THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about 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 Shares in Technovator International Limited, you should at once hand this circular with the enclosed form of proxy 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 the transferee.

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

Technovator

TECHNOVATOR INTERNATIONAL LIMITED 同方泰德國際科技有限公司[*]

(incorporated in Singapore with limited liability)

(Stock Code: 1206)

(1) MAJOR AND CONNECTED TRANSACTION AND

(2) CONTINUING CONNECTED TRANSACTION IN RELATION TO

ACQUISITIONS OF BUSINESSES IN RELATION TO PROVIDING INTELLIGENCE INTEGRATED SOLUTIONS WHICH CENTER AROUND SUPERVISION AND CONTROL SYSTEMS IN THE FIELDS OF INTELLIGENT RAIL TRANSIT, INTELLIGENT BUILDING AND INTELLIGENT URBAN HEATING NETWORK AND RELATED ASSET

Independent Financial Adviser to Independent Board Committee and the Independent Shareholders

A letter from the Board is set out on pages 7 to 28 of this circular. A letter from the Independent Board Committee containing its advice and recommendation to the Independent Shareholders is set out on pages 29 to 30 of this circular. A letter from Quam Capital Limited, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, containing its advice to the Independent Board Committee and the Independent Shareholders, is set out on pages 31 to 62 of this circular.

A notice convening the EGM to be held on 16 October 2015 at 10 a.m. at Unit 806-810, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong, is set out on pages EGM-1 to EGM-2 of this circular. A form of proxy for use by the Shareholders at the EGM is enclosed herein.

Whether or not you are able to attend the EGM, you are requested to complete the accompanying form of proxy for use at the EGM in accordance with the instructions printed thereon and return the same to the Company’s Hong Kong share registrar, Tricor Investor Services 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 holding 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 adjourned meeting thereof should you so wish.

25 September 2015

* For identification purpose only

CONTENTS

		Page
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-6
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-28
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . 29-30
LETTER FROM QUAM CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31-62
APPENDIX I	–	FINANCIAL INFORMATION OF THE GROUP . . . . . . . . I-1-I-4
APPENDIX II	–	UNAUDITED PRO FORMA FINANCIAL
		INFORMATION OF THE ENLARGED GROUP . . . . . II-1-II-7
APPENDIX III	–	FINANCIAL INFORMATION OF THE
		INTELLIGENT RAIL TRANSIT BUSINESS . . . . . . III-1-III-33
APPENDIX IV	–	FINANCIAL INFORMATION OF THE
		INTELLIGENT BUILDING BUSINESS . . . . . . . . . IV-1-IV-32
APPENDIX V	–	FINANCIAL INFORMATION OF THE INTELLIGENT
		URBAN HEATING NETWORK BUSINESS . . . . . . . V-1-V-32
APPENDIX VI	–	MANAGEMENT DISCUSSION AND ANALYSIS
		OF THE TARGET BUSINESSES . . . . . . . . . . . . . . . . VI-1-VI-4
APPENDIX VII	–	VALUATION REPORT OF THE INTELLIGENT
		RAIL TRANSIT BUSINESS . . . . . . . . . . . . . . . . . VII-1-VII-31
APPENDIX VIII	–	VALUATION REPORT OF THE INTELLIGENT
		BUILDING BUSINESS . . . . . . . . . . . . . . . . . . . . VIII-1-VIII-31
APPENDIX IX	–	VALUATION REPORT OF THE INTELLIGENT
		URBAN HEATING NETWORK BUSINESS . . . . . . IX-1-IX-31
APPENDIX X	–	GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . X-1-X-7
APPENDIX XI	–	REPORTS FROM THE REPORTING ACCOUNTANTS
		AND THE LETTER FROM THE BOARD IN
		RELATION TO THE VALUATION OF
		THE TARGET BUSINESSES . . . . . . . . . . . . . . . . . . . XI-1-XI-7
NOTICE OF EGM		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EGM-1-EGM-2

– i –

DEFINITIONS

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

“Accounting Standards for Business Enterprises”
Accounting Standards for Business Enterprises issued by the Ministry of Finance of the PRC
“Acquired Projects”
the contracts or projects entered into between THTF and third parties in relation to the Target Businesses, including, up to the Reference Date, contracts that have been signed but not yet fulfilled, and projects that are under the bidding or negotiation phase and contracts are yet to be signed, and, between the period of the Reference Date and the Completion Date, new contracts that have been signed, and projects that are under the bidding or negotiation phase
“Acquisition”
collectively, the Technovator Beijing Acquisition and the Tongfang Energy Saving Acquisition
“Announcement”
the announcement of the Company dated 28 July 2015 relating to the Acquisition and the Business and Assets Purchase Agreements
“Board”
the board of Directors of the Company
“Business and Assets Purchase Agreements”
collectively, the Technovator Beijing Agreement and the Tongfang Energy Saving Agreement
“business day”
a day (other than Saturday, Sunday, public holiday and any day on which a typhoon signal 8 or above is hoisted or a black rainstorm warning is given in Hong Kong at any time during 9:00 a.m. to 5:00 p.m.) on which banks in Hong Kong are open for general banking business
“Company”
Technovator International Limited (同方泰德國際科技有限公司), a company incorporated with limited liability on 25 May 2005 in Singapore and the Shares of which are listed on the Stock Exchange (stock code: 1206)
“Completion Accounts”
the statements of financial position and the statements of profit and loss as at the Completion Date and for the period between the Reference Date and the Completion Date for the Intelligent Rail Transit Business, the Intelligent Building Business or the Intelligent Urban Heating Network Business, as applicable

– 1 –

DEFINITIONS

“Completion Date”
the date of the completion of the Technovator Beijing Agreement and Tongfang Energy Saving Agreement, which shall be the first business day after all of the conditions precedent are satisfied pursuant to Technovator Beijing Agreement and Tongfang Energy Saving Agreement respectively, or on such date as may be agreed between THTF and Technovator Beijing or Tongfang Energy Saving, as applicable
“connected persons”
has the same meaning ascribed thereto under the Listing Rules
“Controlling Shareholder” has the same meaning ascribed to it under the Listing Rules
“Director(s)” the director(s) of the Company
“EGM”
the extraordinary general meeting of the Company to be convened to consider, and if thought fit, approving the Acquisition
“Enlarged Group” the Group as enlarged by the Acquisition
“Group”
the Company and its subsidiaries (as defined in the Listing Rules) from time to time
“HK$”
Hong Kong dollar, the lawful currency of Hong Kong
“Hong Kong”
the Hong Kong Special Administrative Region of the PRC
“Independent Board Committee”
an independent board committee of the Board comprising all the independent non-executive Directors, namely, Mr. Fan Ren Da Anthony, Mr. Chia Yew Boon and Ms. Chen Hua to advise the Independent Shareholders in respect of the Business and Assets Purchase Agreements and the transactions contemplated thereunder
“Independent Shareholders”
the Shareholders who are not interested in or involved in the Business and Assets Purchase Agreement and the transactions contemplated thereunder
“Intelligent Building Business”

business which provide building intelligence integrated solutions which center around the Building Automation (BA) that has been developed and debugged by THTF with the energy saving algorithm

– 2 –

DEFINITIONS

“Intelligent Building Business Related Assets and Liabilities”
“Intelligent Rail Transit Business”
“Intelligent Rail Transit Business Related Assets and Liabilities”
“Intelligent Urban Heating Network Business”
“Intelligent Urban Heating Network Business Related Assets and Liabilities”
“Latest Practicable Date”
“Listing Rules”
the assets and liabilities associated with the Intelligent Building Business as at the Reference Date and according to the Accounting Standards for Business Enterprises (details of which are set forth in the Valuation Report), and any such changes to the aforementioned assets and liabilities and new assets and liabilities that have been generated from normal operation between the period of the Reference Date and the Completion Date
business which provide intelligence integrated solutions for the main electro-mechanical systems such as Integrated Supervision and Control System (ISCS), Platform Screen Doors (PSD) and Building Automation System (BAS)
the assets and liabilities associated with the Intelligent Rail Transit Business as at the Reference Date and according to the Accounting Standards for Business Enterprises (details of which are set forth in the Valuation Report), and any such changes to the aforementioned assets and liabilities and new assets and liabilities that have been generated from normal operation between the period of the Reference Date and the Completion Date
business which provide integrated solutions for heating plant and network including Supervisory Control And Data Acquisition (SCADA)
the assets and liabilities associated with the Intelligent Urban Heating Network Business as at the Reference Date and according to the Accounting Standards for Business Enterprises (details of which are set forth in the Valuation Report), and any such changes to the aforementioned assets and liabilities and new assets and liabilities that have been generated from normal operation between the period of the Reference Date and the Completion Date
24 September 2015, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained in this circular
the Rules Governing the Listing of Securities on the Stock Exchange, as amended from time to time

– 3 –

DEFINITIONS

“PRC” the People’s Republic of China which, for the purposes of this circular, excludes Hong Kong, Macau Special Administrative Region of the PRC and Taiwan

“Purchaser” collectively, Technovator Beijing and Tongfang Energy Saving

“Quam Capital” Quam Capital Limited, a licensed corporation under the SFO to carry out type 6 (advising on corporate finance) regulated activity, being the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Business and Assets Purchase Agreements
“Reference Date” 31 March 2015
“RMB” Renminbi, the lawful currency of the PRC
“SFO” the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong)
“Share(s)” ordinary share(s) in the capital of the Company “Shareholder(s)” the holder(s) of the Share(s)
“Stock Exchange” The Stock Exchange of Hong Kong Limited “subsidiary(ies)” has the meaning defined in the Listing Rules
“Target Asset” collectively, the Target Assets for Intelligent Building Business, the Target Assets for Intelligent Rail Transit Business and the Target Assets for Intelligent Urban Heating Network Business
“Target Assets for Intelligent Building Business”
the Intelligent Building Business Related Assets and Liabilities and other products and technologies relating to the Intelligent Building Business (including but not limited to the intellectual property rights, technical data and information related to patents, software copyrights, proprietary technologies, source codes, technical manuals, and operation manuals)

– 4 –

DEFINITIONS

“Target Assets for Intelligent Rail Transit Business”
“Target Assets for Intelligent Urban Heating Network Business”
“Target Businesses”
“Target Business Related Assets and Liabilities”
“Technovator Beijing”
“Technovator Beijing Acquisition”
“Technovator Beijing Agreement”
the Intelligent Rail Transit Business Related Assets and Liabilities and other energy saving products and technologies relating to the Intelligent Rail Transit Business (including but not limited to the intellectual property rights, technical data and information related to patents, software copyrights, proprietary technologies, source codes, technical manuals, and operation manuals)
the Intelligent Urban Heating Network Business Related Assets and Liabilities and other products and technologies relating to the Intelligent Urban Heating Network Business (including but not limited to the intellectual property rights, technical data and information related to patents, software copyrights, proprietary technologies, source codes, technical manuals, and operation manuals)
collectively, the Intelligent Rail Transit Business, the Intelligent Building Business and the Intelligent Urban Heating Network Business
collectively, the Intelligent Rail Transit Business Related Assets and Liabilities, the Intelligent Building Business Related Assets and Liabilities and the Intelligent Urban Heating Network Business Related Assets and Liabilities
同方泰德國際科技（北京）有限公司 (TongFang Technovator Int (Beijing) Co., Ltd*), a direct wholly foreign-owned enterprise incorporated in the PRC on 7 August 2006 and a wholly-owned subsidiary of the Company
the acquisition of Intelligent Rail Transit Business, the Intelligent Building Business, the Target Assets for Intelligent Rail Transit Business, and the Target Assets for Intelligent Building Business by Technovator Beijing from THTF pursuant to the terms of Technovator Beijing Agreement
the acquisition agreement entered into by Technovator Beijing and THTF on 28 July 2015 in respect of the Technovator Beijing Acquisition

– 5 –

DEFINITIONS

“THTF”

同方股份有限公司 (Tsinghua Tongfang Co., Ltd), formerly known as 清華同方股份有限公司(Tsinghua Tongfang Company Limited), a joint stock limited company incorporated in the PRC, whose shares are listed and traded on the Shanghai Stock Exchange (上海證券交易所) and a Controlling Shareholder of the Company

“Tongfang Energy Saving”
同方節能工程技術有限公司 (Tongfang Energy Saving Engineering Technology Co., Ltd.*), a wholly foreign-owned enterprise established in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company
“Tongfang Energy Saving Acquisition”
the acquisition of the Intelligent Urban Heating Network Business and Target Assets for Intelligent Urban Heating Network Business by Tongfang Energy Saving from THTF pursuant to the terms of Tongfang Energy Saving Agreement
“Tongfang Energy Saving Agreement”
the acquisition agreement entered into by Tongfang Energy Saving and THTF on 28 July 2015 in respect of the Tongfang Energy Saving Acquisition
“Valuation Date”
31 March 2015
“Valuation Reports”
the valuation reports in respect of the valuation of each of (i) the Intelligent Rail Transit Business; (ii) the Intelligent Building Business; and (iii) the Intelligent Urban Heating Network Business, as at the Valuation Date
“Valuer”
北京卓信大華資產評估有限公司 (Beijing Zhuoxingdahua Appraisal Co., Ltd*), an independent professional valuer
“%”
means per cent
The English translation is for identification purposes only

For the purpose of illustration only, amounts denominated in RMB in this circular have been translated into HK$ at the rate of HK$1 = RMB0.7899. Such translations should not be construed as a representation that the amounts in question have been, could have been or could be converted at any particular rate at all.

ROUNDING

Certain amounts and percentage figures included in this circular have been subject to rounding adjustments. As a result, any discrepancies in any table or chart between the total shown and the sum of the amounts listed are due to rounding.

– 6 –

LETTER FROM THE BOARD

Technovator

TECHNOVATOR INTERNATIONAL LIMITED 同方泰德國際科技有限公司[*]

(incorporated in Singapore with limited liability)

(Stock Code: 1206)

Executive Directors: Mr. Zhao Xiaobo Mr. Seah Han Leong

Non-executive Directors: Mr. Lu Zhicheng Mr. Fan Xin Mr. Liu Tianmin Mr. Ng Koon Siong

Independent Non-executive Directors: Mr. Fan Ren Da Anthony Mr. Chia Yew Boon Ms. Chen Hua

Registered Office: 66 Tannery Lane #04-10/10A Sindo Industrial Building Singapore 347805

Place of Business in Hong Kong: Unit 806–810 Bank of American Tower 12 Harcourt Road Central, Hong Kong

25 September 2015

To the Shareholders

Dear Sir or Madam,

(1) MAJOR AND CONNECTED TRANSACTION AND

(2) CONTINUING CONNECTED TRANSACTION IN RELATION TO

INTRODUCTION

Reference is made to the announcement of the Company dated 28 July 2015. As set out in the Announcement, on 28 July 2015, the Company, through its wholly-owned subsidiaries, Technovator Beijing and Tongfang Energy Saving (as purchasers), entered

* For identification purpose only

– 7 –

LETTER FROM THE BOARD

into agreements (including the Technovator Beijing Agreement and the Tongfang Energy Saving Agreement) with THTF (as vendor) to acquire the businesses in relation to providing intelligence integrated solutions which center around supervision and control systems in the fields of intelligent rail transit, intelligent building and intelligent urban heating network (in each case, together with the assets and liabilities associated with such businesses) for a total consideration of RMB528,000,000 (subject to adjustments). The Technovator Beijing Agreement and the Tongfang Energy Saving Agreement are inter-conditional.

In addition, upon completion of the Acquisition, in order to facilitate the successful transfer of the Target Businesses pursuant to the Acquisition and the future development of the Target Businesses, pursuant to the Business and Assets Purchase Agreements, the Purchaser and THTF will enter into the Future Business Arrangements, which, among other things, will involve transfer of payments received from third party customers from time to time from THTF to the Purchaser and reimbursement of payments made by THTF to third party creditors for projects undertaken by the Target Businesses. The Future Business Arrangements will constitute continuing connected transactions upon completion of the Acquisition.

The purpose of this circular is to provide the Shareholders with information in respect of the details of Acquisition and the Future Business Arrangements. The EGM will be convened to consider, and if thought fit, ratifying and approving the Acquisition, the entering into of the Business and Assets Purchase Agreements and the transactions contemplated thereunder, including the Future Business Arrangements and the Annual Caps.

THE TECHNOVATOR BEIJING AGREEMENT

Date: 28 July 2015

Parties:

(1) Technovator Beijing (a direct wholly-owned subsidiary of the Company) as the purchaser; and
(2) THTF as the vendor.

Business and assets to be acquired:

THTF agrees to transfer the Intelligent Rail Transit Business, the Target Assets for Intelligent Rail Transit Business (including the Intelligent Rail Transit Business Related Assets and Liabilities), the Intelligent Building Business, and the Target Assets for Intelligent Building Business (including the Intelligent Building Business Related Assets and Liabilities) to Technovator Beijing. Please refer to the section headed “ THE TARGET BUSINESSES AND THE TARGET ASSETS” for further details.

– 8 –

LETTER FROM THE BOARD

Consideration:

The total consideration for the Technovator Beijing Acquisition shall be RMB370,000,000. The consideration for the Technovator Beijing Acquisition shall be subject to adjustments as set out below. If the Intelligent Rail Transit Business or the Intelligent Building Business records a net profit in their respective Completion Accounts for the period between the Reference Date and the Completion Date, the consideration for the Technovator Beijing Acquisition will be increased by the amount of such net profit. Conversely, if the Intelligent Rail Transit Business or the Intelligent Building Business records a net loss in their respective Completion Accounts for the period between the Reference Date and the Completion Date, the consideration for the Technovator Beijing Acquisition will be reduced by the amount of such net loss. In addition, if any cash balance is recorded in the Completion Accounts for the Intelligent Rail Transit Business or the Intelligent Building Business as at the Completion Date, the consideration for the Technovator Beijing Acquisition will be reduced by the amount of such cash balance, as such cash will not be transferred to Technovator Beijing.

The consideration for the Technovator Beijing Acquisition was determined based on arm’s length negotiation between Technovator Beijing and THTF with reference to the Valuation Reports in respect of the value of the Intelligent Rail Transit Business and the Intelligent Building Business, respectively, as at the Valuation Date issued by an independent valuer.

The Valuation Reports on the Intelligent Rail Transit Business and the Intelligent Building Business are set out in Appendices VII and VIII, respectively.

Payment term:

Pursuant to the Technovator Beijing Agreement, the consideration for the Technovator Beijing Acquisition shall be satisfied in cash in the following manner:

the full amount of the consideration shall be paid to THTF within fifteen (15) business days after the Completion Date; or alternatively,
no less than 30% of the consideration shall be settled within five (5) business days after the Completion Date; and

– 9 –

LETTER FROM THE BOARD

the balance of the consideration (with interest accrued at the prevailing market interest rate on any outstanding amount) shall be settled by one or more payments at any time within one (1) year after the Completion Date. The loan interest rate stipulated by the People’s Bank of China for the corresponding period will be used as the prevailing market interest rate by the parties for the purpose of this provision.

Conditions Precedent:

The Technovator Beijing Agreement shall take effect upon the satisfaction of the following conditions:

(i) the Technovator Beijing Agreement shall have been signed and/or sealed by the respective legal representative or authorised representative of Technovator Beijing and THTF;
(ii) each of Technovator Beijing and THTF shall have completed their own internal approval process in relation to the Technovator Beijing Acquisition;
(iii) the Company shall have obtained the necessary resolutions and approvals from the Shareholders in accordance with the Listing Rules; and
(iv) all of the conditions precedent set out in the Tongfang Energy Saving Agreement (other than the fulfillment of conditions of the Technovator Beijing Agreement) have been satisfied.

None of the conditions precedent may be waived. As at the Latest Practicable Date, conditions (i) and (ii) have been satisfied and conditions (iii) and (iv) have not been satisfied.

Completion Accounts:

THTF will produce the Completion Accounts as at the Completion Date and the statement of profit and loss for the period between the Reference Date and the Completion Date of the Intelligent Rail Transit Business and the Intelligent Building Business within five (5) business days after the Completion Date.

– 10 –

LETTER FROM THE BOARD

THTF will be entitled to any profit and responsible for any loss of the Intelligent Rail Transit Business and the Intelligent Building Business during the period between the Reference Date and the Completion Date as recorded in the Completion Accounts. Upon settlement of the profit and loss pursuant to adjustments of the consideration for the Technovator Beijing Agreement, such profit and loss will belong to Technovator Beijing.

Completion:

The Completion Date of the Technovator Beijing Acquisition is the first business day after all of the conditions precedent are satisfied, or on such date as may be agreed between Technovator Beijing and THTF. Pursuant to the Technovator Beijing Agreement, THTF agrees to transfer the Target Assets for Intelligent Rail Transit Business and the Target Assets for Intelligent Building Business to Technovator Beijing on or before the Completion Date. Notwithstanding any registration or procedural requirements applicable to the transfer of the Target Assets for Intelligent Rail Transit Business, and the Target Assets for Intelligent Building Business from THTF to Technovator Beijing and to be completed after the Completion Date, all Target Assets for Intelligent Rail Transit Business, and Target Assets for Intelligent Building Business will be deemed to be solely owned by Technovator Beijing since the Completion Date.

Non-competition:

Pursuant to the Technovator Beijing Agreement, THTF undertakes not to, whether by itself or together with other parties, directly or indirectly in any manners whatsoever, engage or invest in any business which competes with the Intelligent Rail Transit Business and the Intelligent Building Business after the Completion Date.

THE TONGFANG ENERGY SAVING AGREEMENT

Date: 28 July 2015

Parties:

(1) Tongfang Energy Saving (an indirect wholly-owned subsidiary of the Company) as the purchaser; and
(2) THTF as the vendor.

– 11 –

LETTER FROM THE BOARD

Business and assets to be acquired:

Consideration:

THTF agrees to transfer the Intelligent Urban Heating Network Business, and the Target Assets for Intelligent Urban Heating Network Business (including the Intelligent Urban Heating Network Business Related Assets and Liabilities) to Tongfang Energy Saving. Please refer to the section headed “THE TARGET BUSINESSES AND THE TARGET ASSETS” for further details.

The total consideration for the Tongfang Energy Saving Acquisition shall be RMB158,000,000. The consideration for the Tongfang Energy Saving Acquisition shall be subject to the adjustments as set out below. If the Intelligent Urban Heating Network Business records a net profit in its Completion Accounts for the period between the Reference Date and the Completion Date, the consideration for the Tongfang Energy Saving Acquisition will be increased by the amount of such net profit. Conversely, if the Intelligent Urban Heating Network Business records a net loss in its Completion Accounts for the period between the Reference Date and the Completion Date, the consideration for the Tongfang Energy Saving Acquisition will be reduced by the amount of such net loss. In addition, if any cash balance is recorded in the Completion Accounts for the Intelligent Urban Heating Network Business as at the Completion Date, the consideration for the Tongfang Energy Saving Acquisition will be reduced by the amount of such cash balance, as such cash will not be transferred to Tongfang Energy Saving.

The consideration for the Tongfang Energy Saving Acquisition was determined based on arm’s length negotiation between Tongfang Energy Saving and THTF with reference to the Valuation Report in respect of the value of the Intelligent Urban Heating Network Business as at the Valuation Date issued by an independent valuer.

The Valuation Report on the Intelligent Urban Heating Network Business is set out in Appendix IX.

– 12 –

LETTER FROM THE BOARD

Payment term:

Pursuant to the Tongfang Energy Saving Agreement, the consideration for the Tongfang Energy Saving Acquisition shall be satisfied in cash in the following manner:

the full amount of the consideration shall be paid to THTF within fifteen (15) business days after the Completion Date; or alternatively,
no less than 30% of the consideration shall be settled within five (5) business days after the Completion Date; and

Conditions Precedent:

The Tongfang Energy Saving Agreement shall take effect upon the satisfaction of the following conditions:

(i) the Tongfang Energy Saving Agreement shall have been signed and/or sealed by the respective legal representative or authorised representative of Tongfang Energy Saving and THTF;
(ii) each of Tongfang Energy Saving and THTF shall have completed their own internal approval process in relation to the Tongfang Energy Saving Acquisition;
(iii) the Company shall have obtained the necessary resolutions and approvals from the Shareholders in accordance with the Listing Rules; and
(iv) all of the conditions precedent set out in the Technovator Beijing Agreement have been satisfied (other than the fulfillment of conditions of the Tongfang Energy Saving Agreement).

– 13 –

LETTER FROM THE BOARD

None of the conditions precedent may be waived. As at the Latest Practicable Date, conditions (i) and (ii) have been satisfied and conditions (iii) and (iv) have not been satisfied.

Completion Accounts:

THTF will produce the Completion Accounts as at the Completion Date and the statement of profit and loss for the period between the Reference Date and the Completion Date of the Intelligent Urban Heating Network Business within five (5) business days after the Completion Date.

THTF will be entitled to any profit and responsible for any loss of the Intelligent Urban Heating Network Business during the period between the Reference Date and the Completion Date as recorded in the Completion Accounts. Upon settlement of the profit and loss pursuant to adjustments of the consideration for the Tongfang Energy Saving Agreement, such profit and loss will belong to Tongfang Energy Saving.

Completion:

Non-competition:

The Completion Date of the Tongfang Energy Saving Acquisition is the first business day after all of the conditions precedent are satisfied, or on such date as may be agreed between Tongfang Energy Saving and THTF. Pursuant to the Tongfang Energy Saving Agreement, THTF agrees to transfer the Target Assets for Intelligent Urban Heating Network Business to Tongfang Energy Saving on or before the Completion Date. Notwithstanding any registration or procedural requirements applicable to the transfer of the Target Assets for Intelligent Urban Heating Network Business from THTF to Tongfang Energy Saving and to be completed after the Completion Date, all Target Assets for Intelligent Urban Heating Network Business will be deemed to be solely owned by Tongfang Energy Saving since the Completion Date.

Pursuant to the Tongfang Energy Saving Agreement, THTF undertakes not to, whether by itself or together with other parties, directly or indirectly in any manners whatsoever, engage or invest in any business which competes with the Intelligent Urban Heating Network Business after the Completion Date.

– 14 –

LETTER FROM THE BOARD

VALUATION OF THE TARGET BUSINESSES AND IMPLICATIONS UNDER THE LISTING RULES

The Valuation Reports were prepared based on a discounted cash flow method. Therefore, the valuation of the Target Businesses in the Valuation Reports constitute a profit forecast under Rule 14.61 of the Listing Rules (the “ Profit Forecast ”). As such, the Company is required to comply with Rules 14.60A, 14.62, and 14A.68(7) of the Listing Rules.

In compliance with the requirements under Rule 14.62(2) of the Listing Rules, the reporting accountants of the Company, KPMG has reported on the calculations of the discounted future cash flows in the Valuation Reports.

The Valuation Reports together with the bases and assumptions upon which they were prepared are set out in Appendix VII to Appendix IX of this circular. The full text of the reports from KPMG in relation to the valuation of the Target Businesses is set out in Appendix XI to this circular.

The Valuer advised that as at the Latest Practicable Date, there had not been any material change in the number of assets of Target Businesses or the bases of the pricing of such assets since the Valuation Date that would result in a manifest impact on the conclusion of the valuation, and accordingly, no re-assessment of the Target Businesses is necessary.

THE TARGET BUSINESSES AND THE TARGET ASSETS

The Target Businesses comprise the following businesses carried on by THTF:

(i) Intelligent Rail Transit Business provides intelligence integrated solutions including the provision of system software and software applications for the main electro-mechanical systems such as Integrated Supervision and Control System (ISCS), Platform Screen Doors (PSD) and Building Automation System (BAS). These solutions also involve provision of services such as purchase of equipment, installation, and system integration to customers.
(ii) Intelligent Building Business provides building intelligence integrated solutions which center around the Building Automation (BA) that has been developed and debugged by THTF with the energy saving algorithm. These solutions involve provision of intelligent procurement and construction services such as program feasibility studies, construction design, equipment, installation and calibration and post-sale operation and maintenance to customers.
(iii) Intelligent Urban Heating Network Business provides integrated solutions for heating plant and network including Supervisory Control And Data Acquisition (SCADA). These solutions involve provision of software and equipment procurement, installation and testing services for heat monitoring and heating network monitoring to customers.

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LETTER FROM THE BOARD

The Target Assets consist of assets and liabilities of the Target Businesses as determined in accordance with the relevant accounting standards as well as other products and technologies relating to the Target Businesses (including but not limited to the intellectual property rights, technical data and information related to patents, software copyrights, proprietary technologies, source codes, technical manuals, and operation manuals).

As of 31 March 2015, the unaudited net asset value of the Target Businesses were as follows:

Net asset value of the Intelligent Rail Transit Business as of 31 March 2015 was RMB80,778,000.

Net asset value of the Intelligent Building Business as of 31 March 2015 was RMB134,740,000.

Net asset value of the Intelligent Urban Heating Network Business as of 31 March 2015 was RMB99,935,000.

Aggregate net asset value of the Target Businesses as of 31 March 2015 was RMB315,453,000.

For the two years ended 31 December 2013 and 2014, the unaudited net profits/loss of the Target Businesses were as follows:

For the year ended 31 December 2013

(i) Intelligent Rail Transit Business: Net profits (before tax): RMB18,296,000 Net profits (after tax): RMB15,461,000
(ii) Intelligent Building Business: Net loss (before tax): RMB7,830,000 Net loss (after tax): RMB7,830,000
(iii) Intelligent Urban Heating Network Business: Net profits (before tax): RMB24,366,000 Net profits (after tax): RMB20,579,000

For the year ended 31 December 2014

(i) Intelligent Rail Transit Business: Net profits (before tax): RMB26,785,000 Net profits (after tax): RMB22,654,000
(ii) Intelligent Building Business: Net profits (before tax): RMB3,997,000 Net profits (after tax): RMB3,788,000

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(iii) Intelligent Urban Heating Network Business: Net profits (before tax): RMB10,022,000 Net profits (after tax): RMB8,434,000

According to the Valuation Reports, the Intelligent Rail Transit Business, the Intelligent Building Business and the Intelligent Urban Heating Network Business were valued at RMB197,000,000, RMB173,000,000, and RMB158,000,000 respectively as at 31 March 2015. THTF established and grew the Target Businesses, and did not acquire from a third party. Thus, there is no original acquisition cost of the Target Businesses and Target Assets.

With respect to the employee arrangements for the transfer of the Target Businesses, pursuant to the Business and Assets Purchase Agreements, THTF and the Purchaser will arrange for current employees of the Target Businesses to enter into employment contracts with the Purchaser to ensure that the current employees responsible for the operation of the Target Businesses will continue to operate the Target Businesses after completion of the Acquisition.

FUTURE BUSINESS ARRANGEMENTS

Overview

In order to facilitate the successful transfer of the Target Businesses pursuant to the Acquisition and the future development of the Target Businesses, pursuant to the Business and Assets Purchase Agreements,

(i) THTF and the Purchaser will cooperate to implement the transfer of the Acquired Projects from THTF to the Purchaser by way of assignment, sub-contracting and/or delegation. Since the Completion Date, the Purchaser will be responsible for performing the work required by the Acquired Projects and entitled to the income from the Acquired Projects. To the extent that the legal rights of THTF under the contracts in respect of any Acquired Projects have not been assigned to the Purchaser, or for any other reasons THTF receives any payment from the customers of any Acquired Projects for any income generated after the Completion Date, THTF is required to pay such amount to the Purchaser no later than the balance sheet date of the month in which such amount is received without any additional compensation;
(ii) THTF should use its reasonable endeavors to notify all of the debtors of loans which are part of the Target Assets of the assignment of such debt to the Purchaser. In the event that the relevant debtors settle such debt by paying THTF, THTF is required to pay such amount to the Purchaser no later than the balance sheet date of the month in which such amount is received without any additional compensation;
(iii) THTF should use its reasonable endeavors to facilitate the assumption of debt which are part of the liabilities of the Target Businesses by the Purchaser, primarily comprising trade payables to third party suppliers. In the event that THTF is required to settle such debt with the relevant third party creditors, the Purchaser is required to reimburse THTF for such amount no later than the balance sheet date of the month in which such amount is paid by THTF;

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(iv) THTF undertakes to assist the Purchaser to take up the Acquired Projects without any additional compensation, including but not limited to providing any necessary information to the Purchaser and handling the relevant project completion and settlement procedures as necessary; and
(v) THTF will support the Purchaser on the continual development and expansion of the Target Businesses, including cooperating with the Purchaser to develop new projects and business opportunities in respect of the Target Businesses, being a party to the relevant agreements to facilitate the Purchaser’s conducting of the Target Businesses if necessary, and providing the required information and assistance to complete the relevant projects, in manners similar to the support to be provided by THTF in respect of the Acquired Projects as set out in paragraphs (i) to (iv) above.

By virtue of the arrangements as set out above (the “Future Business Arrangements”), after completion of the Acquisition, to the extent that any existing sales or project contract of the Target Businesses are not capable to be assigned to Technovator Beijing or Tongfang Energy Saving (as applicable), THTF will continue to act as the party to such agreements, and will transfer any payments it receives from the relevant customers of the Target Businesses to Technovator Beijing and Tongfang Energy Saving, respectively, without any additional charges.

Likewise, under such arrangements, if after completion of the Acquisition circumstances arise such that it is necessary or desirable for THTF to be a contracting party to new sales or project contracts of the Target Businesses, THTF may cooperate with Technovator Beijing or Tongfang Energy Saving (as applicable) in the performance of such contracts for the relevant customers, and transfer any payments it receives from the relevant customers of the Target Businesses to Technovator Beijing and Tongfang Energy Saving, respectively, without any additional charges.

On the other hand, after completion of the Acquisition, to the extent that it is necessary for THTF to act as the party to supply contracts to procure materials or services from third party suppliers for any projects undertaken by the Target Businesses, THTF will procure the necessary materials and services from the relevant third party suppliers for the Purchaser upon instruction by the Purchaser, and the Purchaser is required to reimburse THTF for the amount paid by THTF.

To the extent that there is any new sales, supply or project contract to which THTF will act as the party, all terms of such contracts will still be negotiated by the Purchaser; any payment made or received by THTF shall be based on the results of such negotiation and, if incorporated in the contracts, the terms as determined by the Purchaser, and that the pricing and payment terms as set out in the section headed “Pricing and Payment Terms” shall also apply to and be observed by THTF accordingly.

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Agreement, including those set out in paragraphs (i) to (iv) above, the defaulting party shall be responsible to fully compensate the other party. Accordingly, the risks and legal obligations of THTF and the Purchaser arising from the Acquisition shall be undertaken in accordance with the above terms.

In particular, to the extent that the legal rights of THTF under the Business and Assets Purchase Agreement in respect of any Acquired Projects have been assigned to the Purchaser upon completion of the Acquisition, the Purchaser shall assume all the rights and obligations in respect of the Acquired Projects and be responsible for any claim, controversy or dispute arising out of the disputed project. To the extent that the legal rights of THTF under the Business and Assets Purchase Agreements in respect of any Acquired Projects have not been assigned to the Purchaser upon completion of the Acquisition, THTF shall assume the liabilities for any claim, controversy or dispute arising out of the disputed project to the third party. To comply with its own obligations under the Business and Assets Purchase Agreements, THTF will still be required to pay all income received from customers of any Acquired Projects to the Purchaser even if the Purchaser breaches their undertaking under the relevant Business and Assets Purchase Agreements to perform the work as required by the Acquired Projects as mentioned above. Nonetheless THTF might have legal recourse against the Purchaser in such circumstances.

Other than the Business and Assets Purchase Agreements, the Purchaser and THTF have not entered into any other agreements with respect to the Future Business Arrangements as set out above.

Internal Control Procedures

Pursuant to the Future Business Arrangements, THTF will only enter into contracts for the Target Businesses upon request and instructions of the Purchaser. Nevertheless, to safeguard the entering into of the new sales or supply contracts to which THTF will act as the party, the Purchaser will only recognize contracts (including any amendments of such contracts) the forms of which have been approved by the Purchaser in writing as subject to the Future Business Arrangements, and will manage all such contracts, including keeping original copies of such contracts and all amendments to such contracts, during the course of their terms.

As after completion of the Acquisition, all current employees of the Target Businesses, whose employment will be transferred to the Purchaser, will continue to be responsible for the operation of the Target Businesses, the relevant personnel at the Target Businesses currently responsible for managing sales and supply contracts at the Target Businesses according to their respective functions, including sales, project management, procurement, operation and finance, will continue to be responsible for managing these contracts, under the overall supervision of the general manager of the respective Target Businesses and the senior management of the Purchaser.

Specifically, the sales department will continue to be primarily responsible for determining the terms of bids on projects and negotiating the terms of sales contracts, and the procurement department will continue to be responsible for preparing or negotiating

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supply contracts, both of which will be subject to review by the Target Businesses’ other business functions, including the finance department and operation departments. After the form of the draft contracts and the proposed terms are determined, having taken into account the input from the relevant departments at the Target Businesses and the result of negotiation with the third party customers or suppliers, such contracts will require the approval of the general manager of the respective Target Businesses before the Target Businesses request and instruct THTF to enter into such contracts.

The Annual Caps

The estimated aggregate amount of payments to be transferred by THTF to the Group and the estimated aggregate amount of payments to be transferred by the Group to THTF pursuant to the Future Business Arrangements for each of the years ending 31 December 2015, 2016 and 2017 are as follows (the “ Annual Caps ”):

Payments to be transferred by THTF to the Group Payments to be transferred by the Group to THTF	Year 2015 (RMB million) 338 238	ending 31 December 2016 2017 (RMB million) (RMB million) 778 874 622 700

The Annual Caps only cover (i) any amount paid by THTF to the Purchaser arising from THTF’s obligations under the Business and Assets Purchase Agreements to pay such amount that THTF has received from third party customers in relation to projects undertaken by the Target Businesses; and (ii) any amount paid by the Purchaser to THTF arising from the Purchaser’s obligations under the Business and Assets Purchase Agreements to reimburse THTF for such amount that THTF has paid to third party creditors in relation to projects undertaken by the Target Businesses.

Under the Business and Assets Purchase Agreements, the Purchaser has the right, but not the obligation, to require THTF to facilitate the Target Businesses’ future business in the manners set out above. The Future Business Arrangements will enable the Purchaser to seamlessly take over the Acquired Projects upon completion of the Acquisition and allow the Target Businesses to continue to develop and grow without any interruption as a result of the change in their ownership. In addition, as the Purchaser is entering into the Target Businesses, it will take time for the Purchaser to establish their positions in the market under their own names, instead of THTF. As THTF has been operating for a significant period of time and has built its brand recognition among customers, with its assistance by way of the Future Business Arrangements, the Purchaser can avoid loss of potential business opportunities due to the Purchaser’s relatively new presence in the relevant markets. For example, for projects for which the Target Businesses have submitted bids under the name of THTF before the completion of the Acquisition, THTF will be required to be the contracting party in accordance with the rules of the relevant tenders. In addition, after completion of the Acquisition, THTF will no longer be

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capable of carrying out the Target Businesses and fulfil customer’s requirements for those services. In case of any potential customer who would need time to obtain their own internal approval to deal with a new owner of the Target Businesses and therefore wishes to continue to deal with THTF in the meantime due to their history of dealings with THTF, the Company may capture such opportunity by leveraging on the Future Business Arrangements. Hence the Future Business Arrangements also cover new projects which may be undertaken by the Target Businesses in the future. The Directors consider the Future Business Arrangements an integral aspect of the Acquisition and one of the key factors taken into account by the Company for entering into the Business and Assets Purchase Agreements.

The Annual Caps are determined based on the following factors:

(i) sales data of the Target Businesses, including the contract price of the Acquired Projects, contracts in negotiation and bidding of projects participated by the Target Businesses, and estimated growth for each of the Target Businesses (as further detailed in paragraph (v) below);
(ii) historical pattern of payments of contract prices by the Target Businesses’ customers — Based on the historical pattern of payments of contract prices, for the purpose of determining the amount of fees to be received by the Purchaser from third party customers through THTF, a proportion of the aggregate value of the contracts is allocated to each year at a certain percentage, representing the estimated amount of payments to be received by the Purchaser in each year, taking into account the particular historical payment pattern for each of the Target Business and the actual settlement status of the Acquired Projects as at the Valuation Date. In addition, in assessing the Annual Caps for the year 2015, which represents the maximum transaction amount for the three months ending 31 December 2015, the Company has taken into account the seasonality of payments by customers, based on the historical pattern that during 2012 to 2014, approximately 33% to 54% of the total payments received for a given year were collected by the Target Businesses during the last quarter of that year;
(iii) historical cost of sales of the Target Businesses — The historical cost of sales of the Target Business as a percentage of revenue received each year is used to approximate the amount of payments that the Purchaser will pay to THTF to settle debts with third party creditors by reference to the amount of contract price it will receive for the given year. In addition, in assessing the Annual Caps for the year 2015, the Company has taken into account the seasonality of the purchases from third party suppliers, based on the historical pattern that during 2012 to 2014, approximately 30% to 52% of the total payments paid to third party creditors for a given year were paid by the Target Businesses during the last quarter of that year;

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(iv) trends of the gross profit margin of each of the Target Businesses — The historical gross profit margins of the Target Businesses are different and present different trends. For the purpose of determining the cost of sales of the Target Business as a percentage of revenue received each year (as mentioned in paragraph (iii) above), based on the historical gross profit margins of the Target Businesses and taking into account the prevailing trend of such gross profit margins, the gross profit margin for each of the Target Businesses for each of the three years ending 31 December 2017 is assumed to be a certain percentage between approximately 18% and 23%, depending on the particular Target Business and year concerned;
(v) expected growth of the Target Businesses — Based on the historical growth rates of the Target Businesses, taking into account industry trends and macro-economic factors, for the purpose of determining the Annual Caps, a separate percentage is assigned as the growth rate of the aggregate contract price of the projects undertaken by each of the Target Businesses for each of the three years ending 31 December 2017. Based on such parameters, the total contract price of the Target Businesses as a whole is assumed to increase at a rate of approximately 15% per year during the three years ending 31 December 2017, depending on the year concerned.

The Annual Caps are determined on the assumption that none of the existing sales or project contract of the Target Businesses are assigned to Technovator Beijing or Tongfang Energy Saving, as such assignment would require consents of the relevant customers.

Pricing and Payment Terms

As explained above, the transactions between the Purchaser and THTF under the Future Business Arrangements are part and parcel of the subject matter of the Acquisition, for which THTF will not be entitled to any additional fees or compensation.

Hence, THTF will not be entitled to any additional fees or compensation for transferring payments received from third party customers to the Purchaser under the Future Business Arrangements, and the full amount received by THTF from third party customers will be transferred to the relevant Purchaser, no later than the balance sheet date of the month in which such amount is received.

Similarly, THTF will not be entitled to any additional fees or compensation for settling debts with third party creditors under the Future Business Arrangements, and the Purchaser is required to reimburse THTF for the full amount of such payments no later than the balance sheet date of the month in which such amount is paid by THTF.

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Business which most closely resembles the requirements of the new sales contract concerned. The prices for the purchase of material and/or services to be procured under supply contracts subject to the Future Business Arrangements will be negotiated with third party suppliers based on the price range as indicated by the prices paid by the relevant Target Business in at least two purchases within the past 12 months for similar material and/or services.

As after completion of the Acquisition, all current employees of the Target Businesses, whose employment will be transferred to the Purchaser after completion of the Acquisition, will continue to be responsible for the operation of the Target Businesses, the personnel currently responsible for the negotiation and determination of the pricing and payment terms of sales and supply contracts at the Target Businesses according to their respective functions, such as sales, project management, procurement and finance, will continue to be responsible for the same functions in respect of contracts to be entered into by THTF which are subject to the Future Business Arrangements, under the overall supervision of the general manager of the respective Target Businesses and the senior management of the Purchaser. The sales and procurement departments of the Target Businesses will be primarily responsible for setting or negotiating the pricing and payment terms of sales and supply contracts, with input from other relevant departments at the Target Businesses, such as their respective finance and operation departments. The approval of the general manager of the respective Target Businesses will be required before the Target Businesses request and instruct THTF to enter into such contracts. Please refer to the sub-section headed “Future Business Arrangements — Overview” above for further details.

Continuing Connected Transactions

THTF, which directly and indirectly owns a total of 268,148,142 Shares, representing approximately 34.64% and approximately 34.48% of the entire issued share capital of the Company as at the date of the Business and Assets Purchase Agreements and the Latest Practicable Date, respectively, is a Controlling Shareholder of the Company. Under Rule 14A.07(1) of the Listing Rules, THTF is a connected person of the Company and the aforementioned business arrangements between THTF and the Purchaser after the completion of the Acquisition, including transfer of payments received from third party customers from time to time from THTF to the Purchaser and reimbursement of payments made by THTF to third party creditors for projects undertaken by the Target Businesses will constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

REASONS FOR AND BENEFITS OF THE ACQUISITION AND THE FUTURE BUSINESS ARRANGEMENTS

With the continuous growth in demand for energy saving and emission reduction across the globe, national governments made great efforts in energy-saving and emission-reduction, which will bring an unprecedented historical opportunity for the energy saving industry. As a leading provider of integrated and comprehensive urban energy saving services, Technovator will continue to strengthen the urban integrated energy saving business covering various business fields in the future.

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At the same time, with the increasing requirement for technical development and energy saving and environmental protection, the government and customers of the industry raised a higher demand for the reasonable use of resources, energy saving and consumption reduction and environmental protection in the domains of intelligent and automation control of the energy efficient infrastructure which include the fields of rail transit, building and urban heating network that THTF is engaged in.

The energy saving management of the urban infrastructure is always the core of the Group’s business, where the Group shares the same source of technology and clientele with the Target Business and has in recent years closely cooperated with THTF on providing products for the Target Business’s system integration project. Meanwhile, the Target Businesses have solid technical strength, clientele and market outlook. It will be beneficial to optimize the overall allocation of the resources, enhance business efficiency and create a good complementation and synergy after the Acquisition. In addition, the Group’s overseas capital platform can help to facilitate the more rapid and better development of the Target Businesses.

The Board is of the view that the Acquisition will facilitate the Group to optimize the layout of the industry chain, explore customers’ resources, strengthen the Group’s existing urban integrated services and seize more potential business opportunities so as to provide greater driving force and more sources for the future growth of the Group.

The Directors consider that the Business and Assets Purchase Agreements and the transactions contemplated thereunder, including the Future Business Arrangements, and the Annual Caps are entered into on normal commercial terms, and the terms of the Business and Assets Purchase Agreements are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

An independent board committee comprising all of the independent non-executive Directors, namely Mr. Fan Ren Da Anthony, Mr. Chia Yew Boon and Ms. Chen Hua, has been established in compliance with the Listing Rules to advise the Independent Shareholders, and Quam Capital Limited has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders, in respect of the Business and Assets Purchase Agreements and the transactions contemplated thereunder, including the Future Business Arrangements, and the Annual Caps.

INFORMATION ABOUT THE GROUP AND THE PURCHASERS

The Group is a leading provider of integrated and comprehensive urban energy saving services, focusing on providing integrated products, solutions and services in relation to energy saving. The Group’s businesses cover energy monitoring, management and design and application of solutions for urban infrastructures in relation to energy saving in buildings, industrial energy saving, urban heat supply energy saving and energy saving in urban rail transit. The Company was incorporated in Singapore in 2005, and the shares of the Company are listed on the Main Board of the Stock Exchange since 27 October 2011.

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Technovator Beijing is a wholly-owned subsidiary of the Company and is established in the PRC. Technovator Beijing is principally engaged in providing integrated comprehensive energy saving products, solutions and services in the areas of urban rail transit, building and urban heat supply.

Tongfang Energy Saving is a wholly-owned subsidiary of the Company and is established in the PRC with limited liability. Tongfang Energy Saving is principally engaged in providing energy saving solutions for heating and cooling in areas such as industrial production and building environment with absorption heat pump technology. The main business models of Tongfang Energy Saving are Energy Management Contract (EMC), Engineering, Procurement and Construction (EPC) and sales of products.

INFORMATION ABOUT THE VENDOR

THTF, a Controlling Shareholder of the Company, is a joint stock limited company established in the PRC, whose shares are listed and traded on the Shanghai Stock Exchange (上海證券交易所) since June 1997. The principal businesses of THTF cover the following six sectors: internet services and terminals, public security, intelligent city; energy saving and environment protection, science park, and headquarters and investment. Its internet services and terminal sector includes business groups such as smart chips, hardware terminals and internet content services; its public security sector includes business groups such as security systems, national security and military industry; its intelligent city sector includes business groups such as internet of things, intelligent building, intelligent rail transit and intelligent urban heating network; its energy saving and environment protection sector includes business groups such as building energy saving, industrial energy saving, semi-conductor lighting and water supply.

The Target Businesses in the Acquisition are primarily the businesses relating to intelligent rail transit, intelligent building and intelligent urban heating network in the intelligent city sector which are developed based on core technologies self-developed by THTF.

EFFECT OF THE ACQUISITION ON THE ASSETS AND LIABILITIES OF THE GROUP

Upon completion, the Target Businesses will become part of the Group and their financial results will be consolidated into the financial results of the Company. The unaudited pro forma financial information of the Enlarged Group is set out in Appendix II to this circular. The consolidated total assets and total liabilities of the Group as at 30 June 2015, as extracted from the 2015 interim report of the Company, were approximately US$457.1 million and US$215.8 million, respectively. After taking into account the effects of the Acquisition, assuming the completion of the Technovator Beijing Agreement and Tongfang Energy Saving Agreement took place on 30 June 2015, the total assets and total liabilities of the Enlarged Group would have increased to approximately US$489.9 million and US$283.4 million, respectively. As the Company and the Target Businesses are under common control of THTF, the Acquisition will be accounted for using merger accounting method in accordance with the accounting policy of the Company. Under the merger accounting method, no goodwill will arise from the Acquisition, as the assets and liabilities of the Target Businesses acquired by the Group are measured at the carrying

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amounts as recorded by the Target Businesses, and the difference between the carrying amount of the net assets of the Target Businesses acquired by the Group and the fair value of the consideration for the Acquisition is adjusted directly to the capital reserve. As a result, the net assets of the Company would be decreased from approximately US$241.2 million to approximately US$206.4 million. Such decrease represents the difference between the consideration for the Acquisition, which is determined by reference to the fair value of the Target Business based on their valuation as set out in the Valuation Reports, and the net assets of the Target Businesses measured at the carrying amounts as recorded by the Target Businesses. Since such decrease, if materialized upon the closing of the Acquisition, will be deducted directly from the capital reserve of the Company, there will be no impact on the profit or loss of the Company. Although the consideration for the Acquisition is higher than the net assets of the Target Businesses, taking into account the valuation of the Target Businesses which is primarily based on their cashflow forecast and not on the carrying amounts of their net assets, the potential for growth of the Target Businesses, the macro-economic environment favoring the industries in which the Target Businesses operate and the strategic value of the Acquisition, the Directors consider that the Acquisition is fair and reasonable and in the interest of the Company and the Shareholders as a whole. Please refer to the section headed “REASONS FOR AND BENEFITS OF THE ACQUISITION AND THE FUTURE BUSINESS ARRANGEMENTS” above for further details.

As the financial results of the Target Businesses will be consolidated into the results of the Company after the completion of the Technovator Beijing Agreement and Tongfang Energy Saving Agreement, the earnings of the Group are expected to increase. Nevertheless, the actual effect on earnings or losses of the Company will depend on future financial performance of the Target Businesses.

LISTING RULES IMPLICATIONS

As at the date of the Business and Assets Purchase Agreements, THTF being the beneficial owner of 268,148,142 Shares, representing approximately 34.64% of the entire issued share capital of the Company, is a Controlling Shareholder of the Company. THTF is therefore a connected person of the Company under Rule 14A.07(1) of the Listing Rules. Accordingly, the Acquisition contemplated under the Business and Assets Purchase Agreements constitutes connected transactions of the Company under the Listing Rules.

As disclosed in the sections headed “THE TECHNOVATOR BEIJING AGREEMENT — Consideration” and “THE TONGFANG ENERGY SAVING AGREEMENT — Consideration”, the considerations for the Technovator Beijing Acquisition and the Tongfang Energy Saving Acquisition are subject to adjustments. The consideration may be adjusted upwards or downwards depending on the financial information of the Target Businesses as recorded in the Completion Accounts. As at the Latest Practicable Date, it is not expected that the aggregate consideration for the Acquisition will be adjusted upwards to an extent that the Acquisition will constitute a very substantial acquisition under the Listing Rules. In the event that the aggregate consideration of the Acquisition increases to the extent that the Acquisition constitutes a very substantial acquisition under the Listing Rules, the Company will re-comply with the applicable requirements under the Listing Rules in respect of the Acquisition.

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Given that the Technovator Beijing Acquisition and the Tongfang Energy Saving Acquisition are inter-conditional and the Purchaser is wholly-owned subsidiaries of the Company, the Board considers it appropriate to aggregate the Technovator Beijing Acquisition and the Tongfang Energy Saving Acquisition for the purpose of determining the requirements applicable to the Company under Chapter 14 and Chapter 14A of the Listing Rules in respect of the Acquisition.

As one or more of the applicable percentage ratios in respect of the Acquisition on an aggregate basis is more than 25% but all of the applicable percentage ratios are less than 100%, the Acquisition constitutes a major transaction of the Company under Chapter 14 of the Listing Rules. Accordingly, the Business and Assets Purchase Agreements and the transactions contemplated under it are subject to reporting, announcement and independent shareholders’ approval requirements under the Listing Rules.

In addition, although no consideration will be paid by the Group to THTF in relation to such business arrangements, given that there will be payments between the Group and THTF pursuant to the Future Business Arrangements, the Board considers it appropriate to subject such payments to the requirements for continuing connected transactions under Chapter 14A of the Listing Rules, and adopt the Annual Caps as the maximum transaction amounts for the Future Business Arrangements. As each of the applicable percentage ratios in respect of the Annual Caps is greater than 5%, the Future Business Arrangements and the Annual Caps are subject to the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules. A resolution will be put forth to the Shareholders at the EGM for the Shareholders to consider and approve the Future Business Arrangements and the Annual Caps. In the event that the Future Business Arrangements would continue after 31 December 2017 or if any of the Annual Caps would be exceeded in any relevant years, the Company will re-comply with the requirements regarding continuing connected transactions in respect of the Future Business Arrangements.

EGM

A notice convening the EGM is set out on pages EGM-1 to EGM-2 of this circular. The EGM will be convened for the Shareholders to consider, and if thought fit, to approve the transactions under the Business and Assets Purchase Agreements.

None of the Directors (including the independent non-executive Directors) has a material interest in the Business and Assets Purchase Agreements and has abstained from voting on the board resolutions for approving the Business and Assets Purchase Agreements.

Pursuant to Rule 14A.36 of the Listing Rules, at the EGM, THTF, the Controlling Shareholder of the Company, and its associates are required to abstain from voting on the ordinary resolution approving the Business and Assets Purchase Agreements.

A form of proxy for use at the EGM is enclosed with this circular. Whether or not the Shareholders are able to attend the EGM, the Shareholders are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as

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soon as possible and in any event not less than 48 hours before the time appointed for the EGM or adjournment thereof. Completion and return of the form of proxy shall not preclude you from attending and voting in person at the EGM or any adjourned meeting thereof should the Shareholders so wish.

Pursuant to Rule 13.39(4) of the Listing Rules, any vote of the Shareholders at the EGM must be taken by poll. An announcement will be made by the Company after the EGM regarding the results of the EGM pursuant to the requirements of the Listing Rules.

As completion of the Business and Assets Purchase Agreements is subject to the satisfaction of the conditions precedent under the Business and Assets Purchase Agreements, the Acquisition may or may not be completed. Shareholders and potential investors of the Company are advised to exercise caution when dealing in the securities of the Company.

RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee set out on pages 29 and 30 of this circular and the letter of the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders set out on pages 31 to 62 of this circular in connection with the Business and Assets Purchase Agreements and the transactions contemplated thereunder and the principal factors and reasons considered by the Independent Financial Adviser in arriving at such advice.

The Directors consider that the transactions under the Business and Assets Purchase Agreements are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favour of the relevant resolution to be proposed at the EGM.

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

By order of the Board Technovator International Limited Mr. Lu Zhicheng Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Technovator

TECHNOVATOR INTERNATIONAL LIMITED 同方泰德國際科技有限公司[*]

(incorporated in Singapore with limited liability)

(Stock Code: 1206)

25 September 2015

To the Independent Shareholders

MAJOR AND CONNECTED TRANSACTION IN RELATION TO ACQUISITION OF ASSETS

Dear Sir or Madam,

We refer to the circular of the Company dated 25 September 2015 (the “ Circular ”) to the Shareholders, of which this letter forms part. Unless the context otherwise requires, terms defined in the Circular shall have the same meanings when used in this letter.

We have been appointed as members of the Independent Board Committee to advise you as to whether, in our opinion, the terms of the Business and Assets Purchase Agreements are fair and reasonable so far as the Independent Shareholders are concerned. Quam Capital Limited has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Business and Assets Purchase Agreements.

Your attention is drawn to the “Letter from the Board” set out on pages 7 to 28 of the Circular which contains, inter alia, information about the terms of the Business and Assets Purchase Agreements, and the “Letter from Quam Capital” set out on pages 31 to 62 of the Circular which contains its advice in respect of the Business and Assets Purchase Agreements together with the principal factors taken into consideration in arriving at such.

Having considered the terms of the Business and Assets Purchase Agreements and having taken into account the factors and reasons considered by and the advice of the independent financial adviser as stated in their letter dated 25 September 2015, we consider that (i) the entering into of the Business and Assets Purchase Agreements is on normal commercial terms and in the ordinary and usual course of business of the Company; (ii) the terms of the Business and Assets Purchase Agreements are fair and reasonable so far as the interests of the Independent Shareholders are concerned; and (iii) the entering into of the Business and Assets Purchase Agreements is in the interests of the

* For identification purpose only

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Company and the Independent Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the relevant resolutions to be proposed at the EGM to ratify and approve and the Business and Assets Purchase Agreements.

Yours faithfully, For and on behalf of

Independent Board Committee

Mr. Fan Ren Da Anthony Mr. Chia Yew Boon Independent Non-executive Directors

Ms. Chen Hua

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LETTER FROM QUAM CAPITAL

The following is the full text of a letter of advice from Quam Capital Limited, the independent financial adviser to the Independent Board Committee and the Independent Shareholders in connection with the Business and Assets Purchase Agreements and the transactions contemplated thereunder, including the Future Business Arrangements, and the Annual Caps, which has been prepared for the purpose of incorporation into this circular.

25 September 2015

To the Independent Board Committee and the Independent Shareholders

Technovator International Limited Unit 806–810 Bank of America Tower 12 Harcourt Road Central, Hong Kong

Dear Sirs,

(1) MAJOR AND CONNECTED TRANSACTION AND

(2) CONTINUING CONNECTED TRANSACTION IN RELATION TO

INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the terms of the Business and Assets Purchase Agreement and all transactions contemplated thereunder, including the Future Business Arrangements, and the Annual Caps, details of which are set out in the “Letter from the Board” (the “ Letter from the Board ”) contained in the circular issued by the Company to the Shareholders dated 25 September 2015 (the “ Circular ”), of which this letter forms part. Terms used in this letter shall have the same meaning as defined in the Circular unless the context otherwise requires.

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LETTER FROM QUAM CAPITAL

THE ACQUISITION

On 28 July 2015, the Company, through its wholly-owned subsidiary, Technovator Beijing (as purchasers) entered into the Technovator Beijing Agreement with THTF (as vendor) to acquire the Intelligent Rail Transit Business, the Intelligent Building Business and the respective Target Assets and related assets and liabilities for a total consideration of RMB370.0 million (subject to adjustments). On 28 July 2015, the Company, through its wholly-owned subsidiary, Tongfang Energy Saving (as purchasers) entered into the Tongfang Energy Saving Agreement with THTF (as vendor) to acquire the Intelligent Urban Heating Network Business, the respective Target Assets and related assets and liabilities for a total consideration of RMB158.0 million (subject to adjustments). The Technovator Beijing Agreement and the Tongfang Energy Saving Agreement are inter-conditional.

The aggregate consideration (the “ Consideration ”) of RMB528.0 million (subject to adjustments) for the Acquisition comprised of the total consideration for the Technovator Beijing Acquisition of RMB370.0 million (subject to adjustments) and the total consideration for the Tongfang Energy Saving Acquisition of RMB158.0 million (subject to adjustments) shall be satisfied in cash.

As at the Latest Practicable Date, THTF being the beneficial owner of 268,148,142 Shares, representing approximately 34.5% of the entire issued share capital of the Company, is a Controlling Shareholder of the Company. Under Rule 14A.07(1) of the Listing Rules, THTF is therefore a connected person of the Company. Accordingly, the Acquisition contemplated under the Business and Assets Purchase Agreements, including transfer of payments received from third party customers from time to time from THTF to the Purchaser and reimbursement of payments made by THTF to third party creditors for projects undertaken by the Target Businesses, constitute connected transactions of the Company under the Listing Rules is subject to reporting, announcement and Independent Shareholders’ approval at the EGM.

The Company submits that the Acquisition will not constitute a very substantial acquisition by virtue of the adjustment to the consideration unless the aggregate consideration is drastically increased from RMB528 million to more than RMB3,563 million, causing the consideration ratio (defined as the aggregate consideration for the Acquisition divided by the product sum of the number of issued shares of the Company and the average of the closing prices for the five trading days immediately preceding 28 July 2015 (the “ Average Market Capitalisation ”)) to exceed 100%. As discussed with the management of the Company and based on the aggregate consideration of RMB528

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LETTER FROM QUAM CAPITAL

million and the Average Market Capitalisation of HK$4,510.3 million (equivalent to approximately RMB3,563.1 million), the increase of the aggregate consideration to over RMB3,563 million, causing the consideration ratio to exceed 100% is not expected. Based on the expected completion date no later than 31 December 2015 and the latest projects on hand, the net effect of net profit, if any, of the Target Businesses for the period between the Reference Date and the Completion Date less any cash balance recorded in the Completion Accounts is expected to be less than RMB3,000 million, we concur with the view of the Company that the Acquisition will not constitute a very substantial acquisition by virtue of the adjustment to the consideration.

The Independent Board Committee, comprising all of the independent non-executive Directors, namely Mr. Fan Ren Da Anthony, Mr. Chia Yew Boon and Ms. Chen Hua, has been established to make recommendation to the Independent Shareholders as to whether the terms of the Business and Assets Purchase Agreements and all transactions contemplated thereunder, including the Future Business Arrangements, and the Annual Caps are fair and reasonable, and whether they are in the interests of the Company and the Shareholders as a whole, and as to their voting at the EGM. The Independent Board Committee has approved the appointment of Quam Capital Limited as the independent financial adviser to advise them and the Independent Shareholders in this regard.

BASIS OF OUR OPINION

In formulating our opinion and recommendation, we have relied on (i) the information and facts contained or referred to in the Circular; (ii) the information and facts supplied, and the opinions expressed, by the executive Directors and management of the Group and the Target Businesses; and (iii) our review of the relevant public information. We have assumed that all the information provided and representations and opinions expressed to us or contained or referred to in the Circular were true, accurate and complete in all respects at the date thereof and may be relied upon. We have no reason to doubt the truth, accuracy and completeness of such information and representations provided to us by the management of the Group and the Target Businesses and the Directors. We have also sought and received confirmation from the Directors that no material facts have been withheld or omitted from the information provided and referred to in the Circular and that all information or representations regarding the Group, the Business and Assets Purchase Agreements and the transactions contemplated thereunder, including the Future Business Arrangements, and the Annual Caps provided to us by the Company and/or the Directors and the management of the Group are true, accurate, complete and not misleading in all respects at the time they were made and up to the Latest Practicable Date. Shareholders will be informed as soon as reasonably practicable if we become aware of any material change to the above.

We consider that we have reviewed sufficient information currently available to reach an informed view and to justify our reliance on the accuracy of the information contained in the Circular so as to provide a reasonable basis for our recommendation. We have not, however, carried out any independent verification of the information, nor have we conducted any form of in-depth investigation into the business, affairs, operations, financial position or future prospects of the Company, the Target Businesses or the Target Business Related Assets and Liabilities.

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LETTER FROM QUAM CAPITAL

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our recommendation in respect of the terms of the Business and Assets Purchase Agreements and all transactions contemplated thereunder, including the Future Business Arrangements, and the Annual Caps, we have taken into consideration of the following factors and reasons:

1. Background and financial information of the Group

The Group is a leading provider of integrated and comprehensive urban energy saving services, focusing on providing integrated products, solutions and services in relation to energy saving. The Group’s businesses cover energy monitoring, management and design and application of solutions for urban infrastructures in relation to energy saving in buildings, industrial energy saving, urban heating supply energy saving and energy saving in urban rail transit. The Company was incorporated in Singapore in 2005, and the shares of the Company are listed on the Main Board of the Stock Exchange since 27 October 2011.

Set out below are the summarised consolidated financial statements of the Group for the two years ended 31 December 2014 as extracted from the annual report of the Company for the two years ended 31 December 2014 (the “ 2014 Annual Report ”). Your attention is also drawn to the “Financial information of the Group” set out in Appendix I to the Circular.

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LETTER FROM QUAM CAPITAL

	For the	year	ended	For the	six months
	31 December			ended 30 June
	2013		2014	2014	2015
	US$’000	US$’000		US$’000	US$’000
	(audited)	(audited)		(unaudited)	(unaudited)
Revenue	166,581		221,443	86,419	96,679
Building energy-saving solutions:
Building automation systems	106,820		125,026	54,099	60,822
Energy management systems	21,852		35,692	14,270	17,008
Industrial energy-saving
solutions:	17,868		40,346	12,070	12,875
Others:
Control security systems	19,316		19,383	5,775	5,805
Fire alarm systems	725		996	205	169
Gross profit	56,237		77,037	31,554	34,834
Net profit attributable to the
Shareholders	15,577		24,530	6,591	9,799
					As at
	As at		31 December		30 June
		2013		2014	2015
	US$’000			US$’000	US$’000
	(audited)		(audited)		(unaudited)
Total assets	300,401			362,193	457,055
Cash and cash equivalents	69,222			74,298	134,857
Total liabilities	193,762			228,062	215,841
Total equity attributable to the
Shareholders	101,851			129,379	236,217

For the year ended 31 December 2014

Based on the 2014 Annual Report, the Group recorded revenue of approximately US$221.4 million for the year ended 31 December 2014, representing an increase of approximately 32.9% from approximately US$166.6 million in 2013. Gross profit reached approximately US$77.0 million in 2014, representing an increase of approximately 37.0% over the same period in 2013, while net profit attributable to the Shareholders reached approximately US$24.5 million in 2014, representing an increase of approximately 57.5% over the same period in 2013.

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LETTER FROM QUAM CAPITAL

As set out in the 2014 Annual Report, revenue from building energy-saving solutions increased by approximately US$32.0 million from approximately US$128.7 million for the year ended 31 December 2013 to approximately US$160.7 million for the year ended 31 December 2014 which was contributed by both the Chinese and overseas markets. For the Chinese market, the Company recorded revenue from building energy-saving solutions of approximately US$95.9 million, representing an increase of approximately 28.5% as compared to the previous year. For the overseas market, the Company recorded revenue from building energy-saving solutions of approximately US$64.8 million, representing an increase of approximately 19.9% as compared to the previous year. Increasing demand on building energy-saving played an important role in keeping sustainable growth, which arose from rolling out of domestic encouraging polices and increasing awareness of energy-efficient products globally. The increase was also due to our brand recognition and experience in large-scale projects riding on the Group’s efforts to accelerate the research and development of new technology as well as strengthening sales and marketing strategies.

Revenue from industrial energy-saving solutions significantly increased by approximately 125.8% from approximately US$17.9 million for the year ended 31 December 2013 to approximately US$40.3 million for the year ended 31 December 2014. Besides the domestic encouraging policies on energy saving industry, the dramatically increase in revenue is due to more contracts completing the phase of the construction and entering into the revenue sharing period.

The two non-core business segments, which are controls security systems and fire alarm systems, recorded revenue of approximately US$20.4 million for the year ended 31 December 2014, representing an increase of approximately 1.7% as compared to 2013.

According to the 2014 Annual report, as at 31 December 2014, the Group had total assets of approximately US$362.2 million (31 December 2013: approximately US$300.4 million) and total equity attributable to the Shareholders of approximately US$129.4 million (31 December 2013: approximately US$101.9 million).

Liquidity and financial resources

During 2014, the Group has financed its operations primarily through cash flow from operations and bank borrowings. As at 31 December 2014, the Group had approximately US$74.3 million in cash and cash equivalents. The Group’s cash and cash equivalents consist primarily of cash in the banks and on hand and deposits that are readily convertible into known amounts of cash.

As of 31 December 2014, the Group’s indebtedness consisted of short-term loan of approximately US$63.7 million, average annual interest rate is approximately 5.93%, long-term loan of approximately US$38.5 million, average annual interest rate is approximately 6.15% and obligations under finance lease of approximately US$0.1 million. The increase in the Group’s indebtedness in 2014 was mainly due to the Group’s business expansion in China. The gearing ratio of the Group as at 31 December 2014, defined as loans and borrowings divided by total assets, is approximately 28.2% (2013: approximately 22.7%).

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LETTER FROM QUAM CAPITAL

For the six months ended 30 June 2015

Based on the interim results announcement of the Company dated 25 August 2015 (the “ Interim Results Announcement ”), the Group recorded revenue of approximately US$96.7 million for the six months ended 30 June 2015, representing an increase of approximately 11.9% from approximately US$86.4 million for the six months ended 30 June 2014. Gross profit reached approximately US$34.8 million for the six months ended 30 June 2015, representing an increase of approximately 10.4% over the same period in 2014, while net profit attributable to the Shareholders reached approximately US$9.8 million for the six months ended 30 June 2015, representing an increase of approximately 48.7% over the corresponding period in 2014.

As set out in the Interim Results Announcement, revenue from building energy-saving solutions increased by approximately US$9.4 million from approximately US$68.4 million for the six months ended 30 June 2014 to approximately US$77.8 million for the six months ended 30 June 2015 which was contributed by both the Chinese market and overseas market. For the Chinese market, the Company recorded revenue from building energy-saving solutions of approximately US$44.5 million, representing an increase of approximately 27.2% as compared to the same period in 2014. The increase was mainly attributable to the stable growth in urban comprehensive energy saving business and active promotion of “Internet + Energy Saving” management projects. For the overseas markets, the Company recorded a revenue from building energy-saving solutions of approximately US$33.4 million, flat compared to the corresponding period in 2014.

Revenue from industrial energy-saving solutions slightly increased by approximately 6.7% from approximately US$12.1 million for the six months ended 30 June 2014 to approximately US$12.9 million for the six months ended 30 June 2015.

The aggregate revenue two non-core business segments, which are controls security systems and fire alarm systems, remained stable at approximately US$6.0 million for the six months ended 30 June 2015.

According to the Interim Results Announcement, as at 30 June 2015, the Group had total assets of approximately US$457.1 million (31 December 2014: approximately US$362.2 million) and total equity attributable to the Shareholders of approximately US$236.2 million (31 December 2014: approximately US$129.4 million).

Liquidity and financial resources

During the six months ended 30 June 2015, the Group principally financed its operations by internal resources. As at 30 June 2015, the cash and cash equivalents balance of the Group increased to US$134.9 million from US$74.3 million as at 31 December 2014. As advised by the management of the Group, the increase was mainly due to the proceeds from issuance of a total number of 128,994,000 new

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LETTER FROM QUAM CAPITAL

Shares at the price of HK$5.95 per Share and the net proceeds amounted to approximately HK$750.4 million on 12 May 2015. The Group’s cash and cash equivalents consist primarily of cash in the banks and on hand and deposits that are readily convertible into known amounts of cash.

As at 30 June 2015, the Group’s indebtedness consisted of short-term loans of approximately US$61.1 million with an average annual interest rate of approximately 6.09%, long-term loan of approximately US$33.6 million with an average annual interest rate of approximately 5.98% and obligations under finance lease of approximately US$0.1 million. The decrease in the Group’s indebtedness for the six months ended 30 June 2015 was mainly due to the repayment of bank loans. The gearing ratio of the Group as at 31 December 2014, defined as loans and borrowings divided by total assets, is approximately 20.7% (31 December 2014: approximately 28.2%). The decrease was due to the repayment of loans and borrowing and the top-up placing of 128,994,000 shares on 12 May 2015.

Subsequent development since 30 June 2015

The Company entered into an agreement on 8 March 2015 and a supplemental agreement on 29 June 2015 to dispose all of its shareholdings of approximately 44.0% in Distech Controls Inc., a company principally engaged in the design, manufacturing, sales and marketing of energy management systems and integrated building automation systems, to a purchaser who is an independent third party to the Company, at a consideration of CAD$318.0 million. On 30 July 2015, the resolution proposed in relation to the disposal of Distech Controls Inc. was passed by the independent shareholder of the Company. On 1 September 2015 (Montreal time), the disposal of Distech Controls has been completed and the proceeds from such disposal were received by the Company.

2. Background on the Controlling Shareholder and the Vendor

THTF, a Controlling Shareholder, is a joint stock limited company established in the PRC, whose shares are listed and traded on the Shanghai Stock Exchange (上海證券交易所) since June 1997. The principal businesses of THTF cover the following six sectors: internet services and terminals, public security, intelligent city, energy saving and environment protection, science park, and headquarters and investment. Its internet services and terminal sector includes business groups such as smart chips, hardware terminals and internet content services; its public security sector includes business groups such as security systems, national security and military industry; its intelligent city sector includes business groups such as internet of things, intelligent building, intelligent rail transit and intelligent urban heating network; its energy saving and environment protection sector includes business groups such as building energy saving, industrial energy saving, semi-conductor lighting and water supply.

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LETTER FROM QUAM CAPITAL

3. Background and financial information of the Target Businesses and the Target Business Related Assets and Liabilities

The Target Businesses comprises the following businesses carried on by THTF:

(i) Intelligent Rail Transit Business provide intelligence integrated solutions including the provision of system software and software applications for the main electro-mechanical systems such as Integrated Supervision and Control System (ISCS), Plat form Screen Doors (PSD) and Building Automation System (BAS). These solutions also involve provision of services such as purchase of equipment, installation, and system integration to customers.
(ii) Intelligent Building Business provide building intelligence integrated solutions which center around the Building Automation (BA) that has been developed and debugged by THTF with the energy saving algorithm. These solutions involve provision of intelligent procurement and construction services such as solution planning, construction design, equipment, installation and calibration and post-sale operation and maintenance to customers.
(iii) Intelligent Urban Heating Network Business provide integrated solutions for heating plant and network including Supervisory Control And Data Acquisition (SCADA). These solutions involve provision of software for heat monitoring and heating network monitoring to customers.

The Target Business Related Assets and Liabilities consist of assets and liabilities of the Target Businesses as determined in accordance with the relevant accounting standards as well as other products and technologies relating to the Target Businesses (including but not limited to the intellectual property rights, technical data and information related to patents, software copyrights, proprietary technologies, source codes, technical manuals, and operation manuals).

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LETTER FROM QUAM CAPITAL

Set out below are the audited consolidated financial information of each of the Target Businesses for the three years ended 31 December 2012, 2013 and 2014 and as of 31 December 2012, 2013 and 2014 and 31 March 2015:

		For the year	For the year	ended 31 December	ended 31 December
		2012		2013	2014
	RMB’000		RMB’000		RMB’000
Revenue
Intelligent Rail Transit Business	123,241			131,333	232,556
Intelligent Building Business	101,046			88,353	126,451
Intelligent Urban Heating
Network Business	133,317			190,336	183,996
Net profits/(losses) before tax
Intelligent Rail Transit Business	20,975			18,296	26,785
Intelligent Building Business	(8,829)			(7,830)	3,997
Intelligent Urban Heating
Network Business	20,978			24,366	10,022
Net profits/(losses) after tax
Intelligent Rail Transit Business	17,766			15,461	22,654
Intelligent Building Business	(8,829)			(7,830)	3,788
Intelligent Urban Heating
Network Business	17,735			20,579	8,434
					As of 31
	As of		31 December		March
	2012		2013	2014	2015
	RMB’000	RMB’000		RMB’000	RMB’000
Current assets
Intelligent Rail Transit Business	138,720		164,254	319,436	352,224
Intelligent Building Business	157,994		200,466	183,264	192,764
Intelligent Urban Heating
Network Business	137,303		198,483	193,507	191,879
Current liabilities
Intelligent Rail Transit Business	74,910		162,364	229,418	302,015
Intelligent Building Business	50,676		84,325	94,609	110,413
Intelligent Urban Heating
Network Business	139,693		112,158	120,799	116,697
Total assets
Intelligent Rail Transit Business	154,771		180,745	348,007	382,793
Intelligent Building Business	196,508		229,305	235,580	245,153
Intelligent Urban Heating
Network Business	152,129		232,021	220,922	216,632
Total liabilities
Intelligent Rail Transit Business	74,910		162,364	229,418	302,015
Intelligent Building Business	50,676		84,325	94,609	110,413
Intelligent Urban Heating
Network Business	139,693		112,158	120,799	116,697
Net assets
Intelligent Rail Transit Business	79,861		18,381	118,589	80,778
Intelligent Building Business	145,832		144,980	140,971	134,740
Intelligent Urban Heating
Network Business	12,436		119,863	100,123	99,935

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LETTER FROM QUAM CAPITAL

As shown from the above table, save for the net loss of the Intelligent Building Business for the two years ended 31 December 2013, each of the Target Businesses recorded net profit for the three years ended 31 December 2014. The net loss of the Intelligent Building Business for the two years ended 31 December 2013 was mainly attributable to (i) amortisation of intangible assets during each of the two years ended 31 December 2013; and (ii) lower gross profit margin of certain projects for the year ended 31 December 2012. For the year ended 31 December 2014, the Intelligent Building Business recorded a revenue of approximately RMB126.5 million and a net profits after tax of approximately RMB3.8 million, which was mainly contributed by the increase in the number of large-scale projects with higher gross profit margins and contract sums.

The revenue of the Intelligent Rail Transit Business for the year ended 31 December 2013 increased from approximately RMB131.3 million to approximately RMB232.6 million for the year ended 31 December 2014, representing an increase of approximately 77.2%, and such increase in revenue was mainly attributable to the increase in the number of large-scale projects with higher contract sums.

As advised by the management of the Target Businesses, the profit margin of the Intelligent Rail Transit Business was relatively high as compared to those of the Intelligent Building Business and the Intelligent Urban Heating Network Business, mainly attributable to higher entry barriers for the intelligent rail transit service industry and longer project duration.

The Intelligent Urban Heating Network Business recorded a revenue of approximately RMB184.0 million for the year ended 31 December 2014, representing a decrease of approximately 3.3% from approximately RMB190.3 million for the year ended 31 December 2013, and a decrease of approximately 59.2% in net profit after tax from approximately RMB20.6 million for the year ended 31 December 2013 to approximately RMB8.4 million for the year ended 31 December 2014, mainly attributable to the increase in urban heating technology development cost in 2013 and the commencement of amortisation of intangible assets for the year ended 31 December 2014.

As shown from the above table, save for the net current liabilities of the Intelligent Urban Heating Network Business as at 31 December 2012, the Target Businesses had net current asset positions as at 31 December 2012, 2013 and 2014. The net assets of the Intelligent Urban Heating Network Business improved substantially as at 31 December 2013 was mainly attributed to the increase of approximately RMB25.5 million in inventories and the increase of approximately RMB25.3 million in trade and other receivables mainly due to the increase of revenue for the year ended 31 December 2013 and the increase in construction in progress.

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LETTER FROM QUAM CAPITAL

As shown from the above table, the net current asset position of the Intelligent Rail Transit Business deteriorated as at 31 December 2013, mainly due to the increase of approximately RMB61.4 million in receipt in advance and other payables due to third parties for new projects. It was mainly attributable to the business cycle of the nature of the projects undertook by the Intelligent Rail Transit Business which requires significant amount of prepayments from customers for purchases of raw materials and equipments in the commencement of the projects and the revenue of projects will be incurred according to actual progresses of projects. The net current asset position of the Intelligent Rail Transit Business improved substantially as at 31 December 2014, mainly contributed by the significant increase in trade and other receivables of approximately RMB100.5 million and gross amount due from customers for contract work of approximately RMB61.0 million.

4. Principal terms of the Business and Assets Purchase Agreements

The Technovator Beijing Agreement

Date:

28 July 2015

Parties:

(1) Technovator Beijing; and

(2) THTF.

Business and assets to be acquired:

THTF agrees to transfer the Intelligent Rail Transit Business, the Target Assets for Intelligent Rail Transit Business (including the Intelligent Rail Transit Business Related Assets and Liabilities), the Intelligent Building Business, and the Target Assets for Intelligent Building Business (including the Intelligent Building Business Related Assets and Liabilities) to Technovator Beijing. Please refer to the paragraph headed “The Target Businesses and the Target Assets” in the Letter from the Board for further details.

Consideration:

The total consideration for the Technovator Beijing Acquisition shall be RMB370,000,000. The consideration for the Technovator Beijing Acquisition will be subject to adjustment by adding or subtracting the net profit or loss of the Intelligent Rail Transit Business and the Intelligent Building Business, respectively, during the period between the Reference Date and the Completion Date, and subtracting the amount of cash as recorded in the relevant Completion Accounts.

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LETTER FROM QUAM CAPITAL

We have discussed with the management of the Company and understood that the consideration for the Technovator Beijing Acquisition was determined by the parties through arm’s length negotiation with reference to the Valuation Reports in respect of the value of the Intelligent Rail Transit Business and the Intelligent Building Business, respectively, as at the Valuation Date issued by the Valuer, taking into account the expected income and expenses of 79 and 58 Acquired Projects under the Intelligent Rail Transit Business and the Intelligent Building Business, respectively, based on current business model for the three years ended 31 December 2014 the projected new contracts to be entered into based on the historical revenue growth rate of the Target Businesses and the projected perpetual income and expenses after 2019 based on the expected cash flows of the year 2019. We also understood from the management of the Vendor that THTF established and grew the Intelligent Rail Transit Business and the Intelligent Building Business internally, and did not acquire from a third party. Thus, there is no original acquisition cost of the Intelligent Rail Transit Business and the Intelligent Building Business and related assets.

The Valuation Reports on the Intelligent Rail Transit Business and the Intelligent Building Business are set out in Appendices VII and VIII, respectively. Please also refer to the paragraph headed ”5. Valuation of the Target Businesses and the Target Business Related Assets and Liabilities” in this letter for further details.

The Tongfang Energy Saving Agreement

Date:

28 July 2015

Parties:

(1) Tongfang Energy Saving; and (2) THTF.

Business and assets to be acquired:

THTF agrees to transfer the Intelligent Urban Heating Network Business, and the Target Assets for Intelligent Urban Heating Network Business (including the Intelligent Urban Heating Network Business Related Assets and Liabilities) to Tongfang Energy Saving. Please refer to the sub-section headed “The Target Businesses and the Target Assets” in the Letter from the Board for further details.

Consideration:

The total consideration for the Tongfang Energy Saving Acquisition shall be RMB158,000,000. The consideration for the Tongfang Energy Saving Acquisition subject to adjustment by adding or subtracting the net profit or loss of the Intelligent Urban Heating Network Business, respectively, during

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LETTER FROM QUAM CAPITAL

the period between the Reference Date and the Completion Date, and subtracting the amount of cash as recorded in the relevant Completion Accounts.

We have discussed with the management of the Company and understood that the consideration for the Tongfang Energy Saving Acquisition was determined by the parties through arm’s length negotiation with reference to the Valuation Report in respect of the value of the Intelligent Urban Heating Networks as at the Valuation Date issued by the Valuer, taking into account the expected revenue and expenses of 258 Acquired Projects under the Intelligent Urban Heating Network Business based on current business model for the three years ended 31 December 2014, the projected new contracts to be entered into based on the historical revenue growth rate of the Target Businesses and the projected perpetual income and expenses after 2019 based on the expected cash flows for the year 2019. We also understood from the management of the Vendor that THTF established and grew the Intelligent Urban Heating Network Business internally, and did not acquire from a third party. Thus, there is no original acquisition cost of the Intelligent Urban Heating Network Business and related assets.

The Valuation Report on the Intelligent Urban Heating Network Business is set out in Appendix IX. Please also refer to the paragraph headed ”5. Valuation of the Target Businesses and the Target Business Related Assets and Liabilities” in this letter for further details.

Future Business Arrangements

(i) THTF and the Purchaser will cooperate to implement the transfer of the Acquired Projects from THTF to the Purchaser by way of assignment, sub-contracting and/or delegation. Since the Completion Date, the Purchaser will be responsible for performing the work required by the Acquired Projects and entitled to the income from the Acquired Projects. To the extent that the legal rights of THTF under the contracts in respect of any Acquired Projects have not been assigned to the Purchaser, or for any other reasons THTF receives any payment from the customers of any Acquired Projects for any income generated after the Completion Date, THTF is required to pay such amount to the Purchaser no later than the balance sheet date of the month in which such amount is received without any additional compensation;

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LETTER FROM QUAM CAPITAL

(ii) THTF should use its reasonable endeavors to notify all of the debtors of loans which are part of the liabilities of the Target Businesses by the Purchaser. In the event that the relevant debtors settle such debt by paying THTF, THTF is required to pay such amount to the Purchaser no later than the balance sheet date of the month in which such amount is received without any additional compensation;
(iii) THTF should use its reasonable endeavors to facilitate the assumption of debt which are part of the Target Liabilities by the Purchaser, primarily comprising trade payables to third party suppliers. In the event that THTF is required to settle such debt with the relevant third party creditors, the Purchaser is required to reimburse THTF for such amount no later than the balance sheet date of the month in which such amount is paid by THTF;
(iv) THTF undertakes to assist the Purchaser to take up the Acquired Projects without any additional compensation, including but not limited to providing any necessary information to the Purchaser and handling the relevant project completion and settlement procedures as necessary; and
(v) THTF will support the Purchaser on the continual development and expansion of the Target Businesses, including cooperating with the Purchaser to develop new projects and business opportunities in respect of the Target Businesses, being a party to the relevant agreements to facilitate the Purchaser’s conducting of the Target Businesses if necessary, and providing the required information and assistance to complete the relevant projects, in manners similar to the support to be provided by THTF in respect of the Acquired Projects as set out in paragraphs (i) to (iv) above.

By virtue of the Future Business Arrangements, after completion of the Acquisition, to the extent that any existing sales, supply or project contract of the Target Businesses are not capable to be assigned to Technovator Beijing or Tongfang Energy Saving (as applicable), THTF will continue to act as the party to such agreements, and will transfer any payments it receives from the relevant customers of the Target Businesses to Technovator Beijing and Tongfang Energy Saving, respectively, without any additional charges. To the extent that there is any new sales, supply or project contract to which THTF will act as the party, all terms of such contracts will still be negotiated by the Purchaser; any payment made or received by THTF shall be based on the results of such negotiation and, if incorporated in the contracts, the terms as determined by the Purchaser, and that the pricing and payment terms as set out in the paragraph headed “9. Pricing and Payment Terms of the Future Business Agreements” shall also apply to and be observed by THTF accordingly. Pursuant to the Future Business Arrangements, THTF will only enter into contracts for the Target Businesses upon request and instructions of the Purchaser. Nevertheless, to safeguard the entering into of the new sales or

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supply contracts to which THTF will act as the party, the Purchaser will only recognize contracts (including any amendments of such contracts), the forms of which have been approved by the Purchaser in writing as subject to the Future Business Arrangements, and will manage all such contracts, including keeping original copies of such contracts and all amendments to such contracts, during the course of their terms. As after completion of the Acquisition, all current employees of the Target Businesses, whose employment will be transferred to the Purchaser, will continue to be responsible for the operation of the Target Businesses, the relevant personnel at the Target Businesses currently responsible for managing sales and supply contracts at the Target Businesses according to their respective functions, including sales, project management, procurement, operation and finance, will continue to be responsible for managing these contracts under the overall supervision of the general manager of the respective Target Businesses and the senior management of the Purchaser. Specifically, the sales department will continue to be primarily responsible for determining the terms of bids on projects and negotiating the terms of sales contracts, and the procurement department will continue to be responsible for preparing or negotiating supply contracts, both of which will be subject to review by the Target Businesses’ other business functions, including the finance department and operation departments. After the form of the draft contracts and the proposed terms are determined, having taken into account the input from the relevant departments at the Target Businesses and the result of negotiation with the third party customers or suppliers, such contracts will require the approval of the general manager of the respective Target Businesses before the Target Businesses request and instruct THTF to enter into such contracts.

Likewise, under such arrangements, if after completion of the Acquisition circumstances arise such that it is necessary or desirable for THTF to be a contracting party to new sales, supply or project contracts of the Target Businesses, THTF may cooperate with Technovator Beijing or Tongfang Energy Saving (as applicable) in the performance of such contracts for the relevant customers, and transfer any payments it receives from the relevant customers of the Target Businesses to Technovator Beijing and Tongfang Energy Saving, respectively, without any additional charges.

Pursuant to the Business and Assets Purchase Agreements, if any party incurs any damages, liabilities and/or any costs to the other party due to its breach of any of the representation or warranty, or failure of performing any of its obligations under the Business and Assets Purchase Agreement, the defaulting party shall be responsible to fully compensate the other party.

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Accordingly, the risks and legal obligations of THTF and the Purchaser arising from the Acquisition shall be undertaken in accordance with the above terms.

As disclosed in the sections headed “THE TECHNOVATOR BEIJING AGREEMENT — Consideration” and “THE TONGFANG ENERGY SAVING AGREEMENT — Consideration” in the Letter from the Board, the considerations for the Technovator Beijing Acquisition and the Tongfang Energy Saving Acquisition are subject to adjustments. The consideration may be adjusted upwards or downwards depending on the financial results of the Target Businesses as recorded in their respective Completion Accounts for the period between the Reference Date and the Completion Date. We have reviewed the Technovator Beijing Agreement and the Tongfang Energy Saving Agreement and further discussed with the management of the Company regarding the aforesaid adjustment mechanism of the Consideration, and we note that (i) the initial Consideration of RMB528.0 million was determined with reference to the Valuation Reports in respect of the aggregate value of each of the Target Businesses as at the Valuation Date issued by the Valuer; (ii) the adjustments will be made with reference to the net profit or loss in the respective Completion Accounts of each of the Target Businesses for the period between the Reference Date, being the same as the Valuation Date, and the Completion Date; and (iii) downward adjustment will be made for the amount of cash balance recorded in the Completion Accounts for any of the Target Businesses as at the Completion Date. We consider that the adjustment is fair and reasonable as the adjustments take into account of the net profit or loss between the Valuation Date and the Completion Date and the cash balances of the Target Businesses as such cash will not be transferred to Technovator Beijing and/or Tongfang Energy Saving. As at the Latest Practicable Date, it is not expected that the aggregate consideration for the Acquisition will be adjusted upwards to an extent that the Acquisition will constitute a very substantial acquisition under the Listing Rules.

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As set out in the Letter from the Board, for projects for which the Target Businesses have submitted bids under the name of THTF before the completion of the Acquisition, THTF will be required to be the contracting party in accordance with the rules of the relevant tenders. In addition, after completion of the Acquisition, THTF will no longer be capable of carrying out the Target Businesses and fulfil customer’s requirements for those services. In case of any potential customer who would need time to obtain their own internal approval to deal with a new owner of the Target Businesses and therefore wishes to continue to deal with THTF in the meantime due to their history of dealings with THTF, the Company may capture such opportunity by leveraging on the Future Business Arrangements. Hence, the Future Business Arrangements also cover new projects which may be undertaken by the Target Businesses in the future. We concur with the Directors’ view that the Future Business Arrangements an integral aspect of the Acquisition and one of the key factors taken into account by the Company for entering into the Business and Assets Purchase Agreements. We consider that the Future Business Arrangements are in the best interest of the Company.

5. Valuation of the Target Businesses

According to the Valuation Reports as set out in Appendices VII, VIII, and IX to the Circular, the Intelligent Rail Transit Business, the Intelligent Building Business and the Intelligent Urban Heating Network Business were valued at RMB197,000,000, RMB173,000,000, and RMB158,000,000 respectively as at 31 March 2015. The total Consideration is same as the aggregate valuation amount of the Target Businesses.

We have interviewed the Valuer regarding its expertise and understand that the Valuer is an independent professional valuer with an established track record of business valuations. The Valuer confirmed that it is an independent third party to the parties to the Business and Assets Purchase Agreements and their respective core connected persons. We have also reviewed the terms of the Valuer ’s engagement letter and noted that the scope of work is appropriate for arriving at the opinion of fair value on the Target Businesses and we are unaware that there are any limitations on the relevant scope of work. Furthermore, nothing has come to our attention that parties to the Business and Assets Purchase Agreements had made formal or informal representation to the Valuer that contravenes with our understanding of the information, to a material extent, as set out in this circular. Based on the above, we are of the opinion that we have complied with the requirements of Rule 13.80(2)(d) of the Listing Rules.

In assessing the fairness and reasonableness of the valuation of the Target Businesses, we have studied the valuation methodology, basis of valuation and assumptions underlying the Valuation Reports.

(i) Valuation methodology

We observed from the Valuation Reports that the Valuer had considered three generally accepted valuation methods, i.e. income method, market

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method and cost method and the valuation of the Target Businesses have been carried out on the basis of fair value under the discounted cash flow approach under the income method for a period from April 2015 to perpetuity. As set out in the Valuation Reports, the discounted cash flow approach is a method of estimating the Target Businesses’ assets portfolio by discounting their expected cash flow to present value, that is, the value of the Target Businesses’ assets portfolio is determined by estimating the prospective cash flows and discounting them to present value using an appropriate discount rate that reflects both the current return requirements of the market and the risks inherent in the Target Businesses portfolio.

We have discussed with the Valuer regarding the valuation methodology of the valuation, the forecast of the future income generated from the Target Businesses and the underlying assumptions of the valuation as stated in the Valuation Reports. After discussion with the Valuer, we understand that in the process of valuing the Target Businesses, the Valuer has taken into consideration the industry and nature of the Target Businesses. Having considered the three general valuation methodologies, the Valuer believed that the income method would be appropriate and reasonable in the appraisal of the value of the Target Businesses and the Target Business Related Assets and Liabilities. On the other hand, the market method is not appropriate as the data relating to comparable transaction precedents for comparison is not available and there are any non-market value factors is unknown. As cost method cannot fully reflect the intangible asset value of the profitability of the Target Businesses, the cost method is not appropriate. Therefore, we and the Valuer are of the view that the income method is the most appropriate valuation methodology.

(ii) Valuation of the Target Businesses and its assumptions

We have discussed with the Valuer regarding the factors taken into account in estimating the free cash flow and the determination of the discount rate under the discounted cash flow methodology adopted in such valuation. We have been advised that the value of the Target Businesses was calculated on the basis of free cash flows, depreciation and amortisation, capital expenditures, net change in working capital and discount rate, which is calculated at annual rates ranging from 11.64% to 12.77% as estimated using Capital Asset Pricing Model (“ CAPM ”) with consideration of the capital structure of the Company. We have reviewed the forecast of the future expected income based on 395 total contracts under the Target Businesses with aggregated current contract sums of approximately RMB4,701 million and the future expected income from the projected new contracts to be entered into between 2015 and 2019 based on the historical revenue growth rate of the Target Businesses between 2010 and 2014 and the future expected perpetual income after 2019 based on the expected cash flows for the year 2019 and concur with the Valuer that such forecast of the future expected income has been properly compiled in accordance with the assumptions made by the Directors which have been made with due care and consideration and made on an objective and a reasonable basis.

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We also understand that the discount rate applied to the value of the Target Businesses is based on the cost of equity finance which is developed through the application of the CAPM. The cost of equity, which represents the required rate of return of the Target Businesses, is estimated by using the CAPM taking into account the average market risk premium, risk free interest rate, market return of the PRC and risk adjustment specific to the Target Businesses. The risk adjustment specific to the Target Businesses is determined as 3% with thorough consideration of production and operation scale, status of operation, financial position and liquidity of the Target Businesses portfolio.

We note from the Valuation Report that the conclusions of valuation regarding the Target Businesses are based on the following, amongst others, assumptions, pre-conditions, and limiting conditions:

Assuming the valuation objects are a complete Target Businesses portfolio, and the entire assets, liabilities and intangible assets included in the Target Businesses portfolio are fully transferred.
The fees including operation and management fees of the valuation objects in the coming operating periods will remain relatively stable, and change reasonably following the changes in business scale.
Sales income from the valuation objects is generated in each interim forecast period, and there is no material adverse change in accounting policy and accounting review approach.
The estimation of estimated income is based on the premise of normal operation and management of the overall assets of the Target Businesses portfolio at the Valuation Date, basically taking into no account of the impacts towards the change of the overall asset value of the Target Businesses portfolio due to accidental factors such as further investments or reduction of assets.

Based on our discussion with the management of the Company and the Valuer, we understand that while it is the discretion of the Valuer in selecting the most appropriate methodologies in valuing the underlying business based on their professional judgment, the valuation methods adopted by the Valuer as mentioned above are commonly used and accepted in the PRC and are in accordance with the relevant rules and regulations concerning valuation issued by the Ministry of Finance, the PRC and other relevant authorities in the PRC. The value of the Target Businesses has been reasonably prepared and is normal in nature without any unusual assumption and the basis of the value of the Target Businesses is fair and reasonable. As such, we consider the valuation of the Target Businesses is a good reference for Independent Shareholders to assess the fairness and reasonableness of the Consideration and having considered the fact that the Board has taken into account the

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valuation of the Target Businesses when determining the Consideration, we are of the opinion that the terms of the Business and Assets Purchase Agreements are 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. Independent Shareholders are advised to refer to the Valuation Reports prepared by the Valuer contained in Appendices VII, VIII and IX to the Circular for details of the basis and assumptions of the valuation of the Target Businesses.

6. Financial effects of the Acquisition

As disclosed in the Letter from the Board, the Target Businesses will become part of the Group and their financial results will be consolidated into the financial results of the Company upon completion of the Acquisition. Set out below is an analysis of the financial impact of the Acquisition on the Group.

(i) Earnings

According to the accountants’ reports on the Target Businesses from the Company’s reporting accountant as set out in Appendices III, IV and V to this circular, the Target Businesses were profit-making for the year ended 31 December 2014. Upon completion of the Acquisition, the Target Businesses will become part of the Group and their financial results will be consolidated into the financial results of the Group. The actual effect on earnings or losses of the Company will depend on future financial performance of the Target Businesses. As the decrease in the unaudited pro forma net asset value of the Enlarged Group will be deducted directly from the capital reserve of the Company upon completion of the Acquisition, no gain or loss of the Company is expected to arise directly from the Acquisition.

(ii) Net asset value

As the Company and the Target Businesses are under common control of THTF, the Acquisition will be accounted for using merger accounting method in accordance with the accounting policy of the Company. Under the merger accounting method, no goodwill will arise from the Acquisition, as the assets and liabilities of the Target Businesses acquired by the Group are measured at the carrying amounts as recorded by the Target Businesses, and the difference between the carrying amount of the net assets of the Target Businesses acquired by the Group and the fair value of the consideration for the Acquisition is adjusted directly to the capital reserve. According to the pro forma financial information of the Enlarged Group as set out in Appendix II to the Circular, the unaudited pro forma net asset value of the Enlarged Group was approximately US$206.4 million, representing a decrease of approximately US$34.8 million when compared to the unaudited consolidated net asset value of the Group as at 30 June 2015 of approximately US$241.2 million.

Such decrease, represents the difference between the consideration for the Acquisition, which is determined by reference to the fair value of the

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Target Business based on their valuation as set out in the Valuation Reports, and the net assets of the Target Businesses measured at the carrying amounts as recorded by the Target Businesses, is mainly attributable to the net effect of (i) the decrease in cash and cash equivalents of approximately US$86.4 million for the payment of the Consideration; (ii) the increase in trade and other payables of approximately US$67.6 million; (iii) the increase in gross amounts due from customers for contract work of approximately US$57.4 million; (iv) the increase in trade and other receivables of approximately US$32.1 million; and (v) the increase in intangible assets of approximately US$17.5 million as a result of the Acquisition.

We note that the unaudited net asset value of the Group as at 30 June 2015 amounted to US$0.31 per Share (equivalent to approximately HK$2.42 per Share) (calculated based on 777,572,189 Shares in issue as at the Latest Practicable Date).

However, Shareholders should note that the exact effects of the Acquisition on the Group’s net assets value shall only be determined, and subject to audit, upon completion of the Acquisition based on the then fair value of the consolidated net assets of the Target Business and the Target Business Related Assets and Liabilities.

(iii) Working capital position

As stated in the Letter from the Board, the Consideration will be satisfied in cash by the Company. Therefore, there will be a cash outflow of the Group arising from settlement of the Consideration. As set out in Appendix II to the circular, the unaudited pro forma cash and cash equivalent balance would be approximately US$48.5 million assuming the Acquisition had been completed as at 30 June 2015. As advised by the management of the Target Businesses, it is projected to incur new capital expenditure of approximately RMB13.6 million during the year ending 31 December 2015 for future development. We have also discussed with the reporting accountants of the Company and as set out in the Appendix I of this circular, the Directors are of the opinion that the Enlarged Group has sufficient working capital for its present requirements for the next 12 months from the date of this circular taking into account the financial resources available to the Enlarged Group. As advised by the management of the Company, the additional financing needs for the cash requirement for the new projected projects of the Target Businesses would be fulfilled by cash collected gradually from the completed projects and/or bank borrowings. Given the duration of revenue generated from the existing projects of the Target Businesses are normally in the range of 2 to 5 years, we also considered that the Target Businesses can generate a recurring cash flow to the Enlarged Group upon completion of the Acquisition once all of the aforesaid contracts have been implemented and completed. Therefore, save for the Consideration to be satisfied in cash, there will not be any imminent cash flow burden of the Enlarged Group arising from the projected capital expenditure for the expected new projects in 2015.

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(iv) Gearing

Based on the pro forma financial information of the Enlarged Group as set out in Appendix II to the Circular, the gearing ratio, being measured on the basis of the total loans and borrowings over the total assets, of the Enlarged Group decreased from approximately 20.7% of the Group as at 30 June 2015 to 19.3% due to (i) the increase in gross amounts due from customers for contract work of approximately US$57.4 million; (ii) the increase in trade and other receivables of approximately US$32.1 million; and (iii) the increase in intangible assets of approximately US$17.5 million as a result of the Acquisition.

(v) Conclusion

Despite the decrease in the unaudited pro forma net asset value of the Enlarged Group upon completion of the Acquisition as mentioned above, taking into account (i) the total consideration is same as the aggregate valuation amount of the Target Businesses according to the Valuations Reports as set out in Appendices VII, VIII and IX to the Circular; (ii) the business prospects of the Target Businesses; (iii) the synergies brought by the Acquisition to the Group and positive outlook of the rail-transit and energy-saving industries in the PRC in the long run as detailed in sub-section headed “7. Reasons for and benefits of the entering into of the Sale and Purchase Agreement including the Future Business Arrangements, and the Annual Caps” in this letter; and (iv) the Enlarged Group has sufficient working capital to cover the resulted future cash outflow of the Target Businesses in 2015, we concur with the Directors that the Acquisition is in the interests of the Company and the Shareholders as a whole.

7. Reasons for and benefits of the entering into of the Business and Assets Purchase Agreements including the Future Business Arrangements, and the Annual Caps

The Group is a leading provider of integrated and comprehensive urban energy saving services, focusing on providing integrated products, solutions and services in relation to energy saving. The Group’s businesses cover energy monitoring, management and design and application of solutions for urban infrastructures in relation to energy-saving in buildings, industrial energy saving, urban heating supply energy saving and energy saving in urban rail transit.

As set out in the Letter from the Board, with the continuous growth in demand for energy saving and emission reduction across the globe, national governments made great efforts in energy-saving and emission-reduction, which will bring an unprecedented historical opportunity for the energy saving industry. As set out in 第十二個五年規劃 (the 12th Five-Year Plan*), the energy-saving industry is expected to be one of the seven strategic emerging industries to be developed in the PRC. The PRC government has committed to meet a 16% reduction per unit of GDP in energy

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use and a 17% reduction per unit of GDP in carbon dioxide emissions. It also mentioned that the aggregate sales of the EMC-based energy saving service industry in the PRC is forecasted to grow at an average annual growth rate of 30% during the period of 12th five year (2010–2015). As a leading provider of integrated and comprehensive urban energy saving services, the Group will continue to strengthen the urban integrated energy saving business covering various business fields in the future.

As the Intelligent Rail Transit Business provides intelligence integrated solutions for the main electro-mechanical systems such as Integrated Supervision and Control System (ISCS), Plat form Screen Doors (PSD) and Building Automation System (BAS) which involves rail transit operation efficiency and public safety, we have considered the rail transit operation line length and the number of rail transit passengers in the PRC from 2008 to 2013 to assess the prospect of the Intelligent Rail Transit Business. According to National Bureau of Statistics of China, the rail transit operation line length increased significantly from approximately 835 kilometres in 2008 to 2,408 kilometres in 2013, which represented a compound annual growth rate (“ CAGR ”) of approximately 23.6%. Detail of the rail transit operation line length in the PRC from 2008 to 2013 is illustrated in the chart below:

==> picture [313 x 173] intentionally omitted <==

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

3,000
2,500
2,000
1,500
1,000
500
0
----- End of picture text -----

Note: The detail of the historical rail transit operation line length in the PRC in 2014 is not available.

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According to National Bureau of Statistics of China, the number of rail transit passengers recorded a double-digit CAGR increase, being approximately 26.5%, from approximately RMB3.4 billion in 2008 to RMB10.9 billion in 2013. Detail of the historical number of rail transit passengers in the PRC from 2008 to 2013 is illustrated in the chart below:

==> picture [313 x 174] intentionally omitted <==

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

12,000,000
10,000,000
800,000
600,000
400,000
200,000
0
----- End of picture text -----

Note: The detail of the historical number of rail transit passengers in the PRC in 2014 is not available.

As advised by the management of the Group, the Intelligent Building Business will contribute to the provision of services to its potential customers comprising of, among other things, building owners and property developers for shopping malls, hotels, infrastructure and hospitals, which demand for energy-saving element to be incorporated into their building management, we have considered the historical construction output value in the PRC to assess the prospect of the Intelligent Building Business.

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According to National Bureau of Statistics of China, the total construction output value increased significantly from approximately RMB6,203.7 billion in 2008 to RMB17,671.3 billion in 2014, which represented a CAGR of approximately 19.1%. As the construction output value increases, there would be a higher demand for the Intelligent Building Business to provide building intelligence integrated solutions to building owners and property developers. Details of the total construction output value in the PRC from 2008 to 2014 is illustrated in the chart below:

==> picture [313 x 181] intentionally omitted <==

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

200,000
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
----- End of picture text -----

As advised by the management of the Group, the Intelligent Urban Heating Network Business will contribute to the provision of integrated solutions for heating plant and network in urban area, we have considered the historical urban central heating construction investment value in the PRC to assess the prospect of the Intelligent Urban Heating Network Business.

According to National Bureau of Statistics of China, the urban central heating construction investment value increased significantly from approximately RMB32.8 billion in 2008 to RMB81.9 billion in 2013, which represented a CAGR of approximately 20.1%. As the urban central heating construction investment value increases, there would be a higher demand for the Intelligent Urban Heating Network Business to provide integrated solutions for heating plant and network to heat providers, energy enterprises and gas enterprises. Detail of the urban central

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heating construction investment value in the PRC from 2008 to 2013 is illustrated in the chart below:

==> picture [313 x 169] intentionally omitted <==

Note: The detail of the historical urban central heating construction investment value in the PRC in 2014 is not available.

Given that (i) the historical rail transit operation line length, the historical number of rail transit passengers, the historical construction output value and the historical urban central heating construction investment value are on upward trends, and (ii) the increasing awareness of energy savings in the PRC resulted from promotion of energy consumption efficiency by the PRC government, it is expected that the demand on intelligence integrated solutions provided by the Target Businesses will continue to increase.

As indicated in the 2014 Annual Report, the revenue generated from the Group’s energy management segment recorded US$128.7 million and US$160.7 million for the year ended 31 December 2013 and 2014, respectively, which was on an upward trend. The Group has been focusing on expanding the sales of its energy-saving solutions and products and customer base and will devote its resources to explore new business models, expand customer base and addressable market and enhance its business presences. As stated in the 2014 Annual Report, the business of the Group had successfully extended to energy saving for heat supply network and rail transport and the Group will continuously adhere to the strategy of bilateral integration for independent research and development and industry chain so as to make a huge stride towards the goal of a full coverage of the urban energy saving business field. It was also stated in the 2014 Annual Report, the Group will brace itself to enter into more cities and regions, cooperate with a more diversified customer base and move towards a broader business field with advancement in energy saving driven by technology. Given the Group’s expansion of energy saving coverage to heat supply and rail transport and the Group shares the same source of technology and clientele with the Target Businesses, the Acquisition will further strengthen the Group’s existing technical strength in energy-saving industry and provide a positive synergy impact in better serving its diversified customer base with a wide array of experienced know-how in relation to intelligent construction projects, urban energy projects and urban transportation

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projects. In addition, the Group’s overseas capital platform can provide sources of funding to facilitate the more rapid and better development of the Target Businesses. Thus, we concur with the view of the management of the Company that the entering into of the Business and Assets Purchase Agreements and the Annual Caps in line with the Group’s business strategy.

Upon completion of the Acquisition, the Target Businesses can provide unique intelligence integrated solutions in architectural, industrial and transportation usage as mentioned in the paragraph headed “The Business and Assets Purchase Agreement” above to the Enlarged Group, as well as serving a platform for the Enlarged Group to take advantage of its existing networks to expand its client bases and to further penetrate into the share in energy-saving industry in the PRC. In view of the potential growth in the energy management business, the favourable policy for the energy saving industry set out by the PRC government as set out in the 12th Five-Year Plan and the expanded pools of clientele by sharing information and technology under the energy-saving solution industry, we concur with the Board’s view that the Acquisition will facilitate the Group to optimize the layout of the industry chain, explore customers’ resources, strengthen the Group’s existing urban integrated services and seize more potential business opportunities so as to provide greater driving force and more sources for the future growth of the Group.

Having considered the abovementioned reasons and benefits, we are of the view that the Acquisition offer the Company a good opportunity to further expand into the businesses relating to intelligent rail transit, intelligent building and intelligent urban heating network in the intelligent city sector by leveraging on the existing capabilities and clientele of the Target Businesses and the Group’s expertise in the energy saving industry and are of the opinion that the Acquisition, including the Future Business Arrangements, and the Annual Caps are in the interests of the Company and the Shareholders as a whole.

8. Basis of the Annual Caps

The amount of the Annual Caps for each of the years ending 31 December 2015, 2016 and 2017 are set out as follows:

		Year ending 31 December	Year ending 31 December
	2015	2016	2017
	(RMB	(RMB	(RMB
	million)	million)	million)
Payments to be transferred
by THTF to the Group	338	778	874
Payments to be transferred
by the Group to THTF	238	622	700

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As set out in the Letter from the Board, the Annual Caps were determined based on the following factors:

(i) sales data of the Target Businesses, including the contract price of the Acquired Projects, contracts in negotiation and bidding of projects participated by the Target Businesses, and estimated growth for each of the Target Businesses (as further detailed in paragraph (v) below);
(ii) historical pattern of payments of contract prices by the Target Businesses’ customers — based on the historical pattern of payments of contract prices, for the purpose of determining the amount of fees to be received by the Purchaser from third party customers through THTF, a proportion of the aggregate value of the contracts is allocated to each year at a certain percentage, representing the estimated amount of payments to be received by the Purchaser in each year, taking into account the particular historical payment pattern for each of the Target Businesses and the actual settlement status of the Acquired Projects as at the Valuation Date. In addition, in assessing the Annual Caps for the year 2015, which represents the maximum transaction amount for the three months ending 31 December 2015, the Company has taken into account the seasonality of payments by customers, based on the historical pattern that during 2012 to 2014, approximately 33% to 54% of the total payments received for a given year were collected by the Target Businesses during the last quarter of that year;
(iii) historical cost of sales of the Target Businesses — the historical cost of sales of the Target Businesses as a percentage of revenue received each year is used to approximate the amount of payments that the Purchaser will pay to THTF to settle debts with third party creditors by reference to the amount of contract price it will receive for the given year. In addition, in assessing the Annual Caps for the year 2015, the Company has taken into account the seasonality of the purchases from third party suppliers, based on the historical pattern that during 2012 to 2014, approximately 30% to 52% of the total payments paid to third party creditors for a given year were paid by the Target Businesses during the last quarter of that year;
(iv) trends of the gross profit margin of each of the Target Businesses — the historical gross profit margins of the Target Businesses are different and present different trends. For the purpose of determining the cost of sales of the Target Businesses as a percentage of revenue received each year (as mentioned in paragraph (iii) above), based on the historical gross profit margins of the Target Businesses and taking into account the prevailing trend of such gross profit margins, the gross profit margin for each of the Target Businesses for each of the three years ending 31 December 2017 is assumed to be a certain percentage between approximately 18% and 23%, depending on the particular Target Businesses and year concerned; and

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(v) expected growth of the Target Businesses — based on the historical growth rates of the Target Businesses, taking into account industry trends and macro-economic factors, for the purpose of determining the Annual Caps, a separate percentage is assigned as the growth rate of the aggregate contract price of the projects undertaken by each of the Target Businesses for each of the three years ending 31 December 2017. Based on such parameters, the total contract price of the Target Businesses as a whole is assumed to increase at a rate of approximately 15% per year during the three years ending 31 December 2017, depending on the year concerned.

The Annual Caps are determined on the assumption that none of the existing sales, supply or project contract of the Target Businesses are assigned to Technovator Beijing or Tongfang Energy Saving, as such assignment would require consents of the relevant customers.

The Annual Cap of payments to be transferred by THTF to the Group and payments to be transferred by the Group to THTF for the year ending 31 December 2015 was determined based on (i) the expected payments to be transferred by THTF to the Group and the expected payments to be transferred by the Group to THTF in the fourth quarter of 2015; and (ii) the historical seasonal factor of higher proportion of payments transferred to be accounted for the two years ended 31 December 2014. The Annual Caps of payments to be transferred by THTF to the Group and payments to be transferred by the Group to THTF for the years ending 31 December 2016 and 2017 were determined based on the expected payments to be transferred by THTF to the Group and the expected payments to be transferred by the Group to THTF for the years ending 31 December 2016 and 2017 with reference to the forecast of future expected income for the respective year complied in accordance with the assumptions made by the Directors which have been made with due care and consideration and made on an objective and a reasonable basis.

Having reviewed the Valuation Reports, discussed with management of the Group and the Target Businesses and considered the basis and factors taken into account by the Company in determining the Annual Caps as described above, we are of the view that the Annual Caps are fair and reasonable so far as the Company and the Independent Shareholders are concerned.

9. Pricing and Payment Terms of the Future Business Arrangements

As set out in the Letter from the Board, the transactions between the Purchaser and THTF under the Future Business Arrangements are part and parcel of the subject matter of the Acquisition, for which THTF will not be entitled to any additional fees or compensation.

– 60 –

LETTER FROM QUAM CAPITAL

The prices for new sales contracts to which THTF will act as the party will be negotiated with third party customers based on the price range as indicated by the prices charged by the relevant Target Business in at least two projects within the past 12 months with scope of services undertaken and/or for products sold by the relevant Target Business which most closely resembles the requirements of the new sales contract concerned. The prices for the purchase of material and/or services to be procured under supply contracts subject to the Future Business Arrangements will be negotiated with third party suppliers based on the price range as indicated by the prices paid by the relevant Target Business in at least two purchases within the past 12 months for similar material and/or services. The sales and procurement departments of the Target Businesses will be primarily responsible for setting or negotiating the pricing and payment terms of sales and supply contracts, with input from other relevant departments at the Target Businesses, such as their respective finance and operation departments. The approval of the general manager of the respective Target Businesses will be required before the Target Businesses request and instruct THTF to enter into such contracts. We consider the internal controls as set out above are sufficient to monitor the transactions between the Purchaser and THTF and/or the future customers and/or the future suppliers under the Future Business Arrangements.

Having considered (i) the above internal controls of the Target Businesses regarding the pricing and payment terms of sales and supply contracts; (ii) THTF takes a passive role under the Future Business Arrangements; (iii) THTF will not be entitled to any additional fees or compensation for any transactions between the Purchaser and THTF under the Future Business Arrangements; (iv) the Future Business Arrangements will enable the Purchaser to seamlessly take over the Acquired Projects upon completion of the Acquisition and allow the Target Businesses to continue to develop and grow without any interruption as a result of the change in their ownership; (v) it will take time for the Purchaser to establish its position in the market under its own name as the Purchaser is entering into the Target Businesses; and (vi) the Purchaser can avoid loss of potential business opportunities with its assistance by way of the Future Business Arrangements due to the Purchaser’s relatively new presence in the relevant markets as THTF has been operating in the Target Businesses for a significant period of time and has built its brand recognition among customers, we are of the opinion that the pricing and payment terms of the transactions between the Purchaser and THTF and/or the

– 61 –

LETTER FROM QUAM CAPITAL

future customers and/or the future suppliers under the Future Business Arrangements are fair and reasonable and are in the interests of the Company and the shareholders as a whole.

RECOMMENDATION

Having considered (i) the reasons for and benefits of the entering into of the Business and Assets Purchase Agreements including the Future Business Arrangements; (ii) the Valuation Reports on the Target Businesses; (iii) the financial effects of the Acquisition as mentioned above; (iv) the basis of the Annual Caps, we are of the opinion that the entering into of the Business and Assets Purchase Agreements, including the Future Business Arrangements, and the Annual Caps, are not conducted in the ordinary course of business of the Company but are in the interests of the Company and Shareholders as a whole and the terms of the Business and Assets Purchase Agreements, including the Future Business Arrangements, and the Annual Caps are 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. We therefore recommend (i) the Independent Board Committee to advise the Independent Shareholders; and (ii) the Independent Shareholders, to vote in favour of the relevant resolutions to be proposed at the EGM to approve the Business and Assets Purchase Agreements and the transactions contemplated thereunder, including the Future Business Arrangements, and the Annual Caps.

Yours faithfully, For and on behalf of Quam Capital Limited Gary Mui Deputy Chief Executive Officer

Note: Mr. Gary Mui is a licensed person registered with the Securities and Futures Commission and a responsible officer of Quam Capital Limited to carry out Type 6 (advising on corporate finance) regulated activity under the SFO. He has over 15 years of experience in the finance and investment banking industry.

– 62 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. INDEBTEDNESS STATEMENTS

As at 31 July 2015, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular:

(i) Debt Securities

The Group did not have any debt securities issued and outstanding, or authorised or otherwise created but unissued or any term loans.

(ii) Borrowings and Finance lease

(a) Borrowings

The Group had no other borrowings or indebtedness in the nature borrowing other than below:

Banking overdraft Loans – Secured – Guaranteed – Unsecured and unguaranteed Other borrowings – Unsecured Total	USD’000 54 16,826 20,544 35,477 23,048
	95,949

(b) Obligations under finance lease

The Group had obligation under finance lease amount to approximately USD88,000.

– I-1 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(iii) Mortgages and charges

The Group had no mortgages or charges other than those created pursuant to the secured banking facilities amounting to approximately USD22,580,000, under which the following assets (with an aggregate carrying value shown below) are charged or pledged:

	USD’000
Property, plant and equipment	1,036
Investment in a subsidiary	8,884
Land & building	4,469
Inventories	2,766
Trade debtors and bills receivable	12,896

(iv) Contingent liabilities

The Group did not have any contingent liabilities or guarantees.

(v) Preference Shares

As at 31 July 2015, the Group had redeemable preference shares issued by Distech Controls Inc. in the principal amount of approximately US$38.7 million with carrying value of approximately US$31.7 million. The redeemable preference shares were issued in 2013 with the right to be converted into 14,452,105 common shares of Distech Controls Inc. The redeemable preference shares are redeemable at the option of the holder, if the shares of Distech Controls Inc. are not listed on a stock exchange pursuant to the subscription agreement within 5 years. All such redeemable preference shares are agreed to be sold by the relevant shareholders, including the Company, to 1028665 B.C. Ltd. under the share purchase agreement dated 8 March 2015, the details of which are set out in the announcements of the Company dated Agreement 9, 12 and 30 March 2015, 2 April 2015 and 30 June 2015, and the circular of the Company dated 14 July 2015.

– I-2 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

Following the world’s continuous growth of demand on energy saving and reduction of emission especially on carbon emission reduction in the first half of 2015, as well as the strong facilitation of the energy saving and environmental protection industry by various nations, the PRC government’s focus on implementing energy efficiency enhancement plans and insistence on the strategic priority of energy saving will bring an unprecedented historic opportunity for the energy saving industry in PRC. This can be evidenced by the steady growth of each of the Group’s business segments during the first half of 2015, where China market growth continued to act as the driving force for the Group as a whole.

For building energy-saving, the Group successively secured the tender for several landmark buildings in China during the first half of 2015, including Shanghai Jing’an Tower (上海靜安大廈) and Chongqing Bank Tower (重慶銀行大廈). For industrial energy-saving, a dozen of Energy Management Contract (EMC) projects are obtaining stable energy saving revenue. Certain large-scale projects are at preparatory stage and expected to be executed within the second half of 2015. In addition, as a leading provider of integrated and comprehensive energy saving services, the Group responded to the development needs of the era of big data and took the lead in the industry to propose the idea of “Internet + Energy Saving” and put it into practice. During the first half of 2015, the Group successfully signed contracts for implementing several important projects such as Huiyun Intelligent Management System of Wanda Plaza (萬達廣場慧雲智能化管理系統), the “Pilot Test of National Energy Internet” service project of Suzhou Industrial Park (蘇州工業園「國家級能源互聯網試點」服務項目), and the “Central Platform for Energy Consumption Data Analysis of Public Buildings” project of the Ministry of Housing and Urban-Rural Development of the PRC.

In the future, the energy saving market in PRC will focus on industrial, construction and transportation areas. With a view to strengthening the Group’s core technology capability, expanding the international influence and competitiveness of its brand, and maintaining the stable growth of its basic businesses, the Group will continue to fully utilize the listing platform for effective capital operation. Further, the Group will continue to invest in research and development and keep on innovating technology and application platform. The Group will also expand business fields and models, strengthen industry chain arrangement and search for more potential business opportunities through merger and acquisition and various forms of cooperation, so as to provide continuous and solid force for the Group’s future growth.

On 9 March 2015, the Group made an announcement on its proposed disposal of the Group’s entire interest in Distech Controls Inc. (“Distech Controls”), a subsidiary in Canada, and it is expected that a profit before tax of approximately CAD$122 million will be obtained from such disposal. Such disposal of Distech Controls provided substantial investment returns to the Group on one hand, and assisted Distech Controls to strive for larger room for future development on the other hand, while with both parties continued business connection and cooperation, which promoted the growth of the Group, and leading to long-term mutual benefits and joint development.

– I-3 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

3. WORKING CAPITAL

Taking into account the expected completion of the transactions contemplated under the Business and Assets Purchase Agreements and the financial resources available to the Group, including the internally generated funds and the available banking facilities, the directors of the Company are of the opinion that the Group has sufficient working capital for its present requirements, that is for at least the next 12 months from the date of this circular.

4. FINANCIAL INFORMATION OF THE GROUP

The financial information of the Group for the three years ended 31 December 2012, 2013, 2014 are disclosed on pages 48 to 112 of the annual report of the Company for the year ended 31 December 2012, pages 49 to 118 of the annual report of the Company for the year ended 31 December 2013 and pages 48 to 122 of the annual report of the Company for the year ended 31 December 2014, and the financial information of the Group for the six months ended 30 June 2015 is disclosed on pages 22 to 44 of the interim report 2015 of the Company, all of which are published on the website of the Stock Exchange at http://www.hkexnews.hk, and the website of the Company at http://www.technovator.com.sg/. Quick links to the reports of the Company are set out below:

Annual report of the Company for the year ended 31 December 2012: http://www.hkexnews.hk/listedco/listconews/SEHK/2013/0408/LTN20130408506.pdf

Annual report of the Company for the year ended 31 December 2013: http://www.hkexnews.hk/listedco/listconews/SEHK/2014/0428/LTN201404281515.pdf

Annual report of the Company for the year ended 31 December 2014: http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0324/LTN20150324254.pdf

Interim report of the Company for the six months ended 30 June 2015: http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0910/LTN20150910387.pdf

– I-4 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(A) INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION

The following is the text of a report received from the reporting accountants, KPMG, Certified Public Accountants, Hong Kong, in respect of the Group’s pro forma financial information for the purpose in this circular.

8th Floor Prince’s Building 10 Chater Road Central Hong Kong

25 September 2015

TO THE DIRECTORS OF TECHNOVATOR INTERNATIONAL LIMITED

We have completed our assurance engagement to report on the compilation of pro forma financial information of Technovator International Limited (the “Company”) and its subsidiaries (collectively the “Group”) by the directors of the Company (the “Directors”) for illustrative purposes only. The pro forma financial information consists of the unaudited pro forma consolidated statement of assets and liabilities as at 30 June 2015 and related notes as set out in Part B of Appendix II to the circular dated 25 September 2015 (the “Circular”) issued by the Company. The applicable criteria on the basis of which the Directors have compiled the pro forma financial information are described in Part B of Appendix II to the Circular.

The pro forma financial information has been compiled by the Directors to illustrate the impact of the proposed acquisition of the intelligent rail transit business, the intelligent building business and the intelligent urban heating network business of Tsinghua Tongfang Co., Ltd (the “Target Businesses” ) (the “Acquisition”) on the Group’s financial position as at 30 June 2015 as if the Acquisition had taken place at 30 June 2015. As part of this process, information about the Group’s assets and liabilities as at 30 June 2015 has been extracted by the Directors from the interim report of the Group for the six months ended 30 June 2015, on which a review report has been published.

Directors’ Responsibilities for the Pro Forma Financial Information

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

– II-1 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Reporting Accountants’ Responsibilities

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

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements (“HKSAE”) 3420 “Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus” issued by the HKICPA. This standard requires that the reporting accountants comply with ethical requirements and plan and perform procedures to obtain reasonable assurance about whether the Directors have compiled the pro forma financial information in accordance with paragraph 4.29 of the Listing Rules, and with reference to AG 7 issued by the HKICPA.

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

The purpose of pro forma financial information included in an investment circular is solely to illustrate the impact of a significant event or transaction on the unadjusted financial information of the Group as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the events or transactions at 30 June 2015 would have been as presented.

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

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

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

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

– II-2 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

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

Opinion

In our opinion:

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

KPMG

Certified Public Accountants

Hong Kong

– II-3 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(B) UNAUDITED PRO FORMA FINANCIAL INFORMATION

(1) Introduction to the unaudited pro forma financial information

The following is the unaudited pro forma financial information of the Enlarged Group, being the Group together with the Target Businesses, as if the Acquisition had been completed on 30 June 2015 for the unaudited pro forma consolidated statement of assets and liabilities. Details of the Acquisition are set out in the section headed “Letter from the Board” contained in this Circular.

The unaudited pro forma financial information of the Enlarged Group has been prepared in accordance with Paragraph 4.29 of the Listing Rules, for the purpose of illustrating the effect of the Acquisition pursuant to the terms of the purchase agreements by and among the Company, through its wholly-owned subsidiaries, Tongfang Technovator Int (Beijing) Co., Ltd and Tongfang Energy Saving Engineering Technology Co., Ltd., and Tsinghua Tongfang Co., Ltd (the “Business and Assets Purchase Agreements”). Because of its hypothetical nature, the unaudited pro forma financial information may not give a true picture of the financial position of the Enlarged Group had the Acquisition been completed as of the specified date or any future date.

The unaudited pro forma financial information of the Enlarged Group is based upon the consolidated statement of financial position of the Group as at 30 June 2015, which has been extracted from the Company’s interim report for the six months ended 30 June 2015 as referred to in Appendix I to this Circular; the statements of financial position of the Intelligent Rail Transit Business, the Intelligent Building Business and the Intelligent Urban Heating Network Business as at 31 March 2015 set out in Appendix III, Appendix IV and Appendix V to this Circular respectively, and adjusted on a pro forma basis to reflect the effect of the Acquisition. These pro forma adjustments are (i) directly attributable to the Acquisition and not relating to other future events and decision and (ii) factually supportable based on the terms of the Business and Assets Purchase Agreements.

The unaudited pro forma financial information of the Enlarged Group should be read in conjunction with the historical financial information of the Group set out in the interim report of the Company for the six months ended 30 June 2015 and other financial information included elsewhere in this Circular.

– II-4 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(2) Unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group as at 30 June 2015

The Group USD’000 54,744 541 28,916 12,917 40,919 722	USD’000 (note 3a) 54 4,946	Pro forma adjustments USD’000 USD’000 USD’000 (note 3b) (note 3c) (note 3d) 56 45 8,513 4,004	Pro forma adjustments USD’000 USD’000 USD’000 (note 3b) (note 3c) (note 3d) 56 45 8,513 4,004	Pro forma adjustments USD’000 USD’000 USD’000 (note 3b) (note 3c) (note 3d) 56 45 8,513 4,004	USD’000 (note 3e)	The Enlarged Group USD’000 54,899 541 46,379 12,917 40,919 722
138,759 - - - - - 19,826 161,659 997 957 134,857 318,296 - - - - - 82,683 237 61,138 30 1,101	- - - - - 2,632 25,539 29,443 - - - - - 49,401	- - - - - 304 9,409 21,817 - - - - - 18,060	- - - - - 9,216 16,079 6,091 - - - - - 19,088	- - - - - (18,962) - - - - - (18,962)	- - - - - (86,365) - - - - -	156,377 - - - - - 31,978 193,724 58,348 957 48,492
						333,499 - - - - - 150,270 237 61,138 30 1,101
145,189 - - - - -	- - - - -	- - - - -	- - - - -	- - - - -	- - - - -	212,776 - - - - -

– II-5 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Net current assets Total assets less current liabilities Non-current liabilities Loans and borrowings Obligations under finance leases Deferred tax liabilities Other non-current liabilities Total non-current liabilities Net assets	The Group USD’000 173,107 - - - - - 311,866 - - - - - 33,615 68 2,429 34,540 70,652 - - - - - 241,214	USD’000 (note 3a) - - - - - - - - - - - - - - -	Pro forma adjustments USD’000 USD’000 USD’000 (note 3b) (note 3c) (note 3d) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -	USD’000 (note 3e) - - - - - - - - - - - - - - -	The Enlarged Group USD’000 120,723 - - - - -
					277,100 - - - - - 33,615 68 2,429 34,540
					70,652 - - - - -
					206,448

(3) Notes to the unaudited pro forma financial information of the Enlarged Group
a. The adjustment represents the acquisition of the Intelligent Rail Transit Business of Tsinghua Tongfang Co., Ltd as if the Acquisition had been completed at 30 June 2015 for the unaudited pro forma consolidated statement of assets and liabilities. The adjustment amounts are derived from translating the financial information of the Intelligent Rail Transit Business as set out in Appendix III to this Circular from RMB to US$ at the rate of US$100 = RMB611.36 for the unaudited pro forma consolidated statement of assets and liabilities as at 31 March 2015. No representation is made that RMB denominated amounts have been, could have been or could be converted to US$, or vice versa, at the rates applied or at any other rates or at all.
b. The adjustment represents the acquisition of the Intelligent Building Business of Tsinghua Tongfang Co., Ltd as if the Acquisition had been completed at 30 June 2015 for the unaudited pro forma consolidated statement of assets and liabilities. The adjustment amounts are derived from translating the financial information of the Intelligent Building Business as set out in Appendix IV to this Circular from RMB to US$ at the rate of US$100 = RMB611.36 for the unaudited pro forma consolidated statement of assets and liabilities as at 31 March 2015. No representation is made that RMB denominated amounts have been, could have been or could be converted to US$, or vice versa, at the rates applied or at any other rates or at all.

– II-6 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

c. The adjustment represents the acquisition of the Intelligent Urban Heating Network Business of Tsinghua Tongfang Co., Ltd as if the Acquisition had been completed at 30 June 2015 for the unaudited pro forma consolidated statement of assets and liabilities. The adjustment amounts are derived from translating the financial information of the Intelligent Urban Heating Network Business as set out in Appendix V to this Circular from RMB to US$ at the rate of US$100 = RMB611.36 for the unaudited pro forma consolidated statement of assets and liabilities as at 31 March 2015. No representation is made that RMB denominated amounts have been, could have been or could be converted to US$, or vice versa, at the rates applied or at any other rates or at all.
d. The adjustment represents the elimination of the trade and other receivable/payable balances between the Group and the Target Businesses as at 31 March 2015.
e. The adjustment represents the consideration for the Acquisition of RMB528 million (equivalent to approximately US$86,365,000 at translation rate of US$100 = RMB611.36), assuming no working capital adjustment to the consideration as detailed in the section headed “the Technovator Beijing Agreement” and “the Tongfang Energy Saving Agreement” in this Circular, to be satisfied by cash as if the Acquisition had been completed on 30 June 2015 for the unaudited pro forma consolidated statement of assets and liabilities.
f. The unaudited pro forma financial information of the Enlarged Group has been prepared on the basis of business combination involving entities under common control for the acquisition of the Target Businesses, in which the Group and the Target Businesses are ultimately controlled by the same party both before and after the Acquisition. The assets and liabilities of the Target Businesses acquired by the Group are measured at the carrying amounts as recorded by the Target Businesses as set out in Appendix III to Appendix V, and the difference between the carrying amount of the net assets of the Target Businesses acquired by the Group and fair value of the consideration is adjusted to reserves.
g. No adjustment has been made to the unaudited pro forma financial information for acquisition-related costs (including fees to legal advisers, reporting accountants, valuer, printer, taxes and levies and other expenses) as the Directors determined that such costs are insignificant.
h. Apart from the adjustments as stated above, no adjustments have been made to reflect any trading results or other transactions of the Enlarged Group entered into subsequent to 30 June 2015.

– II-7 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

The following is the full text of a report, prepared for the purpose of incorporation in this circular, received from the Company’s reporting accountants, KPMG, Certified Public Accountants, Hong Kong.

8th Floor Prince’s Building 10 Chater Road Central Hong Kong

25 September 2015

The Board of Directors

Technovator International Limited

Dear Sirs,

INTRODUCTION

We set out below our report on the financial information relating to the Intelligent Rail Transit Business (as defined in note 1(a) of Section B) of Tsinghua Tongfang Co., Ltd. (“Tongfang”) comprising the statements of financial position of the Intelligent Rail Transit Business as at 31 December 2012, 2013 and 2014 and 31 March 2015 and the statements of comprehensive income, the statements of changes in parent’s net investment and the cash flow statements of the Intelligent Rail Transit Business, for each of the years ended 31 December 2012, 2013 and 2014 and the three months ended 31 March 2015 (the “Relevant Periods”), and a summary of significant accounting policies and other explanatory information (the “Financial Information”), for inclusion in the circular issued by Technovator International Limited (the “Company”) dated 25 September 2015 (the “Circular”) in connection with the proposed acquisitions of businesses in relation to providing intelligent integrated solutions which center around supervision and control systems in the fields of Intelligent Rail Transit, Intelligent Building and Intelligent Urban Heating Network and related assets by the Company (the “Proposed Acquisition”).

Tongfang was established on 25 June 1997 with limited liability in the People’s Republic of China (the “PRC”) and its common stock is listed on the Shanghai Stock Exchange. Tongfang prepares its consolidated financial statements comprising Tongfang and its subsidiaries (collectively, the “Tongfang Group”) in accordance with Accounting Standards for Business Enterprises or referred to as China Accounting Standards (“CAS”). During the Relevant Periods, the Intelligent Rail Transit Business did not operate in the form of standalone entities and was held and operated by Tongfang. As the Intelligent Rail Transit Business constitutes only part of the Tongfang Group, no financial statements for the Intelligent Rail Transit Business have previously been prepared or reported on a standalone basis.

– III-1 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

In connection with the Proposed Acquisition, the management of Tongfang has prepared the financial statements of the Intelligent Rail Transit Business for the Relevant Periods (the “Underlying Financial Statements”) on the same basis as used in the preparation of the Financial Information set out in section B below. The Underlying Financial Statements for the Relevant Periods were audited by KPMG Huazhen LLP (畢馬威華振會計師事務所（特殊普通合夥）) in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institution of Certified Public Accountants (the “HKICPA”).

The Financial Information has been prepared by the directors of the Company for inclusion in the Circular in connection with the Proposed Acquisition based on the Underlying Financial Statements, with no adjustments made thereon and in accordance with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL INFORMATION

The directors of the Company are responsible for the preparation of the Financial Information that gives a true and fair view in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the HKICPA and the applicable disclosure provisions of the Listing Rules, and for such internal control as the directors of the Company determine is necessary to enable the preparation of the Financial Information that is free from material misstatement, whether due to fraud or error.

REPORTING ACCOUNTANTS’ RESPONSIBILITY

Our responsibility is to form an opinion on the Financial Information based on our procedures performed in accordance with Auditing Guideline “Prospectuses and the Reporting Accountant” (Statement 3.340) issued by the HKICPA. We have not audited any financial statements of the Intelligent Rail Transit Business in respect of any period subsequent to 31 March 2015.

OPINION

In our opinion, the Financial Information gives, for the purpose of this report and on the basis of preparation set out in note 1 of Section B below, a true and fair view of the financial position of the Intelligent Rail Transit Business as at 31 December 2012, 2013 and 2014 and 31 March 2015 and of the Intelligent Rail Transit Business’s financial performance and cash flows for the Relevant Periods then ended.

– III-2 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

CORRESPONDING FINANCIAL INFORMATION

For the purpose of this report, we have also reviewed the unaudited corresponding interim financial information of the Intelligent Rail Transit Business comprising the statement of comprehensive income, the statement of changes in parent’s net investment and the cash flow statement for the three months ended 31 March 2014, together with the notes thereon (the “Corresponding Financial Information”), for which the directors of the Company are responsible, in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA.

The directors of the Company are responsible for the preparation of the Corresponding Financial Information in accordance with the same basis adopted in respect of the Financial Information. Our responsibility is to express a conclusion on the Corresponding Financial Information based on our review.

A review consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the Corresponding Financial Information.

Based on our review, for the purpose of this report, nothing has come to our attention that causes us to believe that the Corresponding Financial Information is not prepared, in all material respects, in accordance with the same basis adopted in respect of the Financial Information.

– III-3 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

A FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

STATEMENTS OF COMPREHENSIVE INCOME

Years ended 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 123,241 131,333 232,556 (92,722) (97,670) (182,458)	Years ended 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 123,241 131,333 232,556 (92,722) (97,670) (182,458)	Years ended 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 123,241 131,333 232,556 (92,722) (97,670) (182,458)	Three months ended 31 March 2014 2015 RMB’000 RMB’000 (unaudited) 55,608 67,330 (44,689) (55,430)	Three months ended 31 March 2014 2015 RMB’000 RMB’000 (unaudited) 55,608 67,330 (44,689) (55,430)
30,519 (7,857) (1,687) 20,975 (3,209)	33,663 (10,191) (5,176) 18,296 (2,835)	50,098 (15,762) (7,551) 26,785 (4,131)	10,919 (3,085) (1,646) 6,188 (950)	11,900 (4,832) (2,184)
				4,884 (765)
17,766	15,461	22,654	5,238	4,119

The accompanying notes form part of the Financial Information.

– III-4 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

STATEMENTS OF FINANCIAL POSITION

As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 192 256 355 15,799 16,113 27,919 60 122 297	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 192 256 355 15,799 16,113 27,919 60 122 297	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 192 256 355 15,799 16,113 27,919 60 122 297	As at 31 March 2015 RMB’000 329 30,240 –
16,051 - - - - - - - - 13,044 53,883 71,793 138,720 - - - - - - - - 74,910 74,910 - - - - - - - - 63,810 - - - - - - - - 79,861	16,491 - - - - - - - - 28,624 22,723 112,907 164,254 - - - - - - - - 162,364 162,364 - - - - - - - 1,890 - - - - - - - 18,381	28,571 - - - - - - - - 22,335 123,208 173,893 319,436 - - - - - - - - 229,418 229,418 - - - - - - - 90,018 - - - - - - - 118,589	30,569 - - - - - - - - 16,089 156,131 180,004
			352,224 - - - - - - - - 302,015
			302,015 - - - - - - -
			50,209 - - - - - - -
			80,778
79,861 79,861	18,381 18,381	118,589 118,589	80,778

			80,778

The accompanying notes form part of the Financial Information.

– III-5 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

STATEMENTS OF CHANGES IN PARENT’S NET INVESTMENT

Section B
Note
Balance at 1 January 2012
Changes in Parent’s Net Investment for 2012:
Total comprehensive income for the year
Deemed contributions from Parent
1
Balance at 31 December 2012
Changes in Parent’s Net Investment for 2013:
Total comprehensive income for the year
Deemed distributions to Parent
1
Balance at 31 December 2013
Changes in Parent’s Net Investment for 2014:
Total comprehensive income for the year
Deemed contributions from Parent
1
Balance at 31 December 2014
Changes in Parent’s Net Investment for
the three months ended 31 March 2015:
Total comprehensive income for the period
Deemed distributions to Parent
1
Balance at 31 March 2015
Unaudited:
Balance at 31 December 2013
Changes in Parent’s Net Investment for
the three months ended 31 March 2014:
Total comprehensive income for the period
Deemed contributions from Parent
Balance at 31 March 2014

Parent’s Net
Investment
RMB’000
18,711
17,766
43,384
79,861
15,461
(76,941)
18,381
22,654
77,554
118,589
4,119
(41,930)
80,778
18,381
5,238
28,584
52,203

The accompanying notes form part of the Financial Information.

– III-6 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

CASH FLOW STATEMENTS

Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 20,975 18,296 26,785 6,188 4,884 82 87 93 24 26 225 3,205 3,420 801 1,449 (187) 409 1,167 – –	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 20,975 18,296 26,785 6,188 4,884 82 87 93 24 26 225 3,205 3,420 801 1,449 (187) 409 1,167 – –	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 20,975 18,296 26,785 6,188 4,884 82 87 93 24 26 225 3,205 3,420 801 1,449 (187) 409 1,167 – –	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 20,975 18,296 26,785 6,188 4,884 82 87 93 24 26 225 3,205 3,420 801 1,449 (187) 409 1,167 – –	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 20,975 18,296 26,785 6,188 4,884 82 87 93 24 26 225 3,205 3,420 801 1,449 (187) 409 1,167 – –
21,095 (7,743) (27,922) (26,029) 14,448 (26,151) (3,181) (29,332) - - - - - - - (28) (14,024)	21,997 (15,580) 30,751 87,454 (41,114) 83,508 (2,897) 80,611 - - - - - - - (151) (3,519)	31,465 6,289 (101,652) 67,054 (60,986) (57,830) (4,306) (62,136) - - - - - - - (192) (15,226)	7,013 20,215 (38,560) (13,046) (2,240) (26,618) (950) (27,568) - - - - - - - – (1,016)	6,359 6,246 (32,923) 72,597 (6,111)
				46,168 (765)
				45,403 - - - - - - - – (3,770)

– III-7 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

Section B Note Net cash used in investing activities Financing activities Transfers from/(to) parent’s net investment Net cash generated from/(used in) financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents – at beginning and end of the year/period	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) (14,052) (3,670) (15,418) (1,016) (3,770) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 43,384 (76,941) 77,554 28,584 (41,633) 43,384 (76,941) 77,554 28,584 (41,633) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - – – – – – – – – – –	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) (14,052) (3,670) (15,418) (1,016) (3,770) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 43,384 (76,941) 77,554 28,584 (41,633) 43,384 (76,941) 77,554 28,584 (41,633) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - – – – – – – – – – –
		(41,633) - - - - - - -
		– –

The accompanying notes form part of the Financial Information.

– III-8 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

B NOTES TO FINANCIAL INFORMATION

1 DESCRIPTION OF THE INTELLIGENT RAIL TRANSIT BUSINESS AND BASIS OF PREPARATION

Pursuant to an agreement dated 28 July 2015, given the need for strategic planning on the group business of Tsinghua Tongfang Co., Ltd. (“Tongfang”) and the business development of Technovator International Limited (the “Company”), the Company agrees Tongfang Technovator International (Beijing) Co., Ltd. (“Technovator Beijing”), one of its subsidiaries, to acquire from Tongfang its Intelligent Rail Transit Business. The Financial Information set out in this report has been prepared to present the historical operations of the Intelligent Rail Transit Business for the purpose of inclusion in the Circular.

(a) Nature of the Intelligent Rail Transit Business

The intelligent rail transit business of Tongfang is the business which provide intelligence integrated solutions for the main electro-mechanical systems such as Integrated Supervision and Control System (“ISCS”), Platform Screen Doors (“PSD”) and Building Automation System (“BAS”) (“Intelligent Rail Transit Business”). The integral solutions can achieve the rail transit energy saving goal by analyzing the equipment energy consumption and indoor environment, designing and implementing energy saving solutions.

(b) Basis of Preparation

The Financial Information set out in this report has been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”). HKFRS 1, First-Time Adoption of Hong Kong Financial Reporting Standards (“HKFRS 1”) has been applied in the adoption of HKFRS for the purpose of preparing the Underlying Financial Statements and the Financial Information. The transition date is 1 January 2012 (the “Transition Date”). The Intelligent Rail Transit Business has never prepared financial statements or financial information on the basis of preparation presented herein and on any other basis for itself. Prior to the first-time adoption of HKFRS, the financial information of the Intelligent Rail Transit Business included in this report was reflected in Tongfang’s consolidated results and was prepared in accordance with Accounting Standards for Business Enterprises or referred to as China Accounting Standards (“CAS”).

Since no financial statements of the Intelligent Rail Transit Business has previously been prepared, the Financial Information set out in this report do not include any HKFRS 1 first time adoption reconciliations.

The Financial Information has been prepared to reflect the cash flows, revenues, expenses, assets, and liabilities of the Intelligent Rail Transit Business. The Intelligent Rail Transit Business was conducted through, and assets and liabilities held in Tongfang, all of which were under control of Tongfang. Because the Intelligent Rail Transit Business was not historically a single legal entity and was commingled within Tongfang, parent’s net investment is shown in lieu of shareholders’ equity in the Financial Information. Parent’s net investment represents the cumulative interest of Tongfang in the Intelligent Rail Transit Business through that date. The impact of transactions between the Intelligent Rail Transit Business and Tongfang that were not historically settled in cash is also included in parent’s net investment.

During the Relevant Periods, the Intelligent Rail Transit Business functioned as part of Tongfang, and accordingly, a process has been completed to specifically identify assets, liabilities, revenues, expenses and cash flows associated with the Intelligent Rail Transit Business in preparing the Financial Information. Assets, liabilities and costs that were related to the larger business of Tongfang were also assessed to allocate these items

– III-9 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

between the Intelligent Rail Transit Business and other business of Tongfang. This allocation has been completed based on the following general process:

Corporate overhead functions performed for the Intelligent Rail Transit Business – These functions include, but are not limited to, executive oversight, legal, marketing, human resources, internal audit, and financial reporting. The costs of such services have been allocated to the Intelligent Rail Transit Business based on the most relevant allocation method to the service provided, primarily based on relative percentage of revenue. Management of Tongfang believes such allocations are reasonable; however, they may not be indicative of the actual expense that would have been incurred had the Intelligent Rail Transit Business been operating as a separate entity apart from Tongfang. The cost allocated for these functions is included in administrative expenses in the statements of comprehensive income for the Relevant Periods presented. A complete discussion of the Intelligent Rail Transit Business’s relationship with Tongfang, together with the cost allocations, is included in note 17.

The Company believes the basis of preparation described above results in the Financial Information reflecting the assets and liabilities associated with the Intelligent Rail Transit Business and reflecting costs associated with the functions that would be necessary to operate independently. However, as the Intelligent Rail Transit Business did not operate as a stand- alone entity during the Relevant Periods, the Financial Information may not be indicative of the Intelligent Rail Transit Business’s future performance and do not necessarily reflect what its results of operations, financial position, and cash flows would have been had the Intelligent Rail Transit Business operated as a separate entity apart from Tongfang during the Relevant Periods.

2 SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance

The Financial Information set out in this report has been prepared in accordance with HKFRSs, which collective term includes Hong Kong Accounting Standards and related interpretations issued by the HKICPA. Further details of the significant accounting policies adopted are set out in the remainder of this Section B.

The HKICPA has issued certain new and revised HKFRSs. For the purpose of preparing this Financial Information, the Intelligent Rail Transit Business has adopted all these new and revised HKFRSs to the Relevant Period, except for any new standards or interpretations that are not yet effective for the period beginning from 1 January 2015. The revised and new accounting standards and interpretations issued but not yet effective for the period beginning from 1 January 2015 are set out in note 19.

The Financial Information also complies with the applicable disclosure provisions of the Listing Rules.

The accounting policies set out below have been applied consistently to all periods presented in the Financial Information.

The Corresponding Financial Information for the three months ended 31 March 2014 has been prepared in accordance with the same basis and accounting policies adopted in respect of the Financial Information.

(b) Basis of measurement

The Financial Information is presented in Renminbi (“RMB”), rounded to the nearest thousand. It is prepared on the historical cost basis.

– III-10 –

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FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

(c) Use of estimates and judgements

The preparation of Financial Information in conformity with HKFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by management in the application of HKFRSs that have significant effect on the Financial Information and major sources of estimation uncertainty are discussed in note 18.

(d) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (see note 2(g)(ii)).

The cost of self-constructed items of property, plant and equipment includes the cost of materials, direct labour, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and an appropriate proportion of production overheads and borrowing costs.

Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date of retirement or disposal.

Depreciation is calculated to write off the cost or valuation of items of property, plant and equipment, less their estimated residual value, if any, using the straight line method over their estimated useful lives as follows:

Computers and office equipment	5-10 years
Plant and machinery	5-10 years

Where parts of an item of property, plant and equipment have different useful lives, the cost or valuation of the item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reviewed annually.

(e) Intangible assets (other than goodwill)

Expenditure on an internal research and development projects is distinguished between the expenditures during the research phase and expenditures during the development phase. Research activities involve original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding. Development activities involve a plan or design for the production of new or substantially improved materials, devices, products or processes before the start of commercial production or use.

– III-11 –

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FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

Expenditure on research activities is recognised as an expense in the period in which it is incurred. Expenditure on development activities is capitalised if the product or process is technically and commercially feasible and the Group has sufficient resources and the intention to complete development. The expenditure capitalised includes the costs of materials, direct labour, and an appropriate proportion of overheads and borrowing costs, where applicable. Capitalised development costs are stated at cost less accumulated amortisation and impairment losses (see note 2(g)(ii)). Other development expenditure is recognised as an expense in the period in which it is incurred.

Other intangible assets that are acquired by the Intelligent Rail Transit Business are stated at cost less accumulated amortisation (where the estimated useful life is finite) and impairment losses (see note 2(g)(ii)). Expenditure on internally generated goodwill and brands is recognised as an expense in the period in which it is incurred.

Amortisation of intangible assets with finite useful lives is charged to profit or loss on a straight- line basis over the assets’ estimated useful lives. The following intangible assets with finite useful lives are amortised from the date they are available for use and their estimated useful lives are as follows:

Non-patents technology

5 years

Both the period and method of amortisation are reviewed annually.

(f) Leased assets

An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Intelligent Rail Transit Business determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.

(i) Classification of assets leased to the Intelligent Rail Transit Business

Assets that are held by Intelligent Rail Transit Business under leases which transfer to the Intelligent Rail Transit Business substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Intelligent Rail Transit Business are classified as operating leases.

(ii) Operating lease charges

Where the Intelligent Rail Transit Business has the use of assets held under operating leases, payments made under the leases are charged to profit or loss in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognised in profit or loss as an integral part of the aggregate net lease payments made. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred.

– III-12 –

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FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

(g) Impairment of assets

(i) Impairment of trade and other receivables

Receivables that are stated at cost or amortised cost are reviewed at the end of each reporting period to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of the Intelligent Rail Transit Business about one or more of the following loss events:

significant financial difficulty of the debtor;
a breach of contract, such as a default or delinquency in interest or principal payments;
it becoming probable that the debtor will enter bankruptcy or other financial reorganisation;
significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and
a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

If any such evidence exists, any impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material. This assessment is made collectively where these financial assets share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group.

If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result in the asset’s carrying amount exceeding that which would have been determined had no impairment loss been recognised in prior years.

Impairment losses are written off against the corresponding assets directly, except for impairment losses recognised in respect of trade debtors and bills receivable included within trade and other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Intelligent Rail Transit Business is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade debtors and bills receivable directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss.

– III-13 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

(ii) Impairment of other assets

Internal and external sources of information are reviewed at the end of each reporting period to identify indications that the following assets may be impaired or, except in the case of goodwill, an impairment loss previously recognised no longer exists or may have decreased:

Property, plant and equipment
Intangible assets

If any such indication exists, the asset’s recoverable amount is estimated.

Calculation of recoverable amount

The recoverable amount of an asset is the greater of its fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

Recognition of impairment losses

An impairment loss is recognised in profit or loss if the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs of disposal (if measurable) or value in use (if determinable).

Reversals of impairment losses

In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount.

A reversal of an impairment loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognised.

(h) Inventories

Inventories are carried at the lower of cost and net realisable value.

Cost is calculated using the weighted average cost formula and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Net realisable value is the estimated selling price in the ordinary course of Intelligent Rail Transit Business less the estimated costs of completion and the estimated costs necessary to make the sale.

– III-14 –

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FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

When inventories are sold or assigned to specific construction contracts, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

(i)

Construction contracts

Construction contracts are contracts specifically negotiated with a customer for the construction of an asset or a group of assets, where the customer is able to specify the major structural elements of the design. The accounting policy for contract revenue is set out in note 2(o)(i). When the outcome of a construction contract can be estimated reliably, contract costs are recognised as an expense by reference to the stage of completion of the contract at the end of the reporting period. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. When the outcome of a construction contract cannot be estimated reliably, contract costs are recognised as an expense in the period in which they are incurred.

Construction contracts in progress at the end of the reporting period are recorded at the net amount of costs incurred plus recognised profit less recognised losses and progress billings, and are presented in the statement of financial position as the “Gross amount due from customers for contract work” (as an asset) or the “Gross amount due to customers for contract work” (as a liability), as applicable. Progress billings not yet paid by the customer are included under “Trade debtors and bills receivable”. Amounts received before the related work is performed are included under “Trade and other payables”.

(j)

Trade and other receivables

Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost using the effective interest method, less allowance for impairment of doubtful debts (see note 2(g)(i)), except where the receivables are interest-free loans made to related parties without any fixed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less allowance for impairment of doubtful debts.

(k) Trade and other payables

Trade and other payables are initially recognised at fair value. Trade and other payables are subsequently stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

(l) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Intelligent Rail Transit Business’s cash management are also included as a component of cash and cash equivalents for the purpose of the cash flow statement.

(m) Employee benefits

Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

– III-15 –

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FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

(n) Income tax

Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognised in profit or loss except to the extent that they relate to items recognised in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognised in other comprehensive income or directly in equity, respectively.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profits will be available against which the asset can be utilised, are recognised. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilised.

The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and temporary differences relating to investments in subsidiaries to the extent that, in the case of taxable differences, the Intelligent Rail Transit Business controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future.

The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the end of the reporting period. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilised. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.

Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the Intelligent Rail Transit Business has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met:

in the case of current tax assets and liabilities, the Intelligent Rail Transit Business intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously; or

– III-16 –

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FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:
the same taxable entity; or
different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realise the current tax assets and settle the current tax liabilities on a net basis or realise and settle simultaneously.

(o) Revenue recognition

Revenue is reassured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the Intelligent Rail Transit Business and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in profit or loss as follows:

(i) Contract revenue

When the outcome of a construction contract can be estimated reliably:

revenue from a fixed price contract is recognised using the percentage of completion method, measured by reference to the physically completed proportion of the contract work or the percentage of contract costs incurred to date to estimated total contract costs for the contract; and
revenue from a cost plus contract is recognised by reference to the recoverable costs incurred during the period plus an appropriate proportion of the total fee, measured by reference to the proportion that costs incurred to date bear to the estimated total costs of the contract.

When the outcome of a construction contract cannot be estimated reliably, revenue is recognised only to the extent of contract costs incurred that it is probable will be recoverable.

(ii) Sale of goods

Revenue is recognised when goods are delivered at the customers’ premises which is taken to be the point in time when the customer has accepted the goods and the related risks and rewards of ownership. Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts.

(iii) Service income

Service income is recognised when services are rendered to customers.

(iv) Interest income

Interest income is recognised as it accrues using the effective interest method.

(p) Translation of foreign currencies

Foreign currency transactions during the year are translated at the foreign exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at the end of the reporting period. Exchange gains and losses are recognised in profit or loss, except those arising from foreign currency borrowings used to hedge a net investment in a foreign operation which are recognised in other comprehensive income.

– III-17 –

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FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the foreign exchange rates ruling at the transaction dates. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated using the foreign exchange rates ruling at the dates the fair value was measured.

The results of foreign operations are translated into RMB at the exchange rates approximating the foreign exchange rates ruling at the dates of the transactions. Statement of financial position items are translated into RMB at the closing foreign exchange rates at the end of the reporting period. The resulting exchange differences are recognised in other comprehensive income and accumulated separately in equity in the exchange reserve.

(q) Related parties

(a) A person, or a close member of that person’s family, is related to the Intelligent Rail Transit Business if that person:
(i) has control or joint control over the Intelligent Rail Transit Business;
(ii) has significant influence over the Intelligent Rail Transit Business; or
(iii) is a member of the key management personnel of the Intelligent Rail Transit Business or the Intelligent Rail Transit Business’s parent.
(b) An entity is related to the Intelligent Rail Transit Business if any of the following conditions applies:
(i) The entity and the Intelligent Rail Transit Business are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).
(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).
(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
(v) The entity is a post-employment benefit plan for the benefit of employees of either the Intelligent Rail Transit Business or an entity related to the Intelligent Rail Transit Business.
(vi) The entity is controlled or jointly controlled by a person identified in (a).
(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

– III-18 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

(r) Segment reporting

Operating segments, and the amounts of each segment item reported in the financial statements, are identified from the financial information provided regularly to the Intelligent Rail Transit Business’ most senior executive management for the purposes of allocating resources to, and assessing the performance of, the Intelligent Rail Transit Business’s various lines of business and geographical locations.

Individually material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic characteristics and are similar in respect of the nature of products and services, the nature of production processes, the type or class of customers, the methods used to distribute the products or provide the services, and the nature of the regulatory environment. Operating segments which are not individually material may be aggregated if they share a majority of these criteria.

The Intelligent Rail Transit Business operates in a single business segment, namely supplying intelligence integral solutions for the main electro-mechanical systems including ISCS, PSD and BAS, no business segment analysis is presented.

In presenting geographic information, segment revenue is based on geographical location of customers at which the services were provided or the goods were delivered, which are entirely in the PRC. The Intelligent Rail Transit Business’ assets and liabilities are entirely situated in the PRC. Accordingly, no geographic information is presented.

3 TURNOVER

The Intelligent Rail Transit Business supplies intelligence integral solutions for the main electromechanical systems including ISCS, PSD and BAS.

Revenue represents the revenue from construction contracts, sales value of goods supplied to customers and income from provision of services.

The amount of each significant category of revenue recognised during the Relevant Periods is as follows:

Contract revenue Sales of goods Provision of services Total	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 98,857 88,066 145,156 21,526 55,108 22,093 34,305 87,400 34,082 12,222 2,291 8,962 – – – 123,241 131,333 232,556 55,608 67,330	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 98,857 88,066 145,156 21,526 55,108 22,093 34,305 87,400 34,082 12,222 2,291 8,962 – – – 123,241 131,333 232,556 55,608 67,330
		67,330

– III-19 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

Information about major customer

Revenues from customers contributing over 10% of the total revenue of the Intelligent Rail Transit Business of the corresponding years/periods are as follows:

					Three months ended	Three months ended
		Years	ended 31 December		31	March
		2012	2013	2014	2014	2015
		RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
					(unaudited)
Customer	A	60,421	32,974	Note	Note	7,715
Customer	B	14,997	Note	Note	Note	35,132
Customer	C	14,316	Note	Note	Note	Note
Customer	D	13,425	51,207	48,880	11,041	Note
Customer	E	Note	Note	Note	7,870	6,920
Customer	F	Note	Note	80,898	33,477	Note
Customer	G	Note	Note	26,205	Note	Note
Customer	H	Note	Note	23,068	Note	Note
Customer	I	Note	Note	Note	Note	12,222

Note: The revenue from corresponding customer did not contribute over 10% of the total revenue for the year/period.

4 PROFIT BEFORE TAXATION

Profit before taxation is arrived at after charging/(crediting):

(a) Staff costs

Salaries, wages and other benefits Contributions to defined contribution retirement plans	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 4,407 4,913 7,254 1,969 1,990 781 671 1,052 257 316 5,188 5,584 8,306 2,226 2,306	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 4,407 4,913 7,254 1,969 1,990 781 671 1,052 257 316 5,188 5,584 8,306 2,226 2,306
		2,306

Pursuant to the relevant labour rules and regulations in the PRC, the Intelligent Rail Transit Business participate in defined contribution retirement benefit schemes (“the Schemes”) organised by the respective local government authorities whereby the Intelligent Rail Transit Business is required to make contributions to the Schemes at 20% of the eligible employees’ salaries during the Relevant Period.

The Intelligent Rail Transit Business has no other material obligation for the payment of pension benefits beyond the annual contributions described above.

– III-20 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

(b) Other items

				Three months ended	Three months ended
	Years	ended 31 December		31 March
	2012	2013	2014	2014	2015
	RMB’000	RMB’000	RMB’000	RMB’000	MB’000
				(unaudited)
Amortisation of intangible
assets	225	3,205	3,420	801	1,449
Depreciation	82	87	93	24	26
(Reversal of)/impairment
losses on trade and other
receivables	(187)	409	1,167	–	–
Operating lease charge
(minimum lease payments)
in respect of properties	117	185	826	78	311

5 INCOME TAX

(a) Income tax in the statements of comprehensive income represents:

Provision of PRC income tax for the year Deferred tax	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 3,181 2,897 4,306 950 765 28 (62) (175) – – 3,209 2,835 4,131 950 765	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 3,181 2,897 4,306 950 765 28 (62) (175) – – 3,209 2,835 4,131 950 765
		765

– III-21 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

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

Profit before taxation Notional tax calculated at the applicable tax rate Effect of tax concession Tax effect of non-deductible expenses Actual tax expense	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 20,975 18,296 26,785 6,188 4,884 5,244 4,574 6,696 1,547 1,221 (2,139) (1,890) (2,754) (633) (510) 104 151 189 36 54 3,209 2,835 4,131 950 765	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 20,975 18,296 26,785 6,188 4,884 5,244 4,574 6,696 1,547 1,221 (2,139) (1,890) (2,754) (633) (510) 104 151 189 36 54 3,209 2,835 4,131 950 765
		765

Tongfang is subject to PRC corporate income tax at 25% during the Relevant Periods. It is recognised as a high and new technology enterprise and is eligible to enjoy a preferential tax rate of 15% until October 2017. The Intelligent Rail Transit Business functions as part of Tongfang and is subject to same tax rate as Tongfang.

The Intelligent Rail Transit Business is not subject to Hong Kong corporate income tax during the Relevant Periods.

6 DIRECTORS’ REMUNERATION

The directors believe the presentation of such information is not meaningful for the purpose of this report.

7 INDIVIDUALS WITH HIGHEST EMOLUMENTS

The directors believe the presentation of the five highest paid employees’ information is not meaningful for the purpose of this report.

– III-22 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

8 PROPERTY, PLANT AND EQUIPMENT

Computers and office equipments RMB’000 484 28	Plant and machinery RMB’000 – –	Total RMB’000 484 28
512 - - - - - - - - 151 663 - - - - - - - - 151 814 - - - - - - - - (238) (82) (320) - - - - - - - - (87) (407) - - - - - - - - (93) (500) - - - - - - - - (24)	– - - - - - - - - – – - - - - - - - - 41 41 - - - - - - - - – – – - - - - - - - - – – - - - - - - - - – – - - - - - - - - (2)	512 - - - - - - - - 151
		663 - - - - - - - - 192
		855 - - - - - - - - (238) (82)
		(320) - - - - - - - - (87)
		(407) - - - - - - - - (93)
		(500) - - - - - - - - (26)
(524) - - - - - - - - 192 256 314 290	(2) - - - - - - - - – – 41 39	(526) - - - - - - - -
		192

		256

		355

		329

– III-23 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

9 INTANGIBLE ASSETS

Non-patents technology Development costs RMB’000 RMB’000 – 2,000 – 14,024 16,024 (16,024)	Non-patents technology Development costs RMB’000 RMB’000 – 2,000 – 14,024 16,024 (16,024)	Total RMB’000 2,000 14,024 –
16,024 - - - - - - - - – 16,024 - - - - - - - - – 12,960 28,984 - - - - - - - - – 28,984 - - - - - - - - – (225) (225) - - - - - - - - (3,205) (3,430) - - - - - - - - (3,420) (6,850) - - - - - - - - (1,449)	– - - - - - - - - 3,519 3,519 - - - - - - - - 15,226 (12,960) 5,785 - - - - - - - - 3,770 9,555 - - - - - - - - – – – - - - - - - - - – – - - - - - - - - – – - - - - - - - - –	16,024 - - - - - - - - 3,519
		19,543 - - - - - - - - 15,226 –
		34,769 - - - - - - - - 3,770
		38,539 - - - - - - - - – (225)
		(225) - - - - - - - - (3,205)
		(3,430) - - - - - - - - (3,420)
		(6,850) - - - - - - - - (1,449)
(8,299) - - - - - - - - 15,799 12,594 22,134 20,685	– - - - - - - - - – 3,519 5,785 9,555	(8,299) - - - - - - - -
		15,799

		16,113

		27,919

		30,240

– III-24 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

10 INCOME TAX IN THE STATEMENTS OF FINANCIAL POSITION

(a) Deferred tax assets in the statements of financial position

(i) Movements of deferred tax assets are as follows:

Section B Note At beginning of the year/period Credited to the statements of comprehensive income 5(a) Transfers to parent’s net investment At end of the year/period	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 88 60 122 (28) 62 175 – – – 60 122 297	As at 31 March 2015 RMB’000 297 – (297)
		–

(ii) The deferred tax assets are arising from:

							As at
			As	at	31 December		31 March
			2012		2013	2014	2015
			RMB’000		RMB’000	RMB’000	RMB’000
Allowance	for	doubtful
debts			60		122	297	–

11 INVENTORIES

(a) Inventories in the statements of financial position comprise:

Raw materials Goods in transit	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 2 2 2 13,042 28,622 22,333 13,044 28,624 22,335	As at 31 March 2015 RMB’000 2 16,087
		16,089

(b) The analysis of the amount of inventories recognised as an expenses and included in the profit or loss as follows:

				Three months ended	Three months ended
	Years	ended 31 December		31	March
	2012	2013	2014	2014	2015
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
				(unaudited)
Carrying amount of
inventories sold	17,643	27,399	63,295	26,076	9,162

– III-25 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

12 TRADE AND OTHER RECEIVABLES

As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 20,464 12,291 75,110 – – 2,000 (402) (811) (1,978)	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 20,464 12,291 75,110 – – 2,000 (402) (811) (1,978)	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 20,464 12,291 75,110 – – 2,000 (402) (811) (1,978)	As at 31 March 2015 RMB’000 54,088 2,000 (1,978
20,062 4,034 24,096 29,787	11,480 3,521 15,001 7,722	75,132 4,672 79,804 43,404	54,110 4,706
			58,816 97,315
53,883	22,723	123,208	156,131

(a) All of the trade and other receivables are expected to be recovered or recognised as expense within one year.

(b) Ageing analysis

Included in trade and other receivables are external trade and bills receivables (net of allowance for doubtful debts) with the following ageing analysis as of the end of the reporting period:

Less than 1 year More than 1 year but less than 2 years past due More than 2 year but less than 3 years past due More than 3 years	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 16,785 7,298 72,404 3,277 1,267 20 – 2,915 375 – – 2,333 20,062 11,480 75,132	As at 31 March 2015 RMB’000 51,381 21 375 2,333
		54,110

Trade debtors and bills receivable are due from the date of billing. Further details of the Intelligent Rail Transit Business’s credit policy are set out in note 15(a).

– III-26 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

(c) Impairment of trade and other receivables

Impairment losses in respect of trade and other receivables are recorded using an allowance account unless the Intelligent Rail Transit Business is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against trade and other receivables directly (see note 2(g)).

The movement in the allowance for doubtful debts during the year, including both specific and collective loss components, is as follows:

At beginning of the year/period Impairment loss recognised Written back At end of the year/period	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 589 402 811 – 409 1,167 (187) – – 402 811 1,978	As at 31 March 2015 RMB’000 1,978 – –
		1,978

(d) Trade and other receivables that are not impaired

Receivables that were neither past due nor impaired relate to customers for whom there was no recent history of default.

Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Intelligent Rail Transit Business. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Intelligent Rail Transit Business does not hold any collateral over these balances.

13 GROSS AMOUNTS DUE FROM CUSTOMERS FOR CONTRACT WORK

Direct costs incurred to date on contract plus attributable profits less recognised losses Less: Progress payments received Gross amounts due from customers for contract work	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 366,288 430,450 589,872 (294,495) (317,543) (415,979) 71,793 112,907 173,893	As at 31 March 2015 RMB’000 652,284 (472,280)
		180,004

– III-27 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

14 TRADE AND OTHER PAYABLES

Trade payables due to related parties Other trade payables Receipts in advance and other payables – amounts due to third parties	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 21,039 25,114 76,564 28,970 50,938 77,430	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 21,039 25,114 76,564 28,970 50,938 77,430	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 21,039 25,114 76,564 28,970 50,938 77,430	As at 31 March 2015 RMB’000 74,213 52,980
	50,009 24,901	76,052 86,312	153,994 75,424	127,193 174,822
	74,910	162,364	229,418	302,015

All of the above balances are expected to be settled within one year. Included in trade and other payables are trade payables with the following ageing analysis as of the end of the reporting period:

Less than 1 year Over 1 year but within 2 years Over 2 years but within 3 years More than 3 years	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 25,328 64,499 143,938 17,888 5,274 2,581 2,168 3,729 2,254 4,625 2,550 5,221 50,009 76,052 153,994	As at 31 March 2015 RMB’000 115,653 3,020 1,516 7,004
		127,193

The amounts due to related parties are interest free, unsecured and repayable on demand.

15 FINANCIAL RISK MANAGEMENT AND FAIR VALUES

Exposure to credit and liquidity risks arises in the normal course of the Intelligent Rail Transit Business. The Intelligent Rail Transit Business is not exposed to significant interest rate risk and currency risk as it has no interest-bearing financial instruments, and no transactions and balances are in foreign currency. The Intelligent Rail Transit Business’s exposure to these risks and the financial risk management policies and practices used by the Intelligent Rail Transit Business to manage these risks are described below.

(a) Credit risk

Credit risk arises because a counterparty may fail to perform its obligations. The Intelligent Rail Transit Business’s credit risk is primarily attributable to trade and other receivables. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. The Intelligent Rail Transit Business does not require collateral in respect of financial assets.

– III-28 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

In respect of trade and other receivables, individual credit evaluations are performed on all customers requiring credit over a certain amount. These evaluations focus on the customer ‘s past history of making payments when due and current ability to pay, and may take into account information specific to the customer as well as pertaining to the economic environment in which the customer operates. The Intelligent Rail Transit Business requires certain customers to pay deposits upfront and the remaining trade receivables are due from the date of billing. Normally, the Intelligent Rail Transit Business does not obtain collateral from customers.

The Intelligent Rail Transit Business’s exposure to credit risk is influenced mainly by the individual characteristics of each customer rather than the industry in which the customers operate and therefore significant concentrations of credit risk primarily arise when the Intelligent Rail Transit Business has significant exposure to individual customers. As at 31 December 2012, 2013 and 2014, and 31 March 2015, 79%, 58%, 88% and 5% of trade receivables was due from the Intelligent Rail Transit Business’s five largest customers, respectively.

(b)

Liquidity risk

Liquidity risk arises when a company encounters difficulties to meet commitments associated with liabilities and other payment obligations. Such risk may result from inadequate market depth or disruption or refinancing problems. The Intelligent Rail Transit Business has to maintain a suitable level of liquidity to finance the daily operation, capital expenditure and repayment of borrowings. The Intelligent Rail Transit Business’s policy is to regularly monitor current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term.

The following table details the remaining contractual maturities at the end of the reporting period of the Intelligent Rail Transit Business’s financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on rates current at the end of the reporting period) and the earliest date the Intelligent Rail Transit Business can be required to pay:

Trade and other payables As at 31 December 2012 As at 31 December 2013 As at 31 December 2014 As at 31 March 2015	Contractual undiscounted cash flow within 1 year or on demand RMB’000 50,058 76,136 154,246 127,445	Carrying amount RMB’000 50,058

		76,136

		154,246

		127,445

– III-29 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

(c) Fair values

During the Relevant Periods, no financial instrument of the Intelligent Rail Transit Business was measured at fair value across the three levels of the fair value hierarchy defined in IFRS 7, Financial Instruments: Disclosures.

In respect of the Intelligent Rail Transit Business’s trade and other receivables (inclusive of amounts due from related parties), and trade and other payables (inclusive of amounts due to related parties), the carrying amounts approximated fair values during the Relevant Periods due to the relatively short term nature of these financial assets or liabilities.

16 OPERATING LEASE COMMITMENTS

Commitments in respect of properties under operating leases as at the end of the reporting period, not provided for in the financial statements were as follows:

							As at
			As	at	31 December		31 March
			2012		2013	2014	2015
			RMB’000		RMB’000	RMB’000	RMB’000
Within	1	year	1,334		1,334	1,351	1,004

17 MATERIAL RELATED PARTY TRANSACTIONS

(a) Transaction with related parties

During the Relevant Period, transactions with the following parties are considered as related party transactions.

Name of party	Relationship
Tongfang	Parent Company
Tongfang Technovator International Technology (Beijing)	Subsidiary of Tongfang
Co., Ltd. (同方泰德國際科技（北京）有限公司)
Tongfang Technovator Intelligence Technology (Shanghai)	Subsidiary of Tongfang
Co., Ltd. (同方泰德智能科技（上海）有限公司)
Tongfang Technovator Software (Beijing) Co., Ltd	Subsidiary of Tongfang
(同方泰德軟件（北京）有限公司)
Nuctech Company Limited (同方威視技術股份有限公司)	Subsidiary of Tongfang
Tongfang R.I.A Company Limited (同方銳安科技有限公司)	Subsidiary of Tongfang
Beijing Tongfang Property Management	Subsidiary of Tongfang
(北京同方物業管理有限公司)
Tongfang Kawasaki Advanced energy-saving machine Co.,	Associate of Tongfang
Ltd. (同方川崎空調設備有限公司)

The official name of these entities is in Chinese. The English translation of the name is for reference only.

– III-30 –

APPENDIX III

FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

(b) Significant related party transactions

				Three months ended 31	Three months ended 31
	Years	ended 31 December		March
	2012	2013	2014	2014	2015
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
				(unaudited)
Construction revenue from
Tongfang’s subsidiaries	–	8,962	–	–	–
Purchase from Tongfang’s
subsidiaries	507	18,535	86,796	–	–
Rental paid to Tongfang’s
subsidiaries	494	511	1,088	270	645
Corporate overhead
allocations
(note (i))	9,424	11,666	18,633	3,905	5,541

(i) Corporate overhead allocations from Tongfang – Tongfang currently performs certain corporate overhead functions for the Intelligent Rail Transit Business, and costs associated with these functions have been allocated to the Intelligent Rail Transit Business and reflected in the Financial Information. These functions include, but are not limited to, executive oversight, legal, marketing, human resources, internal audit, and financial reporting. The amounts allocated to the Intelligent Rail Transit Business are intended to represent the costs of providing these services, and management believes the allocation methods are reasonable. However, the actual cost of obtaining these individual services, if the Intelligent Rail Transit Business were a stand-alone company, could be materially different. The cost of the services provided by Tongfang was determined by allocating a portion of the overall Tongfang corporate costs to the Intelligent Rail Transit Business based upon the most relevant allocation method to the service provided, primarily based on relative percentage of revenue. Corporate overhead allocations from Tongfang are recorded in administrative expenses in the statements of comprehensive income.

(c) Balances with related parties

								As at
				As	at	31 December		31 March
				2012		2013	2014	2015
				RMB’000		RMB’000	RMB’000	RMB’000
Trade	and	other	payables	21,039		25,114	76,564	74,213

18 CRITICAL ACCOUNTING JUDGEMENTS IN APPLYING THE INTELLIGENT RAIL TRANSIT BUSINESS’S ACCOUNTING POLICIES

Key sources of estimation uncertainty

The Intelligent Rail Transit Business believes the following critical accounting policies involve the most significant judgements and estimates used in the preparation of the financial statements.

(i) Corporate allocations

The Financial Information includes allocations for certain expenses historically maintained by Tongfang, but not recorded in the accounts of the Intelligent Rail Transit

– III-31 –

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FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

Business. Such items have been allocated to the Intelligent Rail Transit Business and included in the Financial Information based on the most relevant allocation method, primarily relative percentage of revenue or headcount. Management believes that this basis for allocation of expenses is reasonable.

(ii) Construction contracts

As explained in policy notes 2(i) and 2(o)(i), revenue and profit recognition on an uncompleted project is dependent on estimating the total outcome of the construction contract, as well as the work done to date. Based on the Intelligent Rail Transit Business’ recent experience and the nature of the construction activity undertaken by the Intelligent Rail Transit Business, the Intelligent Rail Transit Business makes estimates of the point at which it considers the work is sufficiently advanced such that the costs to complete and revenue can be reliably estimated. As a result, until this point is reached the amounts due from/to customers for contract work as disclosed in note 13 will not include profit which the Intelligent Rail Transit Business may eventually realise from the work done to date. In addition, actual outcomes in terms of total cost or revenue may be higher or lower than estimated at the end of the reporting period, which would affect the revenue and profit recognised in future years as an adjustment to the amounts recorded to date.

(iii) Development costs

Critical judgment by the Intelligent Rail Transit Business’ management is applied when deciding whether the recognition requirements for development costs have been met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems at the time of recognition. Judgments are based on the best information available at the end of the reporting period. In addition, all internal activities related to the research and development of new products is continuously monitored by the Intelligent Rail Transit Business’ management.

(iv) Impairment of trade and other receivables

The management determines the impairment of trade and other receivables on a regular basis. This estimate is based on the credit history of its customers and current market conditions. If the financial conditions of the customers were to deteriorate, actual write-off would be higher than estimated. Management reassesses the impairment of trade and other receivables at the end of the reporting period.

(v) Amortization

Items of intangible assets with finite useful lives are amortized on a straight-line basis over the estimated useful lives of the assets. The management reviews the estimated useful lives of the assets regularly in order to determine the amount of amortization expense to be recorded during any reporting period. The useful lives are based on the Intelligent Building Business’s historical experience with similar assets and taking into account anticipated technological changes. The amortization expense for future periods is adjusted if there are significant changes from previous estimates.

– III-32 –

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FINANCIAL INFORMATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

19 POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE

Up to the date of this report, the HKICPA has issued a number of amendments, new standards and interpretations which are not yet effective for the period beginning from 1 January 2015 and which have not been adopted in these financial statements. These included the following which may be relevant to the Intelligent Rail Transit Business’s operations and financial statements.

	Effective for
	accounting periods
	beginning on or after
Amendments to HKFRS 11,
Accounting for acquisitions of interests in joint operations	1 January 2016
Amendments to HKAS 16 and HKAS 38,
Clarification of acceptable methods of depreciation and amortisation	1 January 2016
HKFRS 15, Revenue from contracts with customers	1 January 2017
HKFRS 9, Financial instruments	1 January 2018

The Intelligent Rail Transit Business in the process of making an assessment of what the impact of these amendments, new standards and new interpretations is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the Intelligent Rail Transit Business’s results of operations and financial position.

C SUBSEQUENT FINANCIAL STATEMENTS AND DIVIDENDS

No audited financial statements have been prepared by the Intelligent Rail Transit Business in respect of any period subsequent to 31 March 2015. No dividend or distribution has been declared or made by the Intelligent Rail Transit Business in respect of any period subsequent to 31 March 2015.

Your faithfully KPMG

Certified Public Accountants Hong Kong

– III-33 –

APPENDIX IV FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

8th Floor Prince’s Building 10 Chater Road Central Hong Kong

25 September 2015

The Board of Directors

Technovator International Limited

Dear Sirs,

INTRODUCTION

We set out below our report on the financial information relating to the Intelligent Building Business (as defined in note 1(a) of Section B) of Tsinghua Tongfang Co., Ltd. (“Tongfang”) comprising the statements of financial position of the Intelligent Building Business as at 31 December 2012, 2013 and 2014 and 31 March 2015 and the statements of comprehensive income, the statements of changes in parent’s net investment and the cash flow statements of the Intelligent Building Business, for each of the years ended 31 December 2012, 2013 and 2014 and the three months ended 31 March 2015 (the “Relevant Periods”), a summary of significant accounting policies and other explanatory information (the “Financial Information”), for inclusion in the circular issued by Technovator International Limited (the “Company”) dated 25 September 2015 (the “Circular”) in connection with the proposed acquisition of businesses in relation to providing intelligent integrated solutions which center around supervision and control systems in the fields of Intelligent Rail Transit, Intelligent Building and Intelligent Urban Heating Network and related assets by the Company (the “Proposed Acquisition”).

Tongfang was established on 25 June 1997 with limited liability in the People’s Republic of China (the “PRC”) and its common stock is listed on the Shanghai Stock Exchange. Tongfang prepares its consolidated financial statements comprising Tongfang and its subsidiaries (collectively, the “Tongfang Group”) in accordance with Accounting Standards for Business Enterprises or referred to as China Accounting Standards (“CAS”). During the Relevant Periods, the Intelligent Building Business did not operate in the form of standalone entities and was held and operated by Tongfang. As the Intelligent Building Business constitutes only part of the Tongfang Group, no financial statements for the Intelligent Building Business have previously been prepared or reported on a standalone basis.

– IV-1 –

APPENDIX IV

FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

In connection with the Proposed Acquisition, the management of Tongfang has prepared the financial statements of the Intelligent Building Business for the Relevant Periods (the “Underlying Financial Statements”) on the same basis as used in the preparation of the Financial Information set out in section B below. The Underlying Financial Statements for the Relevant Periods were audited by KPMG Huazhen LLP (畢馬威華振會計師事務所（特殊普通合夥）) in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institution of Certified Public Accountants (the “HKICPA”).

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL INFORMATION

REPORTING ACCOUNTANTS’ RESPONSIBILITY

Our responsibility is to form an opinion on the Financial Information based on our procedures performed in accordance with Auditing Guideline “Prospectuses and the Reporting Accountant” (Statement 3.340) issued by the HKICPA. We have not audited any financial statements of the Intelligent Building Business in respect of any period subsequent to 31 March 2015.

OPINION

In our opinion, the Financial Information gives, for the purpose of this report and on the basis of preparation set out in note 1 of Section B below, a true and fair view of the financial position of the Intelligent Building Business as at 31 December 2012, 2013 and 2014 and 31 March 2015 and of the Intelligent Building Business’s financial performance and cash flows for the Relevant Periods then ended.

CORRESPONDING FINANCIAL INFORMATION

For the purpose of this report, we have also reviewed the unaudited corresponding interim financial information of the Intelligent Building Business comprising the statement of comprehensive income, the statement of changes in parent’s net investment and the cash flow statement for the three months ended 31 March 2014, together with the notes thereon (the “Corresponding Financial Information”), for which the directors of the

– IV-2 –

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FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

Company are responsible, in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA.

– IV-3 –

APPENDIX IV

FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

A FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

STATEMENTS OF COMPREHENSIVE INCOME

Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 101,046 88,353 126,451 44,504 38,833 (90,546) (75,096) (105,667) (36,618) (31,441)	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 101,046 88,353 126,451 44,504 38,833 (90,546) (75,096) (105,667) (36,618) (31,441)	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 101,046 88,353 126,451 44,504 38,833 (90,546) (75,096) (105,667) (36,618) (31,441)	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 101,046 88,353 126,451 44,504 38,833 (90,546) (75,096) (105,667) (36,618) (31,441)	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 101,046 88,353 126,451 44,504 38,833 (90,546) (75,096) (105,667) (36,618) (31,441)
10,500 (6,065) (13,264) (8,829) –	13,257 (7,009) (14,078) (7,830) –	20,784 (8,327) (8,460) 3,997 (209)	7,886 (2,145) (2,057) 3,684 (117)	7,392 (2,737) (3,001)
				1,654 (266)
(8,829)	(7,830)	3,788	3,567	1,388

The accompanying notes form part of the Financial Information.

– IV-4 –

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FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

STATEMENTS OF FINANCIAL POSITION

As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 463 477 375 38,051 28,362 51,398 – – 543	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 463 477 375 38,051 28,362 51,398 – – 543	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 463 477 375 38,051 28,362 51,398 – – 543	As at 31 March 2015 RMB’000 343 52,046 –
38,514 - - - - - - - 1,497 23,156 133,341 157,994 - - - - - - - 50,676 50,676 - - - - - - - 107,318 - - - - - - - 145,832	28,839 - - - - - - - 1,627 41,337 157,502 200,466 - - - - - - - 84,325 84,325 - - - - - - - 116,141 - - - - - - - 144,980	52,316 - - - - - - - 1,550 48,720 132,994 183,264 - - - - - - - 94,609 94,609 - - - - - - - 88,655 - - - - - - - 140,971	52,389 - - - - - - - 1,861 57,523 133,380
			192,764 - - - - - - - 110,413
			110,413 - - - - - - -
			82,351 - - - - - - -
			134,740
145,832 145,832	144,980 144,980	140,971 140,971	134,740

			134,740

The accompanying notes form part of the Financial Information.

– IV-5 –

APPENDIX IV

FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

STATEMENTS OF CHANGES IN PARENT’S NET INVESTMENT

Section B
Note
Balance at 1 January 2012
Changes in Parent’s Net Investment for 2012:
Total comprehensive income for the year
Deemed contributions from Parent
1
Balance at 31 December 2012
Changes in Parent’s Net Investment for 2013:
Total comprehensive income for the year
Deemed contributions from Parent
1
Balance at 31 December 2013
Changes in Parent’s Net Investment for 2014:
Total comprehensive income for the year
Deemed distributions to Parent
1
Balance at 31 December 2014
Changes in Parent’s Net Investment for the three
months ended 31 March 2015:
Total comprehensive income for the period
Deemed distributions to Parent
1
Balance at 31 March 2015
Unaudited:
Balance at 31 December 2013
Changes in Parent’s Net Investment for the three
months ended 31 March 2014:
Total comprehensive income for the period
Deemed distributions to Parent
Balance at 31 March 2014

Parent’s Net
Investment
RMB’000
99,516
(8,829)
55,145
145,832
(7,830)
6,978
144,980
3,788
(7,797)
140,971
1,388
(7,619)
134,740
144,980
3,567
(5,096)
143,451

The accompanying notes form part of the Financial Information.

– IV-6 –

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FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

CASH FLOW STATEMENTS

Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) (8,829) (7,830) 3,997 3,684 1,654 134 133 140 36 32 10,858 12,360 6,183 1,455 2,567 1,076 582 621 – –	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) (8,829) (7,830) 3,997 3,684 1,654 134 133 140 36 32 10,858 12,360 6,183 1,455 2,567 1,076 582 621 – –	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) (8,829) (7,830) 3,997 3,684 1,654 134 133 140 36 32 10,858 12,360 6,183 1,455 2,567 1,076 582 621 – –	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) (8,829) (7,830) 3,997 3,684 1,654 134 133 140 36 32 10,858 12,360 6,183 1,455 2,567 1,076 582 621 – –	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) (8,829) (7,830) 3,997 3,684 1,654 134 133 140 36 32 10,858 12,360 6,183 1,455 2,567 1,076 582 621 – –
3,239 – 76 (13,495) (28,628) (38,808) –	5,245 (130) (18,763) 33,649 (24,161) (4,160) –	10,941 77 (8,004) 10,284 24,508 37,806 (752)	5,175 1,078 (1,528) (2,202) 6,954 9,477 (567)	4,253 (311) (8,803) 15,804 (386)
				10,557 (266)
(38,808) - - - - - -	(4,160) - - - - - -	37,054 - - - - - -	8,910 - - - - - -	10,291 - - - - - -

– IV-7 –

APPENDIX IV

FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) (200) (147) (38) – – (16,137) (2,671) (29,219) (3,814) (3,215)	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) (200) (147) (38) – – (16,137) (2,671) (29,219) (3,814) (3,215)	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) (200) (147) (38) – – (16,137) (2,671) (29,219) (3,814) (3,215)	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) (200) (147) (38) – – (16,137) (2,671) (29,219) (3,814) (3,215)	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) (200) (147) (38) – – (16,137) (2,671) (29,219) (3,814) (3,215)
(16,337) - - - - - - 55,145	(2,818) - - - - - - 6,978	(29,257) - - - - - - (7,797)	(3,814) - - - - - - (5,096)	(3,215) - - - - - - (7,076)
55,145 - - - - - - – –	6,978 - - - - - - – –	(7,797) - - - - - - – –	(5,096) - - - - - - – –	(7,076) - - - - - -
				– –

The accompanying notes form part of the Financial Information.

– IV-8 –

APPENDIX IV

FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

B NOTES TO FINANCIAL INFORMATION

1 DESCRIPTION OF THE INTELLIGENT BUILDING BUSINESS AND BASIS OF PREPARATION

Pursuant to an agreement dated 28 July 2015, given the need for strategic planning on the group business of Tsinghua Tongfang Co., Ltd. (“Tongfang”) and the business development of Technovator International Limited (the “Company”), the Company agrees Tongfang Technovator International (Beijing) Co., Ltd. (“Technovator Beijing”), one of its subsidiaries, to acquire from Tongfang its Intelligent Building Business. The Financial Information set out in this report has been prepared to present the historical operations of the Intelligent Building Business for the purpose of inclusion in the Circular.

(a) Nature of the Intelligent Building Business

The intelligent building business of Tongfang is the business which provide building intelligence integral solution, which center around the Building Automation (“BA”) that has been developed and debugged by Tongfang with the energy saving algorithm (“Intelligent Building Business”). The integral solution can achieve energy efficient, safe, convenient building environment with modern functions. The energy saving algorithm, exclusively developed by Tongfang based on the research of operation principles and energy saving strategy of heating, ventilation, and air conditioning (“HVAC”) system, is an optimization algorithm for building electro-mechanical systems, including chiller and heating plant, air-conditioning, lighting, water supply and drainage, etc. This algorithm can effectively improve the BA functions and enhance building energy saving effect.

(b) Basis of Preparation

The Financial Information set out in this report has been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”). HKFRS 1, First-Time Adoption of Hong Kong Financial Reporting Standards (“HKFRS 1”) has been applied in the adoption of HKFRS for the purpose of preparing the Underlying Financial Statements and the Financial Information. The transition date is 1 January 2012 (the “Transition Date”). The Intelligent Building Business has never prepared financial statements or financial information on the basis of preparation presented herein and on any other basis for itself. Prior to the first-time adoption of HKFRS, the financial information of the Intelligent Building Business included in this report was reflected in Tongfang’s consolidated results and was prepared in accordance with Accounting Standards for Business Enterprises or referred to as China Accounting Standards (“CAS”).

Since no financial statements of the Intelligent Building Business has previously been prepared, the Financial Information set out in this report do not include any HKFRS 1 first time adoption reconciliations.

The Financial Information has been prepared to reflect the cash flows, revenues, expenses, assets, and liabilities of the Intelligent Building Business. The Intelligent Building Business was conducted through, and assets and liabilities held in Tongfang, all of which were under control of Tongfang. Because the Intelligent Building Business was not historically a single legal entity and was commingled within Tongfang, parent’s net investment is shown in lieu of shareholders’ equity in the Financial Information. Parent’s net investment represents the cumulative interest of Tongfang in the Intelligent Building Business through that date. The impact of transactions between the Intelligent Building Business and Tongfang that were not historically settled in cash is also included in parent’s net investment.

– IV-9 –

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FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

During the Relevant Periods, the Intelligent Building Business functioned as part of Tongfang, and accordingly, a process has been completed to specifically identify assets, liabilities, revenues, expenses and cash flows associated with the Intelligent Building Business in preparing the Financial Information. Assets, liabilities and costs that were related to the larger business of Tongfang were also assessed to allocate these items between the Intelligent Building Business and other business of Tongfang. This allocation has been completed based on the following general process:

Corporate overhead functions performed for the Intelligent Building Business – These functions include, but are not limited to, executive oversight, legal, marketing, human resources, internal audit, and financial reporting. The costs of such services have been allocated to the Intelligent Building Business based on the most relevant allocation method to the service provided, primarily based on relative percentage of revenue. Management of Tongfang believes such allocations are reasonable; however, they may not be indicative of the actual expense that would have been incurred had the Intelligent Building Business been operating as a separate entity apart from Tongfang. The cost allocated for these functions is included in administrative expenses in the statements of comprehensive income for the Relevant Periods presented. A complete discussion of the Intelligent Building Business’s relationship with Tongfang, together with the cost allocations, is included in note 17.

The Company believes the basis of preparation described above results in the Financial Information reflecting the assets and liabilities associated with the Intelligent Building Business and reflecting costs associated with the functions that would be necessary to operate independently. However, as the Intelligent Building Business did not operate as a stand-alone entity during the Relevant Periods, the Financial Information may not be indicative of the Intelligent Building Business’s future performance and do not necessarily reflect what its results of operations, financial position, and cash flows would have been had the Intelligent Building Business operated as a separate entity apart from Tongfang during the Relevant Periods.

2 SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance

The HKICPA has issued certain new and revised HKFRSs. For the purpose of preparing this Financial Information, the Intelligent Building Business has adopted all these new and revised HKFRSs to the Relevant Period, except for any new standards or interpretations that are not yet effective for the period beginning from 1 January 2015. The revised and new accounting standards and interpretations issued but not yet effective for the period beginning from 1 January 2015 are set out in note 19.

The Financial Information also complies with the applicable disclosure provisions of the Listing Rules.

The accounting policies set out below have been applied consistently to all periods presented in the Financial Information.

(b) Basis of measurement

The Financial Information is presented in Renminbi (“RMB”), rounded to the nearest thousand. It is prepared on the historical cost basis.

– IV-10 –

APPENDIX IV

FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

(c) Use of estimates and judgements

Judgements made by management in the application of HKFRSs that have significant effect on the Financial Information and major sources of estimation uncertainty are discussed in note 18.

(d) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (see note 2(g)(ii)).

Furniture and fittings	5–10 years
Computers and office equipment	5–10 years
Plant and machinery	5–10 years

(e) Intangible assets (other than goodwill)

– IV-11 –

APPENDIX IV

FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

Other intangible assets that are acquired by the Intelligent Building Business are stated at cost less accumulated amortisation (where the estimated useful life is finite) and impairment losses (see note 2(g)(ii)). Expenditure on internally generated goodwill and brands is recognised as an expense in the period in which it is incurred.

Amortisation of intangible assets with finite useful lives is charged to profit or loss on a straight-line basis over the assets’ estimated useful lives. The following intangible assets with finite useful lives are amortised from the date they are available for use and their estimated useful lives are as follows:

Non-patents technology

5 years

Both the period and method of amortisation are reviewed annually.

(f) Leased assets

An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Intelligent Building Business determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.

(i) Classification of assets leased to the Intelligent Building Business

Assets that are held by Intelligent Building Business under leases which transfer to the Intelligent Building Business substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Intelligent Building Business are classified as operating leases.

(ii) Operating lease charges

Where the Intelligent Building Business has the use of assets held under operating leases, payments made under the leases are charged to profit or loss in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognised in profit or loss as an integral part of the aggregate net lease payments made. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred.

(g) Impairment of assets

(i) Impairment of trade and other receivables

Receivables that are stated at cost or amortised cost are reviewed at the end of each reporting period to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of the Intelligent Building Business about one or more of the following loss events:

significant financial difficulty of the debtor;

– IV-12 –

APPENDIX IV

FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

a breach of contract, such as a default or delinquency in interest or principal payments;
it becoming probable that the debtor will enter bankruptcy or other financial reorganisation;
significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and
a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

Impairment losses are written off against the corresponding assets directly, except for impairment losses recognised in respect of trade debtors and bills receivable included within trade and other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Intelligent Building Business is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade debtors and bills receivable directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss.

(ii) Impairment of other assets

Property, plant and equipment
Intangible assets

If any such indication exists, the asset’s recoverable amount is estimated.

– IV-13 –

APPENDIX IV

FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

–

Calculation of recoverable amount

–

Recognition of impairment losses

–

Reversals of impairment losses

In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount.

(h) Inventories

Inventories are carried at the lower of cost and net realisable value.

Net realisable value is the estimated selling price in the ordinary course of Intelligent Building Business less the estimated costs of completion and the estimated costs necessary to make the sale.

(i) Construction contracts

– IV-14 –

APPENDIX IV

FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

out in note 2(o)(i). When the outcome of a construction contract can be estimated reliably, contract costs are recognised as an expense by reference to the stage of completion of the contract at the end of the reporting period. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. When the outcome of a construction contract cannot be estimated reliably, contract costs are recognised as an expense in the period in which they are incurred.

(j) Trade and other receivables

(k) Trade and other payables

(l) Cash and cash equivalents

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

(m) Employee benefits

(n) Income tax

– IV-15 –

APPENDIX IV

FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and temporary differences relating to investments in subsidiaries to the extent that, in the case of taxable differences, the Intelligent Building Business controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future.

Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the Intelligent Building Business has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met:

in the case of current tax assets and liabilities, the Intelligent Building Business intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously; or
in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:
the same taxable entity; or
different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realise the current tax assets and settle the current tax liabilities on a net basis or realise and settle simultaneously.

– IV-16 –

APPENDIX IV

FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

(o) Revenue recognition

Revenue is reassured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the Intelligent Building Business and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in profit or loss as follows:

(i) Contract revenue

When the outcome of a construction contract can be estimated reliably:

revenue from a fixed price contract is recognised using the percentage of completion method, measured by reference to the physically completed proportion of the contract work or the percentage of contract costs incurred to date to estimated total contract costs for the contract; and
revenue from a cost plus contract is recognised by reference to the recoverable costs incurred during the period plus an appropriate proportion of the total fee, measured by reference to the proportion that costs incurred to date bear to the estimated total costs of the contract.

When the outcome of a construction contract cannot be estimated reliably, revenue is recognised only to the extent of contract costs incurred that it is probable will be recoverable.

(ii) Sale of goods

(iii) Service income

Service income is recognised when services are rendered to customers.

(iv) Interest income

Interest income is recognised as it accrues using the effective interest method.

(p) Translation of foreign currencies

– IV-17 –

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FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

exchange rates at the end of the reporting period. The resulting exchange differences are recognised in other comprehensive income and accumulated separately in equity in the exchange reserve.

(q) Related parties

(a) A person, or a close member of that person’s family, is related to the Intelligent Building Business if that person:
(i) has control or joint control over the Intelligent Building Business;
(ii) has significant influence over the Intelligent Building Business; or
(iii) is a member of the key management personnel of the Intelligent Building Business or the Intelligent Building Business’s parent.
(b) An entity is related to the Intelligent Building Business if any of the following conditions applies:
(i) The entity and the Intelligent Building Business are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).
(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).
(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
(v) The entity is a post-employment benefit plan for the benefit of employees of either the Intelligent Building Business or an entity related to the Intelligent Building Business.
(vi) The entity is controlled or jointly controlled by a person identified in (a).
(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

(r) Segment reporting

Operating segments, and the amounts of each segment item reported in the financial statements, are identified from the financial information provided regularly to the Intelligent Building Business’s most senior executive management for the purposes of allocating resources to, and assessing the performance of, the Intelligent Building Business’s various lines of business and geographical locations.

– IV-18 –

APPENDIX IV

FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

The Intelligent Building Business operates in a single business segment, namely providing building intelligence integrated solutions which center around the BA that has been developed and debugged by Tongfang with the energy saving algorithm, no business segment analysis is presented.

In presenting geographic information, segment revenue is based on geographical location of customers at which the services were provided or the goods were delivered, which are entirely in the PRC. The Intelligent Building Business’s assets and liabilities are entirely situated in the PRC. Accordingly, no geographic information is presented.

3 TURNOVER

The Intelligent Building Services provide building intelligence integrated solutions which center around the BA that has been developed and debugged by Tongfang with the energy saving algorithm.

Revenue represents the revenue from construction contracts, sales value of goods supplied to customers and income from provision of services. The amount of each significant category of revenue recognised during the Relevant Periods is as follows:

Contract revenue Sales of goods Provision of services	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 101,001 88,179 116,772 44,381 35,532 – – 9,285 – 3,086 45 174 394 123 215 101,046 88,353 126,451 44,504 38,833	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 101,001 88,179 116,772 44,381 35,532 – – 9,285 – 3,086 45 174 394 123 215 101,046 88,353 126,451 44,504 38,833
		38,833

Information about major customer

Revenues from customers contributing over 10% of the total revenue of the Intelligent Building Business of the corresponding years/periods are as follows:

					Three months ended	Three months ended
		Years	ended 31 December		31	March
		2012	2013	2014	2014	2015
		RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
					(unaudited)
Customer	A	43,855	Note	19,548	16,659	8,022
Customer	B	Note	Note	42,444	Note	5,886
Customer	C	Note	Note	17,056	17,056	Note
Customer	D	18,140	11,866	Note	Note	Note
Customer	E	Note	Note	15,981	Note	Note
Customer	F	Note	13,338	Note	Note	Note
Customer	G	Note	Note	Note	Note	10,922
Customer	H	Note	Note	Note	Note	6,861
Customer	I	Note	Note	Note	5,637	Note

Note: The revenue from corresponding customer did not contribute over 10% of the total revenue for the year/period.

– IV-19 –

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FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

4 (LOSS)/PROFIT BEFORE TAXATION

(Loss)/profit before taxation is arrived at after charging/(crediting):

(a) Staff costs

Salaries, wages and other benefits Contributions to defined contribution retirement plans	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 3,402 3,382 3,832 1,369 1,128 603 462 556 179 179 4,005 3,844 4,388 1,548 1,307	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 3,402 3,382 3,832 1,369 1,128 603 462 556 179 179 4,005 3,844 4,388 1,548 1,307
		1,307

Pursuant to the relevant labour rules and regulations in the PRC, the Intelligent Building Business participate in defined contribution retirement benefit schemes (“the Schemes”) organised by the respective local government authorities whereby the Intelligent Building Business is required to make contributions to the Schemes at 20% of the eligible employees’ salaries during the Relevant Period.

The Intelligent Building Business has no other material obligation for the payment of pension benefits beyond the annual contributions described above.

(b) Other items

				Three months ended	Three months ended
	Years	ended 31 December		31	March
	2012	2013	2014	2014	2015
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
				(unaudited)
Amortisation of
intangible assets	10,858	12,360	6,183	1,455	2,567
Depreciation	134	133	140	36	32
Impairment losses on
trade and other
receivables	1,076	582	621	–	–
Operating lease charge
(minimum lease
payments) in respect
of properties	91	128	436	54	176

– IV-20 –

APPENDIX IV

FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

5 INCOME TAX

(a) Income tax in the statements of comprehensive income represents:

Provision of PRC income tax for the year/period Deferred tax	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) – – 752 567 266 – – (543) (450) – – – 209 117 266	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) – – 752 567 266 – – (543) (450) – – – 209 117 266
		266

(b) Reconciliation between tax expense and accounting (loss)/profit at applicable tax rates:

(Loss)/profit before taxation Notional tax calculated at the applicable tax rate Effect of tax concession Tax effect of unused tax losses not recognised Tax effect of temporary differences not recognised in prior years Tax effect of non-deductible expenses Actual tax expense	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) (8,829) (7,830) 3,997 3,684 1,654 (2,207) (1,957) 999 921 414 826 740 (440) (379) (179) 1,241 1,109 – – – – – (450) (450) – 140 108 100 25 31 – – 209 117 266	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) (8,829) (7,830) 3,997 3,684 1,654 (2,207) (1,957) 999 921 414 826 740 (440) (379) (179) 1,241 1,109 – – – – – (450) (450) – 140 108 100 25 31 – – 209 117 266
		266

Tongfang is subject to PRC corporate income tax at 25% during the Relevant Periods. It is recognised as a high and new technology enterprise and is eligible to enjoy a preferential tax rate of 15% until October 2017. The Intelligent Building Business functions as part of Tongfang is subject to same tax rate as Tongfang.

The Intelligent Building Business is not subject to Hong Kong corporate income tax during the Relevant Periods.

6 DIRECTORS’ REMUNERATION

The directors believe the presentation of such information is not meaningful for the purpose of this report.

7 INDIVIDUALS WITH HIGHEST EMOLUMENTS

The directors believe the presentation of the five highest paid employees’ information is not meaningful for the purpose of this report.

– IV-21 –

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FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

8 PROPERTY, PLANT AND EQUIPMENT

Furniture and office RMB’000 34 9	Computers and fittings equipment RMB’000 1,013 168	Plant and machinery RMB’000 – 23	Total RMB’000 1,047 200
43 - - - - - - - - 8 51 - - - - - - - - – 51 - - - - - - - - (17) (4) (21) - - - - - - - - (6) (27) - - - - - - - - (6) (33) - - - - - - - - (1)	1,181 - - - - - - - - 139 1,320 - - - - - - - - 38 1,358 - - - - - - - - (633) (129) (762) - - - - - - - - (125) (887) - - - - - - - - (132) (1,019) - - - - - - - - (30)	23 - - - - - - - - – 23 - - - - - - - - – 23 - - - - - - - - – (1) (1) - - - - - - - - (2) (3) - - - - - - - - (2) (5) - - - - - - - - (1)	1,247 - - - - - - - - 147
			1,394 - - - - - - - - 38
			1,432 - - - - - - - - (650) (134)
			(784) - - - - - - - - (133)
			(917) - - - - - - - - (140)
			(1,057) - - - - - - - - (32)
(34) - - - - - - - - 22 24 18 17	(1,049) - - - - - - - - 419 433 339 309	(6) - - - - - - - - 22 20 18 17	(1,089) - - - - - - - -
			463

			477

			375

			343

– IV-22 –

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FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

9 INTANGIBLE ASSETS

Non-patents technology Development costs RMB’000 RMB’000 53,096 7,369 – 16,137 17,660 (17,660)	Non-patents technology Development costs RMB’000 RMB’000 53,096 7,369 – 16,137 17,660 (17,660)	Total RMB’000 60,465 16,137 –
70,756 - - - - - - - - – 2,271 73,027 - - - - - - - - – 21,786 94,813 - - - - - - - - – 94,813 - - - - - - - - (27,693) (10,858) (38,551) - - - - - - - - (12,360) (50,911) - - - - - - - - (6,183) (57,094) - - - - - - - - (2,567)	5,846 - - - - - - - - 2,671 (2,271) 6,246 - - - - - - - - 29,219 (21,786) 13,679 - - - - - - - - 3,215 16,894 - - - - - - - - – – – - - - - - - - - – – - - - - - - - - – – - - - - - - - - –	76,602 - - - - - - - - 2,671 –
		79,273 - - - - - - - - 29,219 –
		108,492 - - - - - - - - 3,215
		111,707 - - - - - - - - (27,693) (10,858)
		(38,551) - - - - - - - - (12,360)
		(50,911) - - - - - - - - (6,183)
		(57,094) - - - - - - - - (2,567)
(59,661) - - - - - - - - 32,205 22,116 37,719 35,152	– - - - - - - - - 5,846 6,246 13,679 16,894	(59,661) - - - - - - - -
		38,051

		28,362

		51,398

		52,046

– IV-23 –

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FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

10 INCOME TAX IN THE STATEMENTS OF FINANCIAL POSITION

(a) Deferred tax assets in the statements of financial position
(i) Movements of deferred tax assets are as follows:

Section B Note At beginning of the year/period Credited to the statements of comprehensive income 5(a) Transfers to parent’s net investment At end of the year/period	As 2012 RMB’000 – – – –	at 31 December 2013 2014 RMB’000 RMB’000 – – – 543 – – – 543	As at 31 March 2015 RMB’000 543 – (543)
			–

(ii) The deferred tax assets are arising from:

					As at
		As at	31 December		31 March
	2012		2013	2014	2015
	RMB’000		RMB’000	RMB’000	RMB’000
Allowance for doubtful debts	–		–	543	–

11 INVENTORIES

(a) Inventories in the statements of financial position comprise:

Raw materials Goods in transit	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 1,497 1,627 1,497 – – 53 1,497 1,627 1,550	As at 31 March 2015 RMB’000 1,497 364
		1,861

(b) The analysis of the amount of inventories recognised as an expenses and included in the profit or loss as follows:

				Three months ended	Three months ended
	Years	ended 31 December		31 March
	2012	2013	2014	2014	2015
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
				(unaudited)
Carrying amount of
inventories sold	–	–	7,161	–	2,082

– IV-24 –

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FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

12 TRADE AND OTHER RECEIVABLES

As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 15,094 30,851 40,236 – 480 – (2,420) (3,002) (3,623)	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 15,094 30,851 40,236 – 480 – (2,420) (3,002) (3,623)	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 15,094 30,851 40,236 – 480 – (2,420) (3,002) (3,623)	As at 31 March 2015 RMB’000 48,288 – (3,623
12,674 945 13,619 9,537	28,329 3,743 32,072 9,265	36,613 1,723 38,336 10,384	44,665 1,362
			46,027 11,496
23,156	41,337	48,720	57,523

(a) All of the trade and other receivables are expected to be recovered or recognised as expense within one year.

(b) Ageing analysis

Included in trade and other receivables are external trade and bills receivables (net of allowance for doubtful debts) with the following ageing analysis as of the end of the reporting period:

Less than 1 year More than 1 year but less than 2 years past due More than 2 year but less than 3 years past due More than 3 years	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 7,067 22,773 22,729 2,770 2,700 11,703 2,326 2,478 – 511 378 2,181 12,674 28,329 36,613	As at 31 March 2015 RMB’000 30,957 11,527 – 2,181
		44,665

Trade debtors and bills receivable are due from the date of billing. Further details of the Intelligent Building Business’s credit policy are set out in note 15(a).

– IV-25 –

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FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

(c) Impairment of trade and other receivables

Impairment losses in respect of trade and other receivables are recorded using an allowance account unless the Intelligent Building Business is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against trade and other receivables directly (see note 2(g)).

The movement in the allowance for doubtful debts during the year, including both specific and collective loss components, is as follows:

At beginning of the year/period Impairment loss recognised At end of the year/period	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 1,344 2,420 3,002 1,076 582 621 2,420 3,002 3,623	As at 31 March 2015 RMB’000 3,623 –
		3,623

(d) Trade and other receivables that are not impaired

Receivables that were neither past due nor impaired relate to customers for whom there was no recent history of default.

Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Intelligent Building Business. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Intelligent Building Business does not hold any collateral over these balances.

13 GROSS AMOUNTS DUE FROM CUSTOMERS FOR CONTRACT WORK

Direct costs incurred to date on contract plus attributable profits less recognised losses Less: Progress payments received Gross amounts due from customers for contract work	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 538,057 634,103 642,724 (404,716) (476,601) (509,730) 133,341 157,502 132,994	As at 31 March 2015 RMB’000 642,035 (508,655)
		133,380

– IV-26 –

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FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

14 TRADE AND OTHER PAYABLES

Trade payables due to related parties Other trade payables Receipts in advance and other payables – amounts due to third parties	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 18,272 29,984 32,982 30,973 47,669 60,208	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 18,272 29,984 32,982 30,973 47,669 60,208	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 18,272 29,984 32,982 30,973 47,669 60,208	As at 31 March 2015 RMB’000 32,982 67,422
	49,245 1,431	77,653 6,672	93,190 1,419	100,404 10,009
	50,676	84,325	94,609	110,413

All of the above balances are expected to be settled within one year. Included in trade and other payables are trade payables with the following ageing analysis as of the end of the reporting period:

Less than 1 year Over 1 year but within 2 years Over 2 years but within 3 years More than 3 years	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 26,108 48,723 49,800 16,006 25,751 24,708 3,254 1,858 15,838 3,877 1,321 2,844 49,245 77,653 93,190	As at 31 March 2015 RMB’000 53,072 14,103 20,201 13,028
		100,404

The amounts due to related parties are interest free, unsecured and repayable on demand.

15 FINANCIAL RISK MANAGEMENT AND FAIR VALUES

Exposure to credit and liquidity risks arises in the normal course of the Intelligent Building Business’s business. The Intelligent Building Business is not exposed to significant interest rate risk and currency risk as it has no interest-bearing financial instruments, and no transactions and balances are in foreign currency. The Intelligent Building Business’s exposure to these risks and the financial risk management policies and practices used by the Intelligent Building Business to manage these risks are described below.

(a) Credit risk

Credit risk arises because a counterparty may fail to perform its obligations. The Intelligent Building Business’s credit risk is primarily attributable to trade and other receivables. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. The Intelligent Building Business does not require collateral in respect of financial assets.

– IV-27 –

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FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

In respect of trade and other receivables, individual credit evaluations are performed on all customers requiring credit over a certain amount. These evaluations focus on the customer’s past history of making payments when due and current ability to pay, and may take into account information specific to the customer as well as pertaining to the economic environment in which the customer operates. The Intelligent Building Business requires certain customers to pay deposits upfront and the remaining trade receivables are due from the date of billing. Normally, the Intelligent Building Business does not obtain collateral from customers.

The Intelligent Building Business’s exposure to credit risk is influenced mainly by the individual characteristics of each customer rather than the industry in which the customers operate and therefore significant concentrations of credit risk primarily arise when the Intelligent Building Business has significant exposure to individual customers. As at 31 December 2012, 2013 and 2014, and 31 March 2015, 25%, 46%, 27% and 29% of trade receivables was due from the Intelligent Building Business’s five largest customers, respectively.

(b)

Liquidity risk

Liquidity risk arises when a company encounters difficulties to meet commitments associated with liabilities and other payment obligations. Such risk may result from inadequate market depth or disruption or refinancing problems. The Intelligent Building Business has to maintain a suitable level of liquidity to finance the daily operation, capital expenditure and repayment of borrowings. The Intelligent Building Business’s policy is to regularly monitor current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term.

The following table details the remaining contractual maturities at the end of the reporting period of the Intelligent Building Business’s financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on rates current at the end of the reporting period) and the earliest date the Intelligent Building Business can be required to pay:

Trade and other payables As at 31 December 2012 As at 31 December 2013 As at 31 December 2014 As at 31 March 2015	Contractual undiscounted cash flow within 1 year or on demand RMB’000 50,103 78,634 93,902 101,028	Carrying amount RMB’000 50,103

		78,634

		93,902

		101,028

– IV-28 –

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FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

(c) Fair values

During the Relevant Periods, no financial instrument of the Intelligent Building Business was measured at fair value across the three levels of the fair value hierarchy defined in IFRS 7, Financial Instruments: Disclosures.

In respect of the Intelligent Building Business’s trade and other receivables (inclusive of amounts due from related parties), and trade and other payables (inclusive of amounts due to related parties), the carrying amounts approximated fair values during the Relevant Periods due to the relatively short term nature of these financial assets or liabilities.

16 OPERATING LEASE COMMITMENTS

Commitments in respect of properties under operating leases as at the end of the reporting period, not provided for in the financial statements were as follows:

							As at
			As	at	31 December		31 March
			2012		2013	2014	2015
			RMB’000		RMB’000	RMB’000	RMB’000
Within	1	year	719		719	728	541

17 MATERIAL RELATED PARTY TRANSACTIONS

(a) Transaction with related parties

During the Relevant Period, transactions with the following parties are considered as related party transactions.

Name of party	Relationship
Tongfang	Parent Company
Tongfang Technovator International Technology (Beijing)	Subsidiary of Tongfang
Co., Ltd. (同方泰德國際科技（北京）有限公司)
Tongfang Technovator Intelligence Technology (Shanghai)	Subsidiary of Tongfang
Co., Ltd. (同方泰德智能科技（上海）有限公司)
Tongfang Technovator Software (Beijing) Co., Ltd	Subsidiary of Tongfang
(同方泰德軟件（北京）有限公司)
Nuctech Company Limited (同方威視技術股份有限公司)	Subsidiary of Tongfang
Tongfang R.I.A Company Limited (同方銳安科技有限公司)	Subsidiary of Tongfang
Beijing Tongfang Property Management	Subsidiary of Tongfang
(北京同方物業管理有限公司)
Tongfang Kawasaki Advanced energy-saving machine Co.,	Associate of Tongfang
Ltd. (同方川崎空調設備有限公司)

The official name of these entities is in Chinese. The English translation of the name is for reference only.

– IV-29 –

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FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

(b) Significant related party transactions

				Three months ended	Three months ended
	Years	ended 31 December		31 March
	2012	2013	2014	2014	2015
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
				(unaudited)
Purchase from Tongfang’s
subsidiaries	1,068	10,471	6,021	907	–
Rental paid to Tongfang’s
subsidiaries	405	344	592	130	176
Corporate overhead
allocations
(note (i))	7,259	8,011	9,844	2,710	3,139

(i) Corporate overhead allocations from Tongfang – Tongfang currently performs certain corporate overhead functions for the Intelligent Building Business, and costs associated with these functions have been allocated to the Intelligent Building Business and reflected in the Financial Information. These functions include, but are not limited to, executive oversight, legal, marketing, human resources, internal audit, and financial reporting. The amounts allocated to the Intelligent Building Business are intended to represent the costs of providing these services, and management believes the allocation methods are reasonable. However, the actual cost of obtaining these individual services, if the Intelligent Building Business were a stand-alone company, could be materially different. The cost of the services provided by Tongfang was determined by allocating a portion of the overall Tongfang corporate costs to the Intelligent Building Business based upon the most relevant allocation method to the service provided, primarily based on relative percentage of revenue. Corporate overhead allocations from Tongfang are recorded in administrative expenses in the statements of comprehensive income.

(c) Balances with related parties

								As at
				As	at	31 December		31 March
				2012		2013	2014	2015
				RMB’000		RMB’000	RMB’000	RMB’000
Trade	and	other	payables	18,272		29,984	32,982	32,982

18 CRITICAL ACCOUNTING JUDGEMENTS IN APPLYING THE INTELLIGENT BUILDING BUSINESS’S ACCOUNTING POLICIES

Key sources of estimation uncertainty

The Intelligent Building Business believes the following critical accounting policies involve the most significant judgements and estimates used in the preparation of the financial statements.

(i) Corporate allocations

The Financial Information includes allocations for certain expenses historically maintained by Tongfang, but not recorded in the accounts of the Intelligent Building Business. Such items have been allocated to the Intelligent Building Business and included in the Financial Information based on the most relevant allocation method,

– IV-30 –

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FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

primarily relative percentage of revenue or headcount. Management believes that this basis for allocation of expenses is reasonable.

(ii) Construction contracts

As explained in policy notes 2(i) and 2(o) (i), revenue and profit recognition on an uncompleted project is dependent on estimating the total outcome of the construction contract, as well as the work done to date. Based on the Intelligent Building Business’s recent experience and the nature of the construction activity undertaken by the Intelligent Building Business, the Intelligent Building Business makes estimates of the point at which it considers the work is sufficiently advanced such that the costs to complete and revenue can be reliably estimated. As a result, until this point is reached the amounts due from/to customers for contract work as disclosed in note 13 will not include profit which the Intelligent Building Business may eventually realise from the work done to date. In addition, actual outcomes in terms of total cost or revenue may be higher or lower than estimated at the end of the reporting period, which would affect the revenue and profit recognised in future years as an adjustment to the amounts recorded to date.

(iii) Development costs

Critical judgment by the Intelligent Building Business’s management is applied when deciding whether the recognition requirements for development costs have been met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems at the time of recognition. Judgments are based on the best information available at the end of the reporting period. In addition, all internal activities related to the research and development of new products is continuously monitored by the Intelligent Building Business’s management.

(iv) Impairment of trade and other receivables

(v) Amortization

– IV-31 –

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FINANCIAL INFORMATION OF THE INTELLIGENT BUILDING BUSINESS

19 POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE

Up to the date of this report, the HKICPA has issued a number of amendments, new standards and interpretations which are not yet effective for the period beginning from 1 January 2015 and which have not been adopted in these financial statements. These included the following which may be relevant to the Intelligent Building Business’s operations and financial statements.

	Effective for
	accounting periods
	beginning on or after
Amendments to HKFRS 11,
Accounting for acquisitions of interests in joint operations	1 January 2016
Amendments to HKAS 16 and HKAS 38,
Clarification of acceptable methods of depreciation and amortisation	1 January 2016
HKFRS 15, Revenue from contracts with customers	1 January 2017
HKFRS 9, Financial instruments	1 January 2018

The Intelligent Building Business in the process of making an assessment of what the impact of these amendments, new standards and new interpretations is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the Intelligent Building Business’s results of operations and financial position.

C SUBSEQUENT FINANCIAL STATEMENTS AND DIVIDENDS

No audited financial statements have been prepared by the Intelligent Building Business in respect of any period subsequent to 31 March 2015. No dividend or distribution has been declared or made by the Intelligent Building Business in respect of any period subsequent to 31 March 2015.

Your faithfully KPMG Certified Public Accountants Hong Kong

– IV-32 –

APPENDIX V FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

8th Floor Prince’s Building 10 Chater Road Central Hong Kong

25 September 2015

The Board of Directors Technovator International Limited

Dear Sirs,

INTRODUCTION

We set out below our report on the financial information relating to the Intelligent Urban Heating Network Business (as defined in note 1(a) of Section B) of Tsinghua Tongfang Co., Ltd. (“Tongfang”) comprising the statements of financial position of the Intelligent Urban Heating Network Business as at 31 December 2012, 2013 and 2014 and 31 March 2015 and the statements of comprehensive income, the statements of changes in parent’s net investment and the cash flow statements of the Intelligent Urban Heating Network Business, for each of the years ended 31 December 2012, 2013 and 2014 and the three months ended 31 March 2015 (the “Relevant Periods”), and a summary of significant accounting policies and other explanatory information (the “Financial Information”), for inclusion in the circular issued by Technovator International Limited (the “Company”) dated 25 September 2015 (the “Circular”) in connection with the proposed acquisition of businesses in relation to providing intelligent integrated solutions which center around supervision and control systems in the fields of Intelligent Rail Transit, Intelligent Building and Intelligent Urban Heating Network and related assets by the Company (the “Proposed Acquisition”).

Tongfang was established on 25 June 1997 with limited liability in the People’s Republic of China (the “PRC”) and its common stock is listed on the Shanghai Stock Exchange. Tongfang prepares its consolidated financial statements comprising Tongfang and its subsidiaries (collectively, the “Tongfang Group”) in accordance with Accounting Standards for Business Enterprises or referred to as China Accounting Standards (“CAS”). During the Relevant Periods, the Intelligent Urban Heating Network Business did not operate in the form of standalone entities and was held and operated by Tongfang. As the Intelligent Urban Heating Network Business constitutes only part of the Tongfang Group, no financial statements for the Intelligent Urban Heating Network Business have previously been prepared or reported on a standalone basis.

– V-1 –

APPENDIX V FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

In connection with the Proposed Acquisition, the management of Tongfang has prepared the financial statements of the Intelligent Urban Heating Network Business for the Relevant Periods (the “Underlying Financial Statements”) on the same basis as used in the preparation of the Financial Information set out in section B below. The Underlying Financial Statements for the Relevant Periods were audited by KPMG Huazhen LLP (畢馬威華振會計師事務所（特殊普通合夥）) in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institution of Certified Public Accountants (the “HKICPA”).

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL INFORMATION

REPORTING ACCOUNTANTS’ RESPONSIBILITY

Our responsibility is to form an opinion on the Financial Information based on our procedures performed in accordance with Auditing Guideline “Prospectuses and the Reporting Accountant” (Statement 3.340) issued by the HKICPA. We have not audited any financial statements of the Intelligent Urban Heating Network Business in respect of any period subsequent to 31 March 2015.

OPINION

In our opinion, the Financial Information gives, for the purpose of this report, on the basis of preparation set out in note 1 of Section B below, a true and fair view of the financial position of the Intelligent Urban Heating Network Business as at 31 December 2012, 2013 and 2014 and 31 March 2015 and of the Intelligent Urban Heating Network Business’s financial performance and cash flows for the Relevant Periods then ended.

– V-2 –

APPENDIX V

FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

CORRESPONDING FINANCIAL INFORMATION

For the purpose of this report, we have also reviewed the unaudited corresponding interim financial information of the Intelligent Urban Heating Network Business comprising the statement of comprehensive income, the statement of changes in parent’s net investment and the cash flow statement for the three months ended 31 March 2014, together with the notes thereon (the “Corresponding Financial Information”), for which the directors of the Company are responsible, in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA.

– V-3 –

APPENDIX V FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

A FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

STATEMENTS OF COMPREHENSIVE INCOME

Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 133,317 190,336 183,996 55,114 15,567 (101,573) (147,280) (149,211) (41,286) (10,263) 31,744 43,056 34,785 13,828 5,304 (8,343) (14,720) (12,505) (3,116) (1,109) (2,423) (3,970) (12,258) (2,488) (1,853) 20,978 24,366 10,022 8,224 2,342 (3,243) (3,787) (1,588) (1,255) (359) 17,735 20,579 8,434 6,969 1,983	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 133,317 190,336 183,996 55,114 15,567 (101,573) (147,280) (149,211) (41,286) (10,263) 31,744 43,056 34,785 13,828 5,304 (8,343) (14,720) (12,505) (3,116) (1,109) (2,423) (3,970) (12,258) (2,488) (1,853) 20,978 24,366 10,022 8,224 2,342 (3,243) (3,787) (1,588) (1,255) (359) 17,735 20,579 8,434 6,969 1,983	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 133,317 190,336 183,996 55,114 15,567 (101,573) (147,280) (149,211) (41,286) (10,263) 31,744 43,056 34,785 13,828 5,304 (8,343) (14,720) (12,505) (3,116) (1,109) (2,423) (3,970) (12,258) (2,488) (1,853) 20,978 24,366 10,022 8,224 2,342 (3,243) (3,787) (1,588) (1,255) (359) 17,735 20,579 8,434 6,969 1,983	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 133,317 190,336 183,996 55,114 15,567 (101,573) (147,280) (149,211) (41,286) (10,263) 31,744 43,056 34,785 13,828 5,304 (8,343) (14,720) (12,505) (3,116) (1,109) (2,423) (3,970) (12,258) (2,488) (1,853) 20,978 24,366 10,022 8,224 2,342 (3,243) (3,787) (1,588) (1,255) (359) 17,735 20,579 8,434 6,969 1,983	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 133,317 190,336 183,996 55,114 15,567 (101,573) (147,280) (149,211) (41,286) (10,263) 31,744 43,056 34,785 13,828 5,304 (8,343) (14,720) (12,505) (3,116) (1,109) (2,423) (3,970) (12,258) (2,488) (1,853) 20,978 24,366 10,022 8,224 2,342 (3,243) (3,787) (1,588) (1,255) (359) 17,735 20,579 8,434 6,969 1,983
31,744 (8,343) (2,423) 20,978 (3,243)	43,056 (14,720) (3,970) 24,366 (3,787)	34,785 (12,505) (12,258) 10,022 (1,588)	13,828 (3,116) (2,488) 8,224 (1,255)	5,304 (1,109 (1,853
				2,342 (359
17,735	20,579	8,434	6,969

The accompanying notes form part of the Financial Information.

– V-4 –

APPENDIX V

FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

STATEMENTS OF FINANCIAL POSITION

As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 233 238 296 14,303 32,820 26,148 290 480 971	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 233 238 296 14,303 32,820 26,148 290 480 971	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 233 238 296 14,303 32,820 26,148 290 480 971	As at 31 March 2015 RMB’000 273 24,480 –
14,826 - - - - - - - - 34,979 76,024 26,300 137,303 - - - - - - - - 139,693 139,693 - - - - - - - - (2,390) - - - - - - - - 12,436	33,538 - - - - - - - - 60,490 101,362 36,631 198,483 - - - - - - - - 112,158 112,158 - - - - - - - - 86,325 - - - - - - - - 119,863	27,415 - - - - - - - - 51,593 103,684 38,230 193,507 - - - - - - - - 120,799 120,799 - - - - - - - - 72,708 - - - - - - - - 100,123	24,753 - - - - - - - - 56,344 98,295 37,240
			191,879 - - - - - - - - 116,697
			116,697 - - - - - - - -
			75,182 - - - - - - - -
			99,935
12,436 12,436	119,863 119,863	100,123 100,123	99,935

			99,935

The accompanying notes form part of the Financial Information.

– V-5 –

APPENDIX V

FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

STATEMENTS OF CHANGES IN PARENT’S NET INVESTMENT

Section B
Note
Balance at 1 January 2012
Changes in Parent’s Net Investment for 2012:
Total comprehensive income for the year
Deemed distributions to Parent
1
Balance at 31 December 2012
Changes in Parent’s Net Investment for 2013:
Total comprehensive income for the year
Deemed contributions from Parent
1
Balance at 31 December 2013
Changes in Parent’s Net Investment for 2014:
Total comprehensive income for the year
Deemed distributions to Parent
1
Balance at 31 December 2014
Changes in Parent’s Net Investment for the three
months ended 31 March 2015:
Total comprehensive income for the period
Deemed distributions to Parent
1
Balance at 31 March 2015
Unaudited:
Balance at 31 December 2013
Changes in Parent’s Net Investment for the three
months ended 31 March 2014:
Total comprehensive income for the period
Deemed distributions to Parent
Balance at 31 March 2014

Parent’s Net
Investment
RMB’000
11,246
17,735
(16,545)
12,436
20,579
86,848
119,863
8,434
(28,174)
100,123
1,983
(2,171)
99,935
119,863
6,969
(11,835)
114,997

The accompanying notes form part of the Financial Information.

– V-6 –

APPENDIX V

FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

CASH FLOW STATEMENTS

Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 20,978 24,366 10,022 8,224 2,342 59 74 72 21 23 – 538 6,672 1,668 1,668 718 1,271 3,274 – – 21,755 26,249 20,040 9,913 4,033 25,588 (25,511) 8,897 9,208 (4,751) (28,576) (26,609) (5,596) (8,517) 5,389 25,899 (27,535) 8,641 8,504 (4,102) (15,180) (10,331) (1,599) (6,018) 990 29,486 (63,737) 30,383 13,090 1,559 (3,351) (3,977) (2,079) (1,255) (359) 26,135 (67,714) 28,304 11,835 1,200 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 20,978 24,366 10,022 8,224 2,342 59 74 72 21 23 – 538 6,672 1,668 1,668 718 1,271 3,274 – – 21,755 26,249 20,040 9,913 4,033 25,588 (25,511) 8,897 9,208 (4,751) (28,576) (26,609) (5,596) (8,517) 5,389 25,899 (27,535) 8,641 8,504 (4,102) (15,180) (10,331) (1,599) (6,018) 990 29,486 (63,737) 30,383 13,090 1,559 (3,351) (3,977) (2,079) (1,255) (359) 26,135 (67,714) 28,304 11,835 1,200 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 20,978 24,366 10,022 8,224 2,342 59 74 72 21 23 – 538 6,672 1,668 1,668 718 1,271 3,274 – – 21,755 26,249 20,040 9,913 4,033 25,588 (25,511) 8,897 9,208 (4,751) (28,576) (26,609) (5,596) (8,517) 5,389 25,899 (27,535) 8,641 8,504 (4,102) (15,180) (10,331) (1,599) (6,018) 990 29,486 (63,737) 30,383 13,090 1,559 (3,351) (3,977) (2,079) (1,255) (359) 26,135 (67,714) 28,304 11,835 1,200 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 20,978 24,366 10,022 8,224 2,342 59 74 72 21 23 – 538 6,672 1,668 1,668 718 1,271 3,274 – – 21,755 26,249 20,040 9,913 4,033 25,588 (25,511) 8,897 9,208 (4,751) (28,576) (26,609) (5,596) (8,517) 5,389 25,899 (27,535) 8,641 8,504 (4,102) (15,180) (10,331) (1,599) (6,018) 990 29,486 (63,737) 30,383 13,090 1,559 (3,351) (3,977) (2,079) (1,255) (359) 26,135 (67,714) 28,304 11,835 1,200 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 20,978 24,366 10,022 8,224 2,342 59 74 72 21 23 – 538 6,672 1,668 1,668 718 1,271 3,274 – – 21,755 26,249 20,040 9,913 4,033 25,588 (25,511) 8,897 9,208 (4,751) (28,576) (26,609) (5,596) (8,517) 5,389 25,899 (27,535) 8,641 8,504 (4,102) (15,180) (10,331) (1,599) (6,018) 990 29,486 (63,737) 30,383 13,090 1,559 (3,351) (3,977) (2,079) (1,255) (359) 26,135 (67,714) 28,304 11,835 1,200 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
21,755 25,588 (28,576) 25,899 (15,180) 29,486 (3,351)	26,249 (25,511) (26,609) (27,535) (10,331) (63,737) (3,977)	20,040 8,897 (5,596) 8,641 (1,599) 30,383 (2,079)	9,913 9,208 (8,517) 8,504 (6,018) 13,090 (1,255)	4,033 (4,751 5,389 (4,102 990
				1,559 (359
26,135 - - - - - - -	(67,714) - - - - - - -	28,304 - - - - - - -	11,835 - - - - - - -

– V-7 –

APPENDIX V FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

Section B Note Investing activities Payments for purchase of property, plant and equipment Payment for purchase of intangible assets Net cash used in investing activities Financing activities Transfers (to)/from parent’s net investment Net cash (used in)/generated from financing activities Net increase/ (decrease) in cash and cash equivalents Cash and cash equivalents – at beginning and end of the year/period	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) (129) (79) (130) – – (9,461) (19,055) – – – (9,590) (19,134) (130) – – - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (16,545) 86,848 (28,174) (11,835) (1,200) (16,545) 86,848 (28,174) (11,835) (1,200) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - – – – – – – – – – –	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) (129) (79) (130) – – (9,461) (19,055) – – – (9,590) (19,134) (130) – – - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (16,545) 86,848 (28,174) (11,835) (1,200) (16,545) 86,848 (28,174) (11,835) (1,200) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - – – – – – – – – – –	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) (129) (79) (130) – – (9,461) (19,055) – – – (9,590) (19,134) (130) – – - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (16,545) 86,848 (28,174) (11,835) (1,200) (16,545) 86,848 (28,174) (11,835) (1,200) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - – – – – – – – – – –	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) (129) (79) (130) – – (9,461) (19,055) – – – (9,590) (19,134) (130) – – - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (16,545) 86,848 (28,174) (11,835) (1,200) (16,545) 86,848 (28,174) (11,835) (1,200) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - – – – – – – – – – –	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) (129) (79) (130) – – (9,461) (19,055) – – – (9,590) (19,134) (130) – – - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (16,545) 86,848 (28,174) (11,835) (1,200) (16,545) 86,848 (28,174) (11,835) (1,200) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - – – – – – – – – – –
	(9,590) - - - - - - - (16,545)	(19,134) - - - - - - - 86,848	(130) - - - - - - - (28,174)	– - - - - - - - (11,835)	– - - - - - - - (1,200
	(16,545) - - - - - - - – –	86,848 - - - - - - - – –	(28,174) - - - - - - - – –	(11,835) - - - - - - - – –

The accompanying notes form part of the Financial Information.

– V-8 –

APPENDIX V FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

B NOTES TO FINANCIAL INFORMATION

1 DESCRIPTION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS AND BASIS OF PREPARATION

Pursuant to an agreement dated 28 July 2015, given the need for strategic planning on the group business of Tsinghua Tongfang Co., Ltd. (“Tongfang”) and the business development of Technovator International Limited (the “Company”), the Company agrees Tongfang Energy Saving Engineering Technology Co., Ltd. (“Tongfang Energy Saving”), one of its subsidiaries, to acquire from Tongfang its Intelligent Urban Heating Network Business. The Financial Information set out in this report has been prepared to present the historical operations of the Intelligent Urban Heating Network Business for the purpose of inclusion in the Circular.

(a) Nature of the Intelligent Urban Heating Network Business

The intelligent urban heating network business of Tongfang is the business which provide integrated solutions for heating plant and network including Supervisory Control and Data Acquisition (”SCADA”)(“Intelligent Urban Heating Network Business”). The integral solutions can effectively reduce the energy consumption of urban heating system on the premise of heating quality assurance.

(b) Basis of Preparation

The Financial Information set out in this report has been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”). HKFRS 1, First-Time Adoption of Hong Kong Financial Reporting Standards (“HKFRS 1”) has been applied in the adoption of HKFRS for the purpose of preparing the Underlying Financial Statements and the Financial Information. The transition date is 1 January 2012 (the “Transition Date”). The Intelligent Urban Heating Network Business has never prepared financial statements or financial information on the basis of preparation presented herein and on any other basis for itself. Prior to the first-time adoption of HKFRS, the financial information of the Intelligent Urban Heating Network Business included in this report was reflected in Tongfang’s consolidated results and was prepared in accordance with Accounting Standards for Business Enterprises or referred to as China Accounting Standards (“CAS”).

Since no financial statements of the Intelligent Urban Heating Network Business has previously been prepared, the Financial Information set out in this report do not include any HKFRS 1 first time adoption reconciliations.

The Financial Information has been prepared to reflect the cash flows, revenues, expenses, assets, and liabilities of the Intelligent Urban Heating Network Business. The Intelligent Urban Heating Network Business was conducted through, and assets and liabilities held in Tongfang, all of which were under control of Tongfang. Because the Intelligent Urban Heating Network Business was not historically a single legal entity and was commingled within Tongfang, parent’s net investment is shown in lieu of shareholders’ equity in the Financial Information. Parent’s net investment represents the cumulative interest of Tongfang in the Intelligent Urban Heating Network Business through that date. The impact of transactions between the Intelligent Urban Heating Network Business and Tongfang that were not historically settled in cash is also included in parent’s net investment.

During the Relevant Periods, the Intelligent Urban Heating Network Business functioned as part of Tongfang, and accordingly, a process has been completed to specifically identify assets, liabilities, revenues, expenses and cash flows associated with the Intelligent Urban Heating Network Business in preparing the Financial Information. Assets, liabilities and costs that were related to the larger business of Tongfang were also assessed to allocate

– V-9 –

APPENDIX V

FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

these items between the Intelligent Urban Heating Network Business and other business of Tongfang. This allocation has been completed based on the following general process:

Corporate overhead functions performed for the Intelligent Urban Heating Network Business – These functions include, but are not limited to, executive oversight, legal, marketing, human resources, internal audit, and financial reporting. The costs of such services have been allocated to the Intelligent Urban Heating Network Business based on the most relevant allocation method to the service provided, primarily based on relative percentage of revenue. Management of Tongfang believes such allocations are reasonable; however, they may not be indicative of the actual expense that would have been incurred had the Intelligent Urban Heating Network Business been operating as a separate entity apart from Tongfang. The cost allocated for these functions is included in administrative expenses in the statements of comprehensive income for the Relevant Periods presented. A complete discussion of the Intelligent Urban Heating Network Business’s relationship with Tongfang, together with the cost allocations, is included in note 17.

The Company believes the basis of preparation described above results in the Financial Information reflecting the assets and liabilities associated with the Intelligent Urban Heating Network Business and reflecting costs associated with the functions that would be necessary to operate independently. However, as the Intelligent Urban Heating Network Business did not operate as a stand-alone entity during the Relevant Periods, the Financial Information may not be indicative of the Intelligent Urban Heating Network Business’s future performance and do not necessarily reflect what its results of operations, financial position, and cash flows would have been had the Intelligent Urban Heating Network Business operated as a separate entity apart from Tongfang during the Relevant Periods.

2 SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance

The HKICPA has issued certain new and revised HKFRSs. For the purpose of preparing this Financial Information, the Intelligent Urban Heating Network Business has adopted all these new and revised HKFRSs to the Relevant Period, except for any new standards or interpretations that are not yet effective for the period beginning from 1 January 2015. The revised and new accounting standards and interpretations issued but not yet effective for the period beginning from 1 January 2015 are set out in note 19.

The Financial Information also complies with the applicable disclosure provisions of the Listing Rules.

The accounting policies set out below have been applied consistently to all periods presented in the Financial Information.

(b) Basis of measurement

The Financial Information is presented in Renminbi (“RMB”), rounded to the nearest thousand. It is prepared on the historical cost basis.

– V-10 –

APPENDIX V FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

(c) Use of estimates and judgements

Judgements made by management in the application of HKFRSs that have significant effect on the Financial Information and major sources of estimation uncertainty are discussed in note 18.

(d) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (see note 2(g)(ii)).

Furniture and fittings 5-10 years Computers and office equipment 5-10 years

(e) Intangible assets (other than goodwill)

– V-11 –

APPENDIX V

FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

intention to complete development. The expenditure capitalised includes the costs of materials, direct labour, and an appropriate proportion of overheads and borrowing costs, where applicable. Capitalised development costs are stated at cost less accumulated amortisation and impairment losses (see note 2(g)(ii)). Other development expenditure is recognised as an expense in the period in which it is incurred.

Other intangible assets that are acquired by the Intelligent Urban Heating Network Business are stated at cost less accumulated amortisation (where the estimated useful life is finite) and impairment losses (see note 2(g)(ii)). Expenditure on internally generated goodwill and brands is recognised as an expense in the period in which it is inc urred.

Non-patents technology

5 years

Both the period and method of amortisation are reviewed annually.

(f) Leased assets

An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Intelligent Urban Heating Network Business determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.

(i) Classification of assets leased to the Intelligent Urban Heating Network Business

Assets that are held by Intelligent Urban Heating Network Business under leases which transfer to the Intelligent Urban Heating Network Business substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Intelligent Urban Heating Network Business are classified as operating leases.

(ii) Operating lease charges

Where the Intelligent Urban Heating Network Business has the use of assets held under operating leases, payments made under the leases are charged to profit or loss in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognised in profit or loss as an integral part of the aggregate net lease payments made. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred.

(g) Impairment of assets

(i) Impairment of trade and other receivables

Receivables that are stated at cost or amortised cost are reviewed at the end of each reporting period to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of the Intelligent Urban Heating Network Business about one or more of the following loss events:

significant financial difficulty of the debtor;

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FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

a breach of contract, such as a default or delinquency in interest or principal payments;
it becoming probable that the debtor will enter bankruptcy or other financial reorganisation;
significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and
a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

Impairment losses are written off against the corresponding assets directly, except for impairment losses recognised in respect of trade debtors and bills receivable included within trade and other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Intelligent Urban Heating Network Business is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade debtors and bills receivable directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss.

(ii)

Impairment of other assets

Property, plant and equipment
Intangible assets

If any such indication exists, the asset’s recoverable amount is estimated.

– V-13 –

APPENDIX V

FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

–

Calculation of recoverable amount

–

Recognition of impairment losses

–

Reversals of impairment losses

In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount.

(h) Inventories

Inventories are carried at the lower of cost and net realisable value.

Net realisable value is the estimated selling price in the ordinary course of Intelligent Urban Heating Network Business less the estimated costs of completion and the estimated costs necessary to make the sale.

(i) Construction contracts

– V-14 –

APPENDIX V FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

(j)

Trade and other receivables

(k) Trade and other payables

(l) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Intelligent Urban Heating Network Business’s cash management are also included as a component of cash and cash equivalents for the purpose of the cash flow statement.

(m) Employee benefits

(n) Income tax

– V-15 –

APPENDIX V

FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and temporary differences relating to investments in subsidiaries to the extent that, in the case of taxable differences, the Intelligent Urban Heating Network Business controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future.

Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the Intelligent Urban Heating Network Business has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met:

in the case of current tax assets and liabilities, the Intelligent Urban Heating Network Business intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously; or
in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:
the same taxable entity; or
different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realise the current tax assets and settle the current tax liabilities on a net basis or realise and settle simultaneously.

– V-16 –

APPENDIX V FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

(o) Revenue recognition

Revenue is reassured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the Intelligent Urban Heating Network Business and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in profit or loss as follows:

(i) Contract revenue

When the outcome of a construction contract can be estimated reliably:

revenue from a fixed price contract is recognised using the percentage of completion method, measured by reference to the physically completed proportion of the contract work or the percentage of contract costs incurred to date to estimated total contract costs for the contract; and
revenue from a cost plus contract is recognised by reference to the recoverable costs incurred during the period plus an appropriate proportion of the total fee, measured by reference to the proportion that costs incurred to date bear to the estimated total costs of the contract.

When the outcome of a construction contract cannot be estimated reliably, revenue is recognised only to the extent of contract costs incurred that it is probable will be recoverable.

(ii) Sale of goods

(iii) Service income

Service income is recognised when services are rendered to customers.

(iv) Interest income

Interest income is recognised as it accrues using the effective interest method.

(p) Translation of foreign currencies

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the foreign exchange rates ruling at the transaction dates. Non- monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated using the foreign exchange rates ruling at the dates the fair value was measured.

– V-17 –

APPENDIX V

FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

exchange rates at the end of the reporting period. The resulting exchange differences are recognised in other comprehensive income and accumulated separately in equity in the exchange reserve.

(q) Related parties

(a) A person, or a close member of that person’s family, is related to the Intelligent Urban Heating Network Business if that person:
(i) has control or joint control over the Intelligent Urban Heating Network Business;
(ii) has significant influence over the Intelligent Urban Heating Network Business; or
(iii) is a member of the key management personnel of the Intelligent Urban Heating Network Business or the Intelligent Urban Heating Network Business’s parent.
(b) An entity is related to the Intelligent Urban Heating Network Business if any of the following conditions applies:
(i) The entity and the Intelligent Urban Heating Network Business are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).
(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).
(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
(v) The entity is a post-employment benefit plan for the benefit of employees of either the Intelligent Urban Heating Network Business or an entity related to the Intelligent Urban Heating Network Business.
(vi) The entity is controlled or jointly controlled by a person identified in (a).
(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

(r) Segment reporting

Operating segments, and the amounts of each segment item reported in the financial statements, are identified from the financial information provided regularly to the Intelligent Urban Heating Network Business’ most senior executive management for the purposes of allocating resources to, and assessing the performance of, the Intelligent Urban Heating Network Business’ various lines of business and geographical locations.

– V-18 –

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FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

or class of customers, the methods used to distribute the products or provide the services, and the nature of the regulatory environment. Operating segments which are not individually material may be aggregated if they share a majority of these criteria.

The Intelligent Urban Heating Network Business operates in a single business segment, namely supplying integral solutions for heating plant and network, no business segment analysis is presented.

In presenting geographic information, segment revenue is based on geographical location of customers at which the services were provided or the goods were delivered, which are entirely in the PRC. The Intelligent Urban Heating Network Business’ assets and liabilities are entirely situated in the PRC. Accordingly, no geographic information is presented.

3 TURNOVER

The Intelligent Urban Heating Network Business supplies integral solutions for heating plant and network including SCADA for them.

Contract revenue Sales of goods Provision of services	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 28,267 73,603 82,875 18,382 12,550 103,578 116,733 85,903 36,732 3,017 1,472 – 15,218 – – 133,317 190,336 183,996 55,114 15,567	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 28,267 73,603 82,875 18,382 12,550 103,578 116,733 85,903 36,732 3,017 1,472 – 15,218 – – 133,317 190,336 183,996 55,114 15,567
		15,567

Information about major customer

Revenues from customers contributing over 10% of the total revenue of the Intelligent Urban Heating Network Business of the corresponding years/periods are as follows:

					Three months ended	Three months ended
		Years	ended 31 December		31	March
		2012	2013	2014	2014	2015
		RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
					(unaudited)
Customer	A	Note	52,975	Note	Note	Note
Customer	B	43,914	Note	Note	Note	Note
Customer	C	Note	Note	26,794	13,929	Note
Customer	D	Note	20,142	Note	Note	2,069
Customer	E	13,862	Note	Note	Note	Note
Customer	F	Note	Note	Note	12,615	Note
Customer	G	Note	Note	Note	6,410	2,019
Customer	H	Note	Note	Note	Note	2,274
Customer	I	Note	Note	Note	Note	1,633
Customer	J	Note	Note	Note	Note	1,624

Note: The revenue from corresponding customer did not contribute over 10% of the total revenue for the year/period.

– V-19 –

APPENDIX V FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

4 PROFIT BEFORE TAXATION

Profit before taxation is arrived at after charging/(crediting):

(a) Staff costs

Salaries, wages and other benefits Contributions to defined contribution retirement plans	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 4,444 7,097 5,483 1,989 457 788 968 795 260 73 5,232 8,065 6,278 2,249 530	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 4,444 7,097 5,483 1,989 457 788 968 795 260 73 5,232 8,065 6,278 2,249 530
		530

Pursuant to the relevant labour rules and regulations in the PRC, the Intelligent Urban Heating Network Business participate in defined contribution retirement benefit schemes (“the Schemes”) organised by the respective local government authorities whereby the Intelligent Urban Heating Network Business is required to make contributions to the Schemes at 20% of the eligible employees’ salaries during the Relevant Period.

The Intelligent Urban Heating Network Business has no other material obligation for the payment of pension benefits beyond the annual contributions described above.

(b) Other items

				Three months ended	Three months ended
	Years	ended 31 December		31	March
	2012	2013	2014	2014	2015
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
				(unaudited)
Amortisation of
intangible assets	–	538	6,672	1,668	1,668
Depreciation	59	74	72	21	23
Impairment losses on
trade and other
receivables	718	1,271	3,274	–	–
Operating lease charge
(minimum lease
payments) in respect
of properties	118	268	624	79	71

– V-20 –

APPENDIX V FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

5 INCOME TAX

(a) Income tax in the statements of comprehensive income represents:

Provision of PRC income tax for the year Deferred tax	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 3,351 3,977 2,079 1,255 359 (108) (190) (491) – – 3,243 3,787 1,588 1,255 359	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 3,351 3,977 2,079 1,255 359 (108) (190) (491) – – 3,243 3,787 1,588 1,255 359
		359

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

Profit before taxation Notional tax calculated at the applicable tax rate Effect of tax concession Tax effect of non-deductible expenses Actual tax expense	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 20,978 24,366 10,022 8,224 2,342 5,244 6,092 2,506 2,056 586 (2,162) (2,526) (1,059) (837) (239) 161 221 141 36 12 3,243 3,787 1,588 1,255 359	Years ended 31 December Three months ended 31 March 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) 20,978 24,366 10,022 8,224 2,342 5,244 6,092 2,506 2,056 586 (2,162) (2,526) (1,059) (837) (239) 161 221 141 36 12 3,243 3,787 1,588 1,255 359
		359

Tongfang is subject to PRC corporate income tax at 25% during the relevant period. It is recognised as a high and new technology enterprise and is eligible to enjoy a preferential tax rate of 15% until October 2017. The Intelligent Urban Heating Network Business functions as part of Tongfang is subject to same tax rate as Tongfang.

The Intelligent Urban Heating Network Business is not subject to Hong Kong corporate income tax during the Relevant Periods.

6 DIRECTORS’ REMUNERATION

The directors believe the presentation of such information is not meaningful for the purpose of this report.

7 INDIVIDUALS WITH HIGHEST EMOLUMENTS

The directors believe the presentation of the five highest paid employees’ information is not meaningful for the purpose of this report.

– V-21 –

APPENDIX V

FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

8 PROPERTY, PLANT AND EQUIPMENT

Furniture and fittings RMB’000 3 –	Computers and office equipments RMB’000 327 129	Total RMB’000 330 129
3 - - - - - - - - 6 9 - - - - - - - - – 9 - - - - - - - - (1) – (1) - - - - - - - - (1) (2) - - - - - - - - (1) (3) - - - - - - - - –	456 - - - - - - - - 73 529 - - - - - - - - 130 659 - - - - - - - - (166) (59) (225) - - - - - - - - (73) (298) - - - - - - - - (71) (369) - - - - - - - - (23)	459 - - - - - - - - 79
		538 - - - - - - - - 130
		668 - - - - - - - - (167) (59)
		(226) - - - - - - - - (74)
		(300) - - - - - - - - (72)
		(372) - - - - - - - - (23)
(3) - - - - - - - - 2 7 6 6	(392) - - - - - - - - 231 231 290 267	(395) - - - - - - - -
		233

		238

		296

		273

– V-22 –

APPENDIX V

FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

9 INTANGIBLE ASSETS

Non-patents technology Development costs RMB’000 RMB’000 – 4,842 – 9,461	Non-patents technology Development costs RMB’000 RMB’000 – 4,842 – 9,461	Total RMB’000 4,842 9,461
– - - - - - - - - – 33,358 33,358 - - - - - - - - – - - - - - - - - (538) (538) - - - - - - - - (6,672) (7,210) - - - - - - - - (1,668)	14,303 - - - - - - - - 19,055 (33,358) – - - - - - - - - – - - - - - - - - – – - - - - - - - - – – - - - - - - - - –	14,303 - - - - - - - - 19,055 –
		33,358 - - - - - - - - – - - - - - - - - (538)
		(538) - - - - - - - - (6,672)
		(7,210) - - - - - - - - (1,668)
(8,878) - - - - - - - - – 32,820 26,148 24,480	– - - - - - - - - 14,303 – – –	(8,878) - - - - - - - -
		14,303

		32,820

		26,148

		24,480

– V-23 –

APPENDIX V FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

10 INCOME TAX IN THE STATEMENTS OF FINANCIAL POSITION

(a) Deferred tax assets in the statements of financial position

(i) Movements of deferred tax assets are as follows:

Section B Note At beginning of the year/period Credited to the statements of comprehensive income 5(a) Transfers to parent’s net investment At end of the year/period	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 182 290 480 108 190 491 – – – 290 480 971	As at 31 March 2015 RMB’000 971 – (971)
		–

(ii) The deferred tax assets are arising from:

							As at
			As	at	31 December		31 March
			2012		2013	2014	2015
			RMB’000		RMB’000	RMB’000	RMB’000
Allowance	for	doubtful
debts			290		480	971	–

11 INVENTORIES

(a) Inventories in the statements of financial position comprise:

Raw materials Goods in transit	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 47 44 77 34,932 60,446 51,516 34,979 60,490 51,593	As at 31 March 2015 RMB’000 88 56,256
		56,344

(b) The analysis of the amount of inventories recognised as an expenses and included in the profit or loss as follows:

				Three months ended	Three months ended
	Years	ended 31 December		31	March
	2012	2013	2014	2014	2015
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
				(unaudited)
Carrying amount of
inventories sold	78,788	86,087	71,009	26,261	1,847

– V-24 –

APPENDIX V

FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

12 TRADE AND OTHER RECEIVABLES

As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 45,140 75,863 90,091 – 300 – (1,930) (3,201) (5,309)	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 45,140 75,863 90,091 – 300 – (1,930) (3,201) (5,309)	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 45,140 75,863 90,091 – 300 – (1,930) (3,201) (5,309)	As at 31 March 2015 RMB’000 82,719 1,350 (5,309
43,210 – 2,825 – 46,035 29,989	72,962 41 3,063 – 76,066 25,296	84,782 41 3,356 (1,166) 87,013 16,671	78,760 41 3,317 (1,166
			80,952 17,343
76,024	101,362	103,684	98,295

(a) All of the trade and other receivables are expected to be recovered or recognised as expense within one year.
(b) Amounts due from related parties are unsecured, interest free and repayable on demand.
(c) Ageing analysis

Included in trade and other receivables are external trade and bills receivables (net of allowance for doubtful debts) with the following ageing analysis as of the end of the reporting period:

Less than 1 year More than 1 year but less than 2 years past due More than 2 year but less than 3 years past due More than 3 years	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 38,364 57,539 56,729 3,150 12,110 21,285 499 2,618 3,522 1,197 695 3,246 43,210 72,962 84,782	As at 31 March 2015 RMB’000 54,981 16,509 2,944 4,326
		78,760

Trade debtors and bills receivable are due from the date of billing. Further details of the Intelligent Urban Heating Network Business’s credit policy are set out in note 15(a).

– V-25 –

APPENDIX V FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

(d) Impairment of trade and other receivables

Impairment losses in respect of trade and other receivables are recorded using an allowance account unless the Intelligent Urban Heating Network Business is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against trade and other receivables directly (see note 2(g)).

The movement in the allowance for doubtful debts during the year, including both specific and collective loss components, is as follows:

At beginning of the year/period Impairment loss recognized At end of the year/period	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 1,212 1,930 3,201 718 1,271 3,274 1,930 3,201 6,475	As at 31 March 2015 RMB’000 6,475 –
		6,475

(e) Trade and other receivables that are not impaired

Receivables that were neither past due nor impaired relate to customers for whom there was no recent history of default.

Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Intelligent Urban Heating Network Business. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Intelligent Urban Heating Network Business does not hold any collateral over these balances.

13 GROSS AMOUNTS DUE FROM CUSTOMERS FOR CONTRACT WORK

Direct costs incurred to date on contract plus attributable profits less recognised losses Less: Progress payments received Gross amounts due from customers for contract work	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 89,950 83,539 111,591 (63,650) (46,908) (73,361) 26,300 36,631 38,230	As at 31 March 2015 RMB’000 113,609 (76,369)
		37,240

– V-26 –

APPENDIX V

FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

14 TRADE AND OTHER PAYABLES

Trade payables due to related parties Other trade payables Receipts in advance and other payables – amounts due to related parties – amounts due to third parties	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 – 15,543 12,877 37,319 41,306 66,080	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 – 15,543 12,877 37,319 41,306 66,080	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 – 15,543 12,877 37,319 41,306 66,080	As at 31 March 2015 RMB’000 12,877 57,745
	37,319 – 102,374	56,849 – 55,309	78,957 1,809 40,033	70,622 1,809 44,266
	139,693	112,158	120,799	116,697

All of the above balances are expected to be settled within one year. Included in trade and other payables are trade payables with the following ageing analysis as of the end of the reporting period:

Less than 1 year Over 1 year but within 2 years Over 2 years but within 3 years More than 3 years	As at 31 December 2012 2013 2014 RMB’000 RMB’000 RMB’000 28,140 46,353 60,628 5,312 4,688 12,005 2,426 3,582 2,798 1,441 2,226 3,526 37,319 56,849 78,957	As at 31 March 2015 RMB’000 50,486 10,425 4,243 5,468
		70,622

The amounts due to related parties are interest free, unsecured and repayable on demand.

15 FINANCIAL RISK MANAGEMENT AND FAIR VALUES

Exposure to credit and liquidity risks arises in the normal course of the Intelligent Urban Heating Network Business. The Intelligent Urban Heating Network Business is not exposed to significant interest rate risk and currency risk as it has no interest-bearing financial instruments, and no transactions and balances are in foreign currency. The Intelligent Urban Heating Network Business’s exposure to these risks and the financial risk management policies and practices used by the Intelligent Urban Heating Network Business to manage these risks are described below.

(a) Credit risk

The Intelligent Urban Heating Network Business’s credit risk is primarily attributable to trade and other receivables. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. The Intelligent Urban Heating Network Business does not require collateral in respect of financial assets.

– V-27 –

APPENDIX V

FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

In respect of trade and other receivables, individual credit evaluations are performed on all customers requiring credit over a certain amount. These evaluations focus on the customer’s past history of making payments when due and current ability to pay, and may take into account information specific to the customer as well as pertaining to the economic environment in which the customer operates. The Intelligent Urban Heating Network Business requires certain customers to pay deposits upfront and the remaining trade receivables are due from the date of billing. Normally, the Intelligent Urban Heating Network Business does not obtain collateral from customers.

The Intelligent Urban Heating Network Business’s exposure to credit risk is influenced mainly by the individual characteristics of each customer rather than the industry in which the customers operate and therefore significant concentrations of credit risk primarily arise when the Intelligent Urban Heating Network Business has significant exposure to individual customers. As at 31 December 2012, 2013 and 2014, and 31 March 2015, 42%, 51%, 11% and 24% of trade receivables was due from the Intelligent Urban Heating Network Business’s five largest customers, respectively.

(b)

Liquidity risk

The Intelligent Urban Heating Network Business has to maintain a suitable level of liquidity to finance the daily operation, capital expenditure and repayment of borrowings. The Intelligent Urban Heating Network Business’s policy is to regularly monitor current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term.

The following table details the remaining contractual maturities at the end of the reporting period of the Intelligent Urban Heating Network Business’s financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on rates current at the end of the reporting period) and the earliest date the Intelligent Urban Heating Network Business can be required to pay:

Trade and other payables As at 31 December 2012 As at 31 December 2013 As at 31 December 2014 As at 31 March 2015	Contractual undiscounted cash flow within 1 year or on demand RMB’000 39,239 58,218 81,331 73,317	Carrying amount RMB’000 39,239

		58,218

		81,331

		73,317

(c) Fair values

During the Relevant Periods, no financial instrument of the Intelligent Urban Heating Network Business was measured at fair value across the three levels of the fair value hierarchy defined in IFRS 7, Financial Instruments: Disclosures.

– V-28 –

APPENDIX V FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

In respect of the Intelligent Urban Heating Network Business’s trade and other receivables (inclusive of amounts due from related parties), and trade and other payables (inclusive of amounts due to related parties), the carrying amounts approximated fair values during the Relevant Periods due to the relatively short term nature of these financial assets or liabilities.

16 OPERATING LEASE COMMITMENTS

Commitments in respect of properties under operating leases as at the end of the reporting period, not provided for in the financial statements were as follows:

							As at
			As	at	31 December		31 March
			2012		2013	2014	2015
			RMB’000		RMB’000	RMB’000	RMB’000
Within	1	year	1,000		1,000	1,013	753

17 MATERIAL RELATED PARTY TRANSACTIONS

(a) Transaction with related parties

During the Relevant Period, transactions with the following parties are considered as related party transactions.

Name of party	Relationship
Tongfang	Parent Company
Tongfang Technovator International Technology	Subsidiary of Tongfang
(Beijing) Co., Ltd. (同方泰德國際科技（北京）有限公司)
Tongfang Technovator Intelligence Technology (Shanghai)	Subsidiary of Tongfang
Co., Ltd. (同方泰德智能科技（上海）有限公司)
Tongfang Technovator Software (Beijing) Co., Ltd	Subsidiary of Tongfang
(同方泰德軟件（北京）有限公司)
Nuctech Company Limited (同方威視技術股份有限公司)	Subsidiary of Tongfang
Tongfang R.I.A Company Limited (同方銳安科技有限公司)	Subsidiary of Tongfang
Beijing Tongfang Property Management	Subsidiary of Tongfang
(北京同方物業管理有限公司)
Tongfang Kawasaki Advanced energy-saving machine Co.,	Associate of Tongfang
Ltd. (同方川崎空調設備有限公司)

The official name of these entities is in Chinese. The English translation of the name is for reference only.

– V-29 –

APPENDIX V

FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

(b) Significant related party transactions

				Three months ended 31	Three months ended 31
	Years	ended 31 December		March
	2012	2013	2014	2014	2015
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
				(unaudited)
Construction revenue from
Tongfang’s subsidiaries	1,472	–	15,218	–	–
Purchase from Tongfang’s
subsidiaries	1,964	12,059	16,870	–	–
Rental paid to Tongfang’s
subsidiaries	534	741	861	210	71
Corporate overhead
allocations
(note (i))	9,988	16,806	14,745	3,916	1,325

(i) Corporate overhead allocations from Tongfang – Tongfang currently performs certain corporate overhead functions for the Intelligent Urban Heating Network Business, and costs associated with these functions have been allocated to the Intelligent Urban Heating Network Business and reflected in the Financial Information. These functions include, but are not limited to, executive oversight, legal, marketing, human resources, internal audit, and financial reporting. The amounts allocated to the Intelligent Urban Heating Network Business are intended to represent the costs of providing these services, and management believes the allocation methods are reasonable. However, the actual cost of obtaining these individual services, if the Intelligent Urban Heating Network Business were a stand-alone company, could be materially different. The cost of the services provided by Tongfang was determined by allocating a portion of the overall Tongfang corporate costs to the Intelligent Urban Heating Network Business based upon the most relevant allocation method to the service provided, primarily based on relative percentage of revenue. Corporate overhead allocations from Tongfang are recorded in administrative expenses in the statements of comprehensive income.

(c) Balances with related parties

								As at
				As	at	31 December		31 March
				2012		2013	2014	2015
				RMB’000		RMB’000	RMB’000	RMB’000
Trade	and	other	receivables	–		41	41	41
Trade	and	other	payables	–		(15,543)	(14,686)	(14,686)

18 CRITICAL ACCOUNTING JUDGEMENTS IN APPLYING THE INTELLIGENT URBAN HEATING NETWORK BUSINESS’S ACCOUNTING POLICIES

Key sources of estimation uncertainty

The Intelligent Urban Heating Network Business believes the following critical accounting policies involve the most significant judgements and estimates used in the preparation of the financial statements.

– V-30 –

APPENDIX V FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

(i) Corporate allocations

The Financial Information includes allocations for certain expenses historically maintained by Tongfang, but not recorded in the accounts of the Intelligent Urban Heating Network Business. Such items have been allocated to the Intelligent Urban Heating Network Business and included in the Financial Information based on the most relevant allocation method, primarily relative percentage of revenue or headcount. Management believes that this basis for allocation of expenses is reasonable.

(ii) Construction contracts

As explained in policy notes 2(i) and 2(o)(i), revenue and profit recognition on an uncompleted project is dependent on estimating the total outcome of the construction contract, as well as the work done to date. Based on the Intelligent Urban Heating Network Business’s recent experience and the nature of the construction activity undertaken by the Intelligent Urban Heating Network Business, the Intelligent Urban Heating Network Business makes estimates of the point at which it considers the work is sufficiently advanced such that the costs to complete and revenue can be reliably estimated. As a result, until this point is reached the amounts due from/to customers for contract work as disclosed in note 13 will not include profit which the Intelligent Urban Heating Network Business may eventually realise from the work done to date. In addition, actual outcomes in terms of total cost or revenue may be higher or lower than estimated at the end of the reporting period, which would affect the revenue and profit recognised in future years as an adjustment to the amounts recorded to date.

(iii) Development costs

Critical judgment by the Intelligent Urban Heating Network Business’s management is applied when deciding whether the recognition requirements for development costs have been met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems at the time of recognition. Judgments are based on the best information available at the end of the reporting period. In addition, all internal activities related to the research and development of new products is continuously monitored by the Intelligent Urban Heating Network Business’s management.

(iv) Impairment of trade and other receivables

(v) Amortization

– V-31 –

APPENDIX V FINANCIAL INFORMATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

19 POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE

Up to the date of this report, the HKICPA has issued a number of amendments, new standards and interpretations which are not yet effective for the period beginning from 1 January 2015 and which have not been adopted in these financial statements. These included the following which may be relevant to the Intelligent Urban Heating Network Business’s operations and financial statements.

Effective for accounting periods beginning on or after

Amendments to HKFRS 11,
Accounting for acquisitions of interests in joint operations	1 January 2016
Amendments to HKAS 16 and HKAS 38,
Clarification of acceptable methods of depreciation and amortisation	1 January 2016
HKFRS 15, Revenue from contracts with customers	1 January 2017
HKFRS 9, Financial instruments	1 January 2018

The Intelligent Urban Heating Network Business in the process of making an assessment of what the impact of these amendments, new standards and new interpretations is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the Intelligent Urban Heating Network Business’s results of operations and financial position.

C SUBSEQUENT FINANCIAL STATEMENTS AND DIVIDENDS

No audited financial statements have been prepared by the Intelligent Urban Heating Network Business in respect of any period subsequent to 31 March 2015. No dividend or distribution has been declared or made by any companies comprising the Intelligent Urban Heating Network Business in respect of any period subsequent to 31 March 2015.

Your faithfully KPMG Certified Public Accountants Hong Kong

– V-32 –

APPENDIX VI

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET BUSINESSES

Set out below is the management discussion and analysis on the financials of the Target Businesses based on the financial information of the Target Businesses as set out in Appendices III, IV and V to this circular for the years ended 31 December 2012, 2013 and 2014, and the three months ended 31 March 2015 (the “ Relevant Periods ”).

OVERVIEW

The Intelligent Rail Transit Business

The Intelligent Rail Transit Business supplies intelligence integral solutions for the main electro-mechanical systems including ISCS, PSD and BAS. During the Relevant Periods, the Intelligent Rail Transit Business did not operate in the form of standalone entities and was held and operated by THTF.

During the Relevant Periods, the revenue and net profit of the Intelligent Rail Transit Business generally followed a rising trend, which was attributable to the organic growth of the Intelligent Rail Transit Business.

The Intelligent Building Business

The Intelligent Building Business provides building intelligence integrated solutions which center around the BA that has been developed and debugged by THTF with the energy saving algorithm. During the Relevant Periods, the Intelligent Building Business did not operate in the form of standalone entities and was held and operated by THTF.

The revenue of the Intelligence Building Business generally increased during the Relevant Periods, primarily due to the growth in the business. It recorded net losses during the years ended 31 December 2012 and 2013 primarily due to the relatively large amortization expense in connection with its intangible assets at the early stage of the business, and recorded a net profit for the year ended 31 December 2014 primarily due to the decrease in such amortization expenses and further growth in the business. The intangible assets recognized by the Intelligent Building Business, as well as that of the other Target Businesses, represent capitalised development costs for non-patents technology that are technically and commercially feasible for the use of the Target Businesses. Intangible assets put into use are amortised on a straight-line basis over their estimated useful lives.

The Intelligent Urban Heating Network Business

The Intelligent Urban Heating Network Business supplies integral solutions for heating plant and network including SCADA for them. During the Relevant Periods, the Intelligent Urban Heating Network Business did not operate in the form of standalone entities and was held and operated by THTF.

– VI-1 –

APPENDIX VI

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET BUSINESSES

The revenue of the Intelligent Urban Heating Network Business increased from RMB133,317,000 for the year ended 31 December 2012 to RMB190,336,000 for the year ended 31 December 2013 primarily due to the growth in the business. Its revenue slightly decreased to RMB183,996,000 for the year ended 31 December 2014. The net profit of the Intelligent Urban Heating Network Business increased from RMB17,735,000 for the year ended 31 December 2012 to RMB20,579,000 for the year ended 31 December 2013 primarily due to the growth in the business. Its net profit decreased to RMB8,434,000 for the year ended 31 December 2014 primarily due to an increase in amortization expenses associated with the cost of research and development which were capitalized as intangible assets.

LIQUIDITY AND FINANCIAL RESOURCES

The Target Businesses did not have any cash or cash equivalents as at the Relevant Periods. The Target Businesses had no borrowings or committed borrowing facilities as at the Relevant Periods and the gearing ratio (calculated as total borrowings divided by parent’s net investment) of each of the Target Businesses as at the end of each of the Relevant Periods were therefore zero.

From 2012 and 2014, the balance of trade and other receivables and the balance of trade and other payables of the Target Businesses had been increasing. Such increases are primarily attributable to the expansion of Target Businesses, which has been reflected in the significant increase in turnover during the same period. In addition, a significant portion of the receivables of the Target Businesses are related to projects which form part of larger projects of the customers with a longer construction period. It is not uncommon for the customers to settle partially the construction fee to the Company during the course of the construction but defer the final settlement until the larger project has been substantially completed, which further contributed to the increase in the balances of the trade and other receivables.

On the other hand, trade and other payables mainly represent trade payables due to the vendors of the Target Businesses. The reason for significant increase of trade and other payables is that the Target Businesses usually defer the settlement with vendors until they are get paid by its customers, in order to better manage the working capital of the Target Businesses. Therefore, the trade and other payables increased in line with the increase of trade and other receivables.

Set out below are the amounts of trade and other receivables, net of allowance for doubtful debts, of the Target Businesses that were past due but not impaired as at the dates indicated below:

		31 December		31 March
	2012	2013	2014	2015
	RMB’000	RMB’000	RMB’000	RMB’000
The Intelligent Rail Transit
Business	20,062	11,480	75,132	54,110
The Intelligent Building Business	12,674	28,329	36,613	44,665
The Intelligent Urban Heating
Network Business	43,210	72,962	84,782	78,760

– VI-2 –

APPENDIX VI

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET BUSINESSES

In general, the Target Businesses do not provide specific credit period to its customers and the billings are due upon issuance, therefore, any receivables outstanding as at period end are classified as past due. Nonetheless, for some of the larger customers with on-going or recurring projects, the Target Businesses are willing to accept a longer settlement period to maintain good business relationships with these customers. To manage the credit risk on receivables, the Target Businesses closely monitor the credit quality of the customers, taking into account of factors including but not limited to their background, repayment history, and aging of receivables, as well as the economic environment they operate, and maintain an allowance for doubtful debts on receivables of which the recoverability is in doubt.

The carrying amount of receivables that were past due but not impaired mainly relate to customers that have a good track record with the Target Businesses and have on-going or recurring business with the Target Businesses. The management of the Target Businesses have assessed the recoverability and believe that no further provision for impairment is necessary as there has not been a significant change in credit quality of these customers and the balances, net of any allowance for doubtful debts provided, are considered recoverable.

SEGMENT INFORMATION

As disclosed in the financial information of the Intelligent Rail Transit Business, the Intelligence Building Business and the Intelligent Urban Heating Network Business set out in Appendix III, Appendix IV and Appendix V, respectively, to this circular, each of the Intelligent Rail Transit Business, the Intelligence Building Business and the Intelligent Urban Heating Network Business operates in a single business segment.

The macro-economic environment and government policies are generally favorable to the Target Businesses. With respect to the Intelligent Rail Transit Business, the rail transit operation line length in the PRC has been increasing at a double-digit rate in recent years and such growth is expected to continue in the near term. As the Intelligence Rail Transit Business primarily engages in providing intelligence integral solutions for the main electro-mechanical systems used in urban rail transportation systems, the continued growth of railways in the PRC represents an ample opportunity for the Intelligent Rail Transit Business to grow further.

The Intelligence Building Business and the Intelligent Urban Heating Network Business, which are focused on delivering energy saving products and solutions in their respective markets, will continue to benefit from the 12th Five-Year Plan, under which the energy-saving industry as a whole will be one of the seven strategic emerging industries to be developed in the PRC. In addition, the continued growth in the construction market in the PRC and the continued investment in urban central heating network by heat providers, energy enterprises and gas enterprises in recent years provide favorable market conditions for the Intelligence Building Business and the Intelligent Urban Heating Network Business, respectively, to expand.

Accordingly, it is expected that the demand on intelligence integrated solutions provided by the Target Businesses will continue to increase, providing opportunities for increase in the profitability of the Target Businesses.

– VI-3 –

APPENDIX VI

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET BUSINESSES

THE STATE OF ORDER BOOK

As at 31 March 2015, the Intelligent Rail Transit Business was engaged in 79 projects, the Intelligent Building Business was engaged in 58 projects, and the Intelligent Urban Heating Network Business was engaged in 258 projects.

SIGNIFICANT INVESTMENTS, MATERIAL ACQUISITIONS AND DISPOSALS

The Target Businesses did not have any significant investments, material acquisitions or disposals as at 31 December 2012, 2013 and 2014 and 31 March 2015.

CONTINGENT LIABILITIES AND CAPITAL COMMITMENT

There were no material contingent liabilities or capital commitments for the Target Businesses as at 31 December 2012, 2013 and 2014 and 31 March 2015.

FOREIGN EXCHANGE EXPOSURE

Most of the sales and purchases carried out by the Target Businesses were denominated in RMB, which does not fluctuate significantly against any foreign currencies, and therefore the Target Businesses are not expected to expose to significant foreign exchange risk. Accordingly, the Target Businesses did not have any foreign currency hedging activity during the Relevant Periods.

CHARGE OF ASSETS

No assets of the Target Businesses were pledged or charged as at the Relevant Periods.

EMPLOYEES AND REMUNERATION POLICY

The remuneration of the employees of the Target Businesses includes basic salaries and other benefits determined with reference to general market conditions and qualifications and experience of the employees concerned.

In addition, pursuant to the relevant labour rules and regulations in the PRC, each of the Target Businesses (as part of THTF) participates in defined contribution retirement benefit schemes organised by the respective local government authorities whereby each of the Target Businesses (as part of THTF) is required to make contributions to the schemes at the rate of 20% of the eligible employees’ salaries during the Relevant Period.

During the Relevant Periods, there was no bonus, share option nor training schemes adopted by the Target Businesses.

– VI-4 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

VALUATION REPORT FOR

THE VALUATION OF

The Proposed Purchase of The Intelligent Rail Transit Business Assets Portfolio in Tsinghua Tongfang Co., Ltd. By TECHNOVATOR INTERNATIONAL LIMITED ZHUOXINDAHUA VALUATION REPORT ZI (2015) NO. 2035-1

BEIJING ZHUOXINDAHUA APPRAISAL CO., LTD.*

29 July 2015

For identification purposes only

– VII-1 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

STATEMENT OF THE REGISTERED ASSETS VALUER


STATEM	ENT OF THE REGISTERED ASSETS VALUER . . . . . . . . . . . . . . . . .	VII-3
SUMMARY OF THE VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . .		VII-4
TEXT OF	THE VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII-6
1.	THE ENTRUSTING PARTY, THE TITLE HOLDING ENTITY,
	AND THE STATUS OF OTHER VALUATION REPORT USERS . .	VII-6
2.	PURPOSE OF VALUATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII-9
3.	OBJECT AND SCOPE OF VALUATION . . . . . . . . . . . . . . . . . . . . . .	VII-10
4.	TYPES OF VALUE AND ITS DEFINITION . . . . . . . . . . . . . . . . . . . .	VII-13
5.	VALUATION BASIS DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII-13
6.	VALUATION BASIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII-13
7.	VALUATION METHOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII-16
8.	IMPLEMENTATION PROCESS OF THE VALUATION
	PROCEDURES AND THE STATUS . . . . . . . . . . . . . . . . . . . . . . . .	VII-26
9.	VALUATION ASSUMPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII-27
10.	VALUATION CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII-28
11.	EXPLANATIONS OF SPECIFIC MATTERS . . . . . . . . . . . . . . . . . . .	VII-28
12.	RESTRICTIONS ON THE USE OF VALUATION REPORT . . . . . . . .	VII-30
13.	DATE OF VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII-30

– VII-2 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

STATEMENT OF THE REGISTERED ASSETS VALUER

The registered assets valuer of Beijing Zhuoxindahua Appraisal Co., Ltd.* made the following statements for the valuation report in relation to the proposed purchase of Intelligent Rail Transit Business assets portfolio in Tsinghua Tongfang Co., Ltd by Technovator International limited:

We possess the relevant qualifications for practice. We perform the asset valuation for the business in accordance with the relevant laws and regulations and assets valuation standards based on independent, objective and fair principles. The content stated in the valuation report is objective with reference to the information collected during the valuation process. We bear corresponding legal responsibilities for the reasonability of the conclusions of the valuation.
The list of assets and liabilities related to the valuation object is reported, signed and sealed and confirmed by the entrusting party and the title holding entity. The entrusting party and the related parties should be responsible for the truth, legality and completeness of the information provided and proper usage of the valuation report.
We do not have any existing or expected interest relationship with the valuation object in the valuation report; we do not have any existing or expected interest relationship with the related parties in the valuation report. We hold no prejudice against the related parties.
We have performed on-site investigation on the valuation object and its related assets. We have given the required concern over the legal ownership of the valuation object and its related assets and examined the legal ownership of the valuation object and its related assets in which it involves, and truthfully disclosed the issues found. We have also submitted to the entrusting party and the related parties to adopt measures to perfect the ownership in order to fulfill the requirement for the issue of the valuation report.
The analysis, judgments and conclusions in the valuation report issued by us are subject to the assumptions and limitations in the valuation report. The valuation report users should give sufficient consideration to the assumptions, limitations and explanatory notes to special matters and their effects on the conclusions of the valuation. The suggestions in the valuation report are only for the basis of value determination for the parties of this transaction. Therefore, the valuation conclusion should not be regarded as a guarantee of the attainable price on the valuation object.

– VII-3 –

APPENDIX VII VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

SUMMARY OF THE VALUATION REPORT FOR The Proposed Purchase of the Intelligent Rail Transit Business Assets Portfolio in Tsinghua Tongfang Co., Ltd By Technovator International Limited

Beijing Zhuoxindahua Appraisal Co., Ltd.* was engaged by Technovator International Limited to perform valuation on the Intelligent Rail Transit Business assets portfolio in connection with the economic activity of the proposed purchase of the Intelligent Rail Transit Business in Tsinghua Tongfang Co., Ltd by Technovator International Limited. The material information and valuation conclusions in the text of the valuation report are now extracted as follows.

Economic Activity: Technovator International Limited proposed to purchase the Intelligent Rail Transit Business assets portfolio in Tsinghua Tongfang Co., Ltd.

Valuation Purpose: It is aimed to provide a fair reflection for the market value of Intelligent Rail Transit Business assets portfolio in connection with the economic activity of the proposed purchase of the Intelligent Rail Transit Business in Tsinghua Tongfang Co., Ltd by Technovator International Limited on the Valuation Basis Date and to provide valuation reference advice for the economic activity.

Object and scope of valuation: the object of valuation is assets portfolio value of Intelligent Rail Transit Business designated by the entrusting party. The valuation scope is the assets portfolio of Intelligent Rail Transit Business in Tsinghua Tongfang Co., Ltd. The carrying amount of total assets in assets portfolio entrusted for valuation was approximately RMB382,793,000, of which current assets was approximately RMB352,224,000 and non-current assets was approximately RMB30,569,000; the total carrying amount of liabilities was approximately RMB302,015,000, of which current liabilities was approximately RMB302,015,000. The carrying amount of net assets was approximately RMB80,778,000.

Type of value: the market value under the premise of going-concern of the object of valuation.

Valuation Basis Date: 31 March 2015.

Valuation method: income method was adopted.

Valuation conclusion: the income method was adopted in this valuation report. Under the premise that the valuation assumptions and limitations are valid, the carrying amount of the Intelligent Rail Transit Business assets portfolio of Tsinghua Tongfang Co., Ltd proposed to be purchased by Technovator International Limited as at the Valuation Basis Date was RMB80,778,000; the appraised value was RMB197,000,000; the appraised appreciation was RMB116,222,000 or 143.88%.

– VII-4 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

Please see the valuation report for the details of valuation conclusion.

The useful life of the valuation conclusion: the useful life of this valuation conclusion is one year commencing from the Valuation Basis Date. Assets should be evaluated again after a year.

Specific matters affecting the valuation conclusion: the attention of the user of the valuation report is drawn to the effect of the special matters of the text of report on the valuation conclusion.

The above content is extracted from the text of the valuation report. If you wish to understand the details of the items of this valuation report and reasonably comprehend the valuation conclusions, you should read the text of the valuation report.

– VII-5 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

TEXT OF THE VALUATION REPORT The Proposed Purchase of Intelligent Rail Transit Business Assets Portfolio In Tsinghua Tongfang Co., Ltd. By Technovator International Limited Zhuoxindahua Valuation Report Zi (2015) No. 2035-1**

Technovator International Limited:

Beijing Zhuoxindahua Appraisal Co., Ltd.* was engaged by the Company to perform valuation on the market value of the assets portfolio in Intelligent Rail Transit Business whereby Technovator International Limited engaged in the economic activity of proposing to purchase the Intelligent Rail Transit Business of Tsinghua Tongfang Co., Ltd on 31 March 2015, in accordance with the relevant laws, regulations, assets valuation standards and principles, adopting income method and following the necessary valuation procedures. The valuation of the assets is reported as follows.

1. THE ENTRUSTING PARTY, THE TITLE HOLDING ENTITY AND THE STATUS OF OTHER VALUATION REPORT USERS

The entrusting party of this valuation is Technovator International Limited. The title holding entity is Tsinghua Tongfang Co., Ltd. The other users of the valuation report are the relevant regulatory bodies.

1. Entrusting party

Chinese company name:	同方泰德國際科技有限公司
English company name:	Technovator International Limited
Registered country:	Singapore
Registered address:	66 Tannery Lane #04-10/10A Sindo Industrial
	Building Singapore
Legal representative:	Lu Zhicheng
Nature of business:	Hong Kong listing company
Stock Code:	1206.HK

Technovator International Limited was incorporated in Singapore in September 2011 with the registration number of 200507127G. Technovator International Limited was listed on the Main Board of the Hong Kong Stock Exchange in October 2011.

The principal business activities include: design, manufacture and distribution of integrated building automation and energy management systems, as well as provision of products and solutions for safety control and fire alarm systems.

– VII-6 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

2. The title holding entity

Name: Tsinghua Tongfang Co., Ltd. Registered Address: A-30 Tsinghua TongFang Hi-Tech Plaza, Haidian District, Beijing Legal representative: Lu Zhicheng Registered capital: $2,963,898,951 Date of incorporation: 25 June 1997 Business operation period: 25 June 1997 to long term Type of business: other limited company (listing)

Business Scope: Engaged in internet information service business but not including the contents such as news, publication, medical and healthcare, drugs, and medical equipment; dispatch of labors required for implementing overseas projects associated with export of self-manufactured equipment; production and sales of commercial encryption products; public safety equipment, transportation engineering equipment, building intellectualization and municipal engineering’s mechanical and electrical equipment, electrical engineering’s mechanical and electrical equipment, and energy saving; artificial environmental control equipment, electronic products for communications, microelectronic integrated circuit, office equipment, devices and instruments, production of electromechanical integration equipment; manufacture of water fountain; Intel access service of the Type II value-added telecommunication services (1 municipal city of Beijing, 2 cities of Changchun and Nanchang) (the operating licence for value-added telecommunication services will expire by 3 May 2017); manufacture, sales, technical service and maintenance of computers and peripheral equipment; public safety equipment, transportation engineering equipment, building intellectualization and municipal engineering’s mechanical and electrical equipment, electrical engineering, mechanical and electrical equipment, and energy saving; sale and engineering installations of artificial environmental control equipment, electronic products for communications, microelectronic integrated circuit, and office equipment; development and sales of devices and instruments, and electromechanical integration equipment; sales of fire protection products; consultancy of advanced technologies, transfer and services of new and advanced technologies, property management, import and export business, contracting and construction for mechanical and electrical installation works; building intellectualization, urban and road lighting, contracting of electronic engineering; indoor air purification project; computer system integration; design for intelligent building system integration project (not including fire protection sub-system); design, installation, and refinement of water fountain; security engineering (design and construction); design and installation of common antenna for cable television; advertising broadcast and agency; vessel rental; engineering investigation and design; design and sales of lighting equipment; basic software services; application software services; sales of mechanical equipment, metal, alternating current, household appliance, software, and auxiliary equipment, television broadcast equipment, telecommunications equipment, and electronic products. ( For those

– VII-7 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

projects requiring approval according to law, the operating activities can be commenced after the approval of the relevant departments according to the approved content.)

Structure of operation management: Tsinghua Tongfang Co., Ltd. adopted corporate governance structure which includes the shareholders committee, the board of directors, and the supervisory committee.

Intelligent Rail Transit Business: it provides intelligent overall solutions of the main electrical and mechanical systems such as integrated monitoring system, security doors, underground environment and equipment monitoring systems.

As a leading enterprise in areas of Intelligent Rail Transit and information technology, Tsinghua Tongfang Co., Ltd has more than 30 years of history in relevant techonology research and industrialization works in Tsinghua University. Over the years, Tsinghua Tongfang continues to promote the demonstrative application of intelligent rail transit and information technologies, based on its strong technical accumulation and strong comprehensive technology management capabilities, and contribute for the improvement of the industry. Iran Tehran Metro implemented overseas was highly praised because of its excellent engineering design and implementation capacity and continuous services for 15 years covering constructions of all 4 lines of Metro, as well as its ongoing operation and maintenance services. Subway equipment and environment monitoring system implemented in the State not only greatly enhances the management level of the user, but also generates great energy efficiency. Each rail line saves users the electricity costs of more than 20 million each year. In this regard it obtained the Science and Technology Progress Award (科技進步獎) and survey and design industry top award (勘察設計行業一等獎) from the Ministry of Construction(建設部). Integrated rail monitoring system and road network command center system concentrate various subsystems and all rail lines on one platform to perform operation management and control, and overcome challenges of numerous interfaces and high difficulties in technology management to realize collaborative applications between systems and rail lines and achieve the world’s leading standards. Being the Major Technical Equipment Demonstration Project (重大技術裝備示範項目) of Beijing city, subway security door/gate system obtained focused support and realized Tongfang’s overall strength in the field of mechatronics. Resolutions for AFC and PIS systems are also widely applied in numerous lines of passenger railways gradually. Tongfang has always ranked first in the industry of intelligent building field including railway construction. It has implemented all kinds of major demonstration projects including the Great Hall (人民大會堂), CCTV (中央電視臺), Xinhua News Agency (新華社), 301 Hospital (301醫院), Beijing hotels (北京飯店), Olympic venues (奧運會場館), and the Ministry of Railways Traffic Control Center (鐵道部客運專線調度中心).

– VII-8 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

The assets, financial and operating conditions of the asset portfolio for the recent three years and as at the Valuation Basis Date:

Unit: RMB’000

	31 December	31 December	31 December	31 March
Item	2012	2013	2014	2015
Current assets	138,720.00	164,254.00	319,436.00	352,224.00
Non-current assets	16,051.00	16,491.00	28,571.00	30,569.00
Total assets	154,771.00	180,745.00	348,007.00	382,793.00
Current liabilities	74,910.00	162,364.00	229,418.00	302,015.00
Non-current liabilities	0.00	0.00	0.00	0.00
Total liabilities	74,910.00	162,364.00	229,418.00	302,015.00
Net assets	79,861.00	18,381.00	118,589.00	80,778.00
				January to
Items	2012	2013	2014	March 2015
Operating income	123,241.00	131,333.00	232,556.00	67,330.00
Total profit	20,975.00	18,296.00	26,785.00	4,884.00
Net profit	17,766.00	15,461.00	22,654.00	4,119.00

3. The relationship between the entrusting party and the title holding entity

Tsinghua Tongfang Co., Ltd. (the title holding entity) is a controlling shareholder of Technovator International Limited (the entrusting party).

4. Other Valuation Report Users other than the entrusting party

Unless the laws and regulations of the PRC otherwise specified, this valuation report is to be used by Technovator International Limited (the entrusting party), Tsinghua Tongfang Co., Ltd. (the title holding entity) and the relevant regulatory authorities as agreed in Engagement Letter for the purpose of valuation set out in this report only. The valuation report users should use the valuation report properly and the liabilities of adverse consequences resulting from improper use of the valuation report shall not be borne by the valuation entity.

2. PURPOSE OF VALUATION

According to the “Minutes of the Board Meeting of Technovator International Limited” dated 28 July 2015, the purpose of this valuation is to provide a fair reflection for the market value of Intelligent Rail Transit Business assets portfolio in connection with the economic activity of the proposed purchase of the Intelligent Rail Transit Business in Tsinghua Tongfang Co., Ltd by Technovator International Limited on the Valuation Basis Date, 31 March 2015, and to provide valuation reference advice for the economic activity.

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APPENDIX VII VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

3. OBJECT AND SCOPE OF VALUATION

(1) Object of Valuation

The object of this valuation is the value of the Intelligent Rail Transit Business assets portfolio in Tsinghua Tongfang Co., Ltd. in respect of the economic activities specified by the entrusting party.

(2) Scope of Valuation

The scope of this valuation is the Intelligent Rail Transit Business assets portfolio of Tsinghua Tongfang Co., Ltd..

Related agreements/projects of Intelligent Rail Transit Business include: The agreements/projects related to the subject business engaging by Tsinghua Tongfang Co., Ltd. and the third party, including the agreements that have been signed but not yet completed as at the Valuation Basis Date, the projects now being under the bidding or negotiation stage with business contracts awaiting to be signed, and the projects under the business contracts newly signed, under the bidding or negotiation stage during the period between the Valuation Basis Date and the closing date.

Related assets of the Intelligent Rail Transit Business include: the related assets and liabilities of the Intelligent Rail Transit Business owned and proposed to be transferred, and other intangible assets related to the products and technological achievement in the Intelligent Rail Transit Business.

– VII-10 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

The assets and liabilities of such assets portfolio as at the Valuation Basis Date are as follows:

			Amount Unit:
			RMB’000
Name of Items	Carrying Value	Name of Items	Carrying Value
Total current assets	352,224.00	Total current liabilities	302,015.00
Cash and cash		Short-term borrowings
equivalents
Bills receivable		Bills payable
Accounts receivable	54,110.00	Accounts payable	127,193.00
Prepayments	97,315.00	Receipts in advance	174,570.00
Other receivables	4,706.00	Payroll payable
Interest receivable		Tax payable
Inventories	196,093.00	Other payables	252.00
Other current assets		Non-current liabilities
		due within one year
Total non-current assets	30,569.00	Total non-current	0.00
		liabilities
Long-term receivables		Long-term borrowings
Long-term equity		Estimated liabilities
investment
Fixed assets	329.00	Deferred income tax
		liabilities
Construction in progress		Other non-current
		liabilities
Intangible assets	30,240.00
Deferred income tax		Total liabilities	302,015.00
Other non-current assets		Total owner’s equity	80,778.00
Total assets	382,793.00	Total liabilities and	382,793.00
		owner’s equity

The object and scope of this valuation are consistent with those in relation to the economic activities of assets portfolio of Intelligent Rail Transit Business in Tsinghua Tongfang proposed to be purchased by Technovator International Limited.

The asset portfolio proposed to be transferred by Tsinghua Tongfang in the Valuation Basis Date and the financial statements for the previous three years were audited by KPMG Huazhen LLP.

– VII-11 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

(3) Legal ownership, economic and physical condition of principal assets

1. Inventories

Inventories mainly refer to issued goods and unsettled engineering projects. Issued goods are mainly the equipment for intelligent rail transit and spare parts like access control equipment, industrial ethernet switches, DCS cabinets, controller keyboard and armored shield cable. Unsettled engineering projects are mainly the construction-in-progress but not settled engineering projects of Tsinghua Tongfang Co., Ltd.

2. Electronic Equipment

The major electronic equipments in the fixed assets are notebooks which were mainly purchased between 2005 and 2014. Most of the equipment were under normal conditions, while some of the equipment had been purchased for a long time in which some functions and spare parts were outdated. Although being remained in use, they were nearly under retirement condition.

(4) Book Entry or Non-recorded Intangible Asset Declared by the Title Holding Entity

The intangible assets declared in the book entry by the title holding entity are safety gate systems. There are two items and were obtained in December 2012 and December 2014 respectively with 5 years of useful life.

(5) Off Balance Sheet Asset Declared

The scope of valuation is confirmed by the entrusting party. All items of asset and liability in the balance sheet on the Valuation Basis Date are declared by the title holding entity. Other than the book value of assets, no other off balance sheet asset or liability has been declared by the entrusting party and the entity being assessed. The appraisers cannot obtain any indication of other off balance sheet assets or liabilities. Therefore, only book value of assets that are declared and included in this the scope of valuation are evaluated.

(6) Quotation of Reports Prepared by Other Entities

The assets and liabilities included in the valuation scope does not involve any reports prepared by other entities.

– VII-12 –

APPENDIX VII VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

4. TYPES OF VALUE AND ITS DEFINITION

General types of value to be used for assessing asset portfolio include market value and non-market value.

For the purpose of this valuation, the type of value of the subject of valuation is the market value under the premise of going-concern.

Market value refers to the estimated amount for which the object of valuation is transacted on a normal and fair basis on the Valuation Basis Date between a willing buyer and a willing seller, wherein the parties each acts rationally without any compulsion.

5. VALUATION BASIS DATE

The Valuation Basis Date of this project is 31 March 2015.

In order to ensure the timeliness of the valuation result and to get as close as possible to the date on which the valuation purpose is achieved, we negotiated with the entrusting party based on the nature of the economic activity of this valuation and finally, the Valuation Basis Date was determined to be 31 March 2015 by the entrusting party.

The Valuation Basis Date is a closing date of a month period during which relevant information and financial data can be fully reflected while a better comparability can be achieved, which benefits the realization of the economic activity.

Pricing standard adopted in this valuation comprises price, tax rate, rates and interest rate of deposits and loans, all of which are effective price standards as at the Valuation Basis Date.

6. VALUATION BASIS

The laws and regulations, standards basis, ownership basis, pricing basis as required by the state, municipal government and relevant departments as well as documentary information and basis that we complied with and referred to during the valuation are mainly as follows:

(I) Basis of the activity

The Minutes of the Board Meeting of Technovator International Limited dated 28 July 2015;
The Engagement Letter on Asset Valuation 《資產評估業務約定書》( ) entered into between the entrusting party and Beijing Zhuoxindahua Appraisal Co., Ltd.*

– VII-13 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

(II) Principal Legal and Regulatory Basis

Company Law of the People’s Republic of China 《中華人民共和國公司( 法》)
Securities Law of the People’s Republic of China 《中華人民共和國證券( 法》);
Enterprise Income Tax Law of the People’s Republic of China (《中華人民共和國企業所得稅法》);
Law of the People’s Republic of China on the State-Owned Assets of Enterprises 《中華人民共和國企業國有資產法》( );
Administrative Measures for Appraisal of State-Owned Assets 《國有資( 產評估管理辦法》) (Order No. 91 of the State Council);
Implementation Rules for the Administrative Measures for Appraisal of State-Owned Assets 《國有資產評估管理辦法實施細則》( ) (Guo Zi Ban Fa [1992] No. 36) originally promulgated by the National State-Owned Asset Administration Bureau;
Rules on Certain Issues relating to the Appraisal of State-Owned Assets 《國有資產評估管理若干問題的規定》( ) (Order [2001] No. 14 of the Ministry of Finance);
Notice of the General Office of the State Council on Forwarding the Opinions of the Ministry of Finance on Reforming State-Owned Assets Valuation Administration Method and Strengthening Asset Valuation Administration Work 《國務院辦公廳轉發財政部關於改革國有資產評估( 行政管理方式加強資產評估監督管理工作意見的通知》) (Guo Ban Fa [2001] No. 102) issued by the General Office of the State Council;
Provisional Measures for Transfer of State-Owned Assets in Enterprises 《企業國有產權轉讓管理暫行辦法》( ) Order [2003] No.3 jointly issued by the State-Owned Assets Supervision and Administration Commission and the Ministry of Finance;
Provisional Regulations on Monitoring and Administration of State-Owned Assets 《企業國有資產監督管理暫行條例》( ), Order [2003] No. 378 of the State Council;
Provisional Measures for Administration of State-Owned Assets Appraisal (《企業國有資產評估管理暫行辦法》), Order [2005] No. 12 of the State-Owned Assets Supervision and Administration Commission;

– VII-14 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

Notice on Certain Issues regarding Strengthening State-Owned Enterprise Asset Appraisal Administration Work 《關於加強企業國有資( 產評估管理工作有關問題的通知》) (Guo Zi Fa Chan Quan [2006] No. 274);
Guidelines on Filing on Record for State-Owned Enterprise Assets Appraisal Projects 《企業國有資產評估項目備案工作指引》( ) (Guo Zi Fa Chan Quan [2013] No. 64);
Other applicable laws and regulations

(III) Standards Basis

Assets Appraisal Standards – Basic Standards 《資產評估準則－基本準( 則》) and Code of Ethics for Assets Appraisal – Basic Standards (《資產評估職業道德準則－基本準則》) (Cai Qi [2004] No. 20);
Notice of the China Appraisal Society on issuing Seven Assets Appraisal Standards including Assets Appraisal Standards – Appraisal Report (《資產評估準則－評估報告》) (Zhong Ping Xie [2007] No. 189);
Guiding Opinions on Determination of Title ownership of the Object of Appraisal by Certified Public Appraisers 《資產評估準則－評估報告》( ) (Kuai Xie [2003] No. 18);
Guide to Service Quality Control in Appraisal Institutions 《評估機構業( 務品質控制指南》) (Zhong Ping Xie [2010] No. 214);
Code of Ethics – Independence 《職業道德準則－獨立性》( ) (Zhong Ping Xie [2012] No. 248);
Notice of China Appraisal Society on Modifying the Signature Clause in the Standards for Appraisal Report 《中評協關於修改評估報告等準則中( 有關簽章條款的通知》) (Zhong Ping Xie [2011] No. 230);
Asset Appraisal Standards – Making Use of Experts (《資產評估準則－利用專家工作》) (Zhong Ping Xie [2012] No. 244).

(IV) Basis of Ownership

EPC contracts for Intelligent Rail Transit Business;
Other title ownership certificates.

– VII-15 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

(V) Pricing Basis

Relevant national industry policies, industry analysis and parameters;
The lending rate published by the People’s Bank of China as at the Valuation Basis Date;
Data provided by Wind Information Co., Ltd.* (上海萬得信息技術股份有限公司);
EPC contracts for Intelligent Rail Transit Business;
Other information such as related contracts and accounting evidence obtained from, and used by, the title holding entity.

(VI) Other references

The assets appraisal breakdown statement provided by the title holding entity;
Future development plans and forecasts provided by the title holding entity;
On-site investigation and survey forms and other information collected and compiled by the appraisers;
Other information relevant to appraisal.

7. VALUATION METHOD

(I) Analysis of the applicability of appraisal approach

In accordance with the requirements of Asset Valuation Standards, Intelligent Rail Transit Business portfolio can be valued under three methods, i.e., income method, market method and cost method. Income method is the quantification and calculation of the present value of the expected profitability of the Intelligent Rail Transit Business being assessed. It stresses on the assessment of the overall expected profitability of the Intelligent Rail Transit Business. Market method refers to a method of valuation in which the present fair market value of the valuation target is valued by comparing it with the references in the real market. The characteristic of this method is that the valuation data is directly sourced from the market, and the result of valuation is strongly convincing. Cost method refers to the perspective in which the value of the object of valuation is ascertained on the basis of reasonable valuation of the assets and liabilities.

– VII-16 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

In light of the characteristics of the economic activity corresponded to the objective of this valuation and the information regarding the operation of the object of valuation collected on the valuation site, and because the data relating to comparable transaction precedents for comparison is not available and whether there is any non-market value factors is unknown, market method cannot be adopted accordingly.

Intelligent Rail Transit Business appraised is a group of Intelligent Rail Transit Business assets portfolio which has independent profitability, and the income and risk for the coming year can be reliably estimated, which satisfies the conditions for adopting income method. Accordingly, the income method is applicable to the valuation.

Taking into account that the valuation result under the cost method is mainly determined by the simple addition of the renewal replacement cost of each individual asset and liability in the balance sheet of the valuation object as at the Valuation Basis Date, which cannot fully reflect the intangible asset value of the profitability of the valuation object, and accordingly, the cost method is not applicable.

In light of the above valuation perspectives, the income method is adopted to value the object of this valuation.

(II) Technologies and Models of the Income Method

The valuation of the business assets portfolio which is proposed to be transferred is undertaken by adopting the discounted cash flow (DCF) approach, based on the features of the Intelligent Rail Transit Business assets portfolio and the means of income.

DCF is a method of estimating the intelligent rail transit business assets portfolio by discounting its expected cash flow to present value, that is, the value of the intelligent rail transit business assets portfolio is determined by estimating the entity’s prospective cash flow and discounting it to present value using an appropriate discount rate. The basic conditions for applying this method are: the intelligent rail transit business assets have the basis and condition for sustainable operation; there is stable corresponding relationship between operation and income; and that the income and risk in future can be predicted and quantified. The key to the application of DCF lies in the prediction of the cash flow in future as well as the objectivity and reliability of data gathering and processing. When the prediction of cash flow in future is objective and fair, and the adoption of discount rate is relatively reasonable, the result of valuation tends to be objective and be accepted by the market easily.

– VII-17 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

Basic calculation model

The basic calculation model in this valuation is:

==> picture [66 x 17] intentionally omitted <==

P: Value of operating assets in assets portfolio;

==> picture [126 x 29] intentionally omitted <==

Where,

Ri: Prospective income of the i[th] year in the future;

Rn: Net realizable value of the Intelligent Rail Transit Business assets portfolio after the yield period;

r: Discount rate;

n: Future forecast yield period.

∑ Ci : Value of non-operating and residual assets of the Intelligent Rail Transit Business assets portfolio existing on the Valuation Basis Date.

==> picture [58 x 10] intentionally omitted <==

Where,

C1: Value not included in the prospective income;

C2: Value of obsolete and idling assets as at the Valuation Basis

Date;

(III) The Appraisal Process of Income Method

1. The Determination of Income Period

The perpetual period is adopted as the income period. Of which, the first stage is from April 2015 to December 2019. During this stage, pursuant to the historical results and future market analysis of the Intelligent Rail Transit Business assets portfolio, the income position will become stable gradually. The second stage is from January 2020 to perpetual operations. During this stage, the net cash flow of the Intelligent Rail Transit Business assets portfolio will remain stable on the basis of 2019.

– VII-18 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

2. Future Income Forecast

(1) The Relevance of Production Business Model and Income Subject and Parameter

Pursuant to the principle of income amount being in line with the discount rate parameter, the future expected income parameter of this valuation of Intelligent Rail Transit Business assets portfolio will be the equity free cash flow of the Intelligent Rail Transit Business assets portfolio, and the equity capital return rate is adopted for discount rate.

Free cash flow of the Intelligent Rail Transit Business assets portfolio = net profit + depreciation and amortization – capital expenditure – net increase of operating capital + increase (decrease) of interest-bearing debts

Expected net profit = operating income – operating costs – operating expenses – administrative expenses – finance expenses – income tax

(2) Operating Income Forecast

The operating income was mainly the income from contracting work projects of Intelligent Rail Transit Business. This valuation was made to forecast the operating income in the coming year based on the analysis of signed contracts and their execution in the previous years and according to and the assessment of the increment of signed contracts volume and revenue of the contracts of Intelligent Rail Transit Business in the previous years as well as on Valuation Basis Date, taking into account the future development plan of Intelligent Rail Transit Business.

(3) Operating Costs Forecast

Operating costs mainly include the subcontracting of the contracting work projects and procurement costs of Intelligent Rail Transit Business. According to the characteristics of Intelligent Rail Transit Business, this valuation was made to forecast the operating costs in the coming year based on the analysis of the movement trend of operating cost in the previous years and the proportion of operating income, taking into account the forecast of future development plans and operating income of Intelligent Rail Transit Business.

– VII-19 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

(4) Operating Expenses Forecast

The sales expenses for previous years mainly include the expenses relating to the wages of sales staff, welfare expenses, insurance, office expenses, travel and meetings expenses, and business hospitality expenses. This valuation was made to forecast the operating expenses in the coming year based on the analysis of the proportion and movement trend of operating expenses in the previous years and the proportion of operating income, taking into account the future development plan and the forecast of operating income of Intelligent Rail Transit Business.

(5) Administrative Expenses Forecast

Administrative expenses mainly include wages, rentals, utilities, and intangible asset amortization. This valuation was made to forecast the administrative expenses in the coming year based on analysis of the proportion and movement trend of selling expenses in the previous years, taking into account the future development plan of Intelligent Rail Transit Business.

(6) Finance Expenses Forecast

Finance expenses mainly include interest of borrowings. This valuation was made to forecast the interest of borrowings in the coming year based on the future development plan of Intelligent Rail Transit Business, taking into account the analysis of the structure of intelligent construction industry and the forecast of the amount of capital requirements and the scale of borrowings and repayments.

(7) Income Tax Forecast

Tsinghua Tongfang Co., Ltd, the title holding entity of Intelligent Rail Transit Business, was qualified on the Valuation Basis Date as a new and advanced technology enterprise effective from 2014 for the term of three years, and accordingly, Intelligent Rail Transit Business was entitled to a concessionary rate of enterprise income tax rate at 15%. The forecast was based on the assumption that Intelligent Rail Transit Business would continue to operate, which meant that it would continue to operate at the condition as at Valuation Basis Date. Also it assumed that the title holding entity of Intelligent Rail Transit Business could continue to be recognized as a new and advanced technology enterprise and that Intelligent Rail Transit Business could continue to be entitled to tax concessions.

– VII-20 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

(8) Depreciation Forecast

The forecast is performed in accordance with the accounting policies adopted by the Intelligent Rail Transit Business and based on the book value of fixed assets on the Valuation Basis Date, historical consolidated depreciation rates for previous years and depreciation period.

(9) Capital Expenditure Forecast

Capital expenditure mainly represents expenditure in research and development. This valuation was made to forecast the capital expenditure in the coming year based on future development plan of Intelligent Rail Transit Business.

(10) Addition of Working Capital Forecast

Increased working capital to an assets portfolio refers to the increased working capital required for the assets portfolio to maintain the capability of sustainable development without changing its existing core business, which represents the cash obtained through acquiring commercial credit of others, cash required for normal operations and inventories following any changes to the business activities of the assets portfolio. Meanwhile, during the course of economic activities, providing commercial credit could reduce the immediate payment in cash. Therefore, the estimation of the increase in working capital in principle requires only the consideration of main factors such as cash required under normal operations, receivables, inventories and payables. The expected increase in working capital according to this valuation is as follows:

Increased working capital = working capital for the current period – working capital for the last period

Working capital = cash + receivables + inventories – payables

Of which: receivables = total operating income / turnover of receivables

Inventories = total operating costs / turnover of inventories

Payables = total operating costs / turnover of payables

Receivables mainly include: trade receivables, bills receivables, long-term receivables and other trade receivables associated with operating activities.

Payables mainly include: trade payables, bills payables and other trade payables associated with operating activities.

– VII-21 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

3. Determination of Discount Rate

Capital Asset Pricing Model (CAPM) is adopted for this valuation.

The formula is as follows:

Re = Rf + β × MRP + Rc

Rf: risk-free rate of income

MRP: Rm-Rf: average market risk premium

Rm: expected market rate of return

β: expected market risk coefficient

Rc: Risk adjustment coefficient specific to enterprises

(1) Determination of Risk-free Rate of Return

Safe yield is also known as the risk-free rate of income or safe interest rate, which is the lowest yield investors shall be offered under the current market conditions. In China, as the treasury bonds is a relatively safe investment, its yield is thereby regarded as the most stable and lowest (i.e. the safe yield) among different investment portfolios. Valuer conducted this valuation with reference to bond-related information published on http://www.hexun.com (www.hexun.com was established in 1996, which is the only financial website owning internet news information service license as well as information spread internet audio-visual program license and securities investment advisory qualifications in China) and applied the yield to maturity of treasury bonds with the remaining term of more than ten years as the risk-free rate of return.

The calculation table of average interest rate (yield to maturity) of intermediate-term and long-term treasury bonds:

Name of			Remaining	Yield to
Treasury bonds	Code	Term	Term	maturity
				(%)
Treasury bonds 1425	101425	30	29.6	3.21%
Treasury bonds 1014	101014	50	45.18	4.03%
09 Treasury bonds 30	19930	50	44.7	4.30%
09 Treasury bonds 25	19925	30	24.56	4.52%
09 Treasury bonds 20	19920	20	14.42	4.00%
09 Treasury bonds 05	19905	30	24.04	4.02%

– VII-22 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

Name of
Treasury bonds
Code
Term
Remaining
Term
09 Treasury bonds 02
19902
20
13.9
08 Treasury bonds 20
19820
30
23.58
08 Treasury bonds 13
19813
20
13.38
08 Treasury bonds 06
19806
30
23.12
14 Treasury bonds 27
19427
50
49.69
14 Treasury bonds 25
19425
30
29.6
14 Treasury bonds 17
19417
20
19.38
14 Treasury bonds 16
19416
30
29.34
14 Treasury bonds 10
19410
50
49.19
14 Treasury bonds 09
19409
20
19.09
13 Treasury bonds 25
19325
30
28.71
13 Treasury bonds 24
19324
50
48.67
13 Treasury bonds 19
19319
30
28.48
13 Treasury bonds 16
19316
20
18.38
13 Treasury bonds 10
19310
50
48.17
13 Treasury bonds 09
19309
20
18.07
12 Treasury bonds 20
19220
50
47.66
12 Treasury bonds 18
19218
20
17.51
12 Treasury bonds 13
19213
30
27.36
12 Treasury bonds 12
19212
30
27.26
12 Treasury bonds 08
19208
50
47.16
12 Treasury bonds 06
19206
20
17.08
11 Treasury bonds 23
19123
50
46.65
11 Treasury bonds 16
19116
30
26.25
11 Treasury bonds 12
19112
50
46.19
11 Treasury bonds 10
19110
20
16.09
11 Treasury bonds 05
19105
30
25.92
10 Treasury bonds 40
19040
30
25.71
10 Treasury bonds 37
19037
50
45.67
10 Treasury bonds 29
19029
20
15.44
10 Treasury bonds 26
19026
30
25.4
10 Treasury bonds 23
19023
30
25.35
10 Treasury bonds 18
19018
30
25.24
10 Treasury bonds 14
19014
50
45.18
10 Treasury bonds 09
19009
20
15.05
10 Treasury bonds 03
19003
30
24.94
07 Treasury bonds 13
10713
20
12.39
07 Treasury bonds 06
10706
30
22.15
06 Treasury bonds (9)
10609
20
11.25
05 Treasury bonds (4)
10504
20
10.13
Average

Yield to
maturity
(%)
3.86%
3.91%
4.94%
4.50%
4.22%
4.30%
4.63%
4.76%
4.67%
4.77%
4.92%
5.23%
3.96%
4.32%
4.24%
3.99%
4.35%
3.86%
4.12%
4.80%
4.25%
4.03%
4.33%
4.17%
4.48%
4.15%
4.31%
4.23%
4.40%
3.85%
3.96%
3.99%
4.03%
4.03%
4.07%
4.08%
4.52%
4.27%
3.70%
3.65%

4.24%

Average

– VII-23 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

(2) Determination of Average Market Risk Premium

Market risk premium is the rate of return required by investors which is higher than risk-free interest rate, in relation to a fully risk-diversified market investment portfolio.

Market risk premium = basic compensation in the mature stock market + national risk compensation

Market risk premium of this valuation is 7.15%.

(3) Determination of Beta Coefficient

Beta coefficient is deemed as an indicator to evaluate the relative risk of a company. In this valuation, listed companies were chosen, among the A-share listed companies which had the same business mode and similar operation scale as the title holding entity, to be the comparable listed companies. Through Wind’s securities information terminal system, we can obtain the comparable listed companies’ Beta coefficient having financial leverage as at the Valuation Basis Date and the ratio of interest-bearing debt to equity capital, and translate them into Beta coefficient without financial leverage. Then, the arithmetic mean value of the translated Beta coefficient without financial leverage is taken as x, and integrate with corporate operation and loan status, and restore x to Beta coefficient with financial leverage of the title holding entity.

β Index conversion formula:

βL = βU [1 + (1 - T) × Wd / We]

(4) Determination of Risk Specific to the Intelligent Rail Transit Business Portfolio

Risk specific to the company represents the impact on the expected revenue of the object of valuation due to possible uncertainties during the operation of such company, such as changes in market demand, changes in supply conditions of production factors, competition among peers, monetary circulation and turnover of capital. After a thorough consideration of the production and operation scale, status of operation, financial position and liquidity of the Intelligent Rail Transit Business portfolio, the specific risk coefficient of such portfolio is determined.

– VII-24 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

(5) Determination of Discount Rate of Cost of Equity Capital

The selected risk-free return rate and risk return rate are substituted in the formula of discount rate estimation:

Re = Rf + β × MRP + RC

4. Determination of the Appraisal Value of the Non-operation Assets and Liabilities

The non-operating assets represent assets that have no direct relationship with the normal operating revenue of the entity and generate no operating returns. Having analyzed, there are no non-operating assets and non-operating liabilities of this project.

5. Determination of the Appraisal Value of the Intelligent Rail Transit Business Portfolio

Intelligent Rail Transit Business Assets Portfolio Value = Operating Asset Value＋Non-operating Asset Value – Non-operating Liabilities Value

(IV) Calculation Process of the Appraisal Value and the Outcome

1. Determination of the Appraisal Value of Operating Assets

Based on each forecast of expected revenue and estimated analysis on the discount rate which are part of the process of the income method as described in the foregoing section headed “The Appraisal Process of Income Method”, the appraisal personnel applied the aforesaid forecast data into the income method model of this valuation project and calculated that the appraisal value of operating asset is RMB197,000,000.

2. Determination of the Appraisal Value of Non-operating Assets and Liabilities

(V) Conclusion for the Selection of Valuation Method

In view of the foregoing, the proposed purchase of the Intelligent Rail Transit Business assets portfolio in the Tsinghua Tongfang Co., Ltd* by Technovator International Limited is valued and concluded using the income method.

– VII-25 –

APPENDIX VII VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

8. IMPLEMENTATION PROCESS OF THE VALUATION PROCEDURES AND THE STATUS

For the purpose of purchasing the Intelligent Rail Transit Business in Tsinghua Tongfang Co., Ltd, the entrusting party decided to entrust us to appraise the value of the Intelligent Rail Transit Business portfolio in Tsinghua Tongfang Co., Ltd after contacting with us. After accepting the commission, and according to the characteristics of the economic activity of this valuation project, we confirmed the purpose of the valuation and the value type of the object of valuation, acquired a preliminary understanding regarding the specific contents of the object of valuation and scope of valuation, determined the Valuation Basis Date after negotiating with the entrusting party, proposed a valuation plan and entered into a Valuation Engagement Agreement.
Pursuant to the requirements of Asset Valuation Standard-Valuation Procedures, we provide the title holding entity with materials required for declaration concerning assets valuation, direct the title holding entity to verify the assets, conduct a forecast on profit of the assets portfolio and fill in the relevant forms; upon completion of the aforesaid preliminary preparation works, our appraisers enter into the valuation site, commence on-site survey, conduct necessary investigation through enquiry, confirmation, verification, monitoring, survey and inspection to have an understanding of the economic and technical utilization conditions and legal title status of the assets, analyze the specific conditions of the object of valuation, collect the recent financial data information of the object of valuation as well as those as at Valuation Basis Date, check whether the valuation information declared by the title holding entity matches with the accounting information provided by the title holding entity, verify whether all the information collected is true and complete and pay necessary attention to the legal title status of the assets.
According to the valuation-related requirements of laws, standards, and pricing basis, we adopt the appropriate valuation methods based on the specific conditions of the assets, collect the market price information as the basis of its value determination, and conduct valuation and estimation on the carrying value after verification to confirm the valuation value.
We summarize the valuation results, analyze the conclusions of valuation, prepare the valuation report, implement the internal tri-tier audit, and submit the valuation report.

– VII-26 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

9. VALUATION ASSUMPTIONS

The conclusions of valuation regarding the object of this valuation are based on the following assumptions, pre-conditions, and limiting conditions. In the event that these pre-conditions and conditions cannot be reasonably satisfied, there will be different degrees of changes in general in the conclusions of valuation of this report.

Assuming that the object of this valuation will continue as a going concern in the future.
Assuming that both transaction parties have equal status regarding the assets that are transacted or are intended to be transacted in the market. Each of them has adequate opportunity and time to access the market information to make rational judgments regarding the transaction value of the object of valuation.
Assuming there are no significant changes in the current relevant PRC laws, regulations and policies and national macroeconomic situation, and no significant changes in the political, economic and social environment in the regions where the parties of this transaction are located.
Assuming that the purchase and acquisition process of assets involved in the object of this valuation are in line with the relevant laws and regulations of the country; both bear no defects of rights, liabilities and restrictive conditions that may affect the value, and it is presumed that taxes and various payables relating to that have been fully recorded.
Assuming the object of this valuation is a complete Intelligent Rail Transit Business assets portfolio.
The fees including operation and management fees of the object of valuation in the coming operating periods will remain relatively stable, and change reasonably following the changes in business scale.
Sales income from the object of this valuation is generated in each interim forecast period, and there is no material change in accounting policy and accounting review approach.
The estimation of estimated income is based on the premise of normal operation and management of the assets of the Intelligent Rail Transit Business portfolio as at the Valuation Basis Date, taking into no account of the impacts towards the change of the overall asset value of the Intelligent Rail Transit Business portfolio due to accidental factors such as further investments or reduction of assets.

– VII-27 –

APPENDIX VII VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

Assuming that there will be no material obstacles relating to the collection of payments during the discounted term.
Unless otherwise stated, it is assumed that the object of this valuation is in full compliance with all relevant laws and regulations.
Assuming that the accounting policies to be adopted by the object of this valuation in the future are basically identical to those adopted during the preparation of this report in material aspects.
Assuming that the title holding entity of Intelligent Rail Transit Business would continue to be recognized as a new and advanced technology enterprise and that Intelligent Rail Transit Business could continue to be entitled to tax concessions.
There will be no other factors of force majeure or unforeseeable factors that may give rise to material adverse impact on the title holding entity.

10. VALUATION CONCLUSION

Upon the implementation of the aforesaid assets valuation methods and procedures, for the purpose of the proposed purchase of assets portfolio of the Intelligent Rail Transit Business in Tsinghua Tongfang Co., Ltd* by the entrusting party, the following conclusions of valuation are formed with reference to the market value as at 31 March 2015:

Through the valuation process with income method and under the premise of the valuation assumptions and limiting conditions being valid, the carrying value of the Intelligent Rail Transit Business assets portfolio in Tsinghua Tongfang Co., Ltd proposed to be purchased by Technovator International Limited as at the Valuation Basis Date is RMB80,778,000; the appraised value is RMB197,000,000; and the appraised appreciation is RMB116,222,000, or 143.88%.

11. EXPLANATIONS OF SPECIFIC MATTERS

The result of this valuation by income method did not take into account the discount factor of liquidity due to the unavailability of adequate relevant statistics of market transactions, and the absence of the basis of analysis and judgement concerning the extent of impact of liquidity on the value of the object of valuation.

– VII-28 –

APPENDIX VII

VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

With regard to the possible existence of other defects concerning the entrusting party and the title holding entity which may affect the conclusions of valuation, without any specific explanation by the entrusting party and the title holding entity and in the absence of any knowledge by the appraisers after performing the valuation procedures, the valuation institution and the appraisers shall assume no respective responsibility.
The conclusions of this valuation did not take into account the impact of certain matters that may affect the conclusions of valuation, such as mortgage and warranty issues that may be undertaken in the future, and special transaction parties that may increase or decrease the price paid, nor has it taken into account the impact of change in national macroeconomic policy as well as natural force and other force majeure on the value of the object of valuation. In the event of any change of the aforesaid conditions as well as other assumptions and pre-conditions such as the going concern principle as abided during the valuation, the conclusions of valuation will, in general, become invalid and the users of the report should not use this valuation report, otherwise they have to bear all the consequences arising therefrom.
The conclusions of this valuation did not take into account any tax liability that arises as a result of the increase or decrease in the value of the valuation and the users of this project valuation report should consider the impact of the relevant tax liability when using the valuation report.
During the period from the Valuation Basis Date to the date of this valuation report, the entrusting party and the title holding entity did not declare any subsequent event that would have significant impact, nor were the appraisers able to discover any subsequent event that will have a significant impact.
In the event of any material changes in the quantity of assets during the period from the date of valuation report to the effective period of the valuation report, the assets amount should be adjusted accordingly. In the event that there are changes in the pricing standard of assets and has an obvious impact on the conclusion of assets valuation, then a re-assessment should be conducted.

For the method of treatment of the said specific matters and the possible impact of these specific matters on the conclusions of valuation, the valuation report users should pay attention to the impact of these specific matters on economic activity.

– VII-29 –

APPENDIX VII VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

12. RESTRICTIONS ON THE USE OF VALUATION REPORT

The valuation report shall only be used for valuation objective and purpose as specified.
The valuation report shall be only used by the users of the valuation report as specified therein, unless otherwise as required in the PRC laws and regulations.
The valuation report can only be used officially after obtaining the prior approval if it has to be submitted for the approval or record by any relevant authorities in accordance with the current PRC statutory requirements.
Save as otherwise provided by the laws and regulations or agreed by the relevant parties, the contents of the valuation report shall not be extracted, referenced to or disclosed to public media without the consent from the valuation institution.
According to Rule 11 of “Assets Valuation Standards-Valuation Report” issued by China Appraisal Society, the valuation report can be used for a validity period of one year, i.e. from the Valuation Basis Date of 31 March 2015 as stated therein to 30 March 2016 and the valuation report shall not be used after the validity period as stated therein.
The right to construe the valuation report shall be vested on the valuation institution of this project only, save as otherwise required by the PRC laws and regulations.
The Chinese valuation report shall prevail over the English version.

13. DATE OF VALUATION REPORT

29 July 2015.

– VII-30 –

APPENDIX VII VALUATION REPORT OF THE INTELLIGENT RAIL TRANSIT BUSINESS

Legal Representative of the Valuation Institution:

Legal Representative of the Valuation Institution: (Lin Mei) PRC Certified Asset Appraiser: (Liu Chunru) PRC Certified Asset Appraiser: (Xue Lupeng)

Beijing Zhuoxindahua Appraisal Co., Ltd.* 29 July 2015

For identification purposes only

– VII-31 –

APPENDIX VIII

VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

VALUATION REPORT FOR

THE VALUATION OF The Proposed Purchase of The Intelligent Building Business Assets Portfolio in Tsinghua Tongfang Co., Ltd. By TECHNOVATOR INTERNATIONAL LIMITED ZHUOXINDAHUA VALUATION REPORT ZI (2015) NO. 2035-3

BEIJING ZHUOXINDAHUA APPRAISAL CO., LTD.*

29 July 2015

For identification purposes only

– VIII-1 –

APPENDIX VIII

VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

STATEMENT OF THE REGISTERED ASSETS VALUER . . . . . . . . . . . . . . . . . . . .VIII-3	STATEMENT OF THE REGISTERED ASSETS VALUER . . . . . . . . . . . . . . . . . . . .VIII-3
SUMMARY OF THE VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .VIII-4
TEXT OF	THE VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .VIII-6
1.	THE ENTRUSTING PARTY, THE TITLE HOLDING ENTITY,
	AND THE STATUS OF OTHER VALUATION REPORT USERS . . . . .VIII-6
2.	PURPOSE OF VALUATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .VIII-9
3.	OBJECT AND SCOPE OF VALUATION . . . . . . . . . . . . . . . . . . . . . . . . .VIII-10
4.	TYPES OF VALUE AND ITS DEFINITION . . . . . . . . . . . . . . . . . . . . . . .VIII-13
5.	VALUATION BASIS DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .VIII-13
6.	VALUATION BASIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .VIII-13
7.	VALUATION METHOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .VIII-16
8.	IMPLEMENTATION PROCESS OF THE VALUATION PROCEDURES
	AND THE STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .VIII-26
9.	VALUATION ASSUMPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .VIII-27
10.	VALUATION CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .VIII-28
11.	EXPLANATIONS OF SPECIFIC MATTERS . . . . . . . . . . . . . . . . . . . . . .VIII-28
12.	RESTRICTIONS ON THE USE OF VALUATION REPORT . . . . . . . . . . .VIII-30
13.	DATE OF VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .VIII-30

– VIII-2 –

APPENDIX VIII

VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

STATEMENT OF THE REGISTERED ASSETS VALUER

The registered assets valuer of Beijing Zhuoxindahua Appraisal Co., Ltd.* made the following statements for the valuation report in relation to the proposed purchase of Intelligent Building Business assets portfolio in Tsinghua Tongfang Co., Ltd by Technovator International limited:

We possess the relevant qualifications for practice. We perform the asset valuation for the business in accordance with the relevant laws and regulations and assets valuation standards based on independent, objective and fair principles. The content stated in the valuation report is objective with reference to the information collected during the valuation process. We bear corresponding legal responsibility for the reasonability of the conclusions of the valuation.
The list of assets and liabilities related to the valuation object is reported, signed and sealed and confirmed by the entrusting party and the title holding entity. The entrusting party and the related parties should be responsible for the truth, legality and completeness of the information provided and proper usage of the valuation report.
We do not have any existing or expected interest relationship with the valuation object in the valuation report; we do not have any existing or expected interest relationship with the related parties in the valuation report. We hold no prejudice against the related parties.
We have performed on-site investigation on the valuation object and its related assets. We have given the required concern over the legal ownership of the valuation object and its related assets and examined the legal ownership of the valuation object and its related assets in which it involves, and truthfully disclosed the issues found. We have also submitted to the entrusting party and the related parties to adopt measures to perfect the ownership in order to fulfill the requirement for the issue of the valuation report.
The analysis, judgments and conclusions in the valuation report issued by us are subject to the assumptions and limitations in the valuation report. The valuation report users should give sufficient consideration to the assumptions, limitations and explanatory notes to special matters and their effects on the conclusions of the valuation. The suggestions in the valuation report are only for the basis of value determination for the parties of this transaction. Therefore, the valuation conclusion should not be regarded as a guarantee of the attainable price on the valuation object.

– VIII-3 –

APPENDIX VIII VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

SUMMARY OF THE VALUATION REPORT FOR The Proposed Purchase of the Intelligent Building Business Assets Portfolio in Tsinghua Tongfang Co., Ltd By Technovator International Limited

Beijing Zhuoxindahua Appraisal Co., Ltd.* was engaged by Technovator International Limited to perform valuation on the Intelligent Building Business assets portfolio in connection with the economic activity of the proposed purchase of the Intelligent Building Business in Tsinghua Tongfang Co., Ltd by Technovator International Limited. The material information and valuation conclusions in the text of the valuation report are now extracted as follows.

Economic Activity: Technovator International Limited proposed to purchase the Intelligent Building Business assets portfolio in Tsinghua Tongfang Co., Ltd.

Valuation Purpose: to provide a fair reflection for the market value of Intelligent Building Business assets portfolio in connection with the economic activity of the proposed purchase of the Intelligent Building Business in Tsinghua Tongfang Co., Ltd by Technovator International Limited on the Valuation Basis Date and to provide valuation reference advice for the economic activity.

Object and scope of valuation: the object of valuation is assets portfolio value of Intelligent Building Business designated by the entrusting party. The valuation scope is the assets portfolio of Intelligent Building Business in Tsinghua Tongfang Co., Ltd. The carrying amount of total assets in assets portfolio entrusted for valuation was approximately RMB245,153,000, of which current assets was approximately RMB192,764,000 and non-current assets was approximately RMB52,389,000; the total carrying amount of liabilities was approximately RMB110,413,000, of which current liabilities was RMB110,413,000. The the carrying amount of net assets was approximately RMB134,740,000.

Type of value: the market value under the premise of going-concern of the object of valuation.

Valuation Basis Date: 31 March 2015.

Valuation method: income method was adopted.

Valuation conclusion: this valuation report adopted the income method. Under the premise that the valuation assumptions and limitations are valid, the carrying amount of the Intelligent Building Business assets portfolio of Tsinghua Tongfang Co., Ltd proposed to be purchased by Technovator International Limited as at the Valuation Basis Date was RMB134,740,000; the appraised value was RMB173,000,000; the appraised appreciation was RMB38,260,000 or 28.39%.

Please see the valuation report for the details of valuation conclusion.

– VIII-4 –

APPENDIX VIII VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

The useful life of the valuation conclusion: the useful life of this valuation conclusion is one year commencing from the Valuation Basis Date. Assets should be evaluated again after a year.

Specific matters affecting the valuation conclusion: the attention of the user of the valuation report is drawn to the effect of the special matters of the text of report on the valuation conclusion.

– VIII-5 –

APPENDIX VIII VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

TEXT OF THE VALUATION REPORT The Proposed Purchase of Intelligent Building Business Assets Portfolio In Tsinghua Tongfang Co., Ltd. By Technovator International Limited Zhuoxindahua Valuation Report Zi (2015) No. 2035-3**

Technovator International Limited:

Beijing Zhuoxindahua Appraisal Co., Ltd.* was engaged by the Company to perform valuation on the market value of the assets portfolio in Intelligent Building Business whereby Technovator International Limited engaged in the economic activity of proposing to purchase the Intelligent Building Business of Tsinghua Tongfang Co., Ltd on 31 March 2015 in accordance with the relevant laws, regulations, assets valuation standards and principles, adopting income method and following the necessary valuation procedures. The valuation of the assets is reported as follows.

1. THE ENTRUSTING PARTY, THE TITLE HOLDING ENTITY AND THE STATUS OF OTHER VALUATION REPORT USERS

1. Entrusting party

Chinese company name:	同方泰德國際科技有限公司
English company name:	Technovator International Limited
Registered country:	Singapore
Registered address:	66 Tannery Lane #04-10/10A Sindo Industrial
	Building Singapore
Legal representative:	Lu Zhicheng
Nature of business:	Hong Kong listing company
Stock Code:	1206.HK

– VIII-6 –

APPENDIX VIII

VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

2. The title holding entity

Name: Tsinghua Tongfang Co., Ltd. Registered Address: A-30 Tsinghua TongFang Hi-Tech Plaza, Haidian District, Beijing Legal representative: Lu Zhicheng Registered capital: $2,963,898,951 Date of incorporation: 25 June 1997 Business operation period 25 June 1997 to long term Type of business: other limited company (listing)

Business Scope: Engaged in internet information service business but not including the contents such as news, publication, medical and healthcare, drugs, and medical equipment; dispatch of labors required for implementing overseas projects associated with export of self-manufactured equipment; production and sales of commercial encryption products; public safety equipment, transportation engineering equipment, building intellectualization and municipal engineering’s mechanical and electrical equipment, electrical engineering’s mechanical and electrical equipment, and energy saving; artificial environmental control equipment, electronic products for communications, microelectronic integrated circuit, office equipments, devices and instruments, production of electromechanical integration equipment; manufacture of water fountain; Intel access service of the Type II value-added telecommunication services (1 municipal city of Beijing, 2 cities of Changchun and Nanchang) (the operating licence for value-added telecommunication services will expire by 3 May 2017); manufacture, sales, technical service and maintenance of computers and peripheral equipment; public safety equipment, transportation engineering equipment, building intellectualization and municipal engineering’s mechanical and electrical equipment, electrical engineering, mechanical and electrical equipment, and energy saving; sale and engineering installations of artificial environmental control equipment, electronic products for communications, microelectronic integrated circuit, and office equipment; development and sales of devices and instruments, and electromechanical integration equipment; sales of fire protection products; consultancy of advanced technologies, transfer and services of new and advanced technologies, property management, import and export business, contracting and construction for mechanical and electrical installation works; building intellectualization, urban and road lighting, contracting of electronic engineering; indoor air purification project; computer system integration; design for intelligent building system integration project (not including fire protection sub-system); design, installation, and refinement of water fountain; security engineering (design and construction); design and installation of common antenna for cable television; advertising broadcast and agency; vessel rental; engineering investigation and design; design and sales of lighting equipment; basic software services; application software services; sales of mechanical equipment, metal, alternating current, household appliance, software, and auxiliary equipment, television broadcast equipment, telecommunications equipment, and electronic products. (For those

– VIII-7 –

APPENDIX VIII

VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

projects requiring approval according to law, the operating activities can be commenced after the approval of the relevant departments according to the approved content.)

Structure of operation management: Tsinghua Tongfang Co., Ltd. adopted corporate governance structure which includes the shareholders committee, the board of directors, and the supervisory committee.

Intelligent Building Business: provide the overall solutions for building intelligence system which focused on the construction equipment control system self-developed and refined by Tsinghua Tongfang Co., Ltd. with the energy saving algorithm.

Tsinghua Tongfang Co., Ltd., one of the earliest enterprises engaging in the area of intelligent buildings in China, has 25 years of extensive experience in the industry, and has carried out over a thousand domestic and overseas major projects. In addition to its numerous landmark projects in the industry, Tongfang has ranked number one in terms of total number of constructions in the intelligent buildings industry in China for four consecutive years, attaining an extensive brand recognition and reputation. As a pioneer in Intelligent Building Business, Tongfang fully utilized its comprehensive strengths of automatic control, artificial environment and energy management, successfully combining the products, technology, construction management, and intellectualized application. From covering innovative products in a number of professional areas to the professionalized technological solutions, as well as from a strong project life cycle management system to comprehensive after-sales services, Tongfang utilizes its professional perspective, professional philosophy, and professional spirit to make every single step perfect. With its technological integration competence, Tongfang creates a number of hi-tech charming professionalized intelligent buildings. With the rapid advancement of intelligent technology nowadays, Tongfang insists on keeping abreast with the times, to accommodate the new changes and to meet the new demands of the industry, and to accelerate self-innovation. Tongfang not only endeavours to develop advanced technology like IP-based Intelligent Building Business products and Tri-networks integration, it also aggressively promotes the national building energy-saving industry by its diversified engineering services model, such as contractual energy management business model.

– VIII-8 –

APPENDIX VIII

VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

The assets, financial and operating conditions of the asset portfolio for the recent three years and as at the Valuation Basis Date:

Unit: RMB’000

	31 December	31 December	31 December	31 March
Item	2012	2013	2014	2015
Current assets	157,994.00	200,466.00	183,264.00	192,764.00
Non-current assets	38,514.00	28,839.00	52,316.00	52,389.00
Total assets	196,508.00	229,305.00	235,580.00	245,153.00
Current liabilities	50,676.00	84,325.00	94,609.00	110,413.00
Non-current liabilities	0.00	0.00	0.00	0.00
Total liabilities	50,676.00	84,325.00	94,609.00	110,413.00
Net assets	145,832.00	144,980.00	140,971.00	134,740.00
				January to
Items	2012	2013	2014	March 2015
Operating income	101,046.00	88,353.00	126,451.00	38,833.00
Total profit	–8,829.00	–7,830.00	3,997.00	1,654.00
Net profit	–8,829.00	–7,830.00	3,788.00	1,388.00

3. The relationship between the entrusting party and the title holding entity

Tsinghua Tongfang Co., Ltd. (the title holding entity) is a controlling shareholder of Technovator International Limited (the entrusting party).

4. Other Valuation Report Users other than the entrusting party

2. PURPOSE OF VALUATION

According to the “Minutes of the Board Meeting of Technovator International Limited” dated 28 July 2015, the purpose of this valuation is to provide a fair reflection for the market value of Intelligent Building Business assets portfolio in connection with the economic activity of the proposed purchase of the Intelligent Building Business in Tsinghua Tongfang Co., Ltd by Technovator International Limited on the Valuation Basis Date, 31 March 2015, and to provide valuation reference advice for the economic activity.

– VIII-9 –

APPENDIX VIII VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

3. OBJECT AND SCOPE OF VALUATION

1. Object of Valuation

The object of this valuation is the value of the Intelligent Building Business assets portfolio in Tsinghua Tongfang Co., Ltd. in respect of the economic activities specified by the entrusting party.

2. Scope Of Valuation

The scope of this valuation is the Intelligent Building Business asset portfolio of Tsinghua Tongfang Co., Ltd.

Related agreements/projects of Intelligent Building Business include: The agreements/projects related to the subject business engaging by Tsinghua Tongfang Co., Ltd. and the third party, including the agreements that have been signed but not yet completed as at the Valuation Basis Date, the now being under the bidding or negotiation stage with business contracts awaiting to be signed, and the projects under the business contracts newly signed, under the bidding or negotiation stage during the period between the Valuation Basis Date and the closing date.

Related assets of the Intelligent Building Business include: the related assets and liabilities of the Intelligent Building Business owned and proposed to be transferred, and other intangible assets related to the products and technological achievement in the Intelligent Building Business.

– VIII-10 –

APPENDIX VIII

VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

The assets and liabilities of such assets portfolio as at the Valuation Basis Date are as follows:

Amount Unit: RMB’000

Name of Items	Carrying Value	Name of Items	Carrying Value
Total current assets	192,764.00	Total current liabilities	110,413.00
Cash and cash		Short-term borrowings
equivalents
Bills receivable		Bills payable
Accounts receivable	144,045.00	Accounts payable	100,404.00
Prepayments	11,496.00	Receipts in advance	9,385.00
Other receivables	1,362.00	Payroll payable
Interest receivable		Tax payable
Inventories	35,861.00	Other payables	624.00
Other current assets		Non-current liabilities
		due within one year
Total non-current assets	52,389.00	Total non-current	0.00
		liabilities
Long-term receivables		Long-term borrowings
Long-term equity		Estimated liabilities
investment
Fixed assets	343.00	Deferred income tax
		liabilities
Construction in progress		Other non-current
		liabilities
Intangible assets	52,046.00
Deferred income tax		Total liabilities	110,413.00
Other non-current assets		Total owner’s equity	134,740.00
Total assets	245,153.00	Total liabilities and	245,153.00
		owner’s equity

The object and scope of this valuation are consistent with those in relation to the economic activities of asset portfolio of Intelligent Building Business in Tsinghua Tongfang proposed to be purchased by Technovator International Limited.

The asset portfolio proposed to be transferred by Tsinghua Tongfang in the Valuation Basis Date and the financial statements for the previous three years were audited by KPMG Huazhen LLP.

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VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

(3) Legal ownership, economic and physical condition of principal assets

1. Inventories

Inventories mainly refer to issued goods and unsettled engineering projects. Issued goods are mainly the equipment for intelligent construction and spare parts like video recorder, galvanizing ladder and access control equipment. Unsettled engineering projects are the construction-in-progress but not settled engineering projects of Tsinghua Tongfang Co., Ltd.

2. Electronic Equipment

(4) Book Entry or Non-recorded Intangible Asset Declared by the Title Holding Entity

The intangible assets declared in the book entry by the title holding entity are specialized technologies and expenditure on development. There are seven items of it and expenditure on development are expenditure on research and development for LONWORK building monitoring platform system.

(5) Off Balance Sheet Asset Declared

(6) Quotation of Reports Prepared by Other Entities

The assets and liabilities included in the valuation scope does not involve any report prepared by other entities.

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APPENDIX VIII VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

4. TYPES OF VALUE AND ITS DEFINITION

General types of value to be used for assessing asset portfolio include market value and non-market value.

For the purpose of this valuation, the type of value of the subject of valuation is the market value under the premise of going-concern.

5. VALUATION BASIS DATE

The Valuation Basis Date of this project is 31 March 2015.

Pricing standard adopted in this valuation comprises price, tax rate, rates and interest rate of deposits and loans, all of which are effective price standards as at the Valuation Basis Date.

6. VALUATION BASIS

(I) Basis of the activity

The Minutes of the Board Meeting of Technovator International Limited dated 28 July 2015;
The Engagement Letter on Asset Valuation 《資產評估業務約定書》( ) entered into between the entrusting party and Beijing Zhuoxindahua Appraisal Co., Ltd.*

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VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

(II) Principal Legal and Regulatory Basis

Company Law of the People’s Republic of China 《中華人民共和國公司( 法》)
Securities Law of the People’s Republic of China 《中華人民共和國證券( 法》);
Enterprise Income Tax Law of the People’s Republic of China (《中華人民共和國企業所得稅法》);
Law of the People’s Republic of China on the State-Owned Assets of Enterprises 《中華人民共和國企業國有資產法》( );
Administrative Measures for Appraisal of State-Owned Assets 《國有資( 產評估管理辦法》) (Order No. 91 of the State Council);
Implementation Rules for the Administrative Measures for Appraisal of State-Owned Assets 《國有資產評估管理辦法實施細則》( ) (Guo Zi Ban Fa [1992] No. 36) originally promulgated by the National State-Owned Asset Administration Bureau;
Rules on Certain Issues relating to the Appraisal of State-Owned Assets (《國有資產評估管理若干問題的規定》) (Order [2001] No. 14 of the Ministry of Finance);
Notice of the General Office of the State Council on Forwarding the Opinions of the Ministry of Finance on Reforming State-Owned Assets Valuation Administration Method and Strengthening Asset Valuation Administration Work 《國務院辦公廳轉發財政部關於改革國有資產評估( 行政管理方式加強資產評估監督管理工作意見的通知》) (Guo Ban Fa [2001] No. 102) issued by the General Office of the State Council;
Provisional Measures for Transfer of State-Owned Assets in Enterprises (《企業國有產權轉讓管理暫行辦法》) Order [2003] No.3 jointly issued by the State-Owned Assets Supervision and Administration Commission and the Ministry of Finance;
Provisional Regulations on Monitoring and Administration of State-Owned Assets 《企業國有資產監督管理暫行條例》( ), Order [2003] No. 378 of the State Council;
Provisional Measures for Administration of State-Owned Assets Appraisal (《企業國有資產評估管理暫行辦法》), Order [2005] No. 12 of the State-Owned Assets Supervision and Administration Commission;

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APPENDIX VIII VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

Notice on Certain Issues regarding Strengthening State-Owned Enterprise Asset Appraisal Administration Work 《關於加強企業國有資( 產評估管理工作有關問題的通知》) (Guo Zi Fa Chan Quan [2006] No. 274);
Guidelines on Filing on Record for State-Owned Enterprise Assets Appraisal Projects 《企業國有資產評估項目備案工作指引》( ) (Guo Zi Fa Chan Quan [2013] No. 64);
Other applicable laws and regulations

(III) Standards Basis

Assets Appraisal Standards – Basic Standards 《資產評估準則－基本準( 則》) and Code of Ethics for Assets Appraisal – Basic Standards (《資產評估職業道德準則－基本準則》) (Cai Qi [2004] No. 20);
Notice of the China Appraisal Society on issuing Seven Assets Appraisal Standards including Assets Appraisal Standards – Appraisal Report (《資產評估準則－評估報告》) (Zhong Ping Xie [2007] No. 189);
Guiding Opinions on Determination of Title ownership of the Object of Appraisal by Certified Public Appraisers 《資產評估準則－評估報告》( ) (Kuai Xie [2003] No. 18);
Guide to Service Quality Control in Appraisal Institutions 《評估機構業( 務品質控制指南》) (Zhong Ping Xie [2010] No. 214);
Code of Ethics – Independence 《職業道德準則－獨立性》( ) (Zhong Ping Xie [2012] No. 248);
Notice of China Appraisal Society on Modifying the Signature Clause in the Standards for Appraisal Report 《中評協關於修改評估報告等準則中( 有關簽章條款的通知》) (Zhong Ping Xie [2011] No. 230);
Asset Appraisal Standards – Making Use of Experts (《資產評估準則－利用專家工作》) (Zhong Ping Xie [2012] No. 244).

(IV) Basis of Ownership

EPC contracts for Intelligent Building Business;
Other title ownership certificates.

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APPENDIX VIII

VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

(V) Pricing Basis

Relevant national industry policies, industry analysis and parameters;
The lending rate published by the People’s Bank of China as at the Valuation Basis Date;
Data provided by Wind Information Co., Ltd.* (上海萬得信息技術股份有限公司);
EPC contracts for Intelligent Building Business;
Other information such as related contracts and accounting evidence obtained from, and used by, the title holding entity.

(VI) Other references

The assets appraisal breakdown statement provided by the title holding entity;
Future development plans and forecasts provided by the title holding entity;
On-site investigation and survey forms and other information collected and compiled by the appraisers;
Other information relevant to appraisal.

7. VALUATION METHOD

(I) Analysis of the applicability of appraisal approach

In accordance with the requirements of Asset Valuation Standards, Intelligent Building Business portfolio can be valued under three methods, i.e., income method, market method and cost method. Income method is the quantification and calculation of the present value of the expected profitability of the Intelligent Building Business being assessed. It stresses on the assessment of the overall expected profitability of the Intelligent Building Business. Market method refers to a method of valuation in which the present fair market value of the valuation target is valued by comparing it with the references in the real market. The characteristic of this method is that the valuation data is directly sourced from the market, and the result of valuation is strongly convincing. Cost method refers to the perspective in which the value of the object of valuation is ascertained on the basis of reasonable valuation of the assets and liabilities.

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APPENDIX VIII

VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

In light of the characteristics of the economic activity corresponded to the objective of this valuation and the information regarding the operation of the object of valuation collected on the valuation site, and because the data relating to comparable transaction precedents for comparison is not available, and whether there is any non-market value factors is unknown, market method cannot be adopted accordingly.

Intelligent Building Business appraised is a group of Intelligent Building Business assets portfolio which has independent profitability, and the income and risk for the coming year can be reliably estimated, which satisfies the conditions for adopting income method. Accordingly, the income method is applicable to the valuation.

In light of the above valuation perspectives, the income method is adopted to value the object of this valuation.

(II) Technologies and Models of the Income Method

The valuation of the business assets portfolio which is proposed to be transferred is undertaken by adopting the discounted cash flow (DCF) approach, based on the features of the Intelligent Building Business assets portfolio and the means of income.

DCF is a method of estimating the intelligent buildings business assets portfolio by discounting its expected cash flow to present value, that is, the value of the intelligent buildings business assets portfolio is determined by estimating the entity’s prospective cash flow and discounting it to present value using an appropriate discount rate. The basic conditions for applying this method are: the intelligent buildings business assets have the basis and condition for sustainable operation; there is stable corresponding relationship between operation and income; and that the income and risk in future can be predicted and quantified. The key to the application of DCF lies in the prediction of the cash flow in future as well as the objectivity and reliability of data gathering and processing. When the prediction of cash flow in future is objective and fair, and the adoption of discount rate is relatively reasonable, the result of valuation tends to be objective and be accepted by the market easily.

– VIII-17 –

APPENDIX VIII VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

Basic calculation model

The basic calculation model in this valuation is:

==> picture [66 x 17] intentionally omitted <==

P: Value of operating assets in assets portfolio

==> picture [126 x 30] intentionally omitted <==

Where,

Ri: Prospective income of the i[th] year in the future;

Rn: Net realizable value of the Intelligent Building Business assets portfolio after the yield period;

r: Discount rate;

n: Future forecast yield period

∑ Ci : Value of non-operating and residual assets of the Intelligent Building Business assets portfolio existing on the Valuation Basis Date.

==> picture [58 x 11] intentionally omitted <==

Where,

C1: Value not included in the prospective income;

C2: Value of obsolete and idling assets as at the Valuation Basis Date;

(III) The Appraisal Process of Income Method

1. The Determination of Income Period

The perpetual period is adopted as the income period. Of which, the first stage is from April 2015 to December 2019. During this stage, pursuant to the historical results and future market analysis of the Intelligent Building Business assets portfolio, the income position will become stable gradually. The second stage is from January 2020 to perpetual operations. During this stage, the net cash flow of the Intelligent Building Business assets portfolio will remain stable on the basis of 2019.

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APPENDIX VIII

VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

2. Future Income Forecast

(1) The Relevance of Production Business Model and Income Subject and Parameter

Pursuant to the principle of income amount being in line with the discount rate parameter, the future expected income parameter of this valuation of Intelligent Building Business assets portfolio will be the equity free cash flow of the Intelligent Building Business assets portfolio, and the equity capital return rate is adopted for discount rate.

Free cash flow of the Intelligent Building Business assets portfolio = net profit + depreciation and amortization– capital expenditure – net increase of operating capital + increase (decrease) of interest-bearing debts

Expected net profit = operating income – operating costs – operating expenses – administrative expenses - finance expenses – income tax

(2) Operating Income Forecast

The operating income was mainly the income from contracting work projects of Intelligent Building Business. This valuation was made to forecast the operating income in the coming year based on the analysis of signed contracts and their execution in the previous years and according to and the assessment of the increment of signed contracts volume and revenue of the contracts of Intelligent Building Business in the previous years as well as on Valuation Basis Date, taking into account the future development plan of Intelligent Building Business.

(3) Operating Costs Forecast

Operating costs mainly include the subcontracting of the contracting work projects and procurement costs of Intelligent Building Business. According to the characteristics of Intelligent Building Business, this valuation was made to forecast the operating costs in the coming year based on the analysis of the movement trend of operating cost in the previous years and the proportion of operating income, taking into account the forecast of future development plans and operating income of Intelligent Building Business.

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APPENDIX VIII

VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

(4) Operating Expenses Forecast

(5) Administrative Expenses Forecast

(6) Finance Expenses Forecast

Finance expenses mainly include interest of borrowings. This valuation was made to forecast the interest of borrowings in the coming year based on the future development plan of Intelligent Building Business, taking into account the analysis of the structure of intelligent construction industry and the forecast of the amount of capital requirements and the scale of borrowings and repayments.

(7) Income Tax Forecast

Tsinghua Tongfang Co., Ltd, the title holding entity of Intelligent Building Business, was qualified on the Valuation Basis Date as a new and advanced technology enterprise effective from 2014 for the term of three years, and accordingly, Intelligent Building Business was entitled to a concessionary rate of enterprise income tax rate at 15%. The forecast was based on the assumption that Intelligent Building Business would continue to operate, which meant that it would continue to operate at the condition as at Valuation Basis Date. Also it assumed that the title holding entity of Intelligent Building Business could continue to be recognized as a new and advanced technology enterprise and that Intelligent Building Business could continue to be entitled to tax concessions.

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APPENDIX VIII

VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

(8) Depreciation Forecast

The forecast is performed in accordance with the accounting policies adopted by the Intelligent Building Business and based on the book value of fixed assets on the Valuation Basis Date, historical consolidated depreciation rates for previous years and depreciation period.

(9) Capital Expenditure Forecast

(10) Addition of Working Capital Forecast

Increased working capital = working capital for the current period – working capital for the last period

Working capital = cash + receivables + inventories - payables

Of which: receivables = total operating income/turnover of receivables

Inventories = total operating costs/turnover of inventories

Payables = total operating costs/turnover of payables

Receivables mainly include: trade receivables, bills receivables, long-term receivables and other trade receivables associated with operating activities.

Payables mainly include: trade payables, bills payables and other trade payables associated with operating activities.

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APPENDIX VIII

VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

3. Determination of Discount Rate

Capital Asset Pricing Model (CAPM) is adopted for this valuation.

The formula is as follows:

Re= Rf+β×MRP+Rc

Rf: risk-free rate of income

MRP: Rm-Rf: average market risk premium

Rm: expected market rate of return

β: expected market risk coefficient

Rc: Risk adjustment coefficient specific to enterprises

(1) Determination of Risk-free Rate of Return

The calculation table of average interest rate (yield to maturity) of intermediate-term and long-term treasury bonds:

Name of			Remaining	Yield to
Treasury bonds	Code	Term	Term	maturity
				(%)
Treasury bonds 1425	101425	30	29.6	3.21%
Treasury bonds 1014	101014	50	45.18	4.03%
09 Treasury bonds 30	19930	50	44.7	4.30%
09 Treasury bonds 25	19925	30	24.56	4.52%
09 Treasury bonds 20	19920	20	14.42	4.00%
09 Treasury bonds 05	19905	30	24.04	4.02%

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APPENDIX VIII

VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

4.24%

Average

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APPENDIX VIII

VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

(2) Determination of Average Market Risk Premium

Market risk premium is the rate of return required by investors which is higher than risk-free interest rate, in relation to a fully risk-diversified market investment portfolio.

Market risk premium = basic compensation in the mature stock market + national risk compensation. Market risk premium of this valuation is 7.15%.

(3) Determination of Beta Coefficient

β Index conversion formula:

βL =βU [1+(1-T)×Wd / We]

(4) Determination of Risk Specific to the Business and Assets Portfolio

Risk specific to the company represents the impact on the expected revenue of the object of valuation due to possible uncertainties during the operation of such company, such as changes in market demand, changes in supply conditions of production factors, competition among peers, monetary circulation and turnover of capital. After a thorough consideration of the production and operation scale, status of operation, financial position and liquidity of the business and assets portfolio, the specific risk coefficient of such portfolio is determined.

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APPENDIX VIII

VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

(5) Determination of Discount Rate of Cost of Equity Capital

The selected risk-free return rate and risk return rate are substituted in the formula of discount rate estimation:

Re=Rf+β×MRP+RC

4. Determination of the Appraisal Value of the Non-operation Assets and Liabilities

5. Determination of the Appraisal Value of the Intelligent Building Business Portfolio

Intelligent Building Business Assets Portfolio Value = Operating Asset Value + Non-operating Asset Value – Non-operating Liabilities Value

(IV) Calculation Process of the Appraisal Value and the Outcome

1. Determination of the Appraisal Value of Operating Assets

2. Determination of the Appraisal Value of Non-operating Assets and Liabilities

(V) Conclusion for the Selection of Valuation Method

In view of the foregoing, the proposed purchase of the Intelligent Building Business assets portfolio in the Tsinghua Tongfang Co., Ltd* by Technovator International Limited is valued and concluded using the income method.

– VIII-25 –

APPENDIX VIII VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

8. IMPLEMENTATION PROCESS OF THE VALUATION PROCEDURES AND THE STATUS

For the purpose of purchasing the Intelligent Building Business in Tsinghua Tongfang Co., Ltd, the entrusting party decided to entrust us to appraise the value of the Intelligent Building Business portfolio in Tsinghua Tongfang Co., Ltd after contacting with us. After accepting the commission, and according to the characteristics of the economic activity of this valuation project, we confirmed the purpose of the valuation and the value type of the object of valuation, acquired a preliminary understanding regarding the specific contents of the object of valuation and scope of valuation, determined the Valuation Basis Date after negotiating with the entrusting party, proposed a valuation plan and entered into a Valuation Engagement Agreement.
Pursuant to the requirements of Asset Valuation Standard-Valuation Procedures, we provide the title holding entity with materials required for declaration concerning assets valuation, direct the title holding entity to verify the assets, conduct a forecast on profit of the assets portfolio and fill in the relevant forms; upon completion of the aforesaid preliminary preparation works our appraisers enter into the valuation site, commence on-site survey, conduct necessary investigation through enquiry, confirmation, verification, monitoring, survey and inspection to have an understanding of the economic and technical utilization conditions and legal title status of the assets, analyze the specific conditions of the object of valuation, collect the recent financial data information of the object of valuation as well as those as at Valuation Basis Date, check whether the valuation information declared by the title holding entity matches with the accounting information provided by the title holding entity, verify whether all the information collected is true and complete and pay necessary attention to the legal title status of the assets.
According to the valuation-related requirements of laws, standards, and pricing basis, we adopt the appropriate valuation methods based on the specific conditions of the assets, collect the market price information as the basis of its value determination, and conduct valuation and estimation on the carrying value after verification to confirm the valuation value.
We summarize the valuation results, analyze the conclusions of valuation, prepare the valuation report, implement the internal tri-tier audit, and submit the valuation report.

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APPENDIX VIII

VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

9. VALUATION ASSUMPTIONS

Assuming that the object of this valuation will continue as a going concern in the future.
Assuming that both transaction parties have equal status regarding the assets that are transacted or are intended to be transacted in the market. Each of them has adequate opportunity and time to access the market information to make rational judgments regarding the transaction value of the object of valuation.
Assuming there are no significant changes in the current relevant PRC laws, regulations and policies and national macroeconomic situation, and no significant changes in the political, economic and social environment in the regions where the parties of this transaction are located.
Assuming that the purchase and acquisition process of assets involved in the object of this valuation are in line with the relevant laws and regulations of the country; both bear no defects of rights, liabilities and restrictive conditions that may affect the value, and it is presumed that taxes and various payables relating to that have been fully recorded.
Assuming the object of this valuation is a complete Intelligent Building Business assets portfolio.
The fees including operation and management fees of the object of valuation in the coming operating periods will remain relatively stable, and change reasonably following the changes in business scale.
Sales income from the object of this valuation is generated in each interim forecast period, and there is no material change in accounting policy and accounting review approach.
The estimation of estimated income is based on the premise of normal operation and management of the assets of the Intelligent Building Business portfolio as at the Valuation Basis Date, taking into no account of the impacts towards the change of the overall asset value of the Intelligent Building Business portfolio due to accidental factors such as further investments or reduction of assets.

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APPENDIX VIII VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

Assuming that there will be no material obstacles relating to the collection of payments during the discounted term.
Unless otherwise stated, it is assumed that the object of this valuation is in full compliance with all relevant laws and regulations.
Assuming that the accounting policies to be adopted by the object of this valuation in the future are basically identical to those adopted during the preparation of this report in material aspects.
Assuming that the title holding entity of Intelligent Building Business would continue to be recognized as a new and advanced technology enterprise and that Intelligent Building Business could continue to be entitled to tax concessions.
Assuming there are no significant changes in relevant interest rates, tax basis and tax rates, levy policies, etc.
There will be no other factors of force majeure or unforeseeable factors that may give rise to material adverse impact on the title holding entity.

10. VALUATION CONCLUSION

Upon the implementation of the aforesaid assets valuation methods and procedures, for the purpose of the proposed purchase of assets portfolio of the Intelligent Building Business in Tsinghua Tongfang Co., Ltd* by the entrusting party, the following conclusions of valuation are formed with reference to the market value as at 31 March 2015:

Through the valuation process with income method and under the premise of the valuation assumptions and limiting conditions being valid, the carrying value of the Intelligent Building Business assets portfolio in Tsinghua Tongfang Co., Ltd proposed to be purchased by Technovator International Limited as at the Valuation Basis Date is RMB134,740,000; the appraised value is RMB173,000,000, and the appraised appreciation is RMB38,260,000, or 28.39%.

11. EXPLANATIONS OF SPECIFIC MATTERS

The result of this valuation by income method did not take into account the discount factor of liquidity due to the unavailability of adequate relevant statistics of market transactions, and the absence of the basis of analysis and judgement concerning the extent of impact of liquidity on the value of the object of valuation.

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VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

With regard to the possible existence of other defects concerning the entrusting party and the title holding entity which may affect the conclusions of valuation, without any specific explanation by the entrusting party and the title holding entity and in the absence of any knowledge by the appraisers after performing the valuation procedures, the valuation institution and the appraisers shall assume no respective responsibility.
The conclusions of this valuation did not take into account the impact of certain matters that may affect the conclusions of valuation, such as mortgage and warranty issues that may be undertaken in the future, and special transaction parties that may increase or decrease the price paid, nor has it taken into account the impact of change in national macroeconomic policy as well as natural force and other force majeure on the value of the object of valuation. In the event of any change of the aforesaid conditions as well as other assumptions and pre-conditions such as the going concern principle as abided during the valuation, the conclusions of valuation will, in general, become invalid and the users of the report should not use this valuation report, otherwise they have to bear all the consequences arising therefrom.
The conclusions of this valuation did not take into account any tax liability that arises as a result of the increase or decrease in the value of the valuation and the users of this project valuation report should consider the impact of the relevant tax liability when using the valuation report.
During the period from the Valuation Basis Date to the date of this valuation report, the entrusting party and the title holding entity did not declare any subsequent event that would have significant impact, nor were the appraisers able to discover any subsequent event that will have a significant impact.
In the event of any material changes in the quantity of assets during the period from the date of valuation report to the effective period of the valuation report, the assets amount should be adjusted accordingly. In the event that there are changes in the pricing standard of assets and has an obvious impact on the conclusion of assets valuation, then a re-assessment should be conducted.

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APPENDIX VIII VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

12. RESTRICTIONS ON THE USE OF VALUATION REPORT

The valuation report shall only be used for valuation objective and purpose as specified.
The valuation report shall be only used by the users of the valuation report as specified therein, unless otherwise as required in the PRC laws and regulations.
The valuation report can only be used officially after obtaining the prior approval if it has to be submitted for the approval or record by any relevant authorities in accordance with the current PRC statutory requirements.
Save as otherwise provided by the laws and regulations or agreed by the relevant parties, the contents of the valuation report shall not be extracted, referenced to or disclosed to public media without the consent from the valuation institution.
According to Rule 11 of “Assets Valuation Standards-Valuation Report” issued by China Appraisal Society, the valuation report can be used for a validity period of one year, i.e. from the Valuation Basis Date of 31 March 2015 as stated therein to 30 March 2016 and the valuation report shall not be used after the validity period as stated therein.
The right to construe the valuation report shall be vested on the valuation institution of this project only, save as otherwise required by the PRC laws and regulations.
The Chinese valuation report shall prevail over the English version.

13. DATE OF VALUATION REPORT

29 July 2015.

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APPENDIX VIII VALUATION REPORT OF THE INTELLIGENT BUILDING BUSINESS

Legal Representative of the Valuation Institution:

Legal Representative of the Valuation Institution: (Lin Mei) PRC Certified Asset Appraiser: (Liu Chunru) PRC Certified Asset Appraiser: (Xue Lupeng)

Beijing Zhuoxindahua Appraisal Co., Ltd.* 29 July 2015

For identification purposes only

– VIII-31 –

APPENDIX IX

VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

VALUATION REPORT FOR

THE VALUATION OF The Proposed Purchase of The Intelligent Urban Heating Network Business Assets Portfolio in Tsinghua Tongfang Co., Ltd. By TECHNOVATOR INTERNATIONAL LIMITED ZHUOXINDAHUA VALUATION REPORT ZI (2015) NO. 2035-2

BEIJING ZHUOXINDAHUA APPRAISAL CO., LTD.* 29 July 2015

For identification purposes only

– IX-1 –

APPENDIX IX

VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

STATEMENT OF THE REGISTERED ASSETS VALUER . . . . . . . . . . . . . . . . .	STATEMENT OF THE REGISTERED ASSETS VALUER . . . . . . . . . . . . . . . . .	IX-3
SUMMARY OF THE VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . .		IX-4
TEXT OF	THE VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IX-6
1.	THE ENTRUSTING PARTY, THE TITLE HOLDING ENTITY,
	AND THE STATUS OF OTHER VALUATION REPORT USERS . . .	IX-6
2.	PURPOSE OF VALUATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IX-9
3.	OBJECT AND SCOPE OF VALUATION . . . . . . . . . . . . . . . . . . . . . . .	IX-10
4.	TYPES OF VALUE AND ITS DEFINITION . . . . . . . . . . . . . . . . . . . .	IX-13
5.	VALUATION BASIS DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IX-13
6.	VALUATION BASIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IX-13
7.	VALUATION METHOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IX-16
8.	IMPLEMENTATION PROCESS OF THE VALUATION
	PROCEDURES AND THE STATUS . . . . . . . . . . . . . . . . . . . . . . . . .	IX-26
9.	VALUATION ASSUMPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IX-27
10.	VALUATION CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IX-28
11.	EXPLANATIONS OF SPECIFIC MATTERS . . . . . . . . . . . . . . . . . . . .	IX-28
12.	RESTRICTIONS ON THE USE OF VALUATION REPORT . . . . . . . . .	IX-30
13.	DATE OF VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IX-30

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APPENDIX IX

VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

STATEMENT OF THE REGISTERED ASSETS VALUER

The registered assets valuer of Beijing Zhuoxindahua Appraisal Co., Ltd.* made the following statements for the valuation report in relation to the proposed purchase of Intelligent Urban Heating Network Business assets portfolio in Tsinghua Tongfang Co., Ltd by Technovator International limited:

We possess the relevant qualifications for practice. We perform the asset valuation for the business in accordance with the relevant laws and regulations and assets valuation standards based on independent, objective and fair principles. The content stated in the valuation report is objective with reference to the information collected during the valuation process. We bear corresponding legal responsibility for the reasonability of the conclusions of the valuation.
The list of assets and liabilities related to the valuation object is reported, signed and sealed and confirmed by the entrusting party and the title holding entity. The entrusting party and the related parties should be responsible for the truth, legality and completeness of the information provided and proper usage of the valuation report.
We do not have any existing or expected interest relationship with the valuation object in the valuation report; we do not have any existing or expected interest relationship with the related parties in the valuation report. We hold no prejudice against the related parties.
We have performed on-site investigation on the valuation object and its related assets. We have given the required concern over the legal ownership of the valuation object and its related assets and examined the legal ownership of the valuation object and its related assets in which it involves, and truthfully disclosed the issues found. We have also submitted to the entrusting party and the related parties to adopt measures to perfect the ownership in order to fulfill the requirement for the issue of the valuation report.
The analysis, judgments and conclusions in the valuation report issued by us are subject to the assumptions and limitations in the valuation report. The valuation report users should give sufficient consideration to the assumptions, limitations and explanatory notes to special matters and their effects on the conclusions of the valuation. The suggestions in the valuation report are only for the basis of value determination for the parties of this transaction. Therefore, the valuation conclusion should not be regarded as a guarantee of the attainable price on the valuation object.

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APPENDIX IX VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

SUMMARY OF THE VALUATION REPORT FOR The Proposed Purchase of

the Intelligent Urban Heating Network Business Assets Portfolio in Tsinghua Tongfang Co., Ltd By Technovator International Limited

Beijing Zhuoxindahua Appraisal Co., Ltd.* was engaged by Technovator International Limited to perform valuation on the Intelligent Urban Heating Network Business assets portfolio in connection with the economic activity of the proposed purchase of the Intelligent Urban Heating Network Business in Tsinghua Tongfang Co., Ltd by Technovator International Limited. The material information and valuation conclusions in the text of the valuation report are now extracted as follows.

Economic Activity: Technovator International Limited proposed to purchase the Intelligent Urban Heating Network Business assets portfolio in Tsinghua Tongfang Co., Ltd.

Valuation Purpose: to provide a fair reflection for the market value of Intelligent Urban Heating Network Business assets portfolio in connection with the economic activity of the proposed purchase of the Intelligent Urban Heating Network Business in Tsinghua Tongfang Co., Ltd by Technovator International Limited on the Valuation Basis Date and to provide valuation reference advice for the economic activity.

Object and scope of valuation: the object of valuation is assets portfolio value of Intelligent Urban Heating Network Business designated by the entrusting party. The valuation scope is the assets portfolio of Intelligent Urban Heating Network Business in Tsinghua Tongfang Co., Ltd. The carrying amount of total assets in assets portfolio entrusted for valuation was approximately RMB216,632,000, of which current assets was approximately RMB191,879,000; non-current assets was approximately RMB24,753,000; the total carrying amount of liabilities was approximately RMB116,697,000, of which current liabilities was approximately RMB116,697,000. The carrying amount of net assets was approximately RMB99,935,000.

Type of value: the market value under the premise of going-concern of the object of valuation.

Valuation Basis Date: 31 March 2015.

Valuation method: income method was adopted.

Valuation conclusion: this valuation report adopted the income method. Under the premise that the valuation assumptions and limitations are valid, the carrying amount of the Intelligent Urban Heating Network Business assets portfolio of Tsinghua Tongfang Co., Ltd by Technovator International Limited as at the Valuation Basis Date was RMB99,935,000; the appraised value was RMB158,000,000; the appraised appreciation was RMB58,065,000 or 58.10%.

Please see the valuation report for the details of valuation conclusion.

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APPENDIX IX

VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

The useful life of the valuation conclusion: the useful life of this valuation conclusion is one year commencing from the Valuation Basis Date. Assets should be evaluated again after a year.

Specific matters affecting the valuation conclusion: the attention of the user of the valuation report is drawn to the effect of the special matters of the text of report on the valuation conclusion.

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APPENDIX IX

VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

TEXT OF THE VALUATION REPORT The Proposed Purchase of Intelligent Urban Heating Network Business Assets Portfolio In Tsinghua Tongfang Co., Ltd. By Technovator International Limited Zhuoxindahua Valuation Report Zi (2015) No. 2035-2

Technovator International Limited:

Beijing Zhuoxindahua Appraisal Co., Ltd.* was engaged by the Company to perform valuation on the market value of the assets portfolio in Intelligent Urban Heating Network Business whereby Technovator International Limited engaged in the economic activity of proposing to purchase the Intelligent Urban Heating Network Business of Tsinghua Tongfang Co., Ltd on 31 March 2015, in accordance with the relevant laws, regulations, assets valuation standards and principles, adopting income method and following the necessary valuation procedures. The valuation of the assets is reported as follows.

1. THE ENTRUSTING PARTY, THE TITLE HOLDING ENTITY AND THE STATUS OF OTHER VALUATION REPORT USERS

1. Entrusting party

Chinese company name: 同方泰德國際科技有限公司 English company name: Technovator International Limited Registered country: Singapore Registered address: 66 Tannery Lane #04-10/10A Sindo Industrial Building Singapore Legal representative: Lu Zhicheng Nature of business: Hong Kong listing company Stock Code: 1206.HK

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VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

2. The title holding entity

Business Scope: Engaged in internet information service business but not including the contents such as news, publication, medical and healthcare, drugs, and medical equipment; dispatch of labors required for implementing overseas projects associated with export of self-manufactured equipment; production and sales of commercial encryption products; public safety equipment, transportation engineering equipment, building intellectualization and municipal engineering’s mechanical and electrical equipment, electrical engineering’s mechanical and electrical equipment, and energy saving; artificial environmental control equipment, electronic products for communications, microelectronic integrated circuit, office equipments, devices and instruments, production of electromechanical integration equipment; manufacture of water fountain; Intel access service of the Type II value-added telecommunication services (1 municipal city of Beijing, 2 cities of Changchun and Nanchang) (the operating licence for value-added telecommunication services will expire by 3 May 2017); manufacture, sales, technical service and maintenance of computers and peripheral equipment; public safety equipment, transportation engineering equipment, building intellectualization and municipal engineering’s mechanical and electrical equipment, electrical engineering, mechanical and electrical equipment, and energy saving; sale and engineering installations of artificial environmental control equipment, electronic products for communications, microelectronic integrated circuit, and office equipment; development and sales of devices and instruments, and electromechanical integration equipment; sales of fire protection products; consultancy of advanced technologies, transfer and services of new and advanced technologies, property management, import and export business, contracting and construction for mechanical and electrical installation works; building intellectualization, urban and road lighting, contracting of electronic engineering; indoor air purification project; computer system integration; design for intelligent building system integration project (not including fire protection sub-system); design, installation, and refinement of water fountain; security engineering (design and construction); design and installation of common antenna for cable television; advertising broadcast and agency; vessel rental; engineering investigation and design; design and sales of lighting equipment; basic software services; application software services; sales of mechanical equipment, metal, alternating current,

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VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

household appliance, software, and auxiliary equipment, television broadcast equipment, telecommunications equipment, and electronic products. (For those projects requiring approval according to law, the operating activities can be commenced after the approval of the relevant departments according to the approved content.)

Structure of operation management: Tsinghua Tongfang Co., Ltd. adopted corporate governance structure which includes the shareholders committee, the board of directors, and the supervisory committee.

Intelligent Urban Heating Network Business: provides heat and heating network overall solutions such as heat monitoring system and heating network monitoring system.

Tsinghua Tongfang Co., Ltd* leverages on the research advantage of Tsinghua University and its accumulation of works, based on its profound understanding of the characteristics of various types of transmission and distribution network in the city and energy production and supply, and combined with its automated information technology, it provides overall solutions such as central heating, boiler and power plants, gas transmission and distribution, and water supply and drainage for hundreds of central cities. It also provides services from package of program feasibility studies, design and equipment to installation and refinement. Better economic and social benefits are created through improvement on management of urban public enterprises by forms of intelligent main contracting works and mechanical and electrical main contracting works.

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APPENDIX IX

VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

The assets, financial and operating conditions of the asset portfolio for the recent three years and as at the Valuation Basis Date:

Unit: RMB’000

	31 December	31 December	31 December	31 March
Item	2012	2013	2014	2015
Current assets	137,303.00	198,483.00	193,507.00	191,879.00
Non-current assets	14,826.00	33,538.00	27,415.00	24,753.00
Total assets	152,129.00	232,021.00	220,922.00	216,632.00
Current liabilities	139,693.00	112,158.00	120,799.00	116,697.00
Non-current liabilities	0.00	0.00	0.00	0.00
Total liabilities	139,693.00	112,158.00	120,799.00	116,697.00
Net assets	12,436.00	119,863.00	100,123.00	99,935.00
				January to
Items	2012	2013	2014	March 2015
Operating income	133,317.00	190,336.00	183,996.00	15,567.00
Total profit	20,978.00	24,366.00	10,022.00	2,342.00
Net profit	17,735.00	20,579.00	8,434.00	1,983.00

3. The relationship between the entrusting party and the title holding entity

Tsinghua Tongfang Co., Ltd. (the title holding entity) is a controlling shareholder of Technovator International Limited (the entrusting party).

4. Other Valuation Report Users other than the entrusting party

2. PURPOSE OF VALUATION

According to the “Minutes of the Board Meeting of Technovator International Limited” dated 28 July 2015, the purpose of this valuation is to provide a fair reflection for the market value of Intelligent Urban Heating Network Business assets portfolio in connection with the economic activity of the proposed purchase of the Intelligent Urban Heating Network Business in Tsinghua Tongfang Co., Ltd by Technovator International Limited on the Valuation Basis Date, 31 March 2015, and to provide valuation reference advice for the economic activity.

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APPENDIX IX VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

3. OBJECT AND SCOPE OF VALUATION

1. Object of Valuation

The object of this valuation is the value of the Intelligent Urban Heating Network Business assets portfolio in Tsinghua Tongfang Co., Ltd. in respect of the economic activities specified by the entrusting party.

2. SCOPE OF VALUATION

The scope of this valuation is the Intelligent Urban Heating Network Business assets portfolio of Tsinghua Tongfang Co., Ltd.

Related agreements/projects of Intelligent Urban Heating Network Business include: The agreements/projects related to the subject business engaging by Tsinghua Tongfang Co., Ltd. and the third party, including the agreements that have been signed but not yet completed as at the Valuation Basis Date, the projects now being under the bidding or negotiation stage with business contracts awaiting to be signed, and the projects under the business contracts newly signed, under the bidding or negotiation stage during the period between the Valuation Business Date and the closing date.

Related assets of the Intelligent Urban Heating Network Business include: the related assets and liabilities of the Intelligent Urban Heating Network Business owned and proposed to be transferred, and other intangible assets related to the products and technological achievement in the Intelligent Urban Heating Network Business.

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APPENDIX IX

VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

The assets and liabilities of such assets portfolio as at the Valuation Basis Date are as follows:

Amount Unit: RMB’000

Name of Items	Carrying Value	Name of Items	Carrying Value
Total current assets	191,879.00	Total current liabilities	116,697.00
Cash and cash		Short-term borrowings
equivalents
Bills receivable		Bills payable
Accounts receivable	78,760.00	Accounts payable	70,622.00
Prepayments	17,343.00	Receipts in advance	45,190.00
Other receivables	2,192.00	Payroll payable
Interest receivable		Tax payable
Inventories	93,584.00	Other payables	885.00
Other current assets		Non-current liabilities
		due within one year
Total non-current assets	24,753.00	Total non-current	0.00
		liabilities
Long-term receivables		Long-term borrowings
Long-term equity		Estimated liabilities
investment
Fixed assets	273.00	Deferred income tax
		liabilities
Construction in progress		Other non-current
		liabilities
Intangible assets	24,480.00
Deferred income tax		Total liabilities	116,697.00
Other non-current assets		Total owner’s equity	99,935.00
Total assets	216,632.00	Total liabilities and	216,632.00
		owner’s equity

The object and scope of this valuation are consistent with those in relation to the economic activities of asset portfolio of Intelligent Urban Heating Network Business in Tsinghua Tongfang proposed to be purchased by Technovator International Limited.

The assets portfolio proposed to be transferred by Tsinghua Tongfang in the Valuation Basis Date and the financial statements for the previous three years were audited by KPMG Huazhen LLP.

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VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

(3) Legal ownership, economic and physical condition of principal assets

1. Inventories

Inventories mainly refer to issued goods and unsettled engineering projects. Issued goods are mainly the equipment for intelligent urban heating network and spare parts like electric control valve, power cable and frequency control cabinet. Unsettled engineering projects are mainly the construction-in-progress but not settled engineering projects of Tsinghua Tongfang Co., Ltd.

2. Electronic Equipment

(4) Book Entry or Non-recorded Intangible Asset Declared by the Title Holding Entity

The intangible assets as declared by the title holding entity on the book record are specialized technology. There are four items of specialized technology.

(5) Off Balance Sheet Asset Declared

(6) Quotation of Reports Prepared by Other Entities

The assets and liabilities included in the valuation scope does not involve any report prepared by other entities.

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APPENDIX IX

VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

4. TYPES OF VALUE AND ITS DEFINITION

General types of value to be used for assessing asset portfolio include market value and non-market value.

For the purpose of this valuation, the type of value of the subject of valuation is the market value under the premise of going-concern.

5. VALUATION BASIS DATE

The Valuation Basis Date of this project is 31 March 2015.

Pricing standard adopted in this valuation comprises price, tax rate, rates and interest rate of deposits and loans, all of which are effective price standards as at the Valuation Basis Date.

6. VALUATION BASIS

(I) Basis of the activity

The Minutes of the Board Meeting of Technovator International Limited dated 28 July 2015;
The Engagement Letter on Asset Valuation 《資產評估業務約定書》( ) entered into between the entrusting party and Beijing Zhuoxindahua Appraisal Co., Ltd.*

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APPENDIX IX

VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

(II) Principal Legal and Regulatory Basis

Company Law of the People’s Republic of China 《中華人民共和國公司( 法》)
Securities Law of the People’s Republic of China 《中華人民共和國證券( 法》);
Enterprise Income Tax Law of the People’s Republic of China (《中華人民共和國企業所得稅法》);
Law of the People’s Republic of China on the State-Owned Assets of Enterprises 《中華人民共和國企業國有資產法》( );
Administrative Measures for Appraisal of State-Owned Assets 《國有資( 產評估管理辦法》) (Order No. 91 of the State Council);
Implementation Rules for the Administrative Measures for Appraisal of State-Owned Assets 《國有資產評估管理辦法實施細則》( ) (Guo Zi Ban Fa [1992] No. 36) originally promulgated by the National State-Owned Asset Administration Bureau;
Rules on Certain Issues relating to the Appraisal of State-Owned Assets 《國有資產評估管理若干問題的規定》( ) (Order [2001] No. 14 of the Ministry of Finance);
Notice of the General Office of the State Council on Forwarding the Opinions of the Ministry of Finance on Reforming State-Owned Assets Valuation Administration Method and Strengthening Asset Valuation Administration Work 《國務院辦公廳轉發財政部關於改革國有資產評估( 行政管理方式加強資產評估監督管理工作意見的通知》) (Guo Ban Fa [2001] No. 102) issued by the General Office of the State Council;
Provisional Measures for Transfer of State-Owned Assets in Enterprises (《企業國有產權轉讓管理暫行辦法》) Order [2003] No.3 jointly issued by the State-Owned Assets Supervision and Administration Commission and the Ministry of Finance;
Provisional Regulations on Monitoring and Administration of State-Owned Assets 《企業國有資產監督管理暫行條例》( ), Order [2003] No. 378 of the State Council;
Provisional Measures for Administration of State-Owned Assets Appraisal (《企業國有資產評估管理暫行辦法》), Order [2005] No. 12 of the State-Owned Assets Supervision and Administration Commission;

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VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

Notice on Certain Issues regarding Strengthening State-Owned Enterprise Asset Appraisal Administration Work 《關於加強企業國有資( 產評估管理工作有關問題的通知》) (Guo Zi Fa Chan Quan [2006] No. 274);
Guidelines on Filing on Record for State-Owned Enterprise Assets Appraisal Projects 《企業國有資產評估項目備案工作指引》( ) (Guo Zi Fa Chan Quan [2013] No. 64);
Other applicable laws and regulations

(III) Standards Basis

Assets Appraisal Standards – Basic Standards 《資產評估準則－基本準( 則》) and Code of Ethics for Assets Appraisal – Basic Standards (《資產評估職業道德準則－基本準則》) (Cai Qi [2004] No. 20);
Notice of the China Appraisal Society on issuing Seven Assets Appraisal Standards including Assets Appraisal Standards – Appraisal Report 《資產評估準則－評估報告》( ) (Zhong Ping Xie [2007] No. 189);
Guiding Opinions on Determination of Title ownership of the Object of Appraisal by Certified Public Appraisers 《資產評估準則－評估報告》( ) (Kuai Xie [2003] No. 18);
Guide to Service Quality Control in Appraisal Institutions 《評估機構業( 務品質控制指南》) (Zhong Ping Xie [2010] No. 214);
Code of Ethics – Independence 《職業道德準則－獨立性》( ) (Zhong Ping Xie [2012] No. 248);
Notice of China Appraisal Society on Modifying the Signature Clause in the Standards for Appraisal Report 《中評協關於修改評估報告等準則中( 有關簽章條款的通知》) (Zhong Ping Xie [2011] No. 230);
Asset Appraisal Standards – Making Use of Experts (《資產評估準則－利用專家工作》) (Zhong Ping Xie [2012] No. 244).

(IV) Basis of Ownership

EPC contracts for Intelligent Urban Heating Network Business;
Other title ownership certificates.

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VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

(V) Pricing Basis

Relevant national industry policies, industry analysis and parameters;
The lending rate published by the People’s Bank of China as at the Valuation Basis Date;
Data provided by Wind Information Co., Ltd.* (上海萬得信息技術股份有限公司);
EPC contracts for Intelligent Urban Heating Network Business;
Other information such as related contracts and accounting evidence obtained from, and used by, the title holding entity.

(VI) Other references

The assets appraisal breakdown statement provided by the title holding entity;
Future development plans and forecasts provided by the title holding entity;
On-site investigation and survey forms and other information collected and compiled by the appraisers;
Other information relevant to appraisal.

7. VALUATION METHOD

(I) Analysis of the applicability of appraisal approach

In accordance with the requirements of Asset Valuation Standards, Intelligent Urban Heating Network Business portfolio can be valued under three methods, i.e., income method, market method and cost method. Income method is the quantification and calculation of the present value of the expected profitability of the Intelligent Urban Heating Network Business being assessed. It stresses on the assessment of the overall expected profitability of the Intelligent Urban Heating Network Business. Market method refers to a method of valuation in which the present fair market value of the valuation target is valued by comparing it with the references in the real market. The characteristic of this method is that the valuation data is directly sourced from the market, and the result of valuation is strongly convincing. Cost method refers to the perspective in which the value of the object of valuation is ascertained on the basis of reasonable valuation of the assets and liabilities.

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VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

In light of the characteristics of the economic activity corresponded to the objective of this valuation and the information regarding the operation of the object of valuation collected on the valuation site, and because the data relating to comparable translation precedents for comparison is not available, and whether there is any non-market value factors is unknown, market method cannot be adopted accordingly.

Intelligent Urban Heating Network Business appraised is a group of Intelligent Urban Heating Network Business assets portfolio which has independent profitability, and the income and risk for the coming year can be reliably estimated, which satisfies the conditions for adopting income method. Accordingly, the income method is applicable to the valuation.

In light of the above valuation perspectives, the income method is adopted to value the object of this valuation.

(II) Technologies and Models of the Income Method

The valuation of the business assets portfolio which is proposed to be transferred is undertaken by adopting the discounted cash flow (DCF) approach, based on the feature of the Intelligent Urban Heating Network Business assets portfolio and the means of income.

DCF is a method of estimating the intelligent Urban Heating Network business assets portfolio by discounting its expected cash flow to present value, that is, the value of the intelligent Urban Heating Network business assets portfolio is determined by estimating the entity’s prospective cash flow and discounting it to present value using an appropriate discount rate. The basic conditions for applying this method are: the intelligent Urban Heating Network business assets have the basis and condition for sustainable operation; there is stable corresponding relationship between operation and income; and that the income and risk in future can be predicted and quantified. The key to the application of DCF lies in the prediction of the cash flow in future as well as the objectivity and reliability of data gathering and processing. When the prediction of cash flow in future is objective and fair, and the adoption of discount rate is relatively reasonable, the result of valuation tends to be objective and be accepted by the market easily.

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VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

Basic calculation model

The basic calculation model in this valuation is:

==> picture [66 x 17] intentionally omitted <==

P: Value of operating assets in assets portfolio

==> picture [126 x 29] intentionally omitted <==

Where,

Ri: Prospective income of the i[th] year in the future;

Rn: Net realizable value of the Intelligent Urban Heating Network Business assets portfolio after the yield period;

r: Discount rate;

n: Future forecast yield period

∑ Ci : Value of non-operating and residual assets of the Intelligent Urban Heating Network Business assets portfolio existing on the Valuation Basis Date.

==> picture [58 x 11] intentionally omitted <==

Where,

C1: Value not included in the prospective income;

C2: Value of obsolete and idling assets as at the Valuation Basis Date;

(III) The Appraisal Process of Income Method

1. The Determination of Income Period

The perpetual period is adopted as the income period. Of which, the first stage is from April 2015 to December 2019. During this stage, pursuant to the historical results and future market analysis of the Intelligent Urban Heating Network Business assets portfolio, the income position will become stable gradually. The second stage is from January 2020 to perpetual operations. During this stage, the net cash flow of the Intelligent Urban Heating Network Business assets portfolio will remain stable on the basis of 2019.

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VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

2. Future Income Forecast

(1) The Relevance of Production Business Model and Income Subject and Parameter

Pursuant to the principle of income amount being in line with the discount rate parameter, the future expected income parameter of this valuation of Intelligent Urban Heating Network Business assets portfolio will be the equity free cash flow of the Intelligent Urban Heating Network Business assets portfolio, and the equity capital return rate is adopted for discount rate.

Free cash flow of the Intelligent Urban Heating Network Business assets portfolio = net profit + depreciation and amortization – capital expenditure – net increase of operating capital + increase (decrease) of interest-bearing debts

Expected net profit = operating income – operating costs – operating expenses – administrative expenses – finance expenses – income tax

(2) Operating Income Forecast

The operating income was mainly the income from contracting work projects of Intelligent Urban Heating Network Business. This valuation was made to forecast the operating income in the coming year based on the analysis of signed contracts and their execution in the previous years and according to and the assessment of the increment of signed contracts volume and revenue of the contracts of Intelligent Urban Heating Network Business in the previous years as well as on Valuation Basis Date, taking into account the future development plan of Intelligent Urban Heating Network Business.

(3) Operating Costs Forecast

Operating costs mainly include the subcontracting of the contracting work projects and procurement costs of Intelligent Urban Heating Network Business. According to the characteristics of Intelligent Urban Heating Network Business, this valuation was made to forecast the operating costs in the coming year based on the analysis of the movement trend of operating cost in the previous years and the proportion of operating income, taking into account the forecast of future development plans and operating income of Intelligent Urban Heating Network Business.

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VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

(4) Operating Expenses Forecast

(5) Administrative Expenses Forecast

(6) Finance Expenses Forecast

Finance expenses mainly include interest of borrowings. This valuation was made to forecast the interest of borrowings in the coming year based on the future development plan of Intelligent Urban Heating Network Business, taking into account the analysis of the structure of intelligent construction industry and the forecast of the amount of capital requirements and the scale of borrowings and repayments.

(7) Income Tax Forecast

Tsinghua Tongfang Co., Ltd, the title holding entity of Intelligent Urban Heating Network Business, was qualified on the Valuation Basis Date as a new and advanced technology enterprise effective from 2014 for the term of three years, and accordingly, Intelligent Urban Heating Network Business was entitled to a concessionary rate of enterprise income tax rate at 15%. The forecast was based on the assumption that Intelligent Urban Heating Network Business would continue to operate, which meant that it would continue to operate at the condition as at Valuation Basis Date. Also it assumed that the title holding entity of Intelligent Urban Heating Network Business could continue to be recognized as a new and advanced technology enterprise and that Intelligent Urban Heating Network Business could continue to be entitled to tax concessions.

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VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

(8) Depreciation Forecast

The forecast is performed in accordance with the accounting policies adopted by the Intelligent Urban Heating Network Business and based on the book value of fixed assets on the Valuation Basis Date, historical consolidated depreciation rates for previous years and depreciation period.

(9) Capital Expenditure Forecast

(10) Addition of Working Capital Forecast

Increased working capital = working capital for the current period – working capital for the last period

Working capital = cash + receivables + inventories – payables

Of which: receivables = total operating income/turnover of receivables

Inventories = total operating costs/turnover of inventories

Payables = total operating costs/turnover of payables

Receivables mainly include: trade receivables, bills receivables, long-term receivables and other trade receivables associated with operating activities.

Payables mainly include: trade payables, bills payables and other trade payables associated with operating activities.

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VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

3. Determination of Discount Rate

Capital Asset Pricing Model (CAPM) is adopted for this valuation.

The formula is as follows:

Re= Rf+β×MRP+Rc

Rf: risk-free rate of income

MRP: Rm-Rf: average market risk premium

Rm: expected market rate of return

β: expected market risk coefficient

Rc: Risk adjustment coefficient specific to enterprises

(1) Determination of Risk-free Rate of Return

The calculation table of average interest rate (yield to maturity) of intermediate-term and long-term treasury bonds:

Name of			Remaining	Yield to
Treasury bonds	Code	Term	Term	maturity
				(%)
Treasury bonds 1425	101425	30	29.6	3.21%
Treasury bonds 1014	101014	50	45.18	4.03%
09 Treasury bonds 30	19930	50	44.7	4.30%
09 Treasury bonds 25	19925	30	24.56	4.52%
09 Treasury bonds 20	19920	20	14.42	4.00%
09 Treasury bonds 05	19905	30	24.04	4.02%

– IX-22 –

APPENDIX IX

VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

4.24%

Average

– IX-23 –

APPENDIX IX

VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

(2) Determination of Average Market Risk Premium

Market risk premium is the rate of return required by investors which is higher than risk-free interest rate, in relation to a fully risk-diversified market investment portfolio.

Market risk premium = basic compensation in the mature stock market + national risk compensation. Market risk premium of this valuation is 7.15%.

(3) Determination of Beta Coefficient

Beta coefficient is deemed as an indicator to evaluate the relative risk of a company. In this valuation, listed companies were chosen, among the A-share listed companies which had the same business mode and similar operation scale as the title holding entity, to be the comparable listed companies. Through Wind’s securities information terminal system, we can obtain the comparable listed companies’ Beta coefficient having financial as at the Valuation Basis Date and the ratio of interest-bearing debt to equity capital, and translate them into Beta coefficient without financial leverage. Then, the arithmetic mean value of the translated Beta coefficient without financial leverage is taken as x, and integrate with corporate operation and loan status, and restore x to Beta coefficient with financial leverage of the title holding entity.

β Index conversion formula:

βL = βU [1 + (1 - T) × Wd / We]

(4) Determination of Risk Specific to the Business and Assets Portfolio

Risk specific to the company represents the impact on the expected revenue of the object of valuation due to possible uncertainties during the operation of such company, such as changes in market demand, changes in supply conditions of production factors, competition among peers, monetary circulation and turnover of capital. After a thorough consideration of the production and operation scale, status of operation, financial position and liquidity of the business and assets portfolio, the specific risk coefficient of such business and assets portfolio is determined.

– IX-24 –

APPENDIX IX

VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

(5) Determination of Discount Rate of Cost of Equity Capital

The selected risk-free return rate and risk return rate are substituted in the formula of discount rate estimation:

Re = Rf + β × MRP + RC

4. Determination of the Appraisal Value of the Non-operation Assets and Liabilities

5. Determination of the Appraisal Value of the Intelligent Urban Heating Network Business Portfolio

Intelligent Urban Heating Network Business Assets Portfolio Value = Operating Asset Value＋Non-operating Asset Value – Non-operating Liabilities Value

(IV) Calculation Process of the Appraisal Value and the Outcome

1. Determination of the Appraisal Value of Operating Assets

2. Determination of the Appraisal Value of Non-operating Assets and Liabilities

(V) Conclusion for the Selection of Valuation Method

In view of the foregoing, the proposed purchase of the Intelligent Urban Heating Network Business assets portfolio in the Tsinghua Tongfang Co., Ltd* by Technovator International Limited is valued and concluded using the income method.

– IX-25 –

APPENDIX IX VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

8. IMPLEMENTATION PROCESS OF THE VALUATION PROCEDURES AND THE STATUS

For the purpose of purchasing the Intelligent Urban Heating Network Business in Tsinghua Tongfang Co., Ltd, the entrusting party decided to entrust us to appraise the value of the Intelligent Urban Heating Network Business portfolio in Tsinghua Tongfang Co., Ltd after contacting with us. After accepting the commission, and according to the characteristics of the economic activity of this valuation project, we confirmed the purpose of the valuation and the value type of the object of valuation, acquired a preliminary understanding regarding the specific contents of the object of valuation and scope of valuation, determined the Valuation Basis Date after negotiating with the entrusting party, proposed a valuation plan and entered into a Valuation Engagement Agreement.
Pursuant to the requirements of Asset Valuation Standard-Valuation Procedures, we provide the title holding entity with materials required for declaration concerning assets valuation, direct the title holding entity to verify the assets, conduct a forecast on profit of the assets portfolio and fill in the relevant forms; upon completion of the aforesaid preliminary preparation works, our appraisers enter into the valuation site, commence on-site survey, conduct necessary investigation through enquiry, confirmation, verification, monitoring, survey and inspection to have an understanding of the economic and technical utilization conditions and legal title status of the assets, analyze the specific conditions of the object of valuation, collect the recent financial data information of the object of valuation as well as those as at Valuation Basis Date, check whether the valuation information declared by the title holding entity matches with the accounting information provided by the title holding entity, verify whether all the information collected is true and complete and pay necessary attention to the legal title status of the assets.
According to the valuation-related requirements of laws, standards, and pricing basis, we adopt the appropriate valuation methods based on the specific conditions of the assets, collect the market price information as the basis of its value determination, and conduct valuation and estimation on the carrying value after verification to confirm the valuation value.
We summarize the valuation results, analyze the conclusions of valuation, prepare the valuation report, implement the internal tri-tier audit, and submit the valuation report.

– IX-26 –

APPENDIX IX

VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

9. VALUATION ASSUMPTIONS

Assuming that the object of this valuation will continue as a going concern in the future.
Assuming that both transaction parties have equal status regarding the assets that are transacted or are intended to be transacted in the market. Each of them has adequate opportunity and time to access the market information to make rational judgments regarding the transaction value of the object of valuation.
Assuming there are no significant changes in the current relevant PRC laws, regulations and policies and national macroeconomic situation, and no significant changes in the political, economic and social environment in the regions where the parties of this transaction are located.
Assuming that the purchase and acquisition process of assets involved in the object of this valuation are in line with the relevant laws and regulations of the country; both bear no defects of rights, liabilities and restrictive conditions that may affect the value, and it is presumed that taxes and various payables relating to that have been fully recorded.
Assuming the object of this valuation is a complete Intelligent Urban Heating Network Business assets portfolio.
The fees including operation and management fees of the object of valuation in the coming operating periods will remain relatively stable, and change reasonably following the changes in business scale.
Sales income from the object of this valuation is generated in each interim forecast period, and there is no material change in accounting policy and accounting review approach.
The estimation of estimated income is based on the premise of normal operation and management of the assets of the Intelligent Urban Heating Network Business portfolio as at the Valuation Basis Date, taking into no account of the impacts towards the asset value of the Intelligent Urban Heating Network Business portfolio due to accidental factors such as further investments or reduction of assets.

– IX-27 –

APPENDIX IX VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

Assuming that there will be no material obstacles relating to the collection of payments during the discounted term.
Unless otherwise stated, it is assumed that the object of this valuation is in full compliance with all relevant laws and regulations.
Assuming that the accounting policies to be adopted by the object of this valuation in the future are basically identical to those adopted during the preparation of this report in material aspects.
Assuming that the title holding entity of Intelligent Urban Heating Network Business would continue to be recognized as a new and advanced technology enterprise and that Intelligent Urban Heating Network Business could continue to be entitled to tax concessions.
13 There will be no other factors of force majeure or unforeseeable factors that may give rise to material adverse impact on the title holding entity.

10. VALUATION CONCLUSION

Upon the implementation of the aforesaid assets valuation methods and procedures, for the purpose of the proposed purchase of assets portfolio of the Intelligent Urban Heating Network Business in Tsinghua Tongfang Co., Ltd* by the entrusting party, the following conclusions of valuation are formed with reference to the market value as at 31 March 2015:

Through the valuation process with income method and under the premise of the valuation assumptions and limiting conditions being valid, the carrying value of the Intelligent Urban Heating Network Business assets portfolio before valuation in Tsinghua Tongfang Co., Ltd proposed to be purchased by Technovator International Limited as at the Valuation Basis Date is RMB99,935,000; the appraised value is RMB158,000,000, and the appraised appreciation is RMB58,065,000, or 58.10%.

11. EXPLANATIONS OF SPECIFIC MATTERS

The result of this valuation by income method did not take into account the discount factor of liquidity due to the unavailability of adequate relevant statistics of market transactions, and the absence of the basis of analysis and judgement concerning the extent of impact of liquidity on the value of the object of valuation.

– IX-28 –

APPENDIX IX

VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

With regard to the possible existence of other defects concerning the entrusting party and the title holding entity which may affect the conclusions of valuation, without any specific explanation by the entrusting party and the title holding entity and in the absence of any knowledge by the appraisers after performing the valuation procedures, the valuation institution and the appraisers shall assume no respective responsibility.
The conclusions of this valuation did not take into account the impact of certain matters that may affect the conclusions of valuation, such as mortgage and warranty issues that may be undertaken in the future, and special transaction parties that may increase or decrease the price paid, nor has it taken into account the impact of change in national macroeconomic policy as well as natural force and other force majeure on the value of the object of valuation. In the event of any change of the aforesaid conditions as well as other assumptions and pre-conditions such as the going concern principle as abided during the valuation, the conclusions of valuation will, in general, become invalid and the users of the report should not use this valuation report, otherwise they have to bear all the consequences arising therefrom.
The conclusions of this valuation did not take into account any tax liability that arises as a result of the increase or decrease in the value of the valuation and the users of this project valuation report should consider the impact of the relevant tax liability when using the valuation report.
During the period from the Valuation Basis Date to the date of this valuation report, the entrusting party and the title holding entity did not declare any subsequent event that would have significant impact, nor were the appraisers able to discover any subsequent event that will have a significant impact.
In the event of any material changes in the quantity of assets during the period from the date of valuation report to the effective period of the valuation report, the assets amount should be adjusted accordingly. In the event that there are changes in the pricing standard of assets and has an obvious impact on the conclusion of assets valuation, then a re-assessment should be conducted.

– IX-29 –

APPENDIX IX VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

12. RESTRICTIONS ON THE USE OF VALUATION REPORT

The valuation report shall only be used for valuation objective and purpose as specified.
The valuation report shall be only used by the users of the valuation report as specified therein, unless otherwise as required in the PRC laws and regulations.
The valuation report can only be used officially after obtaining the prior approval if it has to be submitted for the approval or record by any relevant authorities in accordance with the current PRC statutory requirements.
Save as otherwise provided by the laws and regulations or agreed by the relevant parties, the contents of the valuation report shall not be extracted, referenced to or disclosed to public media without the consent from the valuation institution.
According to Rule 11 of “Assets Valuation Standards-Valuation Report” issued by China Appraisal Society, the valuation report can be used for a validity period of one year, i.e. from the Valuation Basis Date of 31 March 2015 as stated therein to 30 March 2016 and the valuation report shall not be used after the validity period as stated therein.
The right to construe the valuation report shall be vested on the valuation institution of this project only, save as otherwise required by the PRC laws and regulations.
The Chinese valuation report shall prevail over the English version.

13. DATE OF VALUATION REPORT

29 July 2015.

– IX-30 –

APPENDIX IX VALUATION REPORT OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

Legal Representative of the Valuation Institution: (Lin Mei) PRC Certified Asset Appraiser: (Liu Chunru) PRC Certified Asset Appraiser: (Xue Lupeng)

Beijing Zhuoxindahua Appraisal Co., Ltd.* 29 July 2015

For identification purposes only

– IX-31 –

APPENDIX X

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This document, for which the Directors of the Company 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 document 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 document misleading.

2. DISCLOSURE OF INTERESTS

Directors’ and Chief Executive’s Interests and Short Positions in Shares, Underlying Shares and Debentures

As at the Latest Practicable Date, the Directors and the chief executive of the Company and their respective associates had the following interests or short positions in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which have been notified to the Company and the Stock Exchange pursuant to Division 7 and 8 of Part XV of the SFO, including interests and short positions which the Directors and the chief executive of the Company are taken and deemed to have under such provisions of the SFO, or which are required to be and are recorded in the register required to be kept under Section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code:

Long positions in the Company

			Approximate
			percentage of
			interest in the
		Number of	issued share
	Capacity/Nature of	Shares	capital of the
Name of Director	interest	interested	Company(3)
Mr. Seah Han Leong	Interest in a controlled	8,000,000	1.03%
	corporation(1)
	Beneficial owner	10,120,000	1.30%
	Beneficial owner	5,800,000(2)	0.75%
Mr. Lu Zhicheng	Beneficial owner	8,800,000(2)	1.13%
Mr. Zhao Xiaobo	Beneficial owner	5,120,000	0.66%
	Beneficial owner	5,800,000(2)	0.75%
Mr. Leung Lok Wai	Beneficial owner	3,600,000(2)	0.46%
Mr. Ng Koon Siong	Beneficial owner	1,000,000(2)	0.13%
Mr. Liu Tianmin	Beneficial owner	500,000(2)	0.06%
Mr. Fan Ren Da Anthony	Beneficial owner	500,000(2)	0.06%
Mr. Chia Yew Boon	Beneficial owner	500,000(2)	0.06%
Mr. Chen Hua	Beneficial owner	500,000(2)	0.06%

– X-1 –

APPENDIX X

GENERAL INFORMATION

Notes:

(1) Mr. Seah Han Leong is the sole shareholder of M2M Holdings Ltd and hence is deemed to be interested in all the Shares held by M2M Holdings Ltd.
(2) Shares subject to options under the Share Option Scheme.
(3) The percentage of interest in the issued share capital of the Company is calculated based on the number of issued Shares without taking into account Shares which may be allotted and issued to all grantees upon their after full exercise of the options under the Share Option Scheme.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or the chief executive of the Company had or was deemed to have any interests or short position in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO), which had been recorded in the register maintained by the Company pursuant to section 352 of the SFO or which had been notified to the Company and the Stock Exchange pursuant to the Model Code.

At no time was the Company, its holding company, or any of its subsidiaries a party to any arrangements to enable the Directors and the chief executive of the Company (including their spouse and children under 18 years of age) to hold any interest or short positions in the shares, underlying shares or debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO).

Substantial Shareholders’ Interests and Short Positions in Shares and Underlying Shares

So far as is known to any Director or chief executive of the Company, as at the Latest Practicable Date, the persons or corporations (other than Director or chief executive of the Company) who had interest or short positions in the shares and underlying shares of the Company which were required to be disclosed to the Company under the provisions of Division 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept under section 336 of the SFO were as follows:

			Approximate
			percentage of
			interest in the
		Number of	issued share
	Capacity/Nature of	Shares	capital of the
Name of Shareholders	interest	interested	Company
Tsinghua Tongfang Co.,	Beneficial owner	92,000,000	11.83%
Ltd (同方股份有限公司)	Interest in a controlled	176,148,142	22.65%
	corporation(1)
Resuccess Investments	Beneficial owner	176,148,142	22.65%
Limited
Dragon Point Limited	Beneficial owner	47,436,320	6.10%
Zana China Fund L.P	Interest in a controlled	47,436,320	6.10%
	corporation(2)

– X-2 –

APPENDIX X

GENERAL INFORMATION

Notes:

(1) Tsinghua Tongfang Co., Ltd (同方股份有限公司) is the sole shareholder of Resuccess Investments Limited and hence is deemed to be interested in all the Shares held by Resuccess Investments Limited.
(2) Zana China Fund L.P. is the sole shareholder of Dragon Point Limited and hence is deemed to be interested in all the Shares held by Dragon Point Limited.

Save as disclosed above, as at the Latest Practicable Date, the Directors and the chief executive of the Company are not aware of any other person or corporation having an interest or short position in the shares and underlying shares of the Company which would require to be disclosed to the Company under the provisions of Division 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO.

3. FURTHER INFORMATION CONCERNING DIRECTORS

(a) Directors’ service contracts

As at the Latest Practicable Date, none of the Directors had entered, or was proposing to enter, into any service contract with any member of the Group (excluding contracts expiring or determinable by such member of the Group within one year without payment of compensation (other than statutory compensation)).

(b) Directors’ interest in competing business

As at the Latest Practicable Date, none of the Directors or their respective associate is or was interested in any business apart from the Group’s business, that competes or competed or is or was likely to compete, either directly or indirectly, with the Group’s business.

– X-3 –

APPENDIX X

GENERAL INFORMATION

(c) Directors interests in assets

None of the Directors had any direct or indirect interest in any assets which had been acquired or disposed of or leased to any member of the Group or proposed to be so acquired, disposed of or leased since 31 December 2014, being the date to which the latest published audited accounts of the Company were made up, and up to the Latest Practicable Date.

(d) Directors interests in contracts

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

4. MATERIAL CONTRACTS

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

(1) a sale and purchase agreement dated 17 April 2014 entered into between the Company and Resuccess Investments Limited (“ Resuccess ”) and Valueworth Ventures Limited in relation to the sale and purchase of 75% and 25% of the equity interest in Tongfang Energy Saving Engineering Technology Co., Ltd. at a consideration of RMB285 million and RMB95 million, respectively, details of which are set forth in the announcement date 30 April 2014 and the circular dated 24 June 2014;
(2) an indication of interest dated 5 February 2015 entered into between Distech Contrôles Inc. (“ Distech Controls ”) and Acuity Brands Lightings, Inc. in relation to, among other things, break-up fee, public disclosure and exclusive period for the sale of all shares of Distech Controls, details of which are set forth in the announcements dated 9, 12 and 30 March 2015, 2 April 2015 and 30 June 2015 issued by the Company and this circular;
(3) a sale and purchase agreement dated 8 March 2015 entered into between (i) 1028665 B.C. Ltd., (ii) Acuity Brands Lightings, Inc., (iii) Distech Controls, and (iv) all shareholders of Distech Controls, including the Company (other than SVIC No. 25 New Technology Business Investment L.L.P. whose internal approval process for the sale and purchase agreement took longer than other shareholders of Distech Controls), in relation to disposal of all of issued and outstanding shares in the capital of Distech Controls at a consideration of CAD$318,000,000 (subject to adjustments), details of which are set forth in the announcement date 9, 12 and 30 March 2015, 2 April 2015, 30 June 2015 and the circular dated 14 July 2015;

– X-4 –

APPENDIX X

GENERAL INFORMATION

(4) a placing and subscription agreement dated 28 April 2015 entered into between Resuccess, the Company and Shenyin Wanguo Securities (H.K.) Limited (as placing agent) in relation to placing and subscription of up to 128,994,000 Shares held by Resuccess at HK$5.95 per Share;
(5) a letter agreement dated 29 June 2015 entered into among by 1028665 B.C. Ltd., Acuity Brands Lightings, Inc., Distech Controls and all shareholders of Distech Controls, including the Company, in relation to, among other things, an indemnity escrow amount equal to CAD$31,800,000 and the extension of the outside date;
(6) the Technovator Beijing Agreement; and
(7) the Tongfang Energy Saving Agreement.

5. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial position or trading prospects of the Company since 31 December 2014, the date to which the latest audited financial statements of the Company were made up.

6. LITIGATION

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

8. GENERAL

(a) The registered office, the headquarters and principal place of business in Singapore of the Company is at 66 Tannery Lane, #04–10/10A, Sindo Industrial Building, Singapore 347805.
(b) The principal place of business of the Company in Hong Kong is at Unit 806–810, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong.
(c) The Company’s Hong Kong branch share registrar and transfer office is Tricor Investor Services Limited, which is situated at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(d) The joint company secretaries of the Company are Mr. Leung Lok Wai who is a member of Hong Kong Society of Accountants, and Mr. Cheo Meng Ching who is a member of The Singapore Association of the Institute of Chartered Secretaries & Administrators.

– X-5 –

APPENDIX X

GENERAL INFORMATION

(e) The English text of this circular and the accompanying form of proxy, unless otherwise stated, shall prevail over their respective Chinese text for the purpose of interpretation.

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the below documents will be available for inspection during normal business hours at Unit 806–810, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong from the date of this circular up to and including the EGM date:

(a) the Memorandum and the Articles of Association;
(b) the material contracts referred in the paragraph headed “Material contracts” in this appendix;
(c) the Business and Assets Purchase Agreements;
(d) the annual report of the Company for the two years ended 31 December 2015;
(e) the circular dated 24 March 2015 issued by the Company;
(f) the circular dated 13 July 2015 issued by the Company;
(g) this circular;
(h) the Letter from the Board;
(i) the letter from the Independent Board Committee to the Independent Shareholders, the text of which is set out on pages 29 to 30 of this circular;
(j) the letter of advice from Quam Capital to the Independent Board Committees and the Independent Shareholders, the text of which is set out on pages 31 to 62 of this circular;
(k) the accountants’ reports prepared by KPMG in respect of the Target Businesses, the text of which is set out in Appendices III, IV and V to this circular respectively;
(l) the reports from KPMG in respect of the unaudited pro forma financial information of the Enlarged Group, the text of which is set out in Appendix II to this circular;
(m) the Valuation Reports in respect of the Target Businesses, the text of which is set out in Appendices VII, VIII and IX to this circular respectively;
(n) the reports from KPMG in relation to the valuation of the Target Businesses, the text of which is set out in Appendix XI to this circular; and

– X-6 –

APPENDIX X

GENERAL INFORMATION

(o) the written consents referred to in the paragraph headed “EXPERTS” in this appendix.

10. EXPERTS

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

Name Qualifications Quam Capital Limited A corporation licensed to carry on Type 6 (advising on corporate finance) regulated activity under the SFO KPMG Certified public accountants Beijing Zhuoxindahua An independent PRC valuer qualified to carry Appraisal Co., Ltd out valuation in the PRC (“ Beijing Zhuoxindahua* ”)

Each of Quam Capital, KPMG and Beijing Zhuoxindahua has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its report(s), letter(s) or opinion(s) (as the case may be) and references to its name or its report(s), letter(s) or opinion(s) (as the case may be) included in this circular in the form and context in which they respectively appear.

As at the Latest Practicable Date, each of Quam Capital, KPMG and Beijing Zhuoxindahua:

(i) was not beneficially interested in the share capital of any member of the Group nor has any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group; and
(ii) did not have any direct or indirect interest in any assets which have been, since 31 December 2014 (being the date to which the latest published audited consolidated financial statements of the Group were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

– X-7 –

APPENDIX XI REPORT FROM THE REPORTING ACCOUNTANTS AND THE LETTER FROM THE BOARD IN RELATION TO THE VALUATION OF THE TARGET BUSINESSES

(A) REPORTS FROM THE REPORTING ACCOUNTANTS IN RELATION TO THE VALUATION OF THE TARGET BUSINESSES

The following is the text of a report received from the Company’s reporting accountants, KPMG, Certified Public Accountants, Hong Kong, for inclusion in this circular.

PART I

REPORT ON THE DISCOUNTED FUTURE CASH FLOWS IN CONNECTION WITH THE VALUATION OF THE INTELLIGENT RAIL TRANSIT BUSINESS

8th Floor Prince’s Building 10 Chater Road Central Hong Kong

25 September 2015

TO THE BOARD OF DIRECTORS OF TECHNOVATOR INTERNATIONAL LIMITED

We refer to the discounted future cash flows on which the valuation (the “Valuation”) dated 29 July 2015 prepared by Beijing Zhuoxindahua Appraisal Co., Ltd in respect of the appraisal of the fair value of the Intelligent Rail Transit Business as at 31 March 2015 is based. The Valuation is prepared based in part on the discounted future cash flows and is regarded as a profit forecast under paragraph 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

Responsibilities

The directors of Technovator International Limited (the “Directors”) are responsible for the preparation of the discounted future cash flows in accordance with the bases and assumptions determined by the Directors and as set out in the Valuation. This responsibility includes carrying out appropriate procedures relevant to the preparation of the discounted future cash flows for the Valuation and applying an appropriate basis of preparation; and making estimates that are reasonable in the circumstances.

It is our responsibility to report, as required by paragraph 14.62(2) of the Listing Rules, on the calculations of the discounted future cash flows used in the Valuation. The discounted future cash flows do not involve the adoption of accounting policies.

– XI-1 –

APPENDIX XI

REPORT FROM THE REPORTING ACCOUNTANTS AND THE LETTER FROM THE BOARD IN RELATION TO THE VALUATION OF THE TARGET BUSINESSES

Basis of opinion

We conducted our work in accordance with the Hong Kong Standard on Assurance Engagements 3000 “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). This standard requires that we plan and perform our work to obtain reasonable assurance as to whether, so far as the calculations are concerned, the Directors have properly compiled the discounted future cash flows in accordance with the bases and assumptions as set out in the Valuation. We performed procedures on the arithmetical calculations and the compilations of the discounted future cash flows in accordance with the bases and assumptions. Our work is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing issued by the HKICPA. Accordingly, we do not express an audit opinion.

Opinion

In our opinion, so far as the calculations are concerned, the discounted future cash flows have been properly compiled in accordance with the bases and assumptions adopted by the Directors as set out in the Valuation.

Other matters

Without qualifying our opinion, we draw to your attention that we are not reporting on the appropriateness and validity of the bases and assumptions on which the discounted future cash flows are based and our work does not constitute any valuation of the Intelligent Rail Transit Business or an expression of an audit or review opinion on the Valuation.

The discounted future cash flows depend on future events and on a number of assumptions which cannot be confirmed and verified in the same way as past results and not all of which may remain valid throughout the period. Our work has been undertaken for the purpose of reporting solely to you under paragraph 14.62(2) of the Listing Rules and for no other purpose. We accept no responsibility to any other person in respect of, arising out of or in connection with our work.

KPMG

Certified Public Accountants

Hong Kong

– XI-2 –

APPENDIX XI

REPORT FROM THE REPORTING ACCOUNTANTS AND THE LETTER FROM THE BOARD IN RELATION TO THE VALUATION OF THE TARGET BUSINESSES

PART II

REPORT ON THE DISCOUNTED FUTURE CASH FLOWS IN CONNECTION WITH THE VALUATION OF THE INTELLIGENT BUILDING BUSINESS

8th Floor Prince’s Building 10 Chater Road Central Hong Kong

25 September 2015

TO THE BOARD OF DIRECTORS OF TECHNOVATOR INTERNATIONAL LIMITED

We refer to the discounted future cash flows on which the valuation (the “Valuation”) dated 29 July 2015 prepared by Beijing Zhuoxindahua Appraisal Co., Ltd in respect of the appraisal of the fair value of the Intelligent Building Business as at 31 March 2015 is based. The Valuation is prepared based in part on the discounted future cash flows and is regarded as a profit forecast under paragraph 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

Responsibilities

Basis of opinion

– XI-3 –

APPENDIX XI REPORT FROM THE REPORTING ACCOUNTANTS AND THE LETTER FROM THE BOARD IN RELATION TO THE VALUATION OF THE TARGET BUSINESSES

conducted in accordance with Hong Kong Standards on Auditing issued by the HKICPA. Accordingly, we do not express an audit opinion.

Opinion

Other matters

Without qualifying our opinion, we draw to your attention that we are not reporting on the appropriateness and validity of the bases and assumptions on which the discounted future cash flows are based and our work does not constitute any valuation of the Intelligent Building Business or an expression of an audit or review opinion on the Valuation.

KPMG

Certified Public Accountants

Hong Kong

– XI-4 –

APPENDIX XI

REPORT FROM THE REPORTING ACCOUNTANTS AND THE LETTER FROM THE BOARD IN RELATION TO THE VALUATION OF THE TARGET BUSINESSES

PART III

REPORT ON THE DISCOUNTED FUTURE CASH FLOWS IN CONNECTION WITH THE VALUATION OF THE INTELLIGENT URBAN HEATING NETWORK BUSINESS

8th Floor Prince’s Building 10 Chater Road Central Hong Kong

25 September 2015

TO THE BOARD OF DIRECTORS OF TECHNOVATOR INTERNATIONAL LIMITED

We refer to the discounted future cash flows on which the valuation (the “Valuation”) dated 29 July 2015 prepared by Beijing Zhuoxindahua Appraisal Co., Ltd in respect of the appraisal of the fair value of the Intelligent Urban Heating Network Business as at 31 March 2015 is based. The Valuation is prepared based in part on the discounted future cash flows and is regarded as a profit forecast under paragraph 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

Responsibilities

Basis of opinion

– XI-5 –

APPENDIX XI REPORT FROM THE REPORTING ACCOUNTANTS AND THE LETTER FROM THE BOARD IN RELATION TO THE VALUATION OF THE TARGET BUSINESSES

the bases and assumptions. Our work is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing issued by the HKICPA. Accordingly, we do not express an audit opinion.

Opinion

Other matters

Without qualifying our opinion, we draw to your attention that we are not reporting on the appropriateness and validity of the bases and assumptions on which the discounted future cash flows are based and our work does not constitute any valuation of the Intelligent Urban Heating Network Business or an expression of an audit or review opinion on the Valuation.

KPMG

Certified Public Accountants

Hong Kong

– XI-6 –

APPENDIX XI REPORT FROM THE REPORTING ACCOUNTANTS AND THE LETTER FROM THE BOARD IN RELATION TO THE VALUATION OF THE TARGET BUSINESSES

(B) LETTER FROM THE BOARD ON THE PROFIT FORECAST

The following is the text of a letter issued by the Board in connection with the profit forecast regarding the Target Businesses contained in the Valuation Reports.

25 September 2015

The Stock Exchange of Hong Kong Limited 11/F., One International Finance Centre, 1 Harbour View Street, Central, Hong Kong

Dear Sirs,

RE: (1) MAJOR AND CONNECTED TRANSACTION AND (2) CONTINUING CONNECTED TRANSACTION IN RELATION TO ACQUISITIONS OF BUSINESSES IN RELATION TO PROVIDING INTELLIGENCE INTEGRATED SOLUTIONS WHICH CENTER AROUND SUPERVISION AND CONTROL SYSTEMS IN THE FIELDS OF INTELLIGENT RAIL TRANSIT, INTELLIGENT BUILDING AND INTELLIGENT URBAN HEATING NETWORK AND RELATED ASSET

We refer to the circular of Technovator International Limited (the “ Company ”) dated 25 September 2015 (the “ Circular ”). Unless otherwise stated, terms defined in the Announcement shall have the same meanings when used herein.

We refer to the valuation reports (the “ Valuation Reports ”) dated 29 July 2015 prepared by Beijing Zhuoxingdahua Appraisal Co., Ltd. (北京卓信大華資產評估有限公司) (the “ Valuer ”) in relation the valuation of the Intelligent Rail Transit Business, the Intelligent Building Business and the Intelligent Urban Heating Network Business, which are contained in the Circular. The valuation set out in each of the Valuation Reports prepared by the Valuer, for which the Valuer and the Company are responsible, constitutes a profit forecast under Rule 14.61 of the Listing Rules.

We have reviewed and discussed the Valuation Reports, including the bases and assumptions based upon which the valuation of each of the Target Businesses has been prepared. Pursuant to Rule 14.62 of the Listing Rules, we have engaged KPMG, the Company’s auditor, to report on whether, so far as the calculations are concerned, the discounted future cash flows of the Target Businesses have been properly compiled in accordance with the bases and assumptions adopted in the Valuation Reports, and considered such reports issued by KPMG.

On the basis of the foregoing, we are of the opinion that the valuation prepared by the Valuer in the Valuation Reports have been made after due and careful enquiry.

Yours faithfully, For and on behalf of the board of directors of Technovator International Limited Zhao Xiaobo Director

– XI-7 –

NOTICE OF EGM

Technovator

TECHNOVATOR INTERNATIONAL LIMITED 同方泰德國際科技有限公司[*]

(incorporated in Singapore with limited liability)

(Stock Code: 1206)

NOTICE IS HEREBY GIVEN that the extraordinary general meeting (the “ Meeting ”) of Technovator International Limited (the “ Company ”) will be held on 16 October 2015 at 10 a.m. at Unit 806-810, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong, for the purpose of considering and, if though fit, to pass with or without amendments as an ordinary business the following ordinary resolution:

ORDINARY RESOLUTION

“ THAT the Business and Assets Purchase Agreements (as defined in the circular of the Company dated 25 September 2015 (the “ Circular ”) and the transactions contemplated thereunder, be and are hereby approved, confirmed and ratified; and

THAT the Future Business Arrangements (as defined in the Circular) and the Annual Caps (as defined in the Circular) be and are hereby approved, confirmed and ratified, provided that the Annual Caps in respect of each of the years ending 31 December 2015, 2016 and 2017 shall not be exceeded and the Future Business Arrangements shall not continue after 31 December 2017 without the Company having re-complied with the applicable requirements under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.”

By order of the Board Technovator International Limited Mr. Lu Zhicheng Chairman

Hong Kong, 25 September 2015

Principal place of business in Hong Kong: Unit 806–810 Bank of America Tower 12 Harcourt Road Central, Hong Kong

Registered Office: 66 Tannery Lane #04–10/10A Sindo Industrial Building Singapore 347805

For identification purpose only

– EGM–1 –

NOTICE OF EGM

As at the date of this announcement, the executive directors of the Company are Mr. Zhao Xiaobo and Mr. Seah Han Leong; the non-executive directors of the Company are Mr. Lu Zhicheng, Mr. Fan Xin, Mr. Liu Tianmin and Mr. Ng Koon Siong; and the independent non-executive directors of the Company are Mr. Fan Ren Da Anthony, Mr. Chia Yew Boon and Ms. Chen Hua

Notes:

Any member entitled to attend and vote at the Meeting is entitled to appoint one or, if he is the holder of two or more shares, one or more proxies to attend and, on a poll, vote in his stead. A proxy need not be a member of the Company.
In order to be valid, a form of proxy together with the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy thereof, must be deposited at the offices of the Company’s Hong Kong branch share registrar, Tricor Investor Services 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 commencement of the above meeting or any adjournment thereof.
In the case of joint holders of a share, any one of such joint holders may vote, either in person or by proxy, in respect of such share as if he/she were solely entitled thereto, but if more than one of such joint holders be present at any meeting the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.
Delivery of an instrument appointing a proxy shall not preclude a shareholder from attending and voting in person at the meeting convened and in such event, the instrument appointing a proxy shall be deemed to be revoked.

– EGM–2 –

AI assistant

Technovator International Limited — Proxy Solicitation & Information Statement 2015

49767_rns_2015-09-25_3c1d581f-1762-4aa6-8afa-8d1fb343e6c0.pdf

TECHNOVATOR INTERNATIONAL LIMITED 同方泰德國際科技有限公司[*]

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

ROUNDING

Technovator

TECHNOVATOR INTERNATIONAL LIMITED 同方泰德國際科技有限公司[*]

(Stock Code: 1206)

(1) MAJOR AND CONNECTED TRANSACTION AND

(2) CONTINUING CONNECTED TRANSACTION IN RELATION TO

INTRODUCTION

THE TECHNOVATOR BEIJING AGREEMENT

Consideration:

Payment term:

Conditions Precedent:

Completion:

Non-competition:

THE TONGFANG ENERGY SAVING AGREEMENT

Business and assets to be acquired:

Consideration:

Payment term:

Conditions Precedent:

Completion Accounts:

Completion:

Non-competition:

VALUATION OF THE TARGET BUSINESSES AND IMPLICATIONS UNDER THE LISTING RULES

THE TARGET BUSINESSES AND THE TARGET ASSETS

FUTURE BUSINESS ARRANGEMENTS

Overview

Internal Control Procedures

The Annual Caps

LETTER FROM THE BOARD

Pricing and Payment Terms

Continuing Connected Transactions

REASONS FOR AND BENEFITS OF THE ACQUISITION AND THE FUTURE BUSINESS ARRANGEMENTS

INFORMATION ABOUT THE GROUP AND THE PURCHASERS

INFORMATION ABOUT THE VENDOR

EFFECT OF THE ACQUISITION ON THE ASSETS AND LIABILITIES OF THE GROUP

LISTING RULES IMPLICATIONS

EGM

RECOMMENDATION

Technovator

TECHNOVATOR INTERNATIONAL LIMITED 同方泰德國際科技有限公司[*]

MAJOR AND CONNECTED TRANSACTION IN RELATION TO ACQUISITION OF ASSETS

(1) MAJOR AND CONNECTED TRANSACTION AND

(2) CONTINUING CONNECTED TRANSACTION IN RELATION TO

INTRODUCTION

THE ACQUISITION

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background and financial information of the Group

LETTER FROM QUAM CAPITAL

For the year ended 31 December 2014

Liquidity and financial resources

For the six months ended 30 June 2015

Liquidity and financial resources

Subsequent development since 30 June 2015

2. Background on the Controlling Shareholder and the Vendor

LETTER FROM QUAM CAPITAL

4. Principal terms of the Business and Assets Purchase Agreements

The Technovator Beijing Agreement

Date:

Parties:

Business and assets to be acquired:

Consideration:

The Tongfang Energy Saving Agreement

Date:

Parties:

Business and assets to be acquired:

Consideration:

Future Business Arrangements

5. Valuation of the Target Businesses

(i) Valuation methodology

(ii) Valuation of the Target Businesses and its assumptions

6. Financial effects of the Acquisition

(i) Earnings

Technovator International Limited Proxy Solicitation & Information Statement 2015