Ulferts International Limited — Proxy Solicitation & Information Statement 2020

Oct 21, 2020

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular, you should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Shougang Concord Grand (Group) Limited, you should at once hand this circular to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for onward transmission to the purchaser or transferee.

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

首長四方（集團）有限公司[*] SHOUGANG CONCORD GRAND (GROUP) LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 730)

MAJOR TRANSACTION

FINANCE LEASE ARRANGEMENTS

A letter from the Board is set out on pages 3 to 13 of this circular.

• For identification purpose only

22 October 2020

CONTENTS

		Page
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from	the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Appendix I	– Financial Information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Appendix II	– General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19

i

DEFINITIONS

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

• ‘‘Assets under the First Finance Lease Agreement’’

• the assets to be leased back to the First Lessee by South China Leasing under the First Finance Lease Agreement;

• ‘‘Assets under the Second Finance Lease Agreement’’

• the assets to be leased back to the First Lessee by South China Leasing under the Second Finance Lease Agreement;

• ‘‘Assets under the Third Finance the assets to be leased back to the Second Lessee by South China Lease Agreement’’ Leasing under the Third Finance Lease Agreement;

• ‘‘Board’’ the board of directors of the Company;

• ‘‘Company’’ Shougang Concord Grand (Group) Limited, a company incorporated in Bermuda with limited liability whose securities are listed on the main board of the Stock Exchange;

• ‘‘connected person(s)’’ has the same meaning ascribed to it under the Listing Rules;

• ‘‘Finance Lease Agreements’’ the First Finance Lease Agreement, the Second Finance Lease Agreement and the Third Finance Lease Agreement;

• ‘‘Finance Lease Arrangements’’ the First Finance Lease Arrangement and the Second Finance Least Arrangement;

• ‘‘First Finance Lease Agreement’’ the agreement entered into between South China Leasing and the First Lessee on 14 September 2020 in relation to the leasing of the Assets under the First Finance Lease Agreement;

• ‘‘First Finance Lease Arrangement’’ purchase of the Assets under the First Finance Lease Agreement and the Assets under the Second Finance Lease Agreement by South China Leasing from the First Lessee and leasing back the Assets under the First Finance Lease Agreement and the Assets under the Second Finance Lease Agreement to the First Lessee by South China Leasing in accordance with the terms of the First Finance Lease Agreement and the Second Finance Lease Agreement;

• ‘‘First Guarantor’’ 中國林業集團有限公司 (China Forestry Group Corporation);

• ‘‘First Lessee’’ 如皋港務集團有限公司 (Rugao Port Group Co., Ltd);

• ‘‘HK$’’ Hong Kong dollar, the lawful currency of Hong Kong;

• ‘‘Hong Kong’’ the Hong Kong Special Administrative Region of the PRC;

• ‘‘Latest Practicable Date’’ 16 October 2020, being the latest practicable date prior to the printing of this circular for ascertaining certain information in the circular;

1

DEFINITIONS

• ‘‘Lessees’’ the First Lessee and the Second Lessee;

• ‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange;

• ‘‘PRC’’ the People’s Republic of China which, for the purpose of this circular, excludes Hong Kong, the Macau Special Administrative Region of the People’s Republic of China and Taiwan;

• ‘‘RMB’’ Renminbi, the lawful currency of the PRC;

• ‘‘Second Finance Lease the agreement entered into between South China Leasing and the Agreement’’ First Lessee on 14 September 2020 in relation to the leasing of the Assets under the Second Finance Lease Agreement;

• ‘‘Second Finance Lease purchase of the Assets under the Third Finance Lease Agreement Arrangement’’ by South China Leasing from the Second Lessee and leasing back the Assets under the Third Finance Lease Agreement to the Second Lessee by South China Leasing in accordance with the terms of the Third Finance Lease Agreement;

• ‘‘Second Guarantor’’ 上饒創新發展產業投資集團有限公司 (Innovation Development and Industry Investment Group*), a company established in the PRC with limited liability;

• ‘‘Second Lessee’’ 金源華興融資租賃有限公司 (Jinyuan Huaxing Financial Leasing Co., Ltd*.), a company established in the PRC with limited liability;

• ‘‘Shareholder(s)’’ the holder(s) of the ordinary share(s) of HK$0.01 each in the share capital of the Company;

• ‘‘South China Leasing’’ South China International Leasing Company Limited, a company established in the PRC and an indirect non wholly-owned subsidiary of the Company;

• ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited;

• ‘‘Third Finance Lease Agreement’’

• the agreement dated 9 October 2020 entered into between South China Leasing and the Second Lessee;

• ‘‘Wheeling Holdings’’

• Wheeling Holdings Limited, a company incorporated in Samoa and is the controlling shareholder of the Company, holds approximately 50.84% of the issued share capital in the Company as at the date of this circular; and

• ‘‘%’’

• per cent.

• For identification purpose only

2

LETTER FROM THE BOARD

首長四方（集團）有限公司[*] SHOUGANG CONCORD GRAND (GROUP) LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 730)

Directors: Mr. Xu Liang (Chairman) Mr. Su Guifeng (Managing Director) Ms. Li Jing (Executive Director)

Registered Office: Victoria Place, 5th Floor 31 Victoria Street Hamilton, HM 10, Bermuda

Ms. You Wenli (Non-executive Director)

Mr. Huang Donglin (Non-executive Director) Mr. Tam King Ching, Kenny (Independent Non-executive Director)

• Mr. Wan Siu Wah, Wilson (Independent Non-executive Director)

Principal Office in Hong Kong: 5/F., Bank of East Asia Harbour View Centre 56 Gloucester Road Wanchai, Hong Kong

Mr. Zhang Xingyu (Independent Non-executive Director)

22 October 2020

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION FINANCE LEASE ARRANGEMENTS

INTRODUCTION

Reference is made to the announcement of the Company dated 14 September 2020 and the further announcement of the Company dated 22 September 2020 in relation to the First Finance Lease Arrangement and the announcement of the Company dated 9 October 2020 in relation to the Second Finance Lease Arrangement.

The purpose of this circular is to provide you with information in respect of, among other things, further details of the Finance Lease Arrangements.

THE FIRST FINANCE LEASE ARRANGEMENT

On 14 September 2020, South China Leasing, an indirect non wholly-owned subsidiary of the Company, entered into two finance lease agreements with the First Lessee.

The principal terms of, and the arrangements contemplated under, the two finance lease agreements are set out below.

• For identification purpose only

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LETTER FROM THE BOARD

The First Finance Lease Agreement

Subject matter

South China Leasing will provide a finance lease with respect to the Assets under the First Finance Lease Agreement to the First Lessee for a term of three years, which commenced on 15 September 2020 and will mature on 14 September 2023. South China Leasing will purchase the Assets under the First Finance Lease Agreement from the First Lessee and lease the Assets under the First Finance Lease Agreement back to the First Lessee.

The principal amount under the finance lease is RMB150,000,000. The First Lessee will repay the principal amount in twelve instalments during the term of the finance lease. It will make the interest payment on a quarterly basis at a rate equal to the benchmark interest rate for 1-year to 3-year RMB loans published by the People’s Bank of China from time to time plus 15% of the benchmark rate.

South China Leasing is also entitled to a handling fee of RMB5,625,000, payable by the First Lessee, in one lump sum prior to the commencement of the lease term.

The interest rate and the handling fee for the finance lease have been agreed between the parties after arm’s length negotiation. When considering the interest rate and handling fee, the Company took into account the following factors as a whole:

• (i) the benchmark interest rate of 4.75% for 1-year to 3-year RMB loans obtained from the website of the People’s Bank of China on the date of the First Finance Lease Agreement;

• (ii) the credit rating of the guarantor to the finance lease;

• (iii) the interest rate to be within the range of the prevailing market finance lease arrangements:

	Lease	Term of the
	amount	lease	Interest
Lease assets	(RMB)	(years)	rate
Sewer network related assets	200,000,000	5	5.65%
Port equipment and berth assets	200,000,000	5	5.5%
Water supply and drainage facilities	150,000,000	5	6%
Electricity generator and auxiliary facilities	250,000,000	5	4%

In selecting the above market precedents, the Company selected (i) finance leases of which the assets under the finance lease are public infrastructures, similar to the Finance Lease Arrangements; (ii) recent market transactions; and (iii) leases of similar amount to that of the Company.

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LETTER FROM THE BOARD

The consideration for the purchase of the Assets under the First Finance Lease Agreement is RMB150,000,000, which was determined by the parties after arm’s length negotiations with reference to the valuation of the Assets under the First Finance Lease Agreement based on the cost method of approximately RMB168,372,100. The consideration for the purchase of the Assets under the First Finance Lease Agreement will be satisfied by South China Leasing by internal resources and bank borrowing.

The valuation was performed by 北京天健興業資產評估有限公司 (Pan-China Assets Appraisal Co., Ltd.), an independent valuer. The major inputs and assumptions are set out below:

1. Transaction assumption: The transaction assumption assumes that all assets to be evaluated are in the process of transaction, and the appraisers carry out the valuation with the use of a simulated market scenario based on transaction terms of the assets to be valued.

2. Open market assumption: The open market assumption assumes that both parties of the asset transaction or the proposed asset transaction in the market are in equal position and have the opportunities and time to obtain sufficient market information, so as to make rational judgments on the functions, purposes and transaction price of the assets. The open market assumption is made on the basis that the assets can be traded voluntarily, rationally, nonmandatorily and without limitations in the market.

3. Going-concern assumption: The going-concern assumption means the valuation method, parameters and basis are to be determined on the condition that the appraised asset can be used continuously without any change. If there is any change in the aforesaid conditions, the valuation results shall become invalid.

The cost valuation is the product of (1) the replacement value; and (2) the newness rate.

Set out below are the principal underlying inputs to the above calculation method:

• (1) The replacement value

The replacement value represents the sum of (i) the comprehensive construction and installation cost; (ii) the preliminary and other expenses; and (iii) the capital cost.

• (i) The comprehensive construction and installation cost was determined by the cost of building materials, labor costs and machinery costs at prevailing rates published by the local authority and regulations on administrative fees.

• (ii) The preliminary and other expenses was determined by various costs including the management cost, inspection cost and administration costs. These costs are estimated as a percentage of the total construction costs. The management costs was determined per publication of 財政部財建[2016] 504號 (No.504 [2016] of the Ministry of Finance). The other rates are set by the prevailing market rates. The total amount was determined to be 7.69% of the construction costs.

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LETTER FROM THE BOARD

• (iii) The capital cost represents the prevailing costs of financing to the construction, which is determined with reference to the prevailing market rate (4.65% per annum for loans of more than 5 year term and 3.85% for short term loans of less than a year).

• (2) The newness rate

The newness rate is the sum of (i) 60% of the on-site surveyed newness rate; and (ii) 40% of the theoretical newness rate of the appraised asset.

• (i) The on-site surveyed newness rate was determined by on-site inspection by the valuer of the construction completion documents, maintenance and management track record and factors including the structure, decoration and equipment of the buildings.

• (ii) The theoretical newness rate was determined by the remaining service life divided by the theoretical service life. The theoretical service life of the appraised asset was determined with reference to the guidelines published by the Ministry of Housing and Urban-Rural Development of the PRC. The remaining service life was determined by subtracting the actual years of usage from the theoretical service life.

Based on the above formula, the newness rate for the underlying asset of the First Finance Lease Agreement was between 54% and 75% for different components; the Second Finance Lease Agreement was between 67% and 84% for different components; and the Third Finance Lease Agreement was 98%.

The Company considers that the ‘‘cost method’’ is appropriate because of the nature and characteristics of the appraised assets, being a large scale utility infrastructure, and the non-existence of an active secondary market of similar assets. The cost method is also the common approach adopted by South China Leasing in its ordinary course of business when entering into finance lease arrangements with underlying assets as infrastructures or plant and equipment.

Lessee’s option to purchase

At the end of the lease term, the First Lessee will have the right to purchase the Assets under the First Finance Lease Agreement at a nominal purchase price of RMB50.

Guarantee

The First Guarantor, which indirectly holds 35% equity of the First Lessee, will provide a guarantee in favour of South China Leasing in respect of the performance of obligations under the First Finance Lease Agreement by the First Lessee.

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LETTER FROM THE BOARD

The Second Finance Lease Agreement

Subject matter

South China Leasing will provide a finance lease with respect to the Assets under the Second Finance Lease Agreement to the Second Lessee for a term of three years, which commenced on 21 September 2020 and will mature on 20 September 2023. South China Leasing will purchase the Assets under the Second Finance Lease Agreement from the First Lessee and lease the Assets under the Second Finance Lease Agreement back to the First Lessee.

The principal amount under the finance lease is RMB150,000,000. The First Lessee will repay the principal amount in twelve instalments during the term of the finance lease. It will make the interest payment on a quarterly basis at a rate equal to the benchmark interest rate for 1-year to 3-year RMB loans published by the People’s Bank of China from time to time plus 15% of the benchmark rate.

South China Leasing is also entitled to a handling fee of RMB5,625,000, payable by the First Lessee, in one lump sum prior to the commencement of the lease term.

The interest rate and the handling fee for the finance lease have been agreed between the parties after arm’s length negotiation with reference to the prevailing market rates as set out in the subparagraph ‘‘subject matter’’ under the section headed ‘‘The First Finance Least Agreement’’.

The consideration for the purchase of the Assets under the Second Finance Lease Agreement is RMB150,000,000, which was determined by the parties after arm’s length negotiations with reference to the valuation of the Assets under the Second Finance Lease Agreement based on the cost method of approximately RMB182,856,600. The consideration for the purchase of the Assets under the Second Finance Lease Agreement will be satisfied by South China Leasing by internal resources and bank borrowing.

The valuation was performed by 北京天健興業資產評估有限公司 (Pan-China Assets Appraisal Co., Ltd.), an independent valuer. The major inputs and assumptions are set out in the subparagraph ‘‘subject matter’’ under the section headed ‘‘The First Finance Lease Agreement’’.

The Company considers that the ‘‘cost method’’ is appropriate because of the nature and characteristics of the appraised assets, being a large scale utility infrastructure, and the non-existence of an active secondary market of similar assets. The cost method is also the common approach adopted by South China Leasing in its ordinary course of business when entering into finance lease arrangements with underlying assets as infrastructures or plant and equipment.

Lessee’s option to purchase

At the end of the lease term, the First Lessee will have the right to purchase the Assets under the Second Finance Lease Agreement at a nominal purchase price of RMB50.

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LETTER FROM THE BOARD

Guarantee

The First Guarantor, which indirectly holds 35% equity of the First Lessee, will provide a guarantee in favour of South China Leasing in respect of the performance of obligations under the Second Finance Lease Agreement by the First Lessee.

THE SECOND FINANCE LEASE ARRANGEMENT

On 9 October 2020, South China Leasing, an indirect non wholly-owned subsidiary of the Company, entered into the Third Finance Lease Agreement with the Second Lessee.

The principal terms of the Third Finance Lease Agreement are set out below.

Subject matter

South China Leasing will provide a finance lease with respect to the Assets under the Third Finance Lease Agreement to the Second Lessee for a term of not exceeding three years. South China Leasing will purchase the Assets under the Third Finance Lease Agreement from the Second Lessee and lease it back to the Second Lessee under the finance lease arrangement.

The principal amount under the finance lease is RMB140,000,000. The term of the finance lease is 32 months, commencing 15 October 2020 and mature on 5 June 2023. During the term of the lease, the Second Lessee shall make interest payment on the principal amount at the fixed rate of 6.3175% per annum on a quarterly basis. The Second Lessee will repay the principal amount in eleven instalments during the term of the finance lease.

South China Leasing is also entitled to a handling fee of RMB1,000,000, payable by the Second Lessee, in one lump sum prior to the commencement of the term.

The interest rate and the handling fee for the finance lease have been agreed between the parties after arm’s length negotiation with reference to the prevailing market rates. When considering the interest rate, the Company took into account the factors set out in subparagraph ‘‘subject matter’’ under the section headed ‘‘The First Finance Lease Agreement’’.

The consideration for the purchase of the Assets under the Third Finance Lease Agreement is RMB140,000,000, which was determined by the parties after arm’s length negotiations with reference to the valuation of the Assets under the Third Finance Lease Agreement based on the cost method of approximately RMB187,509,494. The consideration for the purchase of the Assets under the Third Finance Lease Agreement will be satisfied by South China Leasing by internal resources and bank borrowing.

The valuation was performed by 江西智宸資產評估有限責任公司 (Jiangxi Zhichen Asset Appraisal Co., Ltd.), an independent valuer. The major inputs and assumptions include:

1. no material changes will be made to the laws, regulations and policies at the national, provincial and/or industrial level and no significant changes in macroeconomic conditions;

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LETTER FROM THE BOARD

1. the title holder is legally interested in the assets appraised;

2. no legal dispute against certain particulars of the assets appraised, including but not limited to the ownership, the quantity and the area of the assets appraised and the projects held in relation to the assets appraised;

3. no consideration will be made to the effect of pledging the assets appraised and/or provision of guarantee by the title holder of the assets appraised; and

4. no occurrence of force majeure events or unforeseen matters which may cause significant impact to the assets appraised.

The Company considers that the ‘‘cost method’’ is appropriate because of the nature and characteristics of the appraised assets, being a large scale utility infrastructure, and the non-existence of an active secondary market of similar assets. The cost method is also the common approach adopted by South China Leasing in its ordinary course of business when entering into finance lease arrangements with underlying assets as infrastructures or plant and equipment.

Lessee’s option to purchase

At the end of the lease term, the Second Lessee will have the right to purchase the Assets under the Third Finance Lease Agreement at a nominal purchase price of RMB10,000.

Guarantee

The Second Guarantor will provide a guarantee in favour of South China Leasing in respect of the obligations of the Second Lessee under the Third Finance Lease Agreement.

CONDITION

The terms of, and the arrangements contemplated under, the Finance Lease Arrangements are subject to approval by the Shareholders in accordance with the requirements of the Listing Rules.

As no shareholder is interested in the transaction and is required to abstain from voting if the Company were to convene a general meeting to approve the Finance Lease Arrangements, the Company has approved the Finance Lease Arrangements by the written approval of Wheeling Holdings, the controlling shareholder of the Company, which holds 2,025,736,972 Shares in the Company (representing approximately 50.84% of the total issued share capital of the Company) as at the date of the Finance Lease Arrangements, pursuant to Rule 14.44 of the Listing Rules.

INFORMATION ABOUT THE ASSETS UNDER THE FIRST FINANCE LEASE AGREEMENT, THE ASSETS UNDER THE SECOND FINANCE LEASE AGREEMENT AND THE ASSETS UNDER THE THIRD FINANCE LEASE AGREEMENT

The Assets under the First Finance Lease Agreement are buildings and other auxiliary facilities, including sewage processing system, external electricity supply system and electricity conversion equipment, located in Rugao Port (如皋港區) of Rugao City, Jiangsu Province, PRC. The valuation by

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LETTER FROM THE BOARD

the independent valuer of each of the buildings, sewage processing system, external electricity supply system and electricity conversion equipment was RMB150,144,500, RMB3,978,800, RMB8,089,600 and RMB6,159,200, respectively.

The Assets under the Second Finance Lease Agreement are buildings and other auxiliary facilities, including external electricity supply system and cranes located in Rugao Port (如皋港區) of Rugao City, Jiangsu Province, PRC. The valuation by the independent valuer of each of the buildings, external electricity supply system and cranes was RMB166,691,900, RMB7,237,900 and RMB8,926,800, respectively.

The Assets under the Third Finance Lease Agreement are sewage pipeline networks of 53,101 metres long and 29,265 metres long located in Hekou Beilu (合口北路) and Zhenxing Dadao (振興大道) of Shangrao City (上饒市), Jingxi Province, PRC respectively. The valuation by the independent valuer of each of the sewage pipeline networks was RMB120,886,551 and RMB66,622,943, respectively.

REASONS FOR THE FINANCE LEASE ARRANGEMENTS

The Company is an investment holding company and its subsidiaries are principally engaged in the provision of finance leasing and other financial services and property leasing and provision of building management services and assets management.

South China Leasing is an indirect non wholly-owned subsidiary of the Company and is principally engaged in the business of finance leasing in the PRC.

Each of the Finance Lease Agreements was entered into in the ordinary and usual course of business of South China Leasing and under normal commercial terms. The entering into of the Finance Lease Agreements will enable South China Leasing to earn a net finance lease income over the lease terms. The Board is of view that the terms of each of the Finance Lease Agreements are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

FINANCIAL EFFECT OF THE FINANCE LEASE ARRANGEMENTS

As a result of the First Finance Lease Agreement and the Second Finance Lease Agreement, at the inception of the First Finance Lease Arrangement , it is expected that (i) the total asset of the Group will increase by approximately RMB251,000,000 to reflect the finance lease receivables and handling fee received under the First Finance Lease Agreement and the Second Finance Lease Agreement; and (ii) the total liabilities of the Group will increase by approximately RMB240,000,000 to reflect the proceeds from the proposed bank borrowing. The Company is of the view that there will be no significant changes in the total assets less total liabilities in the consolidated statement of financial position.

The estimated aggregate of (i) the interest and handling fee received of the First Finance Lease Agreement and the Second Finance Lease Agreement of approximately RMB47,000,000 and (ii) expected cost of lending of approximately RMB19,000,000, will be accounted for in revenue and finance cost of the consolidated statement of comprehensive income and will be amortized over the lease term as stipulated in the First Finance Lease Agreement and the Second Finance Lease Agreement respectively.

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LETTER FROM THE BOARD

As a result of the Third Finance Lease Agreement, at the inception of the Second Finance Lease Arrangement, it is expected that (i) the total asset of the Group will increase by approximately RMB131,000,000 to reflect the finance lease receivables and handling fee received under the Third Finance Lease Agreement; and (ii) the total liabilities of the Group will increase by approximately RMB130,000,000 to reflect the proceeds form the bank loan. The Company is of the view that there will be no significant changes in the total assets less total liabilities in the consolidated statement of financial position.

The estimated aggregate of (i) the interest and handling fee received of the Third Finance Lease Agreement of approximately RMB14,000,000 and (ii) cost of lending of approximately RMB9,000,000 will be accounted for in revenue and finance cost of the consolidated statement of comprehensive income and will be amortized over the lease term as stipulated in the Third Finance Lease Agreement.

INFORMATION OF THE FIRST LESSEE

The First Lessee, Rugao Port Group Co., Ltd (如皋港務集團有限公司) is a limited liability company established in the PRC. It is principally engaged in coal and timber trading and the provision of port logistic services in Rugao City (如皋市), Jiangsu Province, the PRC. To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, the First Lessee is owned as to 41.64% by Jiangsu Golden Seaboard Construction Development Co., Limited (江蘇金海岸建設發 展有限公司) (‘‘Jiangsu Golden Seaboard’’), as to 23.36% by Hong Kong Golden Seaboard Investment Construction Development Co., Limited (香港金海岸建設發展有限公司) (‘‘HK Golden Seaboard’’), and as to 35% by China Forestry Times Holding Co., Ltd. (中林時代控股有限公司) (‘‘China Forestry Times’’). Jiangsu Golden Seaboard is a limited liability company established in the PRC and is principally engaged in the property and construction business, owned by Mr. Hao Zhenya (郝振亞) and Mr. Xing Zhong (邢忠) as to 51% and 49%, respectively. HK Golden Seaboard is a limited company established in Hong Kong and is a wholly-owned subsidiary of Wholly Esprit Limited, which is a limited company established in the British Virgin Islands and wholly-owned by Mr. Huang Fei (黃飛). Each of HK Golden Seaboard and Wholly Esprit Limited is principally engaged in the business of investment holding.

To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, China Forestry Times is principally engaged in port logistics, trading in bulk material (timber, coal) and industrial park development, construction and operation. China Forestry Times is a whollyowned subsidiary of the First Guarantor, China Forestry Group Corporation (中國林業集團有限公司) (‘‘China Forestry Group’’). China Forestry Group is a state-owned enterprise principally engaged in forest resource development, forestry product oil and related ancillary services, as well as forest tree cultivation and seedling breeding.

INFORMATION OF THE SECOND LESSEE

The Second Lessee, Jinyuan Huaxing Financial Leasing Co., Ltd. (金源華興融資租賃有限公司), is a limited liability company principally engaged in the business of finance leases in Shangrao City (上 饒市), Jiangxi Province, the PRC. To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, the Second Lessee is owned as to 35% by Shangrao Digital and Financial Industry Investment Group Co., Ltd. (上饒市數字和金融產業投資集團有限公司) (‘‘Shangrao Digital’’), as to 25% by Jingle Win Holding Co., Ltd. (嘉印控股有限公司) (‘‘Jingle Win’’), as to 20% by

• For identification purpose only

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LETTER FROM THE BOARD

Jiangxi Yunji Investment Co., Ltd. (江西雲濟投資有限公司) (‘‘Jiangxi Yunji’’) and as to 20% by Shangrao Oubaotong Technology Development Center (Limited Partnership) (上饒市歐寶通科技發展中 心（有限合伙）) (‘‘Shangrao Oubaotong’’).

To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, Shangrao Digital is a limited liability company established in the PRC and is principally engaged in the financial investment and consultancy services, wholly-owned by Shangrao Investment Holding Group Co., Ltd. (上饒投資控股集團有限公司) (‘‘Shangrao Investment’’). Shangrao Investment is a limited liability company established in the PRC and is principally engaged in the investments in urban construction, highways, transportation, tourism, finance, automobiles, new energy, agricultural industrialization, small and medium-sized enterprises, as well as infrastructure and public services. Shangrao Investment is owned by Shangrao State-owned Assets Supervision and Administration Commission (上饒市國有資產監督管理委員會) (‘‘Shangrao State-owned Assets Commission’’) and Jiangxi Revitalization Development Shanghai Investment No. 2 Investment Center (Limited Partnership) (江西振興發展上投二號投資中心（ 有限合夥）) as to approximately 97.58% and approximately 2.42%, respectively.

To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, Jingle Win is a limited liability company incorporated in the Cayman Islands and is principally engaged investment holding. Jingle Win is owned by Shangrao Zhuoxin Equity Investment Management Center (Limited Partnership) (上饒市卓信股權投資管理中心（有限合伙）) (‘‘Shangrao Zhuoxin’’) and Shangrao Jiaxin Equity Investment Management Center (Limited Partnership) (上饒市嘉信股權投資管 理中心（有限合伙）) (‘‘Shangrao Jiaxin’’) as to 60% and 40%, respectively. Shangrao Zhuoxin is a limited partnership established in the PRC and is principally engaged in investment holding. Shangrao Zhuoxin is ultimately wholly-owned by Mr. Li Xiande (李仙德) (‘‘Mr. Li’’). Shangrao Jiaxin is a limited partnership established in the PRC and is principally engaged in investment holding. Shangrao Jiaxin is ultimately wholly-owned owned by Mr. Chen Kangping (陳康平) (‘‘Mr. Chen’’).

To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, Jiangxi Yunji is a limited liability company established in the PRC and is principally engaged in trading of building materials and construction equipment, land and infrastructure construction, sewage treatment plants construction, industrial and venture capital investments and provision of investment consultancy services. Jiangxi Yunji is wholly-owned by the Second Guarantor. The Second Guarantor is a limited liability company established in the PRC and is principally engaged in investment holding, infrastructure development, investment in land and the provision of financial services. The Second Guarantor is owned by Shangrao State-owned Assets Commission and Shangrao City Economic and Technological Development Management Committee (上饒市經濟技術開發管理委員會) as to 55% and 45%, respectively.

To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, Shangrao Oubaotong is a limited partnership established in the PRC and is principally engaged in investments and applications of new energy, photovoltaic, internet development. Shangrao Oubaotong is ultimately owned as to 60% by Mr. Li and as to 40% by Mr. Chen respectively.

To the best of the knowledge and belief of the Directors, each of the First Lessee, the First Guarantor, the Second Lessee, the Second Guarantor and its ultimate beneficial owners is independent of and not connected with the Company and its connected persons.

• For identification purpose only

12

LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

As the First Lessee of the First Finance Lease Agreement and the Second Finance Lease Agreement is the same party, the transactions contemplated under the First Finance Lease Agreement shall be aggregated with the Second Finance Lease Agreement pursuant to Rule 14.22 of the Listing Rules. As the highest percentage ratio in respect of the transactions contemplated under the First Finance Lease Agreement, when aggregated with the Second Finance Lease Agreement, is more than 25% but less than 100%, each of the transactions under the Finance Lease Arrangement constitutes a major transaction for the Company under Chapter 14 of the Listing Rules and is subject to the reporting, announcement and Shareholders’ approval requirements under the Listing Rules.

As one of the applicable percentage ratios under Rule 14.07 of the Listing Rules for the transactions contemplated under the Third Finance Lease Agreement exceeds 25% but is less than 100%, the Third Finance Lease Agreement constitutes a major transaction for the Company under the Listing Rules, and shall be subject to the reporting, announcement and the shareholders’ approval requirements under the Listing Rules.

As no shareholder is interested in the transactions and is required to abstain from voting if the Company were to convene a general meeting to approve the Finance Lease Arrangements, the Company has approved the Finance Lease Arrangements by the written approval of Wheeling Holdings, the controlling shareholder of the Company, which holds 2,025,736,972 Shares representing approximately 50.84% of the issued share capital of the Company as at the date of the Finance Lease Agreements, pursuant to Rule 14.44 of the Listing Rules and is exempted from the requirement to convene a shareholders’ meeting for the approval of the Finance Lease Arrangements.

RECOMMENDATION

The Directors are of the opinion that the terms of each of First Finance Lease Agreement, the Second Finance Lease Agreement and the Third Finance lease Agreement is fair and reasonable and are in the interests of the Company and its shareholders as whole. If a general meeting were to be convened for the approval of the Finance Lease Arrangements, the Board would recommend its shareholders to vote in favour of the resolution to approve the Finance Lease Arrangements at such general meeting.

Your faithfully, By order of the Board Shougang Concord Grand (Group) Limited Xu Liang

Chairman

13

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION OF THE GROUP FOR THE THREE FINANCIAL YEARS ENDED 31 DECEMBER 2019

Financial information of the Group for the three years ended 31 December 2017, 2018 and 2019 and six months ended 30 June 2020 has been disclosed in the annual reports of the Company for the three years ended 31 December 2019 and interim report of the Company for the six months ended 30 June 2020, 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.shougang-grand.com.hk. Quick links to the annual reports of the Company are set out below:

annual report of the Company for the year ended 31 December 2017: (Pages 65 to 181) https://www1.hkexnews.hk/listedco/listconews/sehk/2018/0413/ltn201804131029.pdf

annual report of the Company for the year ended 31 December 2018: (Pages 97 to 230) https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0411/ltn20190411714.pdf

annual report of the Company for the year ended 31 December 2019: (Page 102 to 250) https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0416/2020041600687.pdf

interim report of the Company for the six months ended 30 June 2020: (pages 4 to 41) https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0903/2020090301377.pdf

2. INDEBTEDNESS

Borrowings and lease liabilities

At the close of business on 31 August 2020, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, the Group had outstanding bank borrowings of approximately HK$151,156,000, of which as to approximately HK$151,156,000 were secured by certain investment properties, certain finance lease receivables and certain land and building, the Group had lease liabilities of approximately HK$2,665,000, certain of which were secured by the rental deposits and all of which were unguaranteed.

Pledge of assets and restricted bank deposits

At the close of business on 31 August 2020, the Group had the following charge on its assets:

• (i) Certain investment properties with an aggregate carrying value of approximately HK$23,700,000;

• (ii) Certain finance lease receivables with an aggregate carrying value of approximately HK$253,335,000; and

• (iii) Certain land and building with an aggregate carrying value of approximately HK$14,673,000.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Debt securities

At the close of business on 31 August 2020, the Group had no debt securities.

Contingent liabilities

The Group did not have any material contingent liabilities as at the close of business on 31 August 2020.

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities and normal trade and others payables in the ordinary course of business, the Group did not have any other loan capital issued or agreed to be issued, bank overdrafts, loans, debt securities issued and outstanding, and authorised or otherwise created but unissued and term loans or other borrowings, indebtedness in the nature of borrowings, liabilities under acceptance (other than normal trade bills) or acceptance credits, debentures, mortgages, charges, finance lease or hire purchase commitments, which are either guaranteed, unguaranteed, secured or unsecured, guarantees or other material contingent liabilities outstanding on 31 August 2020.

3. WORKING CAPITAL

After taking into account the Group’s internal resources, the cash flows from the Finance Lease Arrangements, the presently available banking facilities and in the absence of unforeseen circumstances, the Directors are of the opinion that the Group will have sufficient working capital to meet its present requirements for the next twelve months from the date of this circular.

4. MATERIAL ADVERSE CHANGE

The Directors were not aware of any material adverse change to the financial or trading position of the Group since 31 December 2019, being the date to which the latest audited consolidated financial statement of the Company were made up.

15

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. LIQUIDITY, FINANCIAL RESOURCES AND FINANCING ACTIVITIES

The Group aimed to maintain stable funding sources and financing is arranged to match business requirements and cash flows. The financial leverage of the Group as at 30 June 2020 as compared to 31 December 2019 is summarised below:

	30 June	31 December
	2020	2019
	HK$’000	HK$’000
Total borrowings
Current borrowings	9,580	297,018
Non-current borrowings	137,363	168,539
Sub-total	146,943	465,557
Total cash
Cash and cash equivalents	501,280	607,782
Term deposits with initial term over three months	–	94,382
Restricted bank deposits	2,505	–
Sub-total	503,785	702,164
Total equity	1,715,141	1,743,498
Total assets	1,946,770	2,294,032
Financial leverage
Current ratio	1,247%	305%
Debt asset ratio	12%	24%

As at 30 June 2020, the Group had cash and cash equivalents of approximately HK$501,280,000 (31 December 2019: HK$607,782,000), restricted bank deposits of approximately HK$2,505,000 (31 December 2019: HK$Nil) and term deposits with initial term over three months of HK$Nil (31 December 2019: HK$94,382,000), which were mainly denominated in Hong Kong dollars, US dollars and Renminbi. The decrease was mainly attributable to the net repayment of bank borrowings of approximately HK$311,700,000.

As at 30 June 2020, the Group’s borrowings amounted to approximately HK$146,943,000, of which approximately HK$9,580,000 were repayable within twelve months from 30 June 2020 and approximately HK$137,363,000 were repayable after twelve months from 30 June 2020. All loans bore interest at market rates.

16

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. CAPITAL STRUCTURE

The equity attributable to owners of the Company amounted to approximately HK$1,329,437,000 as at 30 June 2020 (31 December 2019: HK$1,355,149,000). The decrease was mainly due to exchange difference of approximately HK$27,446,000 arising from conversion in total during the period under review. The Company did not issue any new shares during the period under review. The issued share capital of the Company was approximately HK$39,846,000 (represented by approximately 3,984,640,000 issued ordinary shares).

7. MATERIAL ACQUISITION, DISPOSALS AND SIGNIFICANT INVESTMENT

During the six months ended 30 June 2020, the Group had no material acquisition, disposals and significant investment.

8. FOREIGN EXCHANGE EXPOSURE

The normal operations and investments of the Group are mainly in Hong Kong and Mainland China, with revenue and expenditure denominated in Hong Kong dollars and Renminbi. The Directors believe that the Group does not have significant foreign exchange exposure. However, if necessary, the Group will consider using forward exchange contracts to hedge against foreign exchange exposures. As at 30 June 2020, the Group has no significant foreign exchange exposure.

9. EMPLOYEES

As at 30 June 2020, the Group employed 51 (31 December 2019: 60) full time employees (excluding those under the payroll of associates of the Group). The Group remunerated its employees mainly with reference to the prevailing market practice, individual performance and experience. Other benefits such as medical coverage, insurance plan, mandatory provident fund, discretionary bonus and employees share option scheme are also available to employees of the Group. Remuneration packages are reviewed either annually or individually.

During the six months ended 30 June 2020, the Company and its subsidiaries have not paid or committed to pay to any individual any amount as an inducement to join or upon joining the Company and/or its subsidiaries.

17

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

10. OUTLOOK AND PROSPECTS

Through supply chain management services, financial services and assets management services as our core business and competitive edge in the market, the Group strived to focus on the provision of finance leasing, business factoring, supply chain management, investment and financing advisory services and other portfolios of financial products to two types of target entities including steel companies and domestic large-scale enterprise groups, as well as their upstream and downstream customers, in order to provide customised financial service solutions for target companies, meet the strategic needs of target companies and their upstream and downstream companies for industrial upgrading and give full play to the important role of financial services in empowering real economy. The Group will seize the digital transformation of large enterprises, new infrastructure and other digital economic development opportunities, improve the supply chain management, leasing, asset securitization and other businesses of customer information and data security storage, processing and analysis capabilities, and will provide customers with comprehensive data application services.

18

GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

(a) Shares

As at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interest or short position in the shares, underlying shares and debentures of the Company or any of its associated corporation (within the meaning of Part XV of the SFO) which were required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (b) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) pursuant to the Model Code, to be notified to the Company and the Stock Exchange.

None of the Directors or proposed Director is a director or employee of a company which has an interest in the shares and underlying shares of the Company which would fall to be disclosed under the provisions of Divisions 2 and 3 of Part XV of the SFO.

(b) Directors’ service contracts

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

(c) As at the Latest Practicable Date:

• (i) none of the Directors had any direct or indirect interest in any assets which had been, since the date to which the latest published audited accounts of the Group were made up, acquired or disposed of by, or leased to the Company or any of its subsidiaries, or are proposed to be acquired or disposed of by, or leased to, the Company or any of its subsidiaries; and

• (ii) none of the Directors was materially interested in any contract, save for service contracts as disclosed in paragraph (b) above, or arrangement entered into by the Company or any of its subsidiaries which contract or arrangement is subsisting at the date of this circular and which is significant in relation to the business of the Group.

19

GENERAL INFORMATION

APPENDIX II

(d) Directors’ interests in competing businesses

As at the Latest Practicable Date, in so far as the Directors were aware, none of the Directors or their respective close associates had any interest in a business that competed or was likely to compete with the business of the Group.

3. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, according to the register kept by the Company pursuant to Section 336 of SFO, the following persons and companies (other than the Directors or chief executive of the Company) had an interest or short position in the Shares and the underlying Shares which fell to be disclosed to the Company under the provisions of the Divisions 2 and 3 of Part XV of the SFO:

Long positions in the Shares/underlying Shares

			Interests as to
			% of the issued
		Number	share capital of
		of Shares/	the Company
	Capacity in which	underlying	as at the Latest
Name of Shareholder	interests were held	Shares	Practicable Date	Note(s)
Shougang Group Co., Ltd. (‘‘Shougang	Interests of controlled	2,425,736,972	60.88%	1
Group’’)	corporations
Shougang Holding (Hong Kong) Limited	Interests of controlled	2,025,736,972	50.84%	1
(‘‘Shougang Holding’’)	corporations
Wheeling Holdings Limited	Beneficial owner	2,025,736,972	50.84%	1
(‘‘Wheeling’’)
Beijing Shougang Fund Co., Ltd.	Interests of controlled	400,000,000	10.04%	1
(‘‘Shougang Fund’’)	corporations
Jingxi Holdings Limited (‘‘Jingxi	Beneficial owner	400,000,000	10.04%	1
Holdings’’)
Yip Wang Ngai	Interests of controlled	213,600,000	5.36%	2
	corporations
HY Holdings Limited (‘‘HY Holdings’’)	Beneficial owner	213,600,000	5.36%	2
Mak Siu Hang Viola	Interests of controlled	316,082,538	7.93%	3
	corporations
VMS Investment Group Limited	Beneficial owner	254,413,000	6.38%	3
(‘‘VMS Investment’’)

20

APPENDIX II

GENERAL INFORMATION

			Interests as to
			% of the issued
		Number	share capital of
		of Shares/	the Company
	Capacity in which	underlying	as at the Latest
Name of Shareholder	interests were held	Shares	Practicable Date	Note(s)
Master Competent Limited (‘‘Master	Interests of controlled	61,669,538	1.55%	3
Competent’’)	corporations
VMS Holdings Limited (‘‘VMS	Interests of controlled	61,669,538	1.55%	3
Holdings’’)	corporations
Fastlane Global Investments Limited	Interests of controlled	61,669,538	1.55%	3
(‘‘Fastlane Global’’)	corporations
VMS Securities Holdings Limited	Interests of controlled	61,669,538	1.55%	3
(‘‘VMS Securities Holdings’’)	corporations
VMS Financial Group Limited (‘‘VMS	Interests of controlled	61,669,538	1.55%	3
Financial’’)	corporations
VMS Securities Limited (‘‘VMS	Beneficial owner	61,669,538	1.55%	3
Securities’’)
Notes:

1. Shougang Group indicated in its disclosure form dated 30 July 2019 (being the latest disclosure form filed up to the Latest Practicable Date) that as at 30 July 2019, its interest in the Company was held by Shougang Holding and Shougang Fund respectively, wholly-owned subsidiaries of Shougang Group. Shougang Holding’s interest in the Company was the Shares held by Wheeling, a wholly-owned subsidiary of Shougang Holding, and Shougang Fund’s interest in the Company was the Shares held by Jingxi Holdings, a wholly-owned subsidiary of Shougang Fund.

2. Mr. Yip Wang Ngai indicated in his disclosure form dated 1 August 2019 (being the latest disclosure form filed up to the Latest Practicable Date) that as at 30 July 2019, his interest in the Company was held by HY Holdings which in turn was held as to 80% by Mr. Yip Wang Ngai.

3. Ms. Mak Siu Hang Viola indicated in her disclosure form dated 4 June 2020 (being the latest disclosure form filed up to the Latest Practicable Date) that as at 2 June 2020, (i) VMS Securities, which is a company controlled by her, holds 61,669,538 Shares; and (ii) VMS Investment, which is a company wholly owned by her, holds 254,413,000 Shares. VMS Securities is wholly owned by VMS Financial, which in turn is wholly owned by VMS Securities Holdings and in turn, wholly owned by Fastlane Global. Fastlane Global is wholly owned by VMS Holdings. VMS Holdings is owned as to 59.80% by Ms. Mak Siu Hang Viola and 32.20% by Master Competent, which is wholly owned by Ms. Mak Siu Hang Viola.

21

GENERAL INFORMATION

APPENDIX II

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company was aware of any other person or corporation who had an interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who/which was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group, or any options in respect of such capital.

4. MATERIAL CONTRACTS

The Company has not entered into any material contracts (not being contracts entered into in the ordinary course of business) within the two years immediately preceding the date of this circular which are or may be material.

5. LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration proceedings of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatened by or against any member of the Group.

6. MISCELLANEOUS

• (a) The registered office of the Company is at Victoria Place, 5th Floor, 31 Victoria Street, Hamilton, HM 10, Bermuda and the principal place of business of the Company in Hong Kong is at 5/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.

• (b) The Company’s Hong Kong branch share registrar and transfer office is Tricor Tengis Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

• (c) The company secretary of the Company is Tse Ching Wah. She is a fellow member of both The Hong Kong Institute of Chartered Secretaries and Institute of Chartered Secretaries and Administrators. She is also a member of both The Hong Kong Institute of Certified Public Accountants and The Institute of Chartered Accountants in England and Wales.

• (d) The English text of this circular shall prevail over their respective Chinese text for the purpose of interpretation.

7. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at the Company’s principal office in Hong Kong at 5/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, for a period of 14 days from the date of this circular:

• (a) the bye-laws of the Company;

• (b) the annual reports of the Company for years ended 31 December 2017, 2018 and 2019, and the interim report of the Company for the six months ended 30 June 2020;

22

GENERAL INFORMATION

APPENDIX II

• (c) the First Finance Lease Agreement;

• (d) the Second Finance Lease Agreement;

• (e) the Third Finance Lease Agreement; and

• (f) this circular.

23