RemeGen Co., Ltd. — Proxy Solicitation & Information Statement 2020

May 28, 2020

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 your licensed securities dealer, registered institution in securities, 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 hand this circular together with the accompanying proxy form at once to the purchaser or transferee or to the bank, licensed securities dealer or registered institution in securities 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 AND

CONTINUING CONNECTED TRANSACTIONS: RENEWAL OF FINANCE LEASE AND FACTORING FRAMEWORK AGREEMENTS

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

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Capitalised terms used in this cover page shall bear the same meanings as those defined in the section headed “Definitions” in this circular. A notice convening the EGM to be held at 59/F, Bank of China Tower, 1 Garden Road, Hong Kong on Friday, 19 June 2020 at 11:00 a.m. is set out on pages EGM-1 to EGM-3 of this circular. A form of proxy for use at the EGM is enclosed with this circular. Whether or not you plan to attend the EGM, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the Company’s branch share registrar, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding of the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

PRECAUTIONARY MEASURES FOR THE EGM

Please refer to page ii of this circular for the measures to be implemented at the EGM by the Company against the epidemic to protect the attendees from the risk of infection of the novel coronavirus (“ COVID-19 ”), including: (i) compulsory body temperature check; (ii) compulsory wearing of surgical face mask; (iii) limiting attendance of the EGM in person to 100 Shareholders, with not more than 50 persons to be accommodated in each meeting room or partitioned area; and (iv) no distribution of corporate gifts and no serving of refreshments. Any person who does not comply with the precautionary measures may be denied entry into the EGM venue. For the health and safety of the Shareholders, the Company strongly advises Shareholders that you may appoint the Chairman of the meeting as your proxy to vote on the relevant resolutions at the EGM as an alternative to attending the EGM in person.

29 May 2020

CONTENTS

	Page
Precautionary Measure for the EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Letter from Rainbow Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
Appendix I – Financial Information of the Group . . . . . . . . . . . . . . . . . . .	I-1
Appendix II – General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
Notice of the EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	EGM-1

– i –

PRECAUTIONARY MEASURES FOR THE EGM

In view of the ongoing COVID-19 epidemic and recent requirements for prevention and control of its spread (as per guidelines issued by the Hong Kong government at https://www.chp.gov.hk/tc/features/102742.html), the Company will implement necessary preventive measures at the forthcoming EGM to protect attending Shareholders, proxy and other attendees from the risk of infection, including:

• (i) Compulsory body temperature check will be conducted on every Shareholder, proxy and other attendees at the entrance of the EGM venue and a health registration form must be filled out. Any person with a body temperature of over 37.2 degrees Celsius will be denied entry into the EGM venue or be required to leave the EGM venue.

• (ii) Attendees are required to prepare his/her own surgical face masks and wear the same inside the EGM venue at all times, and to maintain a safe distance between seats. Therefore, the number of seats at the EGM venue will be subject to restrictions and if necessary, the Company may restrict the number of people attending the EGM to avoid overcrowding at the venue.

• (iii) Attendees may be asked about matters such as whether (a) he/she has travelled outside of Hong Kong within the 14-day period immediately before the EGM; and (b) he/she is currently subject to compulsory quarantine prescribed by the Hong Kong Government. Anyone who responds to any of these questions in the affirmative may be denied entry into the EGM venue or be required to leave the EGM venue.

• (iv) No corporate gifts will be distributed and no refreshments will be served.

• (v) The number of management of the Company attending the EGM in person will also be subject to restrictions. The Directors who will not attend the meeting in person will participate by video conference.

Pursuant to Section 5(3) of the Prevention and Control of Disease (Prohibition on Group Gathering) (Amendment) (No. 2) Regulation 2020 made on 5 May 2020 (the “ Regulation ”), a group gathering of more than 50 persons during a shareholders’ meeting of a listed company is required to be separated in different rooms or partitioned areas, each accommodating not more than 50 persons.

To comply with the Regulation and in light of the situation at the EGM venue, the Company will limit attendance of the EGM in person to 100 Shareholders, with not more than 50 persons to be accommodated in each meeting room or partitioned area.

To the extent permitted under law, the Company reserves the right to deny entry into the EGM venue or require any person to leave the EGM venue in order to ensure the safety of the attendees at the EGM.

– ii –

PRECAUTIONARY MEASURES FOR THE EGM

In the interest of all attendees’ health and safety, the Company wishes to advise all Shareholders that physical attendance in person at the EGM is not necessary for the purpose of exercising voting rights. By using proxy forms with voting instructions duly completed, Shareholders may appoint the Chairman of the EGM as their proxy to vote on the relevant resolutions at the EGM as an alternative to attending the EGM in person.

If any Shareholder chooses not to attend the EGM in person but has any question about any resolution or about the Company, or has any matter for communication with the Board, he/she is welcome to send such question or matter to our email at ir-asia@chinaoct.com.

Subject to the development of COVID-19, the Company may implement further changes and precautionary measures and may issue further announcement on such measures as appropriate.

– iii –

DEFINITIONS

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

• “2019 Finance Lease and 2019 OCT Group Agreement and 2019 OCT Ltd. Factoring Framework Agreement Agreements”

• “2019 OCT Group Agreement”

• the finance lease and factoring framework agreement entered into between OCT Financial Leasing and OCT Group on 7 May 2019

• “2019 OCT Ltd. Agreement”

• the finance lease and factoring framework agreement entered into between OCT Financial Leasing and OCT Ltd. on 7 May 2019

• “Annual Cap(s)”

• the maximum transaction amounts in aggregate for all the Financial Services contemplated under all Implementation Agreements which are to be executed within the Effective Period

• “associate(s)”

• has the meaning ascribed to it under 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), an exempted company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the main board of the Stock Exchange

• “connected person(s)”

• has the meaning ascribed to it under the Listing Rules

• “continuing connected transaction(s)”

• has the meaning ascribed to it under the Listing Rules

• “controlling shareholder(s)”

• has the meaning ascribed to it under the Listing Rules

• “Director(s)”

• the director(s) of the Company

• “Effective Period”

one year from the date of approval of the Finance Lease and Factoring Framework Agreements by Independent Shareholders at the EGM

– 1 –

DEFINITIONS

“EGM”

• “Finance Lease and Factoring Framework Agreements”

• “Financial Services”

• “Group”

• “HK$”

• “Hong Kong”

• “Implementation Agreement(s)”

• “Independent Board Committee”

• “Independent Financial Adviser” or “Rainbow Capital”

the extraordinary general meeting of the Company to be convened for approving, among other things, the Finance Lease and Factoring Framework Agreements and the transactions contemplated thereunder

OCT Group Agreement and OCT Ltd. Agreement

• OCT Financial Leasing’s facilitation of finance leases and/or factoring services to Lessees pursuant to Implementation Agreements

• the Company and its subsidiaries

Hong Kong dollar(s), the lawful currency of Hong Kong

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

• separate implementation agreement for each finance lease and/or factoring arrangement to be entered into between relevant member of Lessees

the independent committee of the Board, comprising the independent non-executive Directors, Ms. Wong Wai Ling, Mr. Lam Sing Kwong Simon and Mr. Chu Wing Yu established for the purpose of making recommendations to the Independent Shareholders in respect of the Finance Lease and Factoring Framework Agreements, the transactions contemplated thereunder and the Annual Caps

Rainbow Capital (HK) Limited, a corporation licensed to carry out and Type 6 (advising on corporate finance) regulated activities under the SFO, being the independent financial adviser appointed by the Company to advise the Independent Board Committee and the Independent Shareholders in respect of the Finance Lease and Factoring Framework Agreements, the transactions contemplated thereunder (including the duration of the Implementation Agreements) and the Annual Caps

– 2 –

DEFINITIONS

• “Independent Shareholders” the Shareholders, other than Pacific Climax and its associates, who are not required to abstain from voting on resolutions approving the Finance Lease and Factoring Framework Agreements, the transactions contemplated thereunder and the Annual Caps

• “Latest Practicable Date” 22 May 2020, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular

• “Leased Asset(s)” the equipment to be leased pursuant to Implementation Agreements

• “Lessee(s)” OCT Group and/or OCT Ltd. and/or their subsidiaries

• “Listing Rules”

• the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

• “LPR”

• the loan prime rate as published under the authorisation of the PBOC by the National Interbank Funding Center (全國銀行間同業拆借中心) in the PRC from time to time

• “OCT (HK)”

• Overseas Chinese Town (HK) Company Limited, a company incorporated in Hong Kong with limited liability and wholly owned by OCT Ltd.

• “OCT Financial Leasing” OCT Financial Leasing Co., Ltd. (華僑城融資租賃有限公 司), a company established in the PRC and is a direct wholly-owned subsidiary of the Company

• “OCT Group” Overseas Chinese Town Company Limited (華僑城集團 有限公司), a PRC state-owned company established in the PRC, and the holding company of OCT Ltd.

• “OCT Group Agreement”

• the finance lease and factoring framework agreement entered into between OCT Financial Leasing and OCT Group on 18 May 2020

• “OCT Ltd.”

• Shenzhen Overseas Chinese Town Company Limited (深 圳華僑城股份有限公司), a company established in the PRC, the shares of which are listed on the Shenzhen Stock Exchange

• “OCT Ltd. Agreement”

• the finance lease and factoring framework agreement entered into between OCT Financial Leasing and OCT Ltd. on 18 May 2020

– 3 –

DEFINITIONS

“Pacific Climax”	Pacific Climax Limited, a company incorporated in the	Pacific Climax Limited, a company incorporated in the
	British Virgin Islands with limited	liability, is a
	controlling shareholder of the Company	and is wholly-
	owned by OCT (HK)
“PBOC”	the People’s Bank of China
“PRC”	the People’s Republic of China, for the	purpose of this
	circular, excluding Hong Kong, the	Macau Special
	Administrative Region of the People’s Republic of China
	and Taiwan
“RMB”	the lawful currency of the PRC
“SFO”	Securities and Futures Ordinance (Chapter 571) of the
	Laws of Hong Kong
“Shareholder(s)”	the shareholder(s) of the Company
“Share(s)”	the share(s) of the Company
“subsidiary(ies)”	has the meaning ascribed to it under the	Listing Rules
“substantial shareholder(s)”	has the meaning ascribed to it under the	Listing Rules
“USD”	United States Dollar, the lawful currency of the United
	States of America
“%”	percent

In this circular, amounts in HK$ and US$ are converted into RMB on the basis of: HK$1.00 to RMB0.83591 and US$1.00 to RMB6.5342 as at 31 December 2017, HK$1.00 to RMB0.8762 and US$1.00 to RMB6.8632 as at 31 December 2018, HK$1.00 to RMB0.89578 and US$1.00 to RMB6.9762 as at 31 December 2019. The exchange rates have been used, where applicable, for the purposes of illustration only and do not constitute a representation that any amounts in HK$, US$ or RMB were or may have been exchanged at this or any other rates or at all.

In this circular, the English names of the PRC entities or enterprises are translations of their Chinese names. In the event of any inconsistency, the Chinese names shall prevail.

– 4 –

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: Mr. He Haibin (Chairman) Ms. Xie Mei (Chief Executive Officer) Mr. Lin Kaihua

Non-executive Director:

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

Mr. Zhang Jing

Independent Non-executive Directors: Ms. Wong Wai Ling Mr. Lam Sing Kwong Simon Mr. Chu Wing Yiu

Head office and principal place of business in Hong Kong: 59/F., Bank of China Tower 1 Garden Road Hong Kong

29 May 2020

To the Shareholders

Dear Sir or Madam,

VERY SUBSTANTIAL ACQUISITION AND

CONTINUING CONNECTED TRANSACTIONS: RENEWAL OF FINANCE LEASE AND FACTORING FRAMEWORK AGREEMENTS

INTRODUCTION

Reference is made to the announcement of the Company dated 18 May 2020 in relation to, among others, the renewal of the Finance Lease and Factoring Framework Agreements in respect of the provision of finance lease and factoring services to OCT Group and OCT Ltd., respectively.

– 5 –

LETTER FROM THE BOARD

The purpose of this circular is, among other things, (i) to provide you with further details of the Finance Lease and Factoring Framework Agreements and the transactions contemplated thereunder; (ii) a letter from the Independent Board Committee containing its advice and recommendation to the Independent Shareholders in respect of the Finance Lease and Factoring Framework Agreements and the transactions contemplated thereunder and the Annual Caps; and (iii) a letter from Rainbow Capital to the Independent Board Committee containing its advice in respect of the Finance Lease and Factoring Framework Agreements, the transactions contemplated thereunder and the Annual Caps.

RENEWAL OF FINANCE LEASE AND FACTORING FRAMEWORK AGREEMENTS

References are made to the announcements of the Company dated 7 May 2019 and 19 June 2019, and the circular of the Company dated 24 May 2019 in relation to the 2019 Finance Lease and Factoring Framework Agreements, pursuant to which OCT Financial Leasing agreed to provide finance lease and factoring services to OCT Group and OCT Ltd. for a term of one year from the date of the approval of the 2019 Finance Lease and Factoring Framework Agreements (i.e. 19 June 2019).

As the 2019 Finance Lease and Factoring Framework Agreements will expire on 18 June 2020, on 18 May 2020, OCT Financial Leasing, a direct wholly-owned subsidiary of the Company, entered into (i) the OCT Group Agreement with OCT Group and (ii) the OCT Ltd. Agreement with OCT Ltd., pursuant to which OCT Financial Leasing agreed to provide finance lease and factoring services to OCT Group and OCT Ltd., respectively. Each of the Finance Lease and Factoring Framework Agreements shall be effective for one year from the date of approval of the Finance Lease and Factoring Framework Agreements by the Independent Shareholders at the EGM.

(1) OCT Group Agreement

Date:

18 May 2020

Parties:

• (i) OCT Financial Leasing

• (ii) OCT Group (including its direct and indirect subsidiaries save and except OCT Ltd. and its subsidiaries)

– 6 –

LETTER FROM THE BOARD

(2) OCT Ltd. Agreement

Date:

18 May 2020

Parties:

• (i) OCT Financial Leasing

• (ii) OCT Ltd. (including its direct and indirect subsidiaries)

The principal terms of the Finance Lease and Factoring Framework Agreements are set out below:

Duration:

Each of the Finance Lease and Factoring Framework Agreements shall be effective for one year upon the Independent Shareholders’ approval of the respective Finance Lease and Factoring Framework Agreements at the EGM.

The effectiveness of the Finance Lease and Factoring Framework Agreements are conditional upon the Independent Shareholders’ approval of the respective Finance Lease and Factoring Framework Agreements. If OCT Financial Leasing could no longer perform, or shall delay the performance of, the obligations under the Finance Lease and Factoring Framework Agreements due to requirements of the Stock Exchange or any applicable laws and regulations (including but not limited to the Companies Ordinance of Hong Kong and the Listing Rules), the parties agreed to amend the Finance Lease and Factoring Framework Agreements, or alter or cancel the relevant transactions according to the relevant requirements. Lessees agreed not to claim any liabilities against OCT Financial Leasing and the Company.

Separate Contracts

With respect to each finance lease and/or factoring arrangement, OCT Financial Leasing and the relevant Lessee(s) will enter into a separate Implementation Agreement and the transactions contemplated thereunder shall be conducted on normal commercial terms or better at the time of entering into of the relevant Implementation Agreement. If there is any conflict between the terms of the Implementation Agreement and that of the Finance Lease and Factoring Framework Agreements, the terms of the Finance Lease and Factoring Framework Agreements shall prevail.

– 7 –

LETTER FROM THE BOARD

Contract Period

The contract period of the Implementation Agreements with respect to finance lease service are expected to range from three to five years, depending on the type of Leased Assets involved, while the contract period of the Implementation Agreements with respect to factoring service is expected to be less than three years, depending on the settlement schedule of the relevant accounts. In any event, the Implementation Agreements may have contract period longer than the one-year contract period (i.e. the Effective Period) of the Finance Lease and Factoring Framework Agreements, Implementation Agreements duly executed shall remain to have full force and effect for their respective contract periods even if the Finance Lease and Factoring Framework Agreements are expired or terminated and are not renewed. For the avoidance of doubt, the Finance Lease and Factoring Framework Agreements will not be renewed simply for the purpose of covering the entire period of Financial Services.

It has to be stressed that although the contract periods of the Implementation Agreements are likely to be longer than the Effective Period of the Finance Lease and Factoring Framework Agreements, the Annual Caps to be approved by Independent Shareholders will act as a limit to the aggregated consideration transaction amounts contemplated under all Implementation Agreements that can only be signed within the Effective Period of the Finance Lease and Factoring Framework Agreements.

Please see the paragraph below headed “ANNUAL CAPS AND BASIS OF DETERMINATION” for what the Annual Caps entail and the basis of determination.

Interests and Fees

The interest rate and relevant fees to be agreed in an Implementation Agreement for the Financial Services shall be on normal commercial terms or better and the interest rate determined thereby must not be lower than the benchmark lending rates published by PBOC at the time of entering into of the relevant Implementation Agreement. In particular, the effective interest rate of the relevant Implementation Agreement (the “ Effective Interest Rate ”) shall not be lower than (i) the secured lending rate for the borrowings granted to Lessee(s) by other general financial institutions; or (ii) if OCT Financial Leasing is unable to reasonably obtain the information required under (i) for reference, the capital costs incurred by OCT Financial Leasing at the time of entering into of the relevant Implementation Agreement, which may be adjusted according to the adjustment of the benchmark lending rates published or quoted by PBOC for the same period.

When deciding the mechanism for determining the Effective Interest Rate as mentioned in the paragraph above, the Board and OCT Financial Leasing take into account the following, if applicable, factors to ensure the Effective Interest Rate so determined is fair and reasonable and on normal commercial terms: (i) the benchmark lending rates published by PBOC; (ii) the capital cost of the Company, which shall be the source of fund of OCT Financial Leasing; (iii) in the case of finance lease, the interest spreads disclosed by other finance lease companies listed on the Stock Exchange within one year of the date of the respective Implementation

– 8 –

LETTER FROM THE BOARD

Agreement(s); (iv) in the case of factoring service, the financial position of the debtor and the settlement schedule; and (v) the commercial interest rate of a sizable loan comparable to a contemplated finance lease and/or factoring arrangement.

The Board emphasises that as at the Latest Practicable Date, (i) the LPR ranged from 3.85% to 4.65% per annum as quoted on the website of PBOC on 20 April 2020; (ii) the Group’s bank loans interest rates ranged from one month HIBOR + 0.7%, to 4.99% per annum; (iii) the interest spread enjoyed by a number of finance lease companies or groups listed on the Stock Exchange was approximately 2% for the financial year 2019; (iv) the Group had access to adequate loan capital from independent third parties and/or its direct/indirect controlling shareholders to support the finance lease and factoring services by lending the loan capital obtained to OCT Financial Leasing as shareholder loans; and (v) the Group was financially sound to provide corporate guarantee should OCT Financial Leasing take loans from independent third parties and/or its direct/indirect controlling shareholders.

Preliminary studies on and discussions with various Lessees reveal that their bank loans generally carry interest rates ranging from approximately 4% to 6% per annum. The Group estimated that the interest rate of finance lease together with the handling fee and guarantee deposit is approximately 7.5% per annum, being the internal rate of return (IRR) of OCT Financial Leasing calculated based on the contemplated net cash inflows, which consist of the periodic rental/interest income and handling fees given the respective lease and a total initial investment costs. Such rate is above the LPR and carries an interest spread more than 2%.

For an Implementation Agreement with respect to finance lease, an Effective Interest Rate contemplated thereunder will be regarded as fair and reasonable largely if such rate is higher than the benchmark lending rates published by PBOC and if such rate is at least equal to or greater than the sum of the capital cost of the Company and an interest spread of approximately 2% to 3%. As to an Implementation Agreement with respect to factoring service, whether an Effective Interest Rate is fair and reasonable depends on the financial position and settlement schedule of the factorised accounts and can only be determined on a case by case basis by the management of OCT Financial Leasing.

Guarantees

Pursuant to the Finance Lease and Factoring Framework Agreements, each of OCT Group and OCT Ltd. agreed to provide guarantees to OCT Financial Leasing in respect of the contractual obligations under all the Implementation Agreements to be entered into between the respective Lessee and OCT Financial Leasing, including but not limited to all payments and/or compensation obligations. Furthermore, OCT Financial Leasing shall have the right to require Lessees to provide additional guarantees or collaterals for the finance lease and/or factoring arrangement based on the actual circumstances at the time when Lessees apply for a finance lease and/or a factoring. Only if an Implementation Agreement carries the abovementioned arrangements would it be regarded as fair and reasonable by OCT Financial Leasing.

– 9 –

LETTER FROM THE BOARD

Finance Lease

Lease methods

Pursuant to the Finance Lease and Factoring Framework Agreements, OCT Financial Leasing will provide finance lease services to Lessees in relation to the Leased Assets by way of, including but not limited to, direct leasing and sale and lease back arrangement.

Under the direct leasing arrangement, OCT Financial Leasing will purchase the Leased Assets from the relevant supplier, and then OCT Financial Leasing will lease such Leased Assets to Lessees for an agreed term and will receive the rental fees and handling fees on a periodic basis.

Under sale and lease back arrangement, OCT Financial Leasing will purchase the Leased Assets from Lessees, and then OCT Financial Leasing will lease such Leased Assets back to Lessees for an agreed term and will receive the rental fees and handling fees on a periodic basis.

Leased Assets

The Leased Assets to be leased under the Finance Lease and Factoring Framework Agreements will be the specified equipment relating to the construction and/or operation of the tourist attractions either owned by or to be purchased by Lessees at its request, which include:

• (i) amusement facilities such as ferris wheel, roller coaster and ropeway; and

• (ii) other movable equipment (such as scenic transportation vehicle, intelligent operation systems and other manufacturing equipment).

Under both direct leasing and sale and lease back arrangement, the ownership of the Leased Assets will be vested in OCT Financial Leasing throughout the lease period.

As long as the type of proposed Leased Asset falls under the category set out above, OCT Financial Leasing would have the discretion to decide whether the proposed Leased Asset is acceptable. When considering whether the proposed Leased Asset is acceptable, OCT Financial Leasing would consider the proposed terms of the finance lease as a whole. The key procedures and mechanisms in making such decision are set out in the paragraph headed “INTERNAL CONTROL MEASURES” below.

– 10 –

LETTER FROM THE BOARD

Factoring services

Factoring methods

Pursuant to the Finance Lease and Factoring Framework Agreements, OCT Financial Leasing will provide factoring services to Lessees by way of direct factoring and reverse factoring arrangements.

Factoring assets

The receivables to be factorised are those arisen from the ordinary and usual course of business or the purchase or sale of the assets of the Lessees.

Under direct factoring arrangement, the factorised receivables to be settled by the debtor of Lessees will be assigned to OCT Financial Leasing. Under reverse factoring arrangement, the factorised receivables to be settled by Lessees will be assigned to OCT Financial Leasing.

When considering whether the proposed factoring accounts are acceptable, OCT Financial Leasing would consider the proposed terms of the factoring arrangement and the credit rating of the debtors and creditors involved as a whole. The key procedures and mechanisms in making such decision are set out in the paragraph headed “INTERNAL CONTROL MEASURES” below.

HISTORICAL TRANSACTION AMOUNTS

The table below shows the historical figures and existing annual cap(s) under the 2019 Finance Lease and Factoring Framework Agreements:

2019 OCT Group Agreement Principal Interest and handling fee 2019 OCT Ltd. Agreement Principal Interest and handling fee Total	Annual cap(s) for the period from 19 June 2019 to 18 June 2020 (RMB’000) 1,000,000 890,000 110,000 2,500,000 2,225,000 275,000 3,500,000	Actual transaction amount for the period from 19 June 2019 to 31 March 2020 (unaudited) (RMB’000) 58,650 50,000 8,650 234,610 200,000 34,610
		293,260

– 11 –

LETTER FROM THE BOARD

• Note: The split between the principal amount and the interest and handling fee is only the best estimate of the Group as at 22 May 2019 and is subject to the then finance lease and factoring terms agreed with OCT Group and OCT Ltd, but in any event will not exceed RMB1,000 million and RMB2,500 million (the annual caps amount) for each of the company respectively.

ANNUAL CAPS AND BASIS OF DETERMINATION

The table below shows the Annual Cap(s) for the Effective Period under the Finance Lease and Factoring Framework Agreements:

OCT Group Agreement Principal Interest and handling fee OCT Ltd. Agreement Principal Interest and handling fee Total	Annual Cap(s) (RMB’000) 1,000,000 890,000 110,000 1,000,000 890,000 110,000
	2,000,000

• Note: The split between the principal amount and the interest and handling fee is only the best estimate of the Group as at the Latest Practicable Date.

The funds shall only be applied for the actual needs for production and operation of Lessee and shall not be applied for any illegal purpose.

The Annual Caps include but not limited to the aggregated principal amounts granted to be utilised pursuant to the Implementation Agreements entered into during the Effective Period, the interest, management fees, and handling fees thereunder, the exercise price of the purchase option of the Lessees by the end of leasing period and the consideration for the factoring of the receivables, as well as the related interests and fees.

For the avoidance of doubt, the drawdown or utilisation period for each Implementation Agreement will not be limited by the Effective Period, provided that OCT Financial Leasing shall have the right to approve each drawdown in terms of its use and fund flow and the drawdown and transaction contemplated thereunder will not cause the aggregated transaction amounts under all Implementation Agreements to exceed the Annual Caps.

OCT Financial Leasing has just commenced the finance lease and factoring businesses with OCT Group and OCT Ltd. last year. When determining the annual caps for the 2019 Finance Lease and Factoring Framework Agreements, OCT Group and OCT Ltd. made reference to the rough estimation of their demand for finance lease and factoring services, which was based on the internal calculation done by OCT Group and OCT Ltd.. Due to the

– 12 –

LETTER FROM THE BOARD

market conditions last year and the actual business development of OCT Group and OCT Ltd., adjustment was made to the development plan of the finance lease and factoring projects and as a result, the actual transaction amount under the 2019 Finance Lease and Factoring Framework Agreement for the period from 19 June 2019 to 31 March 2020 amounted to approximately RMB290 million. As at the Latest Practicable Date, the outstanding principal amount granted to OCT Group and OCT Ltd. under the 2019 Finance Lease and Factoring Framework Agreements amounted to approximately RMB45 million and RMB190 million, respectively. Considering: (i) the amounts and fees included in the Annual Caps as described above; (ii) as at the Latest Practicable Date, the amount of the planned finance lease and factoring projects of OCT Group and OCT Ltd. will exceed RMB1,000 million and hence the business amount of OCT Group and OCT Ltd. is expected to be higher than that of last year; and (iii) the funds required by OCT Group and OCT Ltd. for potential finance lease and factoring project development in the future, the Company estimated that the Annual Caps for the Effective Period under the Finance Lease and Factoring Agreements will be RMB2,000 million in total.

REASONS FOR AND BENEFITS OF ENTERING INTO THE FINANCE LEASE AND FACTORING FRAMEWORK AGREEMENT

The Company is an investment holding company. The Group is principally engaged in the comprehensive development business (including the development and operation of tourism theme park, developed and sold residential properties, construction contract, development and management of properties, and property investment), equity investment and fund business and finance lease business.

OCT Financial Leasing is a direct wholly-owned subsidiary of the Company established in the PRC in October 2017 and is primarily engaged in the finance lease business in sectors such as theme parks and the manufacturing industry with a primary focus on customer base such as large to mid-scale state-owned enterprises and high quality listed companies.

OCT Financial Leasing is the first financial leasing company of OCT Group, which has recruited people working in sizable financial leasing companies who possess over 5 years of experience and are familiar with equipment purchasing. The provision of finance lease services by OCT Financial Leasing to Lessees is in line with the strategic development of OCT Financial Leasing.

OCT Group is a large cross-border and cross-industry corporation directly under the central government of the PRC. Its five major directions of development include cultural industry, tourism industry, new urbanisation, electronic industry and investment in related businesses. OCT Group belongs in the first batch of enterprises in the cultural industrial industry. It is also China’s top 30 cultural enterprises, China’s top 20 tourism enterprises and world’s top 4 theme park group. It has received an A grade from the State-owned Assets Supervision and Administrative Commission of the State Council of the PRC for 8 consecutive

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LETTER FROM THE BOARD

years. OCT Ltd. is primarily engaged in cultural tourism and real estate businesses. OCT Ltd. possesses a large amount of movable equipment such as amusement facilities of Happy Valley (歡樂谷). Each of OCT Group and OCT Ltd. has a well-established internal control system and good credibility.

By entering into the Finance Lease and Factoring Framework Agreements with OCT Group and OCT Ltd., it can provide a stable revenue and cashflow stream to the Group. Furthermore, OCT Financial Leasing as a new financial leasing company can also leverage the resources and experience of OCT Group and OCT Ltd. to expand its market share and build up its track records in financial leasing business for culture and tourism industries in a more efficient and faster way.

OCT Ltd. is a public company listed on the Shenzhen Stock Exchange, and is governed by the Rules Governing the Listing of Stocks on the Shenzhen Stock Exchange and the relevant rules and regulations in the PRC. OCT Group is the holding company of OCT Ltd. In order to evaluate the risks faced by the Group when conducting the finance lease, the Group has taken into account the financial performance and position of OCT Group and OCT Ltd., as well as the credit rating attached to OCT Group and OCT Ltd. detailed below:-

(i) Financial performance and position of OCT Group

The operating income of OCT Group has shown an increasing trend for the years ended 31 December 2017 and 2018. The operating income of OCT Group for the nine months ended 30 September 2019 was also higher than that for the same period ended 30 September 2018. The net profit attributable to the shareholders of OCT Group increased from approximately RMB5.87 billion in 2017 to approximately RMB8.44 billion in 2018. The net profit attributable to the shareholders of OCT Group for the nine months ended 30 September 2018 and 2019 were approximately RMB4.35 billion and RMB4.37 billion, respectively. The total equity of OCT Group increased from approximately RMB105.7 billion as at 31 December 2017 to approximately RMB139.3 billion as at 31 December 2018, and further increased to approximately RMB149.4 billion as at 30 September 2019. The current asset of OCT Group amounted to RMB378.2 billion as at 30 September 2019.

(ii) Financial performance and position of OCT Ltd.

The operating income of OCT Ltd. has shown an increasing trend in the past three years. Also, the net profit attributable to the shareholders of OCT Ltd. increased from approximately RMB8.64 billion in 2017 to approximately RMB10.59 billion in 2018, and further increased to approximately RMB12.34 billion in 2019. The total equity of OCT Ltd. increased from approximately RMB65.5 billion as at 31 December 2017 to approximately RMB77.2 billion as at 31 December 2018, and further increased to approximately RMB95 billion as at 31 December 2019. The current asset of OCT Ltd. amounted to RMB298.28 billion as at 31 December 2019.

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LETTER FROM THE BOARD

(iii) Credit ratings

According to the credit rating reports issued by United Credit Ratings Co., Ltd. (“ UCR ”) in 2019, both credit ratings of OCT Group and OCT Ltd. were AAA, the highest rating under UCR’s credit rating scale which implies strong debt repayment capacity, remote default risk and an ability to withstand certain negative economic environment scenarios.

Based on the above and assuming no material change to OCT Group’s and OCT Ltd.’s financial performance and position, the Company considers that OCT Group and OCT Ltd., which agreed to provide guarantees to OCT Financial Leasing in respect of obligations under all Financial Services including but not limited to all payments and/or compensation, has a substantial net asset base and liquidity to satisfy the relevant liability if required.

The Company forms the view that the risk exposure associated with the maximum outstanding principal under the Finance Lease and Factoring Framework Agreements is justified and acceptable to the Group as (i) throughout the year concerned, Lessees shall make rental/interest payment or repayment to the Group and the Group shall collect certain receivables under factoring arrangements; (ii) OCT Group and OCT Ltd. have agreed to provide guarantees to OCT Financial Leasing in respect of their respective subsidiaries’ (in the case of OCT Group, excluding OCT Ltd. and its subsidiaries) obligations under all the Implementation Agreements including but not limited to all payments and/or compensation; (iii) OCT Group and OCT Ltd. has a substantial net asset base and liquidity to satisfy the relevant liability of Lessees in its entirety if required; and (iv) Lessees shall be required to provide OCT Financial Leasing with security deposit in the amount ranging from 5% to 15% of the relevant principal amount, reducing the actual risk exposure as to the size of the outstanding principal in relation to finance lease.

The Directors (including the independent non-executive Directors whose recommendation is set out in the letter from the Independent Board Committee) consider that the terms under the Finance Lease and Factoring Framework Agreements are on normal commercial terms or better, and the transactions contemplated under the Finance Lease and Factoring Framework Agreements are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

INTERNAL CONTROL MEASURES

The Group has adopted the following risk management measures and policies in relation to its finance lease and factoring businesses to maintain the fairness of the terms and price of the transactions:

1. Assessment of the profile of Lessees

The procurement team shall carry out due diligence on Lessee concerned including its background, industry, market share, competitiveness, industry ranking, scale of operation, rate of return, credit rating, compliance records, loan repayment records and financial

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LETTER FROM THE BOARD

conditions, the purpose of use of the proceeds and source of funding for repayment before providing any Financial Service according to a set of guidelines adopted by OCT Financial Leasing. The team members shall have at least 3 years of experience in finance lease and factoring business and possess professional knowledge to assess the value and risk relating to the leased equipment and the accounts.

2. Review and approval of the Financial Services

Upon preliminary assessment made by the procurement team, the risk management and compliance department and finance department of the Group shall scrutinise each transaction in relation to Financial Services to identify whether there are any major risks.

A committee comprising three members including vice president and general manager of the Group will be formed to consider and approve Financial Services transactions. Subject to the approval of the committee, each of the Financial Services transaction shall be submitted to the president and chairman of OCT Financial Leasing for final approval.

For finance lease, to be considered as an acceptable Leased Asset, the asset must be legally tradable, has clear title and validly exist. For factoring arrangement, to be considered as an acceptable accounts to be factorised, the trades give rise to such accounts must be legal and genuine and the accounts have to be transferrable.

Before entering into any Implementation Agreement, the risk management and compliance department and finance department of the Group will review the price range in the industry, the net book value of the Leased Assets and the RMB lending rate published or quoted by the PBOC to ensure that each transaction is in line with the pricing policy. For further details, please refer to the paragraph headed “3. Principal and interest rate determination” below.

3. Principal and interest rate determination

In general, the principal amount to be adopted under individual finance lease agreements shall be, in the case of direct leasing, the purchase price of the relevant Leased Asset, or, in the case of sale and lease back arrangement, capped at the net book value of the Leased Asset.

For direct leasing, the purchase price of the Leased Assets will be determined by OCT Financial Leasing, Lessees and the supplier after arm’s length negotiation between the parties, which shall be within the regular price range in the industry.

For sale and lease back arrangement, the purchase price shall be reasonable and in compliance with applicable accounting principles, and shall not be more than the net book value of the Leased Asset.

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LETTER FROM THE BOARD

For factoring arrangement, factorised amounts, discounts and fees concerned will be determined by OCT Financial Leasing, Lessees and the debtor/creditor after arm’s length negotiation between the parties, which shall be in line with the industry price range.

The interest rate of the Financial Services under any individual Implementation Agreement shall be determined according to the following principles: (i) the interest rate shall not be lower than the benchmark RMB lending rate published by PBOC from time to time; and (ii) the interest rate shall not be less favourable than the sum of the Group’s finance costs in RMB and the relevant interest spread and such interest spread shall fall within the range of the interest difference offered by finance lease companies which are listed in Hong Kong.

4. Monitoring continuing connected transactions

The risk management and compliance department, finance department and relevant senior management of the Company are responsible for monitoring connected transactions of the Company, including the transactions under the Finance Lease and Factoring Framework Agreements.

The risk management and compliance department of the Company will review the actual amount utilised in respect of the Annual Cap every six months. If it is expected that the value of any Implementation Agreements, in aggregate, will exceed the Annual Cap, the Company will take steps in order to comply with the relevant requirement of the Listing Rules.

The risk management and compliance department of the Company will review its internal control procedures annually, and compile and submit the annual internal control report to the Board for review and approval.

The independent non-executive Directors will conduct an annual review of the implementation of the continuing connected transactions in respect of the individual Implementation Agreements.

Therefore, the Company is of the view that the Group has adequate mechanism, internal control procedures and external supervision measures to ensure the continuing connected transactions to be complied with and strictly in accordance with the terms of the Finance Lease and Factoring Framework Agreements and the Listing Rules.

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LETTER FROM THE BOARD

FINANCIAL EFFECT OF THE FINANCE LEASE TRANSACTIONS ON THE GROUP

Earnings

From the date on which the Implementation Agreement becomes effective, the Group would be entitled to recognise interest income and handling fee income from the Lessee(s), which would provide additional income contribution to the Group.

Net assets and gearing

Upon implementation of transactions contemplated under the Implementation Agreement, the Directors consider that there will be no significant immediate change to the Group’s net asset value given the assets will increase pursuant to the value of assets acquired under each finance lease while offset by the payment of proceeds to the Lessee(s). Since the Group will be financing the Finance Lease via banking facilities, upon implementation of transactions contemplated under the Implementation Agreements, the Group’s gearing will increase accordingly.

Liquidity

Given the Group intended to finance the Finance Lease via banking facilities, the payment of sales proceeds to the Lessee(s) by drawing down the Group’s banking facilities will have no significant impact towards the Group’s liquidity.

LISTING RULES IMPLICATION

The transactions contemplated under the Finance Lease and Factoring Framework Agreements will constitute transactions under Chapter 14 of the Listing Rules. As the highest applicable percentage ratio (as defined in Rule 14.07 of the Listing Rules) calculated in accordance with the Listing Rules in respect of the Finance Lease and Factoring Framework Agreements in aggregate exceeds 100%, the transactions contemplated thereunder constitute a very substantial acquisition of the Company subject to the relevant reporting, announcement and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

Pacific Climax is the controlling shareholder of the Company, which, as at the Latest Practicable Date, held approximately 70.94% of the total issued share capital of the Company, and is directly wholly owned by OCT (HK). As OCT Ltd. held 100% equity interest in OCT (HK) and OCT Group is the holding company of OCT Ltd., each of OCT Group, OCT Ltd. and their subsidiaries are connected persons of the Company pursuant to Chapter 14A of the Listing Rules. Accordingly, the Finance Lease and Factoring Framework Agreements also constitute continuing connected transactions of the Company. As the highest applicable ratio of the Annual Caps, in aggregate, on an annual basis is more than 5%, the transactions contemplated thereunder are subject to the relevant reporting, announcement, annual review, and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

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LETTER FROM THE BOARD

In addition, pursuant to Rule 14A.52 of the Listing Rules, as the term of the underlying individual Implementation Agreement in relation to finance lease to be entered into pursuant to the Finance Lease and Factoring Framework Agreements may exceed three years, the Company shall appoint an independent financial adviser to explain why the said individual Implementation Agreements in relation to finance lease require a longer period and to confirm that it is a normal business practice for agreements of this type to be of such duration. Rainbow Capital has been appointed as the Independent Financial Adviser to advise on this regard.

CONFIRMATION OF THE BOARD

None of the Directors has a material interest in the Finance Lease and Factoring Framework Agreements and the transactions contemplated thereunder, and hence no Director has abstained from voting on the Board resolution approving the Finance Lease and Factoring Framework Agreements and the transactions contemplated thereunder.

INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

The Independent Board Committee, comprising of all the independent non-executive Directors, including Ms. Wong Wai Ling, Mr. Lam Sing Kwong Simon and Mr. Chu Wing Yiu, has been established to advise the Independent Shareholders in relation to the Finance Lease and Factoring Framework Agreements, the transactions contemplated thereunder and the Annual Caps. Rainbow Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders on this regard.

EGM

At the EGM, resolutions will be proposed by the Company to seek the Independent Shareholders’ approval on the Finance Lease and Factoring Framework Agreements, the transactions contemplated thereunder and the Annual Caps. Pacific Climax and its associates, which in aggregate, held 530,894,000 Shares, being approximately 70.94% of the total issued share capital of the Company as at the Latest Practicable Date, will abstain from voting for the resolutions regarding the Finance Lease and Factoring Framework Agreements at the EGM. The proposed resolutions will be passed by way of ordinary resolutions and voted on by way of poll in accordance with the requirement of the Listing Rules.

RECOMMENDATION

The Board believes that the terms of the Finance Lease and Factoring Framework Agreements are fair and reasonable and the Finance Lease and Factoring Framework Agreements, the transactions contemplated thereunder and the Annual Caps are in the best interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Independent Shareholders to vote in favour of the resolutions in relation to the Finance Lease and Factoring Framework Agreements, the transactions contemplated thereunder and the Annual Caps to be proposed at the EGM.

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LETTER FROM THE BOARD

Your attention is drawn to the letters from the Independent Board Committee and Rainbow Capital which set out their recommendations in respect of the Finance Lease and Factoring Framework Agreements, the transactions contemplated thereunder and the Annual Caps and the principal factors considered by them in arriving at their recommendations.

ADDITIONAL INFORMATION

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

By order of the Board Overseas Chinese Town (Asia) Holdings Limited He Haibin Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

29 May 2020

==> picture [236 x 59] 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)

To the Independent Shareholders,

Dear Sir or Madam,

VERY SUBSTANTIAL ACQUISITION AND

CONTINUING CONNECTED TRANSACTIONS: RENEWAL OF FINANCE LEASE AND FACTORING FRAMEWORK AGREEMENTS

We refer to the circular dated 29 May 2020 (the “ Circular ”) issued by the Company of which this letter forms part. Terms defined in the Circular shall have the same meanings in this letter unless the context otherwise requires.

We have been appointed as members of the Independent Board Committee to consider the terms of the Finance Lease and Factoring Framework Agreements, the transactions contemplated thereunder and the Annual Caps and to advise you as to whether, in our opinion, the terms of the Finance Lease and Factoring Framework Agreements, the transactions contemplated thereunder and the Annual Caps are fair and reasonable so far as the Independent Shareholders are concerned. Rainbow Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee in respect of the terms of the Finance Lease and Factoring Framework Agreements, the transactions contemplated thereunder and the Annual Caps.

We also wish to draw your attention to (i) the letter from the Board; (ii) the letter from Rainbow Capital; and (iii) the additional information set out in the appendices to the Circular.

Having considered the terms of the Finance Lease and Factoring Framework Agreements, the transactions contemplated thereunder and the Annual Caps, and having taken into account the opinion of Rainbow Capital and, in particular, the factors, reasons and recommendations as set out in the letter from Rainbow Capital on pages 23 to 48 of the Circular, we consider that the terms of the Finance Lease and Factoring Framework Agreements, the transactions

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

contemplated thereunder and the Annual Caps are fair and reasonable so far as the Company and the Independent Shareholders are concerned, and the Finance Lease and Factoring Framework Agreements, the transactions contemplated thereunder and the Annual Caps are on normal commercial terms or better, in the Company’s ordinary and usual course of business and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the relevant resolutions which will be proposed at the EGM to approve the Finance Lease and Factoring Framework Agreements, the transactions contemplated thereunder and the Annual Caps.

Yours faithfully,

Wong Wai Lin

For and on behalf of the Independent Board Committee Lam Sing Kwong Simon

Chu Wing Yiu

Independent non-executive Directors

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LETTER FROM RAINBOW CAPITAL

The following is the full text of a letter of advice from Rainbow Capital, the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the transactions contemplated under the Finance Lease and Factoring Framework Agreements, which has been prepared for the purpose of inclusion in this circular.

Rainbow Capital (HK) Limited

29 May 2020

To the Independent Board Committee and the Independent Shareholders

Dear Sir or Madam,

VERY SUBSTANTIAL ACQUISITION AND CONTINUING CONNECTED TRANSACTIONS: RENEWAL OF FINANCE LEASE AND FACTORING FRAMEWORK AGREEMENTS

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the transactions (the “ Transaction(s) ”) contemplated under the Finance Lease and Factoring Framework Agreements (including the Annual Caps), details of which are set out in the “Letter from the Board” (the “ Letter from the Board ”) contained in the circular issued by the Company to the Shareholders dated 29 May 2020 (the “ Circular ”), of which this letter forms part. Unless the context otherwise requires, capitalised terms used in this letter shall have the same meanings as those defined in the Circular.

On 18 May 2020, OCT Financial Leasing, a direct wholly-owned subsidiary of the Company, entered into the OCT Group Agreement and the OCT Ltd. Agreement with OCT Group and OCT Ltd., pursuant to which OCT Financial Leasing agreed to provide finance lease and factoring services to OCT Group and OCT Ltd., respectively, for a term of one year.

As at the Latest Practicable Date, Pacific Climax is the controlling shareholder of the Company which held approximately 70.94% of the issued share capital of the Company. Given that OCT Ltd. and OCT Group (the holding company of OCT Ltd.) are holding companies of Pacific Climax, they are associates of Pacific Climax and therefore connected persons of the Company under Chapter 14A of the Listing Rules. As the highest applicable percentage ratio exceeds 100%, the Transactions constitute a very substantial acquisition and continuing connected transactions for the Company, and are subject to the reporting, announcement, annual review and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

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LETTER FROM RAINBOW CAPITAL

The Company will seek approval from the Independent Shareholders in respect of the Transactions and the Annual Caps by way of a poll at the EGM. In view of the interest above, Pacific Climax and its associates shall abstain from voting in respect of the ordinary resolutions approving the Transactions at the EGM.

The Independent Board Committee, comprising all the three independent non-executive Directors, namely Ms. Wong Wai Ling, Mr. Lam Sing Kwong Simon and Mr. Chu Wing Yiu, has been established to advise the Independent Shareholders on whether (i) the Transactions are entered into in the ordinary and usual course of business of the Group; and (ii) the terms of the Finance Lease and Factoring Framework Agreements and the Annual Caps are on normal commercial terms which are fair and reasonable and in the interests of the Company and the Shareholders as a whole, and advise the Independent Shareholders as to voting. We, Rainbow Capital, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

As at the Latest Practicable Date, we did not have any relationships or interests with the Group, Pacific Climax, OCT (HK), OCT Ltd. and OCT Group that could reasonably be regarded as relevant to our independence. In the last two years, there was no engagement between the Group and us. Apart from normal professional fees paid or payable to us in connection with this appointment as the Independent Financial Adviser, no arrangements exist whereby we had received any fees or benefits from the Group, Pacific Climax, OCT (HK), OCT Ltd. or OCT Group. Accordingly, we are qualified to give independent advice in respect of the Transactions.

BASIS OF OUR OPINION

In formulating our opinion and advice, we have relied on (i) the information and facts contained or referred to in the Circular; (ii) the information supplied by the Group; (iii) the opinions expressed by and the representations of the Directors and the management of the Group; and (iv) our review of the relevant public information. We have assumed that all the information provided and representations and opinions expressed to us or contained or referred to in the Circular were true, accurate and complete in all respects as at the date thereof and may be relied upon. We have also assumed that all statements contained and representations made or referred to in the Circular are true at the time they were made and continue to be true as at the Latest Practicable Date and all such statements of belief, opinions and intentions of the Directors and the management of the Group and those as set out or referred to in the Circular were reasonably made after due and careful enquiry. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors and the management of the Group. We have also sought and received confirmation from the Directors that no material facts have been withheld or omitted from the information provided and referred to in the Circular and that all information or representations provided to us by the Directors and the management of the Group are true, accurate, complete and not misleading in all respects at the time they were made and continued to be so until the date of the Circular.

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LETTER FROM RAINBOW CAPITAL

We consider that we have reviewed sufficient information currently available to reach an informed view and to justify our reliance on the accuracy of the information contained in the Circular so as to provide a reasonable basis for our recommendation. We have not, however, carried out any independent verification of the information provided, representations made or opinion expressed by the Directors and the management of the Group, nor have we conducted any form of in-depth investigation into the business, affairs, operations, financial position or future prospects of the Group, Pacific Climax, OCT (HK), OCT Ltd., OCT Group or their respective substantial shareholders, subsidiaries or associates.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our recommendation on the Transactions (including the Annual Caps), we have taken into account the principal factors and reasons set out below:

1. Background of the Group

Principal activities

Listed on the Stock Exchange in November 2005, the Group is principally engaged in (i) the development and operation of tourism theme park, developed and sold residential properties, construction services, development and management of properties, property investment and operation of hotel; (ii) the investment in new urbanisation industrial ecosphere, such as domestic and overseas direct investments, industrial fund, and education; and (iii) the finance lease business. For the year ended 31 December 2019, the comprehensive development business and the finance lease business of the Group accounted for approximately 99.0% and 1.0% of total revenue, respectively.

The Group commenced its sale and leaseback business of equipment through its wholly-owned subsidiary, OCT Financial Leasing, in 2018, marking the first step to tap into the finance lease business. OCT Financial Leasing is established in the PRC in October 2017 and is primarily engaged in the finance lease business in sectors such as theme parks and the manufacturing industry with a focus on customer base such as large to mid-scale stated-owned enterprises and high-quality listed companies.

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LETTER FROM RAINBOW CAPITAL

Financial information of the Group (including OCT Financial Leasing)

Set out below is the summarised financial information of the Group prepared in accordance with Hong Kong Financial Reporting Standards, as extracted from the annual report of the Company for the year ended 31 December 2019 (the “ 2019 Annual Results ”):

For the year ended 31 December:	2019	2018
	RMB’000	RMB’000
	(audited)	(audited)
Continuing operations
Revenue	2,071,903	1,584,694
– Comprehensive development business	2,050,553	1,571,505
– Finance lease business	21,350	13,189
Gross profit	765,729	558,588
Gross profit margin	37.0%	35.2%
Profit attributable to Shareholders	266,961	798,702
– Segment profit of the finance lease business	2,508	4,375
As at 31 December:	2019	2018
	RMB’000	RMB’000
	(audited)	(audited)
Non-current assets	16,891,077	13,512,534
– Finance lease receivables	382,253	230,870
Current assets	9,564,325	11,566,273
– Finance lease receivables	117,206	65,342
– Cash at bank and on hand	2,681,489	3,222,953
Net current assets	2,345,258	998,408
Equity attributable to Shareholders	9,346,075	9,466,242
Gearing ratio (Note)	34.3%	33.6%

Note: being total borrowings including bills payable and loans divided by total assets

For the year ended 31 December 2019 (“ FY2019 ”), revenue of the Group increased by approximately 30.7% to approximately RMB2.1 billion, primarily attributable to the increase in revenue generated from the comprehensive development business by approximately 30.5% as a result of the increase in saleable products of a large comprehensive development project located in Chengdu comprising premium residential community, urban entertainment and commercial complex and theme park (“ Chengdu OCT Project ”), as compared to the previous year (“ FY2018 ”). As for the finance lease business commenced in 2018, revenue increased from approximately RMB13.2 million in FY2018 to approximately RMB21.4 million in FY2019, representing an increase of approximately 61.9%. The Group has been developing its finance lease business in a steady and orderly manner.

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LETTER FROM RAINBOW CAPITAL

The increase in gross profit margin of the Group from approximately 35.2% in FY2018 to approximately 37.0% in FY2019 was mainly due to the increase in sales of products of Chengdu OCT Project with higher gross profit margins, which was partially offset by the decrease in the gross profit margin of the finance lease business primarily caused by the increase in interest expenses. In FY2019, the gross profit margins of the comprehensive development business and the finance lease business were approximately 36.3% and 58.5%, respectively.

As a result of the decrease in profits from associates and joint ventures, profit attributable to Shareholders decreased by approximately 66.6% to approximately RMB267.0 million in FY2019 as compared to FY2018. Segment profit of the finance lease business decreased by approximately 42.7% to approximately RMB2.5 million as compared to FY2018, mainly due to the increase in professional consultant fees incurred for the expansion of the finance lease business.

As at 31 December 2019, finance lease receivables and cash at bank and on hand amounted to approximately RMB499.5 million and RMB2.7 billion, representing approximately 1.9% and 10.1% of the Group’s total assets, respectively. As at the end of 2019, total asset size of the Group’s existing projects under the finance lease business amounted to approximately RMB520 million. The Group had net current assets and equity attributable to Shareholders of approximately RMB2.3 billion and RMB9.3 billion, respectively, with a gearing ratio of approximately 34.3%, as at 31 December 2019. The Group’s liquidity position remained stable.

Overall comment

Currently, the growth of the Group is primarily driven by the comprehensive development business. Since commencement of operation in 2018, the finance lease business of the Group has been developing steadily. Although the Group’s finance lease business is still in an early stage of development, it has a higher gross profit margin than that of the comprehensive development. With the support of the controlling shareholders of the Company through the Finance Lease and Factoring Framework Agreements, the finance lease business may represent a potential growth point for the Group in the future.

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LETTER FROM RAINBOW CAPITAL

2. Information on OCT Group and OCT Ltd.

OCT Group is the holding company of OCT Ltd. Both OCT Group and OCT Ltd. are holding companies of Pacific Climax which is a controlling shareholder of the Company. Set out below are the business and financial information of OCT Group and OCT Ltd.:

OCT Group

As a large cross-border and cross-industry corporation directly under the central government of the PRC, OCT Group is principally engaged in tourism and related cultural industrial management, electronics and product packaging manufacturing, supply chain trading, real estate and hotel development. It is one of the PRC’s top 30 cultural enterprises and top 20 tourism enterprises. It has received an A grade accreditation from the State-owned Assets Supervision and Administrative Commission of the State Council for eight consecutive years.

Set out below is a summary of the consolidated financial information of OCT Group prepared in accordance with the Accounting Standards for Business Enterprises (“ ASBEs ”), as extracted from the audit reports of OCT Group for FY2018 and FY2019:

	For the year ended 31 December	For the year ended 31 December	For the year ended 31 December
	2019	2018	2017
	RMB million	RMB million	RMB million
	(audited)	(audited)	(audited)
Operating income	130,982	110,349	80,108
– Tourism comprehensive income	37,577	25,338	22,647
Net profit attributable to shareholders	9,233	8,440	5,865
	As at 31 December
	2019	2018	2017
	RMB million	RMB million	RMB million
	(audited)	(audited)	(audited)
Net current assets	134,903	120,412	75,120
Equity attributable to shareholders	74,180	60,785	50,555
Total Equity	166,553	139,262	105,690

As shown in the table above, operating income of OCT Group increased by approximately 37.8% and 18.7% for FY2018 and FY2019, respectively, as compared to the previous year. Among this, operating income generated from the tourism related business increased by approximately 11.9% and 48.3% for the same periods, respectively.

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LETTER FROM RAINBOW CAPITAL

For FY2018 and FY2019, net profit attributable to shareholders of OCT Group increased by approximately 43.9% and 9.4%, respectively. As at 31 December 2019, OCT Group had net current assets and equity attributable to shareholders of approximately RMB134.9 billion and RMB74.2 billion, representing an increase of approximately 12.0% and 22.0% from those as at 31 December 2018, respectively.

OCT Ltd.

OCT Ltd. is a public company listed on the Shenzhen Stock Exchange (stock code: 000069). It is principally engaged in integrated tourism and real estate businesses. Over the years, it has been operating amusement parks under the themes of “Window of the World” and “Happy Valley” in Shenzhen and in various cities in the PRC, and possesses a large amount of movable equipment such as amusement facilities of its theme parks.

Set out below is a summary of the consolidated financial information of OCT Ltd., as extracted from the annual report of OCT Ltd. for FY2018 and FY2019 and the first quarterly report of OCT Ltd. for the three months ended 31 March 2020, as prepared in accordance with the ASBEs:

		For the three months	For the three months	**For **	**the **	year ended	year ended
		ended 31 March		31 December
		2020	2019	2019		2018	2017
		RMB	RMB	RMB		RMB	RMB
		million	million	million		million	million
		(unaudited)	(unaudited)	(audited)	(audited)		(audited)
Operating income		6,818	7,920	60,025		48,156	42,341
–	Tourism	(Note)	(Note)	30,263		19,038	18,530
	comprehensive
	income
Net	profit attributable	839	1,199	12,340		10,575	8,643
to	shareholders
			As at
		**31 **	March	**As at **	31 December
			2020	2019		2018	2017
			RMB	RMB		RMB	RMB
			million	million	million		million
		(unaudited)		(audited)	(audited)		(audited)
Equity attributable to			67,677	68,637	59,134		52,054
shareholders

Note: Such information is not available in the first quarterly report of OCT Ltd. for the three months ended 31 March 2020.

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LETTER FROM RAINBOW CAPITAL

As shown in the table above, for FY2018 and FY2019, operating income of OCT Ltd. increased by approximately 13.7% and 24.6%, respectively, as compared to the previous year. Among this, operating income generated from the tourism related business increased by approximately 2.7% and 59.0% for the same periods, respectively. For the three months ended 31 March 2020, operating income of OCT Ltd. decreased by approximately 13.9% as compared to the corresponding period in 2019.

For FY2018 and FY2019, net profit attributable to shareholders of OCT Ltd. increased by approximately 22.4% and 16.7%, respectively. For the three months ended 31 March 2020, net profit attributable to shareholders of OCT Ltd. decreased by approximately 30.0% as compared to the corresponding period in 2019.

As at 31 December 2019, OCT Ltd. had equity attributable to shareholders of approximately RMB68.6 billion, representing an increase of approximately 31.9% from those as at 31 December 2017, respectively. Equity attributable to shareholders of OCT Ltd. decreased slightly by approximately 1.4% to approximately RMB67.7 billion as at 31 March 2020 as compared to that as at 31 December 2019.

Credit ratings of OCT Group and OCT Ltd.

According to the credit rating reports issued by United Credit Ratings Co., Ltd. in 2019, both credit ratings of OCT Group and OCT Ltd. were “AAA”, the highest rating among the credit rating scale, indicating a high level of creditworthiness with the strongest debt repayment capacity.

Overall comment

For FY2018 and FY2019, operating income of OCT Group exhibited an upward trend, indicating an expansion in their business activities. Among this, tourism comprehensive income of OCT Group grew rapidly at a compound annual growth rate (“ CAGR ”) of approximately 28.8% during the same periods. On the other hand, for FY2018 and FY2019, operating income of OCT Ltd. also showed an increasing trend. In particular, tourism comprehensive income of OCT Ltd. grew significantly at a CAGR of approximately 27.8% during the same periods. All these resulted in an increase in demand for the Group’s finance lease service. Notwithstanding the above, operating income of OCT Ltd. decreased by over 10% in the first quarter of 2020, which was primarily affected by the outbreak of the novel coronavirus.

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LETTER FROM RAINBOW CAPITAL

Taking into account the credit ratings and the financial performance and position of OCT Group and OCT Ltd., we concur with the Directors that OCT Group and OCT Ltd., which agreed to provide guarantees to OCT Financial Leasing in respect of the obligations under all the Implementation Agreements pursuant to the Finance Lease and Factoring Framework Agreements, have a substantial net asset base and liquidity to satisfy the relevant liability if required.

3. Reasons and benefits for entering into the Finance Lease and Factoring Framework Agreements

As stated in the section headed “1. Background of the Group” above, while the Group’s finance lease business is still in an early stage of development, it may represent a growth potential for the Group in the future. As disclosed in the 2019 Annual Results, the Group will conduct finance lease business in sectors such as theme parks and the manufacturing industry and step up efforts to proactively expand its business in order to constantly increase operating income (the “ Strategic Direction ”).

As stated in the section headed “2. Information on OCT Group and OCT Ltd.” above, both OCT Group and OCT Ltd. are engaged in tourism related businesses. Particularly, OCT Group is one of the PRC’s top 20 tourism enterprises and OCT Ltd. processes a large amount of moveable equipment such as amusement facilities of its theme parks. As a result, both OCT Group and OCT Ltd. would have demand for the Lease Assets to be leased under the Finance Lease and Factoring Framework Agreements which consist of specified equipment relating to the construction and/or operation of tourist attractions.

In view of the background of OCT Group and OCT Ltd., we concur with the Directors that by entering into the Finance Lease and Factoring Framework Agreements, OCT Financial Leasing can leverage on the resources and experience of OCT Group and OCT Ltd. to expand its market share and build up its track records in the finance lease business for culture and tourism industries in a more efficient and faster way as well as providing a stable revenue and cashflow stream to the Group, which is in line with the Strategic Direction.

As the 2019 Finance Lease and Factoring Framework Agreements will expire on 18 June 2020, on 18 May 2020, the Group, through OCT Financial Leasing, entered into the Finance Lease and Factoring Framework Agreements with OCT Group and OCT Ltd., pursuant to which OCT Financial Leasing agreed to provide finance lease and factoring services to OCT Group and OCT Ltd.

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4. Principal terms of the Finance Lease and Factoring Framework Agreements

For details of the terms of the Finance Lease and Factoring Framework Agreements, please refer to the section headed “Renewal of Finance Lease and Factoring Framework Agreements” in the Letter from the Board. Set out below are the principal terms of the Finance Lease and Factoring Framework Agreements:

• Duration : One year upon the Independent Shareholders’ approval of the respective Finance Lease and Factoring Framework Agreements at the EGM.

• Separate contracts : With respect to each finance lease and/or factoring arrangement, OCT Financial Leasing and the relevant Lessee(s) shall enter into a separate Implementation Agreement.

• Contract period : The contract periods of the Implementation Agreements are expected to:

• (i) range from three to five years in respect of finance lease service, depending on the type of Leased Assets involved; and

• (ii) be less than three years in respect of factoring service, depending on the settlement schedule of the relevant accounts.

• Interests and fees : The effective interest rate to be agreed in an Implementation Agreement shall not be lower than:

• (i) the benchmark lending rates published by PBOC at the time of entering into the relevant Implementation Agreement;

• (ii) the secured lending rate for the borrowings granted to the relevant Lessee(s) by other general financial institutions; or

• (iii) if the information in (ii) above is not available, the capital costs incurred by OCT Financial Leasing at the time of entering into the relevant Implementation Agreement, which may be adjusted according to the adjustment of the benchmark lending rates published or quoted by PBOC for the same period.

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LETTER FROM RAINBOW CAPITAL

• Guarantees : (i) Each of OCT Group and OCT Ltd. agreed to provide guarantees to OCT Financial Leasing in respect of the contractual obligations under all the Implementation Agreements to be entered into between the respective Lessees and OCT Financial Leasing; and

• (ii) OCT Financial Leasing shall have the right to require the Lessees to provide additional guarantees or collaterals for the finance lease and/or factoring arrangement based on the actual circumstances at the time when the Lessees apply for a finance lease and/or a factoring.

5. Industry outlook

PRC finance lease industry

According to a research report dated 14 February 2020 issued by Dagong Global Credit Rating Co., Ltd., the only national credit rating agency that obtained the joint approval by the People’s Bank of China and the State Economic and Trade Commission, as at 30 September 2019, the total number of finance lease companies in the PRC was approximately 12,000, representing an increase of approximately 2.5% as compared to that as at 31 December 2018. Total registered capital of finance lease companies in the PRC amounted to approximately RMB3,330.9 billion as at 30 September 2019. The balance of finance lease contracts amounted to approximately RMB6,680 billion as at 30 September 2019, representing an increase of approximately 0.5% as compared to that as at 31 December 2018. Notwithstanding the slowdown of the domestic finance lease industry as evidenced by the decelerated number of finance lease companies and balance of finance lease contracts, taking into account (i) the market size of the PRC finance lease industry as mentioned above; and (ii) that the PRC finance lease industry is still in the initial stage of development with the market penetration rate much lower than those in developed countries, there is a potential for further growth.

PRC factoring industry

According to Factors Chain International (FCI) which was established in 1968 as an umbrella organisation for independent factoring companies around the world, in 2018, the global factoring industry volume increased by approximately 6.5% to approximately EURO2,767 billion, as compared to 2017. Among this, the factoring volume in the PRC amounted to approximately EURO411 billion, representing an increase of approximately 1.2%, as compared to 2017. FCI estimated that the global factoring industry volume in 2019 shall reach EURO2,923 billion, representing an increase of approximately 5.6%, as compared to 2018. The factoring volume in the PRC is expected decrease slightly by approximately 2% in 2019.

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LETTER FROM RAINBOW CAPITAL

Overall comment

Since early 2020, the PRC economy and the PRC finance lease and factory industry have been significantly affected by the outbreak of the novel coronavirus, in addition to uncertainties in the US-Mainland trade tensions and economic recession in major economies. As such, the growth in the PRC finance lease and factoring industry may be restricted in the short run. However, given (i) the market potential of the finance lease and factoring industry in the PRC as mentioned above; (ii) the PRC government’s dedication to recovering the economy through stimulus policies subsequent to the epidemic as well as promoting stable and orderly development of the finance lease industry through optimised regulations; and (iii) that the domestic consumption and the cultural and tourism industry would continue to benefit from the large population base and consumer market of the PRC, the balance of evidence suggests that the outlook for the finance lease and factoring industry in the PRC will be generally positive in the long run. After the epidemic is kept under control, the operating and investing activities of domestic corporations are expected to resume vitality which will in turn boost the demand for financial services.

6. Evaluation of the terms of the Finance Lease and Factoring Framework Agreements

Interests and fees

As disclosed in the Letter from the Board, the effective interest rate associated with the provision of the Financial Services under each Implementation Agreement shall be determined with reference to (i) the benchmark lending rates published by PBOC; (ii) the cost of capital of OCT Financial Leasing; (iii) in the case of finance lease, the interest spreads disclosed by other finance lease companies listed on the Stock Exchange within one year of the date of the respective Implementation Agreement(s). As advised by the management of the Group, an interest spread of approximately 2% to 3% will be typically regarded as fair and reasonable; (iv) in the case of factoring service, the financial position of the debtor and the settlement schedule; and (v) the commercial interest rate of a sizable loan comparable to a contemplated finance lease and/or factoring arrangement (collectively, the “ Pricing Principles ”). As advised by the management of the Group, given that the Group typically obtains loan capital from independent third parties and/or its controlling shareholders to support the Financial Services by lending such loan capital obtained to OCT Financial Leasing as shareholder loans, the Group’s borrowing costs can approximate the cost of capital of OCT Financial Leasing.

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LETTER FROM RAINBOW CAPITAL

In assessing the fairness and reasonableness of the Pricing Principles, we have, on a best effort basis, searched on the website of the Stock Exchange and identified an exhaustive list of (i) finance lease arrangements during the period from 1 January 2020 to the Latest Practicable Date; and (ii) factoring arrangements during the period from 1 June 2019 to the Latest Practicable Date, as disclosed in the circulars published by listed issuers on the Stock Exchange (the “ Comparable Finance Lease and Factoring Transactions ”). We consider that the aforesaid criteria, including the selection of timeframe, allow us to identify a sufficient number of samples for comparison purpose. Details of the Comparable Finance Lease and Factoring Transactions are set out below:

Name of listed issuer (stock code) Date of circular Pricing terms

(i) Finance lease arrangement

1. Huadian Power International 15 May 2020 Corporation Ltd. (1071) (“ Huadian ”)

2. The consideration for the finance lease services shall not be higher than:

3. (i) the finance costs for comparable finance lease services available from other financial leasing companies in the PRC; and

4. (ii) the finance costs for similar finance lease services offered to other member companies of the controlling shareholder of Huadian.

In determining the interest payable for the finance lease services, the prevailing interest costs in the market (including but not limited to finance cost of Huadian and its subsidiaries and borrowing cost of PRC banks offered to customers) shall be considered.

1. Concord New Energy Group 24 April 2020 Ltd. (182) (“ Concord ”)

The interests and fees are determined with reference to:

• (i) the LPR published by the National Interbank Funding Center or the benchmark interest rate published by PBOC, plus a premium;

• (ii) the fees quoted by various finance lease companies in the PRC; and

• (iii) the overall financing costs.

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LETTER FROM RAINBOW CAPITAL

Name of listed issuer (stock code)

Date of circular Pricing terms

The said premium is, in turn, determined with reference to, among other things:

• (i) the prevailing market interest rate;

• (ii) the aggregate amount of the handling fee and security deposit payable by Concord and its subsidiaries; and

• (iii) the interest rates charged by various finance lease companies in the PRC where interest rates per annum ranged from adding zero to 2% above the LPR or ranged from adding zero to 2.2% above the benchmark interest rate.

• China Development Bank 21 April 2020 Financial Leasing Co., Ltd. (1606)

• Lease interests and other expenses were determined upon arm’s length negotiation between the lessee and the lessor with reference to the prevailing market prices of the same category of finance lease products in the PRC.

• The interest rates for the two lease arrangements were approximately 3.83% and 1.66% per annum.

• China Investments Holdings 9 April 2020, The interest rates charged were 1.65% or 2.025% above Ltd. (132) (“ CIH ”) 25 February 2020 the LPR for one-year RMB loan as disclosed by the and 7 January National Interbank Funding Center, or an effective annual 2020 interest rate of 5.667%.

• Interest rate was determined after arm’s length negotiations between the parties with reference to, among other things:

• (i) the interest risk of financing;

• (ii) the return of the finance leases for CIH and its subsidiaries; and

• (iii) the credit risks associated with the finance leases and the targeted overall return of the finance leases of CIH and its subsidiaries (taking into account both the lease payments and the handling charges payable under the finance leases).

• China Boqi Environmental 19 March 2020 (Holding) Co., Ltd. (2377)

• The lease interests and fees are determined with reference to the benchmark interest rate published by PBOC plus a fixed premium of 0.47%, and those quoted by various finance lease companies in the PRC.

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LETTER FROM RAINBOW CAPITAL

Name of listed issuer (stock code) Date of circular Pricing terms

(ii) Factoring arrangement

1. Yue Da International Holdings 8 November 2019 The interests and fees of the factoring arrangement are Ltd. (629) and 25 June 2019 determined by the parties through arm’s length negotiations taking into account:

2. (i) the credit rating of the debtors and/or guarantors;

3. (ii) the credit period;

4. (iii) that the factoring loan is guaranteed or secured;

5. (iv) that the factoring is with recourse; and

6. (v) the interest rates and factoring administration fees of similar services offered to independent third parties.

7. China Datang Corporation 27 September Renewable Power Co., 2019 Ltd. (1798)

8. FY Financial (Shenzhen) Co., 9 September Ltd. (8452) 2019

9. The interests and fees of the factoring arrangement are determined with reference to those offered by other independent commercial factoring companies in the PRC.

10. The factoring interest was determined after arm’s length negotiations among the parties after taking into account:

11. (i) the prevailing interest rate for factoring transactions in the PRC factoring industry;

12. (ii) the average factoring interest rate charged to other factoring customers;

13. (iii) credit assessment of debtors;

14. (iv) the value of the underlying accounts receivable and the value of the relevant pledged assets;

15. (v) repayment capability of the relevant guarantors; and

16. (vi) cost of funding.

17. China Development Bank 13 June 2019 The interest rate applicable to the factoring arrangement Financial Leasing Co., Ltd. shall be no less than 10% below the rate on the factoring (1606) facilities payment date equivalent to the five-year benchmark interest rate of loans denominated in RMB as announced by the PBOC for the corresponding financing term.

Source: the website of the Stock Exchange

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LETTER FROM RAINBOW CAPITAL

As shown above, the effective interest rates associated with the finance lease arrangements in the Comparable Finance Lease and Factoring Transactions are generally determined with reference to, among other thing, (i) the prevailing interest rates or a benchmark rate such as the LPR published by the National Interbank Funding Center or the benchmark interest rate published by PBOC (items 1, 2, 3, 4 and 5); (ii) the cost of capital or finance cost of the lessors (e.g. items 1 and 2); (iii) those charged by other finance lease companies or banks in the PRC (e.g. items 1, 2, 3 and 5); and (iv) the disclosed interest spreads ranging from zero to 2.2% (items 2, 4 and 5). As regards the factoring arrangements in the Comparable Finance Lease and Factoring Transactions, the effective interest rates are generally determined with reference to, among other things, (i) the credit rating of debtors; and (ii) those of similar services offered to other customers or offered by other commercial factoring companies in the PRC. On this basis, we consider that the Pricing Principles are in line with those of the Comparable Finance Lease and Factoring Transactions.

During the period from 19 June 2019 (being the effective date of the 2019 Finance Lease and Factoring Framework Agreements) to 31 March 2020, OCT Financial Leasing only entered into two finance lease agreements with the subsidiaries of OCT Group in October and November 2019, and one finance lease agreement with a subsidiary of OCT Ltd in December 2019 (collectively, the “ Connected Agreements ”). OCT Financial Leasing did not enter into any finance lease or factoring agreement with independent third parties during the same period. As part of our due diligence, we have reviewed the Connected Agreements and noted that (i) the contract periods were all five years; and (ii) the effective interest rates, calculated based on the guarantee deposits, handling fees and expected rental repayment schedules disclosed in the Connected Agreements, were approximately 8.5% per annum, which were all higher than (a) the then China five-year LPR ranging from approximately 4.80% to 4.85% as extracted from Bloomberg; and (b) the average interest rates of the Group’s bank loans ranging from one-month HIBOR plus 0.7% to 4.99% for FY2019. According to Bloomberg, the average daily HSBC markets HIBOR was approximately 1.87% for FY2019. On this basis, we consider that the terms of the Connected Agreements were in compliance with the 2019 Finance Lease and Factoring Framework Agreements and the Pricing Principles.

Taking into account that (i) the effective interest rate to be charged in each Implementation Agreement shall be higher than the relevant benchmark lending rate published by PBOC and the cost of capital of OCT Financial Leasing with the interest spread determined with reference to the industry’s at the time of entering into the Implementation Agreement; (ii) internal control measures, details of which are set out in the section headed “8. Internal control measures” below, are in place with clear segregation of duties of execution, checking and authorising to ensure that the risk is properly managed and that the pricing terms are in compliance with the Finance Lease and Factoring Framework Agreements and the Pricing Principles; (iii) the Pricing Principles are in line with those of the Comparable Finance Lease and Factoring Transactions; and (iv) the terms of the Connected Agreements are on normal commercial terms based on our review as explained above, we consider that the pricing terms (comprising interests and fees) under the Finance Lease and Factoring Framework Agreements and each Implementation Agreement are fair and reasonable.

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LETTER FROM RAINBOW CAPITAL

Duration of the finance lease arrangement under the Implementation Agreements

In assessing the fairness and reasonableness of the duration of the finance lease arrangement under the Implementation Agreements, we have (i) reviewed the financial reports of OCT Group and OCT Ltd. and the Connected Agreements; and (ii) on a best effort basis, searched on the website of the Stock Exchange and identified an exhaustive list of finance lease agreements entered into by companies listed on the Stock Exchange (the “ Comparable Transactions ”) during the period from March to April 2020, being two months preceding the date of the Finance Lease and Factoring Framework Agreements, with principal amounts within HK$1 billion. We consider that the period under review provides a good indication of the recent terms of finance lease arrangement.

Details of the Comparable Transactions are set out below:

Announcement	Company name	Principal		Asset subject to
date	(stock code)	amount	Term	finance lease
		(RMB	(year)
		million)
29 April 2020	Petro-King Oilfield	11.716	2 or	Vertical boring and
	Services Ltd. (2178)		3.5	milling machining
				centre
29 April 2020	China Development	400	3	Vehicle equipment
	Bank Financial Leasing
	Co., Ltd. (1606)
29 April 2020	China Sunshine Paper	50	3	Equipment mainly
	Holdings Co., Ltd.			for boxes printing
	(2002)
29 April 2020	China Glass Holdings	70	3	Cold-end machinery
	Ltd. (3300)			and equipment for
				the float glass
				production line
26 April 2020	China Development	900	5	A reservoir asset in
	Bank Financial Leasing			Shandong Province
	Co., Ltd. (1606)
24 April 2020	Yunnan Water	170	5	Equipment and
	Investment Co., Ltd.			facilities of a
	(6839)			wastewater
				treatment plant

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LETTER FROM RAINBOW CAPITAL

Announcement	Company name	Principal		Asset subject to
date	(stock code)	amount	Term	finance lease
		(RMB	(year)
		million)
16 April 2020	Hong Kong Chaoshang	29	1	Furniture and
	Group Ltd. (2322)			equipment for hotel
				business
9 April 2020	Zhongguancun Science-	60	2 or 3	Computers
	Tech Leasing Co., Ltd.
	(1601)
8 April 2020	Hong Kong Chaoshang	11	3	Telecommunication
	Group Ltd. (2322)			equipment
2 April 2020	Zhongguancun Science-	60	4	Heating facilities of
	Tech Leasing Co., Ltd.			a residential area
	(1601)			located in Gansu
				Province
30 March 2020	Zhongguancun Science-	49	2	Smart robots
	Tech Leasing Co., Ltd.
	(1601)
26 March 2020	Tianjin Capital	20	3	Assets and
	Environmental			equipment
	Protection Group Co.,			(excluding the land)
	Ltd. (1065)			for the expansion of
				the phase I project
				in Shandong
24 March 2020	China Development	500	8	Road assets and
	Bank Financial Leasing			ancillary facilities of
	Co., Ltd. (1606)			certain section of
				expressway located
				in Guizhou Province
19 March 2020	China Investments	150	5	Graves situated at
	Holdings Ltd. (132)			Foshan City

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LETTER FROM RAINBOW CAPITAL

Announcement	Company name	Principal		Asset subject to
date	(stock code)	amount	Term	finance lease
		(RMB	(year)
		million)
18 March 2020	China Chengtong	40	5	Certain solar
	Development Group			photovoltaic
	Ltd. (217)			modules and
				equipment used in a
				photovoltaic power
				station located in
				Ningxia
16 March 2020	Beijing Enterprises	732	7	Photovoltaic power
	Clean Energy Group			generating
	Ltd. (1250)			equipment and
				ancillary facilities
5 March 2020	China Development	478	5	Fixed assets such as
	Bank Financial Leasing			a standardised plant
	Co., Ltd. (1606)			located in Sichuan
				Province
4 March 2020	Concord New Energy	884	10, 11	Certain machinery
	Group Ltd. (182)		or 14	and equipment for
				the operation of the
				wind power projects
				in Shanxi Province
				and Anhui Province
4 March 2020	China Chengtong	100	3	Certain water supply
	Development Group			and drainage
	Ltd. (217)			network facilities as
				well as the relevant
				ancillary,
				replacement and/or
				additional equipment

Source: the website of the Stock Exchange

Based on the financial reports of OCT Group and OCT Ltd., the useful lives of machinery and equipment of OCT Group and OCT Ltd. ranged from 5 years to 30 years. In addition, the contract periods of the Connected Agreements were all five years. Furthermore, as shown in the table above, during the period under review, the terms of finance leases ranged from 1 years to 14 years. On this basis, we consider that it is a normal business practice for finance lease agreements to have a duration of up to five years.

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7. Assessment of the Annual Caps

Historical transaction amounts

Set out below are the historical transaction amounts and existing annual caps under the 2019 Finance Lease and Factoring Framework Agreements:

2019 OCT Group Agreement 2019 OCT Ltd. Agreement Total	Annual caps from 19 June 2019 to 18 June 2020 (RMB’000) 1,000,000 2,500,000 3,500,000	Actual transaction amounts from 19 June 2019 to 31 March 2020 (RMB’000) 58,650 234,610
		293,260

As shown in the table above, the actual transaction amounts under the 2019 Finance Lease and Factoring Framework Agreements were approximately RMB293.3 million for the period from 19 June 2019 to 31 March 2020, representing only approximately 8.4% of the total annual cap of approximately RMB3.5 billion. As disclosed in the Letter from the Board, the low utilisation rate of the annual caps under the 2019 Finance Lease and Factoring Framework Agreements was primarily due to the market conditions and the actual business development of OCT Group and OCT Ltd.

The PRC economy grew 6.1% in 2019, the country’s slowest rate of economic growth since 1990. Such slowdown was significantly affected by the US-Mainland trade war, which brought down exports and weighted on investment in manufacturing through weakened sentiment and confidence. In the first quarter of 2020, the threat of the novel coronavirus infection has added significant downward pressures to the domestic economy. The PRC economy contracted 6.8% in the first quarter of 2020. The International Monetary Fund (IMF) projected that the PRC economy growth will decline to 1.2% in 2020 but rebound strongly to 9.2% in 2021 after the pandemic fades.

In our view, the finance lease and factoring industry was generally affected by the slowing PRC economy growth caused by the US-Mainland trade tensions and the novel coronavirus outbreak, which we consider temporary and will not persist for a long period of time.

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Annual Caps for the Finance Lease and Factoring Framework Agreements

The table below sets out the proposed Annual Caps for the Transactions during the Effective Period:

OCT Group Agreement – Principal – Interest and handling fee OCT Ltd. Agreement – Principal – Interest and handling fee Total	Annual Caps (RMB’000) (Note) 1,000,000 890,000 110,000 1,000,000 890,000 110,000 2,000,000

Note:

Although the contract periods of the Implementation Agreements can be longer than the Effective Period, the Annual Caps will act as a limit to the aggregated transaction amounts (including principals, interests and handling fees, the exercise price of the purchase option of the Lessees by the end of the leasing period and the consideration for the factoring of receivables) contemplated under all Implementation Agreements that can only be signed within the Effective Period.

As disclosed in the Letter from the Board, the Annual Caps are determined based on (i) the estimated amounts of principals, interests and fees included in the Annual Caps; (ii) the planned finance lease and factoring projects of OCT Group and OCT Ltd.; and (iii) the funds required by OCT Group and OCT Ltd. for any potential project development in the future.

Assessment of the Annual Caps

We have discussed with the management of the Group the bases and assumptions underlying the projection of the Annual Caps. As advised by the management of the Group, in arriving at the Annual Caps, they have considered (i) the funding requirements of OCT Group and OCT Ltd. in the coming one year for expanding their businesses; (ii) the Group’s financial resources available for providing the Financial Services to the Lessees; (iii) the estimated cost of funds of, and interest spread to be charged by, OCT Financial Leasing; (iv) the guarantee deposit required by OCT Financial Leasing; and (v) the handling fee to be charged by OCT Financial Leasing.

In assessing the reasonableness of the Annual Caps, we have considered (i) the development strategy of the Group as well as the background and resources of OCT Group and OCT Ltd.; (ii) the potential demand for the Financial Services from OCT Group and OCT Ltd.

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given their respective historical financial performance; (iii) the outlook of the PRC finance lease and factoring industry; (iv) the basis in determining the pricing terms (comprising interests and fees) of each Implementation Agreement and the results of our review of historical Implementation Agreements entered into among OCT Financial Leasing and subsidiaries of OCT Group or OCT Ltd.; and (v) the Group’s utilisation rate of the annual caps under the 2019 Finance Lease and Factoring Framework Agreements and the reasons thereof.

During the course of our consideration above, we noted the following:

• (i) the finance lease business represents a new growth engine for the Group given its relatively high margins. With the support from OCT Group and OCT Ltd., the finance lease business of the Group has been expanding steadily as evidenced by the growth in revenue generated from the finance lease business by over 60% in FY2019. Given the early stage of development of the Group’s finance lease business, it is desirable for the Group to leverage on the resources and experience of OCT Group and OCT Ltd. to expand its market share and build up more track records. The Annual Caps have been tailored for the Group’s future business growth and the setting of which is in line with the Group’s Strategic Direction to proactively expand its finance lease business to constantly increase operating income;

• (ii) operating income of OCT Group and OCT Ltd. generated from the tourism related business grew by over 45% and 55% for FY2019, respectively. These indicated potential demand for the Group’s Financial Services. The decrease in operating income of OCT Ltd. in the first quarter of 2020 was primarily affected by the novel coronavirus outbreak. We consider that the effect of the novel coronavirus infection on the demand from OCT Group and OCT Ltd. for the Group’s Financial Service is rather short term and should not be taken into account in determining the Annual Caps;

• (iii) the outlook for the finance lease and factoring industry is generally positive in the long term given (a) the market size of the PRC finance lease and factoring industry which is still in the initial stage of development with low market penetration rate; (b) the anticipated economic expansionary policies to be implemented by the PRC government to stimulate the economy subsequent to the epidemic; and (c) that the domestic consumption as well as the operating and investing activities of domestic corporations are expected to resume vitality after the novel coronavirus is kept under control. The Annual Caps, which are expected to commence in June 2020, are determined based on the assumption that the PRC economy will resume growth momentum in the second half of 2020 after the pandemic fades. IMF also predicted that the PRC economy growth will rebound strongly to 9.2% in 2021. We consider that the level on which the Annual Caps are fixed allows the Group to take advantage of the potential opportunities arising from the positive industry outlook as well as the expected market rebound;

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• (iv) with adequate internal control measures in place, OCT Financial Leasing has strictly followed the terms of 2019 Finance Lease and Factoring Framework Agreements and the Pricing Principles in determining the pricing terms of each Implementation Agreement based on our review of the Connected Agreements. We therefore consider the pricing terms under the Finance Lease and Factoring Framework Agreements to be fair and reasonable. In our view, as long as the terms of the Finance Lease and Factoring Framework Agreements and the Implementation Agreements are fair and reasonable, it is reasonable to build in certain buffer when setting the Annual Caps to accommodate unexpected business growth of the Group in the future; and

• (v) the low utilisation rate of the annual caps under the 2019 Finance Lease and Factoring Framework Agreements (i.e. 8.4%) was mainly due to the market conditions and the actual business development of OCT Group and OCT Ltd. Although the domestic finance lease and factoring industry was generally affected by the slowing PRC economy growth caused by the US-Mainland trade tensions in the second half of 2019 and the novel coronavirus outbreak in early 2020, we consider that such situation is temporary and will not persist for a long period of time. As such, the Annual Caps, in our view, should not be set with reference to the historical transaction amounts under the 2019 Finance Lease and Factoring Framework Agreements.

Generally speaking, in our opinion, it is in the interests of the Group for the Annual Caps to be as accommodating to the Group as possible (within reason). Provided that the terms for the Transactions are fair and reasonable and the conduct of the Transactions are subject to annual review by the independent non-executive Directors and auditors of the Company (as discussed below) as required under the Listing Rules, the Group would have flexibility in conducting its businesses if the Annual Caps are tailored to future business growth. In assessing the reasonableness of the Annual Caps, we have discussed with the management of the Group their projected growth in revenue and the bases of the calculation and the factors contributing to the fixing of the Annual Caps, which we consider reasonable. Based on the above analysis, we are of the view that the Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Shareholders should note that the Annual Caps should not be construed as an assurance or forecast by the Group of its future revenues.

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LETTER FROM RAINBOW CAPITAL

8. Internal control measures

The Group has adopted certain risk management measures and policies for its finance lease and factoring businesses to ensure the Transactions are conducted on normal commercial terms or better, including but not limited to the following:

• (i) the procurement team, possessing at least three years of experience in the finance lease and factoring businesses, shall perform due diligence on the Lessee including its background, industry, market position, scale of operation, credit rating, compliance records, loan repayment records and financial conditions, the purpose of use of the proceeds and source of funding for repayment prior to entering into any Implementation Agreement;

• (ii) each Transaction shall be counter-checked by the risk management and compliance department and finance department of the Group for any major risks and approved by a committee comprising three members including the vice president and general manager of the Group after the assessment by the procurement team in paragraph (i) above;

• (iii) each Transaction shall be submitted to the president and chairman of OCT Financial Leasing for final approval;

• (iv) the pricing terms of each Implementation Agreement shall be determined in accordance with the industry price ranges and in compliance with the Finance Lease and Factoring Framework Agreements and the Pricing Principles; and

• (v) the risk management and compliance department, finance department and relevant senior management of the Company are responsible for monitoring the Transactions while the independent non-executive Directors shall conduct an annual review of the implementation of the Transactions.

In assessing whether the above internal control procedures are put in place and effectively implemented, we have reviewed the relevant documentation regarding the approval of the Connected Agreements and noted that the transactions contemplated under the Connected Agreements were properly authorised. Having consider the above, in particular (i) that the above internal control procedures include detective control to uncover any major risks associated with the provision of the Financial Services; and (ii) the clear segregation of duties of execution, checking and authorising the Transactions by designating different personnel or teams for the assessment, review and approval of the Financial Services and the ongoing monitoring of the Transactions, we concur with the Directors that appropriate and adequate internal control procedures are in place to ensure that the terms of each Implementation Agreement are in compliance with the Finance Lease and Factoring Framework Agreements.

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LETTER FROM RAINBOW CAPITAL

9. Annual review of the Transactions

Pursuant to Rules 14A.55 to 14A.59 of the Listing Rules, the Transactions are subject to the following annual review requirements:

• (i) the independent non-executive directors must review the Transactions every year and confirm in the annual report whether the Transactions have been entered into:

• (a) in the ordinary and usual course of business of the Group;

• (b) on normal commercial terms or better; and

• (c) according to the agreement governing them on terms that are fair and reasonable and in the interests of the Shareholders as a whole;

• (ii) the auditors of the Company must provide a letter to the Board confirming whether anything has come to their attention that causes them to believe that the Transactions:

• (a) have not been approved by the Board;

• (b) were not, in all material respects, in accordance with the pricing policies of the Group;

• (c) were not entered into, in all material respects, in accordance with the relevant agreement governing the Transactions; and

• (d) have exceeded the Annual Caps;

• (iii) the Company must allow, and ensure that the counterparties to the Transactions allow, the auditors of the Company sufficient access to their records for the purpose of reporting on the Transactions; and

• (iv) the Company must promptly notify the Stock Exchange and publish an announcement if the independent non-executive Directors and/or the auditors of the Company cannot confirm the matters as required. The Stock Exchange may require the Company to re-comply with the announcement and shareholders’ approval requirements and may impose additional conditions.

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LETTER FROM RAINBOW CAPITAL

The independent non-executive Directors and the auditors of the Company have reviewed the then continuing connected transactions conducted for the year ended 31 December 2019 and have provided the relevant confirmation as required under the Listing Rules, details of which are contained in the Company’s 2019 annual report. The required confirmations in respect of the relevant continuing connected transactions conducted for the two years ended 31 December 2021 will be included in the Company’s annual reports for the two years ended 31 December 2021.

In light of the reporting requirements for the Transactions, in particular, (i) the restriction of the values of the Transactions by way of the Annual Caps; and (ii) the requirement under the Listing Rules for the ongoing review by the independent non-executive Directors and the auditors of the Company of the terms of the Transactions and the Annual Caps, we are of the view that appropriate measures will be in place to govern the conduct of the Transactions and safeguard the interests of the Independent Shareholders.

OPINION AND RECOMMENDATION

Taking into account the above principal factors and reasons, we consider that (i) the terms of the Finance Lease and Factoring Framework Agreements and the transactions contemplated thereunder are in the ordinary and usual course of business of the Group, on normal commercial terms which are fair and reasonable, and in the interests of the Company and the Shareholders as a whole; (ii) the Annual Caps are fair and reasonable; and (iii) it is a normal business practice for finance lease agreements of this type to be of such duration. Accordingly, we advise the Independent Board Committee to recommend, and we ourselves recommend, the Independent Shareholders to vote in favour of the relevant ordinary resolutions to be proposed at the EGM to approve the Finance Lease and Factoring Framework Agreements.

Yours faithfully, For and on behalf of Rainbow Capital (HK) Limited Larry Choi Managing Director

Mr. Larry Choi is a licensed person and a responsible officer of Rainbow Capital registered with the Securities and Futures Commission to carry out type 6 (advising on corporate finance) regulated activity under the SFO. He has over 10 years of experience in the corporate finance industry.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION 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, as a comparative table and the latest published 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 2017 has been set out in pages 77 to 178 of the 2017 annual report of the Company which was posted on 13 April 2018 on the Stock Exchange’s website (http://www.hkexnews.hk/listedco/listconews/SEHK/2018/0413/LTN20180413403.pdf).

The audited consolidated financial statements of the Group for the year ended 31 December 2018 has been set out in pages 97 to 230 of the 2018 annual report of the Company which was posted on 26 April 2019 on the Stock Exchange’s website (http://www3.hkexnews.hk/listedco/listconews/SEHK/2019/0426/LTN201904261057.pdf).

The audited consolidated financial statements of the Group for the year ended 31 December 2019 has been set out in pages 113 to 242 of the 2019 annual report of the Company which was posted on 5 May 2020 on the Stock Exchange’s website (https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0505/2020050500961.pdf).

2. INDEBTEDNESS STATEMENT

As at the close of business on 31 March 2020, being the date of this indebtedness statement prior to the printing of this circular, the Group had total borrowings of approximately RMB8,955.74 million, comprising secured and guaranteed bank and related party loans of approximately RMB2,998.06 million, unsecured and unguaranteed bank and related party loans of approximately RMB5,957.68 million.

As at 31 March 2020, the Group’s secured and guaranteed bank loans were secured by: (i) pledged deposits with total carrying values of approximately RMB765.19 million; (ii) other property, plant and equipment and interests in leasehold land held for own use with total carrying value of approximately RMB1,834.97 million; and (iii) guarantees provided by OCT Ltd. and OCT (HK), which are intermediate parents of the Company.

As at 31 March 2020, the Group had outstanding obligations under lease with carrying amount of approximately RMB79.33 million.

As at 31 March 2020, save for the guarantees of approximately RMB716.35 million given to financial institutions for mortgage loan facilities granted to purchasers of the Group’s properties, the Group had no other material contingent liabilities.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

As at 31 March 2020, Overseas Chinese Town (Shanghai) Land Company Limited, a non-wholly owned subsidiary of the Company, participate in a real estate investment trust (the “ REITS ”) programme. The funds raised under the REITS programme totals RMB2,150.00 million, consist of preferential asset-backed securities which amounts to RMB1,935.00 million from investors other than the Group, and secondary asset-backed securities which amounts to RMB215.00 million from the Group. The entire funds raised (after deducting the relevant fees and expenses) from the two kinds of securities remained in the Group in the form of loans from the investors to the Group as long-term liabilities.

Foreign currency amounts have been, for the purposes of this indebtedness statement, translated into RMB at the approximate rates of exchange applicable at the close of business on 31 March 2020.

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 31 March 2020, the Group did not have any other outstanding mortgages, charges, debentures or other loan capital, bank overdrafts or loans, other similar indebtedness, lease liabilities or hire purchase lease commitments, liabilities under acceptance or acceptance credit, guarantees or other material contingent liabilities.

3. WORKING CAPITAL

The Directors are of the opinion that, taking into account the financial resources available to the Group including the internally generated funds and the present available bank facilities, and taking into account the impact of the renewal of Finance Lease and Factoring Framework Agreements, the Group will have sufficient working capital for its requirements for at least the next 12 months from the date of this circular.

4. CONTINGENT LIABILITIES

Save as disclosed in this circular, the Group has no other material contingent liabilities. The Group is not involved in any current material legal proceedings, nor is the Group aware of such material legal proceedings. The Group would record any loss contingencies when, based on information then available, it is probable that a loss had been incurred and the amount of the loss can be reasonably estimated. The Group confirms that there has not been any material change in the level of its contingent liabilities since 31 December 2019 up to the Latest Practicable Date.

5. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

For the year ended 31 December 2019, the Group realised revenue from the continuing operations of approximately RMB2.07 billion, representing a year-on-year increase of approximately 30.7%. For the year ended 31 December 2019, profit attributable to equity holders of the Company was approximately RMB267 million, representing a year-on-year decrease of approximately 66.6%. For the year ended 31 December 2019, the Group’s gross

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

profit margin from the continuing operations was approximately 37.0%, representing an increase of 1.8 percentage points over the same period of 2018. As at 31 December 2019, the Group’s total assets amounted to approximately RMB26.455 billion, representing an increase of approximately 5.5% over that as at 31 December 2018; the Group’s total equity amounted to approximately RMB12.919 billion, which was approximately the same as that as at 31 December 2018.

Comprehensive Development Business

In 2020, under the premise of maintaining the stable operation of the real estate market, the main principle of “houses are for inhabitation, not for speculation” will remain unchanged. With the ongoing progress of urbanisation, there will be constant demand for improved living conditions, which will provide stronger support to the market scale. It is expected that demand in the real estate market of China will remain relatively high. However, due to the great differences between each city and region, the differentiation of urban policies in different cities under the control policy of “implementation of policies according to local conditions” will be deepened. At the same time, the five mega city clusters will become China’s most promising regions with the most development potential in the future, especially core city clusters in China, namely the Beijing-Tianjin-Hebei Area, the Yangtze River Delta and the GuangdongHong Kong-Macao Greater Bay Area, which are likely to develop into world-class city clusters with global influence.

In 2020, the Group will firmly grasp the development opportunities in the Yangtze River Delta Area and the Guangdong-Hong Kong-Macao Greater Bay Area and further its efforts in the comprehensive development projects that focus on new urbanisation, cultural tourism, hot spring and healthcare. We will actively pay attention to and search for diversified investment opportunities, strengthen strategic synergy and business cooperation with invested enterprises. Through various ways such as acquisition, cooperation and equity investment, we will acquire high-quality lands at low cost to increase resource reserve for the projects. On the other hand, we will accelerate the sell-through of existing projects, increase liquidity and revitalise existing resources through various measures, so as to catalyse the reform and upgrade of the comprehensive development business.

In 2020, the planned comprehensive development projects of the Group are as follows: the first batch of residential products of Hefei Chaohu Bantang Hot Spring Town Project, which occupies 101,000 sq.m., is expected to be launched in the middle of 2020, while the construction of water parks, hotels and certain commercial projects is expected to commence in the second half of 2020. The planning of Hefei Airport International Town Project has been completed and is expected to commence construction in the first half of 2020, and commence project sale in 2021. The Group does not rule out the possibility to continuously bid for the land use rights for Phase II of the project during the year. Phase I of high-rise residential properties of Zhongshan Yuhong Project is expected to commence sale at the end of 2020, with

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

a total saleable area of approximately 257,000 sq.m., while the construction of Phase II of the high-rise residential properties is expected to commence in the first half of 2020. The Group will step up its selling efforts for products under Shanghai Suhewan Project and Chongqing OCT Land Project.

The transformation and upgrade of industrial properties and the construction of industrial parks are to witness promising prospects as local governments introduced policies in relation to the separate sales of title of industrial properties. By combining location advantages and integrating surrounding resources, the Group will actively research on innovative development models for existing industrial lands, and continue to push forward industrial park operation and new project construction in the Guangdong-Hong Kong-Macao Greater Bay Area and the Yangtze River Delta region. Following the completion of the OCT Changshu Industrial Park Project in 2020, the leasable area will be increased by approximately 38,700 sq.m., and is scheduled to be leased to the public in the second quarter of 2020.

Equity Investment and Fund Business

Looking ahead to 2020, government-guided funds will strengthen its efforts on deployment in equity investment, while investment institutions will head toward the new market norm of differentiated competition. With regard to funds, it is expected that in 2020, leading private equity fund managers will continuously gain size in funds under management and enjoy resource advantages, while large foreign investment institutions are more poised to register and incorporate private equity firms in China. Along with the continuous development of domestic private equity funds as well as the rising professional level of investors, private equity product lines will also be continuously enriched, gradually moving closer to a mature financial market. The transition of the approval system to the registration system will also provide more exit channels for fund projects.

Being OCT Group’s only offshore listed company and leveraging on its parent company’s leading position in the culture and tourism industry, the Group’s equity investment and fund businesses will be able to gain a strong foothold in the Yangtze River Delta and the Guangdong-Hong Kong-Macao Greater Bay Area, with a primary focus on industries including culture, tourism, technology, education, consumption, healthcare and new urbanisation, etc. The Group will fully leverage on its strengths in industry investment and merger and acquisition, tap the growth potential of relevant industries from an industry perspective, increase project resource reserves, explore channels to create synergy, enhance post-investment management efficiency, and facilitate the rapid development of the invested enterprises. With regard to the raising and utilisation of funds, we will conduct fundraising with high efficiency through various financing methods, and increase the profitability of projects by utilising the lower capital costs. With the management throughout the process of “fundraising, investment, management and exit” being refined, liquidity will be improved, and resource allocation will be optimised. With regard to equity investment, we will primarily focus on high quality companies which possess the potential to become leaders in specific segments, as well as enterprises with unique characteristics and certain market entry barriers in specific segments. We will actively explore equity investment opportunities through the prudent selection of

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

high-quality projects. With regard to fund management, through extensive cooperation with leading fund investment institutions and unleashing their respective professional strengths, the Group pays extra attention to high quality potential targets in their initial establishment and growing stage, fully leverages on social capital and gradually expands the size of funds under management step by step.

Finance Lease Business

In 2020, the Group’s finance lease business will keep up with macro-environment changes and CBIRC’s regulatory trends with proactive expansion and tight risk control. We will conduct finance lease business in sectors such as theme parks and the manufacturing industry, and step up efforts to push forward the expansion of our business in order to constantly increase operating income.

The Board is very confident about the future development prospects of the Group. With the support of its controlling shareholders, the Group will continue to march ahead with innovative development and endeavour to generate ideal investment returns for Shareholders.

6. MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Set out below are the management discussion and analysis of the Group for each of the three financial years ended 31 December 2017, 2018 and 2019.

For the year ended 31 December 2017

The total equity of the Group as at 31 December 2017 was approximately RMB13.31 billion. As at 31 December 2017, the Group had current assets of approximately RMB15.77 billion and current liabilities of RMB9.22 billion. The current ratio of the Group was approximately 1.71 as at 31 December 2017, which is substantially the same comparing with that as at 31 December 2016 (31 December 2016: approximately 1.68). The Group generally finances its operations with internally generated cash flow, credit facilities provided by banks and shareholder’s loans.

As at 31 December 2017, the Group had outstanding bank and other loans of approximately RMB5.01 billion, without any fixed-rate loans. As at 31 December 2017, the interest rates of bank and other loans of the Group ranged from 1.28% to 6.38% per annum. Some of those bank loans were secured by floating charges of certain assets of the Group and 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 27.0% as at 31 December 2017, representing a decrease of 16.2 percentage points as compared with approximately 43.2% as at 31 December 2016, mainly due to the issue of the Perpetual Capital Securities in the amount of US$800.00 million during the period, which resulted in the decrease in the amount of loans and the increase in liquidity.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

As at 31 December 2017, approximately 81.6% of the total amount of outstanding bank and other loans of the Group amounting to approximately HK$4.89 billion was in Hong Kong Dollars; approximately 18.4% of which amounting to approximately RMB920.00 million was in Renminbi; no outstanding bank and other loans were in United States Dollars.

As at 31 December 2017, the total cash and bank balance of the Group was approximately RMB6.93 billion, of which approximately 54.4% was in United States Dollars, approximately 34.4% of which was in Renminbi and approximately 11.2% of which was in Hong Kong Dollars.

For the year ended 31 December 2018

The total equity of the Group as at 31 December 2018 was approximately RMB12.91 billion. As at 31 December 2018, the Group had current assets of approximately RMB11.57 billion and current liabilities of approximately RMB10.57 billion. The current ratio was approximately 1.09 as at 31 December 2018, representing a decrease of 0.62 as compared with that as at 31 December 2017 mainly due to inventory of approximately RMB1.96 billion being transferred from current assets to non-current assets and a number of additional long-term equity investment projects during the period. The Group generally finances its operations with internally generated cash flow, credit facilities provided by banks and shareholder’s loans.

As at 31 December 2018, the Group had outstanding bank and other loans of approximately RMB6.39 billion, without any fixed-rate loans. As at 31 December 2018, the interest rates of bank and other loans of the Group ranged from 3.14% to 6.38% per annum. Some of those bank loans were secured by certain assets of the Group and corporate guarantees provided by certain related companies of the Company. The Group’s gearing ratio (being the total borrowings including bills payable and loans divided by total assets) was approximately 33.6% as at 31 December 2018, representing an increase of 6.6 percentage points as compared with approximately 27.0% as at 31 December 2017, mainly due to the increase in the amount of loans as at the end of the period.

As at 31 December 2018, approximately 88.9% of the total amount of outstanding bank and other loans of the Group amounting to approximately RMB5.68 billion was denominated in Hong Kong Dollars and approximately 11.1% of which amounting to approximately RMB708.50 million was denominated in Renminbi.

As at 31 December 2018, the total cash and bank balance of the Group was approximately RMB3.22 billion, of which approximately 67.6% was denominated in United States Dollars, approximately 30.3% was denominated in Renminbi and approximately 2.1% was denominated in Hong Kong Dollars.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the year ended 31 December 2019

The total equity of the Group as at 31 December 2019 was approximately RMB12.919 billion. As at 31 December 2019, the Group had current assets of approximately RMB9.564 billion and current liabilities of approximately RMB7.219 billion. The current ratio was approximately 1.32 as at 31 December 2019, representing an increase of 0.23 as compared to that as at 31 December 2018 mainly due to the Group’s refinancing of short-term liabilities to long-term liabilities during the period. The Group generally finances its operations with internally generated cash flow, credit facilities provided by banks and shareholder’s loans.

As at 31 December 2019, the Group had outstanding bank and other loans of approximately RMB8.116 billion, without any fixed-rate loans. As at 31 December 2019, the interest rates of bank and other loans of the Group ranged from 3.37% to 4.99% per annum. Some of those bank loans were secured by certain assets of the Group and corporate guarantees provided by certain related companies of the Company. The Group’s gearing ratio (being the total borrowings including bills payable and loans divided by total assets) was approximately 34.3% as at 31 December 2019, representing an increase of 0.7 percentage point as compared with approximately 33.6% as at 31 December 2018, mainly due to the increase in the amount of loans as at the end of the period.

As at 31 December 2019, approximately 61.9% of the total amount of outstanding bank and other loans of the Group amounting to approximately RMB5.021 billion was denominated in Hong Kong Dollars and approximately 38.1% of which amounting to approximately RMB3.095 billion was denominated in Renminbi.

As at 31 December 2019, the total amount of cash and cash equivalents of the Group was approximately RMB2.68 billion, of which approximately 58.5% was denominated in United States Dollars, approximately 32.9% was denominated in Renminbi and approximately 8.6% was denominated in Hong Kong Dollars.

Funding and Treasury Policies

The Group adopted prudent funding and treasury policies. Surplus funds are primarily maintained in the form of cash deposits with leading banks.

Acquisition and development of properties are financed partly by internal resources and partly by bank loans. Repayments of bank loans are scheduled to match asset lives and project completion dates. Bank loans are mainly denominated in Hong Kong dollars and Renminbi and bear interest at floating rates.

Foreign currency exposure is closely monitored by the management and hedged to the extent desirable. As at 31 December 2017, 2018 and 2019, the Group had no material exposure under foreign exchange contracts or any other hedging instruments.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Interest Expense

For the year ended 31 December 2017, the interest expenses of the Group were approximately RMB190.96 million. For the years ended 31 December 2018 and 2019, the Group’s interest expenses from the continuing operations of the Group were approximately RMB175.06 million and RMB268.73 million, respectively. A large portion of the interest expenses were incurred as a result of bank borrowings and debenture interests obtained by the Group for the development of integrated businesses.

Employees and Remuneration Policy

As at 31 December 2017, 2018 and 2019, the Group employed approximately 2,188, 1,735 and 1,352 full-time employees, respectively. The basic remunerations of the employees of the Group 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 members. Salaries of the 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, the Group also provides discretionary bonuses based on the Group’s operating results and the individual performance of the staff.

The Group has not experienced any significant problem 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 of the members of the senior management have been working for the Group for many years.

Under the ordinary resolution passed at the extraordinary general meeting on 15 February 2011, the Board adopted a new share option scheme (the “ New Scheme ”). As at 2 March 2016, all share options granted under the New Scheme have expired, lapsed and cancelled. As at 31 December 2017, 2018 and 2019, no share options were exercised.

Contingent Liabilities

As at 31 December 2017, 2018 and 2019, guarantees given to financial institutions for mortgages facilities granted to buyers of the Group’s properties amounts to approximately RMB427.788 million, RMB824 million and RMB322 million, respectively.

The Group has entered into agreements with certain banks with respect to mortgage loans provided to buyers of the property units. Pursuant to the mortgage agreements signed between the Group and the banks, the guarantee will be released upon the issuance of the individual property ownership certificate. Should the mortgagors fail to pay the mortgage monthly installment before the issuance of the individual property ownership certificate, the banks can draw down the security deposits up to the amount of outstanding mortgage installments and demand the Group to repay the outstanding balance to the extent that the deposit balance is insufficient.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The amount of guarantee deposits required varies among different banks, but is usually within a range of 0% to 5% of the mortgage loans granted to buyers, with prescribed capped amount.

The management does not consider it probable that the Group will sustain a loss under these guarantees as the bank has the rights to sell the property and recovers the outstanding loan balance from the sale proceeds if the property buyers default payment. The management also considers that the market value of the underlying properties is able to cover the outstanding mortgage loans guaranteed by the Group. No liabilities therefore are recognised in respect of these guarantees.

Significant Investments, Material Acquisitions and Disposals

For the year ended 31 December 2017

Investment in Minsheng Education

On 6 March 2017, City Legend entered into the cornerstone investment agreement with, among others, Minsheng Education Group Company Limited (民生教育集團有限公司) (“ Minsheng Education ”), to subscribe for 332,000,000 shares of Minsheng Education at the offer price as part of the international offering of Minsheng Education Group Company Limited. The primary focus of Minsheng Education is to provide high-quality private formal higher education in the PRC dedicated to nurturing professional talents. This investment is expected to broaden the sources of profits of the Group. The subscription was completed on 21 March 2017 at a total effective subscription price of approximately HK$463 million, representing 8.26% of the total issued share capital of Minsheng Education. For further details, please refer to the announcement of the Company dated 6 March 2017.

Investment in Shanghai Libao Huachen Fund

On 17 March 2017, Huayou Investment entered into the limited partnership agreement with Shanghai Rongzheng Libao Investment Management Co., Ltd. (上海榮正利保投資管理 有限公司), Shanghai Rongzheng Investment Advisory Co., Ltd. (上海榮正投資諮詢有限公 司), and other several partners to establish Shanghai Libao Huachen Investment Centre (LLP) (上海利保華辰投資中心(有限合夥)) (“ Shanghai Libao Huachen Fund* ”) with an aggregate capital of RMB400 million, among which Huayou Investment invested a total amount of RMB30 million. Shanghai Libao Huachen Fund principally invests in culture industry, including but not limited to segments of video and media, sports and entertainment, leisure and tourism as well as online education segment, and segments of upgrading and reconstruction of such industries through internet and mobile internet.

For further details, please refer to the announcement of the Company dated 17 March 2017.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Disposal of 100% equity interests in Shanghai Huali

On 20 September 2017, Barwin Development Company Limited (“ Barwin Development ”), the sole shareholder of Shanghai Huali Packaging Co., Ltd. (上海華勵包裝 有限公司) (“ Shanghai Huali ”) and a wholly-owned subsidiary of the Company, entered into the equity transfer agreement (the “Shanghai Huali Equity Transfer Agreement”) with Shanghai Huiyang Industry Co., Ltd. (上海匯陽實業有限公司) (“ Huiyang Industry ”), the winning bidder in the public tender conducted by the Shanghai United Assets and Equity Exchange. Pursuant to the Shanghai Huali Equity Transfer Agreement, Barwin Development disposed of 100% equity interests in Shanghai Huali to Huiyang Industry at a consideration of RMB164,673,100. The disposal was completed on 30 September 2017.

For further details, please refer to the announcements of the Company dated 7 July 2017, 4 August 2017 and 20 September 2017.

Issue of perpetual capital securities in the amount of US$800.00 million

On 11 October 2017, the Company successfully issued the Perpetual Capital Securities in an aggregate principal amount of US$800.00 million, which is unconditionally guaranteed by OCT Group. The securities are listed on the Stock Exchange at an initial distribution rate of 4.3%. It represents the most narrowed margin from the guidance price of Perpetual Capital Securities issued in the Hong Kong capital market in 2017, which will serve as a strong capital support for the future development of the Company. The Company may, at its sole discretion, elect to defer a distribution pursuant to the terms of the securities.

For further details, please refer to the announcements of the Company dated 28 September 2017, 29 September 2017 and 11 October 2017.

Disposal of 51% equity interests in Capital Converge

On 9 November 2017, the Company entered into the sale and purchase agreement and the supplemental agreement (the “ Capital Converge Sale and Purchase Agreement ”) with New China OCT Fund SPC (on behalf of New China Fund SP 1) (“ New China Fund ”), pursuant to which the Company disposed of 51% of the total issued share capital of Capital Converge Holdings Limited (“ Capital Converge ”) and 51% of the shareholder’s loan in Capital Converge to New China Fund, at the consideration in the sum equals to the USD equivalent of approximately RMB1,395 million. Completion of the sale and purchase took place on 29 December 2017. Upon completion of the transaction, the Company indirectly held 49% equity interests in Chongqing OCT Real Estate Limited* (重慶華僑城置地有限公司) through Capital Converge. For further details, please refer to the announcements of the Company dated 13 November 2017, 15 November 2017, 21 December 2017 and 29 December 2017, and the circular of the Company dated 6 December 2017.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the year ended 31 December 2018

Disposal of Huali Packaging (Huizhou) Co., Ltd.

Following the completion of transfer of 85% equity interest in Huali Packaging (Huizhou) Co., Ltd. (“ Huali Packaging (Huizhou) ”) in April 2018, the Group entered into an equity transfer agreement with the successful bidder in June 2018 to sell 15% equity interest in Huali Packaging (Huizhou) at the consideration of approximately RMB12.92 million. Upon completion of the disposal, the Group no longer held any equity interest in Huali Packaging (Huizhou). For further details, please refer to the announcement of the Company dated 15 June 2018.

Acquisition of 5.11% equity interest in Tongcheng-Elong

On 10 May 2018, City Legend International Limited (“ City Legend ”), an indirect wholly-owned subsidiary of the Company, and Suzhou Wan Cheng Sheng Da Travel Development Limited (蘇州萬程晟達旅遊發展有限公司) (“ Suzhou Wancheng* ”) entered into equity transfer agreements, pursuant to which City Legend agreed to acquire 5.11% equity interest in Tongcheng-Elong Holdings Limited at the consideration of approximately RMB1.18 billion. For further details, please refer to the announcements of the Company dated 10 May 2018 and 22 June 2018 and the circular of the Company dated 30 August 2018.

Acquisition of Changshu Land

On 25 June 2018, OCT (Changshu) Investment and Development Co., Ltd. (“ OCT Changshu ”), a non wholly-owned subsidiary of the Company, won the bid for the land use rights of a land parcel located in Changshu City at the base bid price of approximately RMB18.78 million. OCT Changshu entered into a land transfer agreement with the Land and Resources Bureau to acquire the Changshu Land at the consideration of approximately RMB18.78 million. For further details, please refer to the announcement of the Company dated 27 June 2018.

Cornerstone Investment in Tianli Education

On 26 June 2018, City Legend entered into a cornerstone investment agreement with Tianli Education International Holdings Limited (“ Tianli Education ”), pursuant to which City Legend agreed to subscribe for the investor shares of Tianli Education at the offer price as part of the international offering. The subscription was completed on 12 July 2018 at a total effective subscription price of approximately HK$268.68 million, representing 4.82% of the issued share capital of Tianli Education after full exercise of over-allotment option. For further details, please refer to the announcement of the Company dated 26 June 2018.

– I-11 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Cornerstone Investment in E-House Enterprise

On 5 July 2018, City Legend entered into a cornerstone investment agreement with E-House (China) Enterprise Holdings Limited (“ E-House Enterprise ”), pursuant to which City Legend agreed to acquire the investor shares of E-House Enterprise at the offer price as part of the international offering. The subscription was completed on 20 July 2018 at a total effective subscription price of approximately HK$1.07 billion, representing 4.99% of the issued share capital of E-House Enterprise. For further details, please refer to the announcement of the Company dated 5 July 2018 and the circular of the Company dated 24 September 2018.

Acquisition of 9.98% equity interest in Yuzhou Properties

On 31 August 2018, City Legend entered into a subscription agreement with Yuzhou Properties Company Limited (“ Yuzhou Properties ”), pursuant to which City Legend agreed to subscribe 9.90% of the enlarged issued share capital of Yuzhou Properties, at the aggregate subscription price of approximately HK$1.82 billion. For further details, please refer to the announcement of the Company dated 31 August 2018 and the circular of the Company dated 26 October 2018.

On 16 November 2018, Yuzhou Properties declared a scrip dividend scheme in relation to the interim dividend of 2018, and the Group selected for receiving the interim dividend wholly in new and fully paid shares in lieu of cash. The total shares of Yuzhou Properties held by the Group accounted for 9.98% of Yuzhou Properties’ issued share capital after the scrip dividend scheme.

Sale and Leaseback Arrangement

On 11 September 2018, OCT Financial Leasing entered into an acquisition agreement with Yibin Grace Co., Ltd (“ Yibin Grace ”), pursuant to which OCT Financial Leasing agreed to acquire the equipment and machinery used for manufacturing textile related products (“Equipment”) at the consideration of RMB300.00 million.

On the same date, OCT Financial Leasing also entered into a leaseback agreement with Yibin Grace, pursuant to which OCT Financial Leasing agreed to lease the Equipment to Yibin Grace at the interest rate of 5.45% per annum for a term of 60 months. The lease consideration payable by Yibin Grace to OCT Financial Leasing comprises a security deposit of RMB30.00 million, a service fee of RMB9.00 million and the aggregate lease payments amounting to approximately RMB342.90 million. For further details, please refer to the announcement of the Company dated 11 September 2018.

– I-12 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Disposal of 51% equity interest in Chengdu Tianfu OCT Lakeside Business Management Co. Ltd.

On 24 December 2018, Chengdu OCT, Zhongbao Investment Overseas Chinese Town (Shenzhen) Tourism Cultural City Renewal Equity Investment Fund Partnership (Limited Partnership) (中保投華僑城(深圳)旅遊文化城市更新股權投資基金合夥企業(有限合 夥), “ Zhongbao Investment Fund ”) and Chengdu Tianfu OCT Lakeside Business Management Co. Ltd. (成都天府華僑城湖濱商業管理有限公司, “ OCT Lakeside ”) (a whollyowned subsidiary of Chengdu OCT) entered into an equity transfer agreement, pursuant to which Chengdu OCT agreed to sell 51% equity interest in OCT Lakeside to Zhongbao Investment Fund at the consideration of approximately RMB60.53 million. For further details, please refer to the announcement of the Company dated 24 December 2018.

Disposal of 100% equity interest in Zhongshan Huali

On 27 December 2018, Wantex Investment Limited (榮添投資有限公司), an indirectly wholly-owned subsidiary of the Company, entered into an equity transfer agreement with the successful bidders in the public tender to dispose of 100% equity interest in Zhongshan Huali to the successful bidders at the total consideration of approximately RMB150.29 million. The disposal indicated that the Group has fully withdrawn from its paper packaging business. For further details, please refer to the announcements of the Company dated 25 October 2018, 23 November 2018 and 27 December 2018.

For the year ended 31 December 2019

Acquisition of 21% Equity Interest and Debt Interest in Zhongshan Yuhong

On 26 March 2019, Shenzhen Huajing Investment Limited (深圳市華京投資有限公司) (“ Shenzhen Huajing ”), a wholly-owned subsidiary of the Company, entered into a joint venture agreement with Zhuhai Yiyun Real Estate Limited (珠海依雲房地產有限公司) (“ Zhuhai Yiyun ”), Xiamen Yuzhou Grand Future Real Estate Development Company Limited (廈門禹洲鴻圖地產開發有限公司) (“ Xiamen Yuzhou ”) and Zhongshan Yuhong Real Estate Development Limited (中山禹鴻房地產開發有限公司) (“ Zhongshan Yuhong ”), to acquire 21% equity interest and debt interest in Zhongshan Yuhong at a consideration of approximately RMB1.26 million and approximately RMB332 million, respectively. For further details, please refer to the announcement dated 26 March 2019 and the circular dated 24 April 2019 of the Company.

Entering into the Finance Lease and Factoring Framework Agreements

On 7 May 2019, OCT Financial Leasing Co., Ltd.* (華僑城融資租賃有限公司) (“OCT Financial Leasing”), a direct wholly-owned subsidiary of the Company, entered into finance lease and factoring framework agreements (the “Finance Lease and Factoring Framework Agreements”) with OCT Group and OCT Ltd., respectively, agreeing to provide finance lease and factoring services to OCT Group and OCT Ltd., respectively. For further details, please refer to the announcement dated 7 May 2019 and the circular of the Company dated 23 May 2019.

– I-13 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Acquisition of the Land Use Rights in Chaohu, Hefei, Anhui Province

On 15 May 2019, Shenzhen OCT Gangya Holdings Development Co., Ltd. (深圳華僑城 港亞控股發展有限公司) (“ OCT Gangya ”), an indirect wholly-owned subsidiary of the Company, and Hefei Guojia Industry Capital Management Co., Ltd. (合肥國嘉產業資本管理 有限公司) (“ Hefei Guojia ”) jointly bid for and won the land use rights of a land in Chaohu, Hefei, Anhui Province (the “ Chaohu Land ”) at the price of approximately RMB1.13 billion. The Chaohu Land has a total site area of approximately 414,000 sq.m. On 3 June 2019, OCT Gangya and Hefei Guojia entered into a joint venture agreement, agreeing to establish a project company to jointly develop the Chaohu Land. For further details, please refer to the announcements dated 15 May 2019 and 3 June 2019 and the circular of the Company dated 24 June 2019.

Establishment of Xiamen OCT Runyu Investment Partnership (Limited Partnership)

On 7 November 2019, Shenzhen Huajing Investment Limited (深圳市華京投資有限公 司) (“ Shenzhen Huajing ”) and Shenzhen OCT Huaxin Equity Investment Management Limited (深圳華僑城華鑫股權投資有限公司) (“ OCT Huaxin ”), indirect wholly-owned subsidiaries of the Company, entered into a limited partnership agreement with Shenzhen Qianhai Yuzhou Fund Management Co., Ltd. (深圳前海禹舟基金管理有限公司) (“ Yuzhou Fund Management ”) and Xiamen Zhongmao Yitong Commerce Co., Ltd. (廈門中茂益通商 貿有限公司) (“ Xiamen Zhongmao ”) for the establishment of a limited partnership for investment purpose. The capital contribution subscribed for by the partners to the partnership is RMB1,500 million. For further details, please refer to the announcement dated 7 November 2019 and the circular dated 24 December 2019 of the Company.

Formation of Guangzhou Yueke Talent entrepreneurship Investment Partnership (Limited Partnership)

On 25 November 2019, Shenzhen Huayou Investment Co., Ltd. (深圳市華友投資有限公 司) (“ Shenzhen Huayou ”), an indirect wholly-owned subsidiary of the Company, entered into a limited partnership agreement (the “ Limited Partnership Agreement* ”) with four corporate partners to form Guangzhou Yueke Talent Entrepreneurship Investment Partnership (Limited Partnership) with a total capital contribution of RMB375 million upon formation of the fund. For further details, please refer to the announcement of the Company dated 25 November 2019.

Acquisition of Land Use Rights in Hefei Airport International Town

On 13 December 2019, Hefei OCT Industry Development Co., Ltd. (合肥華僑城實業發 展有限公司) (“ Hefei OCT Industry ”), a non-wholly owned subsidiary of the Company, obtained the land use rights of the five parcels of land situated at the first phase of Hefei Airport International Town (the “ Land* ”) at a consideration of approximately RMB2,640 million. The total site area of the Land is approximately 1,042 mu. On 27 December 2019, Hefei OCT Industry entered into Land Use Rights Grant Contracts with Hefei Natural Resources and Planning Bureau for the acquisition of the Land. For further details, please refer to the announcement dated 13 December 2019 and the circular of the Company dated 22 January 2020.

– I-14 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Disposal of Listed Securities in Tianli Education

From 7 November 2019 to 20 December 2019, City Legend, a wholly-owned subsidiary of the Company, disposed of an aggregate of 57,334,000 shares (“ Tianli Shares ”) of Tianli Education in a series of transactions on the market and through block trade. For further details, please refer to the announcement of the Company dated 20 December 2019.

During the year ended 31 December 2019, the Group had the following significant investment held which was classified as equity securities designated at FVOCI:

							Size of the
							investment to
	Number	Approximate		Dividend			the value of
	of shares	percentage of	Net gain	received for			the total
	held by the	shareholding	for the	the year		Fair	assets of the
	Group as at	as at	year ended	ended		value as at	Group as at
	31 December	31 December	31 December	31 December	Investment	31 December	31 December
Name of investment	2019	2019	2019	2019	cost	2019	2019
		%	RMB’000	RMB’000	RMB’000	RMB’000	%
Equity securities designated at
FVOCI Listed shares
Tongcheng-Elong Holdings
Limited (stock code: 0780)
(“Tongcheng-Elong”)(Note 1)	106,079,480	4.9878%	166,598_(Note 2)_	–	1,176,471	1,328,434	5.02%

Notes:

1. Tongcheng-Elong and its subsidiaries engage in provision of travel products and services in the China’s online travel industry. Their products and services include accommodation reservation, transportation ticketing, attractions ticketing and various ancillary value-added products and services.

2. The net movement is recognised in other comprehensive income.

Going forward, the Company will actively explore equity investment opportunities through the prudent selection of high-quality projects that is in line with its corporate development strategy specialising in culture, tourism, new urbanisation and industrial ecosphere investment. The Group will continue to adopt prudent capital management and liquidity risk management policies and practices to preserve adequate buffer to meet the challenges ahead.

Save as disclosed above, as at 31 December 2017, 2018 and 2019, there are no other matters applicable to the Group and required to be disclosed under the requirements of paragraph 32 of Appendix 16 to the Listing Rules.

– I-15 –

GENERAL INFORMATION

APPENDIX II

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. DIRECTORS’ INTERESTS

Directors’ and chief executive’s interests and short positions in the securities of the Company and its associated corporations

Save as disclosed below, as at the Latest Practicable Date, no 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) were held by 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 ”).

				Approximate
				percentage of
				issued share
	Capacity/		Number of	capital of
Name of Directors	Nature	Class of shares	shares held	the Company
Lam Sing Kwong Simon	Beneficial	Ordinary shares	1,000,000	0.13%
	owner

– II-1 –

GENERAL INFORMATION

APPENDIX 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 of the Company 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:

			Approximate
			percentage of
			issued share
Name of Substantial		Number of	capital of
Shareholder	Capacity/Nature	Shares held	the Company
Pacific Climax	Beneficial owner	530,894,000	70.94%
	(note 1)	(long position)
OCT (HK)	Interest of a	530,894,000	70.94%
	controlled	(long position)
	corporation
	(note 2)
OCT Ltd.	Interest of a	530,894,000	70.94%
	controlled	(long position)
	corporation
	(note 3)
OCT Group	Interest of a	530,894,000	70.94%
	controlled	(long position)
	corporation
	(note 4)

Notes:

• (1) The interests held by Pacific Climax consist of interests (long position) in 530,894,000 Shares. Ms. Xie Mei and Mr. Lin Kaihua, both being executive Directors, and Mr. Zhang Jing, being a non-executive Director, are also directors 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 all the Shares beneficially held by Pacific Climax for the purpose of the SFO. Ms. Xie Mei, being an executive Director, is also a director of OCT (HK).

• (3) OCT Ltd. is the beneficial owner of all the issued share capital of OCT (HK), which is in turn the beneficial owner of all the issued share capital of Pacific Climax. OCT Ltd. is deemed, or taken to be interested in all the Shares which are beneficially owned by OCT (HK) and Pacific Climax pursuant to 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.

• (4) OCT Group is the beneficial owner of 47.01% of the issued shares of OCT Ltd., which is the beneficial owner of all the issued shares of OCT (HK) and in turn, the beneficial owner of all the issued share capital of Pacific Climax. Therefore, OCT Group is deemed, or taken to be interested in all the Shares which are beneficially owned by OCT Ltd., OCT (HK) and Pacific Climax 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.

– II-2 –

GENERAL INFORMATION

APPENDIX II

3. COMPETING INTERESTS

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

4. SERVICE CONTRACTS

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

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

As at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any assets which have been, since 31 December 2019 (being the date to which the latest published accounts of the Company were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

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 Group subsisting at the date of this circular and which is significant in relation to the businesses of the Group.

6. MATERIAL ADVERSE CHANGE

The Directors confirm that there had been no material adverse change in the financial or trading position of the Group since 31 December 2019 (being the date to which the latest published accounts of the Company were made up) up to and including the Latest Practicable Date.

7. EXPERT AND CONSENT

The qualifications of the expert who has been named in this circular or has given opinions or advice which are contained herein are set out below:

Name

Qualification

Rainbow Capital a corporation licensed to carry out Type 6 (advising on corporate finance) regulated activities under the SFO

– II-3 –

GENERAL INFORMATION

APPENDIX II

As at the Latest Practicable Date, Rainbow Capital did not have any shareholding in any member of the 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 Group.

Rainbow Capital has given and has not withdrawn its written consent to the issue of this circular, with the inclusion of its letter or references to its name in the form and context in which they are included.

Rainbow Capital did not have any direct or indirect interest in any assets which have been, since 31 December 2019 (being the date to which the latest published audited financial statements of the Group were made up), acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

8. MATERIAL CONTRACTS

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

• (a) the equity transfer agreements (together with the supplemental agreement thereto) entered into between City Legend and Suzhou Wancheng Shengda Travel Development Co., Ltd. (蘇州萬程晟達旅遊發展有限公司 ) on 10 May 2018 in relation to the acquisition of 5.11% equity interest in Tongcheng-Elong Holdings Limited by City Legend at a consideration of approximately RMB1.18 billion;

• (b) the cornerstone investment agreement entered into between City Legend and Tianli Education and China International Capital Corporation Limited on 26 June 2018 in relation to subscription at 4.82% of the issued share capital of Tianli Education at a subscription price of approximately HK$266 million;

• (c) the cornerstone investment agreement entered into among City Legend, E-House (China) Enterprise Holdings Limited and China International Capital Corporation Hong Kong Securities Limited on 5 July 2018 in relation to the subscription of 73,371,900 shares in the E-House (China) Enterprise Holdings Limited at the subscription price of approximately HK$1,055 million;

• (d) the subscription agreement entered into between City Legend and Yuzhou Properties Company Limited (“ Yuzhou Properties ”) on 31 August 2018 in relation to the subscription of 460,489,606 new shares in Yuzhou Properties at the aggregate subscription price of HK$1,823,538,839.76;

– II-4 –

GENERAL INFORMATION

APPENDIX II

• (e) the acquisition agreement and leaseback agreement both dated 11 September 2018 entered into between OCT Financial Leasing Co., Ltd., a wholly-owned subsidiary of the Company, and Yibin Grace Co., Ltd, pursuant to which OCT Financing Leasing Co., Ltd. agreed to acquire certain equipment from Yibin Grace Co., Ltd. at the consideration of RMB300 million and leaseback such equipment to Yibin Grace Co., Ltd.;

• (f) the equity transfer agreement dated 24 December 2018 entered into between Chengdu Tianfu OCT Industry Development Company Limited (成都天府 華僑城實業發展有限公司, “ Chengdu OCT ”), a non-wholly owned subsidiary of the Company, Zhongbo Investment Overseas Chinese Town (Shenzhen) Tourism Cultural City Renewal Equity Investment Fund Partnership (Limited Partnership) (中保投華僑城(深圳)旅遊文化城市更新股權投資基金合夥企業(有限合 夥), “ Zhongbao Investment Fund ”) and Chengdu Tianfu OCT Lakeside Business Management Co. Ltd. (成都天府華僑城湖濱商業管理有限公司, “ OCT Lakeside ”) in relation to the disposal of 51% equity interest in OCT Lakeside by Chengdu OCT to Zhongbo Investment Fund at the consideration of approximately RMB60.53 million;

• (g) the equity transfer agreement dated 27 December 2018 entered into between Wantex Investment Limited (榮添投資有限公司), an indirectly wholly-owned subsidiary of the Company, and Shenzhen Quande Investment Company Limited (深圳市全德投 資有限公司) and Shenzhen Zhijie Investment Company Limited (深圳智捷投資有限 公司) in relation to the disposal of 100% equity interest in Zhongshan Huali Packaging Co., Ltd.* (中山華力包裝有限公司) at the total consideration of approximately RMB150.29 million;

• (h) the cooperation agreement entered into on 26 March 2019, between Zhuhai Yiyun Real Estate Limited (珠海依雲房地產有限公司) (“ Zhuhai Yiyuan ”), Xiamen Yuzhou Grand Future Real Estate Development Company Limited (廈門禹州鴻圖地 產開發有限公司) (“ Xiamen Yuzhou ”), Shenzhen Huajing and Zhongshan Yuhong Real Estate Development Limited (中山禹鴻房地產開發有限公司) (“ Zhongshan Yuhong ”) in relation to the acquisition of 21% of equity interest and debt interest in Zhongshan Yuhong at a total consideration of approximately RMB340,380,433;

• (i) the equity transfer agreement dated 26 March 2019 and entered into between Xiamen Yuzhou and Shenzhen Huajing in respect of the acquisition of 21% of equity interest in Zhongshan Yuhong at a total consideration of RMB1,263,447;

• (j) the debt transfer agreement dated 26 March 2019 and entered into between Xiamen Yuzhou and Shenzhen Huajing in respect of the acquisition of 21% of debt interest in Zhongshan Yuhong at a total consideration of approximately RMB339,116,986;

– II-5 –

GENERAL INFORMATION

APPENDIX II

• (k) the finance lease and factoring framework agreement entered into between OCT Financial Leasing Co., Ltd. (華僑城融資租賃有限公司) (“ OCT Financial Leasing ”), a directly wholly-owned subsidiary of the Company and Shenzhen Overseas Chinese Town Company Limited (深圳華僑城股份有限公司) on 7 May 2019 in relation to provision of finance lease and factoring services from OCT Financing Leasing to OCT Ltd. At an annual cap of RMB2,500,000,000 for one year from the date of independent shareholders’ approval;

• (l) the finance lease and factoring framework agreement entered between OCT Financial Leasing and OCT group on 7 May 2019 in relation to the provision of finance lease and factoring services from OCT Financial Leasing to OCT Group at an annual cap of RMB1,000,000,000 for one year from the date of independent shareholders’ approval;

• (m) the cooperation agreement dated 3 June 2019 and entered into between Shenzhen OCT Gangya Holdings Development Co., Ltd. (深圳華僑城港亞控股發展有限公司, “ OCT Gangya ”) and Hefei Guojia Industry Capital Management Co., Ltd. (合肥國 嘉產業資本管理有限公司, “ Hefei Guojia ”), pursuant to which the parties agreed to establish a joint venture company (the “ Project Company ”) for the development of parcels of land in Hefei and the total capital commitment to be made to the Project Company shall not exceed RMB2,352,941,176, of which RMB1,200,000,000 and RMB1,152,941,176 is attributable to OCT Gangya and Hefei Guojia, respectively, in proportion to their respective shareholdings in the Project Company;

• (n) the joint venture agreement dated 20 June 2019 and entered into between Shenzhen OCT Ganghua Investment Holdings Co., Ltd. (深圳華僑城港華投資控股有限公司, “ OCT Ganghua ”) and Hefei Huaxing Konggang Investment Co., Ltd. (合肥華興空 港投資有限公司) in relation to the establishment of Hefei OCT Industry Development Co., Ltd. (合肥華僑城實業發展有限公司), pursuant to which OCT Ganghua is required to contribute RMB5.1 billion, representing 51% of the registered capital of the joint venture company;

• (o) the lease agreement dated 5 July 2019 and entered into between Overseas Chinese Town (Shanghai) Land Company Limited (華僑城(上海)置地有限公司, “ OCT Shanghai Land ”) and Shanghai Huahe Real Estate Development Co., Ltd. (上海華 合房地產開發有限公司, “ Shanghai Huahe ”) in relation to the lease of the certain properties by OCT Shanghai Land to Shanghai Huahe for a term of 36 months from 1 August 2019 to 31 July 2022 at a monthly rent of RMB769,145;

• (p) the maximum amount guarantee agreement dated 11 July 2019 entered into between the Company and Shenzhen branch of Nanyang Commercial Bank (China) Limited (南洋商業銀行(中國)有限公司深圳分行, the “ Bank ”), pursuant to which the Company agreed to guarantee up to 49% of the loan (being RMB392,000,000) under a loan agreement between Chongqing OCT Real Estate Limited (重慶華僑城置地有 限公司) and the Bank;

– II-6 –

GENERAL INFORMATION

APPENDIX II

• (q) the limited partnership agreement dated 7 November 2019 entered into among Shenzhen Qianhai Yuzhou Fund Management Co., Ltd. (深圳前海禹舟基金管理有限 公司), Shenzhen OCT Huaxin Equity Investment Management Limited (深圳市華僑 城華鑫股權投資管理有限公司, “ OCT Huaxin ”), Shenzhen Huajing Investment Limited (深圳市華京投資有限公司, “ Shenzhen Huajing ”) and Xiamen Zhongmao Yitong Commerce Co., Ltd. (廈門中茂益通商貿有限公司) in relation to the establishment of Xiamen OCT Runyu Investment Partnership (Limited Partnership) (廈門華僑城潤禹投資合夥企業(有限合夥), the “ Partnership ”), pursuant to which OCT Huaxin and Shenzhen Huajing are required to contribute RMB1,000,000 and RMB1,168,000,000, representing 0.07% and 77.87% of the total capital of the Partnership, respectively;

• (r) the limited partnership agreement dated 25 November 2019 entered into between Shenzhen Huayou Investment Co., Ltd. (深圳市華友投資有限公司, “ Shenzhen Huayou ”) and four corporate partners to form Guangzhou Yueke Talent Entrepreneurship Investment Partnership (Limited Partnership) (廣州粵科人才創業 投資中心(有限合夥), the “ Fund ”) with a total subscribed capital contribution of RMB375,000,000 upon formation, pursuant to which Shenzhen Huayou agreed to subscribe for RMB60,000,000 in the Fund as a limited partner, representing 16% of the total subscribed capital contribution of the Fund;

• (s) the limited partnership agreement dated 6 March 2019 entered into between OCT Huaxin, Shenzhen Huayou, Dongguan City Industrial Investment Parent Fund Co., Ltd. (東莞市產業投資母基金有限公司, “ Dongguan Industrial Investment ”), Guangdong Province Yueke Songshan Lake Innovation Venture Capital Parent Fund Co., Ltd. (廣東省粵科松山湖創新創業投資母基金有限公司, “ Songshan Lake Venture Capital ”) and Dongguan City Multiplier Program Industrial M&A Parent Fund Partnership (Limited Partnership) (東莞市倍增計劃產業併購母基金合夥企業 (有限合夥), “ Dongguan Industrial M&A ”) in relation to the establishment of Dongguan City OCT Lüwen Technology Investment Partnership (Limited Partnership) (東莞市華僑城旅文科技投資合夥企業(有限合夥)) for the purpose of investment, pursuant to which the capital contribution subscribed by Shenzhen OCT Huaxin, Shenzhen Huayou, Dongguan Industrial Investment, Songshan Lake Venture Capital and Dongguan Industrial M&A was RMB3,000,000, RMB132,000,000, RMB75,000,000, RMB60,000,000 and RMB30,000,000, respectively;

• (t) OCT Group Agreement; and

• (u) OCT Ltd. Agreement.

9. LITIGATION

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

– II-7 –

GENERAL INFORMATION

APPENDIX II

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 59/F., Bank of China Tower, 1 Garden Road, 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, Wanchai, 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 59/F., Bank of China Tower, 1 Garden Road, Hong Kong from the date of this circular up to and including 11 June 2020:

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

• (b) the annual reports of the Company for the years ended 31 December 2017, 2018 and 2019;

• (c) the written consent as referred to under the section headed “Experts and Consents” in this Appendix;

• (d) the letter from the Independent Board Committee, the text of which is set out on pages 21 to 22 of this circular;

• (e) the letter from the Independent Financial Adviser, the text of which is set out on pages 23 to 48 of this circular;

• (f) the material contracts referred to in the paragraph headed “Material Contracts” in this Appendix;

• (g) a copy of each circular issued pursuant to the requirements set out in Chapters 14 and/or 14A of the Listing Rules which has been issued since 31 December 2019 (being the date of which the last published accounts); and

• (h) this circular.

– II-8 –

NOTICE OF THE EGM

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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)

NOTICE OF EXTRAORDINARY GENERAL MEETING

PRECAUTIONARY MEASURES FOR THE EXTRAORDINARY GENERAL MEETING

Please refer to page ii of the circular of the Company dated 29 May 2020 for the measures to be implemented at the Extraordinary General Meeting by the Company against the epidemic to protect the attendees from the risk of infection of the Novel Coronavirus (“ COVID-19 ”), including:

(i) compulsory body temperature check;

• (ii) compulsory wearing of surgical face mask;

• (iii) limiting attendance of the EGM in person to 100 Shareholders, with not more than 50 persons to be accommodated in each meeting room or partitioned area; and

(iv) no distribution of corporate gifts and no serving of refreshments.

Any person who does not comply with the precautionary measures may be denied entry into the Extraordinary General Meeting venue.

For the health and safety of the Shareholders, the Company strongly advises Shareholders that you may appoint the Chairman of the meeting as your proxy to vote on the relevant resolutions at the Extraordinary General Meeting as an alternative to attending the Extraordinary General Meeting in person.

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (“ EGM ”) of Overseas Chinese Town (Asia) Holdings Limited (the “Company”) will be held at 59/F, Bank of China Tower, 1 Garden Road, Hong Kong on Friday, 19 June 2020 at 11:00 a.m. or any adjournment of such meeting for the purposes of considering and, if thought fit, passing the following resolutions, with or without modifications, as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

1. “ THAT

2. (a) the finance lease and factoring framework agreement entered into between OCT Financial Leasing Co., Ltd. (華僑城融資租賃有限公司) (“ OCT Financial Leasing ”) and Shenzhen Overseas Chinese Town Company Limited (深圳華僑

– EGM-1 –

NOTICE OF THE EGM

城股份有限公司) (“ OCT Ltd. ”) dated 18 May 2020 (the “ OCT Ltd. Agreement ”) in relation to the provision of finance lease and factoring services by OCT Financial Leasing to OCT Ltd. for a term of one year from the date of passing of this resolution and the annual cap of RMB1,000,000,000 (a copy of which has been produced to the Meeting marked “A” and initialed by the Chairman of the Meeting for the purpose of identification) and transactions contemplated thereunder be and are hereby approved, confirmed and ratified; and

• (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 OCT Ltd. Agreement and the transactions contemplated thereunder.”

• “ THAT

• (a) the finance lease and factoring framework agreement entered into between OCT Financial Leasing and Overseas Chinese Town Company Limited (華僑 城集團有限公司) (“ OCT Group ”) dated 18 May 2020 (the “ OCT Group Agreement ”) in relation to the provision of finance lease and factoring services by OCT Financial Leasing to OCT Group for a term of one year from the date of passing of this resolution and the annual cap of RMB1,000,000,000 (a copy of which has been produced to the Meeting marked “B” and initialed by the Chairman of the Meeting for the purpose of identification) and transactions contemplated thereunder be and are hereby approved, confirmed and ratified; and

• (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 OCT Group Agreement and the transactions contemplated thereunder.”

By order of the Board

Overseas Chinese Town (Asia) Holdings Limited He Haibin Chairman

Hong Kong, 29 May 2020

– EGM-2 –

NOTICE OF THE EGM

Notes:

1. Any member entitled to attend and vote at the EGM (and any adjournment of such 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 of the Company may appoint more than one proxy to represent him and vote on his behalf at the EGM (and any adjournment of such meeting). A proxy need not be a member of the Company. In addition, a proxy or proxies representing either a member who is an individual or a member which is a corporation shall be entitled to exercise the same powers on behalf of the member which he or they represent as such member could exercise.

2. 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 seal or under the hand of an officer, attorney or other person authorised to sign the same.

3. In order to be valid, the proxy form and the power of attorney or other authority (if any) under which it is signed, or a certified copy of such power of attorney or authority, must be deposited with the Company’s branch share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, as soon as possible and in any event not less than forty-eight (48) hours before the time appointed for holding the EGM (or any adjournment of such meeting) (as the case may be) at which the person named in the instrument proposes to vote.

4. The register of members of the Company will be closed from 16 June 2020 to 19 June 2020 (both days included), for the purpose of determining the list of shareholders entitled to attend the EGM, during which period no transfer of shares of the Company will be registered. In order to qualify for attendance and voting at the meeting, all completed transfer documents accompanied by the relevant share certificates must be lodged with the Company’s share registrar in Hong Kong not later than 4:30 p.m. on Monday, 15 June 2020.

5. Completion and return of the proxy form does not preclude a member from attending and voting in person at the EGM (or any adjournment of such meeting) and, in such event, the proxy form shall be deemed to be revoked.

6. Where there are joint holders of any shares of the Company, any one of such joint holders may vote, either in person or by proxy, in respect of such shares as if he were solely entitled thereto; but if more than one of such joint holders are present at the EGM (and any adjournment of such meeting), the most senior will alone be entitled to vote, whether in person or by proxy. For this purpose, seniority will be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.

– EGM-3 –