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 stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your securities in Energy International Investments Holdings Limited (the “ Company ”), you should at once hand this circular, and the accompanying proxy form, to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

This circular is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities of the Company.

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.

ENERGY INTERNATIONAL INVESTMENTS HOLDINGS LIMITED 能源國際投資控股有限公司[*]

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 353)

(1) SUBSCRIPTION OF CONVERTIBLE BONDS BY GIANT CRYSTAL LIMITED UNDER SPECIFIC MANDATE CONSTITUTING A CONNECTED TRANSACTION; (2) PLACING OF CONVERTIBLE BONDS UNDER SPECIFIC MANDATE; AND

(3) NOTICE OF EXTRAORDINARY GENERAL MEETING

Placing Agent

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

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A notice of extraordinary general meeting (the “ EGM ”) of the Company to be held at 2/F, J Plus 35-45B Bonham Strand, Sheung Wan, Hong Kong on Friday, 17 August 2018 at 3:00 p.m. is set out on pages 59 to 61 of this circular. A form of proxy for use by the Shareholders at the EGM is enclosed with this circular. Such form of proxy is also published on the web site of The Stock Exchange of Hong Kong Limited.

Whether or not you are able to attend the EGM in person, you are requested to complete the form of proxy, in accordance with the instructions printed thereon and deposit the same at the office of the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for the 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.

27 July 2018

For identification purpose only

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
Letter from the Independent Financial Adviser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Appendix – General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	52
Notice of Extraordinary General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	59

– i –

DEFINITIONS

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

“2015 CB” the 3-year, 5% p.a. convertible bonds issued by the Company in September 2015 maturing in September 2018 “Announcement” the Company’s announcement dated 14 June 2018 in relation to the GCL CB Subscription and the CB Placing “associates” having the meaning ascribed to it under the Listing Rules

“Board” the board of Directors
“Business Day” any day (other than a Saturday, Sunday or a day on which a typhoon signal no. 8 or above or black rainstorm signal is hoisted in Hong Kong between 9:00 a.m. to 5:00 p.m.) on which banks in Hong Kong are open for business
“CB Placees” any independent individual, professional or institutional investors whom the Placing Agent and/or any of its subplacing agent(s) have procured to subscribe for any of the Placing Convertible Bonds under the CB Placing

“CB Placing” the placing of the Placing Convertible Bonds (on best effort basis) on the terms and subject to the conditions of the CB Placing Agreement “CB Placing Agreement” the conditional placing agreement entered into between the Company and the Placing Agent dated 14 June 2018 in relation to the CB Placing on best effort basis, as amended and modified by the letter agreement dated 20 July 2018 regarding the extension of its long stop date

“Company” Energy International Investments Holdings Limited, a company incorporated in the Cayman Islands with limited liability and whose shares are listed on the Main Board of the Stock Exchange with stock code 353
“connected persons” having the meaning ascribed to it under the Listing Rules “Conversion Period” the period commencing on the date of issue of the Convertible Bonds and ending on the Maturity Date
“Conversion Price” HK$0.255 per Conversion Shares, subject to adjustments and the terms and conditions of the Convertible Bonds
“Conversion Shares” collectively, the GCL Conversion Shares and the Placing Conversion Shares or (where the context requires) any part of them

– 1 –

DEFINITIONS

“Convertible Bonds” collectively, the GCL Convertible Bonds and the Placing Convertible Bonds or (where the context requires) any part of them
“Director(s)” the director(s) of the Company
“EGM” the extraordinary general meeting of the Company to be convened to be held at 2/F, J Plus 35-45B Bonham Strand, Sheung Wan, Hong Kong on Friday, 17 August 2018 at 3:00 p.m. to consider and, if thought fit, approve, amongst other things, the GCL CB Subscription Agreement and the CB Placing Agreement and the transactions contemplated thereunder, including the issue of the Convertible Bonds and the allotment and issue of the Conversion Shares under the Specific Mandates
“GCL” Giant Crystal Limited, a company incorporated in the British Virgin Islands with limited liability ultimately and beneficially owned as to 50% each by Mr. Cao and Mr. Yu and a substantial shareholder of the Company
“GCL 2010 CB” the convertible bonds of the Company in the principal amount of HK$628,160,000 previously held by GCL, which were converted into 785,200,000 Shares on 22 June 2018
“GCL CB Subscription” the subscription of the GCL Convertible Bonds by GCL on the terms and subject to the conditions of the GCL CB Subscription Agreement
“GCL CB the conditional subscription agreement entered into Subscription Agreement” between the Company and GCL dated 14 June 2018 in relation to the subscription by GCL of the GCL Convertible Bonds, as amended and modified by the letter agreement dated 20 July 2018 regarding the extension of its long stop date
“GCL Conversion Shares” the new Shares to be allotted and issued by the Company upon the exercise of the conversion rights attaching to the GCL Convertible Bonds
“GCL Convertible Bonds” the two-year, 3% p.a. convertible bonds proposed to be issued by the Company in the aggregate principal amount of HK$200,000,000 under the GCL CB Subscription Agreement
“GCL Specific Mandate” the authority to be sought from the Independent Shareholders at the EGM to authorise the Directors to issue the GCL Convertible Bonds under the GCL CB Subscription Agreement and to allot and issue the GCL Conversion Shares upon conversion of the GCL Convertible Bonds

– 2 –

DEFINITIONS

“Group”
“HK$”
“Hong Kong”
“Independent Board Committee”
“Independent Financial Adviser” or “Astrum”
“Independent Shareholders”
“Independent Third Party(ies)”
“Latest Practicable Date”
“Listing Rules”
“Majority Bondholder(s)”

the Company and its subsidiaries from time to time

Hong Kong dollars, the lawful currency of Hong Kong

the Hong Kong Special Administrative Region of the People’s Republic of China
the independent board committee of the Company, comprising all the independent non-executive Directors, namely Mr. Lee Hoi Yan, Mr. Wang Jinghua and Mr. Fung Nam Shan, which was established to make a recommendation regarding the terms of the GCL CB Subscription Agreement and the GCL Specific Mandate
Astrum Capital Management Limited, a corporation licensed to carry on type 1 (dealing in securities), type 2 (dealing in futures contracts), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO, being the independent financial adviser appointed to advise the Independent Board Committee and the Independent Shareholders regarding the terms of the GCL CB Subscription Agreement and the GCL Specific Mandate
Shareholders other than (a) GCL, Mr. Cao, Mr. Yu and their respective associates; and (b) any other Shareholders who are required by the Listing Rules to abstain from voting in respect of the resolution(s) relating to the GCL CB Subscription Agreement and the GCL Specific Mandate at the EGM
persons who themselves (and in the case of any corporate entities, their ultimate beneficial owners) are, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, third parties independent of, and not connected with, the Company and its connected persons
24 July 2018, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information for inclusion in this circular
the Rules Governing the Listing of Securities on the Main Board of the Stock Exchange
a holder or a group of holders of Convertible Bonds in aggregate holding not less than 50% of the outstanding principal amount of the Convertible Bonds from time to time

– 3 –

DEFINITIONS

“Maturity Date”

the day falling on the second anniversary of the date of issue of the Convertible Bonds or if such date is not a Business Day, the next Business Day

“Mr. Cao”
Mr. Cao Sheng, an executive Director of the Company
“Mr. Yu”
Mr. Yu Zhiyong, an executive Director of the Company
“Placing Agent” Golden Rich Securities Limited, a corporation licensed to carry on type 1 (dealing in securities) regulated activities under the SFO
“Placing Conversion Shares” the new Shares to be allotted and issued by the Company upon the exercise of the conversion rights attaching to the Placing Convertible Bonds
“Placing Convertible Bonds” the two-year, 3% p.a. convertible bonds proposed to be issued by the Company in the aggregate principal amount of up to HK$500,000,000, to be placed by the Placing Agent on best effort basis under the CB Placing Agreement
“Placing Specific Mandate” the authority to be sought from the Shareholders at the EGM to authorise the Directors to issue the Placing Convertible Bonds under the CB Placing Agreement and to allot and issue the Placing Conversion Shares upon conversion of the Placing Convertible Bonds

“SFO”

the Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong
“Share(s)” ordinary share(s) of HK$0.10 each in the share capital of the Company
“Shareholders”
holders of the Shares
“Specific Mandates” collectively, the GCL Specific Mandate and the Placing Specific Mandate
“Stock Exchange”
The Stock Exchange of Hong Kong Limited
“substantial shareholders”
having the meaning ascribed thereto under the Listing Rules
“Takeovers Code” the Hong Kong Code on Takeovers and Mergers
“%” per cent.

– 4 –

LETTER FROM THE BOARD

ENERGY INTERNATIONAL INVESTMENTS HOLDINGS LIMITED 能源國際投資控股有限公司[*]

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 353)

Executive Directors: Mr. Lan Yongqiang (Chairman) Ms. Wang Meiyan Mr. Chan Wai Cheung Admiral Ms. Jin Yuping Mr. Cao Sheng Mr. Yu Zhiyong

Independent non-executive Directors: Mr. Lee Hoi Yan Mr. Wang Jinghua Mr. Fung Nam Shan

Registered office: Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Head office and principal place of business in Hong Kong: Unit 1508, 15th Floor The Center 99 Queen’s Road Central Hong Kong

27 July 2018

To the Shareholders

Dear Sir or Madam,

(1) SUBSCRIPTION OF CONVERTIBLE BONDS BY GIANT CRYSTAL LIMITED UNDER SPECIFIC MANDATE CONSTITUTING A CONNECTED TRANSACTION; AND

(2) PLACING OF CONVERTIBLE BONDS UNDER SPECIFIC MANDATE

INTRODUCTION

Reference is made to (a) the Company’s Announcement dated 14 June 2018 in relation to the subscription of the GCL Convertible Bonds in the principal amount of HK$200,000,000 by GCL under the GCL Specific Mandate constituting a connected transaction and the placing of the Placing Convertible Bonds in the principal amount of up to HK$500,000,000 by the Placing Agent (on best effort basis) under the Placing Specific Mandate; (b) the Company’s announcement dated 6 July 2018 in relation to the appointment of the Independent Financial Adviser and the delay in dispatch of circular; and (c) the Company’s announcement dated 20 July 2018 in relation to the delay in dispatch of circular and extension of the long stop dates.

For identification purpose only

– 5 –

LETTER FROM THE BOARD

The purpose of this circular is to provide you with, among other things, (i) further information on the GCL CB Subscription Agreement and the CB Placing Agreement and the transactions contemplated thereunder, including the issue of the Convertible Bonds and the allotment and issue of the Conversion Shares under the Specific Mandates; (ii) the recommendation of the Independent Board Committee to the Independent Shareholders regarding the terms of the GCL CB Subscription Agreement and the GCL Specific Mandate; (iii) a letter from the Independent Financial Adviser containing their advice to the Independent Board Committee and the Independent Shareholders regarding the terms of the GCL CB Subscription Agreement and the GCL Specific Mandate; (iv) other information prescribed by the Listing Rules; and (v) the notice of the EGM.

THE GCL CB SUBSCRIPTION

The principal terms of the Convertible Bonds are summarised in the section headed “PRINCIPAL TERMS OF THE CONVERTIBLE BONDS” in this circular.

Conditions precedent to the GCL CB Subscription

Completion of the GCL CB Subscription Agreement is conditional upon:

(1) the Company having obtained the approval from the Stock Exchange for the listing of, and permission to deal in, the GCL Conversion Shares upon conversion of the GCL Convertible Bonds, and such approval not having been revoked or cancelled prior to completion of the GCL CB Subscription; and
(2) the obtaining by the Company of the approval of the Independent Shareholders at the EGM in respect of the connected transaction arising from the GCL CB Subscription and the GCL Specific Mandate.

None of the conditions above can be waived by any party in any event.

The long stop date for the fulfillment of the conditions precedent to the GCL CB Subscription Agreement was originally fixed for 31 July 2018 (the “ Subscription Long Stop Date ”). On 20 July 2018, the parties to the GCL CB Subscription Agreement signed a letter agreement to extend the Subscription Long Stop Date to 17 September 2018. If the conditions precedent to the GCL CB Subscription Agreement are not fulfilled at or before 5:00 p.m. on the Subscription Long Stop Date, then unless the Company and GCL mutually agree to further extend the Subscription Long Stop Date, the GCL CB Subscription Agreement shall lapse and become null and void and the parties to the GCL CB Subscription Agreement shall be released from all obligations thereunder forthwith, save for liabilities for any antecedent breaches thereof.

Completion of the GCL CB Subscription shall take place within five Business Days after the day on which the last condition precedent to the GCL CB Subscription Agreement is fulfilled (or such other date as the Company and GCL may agree in writing), and in any event completion of the GCL CB Subscription shall take place within one month after the date of obtaining of the Independent Shareholders’ approval on the GCL Specific Mandate at the EGM.

– 6 –

LETTER FROM THE BOARD

Under the terms of the GCL CB Subscription Agreement, GCL has the right to nominate either itself or its wholly-owned subsidiary to take up the GCL Convertible Bonds on completion of the GCL CB Subscription.

Information relating to GCL

GCL is a company incorporated in the British Virgin Islands with limited liability principally engaged in investment holding. GCL is 100% legally and beneficially owned by Cosmic Shine International Limited (“ Cosmic Shine ”), which is in turn legally and beneficially owned as to 50% by Mr. Cao and as to the other 50% by Mr. Yu.

Mr. Cao and Mr. Yu are both executive Directors and controlling shareholders of the Company who are deemed, pursuant to Part XV of the SFO, to be interested in the 1,370,000,000 Shares held by GCL, representing 27.25% of the total issued share capital of the Company. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, as at the Latest Practicable Date, GCL was deemed to be (i) a controlled corporation of both Mr. Cao and Mr. Yu pursuant to Part XV of the SFO; and (ii) a substantial shareholder and connected person of the Company as defined in the Listing Rules.

THE CB PLACING

On 14 June 2018 (after trading hours), the Company entered into the CB Placing Agreement with the Placing Agent pursuant to which the Placing Agent conditionally agreed to place, on a best effort basis, the Placing Convertible Bonds in the aggregate principal amount of up to HK$500,000,000 to not less than six CB Placees.

To the best of the knowledge, information and belief of the Board, having made all reasonable enquiries, the Placing Agent and its ultimate beneficial owner(s) are Independent Third Parties. As at the Latest Practicable Date, the Placing Agent was not interested in any Shares.

The Placing Agent will receive a placing commission of 2% of the aggregate principal amount of the Placing Convertible Bonds successfully placed by the Placing Agent to the CB Placees procured by it.

The principal terms of the Convertible Bonds are summarised in the section headed “PRINCIPAL TERMS OF THE CONVERTIBLE BONDS” in this circular.

The CB Placees

Under the terms of the CB Placing Agreement, the Placing Agent shall ensure that (a) all CB Placees are independent individual, professional or institutional investors; (b) all CB Placees are (and for all CB Placees who are corporations, together with their ultimate beneficial owners) Independent Third Parties and not connected persons of the Company; and (c) none of the CB Placees will become a substantial shareholder of the Company as a result of the placing of the Placing Convertible Bonds subscribed by him on fully converted basis as at the date of completion of the CB Placing (taking into account other securities held by such CB Placee at the time of his subscription of the Placing Convertible Bonds).

– 7 –

LETTER FROM THE BOARD

Conditions precedent to the CB Placing

Completion of the CB Placing Agreement is conditional upon:

(1) the Company having obtained the approval from the Stock Exchange for the listing of, and permission to deal in, the Placing Conversion Shares upon conversion of the Placing Convertible Bonds, and such approval not having been revoked or cancelled prior to completion of the CB Placing;
(2) the obtaining by the Company of the approval of the Shareholders at the EGM in respect of the Placing Specific Mandate arising from the CB Placing and the issue of the Placing Convertible Bonds; and
(3) the completion of GCL CB Subscription.

None of the conditions above can be waived by any party in any event.

The long stop date for the fulfillment of the conditions precedent to the CB Placing Agreement was originally fixed for 31 July 2018 (the “ Placing Long Stop Date ”). On 20 July 2018, the parties to the CB Placing Agreement signed a letter agreement to extend the Placing Long Stop Date to 17 September 2018. If the conditions precedent to the CB Placing Agreement are not fulfilled at or before 5:00 p.m. on the Placing Long Stop Date, then unless the Company and the Placing Agent mutually agree to further extend the Placing Long Stop Date, the CB Placing Agreement shall lapse and become null and void and the parties to the CB Placing Agreement shall be released from all obligations thereunder forthwith, save for liabilities for any antecedent breaches thereof.

Completion of the CB Placing shall take place within five Business Days after the day on which the last condition precedent to the CB Placing Agreement is fulfilled (or such other date as the Company and the Placing Agent may agree in writing), and in any event completion of the CB Placing shall take place within one month after the date of obtaining of the Shareholders’ approval on the Placing Specific Mandate at the EGM.

Termination of the CB Placing Agreement

If at any time on or prior to 12:00 noon on the date of completion of the CB Placing:

(i) there shall have been, since the date of the CB Placing Agreement, such a change in national or international financial, political or economic conditions or taxation or exchange controls as would, in the opinion of the Placing Agent, be likely to prejudice materially the consummation of the CB Placing; or
(ii) any breach of any of the representations and warranties set out in the CB Placing Agreement comes to the knowledge of the Placing Agent or any event occurs or any matter arises on or after the date of the CB Placing Agreement and prior to the date of completion of the CB Placing which if it had occurred or arisen before the date of the CB Placing Agreement would have rendered any of such representations and warranties untrue or incorrect in any material respect or there has been a material breach by the Company of any other provisions of the CB Placing Agreement; or

– 8 –

LETTER FROM THE BOARD

(iii) any moratorium, suspension or restriction on trading in shares or securities generally on the Stock Exchange due to exceptional financial circumstances;

then and in any such case, the Placing Agent may terminate the CB Placing Agreement without liability to the Company by giving notice in writing to the Company, provided that such notice is received prior to 12:00 noon on the date of completion of the CB Placing.

In the event the Placing Agent terminates the CB Placing Agreement, all obligations of each of the parties under the CB Placing Agreement shall cease and determine and no party shall have any claim against the other party in respect of any matter arising out of or in connection with the CB Placing Agreement except for any antecedent breach of any obligation under the CB Placing Agreement.

PRINCIPAL TERMS OF THE CONVERTIBLE BONDS

Issuer : The Company Principal amount : Up to HK$700,000,000 in aggregate, comprising: (a) GCL Convertible Bonds of HK$200,000,000; and (b) Placing Convertible Bonds of up to HK$500,000,000. Interest : Three per cent. (3%) per annum payable on the due date of the principal amount, provided that no interest is payable for any part of the Convertible Bonds which are converted into Conversion Shares pursuant to the conditions of the Convertible Bonds. Maturity Date : The day falling on the second anniversary of the date of issue of the Convertible Bonds (or if such date is not a Business Day, the next Business Day). Conversion Period : The period commencing on the date of issue of the Convertible Bonds and ending on the Maturity Date. Conversion Rights : Holders of the Convertible Bonds shall have the right to convert the whole or part of the principal amount of the Convertible Bonds into Conversion Shares at the initial Conversion Price of HK$0.255 per Conversion Share at any time during the Conversion Period, provided always that the holder shall not convert the Convertible Bonds to an extent which would either (a) reduce the public float of the Company to less than 25% (or the relevant percentage as prescribed by the Listing Rules) of the issued Shares or (b) result in any change of control (as defined in the Takeovers Code) of the Company or otherwise trigger any mandatory offer obligation under Rule 26 of the Takeovers Code on the part of the holder of the Convertible Bonds who exercises the conversion rights (or party acting in concert with it) unless the regulatory requirements under the Takeovers Code and the Listing Rules are fully complied with (collectively, the “ Conversion Restrictions ”).

– 9 –

LETTER FROM THE BOARD

Conversion Shares : Based on the initial Conversion Price of HK$0.255 per Conversion Share and in each case assuming there is no other change in the issued share capital of the Company between the Latest Practicable Date and the full conversion of the Convertible Bonds:

(a) an aggregate of 784,313,725 GCL Conversion Shares will be allotted and issued by the Company upon exercise in full of the conversion rights attaching to the GCL Convertible Bonds, representing: (a) approximately 15.60% of the existing issued share capital of the Company; (b) approximately 13.50% of the issued share capital of the Company as enlarged by the issue of 784,313,725 GCL Conversion Shares; and (c) approximately 10.09% of the issued share capital of the Company as enlarged by the issue of the maximum of 2,745,098,038 Conversion Shares; and
(b) an aggregate of up to 1,960,784,313 Placing Conversion Shares will be allotted and issued by the Company upon exercise in full of the conversion rights attaching to the maximum principal amount of Placing Convertible Bonds, representing: (a) approximately 39.00% of the existing issued share capital of the Company; (b) approximately 28.06% of the issued share capital of the Company as enlarged by the issue of the maximum of 1,960,784,313 Placing Conversion Shares; and (c) approximately 25.23% of the issued share capital of the Company as enlarged by the issue of the maximum of 2,745,098,038 Conversion Shares.

The aggregate nominal value of the maximum 2,745,098,038 Conversion Shares is HK$274,509,803.80.

– 10 –

LETTER FROM THE BOARD

Conversion Price

: The initial Conversion Price of HK$0.255 (which is subject to adjustments upon occurrence of the Adjustment Events): (i) is equivalent to the closing price of HK$0.255 per Share as quoted on the Stock Exchange on the date of signing of the GCL CB Subscription Agreement and the CB Placing Agreement; (ii) represents a premium of approximately 0.39% over the average closing price of HK$0.254 per Share as quoted on the Stock Exchange for the five trading days immediately prior to the date of signing of the GCL CB Subscription Agreement and the CB Placing Agreement; (iii) represents a premium of approximately 280.60% over the net asset value per Share of approximately HK$0.067 as calculated from the audited equity attributable to the owners of the Company as at 31 December 2017 of approximately HK$203.5 million and the total number of 3,049,704,594 issued shares of the Company as at 31 December 2017; (iv) represents a premium of approximately 235.53% over the adjusted net asset value per Share of approximately HK$0.076 as calculated from the adjusted net assets (the “ Adjusted NAV ”) of the Company of approximately HK$380.6 million and the total number of 5,027,123,073 issued shares of the Company as at the Latest Practicable Date; and (v) represents a premium of approximately 7.14% over the closing price of HK$0.238 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

The Adjusted NAV of the Company is calculated from (a) the audited equity attributable to the owners of the Company as at 31 December 2017 of approximately HK$203.5 million, adding (b) net proceeds in the approximate amount of HK$85.1 million raised from the Company’s placing of 609,940,000 Shares which was completed on 14 February 2018, and deducting from it (c) current liabilities in the principal amount of HK$92 million due to the conversion of 2015 CB into 582,278,479 Shares after 31 December 2017 but before the Latest Practicable Date. For the avoidance of doubt, the conversion of convertible bonds in the principal amount of HK$628,160,000 by GCL into 785,200,000 Shares as disclosed in the Company’s announcement dated 22 June 2018 has not resulted in any change to the Company’s net assets.

– 11 –

LETTER FROM THE BOARD

Adjustments Events : The Conversion Price will be subject to adjustments upon the occurrence of the following events (the “ Adjustment Events ”): (i) an alteration of the nominal amount of the Shares by reason of consolidation, subdivision, reclassification or otherwise;
(ii) an issue of Shares credited as fully paid to the Shareholders by way of capitalisation of profits or reserves (including any share premium account or capital redemption reserve), other than Shares paid up out of profits or reserves and issued in lieu of (in whole or in part) a cash dividend, being a dividend which the Shareholders concerned would or could otherwise have received and which does not constitute a capital distribution (as such term is defined in the conditions of the Convertible Bonds);
(iii) a capital distribution (as such term is defined in the conditions of the Convertible Bonds) to the Shareholders being made by the Company;
(iv) an issue of Shares to all or substantially all Shareholders as a class by way of rights, or issue or grant to all or substantially all Shareholders as a class by way of rights, any options, warrants or other rights to subscribe for or purchase any Shares, in each case at less than 80% of the market price of the Shares;
(v) an issue of Shares being made wholly for cash at a price less than 80% of the market price of the Shares;
(vi) an issue wholly for cash being made by the Company of securities convertible into or exchangeable for or carrying rights of subscription for Shares, at a consideration per Share which is less than 80% of the market price of the Shares, or the conversion, exchange or subscription rights of any such securities (other than in accordance with the terms applicable thereto) are altered or modified so that the consideration per Share is less than 80% of the market price of the Shares;

– 12 –

LETTER FROM THE BOARD

(vii) an issue of Shares for the acquisition of asset at a total effective consideration per Share which is less than 80% of the market price of the Shares; and
(viii) an issue of any securities which by their terms are convertible into or exchangeable for or carry rights of subscription for new Shares for the acquisition of asset at a total effective consideration initially receivable for such securities which is less than 80% of the market price of the Shares.
Events of Default : If any of the following events (“ Events of Default ”) occurs, the Majority Bondholder will be entitled to give a notice in writing to the Company to require the Company to forthwith redeem the Convertible Bonds outstanding and held by the bondholders at the principal amount then outstanding together with interest of 3% per annum calculated from the date of issue of the bond up to and including the date of payment: (i) there is a failure by the Company to deliver the Conversion Shares pursuant to the conditions of the Convertible Bonds; or
(ii) the Company does not perform or comply with any one or more of its other obligations under the Convertible Bonds which default is incapable of remedy, or is not remedied within 15 days after notice requiring the same to be remedied is served by the Majority Bondholder on the Company; or
(iii) an order is made or an effective resolution passed for winding-up or dissolution of the Company, or the Company ceases or threatens to cease to carry on all or a material part of its business or operations, except for the purpose of and followed by a reconstruction, amalgamation, reorganisation, merger or consolidation.

Transferability : The Convertible Bonds are freely transferable, provided that no transfer of the Convertible Bonds to any connected person (as defined in the Listing Rules) of the Company shall be made without the prior written consent of the Company.

– 13 –

LETTER FROM THE BOARD

Redemption

: Subject to the provisions of Events of Default, the Convertible Bonds may not be redeemed by the holder before the Maturity Date.

The Convertible Bonds may be redeemed in whole or part by the Company before the Maturity Date at the redemption price which is equivalent to the principal amount of the redeemed Convertible Bonds plus interest of 3% per annum calculated from the date of issue of the bond up to and including the date of redemption.

Unless the Company is required to redeem the Convertible Bonds pursuant to their terms as a result of the serving of default notice by the Majority Bondholder upon the occurrence of an Event of Default, or redeemed pursuant to the exercise of the Company’s early redemption, or it becomes necessary for the Company to redeem all or part of the Convertible Bonds on the Maturity Date as conversion is prohibited by the Conversion Restrictions, all Convertible Bonds are automatically converted into Conversion Shares on the Maturity Date. For the avoidance of doubt, no interest shall be payable on any Convertible Bonds if they are eventually converted into Conversion Shares.

Voting : The Convertible Bonds shall not confer on the holders the right to vote at any general meetings of the Company. Listing : No application will be made for the listing of the Convertible Bonds on the Stock Exchange or any other stock exchange.

Application will be made by the Company to the Stock Exchange for the listing of, and permission to deal in, the Conversion Shares that may be allotted and issued upon the exercise of the conversion rights attaching to the Convertible Bonds.

Ranking of : The Conversion Shares will, when issued and allotted, rank the Conversion Shares pari passu in all respects among themselves and with all other fully paid Shares in issue.

– 14 –

LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE TRANSACTIONS AND THE USE OF PROCEEDS

The principal activity of the Company is investment holding. Its principal subsidiaries are engaged in the oil production and the leasing of oil and liquefied chemical terminal together with its storage and logistics facilities.

As disclosed in the Company’s Annual Report 2017, as at 31 December 2017, the Group recorded (a) total liabilities of HK$1,623 million of which HK$1,225 million were current liabilities due or falling due within twelve months; and (b) net current liabilities of HK$1,076 million. The increase of liabilities is principally resulted from the construction of the port and storage facilities of the Group’s oil and liquefied chemical terminal segment since the acquisition of the project in December 2015. Further to the Company’s announcement dated 19 June 2018, the port and storage facilities have already commenced full-scale operation before the end of June 2018.

In February 2018, the Company completed a share placement (the “ February Share Placement ”) raising net proceeds of approximately HK$85.1 million, of which HK$21.8 million was intended for general working capital of the Group and HK$63.3 million was intended for repayment of debt and liabilities. As of the Latest Practicable Date, out of the above placing proceeds, approximately HK$30.3 million was already utilised for repayment of debt and liabilities, approximately HK$23.5 million was set aside for interest payable on the 2015 CB, approximately HK$6.9 million was utilised for rental expenses, staff salaries, professional fees and other operating expenses between February and July 2018, approximately HK$5.3 million was set aside for accrued expenses, and the remaining HK$19.1 million was set aside for general working capital and repayment of debt and liabilities. Despite the completion of the February Share Placement mentioned above, the Group’s overall level of total liabilities and current liabilities remained high. The Directors therefore consider that it is desirable to launch another fund-raising with significantly larger amount of intended net proceeds, thereby reducing the Group’s liabilities to a more comfortable level.

The Company has considered alternative fund-raising methods (such as bank borrowings and equity financing) other than the GCL CB Subscription and the CB Placing. In respect of debt borrowings, the Company has enquired with two existing creditors of the Group, one being a rural commercial bank in China and the other being a financial leasing institution in China, and four commercial banks in Hong Kong. The Group requested the first PRC rural commercial bank creditor (which formerly granted a loan of RMB30 million to the Group) to extend the loan with a larger loan size, but the creditor reduced the loan size instead. The Group requested the second PRC financial leasing institution (which has granted a loan of RMB150 million to the Group) to enlarge the loan size to us, but the creditor rejected our application.

Regarding the four commercial banks in Hong Kong, two of them had ongoing business dealings with the Group but none of them had previously granted any credit or loan facilities to the Group. The Group enquired with these four banks to explore the possibility of applying for credit line or loan facilities, but all of them verbally turned down our requests and indicated that they were not prepared to grant any sensible loan amount to us without the fortification by real property collaterals. One of the banks approached by the Group indicated that unless the Group can improve its financial position, it was unable to consider any loan application by us.

– 15 –

LETTER FROM THE BOARD

The Group has made enquiries with four securities firms (including the Placing Agent) about the possibility and feasibility of acting as the Company’s placing agent for placing or as the underwriter for rights issue or open offer, in each case involving either shares, bonds or convertible bonds to be issued by the Company in a fund-raising size which matches the Group’s liabilities. The first securities firm indicated that its investors had little interest in the Company’s securities, given our currently weak financial position. The second securities firm indicated interest of assisting the Company to launch a best-effort placing of the Company’s convertible bonds, but its investors were expecting an interest rate of at least 7-8% per annum, conversion price of at least 15% discount to the market trading price level and it was only prepared to manage a fund-raising size of under HK$200 million amidst the current market sentiment even under best-effort basis. The third securities firm also expressed interest in launching a best-effort placing of convertible bonds, but its investors were expecting an interest rate of at least 5-6% per annum, conversion price of at least 25% discount to the market trading price level and with a fund-raising size of only HK$100 million. None of the securities firms approached by the Company is prepared to underwrite any open offer or rights issue for us. Only the Placing Agent indicated willingness to conduct a besteffort placing of convertible bonds of the Company in the size of HK$500 million, which is closest to the Company’s fund-raising target.

The Placing Agent requested the Company to explore the possibility of a direct subscription of bonds or shares of the Company by the substantial Shareholders of the Company to show their support and commitment to the Company, which will help to boost investors’ confidence despite the weak financial position of the Group. The Company therefore approached GCL to explore the possibility of the GCL CB Subscription which in the view of the Directors will provide the following complementary value to the CB Placing, namely: (a) topping up the shortfall between the CB Placing and the total fund-raising size desired and needed by the Company of HK$700 million; (b) providing a certain minimum level of funding assurance to the Company, as the outcome of the best-effort CB Placing is inevitably susceptible to recent fluctuations in global economy, interest rate trends, stock market performance and investors’ appetite in general; and (c) signifying the support and confidence of the management and substantial Shareholders on the future prospect of the Group.

Having taken into consideration the feedbacks from banks, creditors and securities firms for possible borrowings and equity fund-raisings as stated above, together with the facts that (i) the GCL CB Subscription would not incur immediate dilution effect on the shareholding of the existing Shareholders as compared to share placement; and (ii) notwithstanding the interest-bearing nature of the GCL Convertible Bonds, no interest is payable if they are ultimately converted into Shares and all the outstanding GCL Convertible Bonds shall be automatically converted into GCL Conversion Shares on the Maturity Date (unless redeemed due to Events of Default, early redeemed at the discretion of the Company or conversion of bonds is restricted by the Conversion Restrictions), the Directors are of the view that the GCL CB Subscription is the most desirable and feasible means for the Company to raise fund of sufficient size to top up the shortfall between the CB Placing and the total fund-raising size desired and needed by the Company of HK$700 million.

– 16 –

LETTER FROM THE BOARD

Against the above background, the Directors considered that they have made their best efforts in considering various alternative fund raising methods under the prevailing market conditions, and consider that the GCL CB Subscription provides the Company with certainty on the outcome of the fund-raising and signifies the support and confidence of the Company’s substantial Shareholder on the Group’s future prospect, and that the CB Placing is intended to raise additional funding which is closer to the size of the Group’s liabilities. Compared with rights issue or open offer of a comparable size of fund-raising, the timetable for the GCL CB Subscription and the CB Placing is expected to be shorter since there is no need to prepare and vet a prospectus for registration. Although the debt financing nature of the Convertible Bonds will incur interest cost on cash redemption as compared to equity financing, the terms of the Convertible Bonds provide that no interest is payable if they are ultimately converted into Shares and that the bonds shall automatically convert into Shares on maturity (unless redeemed due to Events of Default, early redeemed at the discretion of the Company or conversion to Shares is restricted by Conversion Restrictions), thereby increasing the chance of conversion which is hoped to save interest cost and release the Company from the repayment obligations when the bonds mature in two-year time.

The gross and net proceeds from the GCL CB Subscription are estimated to be HK$200 million and approximately HK$199 million, respectively. The net price for the GCL CB Subscription is approximately HK$0.254 per GCL Conversion Share. The Company intends to use the net proceeds from the GCL CB Subscription for repayment of debt and liabilities.

Assuming the maximum principal amount of the Placing Convertible Bonds are successfully placed by the Placing Agent and based on the estimated expenses of the CB Placing in the amount of approximately HK$12 million, the gross and net proceeds from the CB Placing are estimated to be HK$500 million and approximately HK$488 million, respectively. The net price for the CB Placing is approximately HK$0.249 per Placing Conversion Share. The Company intends to use the net proceeds from the CB Placing as to HK$98 million for the repayment of the principal of the outstanding and unconverted 2015 CB which will mature in September 2018, as to approximately HK$250 million for repayment of other debt and liabilities, as to approximately HK$40 million for expansion and business development of the Group’s newly-acquired financial consulting business, as to approximately HK$50 million being set aside for the maintenance of the Group’s existing businesses of oil production and oil and liquefied chemical terminal, storage and logistics, and as to approximately HK$50 million for the possible financing of acquisition opportunities as and when they arise.

As disclosed in the Company’s announcements dated 6 February 2018 and 7 May 2018, the Group acquired 80% issued share capital of iECO Financial Consulting Limited (“ iECO ”), which is principally engaged in the provision of financial consulting and insurance brokerage services, with the view to broadening the Group’s revenue stream. Following the completion of the acquisition of iECO, the Company continues to explore business opportunities in Hong Kong and China which may be able to create synergy with iECO’s businesses. Up to the Latest Practicable Date, the Company was in preliminary negotiations with several financial services companies in China with the view to exploring the possibility of cooperation, investment and/or acquisition. However, no legally binding agreement has been entered into in respect of any of such negotiations up to now, and announcement(s) will be made by the Company as and when appropriate if any disclosure obligation arises.

– 17 –

LETTER FROM THE BOARD

While the aggregate net proceeds raised from the February Share Placement of approximately HK$85.1 million and expected to be raised from the CB Placing and the GCL CB Subscription of approximately HK$687 million are insufficient to restore the Company’s net current liabilities position of HK$1,076 million as at 31 December 2017, the Company has during the first half of 2018 managed to obtain new financing facilities and to renew existing financing facilities in the aggregate amount of approximately HK$380 million. In addition, with the full-scale operation of the Group’s Dongying Port project before the end of June 2018, the continuing cash inflow from the port’s rental income is also expected to improve the Group’s financial position in the second half of 2018. While the Company has no current plans to raise further funding in the coming 12 months, the Company is capable of capturing suitable market opportunities using the general mandate granted by the Shareholders to the Directors at the Company’s annual general meeting held on 11 June 2018. In the light of the foregoing, the Directors are cautiously optimistic on alleviating (or at least substantially narrowing) its net current liabilities position by the end of 2018, assuming that the CB Placing and the GCL CB Subscription proceeds as expected and completes satisfactorily.

The terms of the CB Placing Agreement (including the placing commission) and the Placing Convertible Bonds (including the Conversion Price, the interest rate and the Maturity Date) were determined after arm’s length negotiations between the Company and the Placing Agent with reference to (a) the historical trading prices, with the closing prices of the Shares for the month prior to the date of the CB Placing Agreement being quoted in the range of HK$0.242 to HK$0.255 and with an average closing price of HK$0.250 during the month; (b) the liquidity of the Shares which remained at a low level for the three months prior to the date of the CB Placing Agreement, with an average trading volume of approximately 10,475,448 Shares (representing approximately 0.208% of the total number of the Shares in issue as at the Latest Practicable Date); (c) the Group’s financial position including in particular its continual loss-making and net current liabilities position; and (d) market interest rates of unsecured loans, market rates of placing commission and the customary terms of other corporate bonds issued by listed companies in Hong Kong of similar size (such as the terms to maturity, events of default and those relating to the Conversion Restrictions) during the six months prior to the date of the date of the CB Placing Agreement. Completion of the CB Placing Agreement is conditional upon completion of the GCL CB Subscription Agreement, such that potential investors are reassured by the continual support and commitment of the Company’s substantial shareholder, GCL and the improvement in financial position brought by the HK$199 million net proceeds raised under the GCL CB Subscription Agreement, which can in turn reinforce potential investors’ confidence.

The terms of the GCL CB Subscription Agreement and the GCL Convertible Bonds (including the Conversion Price, the interest rate and the Maturity Date) were determined after arm’s length negotiations between the Company and GCL by reference to the terms of the Placing Convertible Bonds. The Directors are of the view that it is fair and reasonable to benchmark the terms of the GCL Convertible Bonds against the Placing Convertible Bonds, with the view to ensuring that the commercial terms being offered to connected persons are no more favourable than those offered to independent Placees to be procured by the Placing Agent.

– 18 –

LETTER FROM THE BOARD

Having considered the facts that (i) the continual loss-making and net current liabilities position of the Group led to the going concern issue raised by the Company’s auditor; (ii) the Group is in great need of raising fund with substantial amount to lower the liabilities level and relieve the repayment pressure, and in turn, improve the Group’s financial position; (iii) the GCL CB Subscription can, on one hand, strengthen the Group’s liquidity level and on another hand, signify the support and confidence of the management and substantial Shareholders on the future prospect of the Group; (iv) the GCL CB Subscription is the most desirable and feasible means for the Group to raise fund with sufficient size to top up the shortfall between the CB Placing and the total fund-raising size desired and needed by the Company of HK$700 million; and (v) notwithstanding the potential dilution effect which may arise from the conversion of the Convertible Bonds, the fund-raisings offer a good opportunity for the Company to raise a significant amount of additional funding to improve the financial position of the Group, the Directors (including the independent non-executive Directors whose recommendations are now contained in the Letter from the Independent Board Committee after considering the advice contained in the Letter from the Independent Financial Adviser, both forming part of this circular) are of the view that the GCL CB Subscription Agreement, the CB Placing Agreement and the terms of the Convertible Bonds are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

– 19 –

LETTER FROM THE BOARD

EQUITY FUND RAISING ACTIVITIES OF THE COMPANY DURING THE PAST TWELVE MONTHS

The Company has conducted the following equity fund raising exercises in the past twelve months immediately preceding the Latest Practicable Date:

Date of	Equity fund	Net proceeds raised	Intended use of	Intended use of
announcement	raising exercise	(approximately)	proceeds		Actual	use of proceeds
22 January 2018	Placing of up to	HK$85.1 million	(a)	as to HK$21.8	(a)	approximately
	609,940,000 new			million for		HK$30.3 million was
	Shares at the placing			general working		already utilised for
	price of HK$0.143			capital of the		repayment of debt
	per Share under			Group; and		and liabilities;
	general mandate,
	which was completed		(b)	as to HK$63.3	(b)	approximately
	on 14 February 2018.			million for		HK$23.5 million was
				repayment		set aside for interest
				of debt and		payable on the 2015
				liabilities		CB;
					(c)	approximately
						HK$6.9 million was
						utilised for rental
						expenses, staff
						salaries, professional
						fees and other
						operating expenses
						between February
						and July 2018;

(d) approximately HK$5.3 million was set aside for accrued expenses; and (e) the remaining HK$19.1 million was set aside for general working capital and repayment of debt and liabilities.

– 20 –

LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF THE COMPANY

The table below illustrates the shareholding structures of the Company (i) as at the Latest Practicable Date; (ii) immediately after the allotment and issue of all the GCL Conversion Shares upon full exercise of conversion rights attaching to the GCL Convertible Bonds; (iii) immediately after the allotment and issue of all the Placing Conversion Shares upon full exercise of conversion rights attaching to the maximum principal amount of the Placing Convertible Bonds; and (iv) immediately after the allotment and issue of all the Conversion Shares upon full exercise of conversion rights attaching to the maximum principal amount of the Convertible Bonds (comprising both the GCL Convertible Bonds and the Placing Convertible Bonds), in each case assuming there is no other change in the issued share capital of the Company between the Latest Practicable Date and the full conversion of the relevant Convertible Bonds:

Giant Crystal Limited CB Placees Public shareholders Total	As at the Latest Practicable Date No. of shares % 1,370,000,000 (Note 1) 27.25 – – 3,657,123,073 72.75 5,027,123,073 100.00	Immediately after full conversion of the GCL Convertible Bonds No. of shares % 2,154,313,725 37.07 (Note 2) – – 3,657,123,073 62.93 5,811,436,798 100.00	Immediately after full conversion of the maximum Placing Convertible Bonds No. of shares % 1,370,000,000 19.61 1,960,784,313 28.06 3,657,123,073 52.33 6,987,907,386 100.00	Immediately after full conversion of the GCL Convertible Bonds and the maximum Placing Convertible Bonds No. of shares % 2,154,313,725 27.72 1,960,784,313 25.23 3,657,123,073 47.05 7,772,221,111 100.00	Immediately after full conversion of the GCL Convertible Bonds and the maximum Placing Convertible Bonds No. of shares % 2,154,313,725 27.72 1,960,784,313 25.23 3,657,123,073 47.05 7,772,221,111 100.00
					100.00

Notes:

GCL is 100% legally and beneficially owned by Cosmic Shine, which is in turn legally and beneficially owned as to 50% by Mr. Cao and as to the other 50% by Mr. Yu, both being executive Directors of the Company. As at the date of the Announcement, GCL was interested in 584,800,000 Shares and the GCL 2010 CB in the principal amount of HK$628,160,000 (carrying right to convert into 785,200,000 Shares by 10 August 2018). The GCL 2010 CB were fully converted into 785,200,000 Shares on 22 June 2018. As at the Latest Practicable Date, GCL was interested in 1,370,000,000 Shares, representing 27.25% of the total issued share capital of the Company.
Conversion of the Convertible Bonds is limited by the Conversion Restrictions, such that no bondholder shall convert the Convertible Bonds to an extent which would trigger the mandatory offer obligation under the Takeovers Code. Therefore, GCL will not be able to convert the GCL Convertible Bonds to an extent which causes its voting right in the Company to exceed 30%. The shareholding number and percentage of GCL here are for illustration purpose only.

– 21 –

LETTER FROM THE BOARD

IMPLICATIONS UNDER THE LISTING RULES

GCL is a substantial shareholder of the Company which is ultimately owned and controlled by Mr. Cao and Mr. Yu, both being executive Directors of the Company. Accordingly, the entering into of the GCL CB Subscription Agreement constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules and is subject to the announcement, reporting and Independent Shareholders’ approval requirements pursuant to the Listing Rules.

The GCL Convertible Bonds under the GCL CB Subscription and the GCL Conversion Shares upon their conversion will be issued under the GCL Specific Mandate, which is subject to Independent Shareholders’ approval at the EGM.

The Placing Convertible Bonds under the CB Placing and the Placing Conversion Shares upon their conversion will be issued under the Placing Specific Mandate, which is subject to Shareholders’ approval at the EGM.

EGM

A notice convening the EGM is set out on pages 59 to 61 of this circular. The EGM will be convened and held for the purposes of considering and, if thought fit, approving the GCL CB Subscription Agreement and the CB Placing Agreement and the transactions contemplated thereunder, including the issue of the Convertible Bonds and the allotment and issue of the Conversion Shares under the Specific Mandates.

A form of proxy for use at the EGM is enclosed with this circular. Whether or not you propose to attend the EGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and deposit the same at the offices of the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not later than 48 hours before the time of the EGM or any adjourned meeting. Completion and return of the form of proxy will not preclude you from attending and voting at the EGM or any adjourned meeting if you so desire.

Pursuant to Rule 13.39(4) of the Listing Rules, any votes of the shareholders at a general meeting must be taken by poll except where the chairman of the meeting, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands. Therefore, the chairman of the EGM will demand a poll for the resolution put forward at the EGM in respect of all the resolutions stated in the notice of the EGM.

– 22 –

LETTER FROM THE BOARD

GCL is 100% legally and beneficially owned by Cosmic Shine, which is in turn legally and beneficially owned as to 50% by Mr. Cao and as to the other 50% by Mr. Yu, both being executive Directors of the Company. In accordance with the Listing Rules, GCL, Mr. Cao, Mr. Yu and their respective associates will be required to abstain from voting on the resolution(s) in respect of the GCL CB Subscription at the EGM.

As at the date of the Announcement, GCL was interested in 584,800,000 Shares and GCL 2010 CB in the principal amount of HK$628,160,000 (carrying right to convert into 785,200,000 Shares by 10 August 2018). The GCL 2010 CB were fully converted into 785,200,000 Shares on 22 June 2018. As at the Latest Practicable Date, GCL was interested in 1,370,000,000 Shares (representing 27.25% of the total issued share capital of the Company). In addition, GCL is the subscriber of the GCL CB Subscription. Mr. Cao, Mr. Yu and GCL confirmed to the Company that (a) save as disclosed above, as at the Latest Practicable Date, they and their associates were not interested in any other Shares or underlying Shares; and (b) GCL will abstain from voting on the resolution(s) in respect of the GCL CB Subscription at the EGM in respect of its current holding of 1,370,000,000 Shares.

RECOMMENDATIONS

The Independent Board Committee, comprising all the independent non-executive Directors, namely Mr. Lee Hoi Yan, Mr. Wang Jinghua and Mr. Fung Nam Shan, has been established to advise the Independent Shareholders regarding the terms of the GCL CB Subscription Agreement and the GCL Specific Mandate. Having taken into account the terms of the GCL CB Subscription Agreement, the information stated in the Letter from the Board and the Letter from the Independent Financial Adviser, the Independent Board Committee concurs with the view of the Independent Financial Adviser and considers that although the GCL CB Subscription is not conducted in the ordinary and usual course of business of the Company, the terms of the GCL CB Subscription Agreement are on normal commercial terms and the GCL CB Subscription and the grant of the GCL Specific Mandate are fair and reasonable so far as the Independent Shareholders are concerned, and that the entering into of the GCL CB Subscription is in the interests of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the resolutions to be proposed at the EGM to approve the GCL CB Subscription Agreement and the transactions contemplated thereunder and the grant of the GCL Specific Mandate. The full text of the Letter from the Independent Board Committee is set out on page 25 of this circular.

The Independent Financial Adviser has been appointed to advise the Independent Board Committee and the Independent Shareholders regarding the terms of the GCL CB Subscription Agreement and the GCL Specific Mandate. Having taken into consideration the factors and reasons stated in the Letter from the Independent Financial Adviser, the Independent Financial Adviser is of the opinion that although the entering into of the GCL Subscription Agreement is not in the ordinary and usual course of business of the Company, it is on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned, and in the interests of the Company and the Shareholders as a whole. Accordingly, the Independent Financial Adviser recommends the Independent Shareholders to, and the Independent Board Committee to advise the Independent Shareholders to, vote in favour of the relevant resolution(s) to be proposed at the EGM to approve the GCL CB Subscription Agreement. The full text of the Letter from the Independent Financial Adviser is set out on pages 26 to 51 of this circular.

– 23 –

LETTER FROM THE BOARD

Having considered the factors stated in the paragraph headed “REASONS FOR AND BENEFITS OF THE TRANSACTIONS AND THE USE OF PROCEEDS” of the Letter from the Board, the Directors (including the independent non-executive Directors whose recommendation are now contained in the Letter from the Independent Board Committee after considering the advice contained in the Letter from the Independent Financial Adviser, both forming part of this circular) are of the view that the GCL CB Subscription Agreement, the CB Placing Agreement and the terms of the Convertible Bonds are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend (a) the Independent Shareholders to vote in favour of the resolutions to be proposed at the EGM to approve the GCL CB Subscription Agreement and the transactions contemplated thereunder and the grant of the GCL Specific Mandate; and (b) the Shareholders to vote in favour of the resolutions to be proposed at the EGM to approve the CB Placing Agreement and the transactions contemplated thereunder and the grant of the Placing Specific Mandate.

WARNING

SHAREHOLDERS AND/OR POTENTIAL INVESTORS OF THE COMPANY SHOULD NOTE THAT COMPLETION OF THE GCL CB SUBSCRIPTION AGREEMENT AND THE CB PLACING AGREEMENT IS CONDITIONAL UPON THE SATISFACTION OF CERTAIN CONDITIONS PRECEDENT AND THEREFORE MAY OR MAY NOT PROCEED. SHAREHOLDERS AND/OR POTENTIAL INVESTORS OF THE COMPANY SHOULD THEREFORE EXERCISE CAUTION WHEN DEALING IN THE SECURITIES OF THE COMPANY. PERSONS WHO ARE IN DOUBT AS TO THE ACTION THEY SHOULD TAKE SHOULD CONSULT THEIR PROFESSIONAL ADVISERS.

ADDITIONAL INFORMATION

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

Yours faithfully By order of the Board Energy International Investments Holdings Limited Lan Yongqiang Chairman

– 24 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

ENERGY INTERNATIONAL INVESTMENTS HOLDINGS LIMITED 能源國際投資控股有限公司[*]

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 353)

27 July 2018

To the Independent Shareholders

Dear Sir or Madam,

SUBSCRIPTION OF CONVERTIBLE BONDS BY GIANT CRYSTAL LIMITED UNDER SPECIFIC MANDATE CONSTITUTING A CONNECTED TRANSACTION

We have been appointed to form an independent board committee to consider and advise you on the terms of the GCL CB Subscription Agreement and the GCL Specific Mandate, details of which are set out in the circular issued by the Company to the Shareholders dated 27 July 2018 (the “ Circular ”), of which this letter forms part. Terms defined in the Circular will have the same meanings when used herein unless the context otherwise requires.

We wish to draw your attention to the Letter from the Board set out on pages 5 to 24 of the Circular, and the Letter from the Independent Financial Adviser set out on pages 26 to 51 of the Circular, and the additional information set out in the appendix to the Circular.

Having taken into consideration the terms of the GCL CB Subscription Agreement and the advice of the Independent Financial Adviser, we concur with the view of the Independent Financial Adviser and consider that although the GCL CB Subscription is not conducted in the ordinary and usual course of business of the Company, the terms of the GCL CB Subscription Agreement are on normal commercial terms and the GCL CB Subscription and the grant of the GCL Specific Mandate are fair and reasonable so far as the Independent Shareholders are concerned, and the entering into of the GCL CB Subscription is in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolutions to be proposed at the EGM to approve the GCL CB Subscription Agreement and the transactions contemplated thereunder and the grant of the GCL Specific Mandate.

Yours faithfully,

For and on behalf of the Independent Board Committee

Lee Hoi Yan Wang Jinghua Fung Nam Shan Independent non-executive Independent non-executive Independent non-executive Director Director Director

For identification purpose only

– 25 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

==> picture [103 x 76] intentionally omitted <==

Room 2704, 27/F, Tower 1, Admiralty Centre, 18 Harcourt Road, Admiralty, Hong Kong

27 July 2018

To the Independent Board Committee and the Independent Shareholders of Energy International Investments Holdings Limited

Dear Sirs,

SUBSCRIPTION OF CONVERTIBLE BONDS BY GIANT CRYSTAL LIMITED UNDER SPECIFIC MANDATE CONSTITUTING A CONNECTED TRANSACTION

INTRODUCTION

We refer to our engagement as the independent financial adviser to advise the independent board committee (the “ Independent Board Committee ”) and the independent shareholders (the “ Independent Shareholders ”) of Energy International Investments Holdings Limited (the “ Company ”) in relation to the subscription (the “ GCL CB Subscription ”) of convertible bonds proposed to be issued by the Company in the aggregate principal amount of HK$200,000,000 (the “ GCL Convertible Bonds ”) by Giant Crystal Limited (“ GCL ”). The details of the GCL CB Subscription is disclosed in the announcement of the Company dated 14 June 2018 (the “ Announcement ”) and in the letter from the Board (the “ Letter from the Board ”) set out on pages 5 to 24 of the circular of the Company dated 27 July 2018 (the “ Circular ”) to its shareholders, of which this letter forms part. Terms used in this letter shall have the same meanings as those defined in the Circular unless the context otherwise defined.

On 14 June 2018 (after trading hours), the Company entered into the GCL CB Subscription Agreement with GCL pursuant to which the Company conditionally agreed to issue, and GCL conditionally agreed to subscribe for, the GCL Convertible Bonds in the aggregate principal amount of HK$200,000,000. On 20 July 2018, the Company and GCL entered into a letter agreement (the “ Letter Agreement ”) to extend the long stop date from 31 July 2018 to 17 September 2018, unless extended by mutual consent of the Company and GCL.

Based on the information disclosed in the Letter from the Board, GCL is a substantial shareholder of the Company which is ultimately owned and controlled by Mr. Cao and Mr. Yu, both being executive Directors of the Company. Accordingly, the entering into of the GCL CB Subscription Agreement constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules and is subject to the announcement, reporting and Independent Shareholders’ approval requirements pursuant to the Listing Rules.

– 26 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on the information disclosed in the Letter from the Board, GCL is 100% legally and beneficially owned by Cosmic Shine, which is in turn legally and beneficially owned as to 50% by Mr. Cao and as to the other 50% by Mr. Yu, both being executive Directors of the Company. In accordance with the Listing Rules, GCL, Mr. Cao, Mr. Yu and their respective associates will be required to abstain from voting on the resolution(s) in respect of the GCL CB Subscription at the EGM. As at the date of the Announcement, GCL was interested in 584,800,000 Shares and GCL 2010 CB in the principal amount of HK$628,160,000 (carrying right to convert into 785,200,000 Shares by 10 August 2018). The GCL 2010 CB were fully converted into 785,200,000 Shares on 22 June 2018. As at the Latest Practicable Date, GCL was interested in 1,370,000,000 Shares (representing approximately 27.25% of the total issued share capital of the Company). In addition, GCL is the subscriber of the GCL CB Subscription. Mr. Cao, Mr. Yu and GCL confirmed to the Company that (a) save as disclosed above, as at the Latest Practicable Date, they and their associates were not interested in any other Shares or underlying Shares; and (b) GCL will abstain from voting on the resolution(s) in respect of the GCL CB Subscription at the EGM in respect of its current holding of 1,370,000,000 Shares.

The Independent Board Committee, comprising all of the independent non-executive Directors, namely Mr. Lee Hoi Yan, Mr. Wang Jinghua and Mr. Fung Nam Shan, has been established to advise the Independent Shareholders (i) as to whether the terms of the GCL CB Subscription Agreement are on normal commercial terms and as to whether the GCL CB Subscription and the grant of the GCL Specific Mandate are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) as to whether the entering into of the GCL CB Subscription Agreement is in the interests of the Company and the Shareholders as a whole, and as to their recommendation on voting in respect of the GCL CB Subscription and the GCL Specific Mandate at the EGM. We, Astrum Capital Management Limited, have been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

INDEPENDENCE DECLARATION

As at the Latest Practicable Date, we were not aware of any relationships or interests between Astrum Capital Management Limited, the Company, Mr. Cao, Mr. Yu, Cosmic Shine, GCL and/or any of their respective substantial shareholders, directors or chief executive, or any of their respective associates. In the last two years, there was no other engagement between the Group and Astrum Capital Management Limited. Apart from the normal advisory fees payable to us for the relevant engagement in relation to the GCL CB Subscription, no other arrangement exists whereby we will receive any fees and/or benefits from the Group. Accordingly, Astrum Capital Management Limited is independent as defined under Rule 13.84 of the Listing Rules to act as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in connection with the GCL CB Subscription.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR OPINION

In formulating our opinion and recommendations, we have reviewed, inter alia , the Announcement, the other parts of the Circular, the GCL CB Subscription Agreement, the CB Placing Agreement as amended and modified by the Letter Agreement and the annual reports of the Company for the two years ended 31 December 2016 and 31 December 2017 (the “ 2016 Annual Report ” and the “ 2017 Annual Report ”, respectively). We have also reviewed certain information provided by the management of the Company (the “ Management ”) relating to the operations, financial conditions and prospects of the Group. We have (i) considered such other information, analyses and market data which we deemed relevant; and (ii) conducted verbal discussions with the Management regarding the GCL CB Subscription, the businesses, financial position and future outlook of the Group. We have assumed that such information and statements, and any representation made to us, are true, accurate and complete in all material respects as of the date hereof and we have relied upon them in formulating our opinion.

All Directors collectively and individually accept full responsibility for the purpose of giving information with regard to the Company in the Announcement and the Circular and, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in the Announcement and the Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters not contained in the Announcement and the Circular, the omission of which would make any statement herein or in the Announcement and the Circular misleading. We consider that we have performed all necessary steps to enable us to reach an informed view regarding the terms of, and the reasons for entering into, the GCL CB Subscription Agreement and the transactions contemplated thereunder (including the GCL CB Subscription) and the grant of the GCL Specific Mandate and to justify our reliance on the information provided so as to provide a reasonable basis of opinion. We have no reasons to suspect that any material information has been withheld by the Directors or the Management, or is misleading, untrue or inaccurate. We have not, however, for the purpose of this exercise, conducted any independent detailed investigation or audit into the businesses or affairs or future prospects of the Group. Our opinion is necessarily based on financial, economic, market and other conditions in effect, and the information made available to us, as at the Latest Practicable Date. This letter is issued to provide the information for the Independent Board Committee and the Independent Shareholders solely in connection with their consideration of the Company’s entering into of the GCL CB Subscription Agreement and the transactions contemplated thereunder (including the GCL CB Subscription) and the grant of the GCL Specific Mandate to the Directors. Except for the inclusion in the Circular, this letter is not to be quoted or referred to, in whole or in part, nor shall it be used for any other purposes, without our prior written consent.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinions and recommendations to the Independent Board Committee and the Independent Shareholders in respect of the entering into of the GCL CB Subscription Agreement and the transactions contemplated thereunder (including the GCL CB Subscription) and the grant of the GCL Specific Mandate, we have taken into account the following principal factors and reasons:

I. Information on the Group

According to the Letter from the Board, the Group is principally engaged in the oil production and the leasing of oil and liquefied chemical terminal together with its storage and logistics facilities.

The following table sets out the audited financial information of the Group for the three financial years ended 31 December 2015, 31 December 2016 and 31 December 2017 (“ FY2015 ”, “ FY2016 ” and “ FY2017 ”, respectively) as extracted from the 2016 Annual Report and the 2017 Annual Report:

Table 1: Financial information of the Group

	FY2015	FY2016	FY2017
	(audited)	(audited)	(audited)
	HK$’000	HK$’000	HK$’000
Continuing operations
Revenue	87,480	40,926	30,338
– Oil production	40,675	18,762	20,192
– Supply of electricity and heat	46,805	22,164	–
– Oil and liquefied chemical terminal	–	–	10,146
Gross (loss)/profit	(44,437)	(21,031)	8,806
(Loss) before income tax	(635,175)	(248,312)	(231,539)
(Loss) for the year from
continuing operations	(531,976)	(200,964)	(191,860)
Discontinued operation(Note 1)
(Loss) for the year from
discontinued operation	–	–	(9,570)
(Loss) for the year attributable to
owners of the Company	(492,568)	(189,971)	(187,121)

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Cash and cash equivalents(Note 2) Current assets Current (liabilities) Net current (liabilities) Equity attributable to owners of the Company	As at 31 December 2015 (audited) HK$’000 238,282 395,769 (500,682) (104,913) 552,800	As at 31 December 2016 (audited) HK$’000 238,814 362,881 (716,008) (353,127) 349,788	As at 31 December 2017 (audited) HK$’000 57,059 149,327 (1,225,104) (1,075,777) 203,530

Sources: the 2016 Annual Report and the 2017 Annual Report

Notes:

Upon completion of disposal of Sunlight Rise Limited, which took place on 17 March 2017, the Group discontinued the electricity and heat business. Accordingly, the Group treated the electricity and heat business as discontinued operation under its financial statements for FY2017.
Cash and cash equivalents comprise cash and bank balances as well as pledged bank deposits.

(i) For the year ended 31 December 2016 (i.e. FY2016)

In December 2015, the Group tapped into the oil and liquefied chemical terminal business through acquiring 51% equity interest in Shandong Shundong Port Services Company Limited（山東順東港務有限公司）(“ Shundong Port ”). After completion of acquisition of Shundong Port, the Group has been proactively promoting the continual construction of the liquid chemical terminal, storage and logistics facilities (the “ Port and Storage Facilities ”). Since the construction works on the Port and Storage Facilities were still in progress, no revenue was generated from the Group’s oil and liquefied chemical terminal segment during FY2015 and FY2016.

All the Group’s revenue in FY2015 and FY2016 were generated from the Group’s oil production business as well as electricity and heat business. During FY2016, the Group recorded total revenue of approximately HK$40.9 million, representing a significant decrease of approximately 53.2% as compared to approximately HK$87.5 million in FY2015. Such decrease was mainly attributable to (i) the decrease in electricity consumption; (ii) the fact that there was no supply of heat energy during FY2016; and (iii) the combined impact of the low level in both the selling price and sales volume of crude oil. The decrease in costs of sales was in line with the decrease in revenue, resulting in the drop in gross loss from approximately HK$44.4 million in FY2015 to approximately HK$21.0 million in FY2016. Due to the drop in gross loss, coupled with (i) the decrease in impairment loss on property, plant and equipment and intangible assets from approximately HK$491.4 million in FY2015 to approximately HK$178.0 million in FY2016; and (ii) the decrease in other operating expenses of approximately HK$36.9 million, loss attributable to owners of the Company narrowed down from approximately HK$492.6 million in FY2015 to approximately HK$190.0 million in FY2016.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As at 31 December 2016, the Group’s current assets and current liabilities amounted to approximately HK$362.9 million and approximately HK$716.0 million, respectively, resulting in a net current liabilities position of approximately HK$353.1 million as compared to a net current liabilities position of approximately HK$104.9 million as at 31 December 2015. Such deterioration was principally due to (i) the increase in other borrowings of approximately HK$97.8 million and the increase in bills and other payables and accruals of approximately HK$64.9 million as a result of the construction of the Port and Storage Facilities; and (ii) the new addition of finance lease liabilities of approximately HK$38.0 million. As stated in the sub-paragraph headed “2. Uncertainties relating to going concern” under the paragraph headed “BASIS FOR DISCLAIMER OF OPINION” in the independent auditor’s report as contained in the 2016 Annual Report, the Group’s condition, including (i) the incurring by the Group of a loss of approximately HK$201.0 million for FY2016; (ii) the net current liabilities of the Group of approximately HK$353.1 million as at 31 December 2016; (iii) the total outstanding construction costs of approximately HK$420.7 million which was required to be repaid within one year after the reporting date of 31 December 2016; and (iv) bank loan of approximately HK$49.4 million as at 31 December 2016 which was overdue for repayments, indicated the existence of a material uncertainty that may cast significant doubt about the Group’s ability to continue as a going concern (the “ Going Concern Issue ”). In fact, the Going Concern Issue has first arisen as the basis of disclaimer in the consolidated financial statements of the Group for FY2015. In response to the Going Concern Issue, the Company has taken the following measures since 2015 to alleviate its net current liabilities position: (a) entering into a sale and purchase agreement to dispose of the electricity and heat business which has poor performance in recent years; (b) focusing on costs deduction and enhancing efficiency during the operation of the oil business; (c) delaying the drill schedule of oil production wells and capital expenditure at the current low oil price environment; (d) conducting share and convertible bond placements to raise aggregate net cash proceeds of approximately HK$347 million during 2015; (e) acquiring 51% effective interest in Shundong Port and entering into a lease agreement to lease the Port and Storage Facilities, which is expected to provide an opportunity for the Company to generate a stable rental income, to expedite the Group’s recovery of investment costs and to deliver reasonable return on capital to the Group from the operation of liquid chemical terminal, storage and logistics facilities business; (f) negotiating with certain contractors to extend the repayment dates over twelve months after 31 December 2016; and (g) obtaining banking facilities and certain medium term loans to finance the construction of the Port and Storage Facilities.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(ii) For the year ended 31 December 2017 (i.e. FY2017)

In March 2017, the Group completed the disposal of the entire issued share capital of Sunlight Rise limited (the “ Disposal ”) and recorded a loss on disposal of approximately HK$9.1 million. No revenue was generated from this discontinued operation in FY2017, as compared to approximately HK$22.2 million in FY2016. Upon completion of the Disposal, the Group discontinued the electricity and heat business. Details of the Disposal was disclosed in the circular of the Company dated 17 February 2017.

The Group recorded total revenue of approximately HK$30.3 million in FY2017, representing a decrease of approximately 25.9% as compared to approximately HK$40.9 million in FY2016. Such decrease was mainly attributable to the discontinuance of the Group’s electricity and heat business as discussed above, which was partially offset by the commencement of the Group’s oil and liquefied chemical terminal business in FY2017. Notwithstanding the drop in revenue, the Group’s continuing operations turned from gross loss position in FY2016 to gross profit position in FY2017. We noted from the 2017 Annual Report that such turnaround was mainly attributable to (i) the increase in average oil price; (ii) the result from certain cost saving measures taken by the Group; and (iii) the commencement of leasing of the Group’s oil and liquefied chemical terminal since late September 2017. The Group’s loss from the continuing operations decreased slightly from approximately HK$201.0 million in FY2016 to approximately HK$191.9 million in FY2017. After taking into consideration the results from both the continuing operations and the discontinued operation, loss attributable to owners of the Company amounted to approximately HK$187.1 million in FY2017, as compared to approximately HK$190.0 million in FY2016.

As at 31 December 2017, the Group’s cash and cash equivalents amounted to approximately HK$57.1 million, representing an annual decrease of approximately 76.1% as compared to approximately HK$238.8 million as at 31 December 2016. Such decrease was principally due to (i) the net cash used in operating activities of approximately HK$41.3 million; (ii) the repayment of bank and other borrowings and obligation under finance lease of approximately HK$382.6 million; and (iii) purchase of property, plant and equipment of approximately HK$283.8 million, which was partially offset by the proceeds from new bank and other borrowings and finance lease of approximately HK$517.0 million. As at 31 December 2017, the Group’s net current liabilities amounted to approximately HK$1,075.8 million. As stated in the paragraph headed “DISCLAIMER OF OPINION” in the independent auditor’s report as contained in the 2017 Annual Report, the Going Concern Issue remained a basis of the disclaimer of opinion by the Company’s auditor on the Company’s financial statements for FY2017.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

II. Background of, reasons for and benefits of the GCL CB Subscription

The Group is principally engaged in the oil production and the leasing of oil and liquefied chemical terminal together with its storage and logistics facilities.

During the past few years, the Group has taken various corporate actions to improve the financial performance and position of the Group. In late 2015, the Group tapped into the oil and liquefied chemical terminal business by acquiring 51% equity interest in Shundong Port. On the other hand, the Group disposed of its poor performing electricity and heat business in March 2017. As a result of the efforts made by the Group, loss attributable to owners of the Company decreased from approximately HK$492.6 million in FY2015 to approximately HK$190.0 million in FY2016, and decreased further to approximately HK$187.1 million in FY2017. Notwithstanding the improvement in financial performance, the Group’s financial position remained highly geared. As at 31 December 2017, the Group’s current assets and current liabilities amounted to approximately HK$149.3 million and approximately HK$1,225.1 million, respectively, resulting in a net current liabilities position of approximately HK$1,075.8 million as compared to a net current liabilities position of approximately HK$353.1 million as at 31 December 2016. We have studied the consolidated statement of financial position of the Group as set out in the 2017 Annual Report and noted that the Group’s indebtedness (the “ Indebtedness ”), which is due within one year, amounted to approximately HK$1,075.7 million (comprising (i) construction cost which was recognised as other payables of approximately HK$403.9 million; (ii) bank and other borrowings of approximately HK$227.9 million; (iii) convertible bonds of approximately HK$195.4 million; (iv) finance lease liabilities of approximately HK$146.9 million; and (v) amount due to non-controlling shareholders of a non-wholly owned subsidiary of the Company of approximately HK$101.6 million) and represented approximately 19 times of the Group’s cash and cash equivalents of approximately HK$57.1 million as at 31 December 2017, implying that the Group is in need to additional cash to settle the Indebtedness. As mentioned in the paragraph headed “1. Information on the Group” above, the continual loss-making and net current liabilities position of the Group led to the Going Concern Issue. In view of the above, we concur with the Management’s view that the Group is in need of raising fund with substantial amount to lower the liabilities level and relieve the repayment pressure, and in turn, improve the Group’s financial position.

With an aim to enhance the Group’s liquidity level, the Management has, from time to time, been exploring alternative funding sources by approaching banks and financial institutions to raise additional capital by way of debt or equity fund-raising. In January 2018, the Company entered into a placing agreement with the Placing Agent in respect of placing of up to 609,940,000 new Shares at a price of HK$0.143 per Share (the “ Share Placing ”). The Share Placing with net proceeds of approximately HK$85.1 million completed on 14 February 2018. Please refer to the announcements of the Company dated 22 January 2018 and 14 February 2018 for further details of the Share Placing. As of the Latest Practicable Date, out of net proceeds from the Share Placing, approximately HK$37.2 million was already utilised as detailed in the Letter from the Board while the remaining proceeds of approximately HK$47.9 million was set aside for the following purposes: (i) as to approximately HK$23.5 million for interest payable on the 2015 CB; (ii) as to approximately HK$5.3 million for accrued expenses; and (iii) as to approximately HK$19.1 million for general working capital and repayment of debt and liabilities. As the net proceeds from the Share Placing merely represented approximately 5.2% of the Group’s total liabilities and approximately 6.9% of the Group’s current liabilities as at 31 December 2017, the Group’s overall level of total liabilities and current liabilities still remained high after completion of the Share Placing. In the light of the above, we concur with the views of the Management and the Directors that it is desirable to launch another fund-raising with significantly larger amount of intended net proceeds, thereby reducing the Group’s liabilities to a more comfortable level.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Subsequently, on 14 June 2018, the Group entered into the GCL CB Subscription Agreement with GCL for the subscription of the GCL Convertible Bonds in the aggregate principal amount of HK$200,000,000. According to the Letter from the Board, GCL is 100% legally and beneficially owned by Cosmic Shine, which is in turn legally and beneficially owned as to 50% by Mr. Cao and as to the other 50% by Mr. Yu. Both Mr. Cao and Mr. Yu are executive Directors and controlling Shareholders who are deemed, pursuant to Part XV of the SFO, to be interested in the 1,370,000,000 Shares held by GCL (representing approximately 27.25% of the total issued capital of the Company). We consider that the GCL CB Subscription can, on one hand, strengthen the Group’s liquidity level and on another hand, signify the support and confidence of the management and substantial Shareholders on the future prospect of the Group which in turn reinforce the confidence of other investors and creditors of the Company.

On the same date of the entering into of the GCL CB Subscription Agreement, the Group entered into the CB Placing Agreement with the Placing Agent for the placing of the Placing Convertible Bonds in the aggregate principal amount of up to HK$500,000,000 to not less than six CB Placees on a best effort basis. The maximum principal amount of the CB Placing represents approximately 40.8% of the Group’s current liabilities as at 31 December 2017. For the details of the CB Placing, please refer to the Letter from the Board. It is notable that completion of the CB Placing is conditional to, among other things, completion of the GCL CB Subscription. If the GCL CB Subscription does not complete, the CB Placing Agreement will lapse and the CB Placing will not proceed.

Upon enquiry, the Management advised us that they had considered alternative fund-raising methods (such as bank borrowings and equity financing) other than the GCL CB Subscription and the CB Placing. In respect of borrowings from banks or other institutions, the Company has enquired with two existing creditors (including one bank and one financial leasing institution) regarding the possibility of increasing the size of loan or credit line, and with four commercial banks regarding the possibility and feasibility of applying for new credit line or loan for the Group. However, all the existing creditors approached by the Company indicated that they were unable to increase the size of loan or credit line any further, and none of the commercial banks approached by the Company indicated willingness to grant credit line or loan to the Group unless we are able to provide satisfactory real property collateral to fortify the loan. One of the financiers indicated that it would first like to see that the Company can improve its financial position before it is in the position to provide loan and credit line to the Group.

As to equity fund-raising exercise, the Group has approached four securities firms (including the Placing Agent) about the possibility and feasibility of acting as placing agent or underwriter for rights issue or open offer. However, save for the Placing Agent, the Company did not receive positive feedbacks from other securities firms approached by it for conducting fund-raising exercises of the size desirable by the Group. Based on the understanding of the Management, all securities firms approached by the Company are not prepared, under the current market sentiment, to underwrite any rights issue or open offer, or act as placing agent of the Company for placing of shares or convertible securities, matching the size of the proposed bond issue. In any event, the Company considers that it would be costly and timely to conduct rights issue or open offer as compared to the GCL CB Subscription.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

According to the Management, the Placing Agent is the only securities firm which is willing to act as the placing agent, on a best-effort basis, for the Placing Convertible Bonds in the maximum principal amount of HK$500 million. Following discussion with the Placing Agent, the Company approached GCL to explore the possibility of the GCL CB Subscription which in the view of the Directors will provide the following complementary value to the CB Placing, namely: (a) topping up the shortfall between the CB Placing and the total fund-raising size desired and needed by the Company of HK$700 million; (b) providing a certain minimum level of funding assurance to the Company, as the outcome of the best-effort CB Placing is inevitably susceptible to recent fluctuations in global economy, interest rate trends, stock market performance and investors’ appetite in general; and (c) signifying the support and confidence of the management and substantial Shareholders on the future prospect of the Group.

Having taken into consideration the feedbacks from banks, creditors and securities firms for possible borrowings and equity fund-raisings as stated above, together with the facts that (i) the GCL CB Subscription would not incur immediate dilution effect on the shareholding of the existing Shareholders as compared to share placement; and (ii) notwithstanding the interest-bearing nature of the GCL Convertible Bonds, no interest is payable if they are ultimately converted into Shares and all the outstanding GCL Convertible Bonds shall be automatically converted into GCL Conversion Shares on the Maturity Date (unless redeemed due to Events of Default, early redeemed at the discretion of the Company or conversion of bonds is restricted by the Conversion Restrictions), we concur with the Management that the GCL CB Subscription is the most desirable and feasible means for the Company to raise fund of sufficient size to top up the shortfall between the CB Placing and the total fund-raising size desired and needed by the Company of HK$700 million.

According to the Letter from the Board, the gross and net proceeds from the GCL CB Subscription are estimated to be HK$200 million and approximately HK$199 million, respectively. The Company intends to use the net proceeds from the GCL CB Subscription for repayment of debt and liabilities.

Having considered the facts that (i) the continual loss-making and net current liabilities position of the Group led to the Going Concern Issue; (ii) the Group is in need of raising fund with substantial amount to lower the liabilities level and relieve the repayment pressure, and in turn, improve the Group’s financial position; (iii) the GCL CB Subscription can, on one hand, strengthen the Group’s liquidity level and on another hand, signify the support and confidence of the management and substantial Shareholders on the future prospect of the Group; (iv) the GCL CB Subscription is the most desirable and feasible means for the Company to raise fund of sufficient size to top up the shortfall between the CB Placing and the total fund-raising size desired and needed by the Company of HK$700 million; and (v) the terms of the GCL CB Subscription Agreement are fair and reasonable so far as the Independent Shareholders are concerned (please refer to the section headed “III. Principal terms of the GCL CB Subscription Agreement” below for our analysis), we concur with the Management’s view that the GCL CB Subscription is in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

III. Principal terms of the GCL CB Subscription Agreement

On 14 June 2018 (after trading hours), the Company entered into the GCL CB Subscription Agreement with GCL pursuant to which the Company conditionally agreed to issue, and GCL conditionally agreed to subscribe for, the GCL Convertible Bonds in the aggregate principal amount of HK$200,000,000. On 20 July 2018, the Company and GCL entered into a Letter Agreement to extend the long stop date from 31 July 2018 to 17 September 2018, unless extended by mutual consent of the Company and GCL.

Set out below are the principal terms of the Convertible Bonds (including the GCL Convertible Bonds):

Issuer : The Company Principal amount : Up to HK$700,000,000 in aggregate, comprising: (a) GCL Convertible Bonds of HK$200,000,000; and (b) Placing Convertible Bonds of up to HK$500,000,000. Interest : Three per cent. (3%) per annum payable on the due date of the principal amount, provided that no interest is payable for any part of the Convertible Bonds which are converted into Conversion Shares pursuant to the conditions of the Convertible Bonds. Maturity Date : The day falling on the second anniversary of the date of issue of the Convertible Bonds (or if such date is not a Business Day, the next Business Day). Conversion Period : The period commencing on the date of issue of the Convertible Bonds and ending on the Maturity Date. Conversion Rights : Holders of the Convertible Bonds shall have the right to convert the whole or part of the principal amount of the Convertible Bonds into Conversion Shares at the initial Conversion Price of HK$0.255 per Conversion Share at any time during the Conversion Period, provided always that the holder shall not convert the Convertible Bonds to an extent which would either (a) reduce the public float of the Company to less than 25% (or the relevant percentage as prescribed by the Listing Rules) of the issued Shares or (b) result in any change of control (as defined in the Takeovers Code) of the Company or otherwise trigger any mandatory offer obligation under Rule 26 of the Takeovers Code on the part of the holder of the Convertible Bonds who exercises the conversion rights (or party acting in concert with it) unless the regulatory requirements under the Takeovers Code and the Listing Rules are fully complied with (collectively, the “ Conversion Restrictions ”).

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Conversion Shares : Based on the initial Conversion Price of HK$0.255 per Conversion Share and in each case assuming there is no other change in the issued share capital of the Company between the Latest Practicable Date and the full conversion of the Convertible Bonds:
(a) an aggregate of 784,313,725 GCL Conversion Shares will be allotted and issued by the Company upon exercise in full of the conversion rights attaching to the GCL Convertible Bonds, representing: (a) approximately 15.60% of the existing issued share capital of the Company; (b) approximately 13.50% of the issued share capital of the Company as enlarged by the issue of 784,313,725 GCL Conversion Shares; and (c) approximately 10.09% of the issued share capital of the Company as enlarged by the issue of the maximum of 2,745,098,038 Conversion Shares; and
(b) an aggregate of up to 1,960,784,313 Placing Conversion Shares will be allotted and issued by the Company upon exercise in full of the conversion rights attaching to the maximum principal amount of Placing Convertible Bonds, representing: (a) approximately 39.00% of the existing issued share capital of the Company; (b) approximately 28.06% of the issued share capital of the Company as enlarged by the issue of the maximum of 1,960,784,313 Placing Conversion Shares; and (c) approximately 25.23% of the issued share capital of the Company as enlarged by the issue of the maximum of 2,745,098,038 Conversion Shares.

The aggregate nominal value of the maximum 2,745,098,038 Conversion Shares is HK$274,509,803.80.

Conversion Price : The initial Conversion Price of HK$0.255 (which is subject to adjustments upon occurrence of the Adjustment Events).
Transferability : The Convertible Bonds are freely transferable, provided that no transfer of the Convertible Bonds to any connected person (as defined in the Listing Rules) of the Company shall be made without the prior written consent of the Company.

For further details of the principal terms of the Convertible Bonds, please refer to the section headed “Principal Terms of the Convertible Bonds” in the Letter from the Board.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As advised by the Management, the terms of the GCL CB Subscription Agreement and the GCL Convertible Bonds (including the Conversion Price, the interest rate and the Maturity Date) were determined after arm’s length negotiations between the Company and GCL by reference to the terms of the Placing Convertible Bonds. We noted from the Letter from the Board that the terms of the Placing Convertible Bonds were determined after arm’s length negotiations between the Company and the Placing Agent, which is an Independent Third Party. The Conversion Price was determined by the Company and the Placing Agent with reference to, amongst other things, (i) the historical trading prices of the Shares, where the closing prices of the Shares for the last month prior to the date of signing of the CB Placing Agreement ranged from HK$0.242 to HK$0.255, with an average closing price of HK$0.250; (ii) the liquidity of the Shares, which maintained at a relatively low level for the last three months immediately prior to the date of signing of the CB Placing Agreement with an average trading volume of approximately 10,475,448 Shares (representing approximately 0.208% of the total number of the Shares in issue as at the Latest Practicable Date); and (iii) the Group’s financial position (in particular, the continual loss-making and net current liabilities position of the Group). The other major terms of the Placing Convertible Bonds (including terms to maturity, events of default and those relating to the Conversion Restrictions) were determined by the Company and the Placing Agent with reference to the terms of other convertible bonds/notes issued by listed companies in Hong Kong during the six months prior to the date of the CB Placing Agreement. Having considered the facts that (i) it is common for issuers to determine issue or conversion price of shares with reference to the historical trading prices and liquidity of shares, as well as the financial position of the issuers; and (ii) the terms of other convertible bonds/notes issued by listed companies in Hong Kong can, to a certain extent, reflect the recent market practice in respect of the issue and subscription of convertible notes/bonds under the current market condition and sentiment, we are of the view that the determination basis of the terms of the CB Placing Agreement are fair and reasonable.

In order to assess the fairness and reasonableness of the terms of the GCL CB Subscription Agreement, we have conducted our independent analysis as detailed below:

A. Conversion Price

The initial Conversion Price of HK$0.255 (which is subject to adjustments upon occurrence of the Adjustment Events):

(i) is equivalent to the closing price of HK$0.255 per Share as quoted on the Stock Exchange on the date of signing of the GCL CB Subscription Agreement;
(ii) represents a premium of approximately 0.39% over the average closing price of HK$0.254 per Share as quoted on the Stock Exchange for the five trading days immediately prior to the date of signing of the GCL CB Subscription Agreement;
(iii) represents a premium of approximately 280.60% over the net asset value per Share of approximately HK$0.067 as calculated from the audited equity attributable to the owners of the Company as at 31 December 2017 of approximately HK$203.5 million and the total number of 3,049,704,594 issued shares of the Company as at 31 December 2017;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iv) represents a premium of approximately 235.53% over the adjusted net asset value per Share of approximately HK$0.076 (the “ Adjusted NAV per Share ”) as calculated from the adjusted net assets of the Company (the “ Adjusted NAV ”) of approximately HK$380.6 million and the total number of 5,027,123,073 issued shares of the Company as at the Latest Practicable Date; and
(v) represents a premium of approximately 7.14% over the closing price of HK$0.238 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

The Adjusted NAV of the Company is calculated from (a) the audited equity attributable to the owners of the Company as at 31 December 2017 of approximately HK$203.5 million, adding (b) net proceeds in the approximate amount of HK$85.1 million raised from the Company’s placing of 609,940,000 Shares which was completed on 14 February 2018, and deducting from it (c) current liabilities in the principal amount of HK$92 million due to the conversion of 2015 CB into 582,278,479 Shares after 31 December 2017 but before the Latest Practicable Date. The conversion of convertible bonds in the principal amount of HK$628,160,000 by GCL into 785,200,000 Shares as disclosed in the Company’s announcement dated 22 June 2018 has not resulted in any change to the Company’s net assets.

In assessing the fairness and reasonableness of the Conversion Price, we have primarily taken into account (a) the historical trading price of the Shares; and (b) the market comparables in respect of recent issue and subscription of convertible notes/bonds.

(a) Review on historical trading price

The chart below illustrates the daily closing price of the Shares as quoted on the Stock Exchange against the Conversion Price for the period commencing from 14 June 2017, being the twelve-month period prior to the date of the GCL CB Subscription Agreement, and up to and including the Latest Practicable Date (the “ Review Period ”). We consider that the Review Period, which covers a full year prior to the date of the GCL CB Subscription Agreement, represents a reasonable period to provide a general overview of the historical trend of the Share price when assessing the fairness and reasonableness of the Conversion Price.

Chart 1: Closing price of Shares during the Review Period

==> picture [275 x 154] intentionally omitted <==

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

0.35
Conversion Price = HK$0.255
0.30
0.25
0.20
0.15
0.10 Date of the GCL CB
Subscription
0.05
0.00
Closing price (HK$)
----- End of picture text -----

Source: the website of the Stock Exchange (www.hkex.com.hk)

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

During the Review Period, the lowest and highest closing price of the Shares as quoted on the Stock Exchange were HK$0.134 per Share recorded on 9 August 2017 and HK$0.290 per Share recorded on 19 March 2018 and 20 March 2018, respectively. As illustrated in Chart 1 above, the Conversion Price of HK$0.255 is, in general, higher than the closing price of the Shares throughout the Review Period, and represents a premium of approximately 24.5% over the average closing price of the Shares during the Review Period of approximately HK$0.205 per Share.

The closing price of the Shares were HK$0.255 and HK$0.238 per Share on the date of the GCL CB Subscription Agreement and the Latest Practicable Date, respectively.

(b) Comparable analysis

As part of our analysis, we have also identified an exhaustive list of issue and subscription of convertible notes/bonds exercises as initially announced by companies listed on the Stock Exchange (the “ Comparables ”) during the last three months prior to and including 14 June 2018, being the date of the GCL CB Subscription Agreement. To the best of our knowledge and as far as we are aware of, we identified an exhaustive list of 28 Comparables which met the said criteria and have not lapsed as at the Latest Practicable Date. We consider that a review period of three months is appropriate to capture the recent market practice in respect of the issue and subscription of convertible notes/bonds under the current market condition and sentiment. Shareholders should, however, note that the businesses, operations and prospect of the Company are not the same as that of the Comparables’ issuers and thus, the Comparables are only used to provide a general reference for the recent market practice of listed companies in Hong Kong in relation to the issue and subscription of convertible notes/bonds exercises. The following table sets forth the relevant details of the Comparables:

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

													Interest rate		(% per annum)	7.00		2.00	0.00	2.00		6.50		3.50		0.00		0.00	7.50		10.00	0.00
					Premium/	(Discount) of	the conversion	price over/to	the net asset	value per Share	(the “Premium/	(Discount)	– NAV”)		(%)	44.47		269.00	2.11	56.23		6.62		10.70		(89.47)		(82.68)	46.84		468.02	256.32	(Note 8)
Premium/	(Discount) of the	conversion price	over/to the average	closing price for	the five trading	days immediately	prior to and	including the date	of agreement/	last trading day	(the “Premium/	(Discount)	– Five Days”)		(%)	(4.48)		(1.90)	(9.90)	25.15		(19.17)		14.10		30.43		4.60	17.02		7.96	31.58	(Note 8)
			Premium/	(Discount) of	the conversion	price over/	to the closing	price on the date	of agreement/	last trading day	(the “Premium/	(Discount)	– Last Day”)		(%)	(9.86)		(7.20)	(11.97)	20.11		(17.80)		6.22		25.00		4.20	13.24		7.41	27.99	(Note 8)
													Stock code Principal amount Maturity	(approximately	HK$ million) (years)	24 101.4 1.5	(Note 1)	112 4,500.0 Perpetual	872 53.7 5.0	981 3,900 Perpetual	(Note 1)	527 174.1 1.0	(Note 4)	1298 202.7 5.0	(Notes 1 and 5)	76 600.0 10.0	(Note 6)	1678 8.0 3.0	198 647.4 2.0	(Note 1) (Note 7)	8007 20.0 2.0	881 4,700.0 5.1
													Name of company			Burwill Holdings Limited		LT Commercial Real Estate Limited	TUS International Limited	Semiconductor Manufacturing International	Corporation	China Ruifeng Renewable Energy Holdings Limited		Techcomp (Holdings) Limited		South Sea Petroleum Holdings Limited		China Creative Global Holdings Limited	SMI Holdings Group Limited		Global Strategic Group Limited	Zhongsheng Group Holdings Limited
												Date of	announcement			20/3/2018		20/3/2018	17/4/2018	23/4/2018		24/4/2018		24/4/2018		25/4/2018		26/4/2018	2/5/2018		3/5/2018	4/5/2018

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

													Interest rate		(% per annum)	5.00		8.00	4.00		0.00	7.00	5.00	6.50	8.00		2.00	10.00		0.00		1.00	0.80
					Premium/	(Discount) of	the conversion	price over/to	the net asset	value per Share	(the “Premium/	(Discount)	– NAV”)		(%)	(38.36)		(27.66)	170.19		15.23	92.12	(28.65)	10.55	780.00		7.52	30.46		48.59		31.44	421.88	(Note 11)
Premium/	(Discount) of the	conversion price	over/to the average	closing price for	the five trading	days immediately	prior to and	including the date	of agreement/	last trading day	(the “Premium/	(Discount)	– Five Days”)		(%)	21.95		(2.08)	18.02		16.00	17.90	4.55	19.21	71.95		(19.17)	(0.57)		2.25		(2.44)	(16.67)	(Note 11)
			Premium/	(Discount) of	the conversion	price over/	to the closing	price on the date	of agreement/	last trading day	(the “Premium/	(Discount)	– Last Day”)		(%)	18.64		0.00	18.61		15.10	20.30	9.52	19.83	73.11		(18.87)	0.00		(0.50)		2.56	(16.67)	(Note 11)
													Maturity		(years)	1.0	(Note 9)	1.5	5.0		5.0	1.0	1.0	2.0	3.0		2.0	3.0		5.0		Perpetual	1.0
													Principal amount	(approximately	HK$ million)	78.4		30.0	780.0	(Note 1)	1,850.0	160.0	21.2	300.0	54.6	(Note 1)	35.0	78.0	(Note 1)	756.0	(Note 2)	1,180.1	80.0
													Stock code			986		2178	95		347	6880	875	2699	646		456	712		3869		108	1470
													Name of company			China Environmental Energy Investment Limited		Petro-king Oilfield Services Limited	LVGEM (China) Real Estate Investment	Company Limited	Angang Steel Company Limited	Tempus Holdings Limited	China Finance Investment Holdings Limited	Xinming China Holdings Limited	China Environmental Technology Holdings Limited		New City Development Group Limited	Comtec Solar Systems Group Limited		Hospital Corporation of China Limited		GR Properties Limited	Prosper One International Holdings Company Limited
												Date of	announcement			8/5/2018		10/5/2018	10/5/2018		11/5/2018	15/5/2018	15/5/2018	15/5/2018	16/5/2018		16/5/2018	18/5/2018		29/5/2018		30/5/2018	31/5/2018

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

													Interest rate		(% per annum)	1.50		5.00	3.95		0.00	10.00		0.00		3.73		3.79		3.0
					Premium/	(Discount) of	the conversion	price over/to	the net asset	value per Share	(the “Premium/	(Discount)	– NAV”)		(%)	N/A	(Note 12)	169.13	161.82		3.16	468.02	(Note 15)	(89.47)	(Note 15)	30.95	(Note 15)	79.06	(Note 15)	235.53	(Note 16)
Premium/	(Discount) of the	conversion price	over/to the average	closing price for	the five trading	days immediately	prior to and	including the date	of agreement/	last trading day	(the “Premium/	(Discount)	– Five Days”)		(%)	10.00		(24.55)	35.70		(0.79)	35.70	(Note 15)	(24.55)	(Note 15)	4.60	(Note 15)	6.47	(Note 15)	0.39
			Premium/	(Discount) of	the conversion	price over/	to the closing	price on the date	of agreement/	last trading day	(the “Premium/	(Discount)	– Last Day”)		(%)	0.00		(21.30)	35.70		(2.98)	35.70	(Note 15)	(21.30)	(Note 15)	4.20	(Note 15)	5.08	(Note 15)	0.00
													Maturity		(years)	2.0		2.0	3.0	(Note 13)	10.0	Perpetual		1.0		2.0	(Note 14)	3.3	(Note 14)	2.0
													Principal amount	(approximately	HK$ million)	395.0		100.0	80.0		6,506.0	Maximum:		Minimum:		Median:		Average:
													Stock code			61		758	704		1387
													Name of company			Green Leader Holdings Group Limited		Junefield Department Store Group Limited	Huscoke Resources Holdings Limited		Renhe Commercial Holdings Company Limited									Convertible Bonds:
												Date of	announcement			1/6/2018		1/6/2018	4/6/2018		5/6/2018

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Notes:

For the purpose of illustration, the amounts denominated in United States dollars (US$), the lawful currency of the United States of America, have been converted into HK$ at an exchange rate of US$1.0 = HK$7.8.
For the purpose of illustration, the amounts denominated in Renminbi (RMB), the lawful currency of the People’s Republic of China, have been converted into HK$ at an exchange rate of RMB1.0 = HK$1.2.
According to the announcement of LT Commercial Real Estate Limited (stock code: 112) dated 20 March 2018, the convertible securities bear a coupon rate of 2.00% per annum and will cease to bear any coupon after the fifth (5th) anniversary of the date of issue. For our analysis purpose, we assume the interest rate of the convertible securities is 2.00% per annum.
According to the announcement of China Ruifeng Renewable Energy Holdings Limited (stock code: 527) (“ China Ruifeng ”) dated 24 April 2018, the maturity date of the convertible notes is the date falling twelfth (12th) month of the issue date, which can be extended to the date falling twenty-fourth (24th) month of the issue date by mutual consent of China Ruifeng and the noteholders. For our analysis purpose, the maturity date of the convertible notes is set as the date falling twelfth (12th) month of the date of issue.
According to the joint announcement of Techcomp (Holdings) Limited (stock code: 1298) (“ Techcomp ”), Baodi International Investment Company Limited and Circle Brown Limited dated 24 April 2018, the principal amount of the convertible bonds to be issued by Techcomp would be not more than US$25,985,846.
According to the announcement of South Sea Petroleum Holdings Limited (stock code: 76) dated 25 April 2018, the maturity date of the convertible debentures is 25 April 2028.
According to the announcement of SMI Holdings Group Limited (stock code: 198) (“ SMI Holdings ”) dated 2 May 2018, the maturity date of the convertible loans is the date falling the second (2nd) anniversary of the issue date, which can be extended to the date falling on the third (3rd) anniversary of the issue date by mutual agreement between SMI Holdings and the subscriber. For our analysis purpose, the maturity date of the convertible notes is set as the date falling the second (2nd) anniversary of the issue date.
According to the announcements of Zhongsheng Group Holdings Limited (stock code: 881) (“ Zhongsheng ”) dated 4 May 2018, 6 May 2018 and 15 May 2018, the Premium/ (Discount) – Last Day, Premium/(Discount) – Five Days and Premium/(Discount) – NAV of the convertible bonds to be issued by Zhongsheng is based on (i) the conversion price of HK$30.0132 per conversion share; (ii) the closing price of HK$23.45 per share of Zhongsheng as quoted on the Stock Exchange on the date of relevant subscription agreement (i.e. 4 May 2018); (iii) the average closing price of HK$22.81 per share of Zhongsheng as quoted on the Stock Exchange for the five trading days immediately prior to and including the date of relevant subscription agreement; and (iv) the net asset value per Share attributable to the Shareholders of approximately HK$8.423 as at 31 December 2017.
According to the announcement of China Environmental Energy Investment Limited (stock code: 986) (“ China Environmental Energy ”) dated 8 May 2018, the maturity date of the convertible bonds is the date falling twelfth (12th) month of the issue date of the convertible bonds, which can be extended to the date falling twenty-fourth (24th) month of the issue date by mutual consent of China Environmental Energy and the holder(s) of the convertible bonds. For our analysis purpose, the maturity date of the convertible bonds is set as the date falling twelfth (12th) month of the date of issue.
According to the announcement of GR Properties Limited (stock code: 108) dated 30 May 2018, the convertible bonds bear a coupon rate of 1% per annum and will cease to bear any coupon after the fifth (5th) anniversary of the date of issue. For our analysis purpose, we assume the interest rate of the convertible bonds is 1.00% per annum.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

According to the announcement of Prosper One International Holdings Company Limited (stock code: 1470) (“ Prosper One International ”) dated 31 May 2018, the conversion price of the convertible notes will be 90% of the volume weighted average price of the shares of Prosper One International as traded on the Stock Exchange on the trading day immediately preceding the date of conversion and the minimum conversion price would be HK$0.8 per conversion share (the “ Floor Price ”). For our analysis purpose, the Premium/ (Discount) – Last Day, the Premium/(Discount) – Five Days and the Premium/(Discount) – NAV of the convertible bonds to be issued by Prosper One International is based on the Floor Price.
Premium/(Discount) – NAV of Green Leader Holdings Group Limited (stock code: 61) is not available because it recorded deficit attributable to owners of the company in its latest full financial year.
According to the announcement of Huscoke Resources Holdings Limited (stock code: 704) (“ Huscoke Resources ”) dated 4 June 2018, the maturity date of the convertible bonds is the date falling the third (3rd) anniversary of the date of first issue of the convertible bonds, which may be extended for one (1) additional year subject to agreement between the Huscoke Resources and the holder of the convertible bonds. For our analysis purpose, the maturity date of the convertible notes is set as the date falling the third (3rd) anniversary of the date of issue.
For our analysis purpose, the perpetual convertible bonds have been excluded from the calculation for median and average of terms to maturity of the Comparables.
As the Premium/(Discount) – Last Day, the Premium/(Discount) – Five Days and the Premium/(Discount) – NAV represented by the conversion price of China Environmental Technology Holdings Limited (stock code: 646) are exceptionally high as compared with those of other Comparables, we consider that the conversion price of China Environmental Technology is an outlier and have excluded it from our analysis for the Premium/(Discount) – Last Day, the Premium/(Discount) – Five Days and the Premium/(Discount) – NAV represented by the Comparables.
The Premium/(Discount) – NAV of the Convertible Bonds is based on the Conversion Price and the Adjusted NAV per Share.

Among the Comparables, we noted that the Premium/(Discount) – Last Day, the Premium/(Discount) – Five Days and the Premium/(Discount) – NAV represented by the conversion price of China Environmental Technology Holdings Limited (“ China Environmental Technology ”) (stock code: 646) are exceptionally high as compared with those of other Comparables. Therefore, we consider that the conversion price of China Environmental Technology is an outlier. To avoid distortion to the overall comparable analysis due to the abnormality of such single result, the Premium/ (Discount) – Last Day, the Premium/(Discount) – Five Days and Premium/(Discount) – NAV represented by the conversion price of China Environmental Technology have been excluded in our analysis.

After excluding China Environmental Technology, the Premium/(Discount) – Last Day represented by the conversion prices of other Comparables ranged from a discount of approximately 21.30% to a premium of approximately 35.70% (the “ LTD Comparable Range ”), with a median of a premium of approximately 4.20% (the “ LTD Comparable Median ”) and an average of a premium of approximately 5.08%. The Conversion Price is equivalent to the closing price of the Shares on the date of signing of the GCL CB Subscription Agreement. The Premium/(Discount) – Last Day represented by the Conversion Price falls within the LTD Comparable Range.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

After excluding China Environmental Technology, the Premium/(Discount) – Five Days represented by the conversion prices of other Comparables ranged from a discount of approximately 24.55% to a premium of approximately 35.70% (the “ 5Days Comparable Range ”), with a median of a premium of approximately 4.60% (the “ 5-Days Comparable Median ”) and an average of a premium of approximately 6.47%. The Premium/(Discount) – Five Days represented by the Conversion Price is a premium of 0.39%, which also falls within the 5-Days Comparable Range.

After excluding China Environmental Technology, the Premium/(Discount) – NAV represented by the conversion prices of other Comparables ranged from a discount of approximately 89.47% to a premium of approximately 468.02% (the “ NAV Comparable Range ”), with a median of a premium of approximately 30.95% (the “ NAV Comparable Median ”) and an average of a premium of approximately 79.06%. The Premium/(Discount) – NAV represented by the Conversion Price is a premium of 235.53%, which also falls within the NAV Comparable Range and is much higher than the NAV Comparable Median.

We further noted that the Premium/(Discount) – Last Day and the Premium/ (Discount) – Five Days represented by the Conversion Price are below the LTD Comparable Median and the 5-Days Comparable Median, respectively. Notwithstanding the above, and having considered the facts that (i) the Premium/ (Discount) – Last Day represented by the Conversion Price does not fall near the lower end of the LTD Comparable Range; (ii) the Premium/(Discount) – Five Days represented by the Conversion Price does not fall near the lower end of the 5-Days Comparable Range; and (iii) the Premium/(Discount) – NAV represented by the Conversion Price is a premium of 235.53%, which falls within the NAV Comparable Range and is much higher than the NAV Comparable Median, we still consider that the Conversion Price is fair and reasonable, and is in line with recent market practice.

(c) Conclusion

Having taken into account the above, particularly the facts that:

(i) the Conversion Price is, in general, higher than the closing price of the Shares throughout the Review Period, and represents a premium of approximately 24.5% over the average closing price of the Shares during the Review Period;
(ii) the Conversion Price is equivalent to the closing price of the Shares on the date of signing of the GCL CB Subscription Agreement, which falls within the LTD Comparable Range;
(iii) the Conversion Price represents a premium of approximately 0.39% over the average closing price of the Shares for the five trading days immediately prior to the date of signing of the GCL CB Subscription Agreement, which falls within the 5-Days Comparable Range; and

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iv) the Conversion Price represents a premium of approximately 235.53% over the Adjusted NAV per Share, which falls within the NAV Comparable Range and is much higher than the NAV Comparable Median,

we are of the view that the Conversion Price is fair and reasonable and is in the interests of the Company and the Shareholders as a whole.

B. Interest rate

As shown in Table 2 above, the interest rates of the Comparables ranged from nil to 10.0% per annum with an average of approximately 3.79% per annum. The interest rate of the GCL Convertible Bonds of 3% per annum falls within the range of interest rates of the Comparables, and is lower than the average of interest rates of the Comparables. In view of the above, we consider that the interest rate of the GCL Convertible Bonds is fair and reasonable.

We noted from the Letter from the Board that the interest of the GCL Convertible Bonds would be paid by the Company to the bondholder(s) when the GCL Convertible Bonds are due, i.e. when redeemed due to Events of Default, early redeemed at the discretion of the Company or where conversion of bonds is restricted by the Conversion Restrictions by the bond’s maturity (the “ Interest Payment Arrangement ”). Having considered that (i) the Company may at its own discretion redeem the GCL Convertible Bonds, in whole or in part, at any time commencing on the date of issue of the GCL Convertible Bonds and ending on the Maturity Date; (ii) GCL has no right to demand early redemption unless due to Events of Default; (iii) GCL has no right to demand cash redemption at maturity unless conversion is restricted by the Conversion Restrictions; and (iv) no interest shall be payable on any GCL Convertible Bonds if they are eventually converted into GCL Conversion Shares, we are of the view that the Interest Payment Arrangement can avoid the unnecessary payment of interest if the GCL Convertible Bonds are subsequently converted into GCL Conversion Shares. Furthermore, we have reviewed the interest payment arrangement of the Comparables, and noted that among 21 interest-bearing Comparables, the convertible bonds issued by China Finance Investment Holdings Limited (stock code: 875), New City Development Group Limited (stock code: 456) and Huscoke Resources Holdings Limited (stock code: 704) adopted similar interest payment arrangement as the GCL Convertible Bonds where interest will be payable on maturity date or, if earlier, upon full conversion or redemption of the convertible bonds. It is considered that the Interest Payment Arrangement is not uncommon and is in line with market practice. In view of the above, we are of the view that the Interest Payment Arrangement is fair and reasonable.

C. Maturity

The terms to maturity of the Comparables ranged from 1 year to perpetual with an average term to maturity of approximately 3.3 years. The term to maturity of the GCL Convertible Bonds of 2 years falls within the range of duration of the Comparables.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

D. Redemption

We noted under the terms of the GCL Convertible Bonds, the Company may at its own discretion redeem the GCL Convertible Bonds, in whole or in part, at any time commencing on the date of issue of the GCL Convertible Bonds and ending on the Maturity Date (the “ Early Redemption Clause ”). The early redemption price shall be equivalent to the principal amount of the redeemed GCL Convertible Bonds plus interest of 3% per annum calculated from the date of issue of the bond up to and including the date of redemption. Furthermore, unless the GCL Convertible Bonds are redeemed due to Events of Default, early redeemed at the discretion of the Company or where conversion of bonds is restricted by the Conversion Restrictions (as detailed in the section headed “Principal Terms of the Convertible Bonds” in the Letter from the Board), all the outstanding GCL Convertible Bonds shall be automatically converted into GCL Conversion Shares on the Maturity Date (the “ Automatic Conversion Clause ”). No interest shall be payable on any GCL Convertible Bonds if they are eventually converted into GCL Conversion Shares.

We consider that the co-existence of the Early Redemption Clause and the Automatic Conversion Clause provides the Group with great financial flexibility in choosing from (i) redeeming the part or whole of the GCL Convertible Bonds before the Maturity Date should its internal resources allow, so as to avoid the incurrence of unnecessary interest costs; or (ii) waiting for the automatic conversion of the outstanding GCL Convertible Bonds on the Maturity Date, to release the Group from the repayment obligation when the GCL Convertible Bonds become mature. Therefore, we are of the view that both the Early Redemption Clause and the Automatic Conversion Clause are in the interests of the Company and the Shareholders as a whole.

E. Adjustment to the Conversion Price

The Conversion Price will be subject to adjustments (the “ Adjustments ”) upon the occurrence of the following Adjustment Events:

(i) an alteration of the nominal amount of the Shares by reason of consolidation, subdivision, reclassification or otherwise;
(ii) an issue of Shares credited as fully paid to Shareholders by way of capitalisation of profits or reserves (including any share premium account or capital redemption reserve), other than Shares paid up out of profits or reserves and issued in lieu (in whole or in part) of a cash dividend, being a dividend which the Shareholders concerned would or could otherwise have received and which does not constitute a capital distribution (as such term is defined in the conditions of the GCL Convertible Bonds);
(iii) a capital distribution (as such term is defined in the conditions of the GCL Convertible Bonds) to Shareholders being made by the Company;
(iv) an issue of Shares to all or substantially all Shareholders as a class by way of rights, or issue or grant to all or substantially all Shareholders as a class by way of rights, any options, warrants or other rights to subscribe for or purchase any Shares, in each case at less than 80% of the market price of the Shares;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(v) an issue of Shares being made wholly for cash at a price less than 80% of the market price of the Shares;
(vi) an issue wholly for cash being made by the Company of securities convertible into or exchangeable for or carrying rights of subscription for Shares, at a consideration per Share which is less than 80% of the market price of the Shares, or the conversion, exchange or subscription rights of any such securities (other than in accordance with the terms applicable thereto) are altered or modified so that the consideration per Share is less than 80% of the market price of the Shares;
(vii) an issue of Shares for the acquisition of asset at a total effective consideration per Share which is less than 80% of the market price of the Shares; and
(viii) an issue of any securities which by their terms are convertible into or exchangeable for or carry rights of subscription for new Shares for the acquisition of asset at a total effective consideration initially receivable for such securities which is less than 80% of the market price of the Shares.

Based on our research of information published on the website of the Stock Exchange, we noted that similar anti-dilution adjustment mechanisms are commonly included in convertible notes/bonds issued by other companies listed on the Stock Exchange and, having reviewed such adjustment mechanisms, we consider that the inclusion of the Adjustments is in line with normal market practice.

F. Conclusion

In view of the above, we are of the view that the terms of the GCL CB Subscription Agreement are fair and reasonable so far as the Independent Shareholders are concerned.

IV. Possible dilution effect on the shareholding interests of Shareholders

The table below sets out the shareholding structures of the Company (i) as at the Latest Practicable Date; and (ii) immediately after the allotment and issue of all the GCL Conversion Shares upon full exercise of conversion rights attaching to the GCL Convertible Bonds (assuming that there is no other change in the issued share capital of the Company between the Latest Practicable Date and the full conversion of the GCL Convertible Bonds) for illustration purpose only:

Table 3: Shareholding structure of the Company

GCL Public Shareholders Total	As at the Latest Practicable Date No. of Shares % 1,370,000,000 27.25 (Note 1) 3,657,123,073 72.75 5,027,123,073 100.00	Immediately after full conversion of the GCL Convertible Bonds No. of Shares % 2,154,313,725 37.07 (Note 2) 3,657,123,073 62.93 5,811,436,798 100.00	Immediately after full conversion of the GCL Convertible Bonds No. of Shares % 2,154,313,725 37.07 (Note 2) 3,657,123,073 62.93 5,811,436,798 100.00
			100.00

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Notes:

GCL is 100% legally and beneficially owned by Cosmic Shine, which is in turn legally and beneficially owned as to 50% by Mr. Cao and as to the other 50% by Mr. Yu, both being executive Directors of the Company. As at the date of the Announcement, GCL was interested in 584,800,000 Shares and the GCL 2010 CB in the principal amount of HK$628,160,000 (carrying right to convert into 785,200,000 Shares by 10 August 2018). The GCL 2010 CB were fully converted into 785,200,000 Shares on 22 June 2018. As at the Latest Practicable Date, GCL was interested in 1,370,000,000 Shares (representing approximately 27.25% of the total issued share capital of the Company).
Conversion of the GCL Convertible Bonds is limited by the Conversion Restrictions, such that no bondholder shall convert the GCL Convertible Bonds to an extent which would trigger the mandatory offer obligation under the Takeovers Code. Therefore, GCL will not be able to convert the GCL Convertible Bonds to an extent which causes its voting right in the Company to exceed 30%. The shareholding number and percentage of GCL here are for illustration purpose only.

As shown in Table 3 above, the shareholding of the existing public Shareholders will be diluted from approximately 72.75% of the issued share capital of the Company as at the Latest Practicable Date to approximately 62.93% immediately after full conversion of the GCL Convertible Bonds into the GCL Conversion Shares, assuming that there is no other change in the issued share capital of the Company between the Latest Practicable Date and the full conversion of the GCL Convertible Bonds.

Having considered (i) the benefits of the GCL CB Subscription as detailed in the section headed “II. Background of, reasons for and benefits of the GCL CB Subscription” above; (ii) the terms of the GCL CB Subscription Agreement are fair and reasonable so far as the Independent Shareholders are concerned (please refer to the section headed “III. Principal terms of the GCL CB Subscription Agreement” above for our relevant analysis); and (iii) the conversion of the GCL Convertible Bonds is subject to the minimum public float requirement under the Listing Rules and the mandatory offer obligation under Rule 26 of the Takeovers Code, we are of the view that such dilution effect is acceptable and commercially justifiable, and that the benefits of the GCL CB Subscription outweigh its potential dilution effect.

V. Financial effects of the GCL CB Subscription

Based on our discussion and the representation from the Management, we understand that the following factors have been taken into account when the Company considered the potential impact of the GCL CB Subscription on the financial performance and position of the Group:

(i) Effect on net asset value

The GCL Convertible Bonds will consist of an equity portion and a liability portion when being booked into the financial statements of the Group. The equity portion and the liability portion of the GCL Convertible Bonds to be recognised will be subject to assessment and valuation by a professional valuer in accordance with the Hong Kong Financial Reporting Standards.

On the other hand, it is expected that the net asset value of the Group would increase upon conversion of the GCL Convertible Bonds into the GCL Conversion Shares as a result of the decrease in liabilities.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(ii) Effects on liquidity and working capital

As the GCL Convertible Bonds bear interest from the issue date at a rate of 3% per annum, the interest payment of the GCL Convertible Bonds will involve cash outflow of the Group.

As stated in the Letter from the Board, the net proceeds from the GCL CB Subscription of approximately HK$199 million is intended to be used for repayment of debt and liabilities. It is expected that the GCL CB Subscription would not have material impact on the liquidity and working capital position of the Group.

It should be noted that the analyses above are for illustration purpose only and do not purport to represent how the financial performance and position of the Group will be after completion of the GCL CB Subscription.

OPINION

Having taken into account the above principal factors and reasons, we are of the view that notwithstanding that the GCL CB Subscription is not conducted in the ordinary and usual course of business of the Company, the terms of the GCL CB Subscription Agreement are on normal commercial terms and the GCL CB Subscription and the grant of the GCL Specific Mandate are fair and reasonable so far as the Independent Shareholders are concerned, and the entering into of the GCL CB Subscription Agreement is in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Board Committee to advise, and ourselves recommend, the Independent Shareholders to vote in favor of the relevant resolutions at the EGM to approve the GCL CB Subscription Agreement and the transactions contemplated thereunder and the grant of the GCL Specific Mandate.

Yours faithfully, For and on behalf of Astrum Capital Management Limited Hidulf Kwan Rebecca Mak Managing Director Director

Note: Mr. Hidulf Kwan has been a responsible officer of Type 6 (advising on corporate finance) regulated activity under the SFO since 2006 and has participated in and completed various independent financial advisory transactions.

Ms. Rebecca Mak has been a responsible officer of Type 6 (advising on corporate finance) regulated activity under the SFO since 2011 and has participated in and completed various independent financial advisory transactions.

– 51 –

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS BY DIRECTORS AND CHIEF EXECUTIVES IN THE COMPANY

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executives of the Company in the Shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were (i) notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) recorded in the register (the “ Section 352 Register ”) maintained by the Company pursuant to section 352 of the SFO; or (iii) notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies (the “ Model Code ”) set out in Appendix 10 to the Listing Rules, were as follows:

		Long positions
		in Shares and
	Capacity or	underlying	Shareholding
Names of Directors	nature of interest	Shares	percentage
			(Note 2)
Mr. Cao Sheng (Note 1)	Interest of controlled	2,154,313,725	42.85%
	corporation
Mr. Yu Zhiyong (Note 1)	Interest of controlled	2,154,313,725	42.85%
	corporation

Notes:

According to disclosure of interest filings, these 2,154,313,725 Shares and underlying Shares comprise (a) 1,370,000,000 Shares held by GCL; (b) 784,313,725 underlying Shares falling to be issued upon full conversion of the GCL Convertible Bonds subscribed by GCL under the GCL CB Subscription (which is still subject to fulfillment of conditions and has yet to complete). GCL is 100% legally and beneficially owned by Cosmic Shine, which is in turn legally and beneficially owned as to 50% by Mr. Cao and as to the other 50% by Mr. Yu, both being executive Directors of the Company. Cosmic Shine and GCL are regarded as controlled corporations of Mr. Cao and Mr. Yu and therefore, Mr. Cao and Mr. Yu are deemed to be interested in all the 2,154,313,725 Shares and underlying Shares interested in by Cosmic Shine and GCL. The deemed interest under Part XV of the SFO of Mr. Cao, Mr. Yu, Cosmic Shine and GCL duplicate with each others completely.
The percentages are calculated based on the total number of 5,027,123,073 issued Shares as at the Latest Practicable Date.

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GENERAL INFORMATION

APPENDIX

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executives of the Company had or was deemed to have any interests or short positions in the Shares, underlying shares or debentures of the Company or any of its associated corporations which were (i) notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO; or (ii) recorded in the Section 352 Register; or (iii) notified to the Company and the Stock Exchange pursuant to the Model Code.

3. DISCLOSURE OF INTERESTS BY SUBSTANTIAL SHAREHOLDERS AND OTHER PERSONS

As at the Latest Practicable Date, so far as any Directors are aware based on the disclosure of interest notices filings revealed by the Company from public records, persons (other than the Directors or chief executives of the Company) who have interests or short positions in the Shares or underlying shares of the Company which were disclosed to the Company under Divisions 2 and 3 of Part XV of the SFO or which were recorded in the register (the “ Section 336 Register ”) maintained by the Company pursuant to section 336 of the SFO, were as follows:

		Long positions
		in Shares and
	Capacity or	underlying	Shareholding
Names of Shareholders	nature of interest	Shares	percentage
			(Note 3)
GCL (Note 1)	Beneficial owner	2,154,313,725	42.85%
Cosmic Shine (Note 1)	Interest of controlled	2,154,313,725	42.85%
	corporation
Media Forecast Limited	Beneficial owner	253,164,556	5.04%
(Note 2)
Qin Zhiwen (Note 2)	Interest of controlled	253,164,556	5.04%
	corporation

Notes:

According to disclosure of interest filings, these 2,154,313,725 Shares and underlying Shares comprise (a) 1,370,000,000 Shares held by GCL; (b) 784,313,725 underlying Shares falling to be issued upon full conversion of the GCL Convertible Bonds subscribed by GCL under the GCL CB Subscription (which is still subject to fulfillment of conditions and has yet to complete). GCL is 100% legally and beneficially owned by Cosmic Shine, which is in turn legally and beneficially owned as to 50% by Mr. Cao and as to the other 50% by Mr. Yu, both being executive Directors of the Company. Cosmic Shine and GCL are regarded as controlled corporations of Mr. Cao and Mr. Yu and therefore, Mr. Cao and Mr. Yu are deemed to be interested in all the 2,154,313,725 Shares and underlying Shares interested in by Cosmic Shine and GCL. The deemed interest under Part XV of the SFO of Mr. Cao, Mr. Yu, Cosmic Shine and GCL duplicate with each others completely.
Based on disclosure of interest filing, the entire issued share capital of Media Forecast Limited is whollyowned by Mr. Qin Zhiwen. Mr. Qin Zhiwen is therefore deemed to be interested in all the 253,164,556 Shares held by Media Forecast Limited.
The percentages are calculated based on the total number of 5,027,123,073 issued Shares as at the Latest Practicable Date.

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GENERAL INFORMATION

APPENDIX

Save as disclosed above, as at the Latest Practicable Date, the Directors are not aware of any persons (other than the Directors or chief executives of the Company) who have interests or short positions in the Shares or underlying shares of the Company which were disclosed to the Company under Divisions 2 and 3 of Part XV of the SFO or recorded in the Section 336 Register.

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

5. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors nor their respective close associates (as defined in the Listing Rules) was interested in any business apart from the business of the Group, which competes or is likely to compete, either directly or indirectly, with the business of the Group.

6. DIRECTORS’ INTEREST IN CONTRACTS OR ARRANGEMENTS

As at the Latest Practicable Date, there was no contract or arrangement subsisting in which any Director was materially interested and which was significant in relation to any business of the Group.

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which had been since 31 December 2017 (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.

7. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading positions of the Group since 31 December 2017, being the date to which the latest published audited financial statements of the Group were made up.

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GENERAL INFORMATION

APPENDIX

8. LITIGATION

Save as disclosed below, as at the Latest Practicable Date, neither the Company nor any of its subsidiaries was engaged in any litigation or arbitration of material importance and no litigation, arbitration or claim of material importance was known to the Directors to be pending or threatened against any member of the Group:

In April 2015, the Higher People’s Court of Qinghai Province (the “ Qinghai Higher Court ”) handed down the second-instance and final judgment (the “ Final Judgment ”) for the litigations (the “ Mining Litigations ”) against Inner Mongolia Xiao Hong Shan Yuen Xian Mining Industry Company Limited (“ Yuen Xian Company ”) commenced by the Group, with the view to invalidating the change of exploration right agreement dated 11 November 2009 entered into between Qinghai Forest Source Mining Industry Developing Company Limited (“ QHFSMI ”) and Yuen Xian Company (which caused the loss of the exploration license by QHFSMI), and seeking to regain the control of QHFSMI and the exploration license, whereby the Group eventually won the Mining Litigations and the change of exploration right agreement was eventually affirmed by the Qinghai Higher Court to be invalid. The defendants of the Mining Litigations sought to apply for an review of the Final Judgment by Qinghai Province People’s Procuratorate (“ Qinghai Procuratorate ”) but the Review application was not supported by Qinghai Procuratorate. As advised by the Company’s legal advisers as to Chinese law, the final judgment made by Qinghai Higher Court in favour of the Group in April 2015 was final and binding judgment against the defendants. For further details, please refer to the announcements of the Company dated 26 August 2010, 10 January 2013, 22 November 2013, 11 June 2015, 12 June 2015, 17 July 2015, 8 December 2015 and 9 March 2016, respectively.

Following the conclusion of the Mining Litigations, the Company has appointed its legal advisers as to Chinese law to enforce the judgment to uphold the Group’s right. In the event that the Group could regain the control of QHFSMI, the Group will be in the position to have access to the relevant exploration and mining license and thereafter the Group will perform due diligence review on the mining site. The Group is conducting regular re-assessment on the progress made by its legal advisers and the prospect of the Group’s mining segment from time to time.

9. MATERIAL CONTRACTS

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

(1) the lease agreement entered on 24 October 2016 between Shandong Shundong Port Services Company Limited (a 51%-owned subsidiary of the Company) (as lessor) and Dongying Haike Ruilin Chemical Co., Ltd. (as lessee) in relation to the lease of the Group’s chemical terminal, storage and logistics facilities at Dongying Port;
(2) the placing agreement dated 22 January 2018 between the Company and Golden Rich Securities Limited for the best effort placing of up to 609,940,000 new Shares at the placing price of HK$0.143 per placing share under general mandate;

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GENERAL INFORMATION

APPENDIX

(3) the non-legally binding memorandum of understanding dated 6 February 2018 between the Company, iECO Financial Consulting Limited (“ iECO ”) and the shareholders of iECO in relation to the possible acquisition of 80% shareholding in iECO;
(4) the sale and purchase agreement dated 7 May 2018 between Great Trade Global Limited (a wholly-owned subsidiary of the Company) (as purchaser), Mr. Xu Zhen Sheng (as vendors’ guarantor), Sealand Corporation, Baba World Limited, Mr. Lin Wanqiang and Mr Chen Xiwang (as vendors) and iECO (as the target company) in relation to the proposed acquisition of 80% issued share capital and shareholders’ loans of iECO for the consideration of HK$1,624,000 (subject to completion adjustment);
(5) the GCL CB Subscription Agreement;
(6) the CB Placing Agreement; and
(7) the letter agreements both dated 20 July 2018 regarding the extension of long stop dates of the GCL CB Subscription and the CB Placing.

10. EXPERT AND CONSENT

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

Name of expert	Qualification
Astrum Capital	A corporation licensed to carry on type 1 (dealing in
Management Limited	securities), type 2 (dealing in futures contracts), type
	6 (advising on corporate finance) and type 9 (asset
	management) regulated activities under the SFO

The above expert has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and references to its name in the form and context in which it appears.

As at the Latest Practicable Date, the above expert did not have any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, the above expert did not have any direct or indirect interest in any assets which have been acquired or disposed of or leased to any member of the Group, or which are proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2017 (being the date to which the latest published audited accounts of the Company were made up).

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GENERAL INFORMATION

APPENDIX

11. CORPORATE INFORMATION OF THE GROUP

Registered office Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands Principal place of Unit 1508, 15/F business in Hong Kong The Center 99 Queen’s Road Central Hong Kong

Principal share registrar and Conyers Trust Company (Cayman) Limited transfer agent Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands Hong Kong branch share Tricor Tengis Limited registrar and transfer office Level 22, Hopewell Centre 183 Queen’s Road East Hong Kong Company secretary

Mr. Chan Wai Cheung Admiral, a member of the Hong Kong Institute of Certified Public Accountants

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be made available for inspection during normal business hours (i.e. 9:00 a.m. to 1:00 p.m. and 2:00 p.m. to 5:00 p.m. on weekdays excluding Saturdays, Sundays and Hong Kong public holidays) from the date of this circular up to and including the date of the EGM at the head office and principal place of business in Hong Kong of the Company at Unit 1508, 15/F, The Center, 99 Queen’s Road Central, Hong Kong:

(a) the memorandum of association and the articles of association of the Company;
(b) the “Letter from the Board”, the text of which is set out on pages 5 to 24 of this circular;
(c) the “Letter from the Independent Board Committee”, the text of which is set out on page 25 of this circular;

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GENERAL INFORMATION

APPENDIX

(d) the “Letter from the Independent Financial Adviser”, the text of which is set out on pages 26 to 51 of this circular;
(e) the material contracts referred to in the paragraph headed “Material Contracts” of this appendix;
(f) the written consent referred to in the paragraph headed “Expert and Consent” of this appendix;
(g) the GCL CB Subscription Agreement and the CB Placing Agreement;
(h) the letter agreements both dated 20 July 2018 regarding the extension of long stop dates of the GCL CB Subscription and the CB Placing; and
(i) this circular.

– 58 –

NOTICE OF EXTRAORDINARY GENERAL MEETING

ENERGY INTERNATIONAL INVESTMENTS HOLDINGS LIMITED 能源國際投資控股有限公司[*]

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 353)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “ EGM ”) of Energy International Investments Holdings Limited (the “ Company ”) will be held at 2/F, J Plus 35-45B Bonham Strand, Sheung Wan, Hong Kong on Friday, 17 August 2018 at 3:00 p.m. for the purpose of considering and, if thought fit, passing the following resolutions, with or without amendments, as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

1. “ THAT :

(a) the entering into of the subscription agreement (the “ GCL CB Subscription Agreement ”, a copy of which has been produced to this meeting marked “A” and signed by the chairman of this meeting for the purpose of identification) dated 14 June 2018 by Giant Crystal Limited (“ GCL ”) as subscriber and the Company as issuer in relation to the subscription by GCL of 3% per annum convertible bonds (the “ GCL Convertible Bonds ”) in the principal amount of HK$200,000,000 to be issued by the Company due on the second anniversary of the date of issue carrying a conversion right entitling their holders to subscribe for 784,313,725 Shares (the “ GCL Conversion Shares ”) at the initial conversion price of HK$0.255 per ordinary share in the Company (“ Share ”) (subject to adjustments in accordance with the terms and conditions of the GCL Convertible Bonds), and all transactions contemplated thereunder and all other matters thereof and incidental thereto and in connection therewith, be and are hereby generally and unconditionally approved, confirmed and ratified in all respects;
(b) conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited (the “ Listing Committee ”) granting the listing of, and permission to deal in the GCL Conversion Shares, the directors (the “ Directors ”) of the Company be and are hereby (i) authorised to issue the GCL Convertible Bonds to GCL; and (ii) granted a specific mandate (the “ GCL Specific Mandate ”) to allot and issue the GCL Conversion Shares, in each case on the terms and subject to the conditions of the GCL Convertible Bonds, such GCL Specific Mandate being in additional to and not prejudicing or revoking any general or specific mandate(s) which has/have been granted or may from time to time be granted to the Directors by the shareholders of the Company; and

For identification purpose only

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NOTICE OF EXTRAORDINARY GENERAL MEETING

(c) the Directors be and are hereby generally and unconditionally authorised to do all such acts or things and execute and deliver all such documents, instruments and agreements which they consider necessary, desirable or expedient to give effect to the transactions contemplated by the GCL CB Subscription Agreement, the issue of the GCL Convertible Bonds and the allotment and issue of the GCL Conversion Shares, and to agree to such variation, amendments or waiver of matters relating thereto as are, in the opinion of the Directors, in the interests of the Company, including without limitation the letter agreement dated 20 July 2018 regarding the extension of long stop date.”
“ THAT :
(a) the entering into of the placing agreement (the “ CB Placing Agreement ”, a copy of which has been produced to this meeting marked “B” and signed by the chairman of this meeting for the purpose of identification) dated 14 June 2018 by the Company and Golden Rich Securities Limited (the “ Placing Agent ”) in relation to the best-effort placing by the Placing Agent of 3% per annum convertible bonds (the “ Placing Convertible Bonds ”) in the principal amount of up to HK$500,000,000 to be issued by the Company due on the second anniversary of the date of issue carrying a conversion right entitling their holders to subscribe for up to 1,960,784,313 Shares (the “ Placing Conversion Shares ”) at the initial conversion price of HK$0.255 per Share (subject to adjustments in accordance with the terms and conditions of the Placing Convertible Bonds), and all transactions contemplated thereunder and all other matters thereof and incidental thereto and in connection therewith, be and are hereby generally and unconditionally approved, confirmed and ratified in all respects;
(b) conditional upon the Listing Committee granting the listing of, and permission to deal in the Placing Conversion Shares and other conditions of the CB Placing Agreement, the Directors be and are hereby (i) authorised to issue the Placing Convertible Bonds; and (ii) granted a specific mandate (the “ Placing Specific Mandate ”) to allot and issue the Placing Conversion Shares, in each case on the terms and subject to the conditions of the Placing Convertible Bonds, such Placing Specific Mandate being in additional to and not prejudicing or revoking any general or specific mandate(s) which has/have been granted or may from time to time be granted to the Directors by the shareholders of the Company; and

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NOTICE OF EXTRAORDINARY GENERAL MEETING

(c) the Directors be and are hereby generally and unconditionally authorised to do all such acts or things and execute and deliver all such documents, instruments and agreements which they consider necessary, desirable or expedient to give effect to the transactions contemplated by the CB Placing Agreement, the issue of the Placing Convertible Bonds and the allotment and issue of the Placing Conversion Shares, and to agree to such variation, amendments or waiver of matters relating thereto as are, in the opinion of the Directors, in the interests of the Company, including without limitation the letter agreement dated 20 July 2018 regarding the extension of long stop date.”

By order of the Board Energy International Investments Holdings Limited Lan Yongqiang Chairman

Hong Kong, 27 July 2018

Registered office: Head office and principal place of Cricket Square business in Hong Kong: Hutchins Drive Unit 1508, 15th Floor P.O. Box 2681 The Center Grand Cayman KY1-1111 99 Queen’s Road Central Cayman Islands Hong Kong

Notes:

A member entitled to attend and vote at the meeting convened by the above notice is entitled to appoint one or more proxy to attend and, subject to the provisions of the articles of association of the Company, vote in his stead. A proxy need not be a member of the Company.
In order to be valid, the form of proxy must be deposited together with a power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority, at the office of the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.
Pursuant to Rule 13.39(4) of the Listing Rules, all votes of shareholders at the meeting will be taken by poll.
As at the date of this notice, the executive Directors are Mr. Lan Yongqiang (Chairman), Ms. Wang Meiyan, Mr. Chan Wai Cheung Admiral, Ms. Jin Yuping, Mr. Cao Sheng and Mr. Yu Zhiyong; and the independent non-executive Directors are Mr. Lee Hoi Yan, Mr. Wang Jinghua and Mr. Fung Nam Shan.

– 61 –

AI assistant

REPT BATTERO Energy Co., Ltd. — Proxy Solicitation & Information Statement 2018

49377_rns_2018-07-26_431b1ea2-0791-471c-9e98-c014137b62f8.pdf

ENERGY INTERNATIONAL INVESTMENTS HOLDINGS LIMITED 能源國際投資控股有限公司[*]

(1) SUBSCRIPTION OF CONVERTIBLE BONDS BY GIANT CRYSTAL LIMITED UNDER SPECIFIC MANDATE CONSTITUTING A CONNECTED TRANSACTION; (2) PLACING OF CONVERTIBLE BONDS UNDER SPECIFIC MANDATE; AND

(3) NOTICE OF EXTRAORDINARY GENERAL MEETING

Placing Agent

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

LETTER FROM THE BOARD

ENERGY INTERNATIONAL INVESTMENTS HOLDINGS LIMITED 能源國際投資控股有限公司[*]

(1) SUBSCRIPTION OF CONVERTIBLE BONDS BY GIANT CRYSTAL LIMITED UNDER SPECIFIC MANDATE CONSTITUTING A CONNECTED TRANSACTION; AND

(2) PLACING OF CONVERTIBLE BONDS UNDER SPECIFIC MANDATE

INTRODUCTION

LETTER FROM THE BOARD

THE GCL CB SUBSCRIPTION

Conditions precedent to the GCL CB Subscription

LETTER FROM THE BOARD

Information relating to GCL

THE CB PLACING

The CB Placees

LETTER FROM THE BOARD

Conditions precedent to the CB Placing

Termination of the CB Placing Agreement

LETTER FROM THE BOARD

PRINCIPAL TERMS OF THE CONVERTIBLE BONDS

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE TRANSACTIONS AND THE USE OF PROCEEDS

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

EQUITY FUND RAISING ACTIVITIES OF THE COMPANY DURING THE PAST TWELVE MONTHS

LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF THE COMPANY

IMPLICATIONS UNDER THE LISTING RULES

EGM

LETTER FROM THE BOARD

RECOMMENDATIONS

LETTER FROM THE BOARD

WARNING

ADDITIONAL INFORMATION

ENERGY INTERNATIONAL INVESTMENTS HOLDINGS LIMITED 能源國際投資控股有限公司[*]

SUBSCRIPTION OF CONVERTIBLE BONDS BY GIANT CRYSTAL LIMITED UNDER SPECIFIC MANDATE CONSTITUTING A CONNECTED TRANSACTION

Yours faithfully,

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

SUBSCRIPTION OF CONVERTIBLE BONDS BY GIANT CRYSTAL LIMITED UNDER SPECIFIC MANDATE CONSTITUTING A CONNECTED TRANSACTION

INTRODUCTION

INDEPENDENCE DECLARATION

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

I. Information on the Group

(i) For the year ended 31 December 2016 (i.e. FY2016)

(ii) For the year ended 31 December 2017 (i.e. FY2017)

II. Background of, reasons for and benefits of the GCL CB Subscription

III. Principal terms of the GCL CB Subscription Agreement

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

A. Conversion Price

(b) Comparable analysis

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(c) Conclusion

B. Interest rate

C. Maturity

D. Redemption

E. Adjustment to the Conversion Price

F. Conclusion

IV. Possible dilution effect on the shareholding interests of Shareholders

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

V. Financial effects of the GCL CB Subscription

REPT BATTERO Energy Co., Ltd. Proxy Solicitation & Information Statement 2018