the loan rate shall not be lower than 1.1 times of the benchmark rate. For those purchasing their third or more housing units, the downpayment proportion and loan rate shall be substantially increased, with specific details to be determined by individual commercial banks in accordance with the principles of risk management. The People’s Bank of China (“PBOC”) and the China Banking Regulatory Commission (“CBRC”) shall instruct and supervise commercial banks in implementing strict management of housing loans. Together with PBOC and CBRC, the Ministry of Housing and Urban-Rural Development (“MOHURD”) shall stringently formulate standards in relation to identification of purchase of second housing unit. All forms of real estate speculation and speculators’ purchase of properties shall be strictly controlled for regions where commercial housing prices are too expensive and have been surging too rapidly coupled with tight supply. Commercial banks may, based on their risk conditions temporarily terminate the granting of loans for the purchase of third or more housing units as well as housing loans to non-local citizens not capable of producing proofs of payment of local tax or social insurance for one year or more. The local government may, based on actual conditions, adopt temporary measures to restrict the number of housing units purchased within a certain period. Relevant policies shall be strictly implemented for the purchase of real estates by foreign institutions and individuals. Tax departments shall consciously implement the collection and management of land value-added tax in strict accordance with the taxation laws and relevant policies and regulations and shall carry out major clearing and inspection of real estate development projects with over-high pricing or overly rapid increase in prices;
The total supply of residential land shall be increased in cities with an overly rapid increase in real estate prices. The handling of idle real estates sites shall be accelerated in accordance with the law. For recovered idle sites, priority shall be given to construction of general housing. Alongside the persistence and improvement of the land auction system, most of sales such as “comprehensive evaluation”, “one-time auction” and “twoway auction” shall be explored to restrain the irrational surge in selling prices of residential land. The structure of housing supply shall be adjusted. All regions shall prepare and release housing construction plans as soon as possible in which the quantity and proportion of low-income and medium-to-small-sized general commercial housing are to be clearly defined. The MOHURD shall accelerate its approval process in relation to planning, commencement of construction and pre-sale applications for general commodity housing to create an effective supply as quickly as possible. Land for lowincome housing and shanty town with construction and medium-to-small-sized general commodity housing shall not be less than 70% of the total housing land supply and shall be given the priority in land supply. Department in charge of urban-rural planning and real estate shall actively coordinate with the land and resources department in
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incorporating items such as housing prices, unit quantity, floor area, proportion of lowincome housing, project commencement and completion time, as well as penalty clauses on breach of contract into the land transfer agreements in order to ensure the structure and proportion of the supply of medium-to-small-sized housing units are in strict accordance with relevant regulations. For regions where there is an over-high pricing and overly rapid increase in real estate prices, the supply of public rental, economically affordable as well as price-restricted commodity housing shall be substantially increased.

Based on the principle of governmental organization and social participation, the development of public rental housing shall be accelerated and all levels of the local governments shall increase their input with the central government providing appropriate funding support. State-owned real estate enterprises shall participate actively in the construction of low-income housing and the reconstruction of shanty towns.
The supervision on land purchase and financing of real estate developers shall be strengthened. Departments of the Ministry of Land and Resources shall increase their special remediation and clearance efforts; investigate idle land and land speculation in strict accordance with the law; and restrict new purchase of land by enterprises having violated the laws and regulations. Shareholders of real estate developers are prohibited to provide loans, on-landing loans, guarantees or other relevant financing facilities to the enterprises during participation in land bidding and development and construction process. State-owned and State-controlled enterprises which are not primarily engaged in real estate business shall be strictly prohibited to take part in commercial land development and real estate businesses. Departments in charge of State-owned assets and financial supervision shall increase their strength in investigation. Commercial banks shall strengthen pre-loan review and post-loan management of loans to real estate developers. Commercial banks shall not grant loans to new projects of real estate developers having idle land and making land speculations and that the securities regulatory departments shall temporarily suspend their listing, re-financing and restructuring of major assets applications. Supervision on trading discipline shall be increased. Real estate development projects which have obtained pre-sale permit or having applied for the sales of real estates shall make public all of the housing units for sale at one time within a specified period and carry out external sales in strict accordance with prices clearly set and declared. Departments of the MOHURD shall implement clearance of commercial housing projects with pre-sale permit; increase exposure and punishment on real estate developers engaging in activities such as accumulation of housing sources and building up of real estate prices; cancel business qualifications of developers in serious cases; and investigate the accountabilities of relevant persons violating the laws and regulations. All provincial governments (autonomous regions and municipalities) shall implement an investigation of the business activities of all local real estate developers; timely rectify and swiftly handle any unlawful practices; and report the investigation results to the State Council by the end of June 2010.
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SUMMARY OF PRC LAWS IN RELATION TO PROPERTY SECTOR

N. The “Notice of the General Office of the State Council on Issues Relating to Further Regulation of the Real Estate Market”

The “Notice of the General Office of the State Council on Issues Relating to Further Regulation of the Real Estate Market” (Guo Ban Fa [2011] No. 1)《國務院辦公廳關於進一步做好房地產市場調控工作有關問題的通知》（國辦發[2011]1號）issued on 26 January 2011 calls for:

Further confirmation of the responsibility of local governments on increasing the effective land supply, further increase of the emphasis on building ordinary housing; to perfect the strict policy on differentiated housing loans and taxation, and to further curb on speculative property purchases.

2. Increasing the emphasis of building government subsidized housing

The local People’s Government should implement policies on land supply, capital injection and tax incentives, guiding the real estate developers to actively take part in the construction of government subsidized houses and reconstructing shanty houses and making sure the projects are completed.

To formulate preferential policies to encourage real estate developers to set aside a certain proportion of houses for public rental within ordinary commodity housing projects, to own and operate those houses or sell them to the government.

3. Adjustment and facilitation of relevant taxation policies and improvement on tax levying and management

To adjust the policy on business taxes on individuals for transferring property, a uniform business tax is levied on the entire sale proceeds of any property sold within five years of purchase.

4. Reinforcement of the policy of differentiated housing loans

For families purchasing a second house on loan, the down-payment proportion shall not be lower than 60%, and the interest rate of the loan shall not be less than 1.1 times of the benchmark interest rate. Each of the branches of the People’s Bank of China may, on the basis of the State’s uniform credit policy, raise the down-payment proportion and rate for the loan of second housing in accordance with the local People’s Government’s control target and policy requirement on new housing prices.

5. Strict management on the supply of land for residential use

The effective land supply in the country should be increased. At least 70% of the total land supply arranged for residential property development must be used for developing government subsidized houses and reconstructing shanty houses and small-to-medium size ordinary commodity houses. In the annual plan of new land for residential use,

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SUMMARY OF PRC LAWS IN RELATION TO PROPERTY SECTOR

APPENDIX VII

priority should be given to the land supply of government subsidized house construction. The mechanism of land granting should be further optimized and ‘decrease the house price and increase the land premiums ‘should be applied widely so as to guarantee the land supply of low to medium-end ordinary commodity houses. In cities where housing price increases are rampant, local governments should increase the planned supply of price-capped commodity housing.

Stricter scrutiny is imposed on the qualifications of corporations in entering the land market and their source of funds. Units or individuals participating in the land bidding shall explain the source of fund and provide relevant evidence. Altering the nature of the land for government housing without authorisation shall be resolutely rectified and punished. If the developer does not obtain the Permit for Commencement of Construction to commence construction of the granted real estate land in over two years, the land use right shall be forfeited in time and the developer shall be fined for leaving land idle for more than one year. Illegal transfer of land use right shall be investigated and punished according to law. The land and the land development project agreed in the contract cannot be transferred in any ways on the conditions that the investment percentage of real estate development and construction represents less than 25% of the total investment (not including land fees).

6. Direct housing needs in a reasonable manner

Municipalities, independently planned cities, provincial capitals and the cities in which housing prices rise too rapidly are to formulate and implement purchase limitation measures during a certain period. As for families owning local household registration and holding one set of housing and families without local household registration but can provide certification for local tax payment or social security payment, they shall purchase only one set of housing (including newly built commodity houses and secondhand houses);

As for families owning local household registration and owning two or more residential properties and families without local household registration and owning at least one residential property or who cannot provide a local tax payment certificate or a social security certificate are prohibited from purchasing an additional residential properties in the local district.

Should cities which have imposed purchase limitation measures have any inconsistency with this Notice, adjustments on the relevant implementation regulations must be made immediately and to increase scrutiny on the qualifications of the house buyers to ensure the policy is properly implemented. Municipalities, independently planned cities, provincial capitals and the cities in which housing prices rise too rapidly and have not yet imposed purchase limitation measures must issue implementation regulations for purchase limitation by mid-February. Other cities are to timely carry out purchase limitation measures in response to the situation in the local real estate market.

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APPENDIX VII

II. MAJOR TAXES APPLICABLE TO PROPERTY DEVELOPERS

A. Income tax

According to the “Income Tax Law of The People’s Republic of China for Enterprises with Foreign Investment and Foreign Enterprises” enacted by National People’s Congress on 9 April 1991 and enforced on 1 July 1991 and its detailed rules enacted by the State Council on 30 June 1991, the rate of enterprise income tax for foreign investment enterprises and enterprise income tax for entities and premises engaged in production and operation by foreign enterprises in China shall be 30%, and the rate of local income tax shall be 3%.

According to the PRC Enterprise Tax Law enacted by the National People’s Congress on 16 March 2007 and enforced from 1 January 2008 onwards, a uniform income tax rate of 25% will be applied towards foreign investment enterprise and foreign enterprises which have set up production and operation facilities in the PRC as well as PRC enterprises.

B. Business tax

Pursuant to the “Interim Regulations of the People’s Republic of China on Business Tax” enacted by the State Council on 13 December 1993 and enforced on 1 January 1994 and its “Detailed Implementation Rules on the Provisional Regulations of The People’s Republic of China on Business Tax” issued by the Ministry of Finance on 25 December 1993, the tax rate on transfer of immovable properties, their superstructures and attachments is 5%.

C. Land appreciation tax

According to the requirements of the Provisional Regulations of The People’s Republic of China on Land Appreciation Tax (the “Land Appreciation Provisional Regulations”) which was enacted on 13 December 1993 and effected on 1 January 1994, and the Detailed Implementation Rules on the Provisional Regulations of The People’s Republic of China on Land Appreciation Tax (the “Land Appreciation Detailed Implementation Rules”) which was enacted on 27 January 1995 and enforced back to 1 January 1994, any appreciation amount gained from taxpayer’s transfer of property shall be subject to land appreciation tax. Land appreciation tax shall be subject to a regime of four level progressive rates: 30% on the appreciation amount not exceeding 50% of the sum of deductible items; 40% on the appreciation amount exceeding 50% but not exceeding 100% of the sum of deductible items; 50% on the appreciation amount exceeding 100% but not exceeding 200% of the sum of deductible items; and 60% on the appreciation amount exceeding 200% of the sum of deductible items. The related deductible items aforesaid include the following:

amount paid for obtaining the land use right;
costs and expenses for development of land;
costs and expenses of new buildings and ancillary facilities, or estimated prices of old buildings and constructions;
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SUMMARY OF PRC LAWS IN RELATION TO PROPERTY SECTOR

related tax payable for transfer of property;
other deductible items as specified by MOF.

According to the requirements of the Land Appreciation Provisional Regulations, the Land Appreciation Detailed Implementation Rules and the Notice issued by the MOF in respect of the Levy and Exemption of Land Appreciation Tax for Development and Transfer Contracts signed before 1 January 1994 which was announced by the MOF and State Administration of Taxation on 27 January 1995, Land Appreciation Tax shall be exempted under any one of the following circumstances:

Taxpayers building ordinary standard residential properties for sale (i.e. residential properties built in accordance with the local standard for general civilian residential properties. Deluxe apartments, villas, resorts etc. are not under the category of ordinary standard residential properties), where the appreciation amount does not exceed 20% of the sum of deductible items;
Property taken over and repossessed according to laws due to the construction requirements of the State;
Due to redeployment of work or improvement of living standard, individuals transfer originally self-used residential property, of which they have been living there for 5 years or more, and after obtaining tax authorities’ approval;
For property transfer contract which were signed before 1 January 1994, whenever the properties are transferred, the Land Appreciation Tax shall be exempted;
If the property assignments were signed before 1 January 1994 or the project proposal has been approved and that capital was injected for development in accordance with the conditions agreed, the Land Appreciation Tax shall be exempted if the properties are transferred within 5 years after 1 January 1994 for the first time. The date of signing the contract shall be the date of signing the Sale and Purchase Agreement. Particular property projects which are approved by the Government for the development of the whole piece of land and long-term development, of which the properties are transferred for the first time after the 5-year tax-free period, after auditing being conducted by the local financial and tax authorities, and approved by MOF and the State Administration of Taxation, the tax-free period would then be appropriately prolonged.

After the issuance of the “Land Appreciation Provisional Regulations” and the “Land Appreciation Detailed Implementation Rules”, due to the relatively long period required for property development and transfer, many districts, while they were implementing the regulations and rules, did not mandatorily require the property development enterprises to declare and pay the Land Appreciation Tax. Therefore, in order to assist the local tax authorities in the collection of Land Appreciation Tax, the MOF, State Administration of Taxation, the Ministry of Construction and the Ministry of Land and Resource had separately and jointly issued several notices to restate the following: After the assignments are signed, the taxpayers should declare the tax to the local tax authorities where the

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SUMMARY OF PRC LAWS IN RELATION TO PROPERTY SECTOR

APPENDIX VII

properties are located, and pay the Land Appreciation Tax in accordance with the amount as calculated by the tax authority and within the specified time limit. For those who fail to acquire proof of tax payment or tax exemption from the tax authorities, the property administration authority shall not process the relevant title change procedures, and shall not issue the property title certificate.

State Administration of Taxation also issued the “Notice issued by State Administration of Taxation in respect of the Serious Handling of Administration Work in relation to the Collection of Land Appreciation Tax” on 10 July 2002 to request local tax authorities to modify the management system of Land Appreciation Tax collection and operation procedures, to build up a proper tax return system for Land Appreciation Tax, to improve the methods of pre-levying for the pre-sale of properties. That notice also pointed out that the preferential policy of Land Appreciation Tax exemption for first time transfer of properties under property development contracts signed before 1 January 1994 or project proposal that has been approved and capital was injected for development, is expired, and that such tax shall be levied again.

State Administration of Taxation issued the “Notice of State Administration of Taxation in respect of the Strengthening of Administration Work in relation to the Collection of Land Appreciation Tax” on 2 August 2004 and the “Notice of State Administration of Taxation in respect of the Further Strengthening of Administration Work in relation to the Collection of Land Appreciation Tax and Land Use Tax in Cities and Towns” on 5 August 2004. The aforesaid notices point out that the administration work in relation to the collection of land appreciation tax should be further strengthened. The preferential policy of Land Appreciation Tax exemption for first time transfer of properties under property development contracts signed before 1 January 1994 is expired and such tax shall be levied again. Where such taxes were still not levied, the situation should be corrected immediately. Also, the notice required that the system of tax declaration and tax sources registration in relation to the land appreciation tax should be further improved and perfected.

On 2 March 2006, the MOF and State Administration of Taxation issued the “Notice of Certain Issues Regarding Land Appreciation Tax”. The notice clarifies the relevant issues regarding land appreciation tax as follows:

(i) As to the Tax Collection and Exemption in the Sale of Ordinary Standard Residential Properties Built by Taxpayer

The notice sets out the recognised standards for ordinary standard residential properties. Where any developers build ordinary standard residential properties as well as other commercial properties, the value of land appreciation shall be assessed separately. In respect of ordinary standard residential properties for which application for tax exemption has been filed with the tax authority at the locality of the property before the notice is issued and for which land appreciation tax exemption has been granted by the tax authority on the basis of the standards of ordinary residential properties originally set down by the people’s government of the province, autonomous region or municipality directly under the Central Government, no adjustment shall be retroactively made.

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SUMMARY OF PRC LAWS IN RELATION TO PROPERTY SECTOR

(ii) As to the Advance Collection of Land Appreciation Tax as well as the Settlement

All regions shall further improve the measures for the advance collection of land appreciation tax, and decide the advance collection rate in a scientific and reasonable manner, and adjust it at a proper time according to the level of value appreciation in the property industry and market conditions within the region and on the basis of the specific property categories, namely, ordinary standard residential properties, non-ordinary standard residential properties and commercial properties. After a project is completed, the relevant settlement shall be handled in a timely manner, with any overpayment refunded or any underpayment being made up;

If any tax pre-payment is not paid within the advance collection period, an overdue fines shall be imposed additionally as of the day following the expiration of the prescribed advance collection period, according to the relevant provisions of the Tax Collection and Administration Law and its detailed rules for implementation;

As to any property project that has been completed and gone through the acceptance as well, where the floor area of the property as transferred makes up 85% or more in the salable floor area, the tax authority may require the relevant taxpayer to conduct the settlement of land appreciation tax on the transferred property according to the matching principles regarding the proportion between the income as generated from the transfer of property and the amount under the item of deduction. The specific method of settlement shall be prescribed by the local tax authority of a province, autonomous region, municipality directly under the Central Government, or a city under separate state planning;

On 28 December 2006, the State Administration of Taxation issued the Notice on the Administration of the Settlement of Land Appreciation Tax of Property Development Enterprises, which came into effect on 1 February 2007. The notice set our further provisions concerning the settlement of land appreciation tax by property developers by clarifying details regarding units responsible for settlement of land appreciation tax, requirements, materials to be submitted, auditing and verification, recognition of revenue of indirect sale and self-use properties, deductible items and handling of transfer after tax is imposed and settled etc. Local provincial tax authorities can formulate their own implementation rules according to the notice and local situation.

On 25 May 2010, the State Administration of Taxation issued the “Notice on Strengthening the Administration of Collection of Land Value-added Tax” 《( 關於加強土地增值稅征管工作的通知》). The Notice stipulates that in order to fully implement the “Notice of the State Council on Resolutely Curbing the Soaring of Housing Prices in Some Cities” (Guo Fa [2010] No. 10) 《( 國務院關於堅決遏制部分城市房價過快上漲的通知》(國發[2010]10號)), the administration of the collection of the land value-added tax shall be strengthened with a view to bring land value-added tax into full play, enhance the system of advance collection and settlement of land value-added tax, carry out advance collection in a scientific manner and thoroughly implement the settlement. As for the advance collection of land value-added tax, the prevailing rates for advance collection adopted by local taxation authorities shall be adjusted.

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SUMMARY OF PRC LAWS IN RELATION TO PROPERTY SECTOR

Except for affordable housing, the minimum rates for advance collection applied in the provinces of the eastern region, central and north eastern region and western region shall be 2%, 1.5% and 1% respectively. An appropriate rate for advance collection shall be set in line with the varied types of the real estate projects (the geographical delineation shall comply with relevant provisions under the administrative regulations of the State Council). As for the system of settlement, the taxation authorities at all levels shall formulate specific implementation rules in the light of local conditions based on the “Rules on the Administration of the Settlement of Land Value-added Tax” 《( 土地增值稅清算管理規程》) so as to optimize the settlement process, scrutinize the income and deduction items of the real estate projects, request relevant enterprises to settle tax payment timely in accordance with laws and fulfill the reporting obligation in accordance with the provisions and timeframe stipulated under the “Rules on the Administration of the Settlement of Land Value-added Tax”. For tax payers who fail to settle the tax payment timely in accordance with laws and regulations on taxation, appropriate penalty shall be imposed in accordance with laws. Any substantial doubts raised during the examination shall be transferred to tax audit authorities promptly for further investigation. For cases involving serious tax evasion, competent taxation authorities shall make available to the public the investigation progress from time to time. The Notice also regulates verification collection of tax and provides that the minimum rate of verification collection shall be 5% in principle. The taxation authorities at provincial level shall determine specific verification collection rates for different types of real estate projects in the light of their local conditions.

D. Deed tax

Pursuant to the “Interim regulations of the People’s Republic of China on Deed Tax” enacted by the State Council on 7 July 1997 and enforced on 1 October 1997, the transferee, whether an entity or individual, of the title to a land site or building in the PRC shall have to pay deed tax. The rate of deed tax is 3%-5%. The governments of provinces, autonomous regions and municipalities directly under the central government may, within the foresaid range, determine and report their effective tax rates to the MOF and the State Administration of Taxation for the record. Pursuant to the “Opinions Regarding Implementing the Provisional Regulations of the PRC on the Deed Tax in Shanghai”《關於本市貫徹《中華人民共和國契稅暫行條例》的若干意見》issued by the Shanghai Municipal Finance Bureau and approved by the Shanghai Municipal People’s Government on 31 December 1997, the applicable rate of the deed tax in Shanghai is 3%.

Pursuant to the “Notice of Deed Tax on the Adjustment of Personal Income Tax Preferential Policies Applicable to Real Estate Transactions” 《( 關於調整房地產交易環節契稅個人所得稅優惠政策的通知》) jointly issued by the Ministry of Finance, State Administration of Taxation and Ministry of Housing and Urban-Rural Development on 29 September 2010 and became effective on 1 October 2010, for the purchases of ordinary housing by individuals which is also the only housing for the family (including the buyer, his/her spouse and their minor children), a 50% deduction in the deed tax is applicable. For purchases of ordinary housing with area of 90 sq.m or below by individuals which is also the only housing of the family, the deed tax is levied at the reduced rate of 1%.

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SUMMARY OF PRC LAWS IN RELATION TO PROPERTY SECTOR

E. Urban land use tax

Pursuant to the “Provisional Regulations of the People’s Republic of China Governing Land Use Tax in Cities and Towns” enacted by the State Council on 27 September 1988 and enforced on 1 November 1988, the land use tax in respect of urban land is levied according to the area of relevant land. The annual tax shall be between RMB0.2 and RMB10 per sq.m. of urban land collected according to the tax rate determined by local tax authorities. According to the “Notice on Land Use Tax Exemption of Foreign Investment Enterprises and Institutions of Foreign Enterprises in China” enacted by the MOF on 2 November 1988 and the “Approval on Land Use Tax Exemption of Foreign Investment Enterprises” issued by the State Administration of Taxation on 27 March 1997, land use fee instead of land use tax shall be collected from a foreign investment enterprise. However, the Provisional Regulations of the People’s Republic of China Governing Land Use Tax in Cities and Towns was revised by the State Council on 31 December 2006. As of 1 January 2007, land use tax shall be collected from foreign investment enterprise. The annual tax shall be between RMB0.6 and RMB30.0 per sq.m. of urban land.

F. Buildings tax

Under the “Interim Regulations of the People’s Republic of China on Buildings Tax” enacted by the State Council on 15 September 1986 and enforced on 1 October 1986, buildings tax shall be 1.2% if it is calculated on the basis of the residual value of a building, and 12% if it is calculated on the basis of the rental.

G. Stamp duty

Under the “Interim regulations of the People’s Republic of China on Stamp Duty” enacted by the State Council on 6 August 1988 and enforced on 1 October 1988, for property rights transfer instruments, including those in respect of property ownership transfer, the rate of stamp duty shall be 0.05% of the amount stated therein; for permits and certificates relating to rights, including property title certificates and land use rights certificates, stamp duty shall be levied on an item basis of RMB5 per item.

H. Urban maintenance and construction tax

Under the “Interim Regulations of the People’s Republic of China on Urban Maintenance and Construction Tax” enacted by the State Council on 8 February 1985, any taxpayer, whether an entity or individual, of product tax, value-added tax or business tax shall be required to pay urban maintenance and construction tax. The tax rate shall be 7% for a taxpayer whose domicile is in an urban area, 5% for a taxpayer whose domicile is in a county and a town, and 1% for a taxpayer whose domicile is not in any urban area or county or town. Under the “Circular Concerning Temporary Exemption from Urban and Construction Maintenance Tax and Education Surcharge For Enterprises with Foreign Investment and Foreign Enterprises” and the “Approval on Exemption of Urban Maintenance and Construction Tax and Education Surcharge in Foreign-Invested Freightage Enterprises” issued by State Administration of Taxation on 25 February 1994 and on 14 September 2005 respectively, whether foreign investment enterprises are subject to urban maintenance and

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SUMMARY OF PRC LAWS IN RELATION TO PROPERTY SECTOR

construction tax shall be determined in accordance with notices issued by the State Council; and such tax is not applicable to enterprises with foreign investment for the time being, until further explicit stipulations are issued by the State Council.

Pursuant to the “Circular of the State Council on Unifying the System of Urban Maintenance and Construction Tax and Education Surcharge Paid by Domestic and Foreign-Invested Enterprises and Individuals” (Guo Fa [2010] No.35)《國務院關於統一內外資企業和個人城市維護建設稅和教育費附加制度的通知》 (國發[2010]35號) issued by the State Council on 18 October 2010, the “Provisional Regulations of the PRC on Urban Maintenance and Construction Tax”《中華人民共和國城市維護建設稅暫行條例》and the “Tentative Rules on Levy of Education Surcharge”《徵收教育費附加的暫行規定》issued by the State Council in 1985 and 1986, respectively, became applicable to foreign-invested enterprises, foreign enterprises and foreign individuals from 1 December 2010 onwards. The regulations, rules and policies issued by the State Council and its administrative divisions regulating fiscal and taxation matters since 1985 and 1986 that are related to urban maintenance and construction tax and education surcharge are also applicable to foreign-invested enterprises, foreign enterprises and foreign individuals. Therefore, foreign-invested enterprises, foreign enterprises and foreign individuals ceased to enjoy the preferential policy on urban maintenance and construction tax and education surcharge since then.

The “Notice on Relevant Issues for Urban Maintenance and Construction Tax and Education Surcharge Imposed on Foreign-invested Enterprises”《關於對外資企業徵收城市維護建設稅和教育費附加有關問題的通知》issued by the Ministry of Finance and the State Administration of Taxation on 4 November 2010 further specify that foreign-invested enterprises shall pay urban maintenance and construction tax and education surcharge in relation to the valued-added tax, sales tax and business tax (the “Three Taxes”) payable by them since 1 December 2010 (the day inclusive), whereas no urban maintenance and construction tax and education surcharge is charged on the foreign-invested enterprises for the Three Taxes payable prior to 1 December 2010.

I. Education surcharge

Under the “Interim Provisions on Imposition of Education Surcharge” enacted by the State Council on 28 April 1986 and revised on 7 June 1990 and 20 August 2005, a taxpayer, whether an entity or individual, of product tax, value-added tax or business tax shall pay an education surcharge, unless such obliged taxpayer is instead required to pay a rural area education surcharge as provided by the “Notice of the State Council on Raising Funds for Schools in Rural Areas”. Under the supplementary Notice Concerning Imposition of Education Surcharge” issued by the State Council on 12 October 1994, the “Circular Concerning Temporary Exemption from Urban Maintenance and Construction Tax and Education Surcharge For Enterprises with Foreign Investment and Foreign Enterprises” and the “Reply on Exemption of Urban Maintenance and Construction Tax and Education Surcharge in Foreign-Invested Freightage Enterprises” issued by State Administration of Taxation on 25 February 1994 and on 14 September 2005 respectively, whether foreign investment enterprises are subject to the education surcharge shall be determined in accordance with notices issued by the State Council; and such tax is not applicable to enterprises with foreign investment for the time being, until further explicit stipulations are issued by the State Council.

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SUMMARY OF PRC LAWS IN RELATION TO PROPERTY SECTOR

The “Notice on Relevant Issues for Urban Maintenance and Construction Tax and Education Surcharge Imposed on Foreign-invested Enterprises《” 關於對外資企業徵收城市維護建設稅和教育費附加有關問題的通知》issued by the Ministry of Finance and the State Administration of Taxation on 4 November 2010 further specify that foreign-invested enterprises shall pay urban maintenance and construction tax and education surcharge in relation to the valued-added tax, sales tax and business tax (the “Three Taxes”) payable by them since 1 December 2010 (the day inclusive), whereas no urban maintenance and construction tax and education surcharge is charged on the foreign-invested enterprises for the Three Taxes payable prior to 1 December 2010.

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GENERAL INFORMATION

APPENDIX VIII

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

(i) Directors’ and chief executives’ interests and short positions in securities of the Company and its associated corporations

As at the Latest Practicable Date, interests and short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) of the Directors and chief executives of the Company which have been 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 were taken or deemed to have under such provisions of the SFO) or have been entered in the register maintained by the Company pursuant to section 352 of the SFO, or otherwise have been notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies (the “Model Code”) are as follows:

Long Positions in Underlying Shares of the Company

				Approximate
	Number of			% of issued
	underlying		Nature of	share capital of
Name of Directors	shares held	Capacity	interest	the Company
He Haibin (Note 1)	400,000	Beneficial owner	Personal	0.08%

Notes:

Mr. He Haibin is taken to be interested as a grantee of options to subscribe for 400,000 Shares under the share option scheme of the Company.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executives of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept by the Company under section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

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GENERAL INFORMATION

APPENDIX VIII

(ii) Persons who have interests or short positions which are discloseable under Divisions 2 and 3 of Part XV of the SFO

As at the Latest Practicable Date, as far as is known to the Directors, the following persons (not being a Director or chief executive of the Company) had interests or short positions in the shares or underlying shares which fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO as recorded in the register required to be kept by the Company pursuant to section 336 of the SFO:

Long Position in the Shares

			Approximate %
			of issued share
Name of Substantial		No. of	capital of the
Shareholders	Capacity/Nature	Shares held	Company
Pacific Climax (Note 1)	Beneficial owner	294,894,000	57.85%
OCT (HK) (Note 2)	Interest of a controlled	294,894,000	57.85%
	corporation
OCT Ltd (Note 3)	Interest of a controlled	294,894,000	57.85%
	corporation
Overseas Chinese Town	Interest of a controlled	294,894,000	57.85%
Enterprises Company	corporation
(“OCT Group”) (Note 4)
Others
UBS AG	Beneficial owner	636,000	0.12%
	Interest of a controlled	50,162,000	9.84%
	corporation (Note 5)

Notes:

(1) Ms. Xie Mei, being an executive Director, is also a director of Pacific Climax.
(2) OCT (HK) is the beneficial owner of all the issued share capital in Pacific Climax. Therefore, OCT (HK) is deemed, or taken to be interested in these Shares for the purpose of the SFO. Ms. Wang Xiaowen and Ms. Xie Mei, both being executive Directors, are also directors of OCT (HK).
(3) OCT Ltd. is the beneficial owner of all the issued share capital in OCT (HK). Therefore, OCT Ltd. is deemed, or taken to be interested in all the Shares which are beneficially owned by Pacific Climax for the purpose of the SFO. OCT Ltd. is a company incorporated in the PRC, the shares of which are listed on the Shenzhen Stock Exchange. OCT Ltd. is a subsidiary of OCT Group.
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APPENDIX VIII

(4) OCT Group is the beneficial owner of 56.62% of the issued shares in OCT Ltd., which is the beneficial owner of all the issued share capital in OCT (HK) and in turn, the beneficial owner of all the issued share capital in Pacific Climax. Therefore, OCT Group is deemed, or taken to be interested in all the Shares which are beneficially owned by Pacific Climax for the purpose of the SFO.
(5) The interest of UBS AG is derived from its interests in 636,000 Shares and the interests in 37,708,000 Shares, 8,920,000 Shares and 3,534,000 Shares (total: 50,162,000 Shares) held by UBS Fund Services (Luxembourg) SA, UBS Global Asset Management (Hong Kong) Ltd. and UBS Global Asset Management (Singapore) Ltd., respectively, which are directly wholly-owned by UBS AG. Therefore, UBS AG is deemed, or taken to be interested in the total of 50,798,000 Shares for the purpose of the SFO.

Save as disclosed above, no other interests required to be recorded in the register kept under section 336 of the SFO have been notified to the Company as at the Latest Practicable Date.

3. COMPETING INTERESTS

As at the Latest Practicable Date, so far as the Directors are aware, none of the Directors or their respective associates has any interest in any business which competes or is likely to compete with the businesses of the Enlarged Group.

4. SERVICE CONTRACT

As at the Latest Practicable Date, none of the Directors has a service contract with any member of the Enlarged Group which was not determinable by the Enlarged Group within one year without payment of compensation (other than statutory compensation).

5. INTEREST IN THE ENLARGED GROUP’S ASSETS OR CONTRACTS OR ARRANGEMENTS SIGNIFICANT TO THE ENLARGED GROUP

As at the Latest Practicable Date, none of the Directors or the experts as named in the paragraph headed “Experts and Consents” in this appendix had any interest, direct or indirect, in any assets which have been, since 31 December 2011 (being the date to which the latest published audited accounts of the Company were made up), acquired or disposed of by or leased to any member of the Enlarged Group, or are proposed to be acquired or disposed of by or leased to any member of the Enlarged Group.

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement entered into by any member of the Enlarged Group subsisting at the date of this circular and which is significant in relation to the businesses of the Enlarged Group.

6. LITIGATION

As at the Latest Practicable Date, so far as the Directors are aware, the Enlarged Group was not engaged in any litigation or claims of material importance, and so far as the Directors are aware, no litigation or claims of material importance is pending or threatened against the Enlarged Group.

VIII-3 -

GENERAL INFORMATION

APPENDIX VIII

7. MATERIAL CONTRACTS

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

(a) the capital investment agreement (the “Capital Investment Agreement”) entered into between 深圳華僑城房地產有限公司 (Overseas Chinese Town Real Estate Company Limited) (“OCT Properties”) and Great Tec Investment Limited (an indirect wholly-owned subsidiary of the Company) (“Great Tec”) dated 5 January 2012, pursuant to which Great Tec agreed to make a capital injection of RMB2,232,000,000 into 華僑城（上海）置地有限公司 (Overseas Chinese Town (Shanghai) Land Company Limited) (“OCT Shanghai Land”), whereby the equity interest of OCT Shanghai Land would be owned as to 50.5% by Great Tec and as to 49.5% by OCT Properties with the registered capital of RMB1,530,000,000 be held by Great Tec and the surplus of RMB702,000,000 be booked as capital reserve of OCT Shanghai Land;
(b) the loan agreement entered into between Overseas Chinese Town (HK) Company Limited (as lender) and the Company (as borrower) dated 5 January 2012, pursuant to which the Company agreed to lend from Overseas Chinese Town (HK) Company Limited a sum of RMB900,000,000 for a term of 5 years from the date the loan agreement becomes unconditional at an interest rate of 3.62% per annum payable every six months from the date of drawdown;
(c) the Agreement;
(d) the Supplemental Agreement; and
(e) the Undertaking.

8. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Enlarged Group since 31 December 2011 (being the date to which the latest published audited accounts of the Company were made up).

9. EXPERTS AND CONSENTS

(a) The following is the qualification of the experts which have given their opinions which

Name	Qualification
RSM Nelson Wheeler	Certified Public Accountants
Savills Valuation and Professional	Independent Property Valuer
Services Limited

VIII-4 -

GENERAL INFORMATION

APPENDIX VIII

V&T

PRC legal advisers

(b) As at the Latest Practicable Date, none of RSM Nelson Wheeler, Savills Valuation and Professional Services Limited or V&T had any shareholding in any member of the Enlarged Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Enlarged Group.
(c) Each of RSM Nelson Wheeler, Savills Valuation and Professional Services Limited and V&T has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter, opinion, report and references to its name in the form and context in which they are included.
(d) The letter, opinion and report given by each of RSM Nelson Wheeler, Savills Valuation and Professional Services Limited and V&T is given as of the date of this circular for incorporation in this circular.

10. GENERAL

(a) The company secretary and the qualified accountant of the Company is Mr. Fong Fuk Wai, who is a fellow member of the Hong Kong Institute of Certified Public Accountants.
(b) The Company’s registered office is at Clifton House, 75 Fort Street, PO Box 1350 GT, George Town, Grand Cayman, Cayman Islands. The head office and principal place of business is at Suites 3203-3204, Tower 6, The Gateway, Harbour City, Canton Road, Tsimshatsui, Kowloon, Hong Kong.
(c) The Hong Kong branch share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong.
(d) The English text of this circular shall prevail over the Chinese text.

11. DOCUMENTS AVAILABLE FOR INSPECTION

A copy of the following documents are available for inspection during normal business hours except on Saturday, Sunday and public holidays at the office of the Company in Hong Kong at Suites 3203-3204, Tower 6, The Gateway, Harbour City, Canton Road, Tsimshatsui, Kowloon, Hong Kong from the date of this circular up to and including 10 December 2012:

(a) the memorandum and articles of association of the Company;
(b) the letter from the Board, the text of which is set out on pages 4 to 25 of this circular;
(c) the annual reports of the Company for the three years ended 31 December 2011;
VIII-5 -

GENERAL INFORMATION

APPENDIX VIII

(d) the accountants’ report of Tianjin Tianxiao, the text of which is set out in Appendix I of this circular;
(e) the report on the unaudited pro forma financial information of the Enlarged Group, the text of which is set out in Appendix V of this circular;
(f) the property valuation report, the text of which is set out in Appendix VI of this circular;
(g) the material contracts referred to in the paragraph headed “Material Contracts” in this appendix;
(h) the written consents referred to in the paragraph headed “Experts and Consents” in this appendix;
(i) the legal opinion issued by V&T dated 2 November 2012 in relation to the Acquisition;
(j) the circular of the Company dated 8 March 2012 in relation to, among other things, renewal of general mandates to issue new shares and repurchase shares and notice of annual general meeting;
(k) the circular of the Company dated 23 March 2012 in relation to, among other things, very substantial acquisition and connected transaction concerning the Capital Investment Agreement; and
(l) this circular.
VIII-6 -

NOTICE OF EGM

==> picture [213 x 52] intentionally omitted <==

Overseas Chinese Town (Asia) Holdings Limited 華僑城（亞洲）控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 03366)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “Meeting”) of Overseas Chinese Town (Asia) Holdings Limited (the “Company”) will be held at 11 a.m. on Tuesday, 11 December 2012 at Ming Room II, 4/F, Sheraton Hong Kong Hotel, 20 Nathan Road, Kowloon, Hong Kong considering and, if thought fit, passing, with or without amendments, the following resolution as ordinary resolution of the Company:

ORDINARY RESOLUTION

“THAT

(a) the agreement entered into between Excel Founder Limited (“Excel Founder”) and 天津津濱發展股份有限公司 (Tianjin Jinbin Development Company Limited) (“Tianjin Jinbin”) dated 2 November 2012 (the “Agreement”) in relation to the acquisition of the entire equity interests in 天津天瀟投資發展有限公司 (Tianjin Tianxiao Investment Development Company Limited) and all rights attached thereto at a consideration of RMB384,995,400 (copy of which has been produced to the Meeting marked “A” and initialed by the Chairman of the Meeting for the purpose of identification) (as amended by the supplemental agreement dated 2 November 2012 entered into between Excel Founder and Tianjin Jinbin (the “Supplemental Agreement”), copy of which has been produced to the Meeting marked “B” and initialed by the chairman of Meeting for identification purpose), the undertaking given by the Company to Tianjin Jinbin dated 2 November 2012 (the “Undertaking”), pursuant to which the Company guarantees the due performance of Excel Founder’s obligation under the Agreement and the Supplemental Agreement and undertakes that the Company will assume joint liability with Excel Founder in respect of the aforesaid performance of obligations (copy of which has been produced to the Meeting marked ‘C’ and initialed by the Chairman of the Meeting for the purpose of identification) and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified; and
EGM-1 -

NOTICE OF EGM

(b) each of the directors of the Company be and is hereby authorised to do all such further acts and things, negotiate, approve, agree, sign, initial, ratify and/or execute such further documents and take all steps which may be in their opinion necessary, desirable or expedient to implement and/ or give effect to the terms of the Agreement, the Supplemental Agreement and the Undertaking, and the transactions contemplated thereunder.”

By Order of the Board Overseas Chinese Town (Asia) Holdings Limited Wang Xiaowen Chairman

Hong Kong, 26 November 2012

Notes:

Any member of the Company entitled to attend and vote at the Meeting shall be entitled to appoint another person as his proxy to attend and vote instead of him. A member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at the Meeting provided that if more than one proxy is so appointed the appointment shall specify the number of Shares in respect of which each such proxy is so appointed. A proxy need not be a member of the Company. On a poll, votes may be given either personally or by proxy.
The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under its common seal or under the hand of an officer, attorney or other person duly authorised to sign the same.
To be valid, the instrument appointing a proxy and (if required by the board of directors) the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power or authority, shall be delivered to the Company’s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 48 hours before the time appointed for holding the Meeting or any adjournment thereof.
No instrument appointing a proxy shall be valid after expiration of 12 months from the date named in it as the date of its execution, except at an adjourned meeting or on a poll demanded at the Meeting or any adjournment thereof in cases where the Meeting was originally held within 12 months from such date.
Where there are joint holders of any shares, any one of such joint holders may vote at the Meeting, either in person or by proxy, in respect of such share as if he/she was solely entitled thereto, but if more than one of such joint holders be present at the Meeting, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose, seniority shall be determined by the order in which the names stand in the Register of Members of the Company in respect of the joint holding.
Completion and delivery of an instrument appointing a proxy shall not preclude a member from attending and voting in person at the Meeting if the member so wish and in such event, the instrument appointing a proxy should be deemed to be revoked.
As at the date of this notice of EGM, the board of directors of Company comprises seven directors, namely: Ms. Wang Xiaowen, Ms. Xie Mei and Mr. Yang Jie as executive directors; Mr. He Haibin as non-executive director; Ms. Wong Wai Ling, Mr. Xu Jian and Mr. Lam Sing Kwong Simon as independent non-executive directors.
EGM-2 -

AI assistant

RemeGen Co., Ltd. — Proxy Solicitation & Information Statement 2012

51206_rns_2012-11-23_a368ae36-c807-4747-9ad4-e74c21833ed2.pdf

Overseas Chinese Town (Asia) Holdings Limited 華僑城（亞洲）控股有限公司

VERY SUBSTANTIAL ACQUISITION

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

Overseas Chinese Town (Asia) Holdings Limited 華僑城（亞洲）控股有限公司

VERY SUBSTANTIAL ACQUISITION

INTRODUCTION

THE AGREEMENT

Date:

Parties:

Assets to be acquired

Conditions Precedent to the Agreement

LETTER FROM THE BOARD

Consideration

Basis of determination of the consideration

Management of Tianjin Tianxiao during the transitional period before Completion

LETTER FROM THE BOARD

Land use right certificate

THE SUPPLEMENTAL AGREEMENT

Adjustment of the Land

Compensation in relation to Adjustment

Delivery of the Land

LETTER FROM THE BOARD

Repayment of debt

LETTER FROM THE BOARD

Total Commitment of the Group and Source of Funding

UNDERTAKING BY THE COMPANY

INFORMATION OF TIANJIN TIANXIAO AND ITS DEVELOPMENT PLANS

LETTER FROM THE BOARD

REASONS FOR AND BENEFIT OF ENTERING INTO THE ACQUISITION

FINANCIAL EFFECT OF THE ACQUISITION

FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

LETTER FROM THE BOARD

INDUSTRY OVERVIEW

The Overview of the PRC Property Market

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Major property markets

Tianjin

Overview

LETTER FROM THE BOARD

Tianjin Property Market

LETTER FROM THE BOARD

RISK FACTORS

Tianjin Tianxiao is subject to legal and business risks if the Land fails to obtain the land use right certificate

Risk of a delay or failure in transferring the Land

Risk of a failure of Adjustment

Delay in completion of the Tianjin Tianxiao Project

LETTER FROM THE BOARD

Volatility in the price of construction materials

Fluctuation of interest rates

Natural disaster or bad weather that may disrupt operations and damage the properties in Tianjin Tianxiao Project

The Enlarged Group may have insufficient financing to fund its property development

LETTER FROM THE BOARD

Upon completion of the Acquisition, the Enlarged Group will depend heavily on the performance of the property market in the PRC, particularly in Tianjin

Risks Relating to the Enlarged Group

The Enlarged Group relies on the performance of external contractors and suppliers to deliver its projects on time and up to its specified quality standards.

LETTER FROM THE BOARD

Risks Relating to Property Development in the PRC

The Enlarged Group’s business is subject to extensive governmental regulation.

LETTER FROM THE BOARD

LETTER FROM THE BOARD

The Enlarged Group faces intense competition from other real estate developers.

LETTER FROM THE BOARD

The outbreak of any severe communicable disease in the PRC, if uncontrolled, may materially and adversely affect the Enlarged Group’s results of operations.

Government control in foreign currency conversion may materially and adversely affect the financial condition, results of operations and ability to meet foreign exchange requirements of the Enlarged Group.

LETTER FROM THE BOARD

Risk relating to this circular

LETTER FROM THE BOARD

IMPLICATION UNDER THE LISTING RULES

EGM

RECOMMENDATION

ADDITIONAL INFORMATION

APPENDIX I

FINANCIAL INFORMATION

RemeGen Co., Ltd. Proxy Solicitation & Information Statement 2012