Weiye Holdings Limited - Proxy Solicitation & Information Statement 2013

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Culture Landmark Investment Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or 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.

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities of Culture Landmark Investment Limited.

CULTURE LANDMARK INVESTMENT LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 674)

MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF LONGISLAND TOURISM INVESTMENT & DEVELOPMENT LIMITED INVOLVING THE ISSUE OF CONVERTIBLE BONDS

Financial adviser to Culture Landmark Investment Limited

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建勤環球金融服務有限公司 Baron Global Financial Services Limited

Capitalised terms used in this cover page shall have the same meanings as those defined in the section headed “Definitions” in this circular.

A letter from the Board is set out on pages 8 to 28 of this circular. A notice convening the SGM of the Company to be held at Rooms 2501-05, 25th Floor, China Resources Building, No. 26 Harbour Road, Wanchai, Hong Kong, on 7 November 2013 at 4:00 p.m., is set out on pages 168 to 170 of this circular.

Whether or not you intend to attend the SGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the office of the Company’s branch share registrar in Hong Kong, Tricor Secretaries Limited, 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, as soon as possible and in any event not less than 48 hours before the appointed time for holding the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM and any adjournment thereof (as the case may be) should you so wish.

23 October 2013

TABLE OF CONTENTS

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Acquisition Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Convertible Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Shareholding structure of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Information of the Target Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Information of the Xi’an Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Development of the Xi’an Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
Financial information of the Target Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
Information of the Vendor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
Possible financial effects of the Acquisition on the Group . . . . . . . . . . . . . . . . . . . . .	26
Reasons for the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Implications of the Listing Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	27
Voting by Poll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	27
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	27
Additional information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	28
APPENDIX I – FINANCIAL INFORMATION OF THE GROUP . . . . . . .	29
APPENDIX II – FINANCIAL INFORMATION OF THE TARGET
GROUP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	45
APPENDIX III – UNAUDITED PRO FORMA FINANCIAL
INFORMATION OF THE ENLARGED GROUP . . . . .	144
APPENDIX IV – VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . .	154
APPENDIX V – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . .	160
NOTICE OF THE SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	168

This circular in both English and Chinese is available in printed form and published on the respective websites of the Company at “http://www.tricor.com.hk/webservice/000674” and Hong Kong Exchanges and Clearing Limited at “http://www.hkexnews.hk”.

– i –

DEFINITIONS

In this circular, unless the context requires otherwise, the expressions as stated below will have the following meanings:

“Announcement”
the announcement of the Company dated 1 August 2013 in relation to the Acquisition
“Acquisition”
the acquisition of the Sale Share by the Purchaser from the Vendor pursuant to the Acquisition Agreement and anticipated under MOU II
“Acquisition Agreement” the conditional sale and purchase agreement dated 1 August 2013 entered into between the Vendor and the Company in relation to the Acquisition
“associate(s)”
has the meaning ascribed thereto in the Listing Rules
“Associated Corporation(s)”
has the meaning ascribed thereto in Part XV of the SFO
“Beijing Times” 北京譽祥時代科技有限公司 (Beijing Yuxiang Times Technology Limited*), a wholly foreign-owned enterprise established in the PRC and is wholly owned by Longisland HK
“Board” the board of Directors
“Bondholders” holders of the Convertible Bonds, and the term “ Bondholder ” shall be construed accordingly
“Business Day”
a day (other than Saturday) on which banks are open in Hong Kong for general banking business
“BVI”
the British Virgin Islands
“Cash Consideration”

HK$150,000,000 which has been paid or has to be paid by the Company to the Vendor as part of the Consideration pursuant to the Acquisition Agreement

“Company” or “Purchaser”
Culture Landmark Investment Limited, a company incorporated in Bermuda with limited liability, the Shares of which are listed on the Main Board of the Stock Exchange
“Completion”

completion of the Acquisition

– 1 –

DEFINITIONS

“Completion Date”
the tenth Business Day after the fulfilment (or waiver, as the case may be) of the Conditions Precedent for the completion of the Acquisition or such other date as may be agreed by the Vendor and the Purchaser in writing
“Conditions Precedent” the conditions precedent to the Completion as set out in sub-paragraph headed “Conditions Precedent” in this circular
“Consideration” the total consideration for the Acquisition, being HK$400,000,000. Details of the Consideration have been set out in the sub-paragraph headed “Consideration” in this circular
“Conversion Price” HK$0.62, being the initial conversion price per Conversion Share upon the exercise of the Conversion Rights attached to the Convertible Bonds, subject to the adjustments under the terms and conditions of the Convertible Bonds
“Conversion Rights”
the rights attached to the Convertible Bonds to convert the same or a part thereof into Conversion Shares
“Conversion Shares”
the Shares to be allotted and issued by the Company upon the exercise of the Conversion Rights attached to the Convertible Bonds
“Convertible Bonds”
the convertible bonds in the aggregate principal amount of HK$250,000,000 to be issued in denomination of HK$5,000,000 each by the Company to the Vendor or its nominee as part of the Consideration and due on the Maturity Date pursuant to the Acquisition Agreement
“Director(s)”
the director(s) of the Company
“Earnest Money”
HK$20,000,000, which has been paid by the Purchaser to the Vendor pursuant to MOU II and forms part of the Cash Consideration
“Encumbrance”
any option, right to acquire, right of pre-emption, mortgage, charge, pledge, lien, hypothecation, title retention, right of set off, counterclaim, trust arrangement or other security or any equity or restriction

– 2 –

DEFINITIONS

“Enlarged Group”
the Group as enlarged by the Acquisition
“Group” the Company and its subsidiaries
“HK$”
Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong”
the Hong Kong Special Administrative Region of the PRC
“Independent Third Parties”
persons or companies which are independent of and not connected with any of the directors, chief executive and substantial shareholders of the Company or any of its subsidiaries and their respective associates, and the term “ Independent Third Party ” shall be construed accordingly
“Issue Date”
date of issue of the Convertible Bonds
“KRW”
South Korean Won, the lawful currency of South Korea
“Last Trading Day”
1 August 2013, being the last trading day prior to the signing of the Acquisition Agreement
“Latest Practicable Date”
18 October 2013, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein
“Listing Committee”
the listing sub-committee of the board of directors of the Stock Exchange with responsibility for considering applications for listing and the granting of listing on the Main Board of the Stock Exchange
“Listing Rules”
the Rules Governing the Listing of Securities on the Stock Exchange, as amended, supplemented or otherwise modified from time to time
“Long Stop Date”
31 July 2014, being the date of 12 months after the execution of the Acquisition Agreement or such later date as may be agreed between the Vendor and the Purchaser
“Longisland Beijing”
北京長島恒業企業管理有限公司 (Beijing Longisland Hengye Enterprise Management Limited*), a limited liability company established in the PRC and is wholly owned by Beijing Times

– 3 –

DEFINITIONS

“Longisland HK”
“Main Board”
“Maturity Date”
“MOU Announcement”
“MOU I”
“MOU II”
“Mr. Cheung”
“Notice of the SGM”

Longisland Travel Investment & Development (HK) Limited (長島旅遊投資發展(香港)有限公司), a limited liability company incorporated in Hong Kong and is wholly owned by the Target Company

the stock market (excluding the option market) operated by the Stock Exchange which is independent from and operated in parallel with the Growth Enterprise Market of the Stock Exchange, and for the avoidance of doubt, the Main Board shall exclude the Growth Enterprise Market

in respect of each Convertible Bond, the date falling on the third anniversary of the Issue Date (the “ First Term ”), subject to (i) an automatic extension of one (1) year from the First Term (the “ Second Term ”), unless either the Company or the Bondholder(s) serves on the other party a written notice objecting to this extension one (1) month before the expiry of the First Term; and (ii) a further automatic extension of one (1) year from the Second Term, unless either the Company or the Bondholder(s) serves on the other party a written notice objecting to this extension one (1) month before the expiry of the Second Term
the announcement of the Company dated 14 June 2013 in relation to MOU I and MOU II
the non legally-binding Chinese memorandum of cooperation entered into between the Company and Estate Fortune Limited dated 14 June 2013. Details of MOU I have been set out in the MOU Announcement
the non legally-binding Chinese memorandum of cooperation entered into between the Company and the Vendor dated 14 June 2013 regarding the Acquisition. Details of MOU II have been set out in the MOU Announcement
張廣生 (Mr. Cheung Kwong Sang), an Independent Third Party
the notice convening the SGM, as set out on pages 168 to 170 of this circular

– 4 –

DEFINITIONS

“Partial Payment”
HK$60,000,000 payable by the Purchaser to the Vendor within five (5) Business Days after the execution of the Acquisition Agreement
“PRC”
People’s Republic of China, which for the purposes of this circular, shall exclude Hong Kong, Macau Special Administrative Region of the PRC and Taiwan
“PRC Legal Advisers” Commerce & Finance Law Offices
“PRC Legal Opinion”
the legal opinion (in form and substance satisfactory to the Purchaser) to be issued by the PRC Legal Advisers and dated on or about the Completion Date. The areas covered in the PRC Legal Opinion has been set out in the sub-paragraph headed “Conditions Precedent” in this circular
“Project Companies”
Xi’an Hengye and Xi’an Green River
“Properties”
those properties developed or to be developed within the Xi’an Project and/or leased by the Target Group and the expression “ Property ” shall be construed accordingly
“Residual Payment”
HK$70,000,000 payable by the Purchaser to the Vendor on or before the Completion Date
“Restructuring”
the restructuring to be undergone or being undergone by the Vendor, pursuant to which the Vendor shall become the sole legal and beneficial owner of the Target Company while the Target Company shall become the ultimate holding company of the Subsidiaries and all debts owed by any Target Group Company to the Vendor shall have been waived or otherwise assigned to other Target Group Company before the Completion
“RMB”
Renminbi, the lawful currency of the PRC
“Sale Share”
one (1) share of US$1 each in the share capital of the Target Company, being its entire issued share capital
“SFC”
Securities and Futures Commission in Hong Kong
“SFO”

Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

– 5 –

DEFINITIONS

“SGM” the special general meeting of the Company to be convened to consider and approve, among other things, the Acquisition Agreement and the transactions contemplated thereunder
“Share(s)” ordinary shares of HK$0.05 each in the share capital of the Company, and where applicable, the term shall also include shares of any class or classes resulting from any subdivision, consolidation or re-classification of those shares and the term “ Share ” shall be construed accordingly
“Shareholders” holders of the Shares and the term “ Shareholder ” shall be construed accordingly
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Subsidiaries” Longisland HK, Beijing Times, Longisland Beijing, Xi’an Hengye and Xi’an Green River
“Target Company” Longisland Tourism Investment & Development Limited (長島旅遊投資發展有限公司), a company incorporated in the BVI with limited liability and is wholly owned by the Vendor
“Target Group” the Target Company, Longisland HK, Beijing Times, Longisland Beijing, Xi’an Hengye and Xi’an Green River, and the term “ Target Group Company ” means any of them
“US$” United States Dollars, the lawful currency of the United States of America
“Valuation Report”
the valuation report issued by the Valuer on the Xi’an Project using a methodology acceptable to the Vendor and the Purchaser
“Valuer”
第一太平戴維斯估值及專業顧問有限公司 (Savills Valuation and Professional Services Limited), an Independent Third Party and the professional valuer appointed by the Vendor and acceptable to the Purchaser

– 6 –

DEFINITIONS

“Vendor”
Bliss Zone Limited, a company incorporated in the BVI with limited liability, which is an Independent Third Party and the legal and beneficial owner of the entire issued share capital of the Target Company
“Xi’an Green River” 西安長島綠河置業有限公司 (Xi’an Longisland Green River Properties Limited*), a limited liability company established in the PRC and a wholly-owned subsidiary of Longisland Beijing after Restructuring
“Xi’an Hengye” 西安長島恒業置業有限公司 (Xi’an Longisland Hengye Properties Limited*), a limited liability company established in the PRC and a wholly-owned subsidiary of Longisland Beijing after Restructuring
“Xi’an Project” 西安錦綉森林項目 (Xi’an Jinxiu Forest project), a land development project located in 中國西安市滻灞生態區 (Chanba Ecological District of Xi’an City, the PRC). Details of the Xi’an Project have been set out in the paragraph headed “Information of the Xi’an Project” in this circular
“%” per cent.
“*” is for identification purpose only.

– 7 –

LETTER FROM THE BOARD

CULTURE LANDMARK INVESTMENT LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 674)

Executive Directors: Mr. Cheng Yang ( Chairman and Chief Executive Officer ) Ms. Lei Lei (Deputy Chief Executive Officer) Mr. Li Weipeng

Registered Office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Independent non-executive Directors:

Mr. Tong Jingguo Mr. Yang Rusheng Mr. So Tat Keung

Head Office: Rooms 2501-2505, 25th Floor China Resources Building No. 26 Harbour Road Wanchai Hong Kong

23 October 2013

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF LONGISLAND TOURISM INVESTMENT & DEVELOPMENT LIMITED INVOLVING THE ISSUE OF CONVERTIBLE BONDS AND NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

Reference is made to the Announcement dated 1 August 2013 regarding the Acquisition by the Company. The Vendor and the Company entered into the Acquisition Agreement on 1 August 2013 (after trading hours) pursuant to which the Vendor has conditionally agreed to sell and the Purchaser has conditionally agreed to purchase the Sale Share, representing the entire issued share capital of the Target Company at the Consideration. The Target Company will indirectly own the Xi’an Project through the Project Companies after the Restructuring and before the Completion.

– 8 –

LETTER FROM THE BOARD

The Company will issue the Convertible Bonds as part of the Consideration. No application will be made for the listing of the Convertible Bonds. Application will be made to the Listing Committee for the listing of and permission to deal in the Conversion Shares.

The purpose of this circular is to provide you with, among others, (i) further details of the Acquisition and the issue of the Convertible Bonds; (ii) financial and other information of the Group; (iii) financial and other information of the Target Group; (iv) unaudited pro forma financial information of the Enlarged Group upon Completion; and (v) the Notice of the SGM at which resolutions will be proposed to consider and, if thought fit, to approve the Acquisition Agreement and the transactions contemplated thereunder, including the issue of the Convertible Bonds together with the allotment and issue of the Conversion Shares upon the exercise of the Conversion Rights.

ACQUISITION AGREEMENT

Principal terms of the Acquisition Agreement

Date: 1 August 2013 Parties: (1) the Company (as the Purchaser)

(2) the Vendor

As at the Latest Practicable Date, the Target Company was legally and beneficially owned as to 100% by the Vendor. To the best of the knowledge, information and belief of the Board, having made all reasonable enquiries, the Vendor and its ultimate beneficial owner are Independent Third Parties.

Assets to be acquired

Pursuant to the Acquisition Agreement, the Vendor has conditionally agreed to sell and the Purchaser has conditionally agreed to purchase the Sale Share, representing the entire issued share capital of the Target Company. The Target Company will indirectly own the Xi’an Project through the Project Companies after the Restructuring and before the Completion.

Consideration

The Consideration for the Sale Share is HK$400,000,000, which will be satisfied in the following manner:

(a) HK$20,000,000 had been paid by the Purchaser to the Vendor as Earnest Money pursuant to MOU II;
(b) Partial Payment amounting to HK$60,000,000 had been paid by the Purchaser to the Vendor within five (5) Business Days after the execution of the Acquisition Agreement;

– 9 –

LETTER FROM THE BOARD

(c) Residual Payment amounting to HK$70,000,000 is payable by the Purchaser to the Vendor, which may, at the sole discretion of the Purchaser, be partly settled by the Purchaser on such time and days between the date of execution of the Acquisition Agreement and the Completion Date, and in any event the full amount of the Residual Payment shall be settled on or before the Completion Date; and
(d) HK$250,000,000 is payable by the Purchaser to the Vendor by way of issue of the Convertible Bonds to the Vendor or its nominee at Completion.

In order to maintain reasonable amount of cash flow available for the Company, when determining the Consideration, the Convertible Bonds constituted a larger proportion of the Consideration comparing to the Cash Consideration.

The remaining Cash Consideration payable by the Purchaser to the Vendor may be paid in HK$ or RMB at the exchange rate as quoted by the People’s Bank of China at the close of business on the Business Day immediately preceding the relevant date of payment.

The Earnest Money was funded by the internal resources of the Group and the remaining balance of the Cash Consideration will also be funded by the internal resources of the Group. Based on the management accounts of the Group, as at 31 March 2013, the Group had cash balance of approximately HK$187,756,090 which is sufficient to fund the remaining Cash Consideration under the Acquisition Agreement.

Basis of the Consideration

The Consideration was arrived at based on normal commercial terms and after arm’s length negotiations between the Company and the Vendor with reference to (i) the preliminary valuation of the Xi’an Project of RMB558,000,000 as at 30 April 2013 by the Valuer; (ii) the prospects of the Xi’an Project; (iii) the financial position of the Group; and (iv) other factors set out in the paragraph headed “Reasons for the Acquisition” in this circular. Based on the factors mentioned above and, in particular, the preliminary valuation of the Xi’an Project by the Valuer, the Consideration payable by the Group is considered by the Board as fair and reasonable and in the interests of the Group and the Shareholders as a whole.

Conditions Precedent

It shall be the Conditions Precedent of Completion that prior thereto:

(a) the Restructuring having been duly completed in accordance with all applicable laws and regulations in the PRC;
(b) all necessary consents, approvals, permits and/or authorisations in respect of each of the Restructuring, the carrying of the business by each Target Group Company and the transactions contemplated under the Acquisition Agreement having been obtained;

– 10 –

LETTER FROM THE BOARD

(c) the PRC Legal Advisers having issued the PRC Legal Opinion;
(d) the Valuer having issued the Valuation Report;
(e) all warranties given by the Vendor set out in the Acquisition Agreement being true, accurate and not misleading at all times between the date of the Acquisition Agreement and the Completion Date (as though they had been made on such dates by reference to the facts and circumstances then subsisting);
(f) there having been no material adverse change, or any development likely to involve a prospective material adverse change, in the condition (financial, operational or otherwise) or in the earnings, business affairs or business prospects, assets or liabilities of the Target Company or any Target Group Company, whether or not arising in the ordinary course of business since the date of the Acquisition Agreement;
(g) the Purchaser having conducted due diligence exercise (legal and financial) on the Target Group and being satisfied with the results thereof;
(h) the Vendor having conducted due diligence exercise on the Group and being satisfied with the results thereof;
(i) the Listing Committee having granted (either unconditionally or subject to conditions to which neither the Purchaser nor the Vendor objects) listing of and permission to deal in the Conversion Shares to be issued by the Purchaser upon exercise of the Conversion Rights;
(j) the issue of the Convertible Bonds and the issue of the Conversion Shares upon exercise of the Conversion Rights not having been deemed by the Stock Exchange as a new listing application under the Listing Rules;
(k) the acquisition of the Convertible Bonds by the Vendor not having been deemed by the SFC as invoking a general offer obligation on the part of the Vendor; and
(l) the Shareholders having passed relevant resolutions in approving, among others, the Acquisition Agreement and the transactions contemplated thereunder and the issue of the Conversion Shares upon exercise of the Conversion Rights in general meeting.

Save for (i) and (l) above, which are considered to be the most vital conditions, all other Conditions Precedent may be jointly waived by the Company and the Vendor by written consent in order to facilitate Completion. However the Company does not intend to waive any Conditions Precedent, but may only consider waiving certain condition(s) if such waiver would not have any material adverse consequence which would affect the interests of the Company and its Shareholders as a whole. The Company and the Vendor agreed to use their best endeavours to ensure that the Conditions Precedent are fulfilled as early as practicable and in any event not later than the Long Stop Date. The Company and the Vendor further undertook to provide all reasonable assistance to each other to fulfill the Conditions Precedent.

– 11 –

LETTER FROM THE BOARD

As at the Latest Practicable Date, the condition referred to in (d) above has been fulfilled.

If the Conditions Precedent have not been fulfilled on or before the Long Stop Date,

(a) the Acquisition Agreement will lapse and become null and void and the Company and the Vendor will be released from all obligations hereunder, save for liabilities for any antecedent breaches hereof; and
(b) the Earnest Money, the Partial Payment and any settled Residual Payment shall be rebated to the Purchaser within three (3) days (“ Due Date ”) from the Long Stop Date without interest, failing which, the Vendor shall pay daily interest of 0.1% to the Purchaser on any such amount in default from the Due Date until repayment in full as liquidated damages.

The area covered in the PRC Legal Opinion as described in condition (c) above include:

each of the Target Group Companies, if established in the PRC, has been duly established and is validly subsisting as at the Completion Date;
each of the Target Group Companies, if established in the PRC, has obtained all necessary consents, approvals, permits and/or authorisations to carry on its business;
the Restructuring (as far as PRC law is involved) has been duly completed in accordance with all applicable laws and regulations in the PRC;
the Xi’an Project is wholly owned by the Project Companies and is free from all Encumbrances;
there is no title defect in respect of any of the Properties; and
such other matters as may be required by the Purchaser in respect of either or all of the Restructuring, the Target Group Company (if incorporated in the PRC), the Acquisition and the Xi’an Project.

Completion

Completion shall take place at the office of the Purchaser at Rooms 2501-2505, 25th Floor, China Resources Building, No. 26 Harbour Road, Wanchai, Hong Kong at 5 p.m. on the Completion Date (or at such other place, on such other time and/or day as the Company and the Vendor may agree in writing) when all the Conditions Precedent having been fulfilled or waived by the parties.

CONVERTIBLE BONDS

HK$250,000,000 of the Consideration under the Acquisition Agreement will be satisfied by the issue of the Convertible Bonds by the Company to the Vendor or its nominee on Completion.

– 12 –

LETTER FROM THE BOARD

Upon Completion and assuming the full exercise of the Conversion Rights attaching to the Convertible Bonds at the Conversion Price of HK$0.62 by the Bondholders, the Company will issue an aggregate of 403,225,806 Conversion Shares, representing (i) approximately 67.34% of the issued share capital of the Company as at the date of this circular; and (ii) approximately 40.24% of the issued share capital of the Company as enlarged by the allotment and issue of the Conversion Shares. However, no Conversion Rights shall be exercised if it will result in (a) over 29.90% of the issued share capital of the Company being held by one person and his concerted parties or a change of control within the meaning of the Hong Kong Code on Takeovers and Mergers; or (b) insufficient public float of the Shares.

No application will be made for listing of the Convertible Bonds. Application will be made to the Listing Committee for the listing of and permission to deal in the Conversion Shares.

The principal terms of the Convertible Bonds are as follows:

(1) Principal amount

HK$250,000,000 in aggregate.

(2) Interest

The Convertible Bonds shall bear interest from the Issue Date at the rate of 4.6% per annum on the principal amount of the Convertible Bonds outstanding, which subject to the terms and conditions of the Convertible Bonds, shall be payable every six (6) months from the Issue Date. Interest will accrue daily and be calculated on the actual number of days elapsed on the basis of a 365-day year.

(3) Maturity Date

In respect of each Convertible Bond, the date falling on the third anniversary of the Issue Date (the “ First Term ”), subject to (i) an automatic extension of one (1) year from the First Term (the “ Second Term ”), unless either the Company or the Bondholder(s) serves on the other party a written notice objecting to this extension one (1) month before the expiry of the First Term; and (ii) a further automatic extension of one (1) year form the Second Term, unless either the Company or the Bondholder(s) serves on the other party a written notice objecting to this extension one (1) month before the expiry of the Second Term.

(4) Conversion

Subject to the terms and conditions of the Convertible Bonds, the Bondholders shall have the Conversion Rights to convert such Convertible Bonds into Conversion Shares, at any time (subject to any applicable fiscal or other laws or regulations and as hereinafter provided) commencing from the end of the three-month period from the Issue Date up to (but excluding) the period of five (5) Business Days ending on the Maturity Date. Any Conversion Rights may only be exercised in integral multiples of HK$5,000,000.

– 13 –

LETTER FROM THE BOARD

No Conversion Rights shall be exercised if it will result in (a) over 29.90% of the issued capital of the Company being held by one person and his concerted parties or a change of control within the meaning of the Hong Kong Code on Takeovers and Mergers; or (b) insufficient public float of the Shares.

Prior to the exercise of the Conversion Rights attaching to the Convertible Bonds, the issue of the Convertible Bonds will not result in a change of control of the Company. Under the terms and conditions of the Convertible Bonds, the Conversion Rights cannot be exercised by any Bondholder to the extent that if immediately after such conversion, the Bondholder, whether alone or together with party(ies) acting in concert with it will, directly or indirectly, control or be interested in over 29.90% of the issued share capital of the Company.

(5) Conversion Price

The Convertible Bonds will be converted at the initial Conversion Price of HK$0.62 per Conversion Share which was determined after arm’s length negotiations between the Company and the Vendor with reference to the recent trading prices of the Shares. The initial Conversion Price of HK$0.62 per Conversion Share represents:

(a) a discount of approximately 29.55% to the closing price of HK$0.88 per Share as quoted on the Stock Exchange on the Last Trading Day;
(b) a discount of approximately 29.55% to the average closing price of approximately HK$0.88 per Share as quoted on the Stock Exchange for the last five (5) consecutive trading days up to and including the Last Trading Day;
(c) a discount of approximately 16.22% to the closing price of HK$0.74 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
(d) a discount of approximately 13.89% to the average closing price of approximately HK$0.72 per Share as quoted on the Stock Exchange for the last five (5) consecutive trading days up to and including the Latest Practicable Date; and
(e) a discount of approximately 51.94% to the audited net asset value of HK$1.29 per Share as at 31 March 2013 (based on the latest published audited consolidated net asset value of the Company of approximately HK$772.40 million as at 31 March 2013 and 598,767,047 Shares as at the Last Trading Day).

The Conversion Price was determined after arm’s length negotiations among the parties to the Acquisition Agreement with reference to:

(i) the average closing price per Share of HK$0.549 for the last 30 consecutive trading days before the date of the MOU Announcement, with a premium of 12.93%. During the same period, the average daily trading volume was approximately 25,787 Shares which was considered a relatively low trading volume;

– 14 –

LETTER FROM THE BOARD

(ii) the increase in the average closing price per Share after the date of the MOU Announcement by taking into consideration of the average closing price per Share of HK$0.791 for the 30 consecutive trading days after the date of the MOU Announcement, with a discount of 21.62%. During the same period, the average daily trading volume was approximately 635,960 Shares which significantly increased when compared with the period of 30 consecutive trading days before the MOU Announcement;
(iii) the overall low trading volume of the Shares; and
(iv) the discount represented by the Consideration to the preliminary valuation of the Xi’an Project. The Consideration for the Sale Share is HK$400,000,000 (approximately RMB319 million), which represented at a discount of 5.24% to the preliminary valuation of the Xi’an Project when taking into account of the outstanding commitment of RMB210 million. However, if the outstanding commitment is not considered, the discount would be 42.88% to the preliminary valuation of the Xi’an Project. As a result, when the Conversion Price was determined, the Company among others made reference to the discount represented by the Consideration to the preliminary valuation of the Xi’an Project. The detailed calculations of the discounts are set out below:

	Calculation of	Calculation of
	the discount	the discount
	with	without
	consideration	consideration
	of the	of the
	outstanding	outstanding
	commitment	commitment
	RMB’000	RMB’000
Consideration	318,750	318,750
Less: Valuation as set out in the preliminary
valuation report	558,000	558,000
Add: Outstanding commitment	210,000	–
Discount amount	29,250	239,250


Discount%	5.24%	42.88%

(6) Adjustments of the Conversion Price

The Conversion Price will be subject to, among others, the following adjustments for dilutive events which may have adverse effects on the rights of the Bondholders:

(a) an alteration of the nominal amount of each Share by reason of any consolidation or subdivision;

– 15 –

LETTER FROM THE BOARD

(b) an issue (other than in lieu of a cash dividend) by the Company of Shares credited as fully paid by way of capitalisation of profits or reserves (including any share premium account or capital redemption reserve fund);
(c) a capital distribution being made by the Company, whether on a reduction of capital or otherwise, to the Shareholders (in their capacity as such) or a grant by the Company to the Shareholders (in their capacity as such) or rights to acquire for cash assets of the Company or any of its subsidiaries;
(d) an offer to the Shareholders new Shares for conversion by way of rights or grant the Shareholders any options or warrants to subscribe for new Shares, at a price per new Share which is less than 90% of the market price at the date of the announcement of the terms of the offer or grant;
(e) an issue wholly for cash being made by the Company of securities convertible into or exchangeable for or carrying rights of conversion for new Shares and the total effective consideration per new Share receivable for such securities is less than 90% of the market price on the date of announcement of the terms of the issue of such securities;
(f) an issue of Shares by the Company wholly for cash at a price per Share which is less than 90% of the market price at the date of announcement of the terms of such issue; or
(g) an offer or invitation to the Shareholders to tender for sale to the Company any Shares or the Company purchases any Shares or securities convertible into Shares or any rights to acquire Shares (excluding any such purchase made on the Stock Exchange, or any other stock exchange recognised for this purpose by the SFC or equivalent authority and the Stock Exchange), and (i) the Directors; and (ii) the approved merchant bank and auditors appointed by the Directors consider appropriate to make an adjustment to the Conversion Price.

(7) Conversion Shares

The Conversion Shares allotted and issued on conversion will be fully paid and will rank pari passu in all respects with, and within the same class as, the Shares in issue on the registration date of the Conversion Shares, except that the Conversion Shares so allotted will not rank for any dividend or other distribution declared or paid or made by reference to a record date for the payment of a dividend or other distribution with respect to the Shares on or prior to the registration date of the Conversion Shares in respect of the Convertible Bonds converted into such Conversion Shares.

(8) Transferability

The Convertible Bonds are transferable pursuant to the terms and conditions set out therein and all transfers shall be in integral multiples of HK$5,000,000.

– 16 –

LETTER FROM THE BOARD

(9) Voting rights at general meeting

Bondholders will not be entitled to receive notices of general meetings of the Company or to attend or vote at the general meetings of the Company by reason of it being a Bondholder.

(10) Status

Each Convertible Bond constitutes a direct unconditional, unsubordinated and unsecured obligation of the Company and at all times ranks pari passu and rateably without preference (with the exception of obligations in respect of taxes and certain other statutory exceptions) equally with all other unsecured and unsubordinated obligations of the Company. The payment obligations of the Company under the Convertible Bonds shall, save for such exceptions as may be provided by applicable legislation, rank at least equally with all its other present and future unsecured and unsubordinated obligations.

(11) Redemption

Unless previously cancelled or purchased or otherwise acquired and (at the election of the Company) cancelled, each Convertible Bond will be redeemed at 100% of the principal amount outstanding on the Maturity Date.

SHAREHOLDING STRUCTURE OF THE COMPANY

Details of the shareholding structure of the Company (i) as at the Latest Practicable Date; (ii) after Completion but before the conversion of the Convertible Bonds by the Vendor; (iii) after Completion and the full conversion of the Convertible Bonds by the Vendor [(Note][2)] ; and (iv) after Completion and conversion of the Convertible Bonds up to the conversion limit by the Vendor, assuming that there is no other change in the share capital of the Company, are set out below:

																After Completion and	After Completion and	After Completion and	After Completion and
						After Completion but							After Completion and				conversion of the
						before the		conversion					the full conversion of			Convertible Bonds up
	As at the		Latest				of the Convertible						the Convertible Bonds			to the conversion limit
	Practicable Date					Bonds by		the	Vendor				by the Vendor (Note 2)				by the	Vendor
	No. of Shares			_% _		No. of Shares					_% _		No. of Shares		_% _	No. of Shares			%
The Vendor or its
nominee		0			0			0				0	403,225,806		40.24	255,394,218			29.90
Director
Cheng Yang (Note 1)	89,349,000			14.92			89,349,000			14.92				89,349,000	8.92		89,349,000		10.46
Substantial
Shareholder
China Resources
(Holdings)
Company Limited	66,666,666			11.13			66,666,666			11.13				66,666,666	6.65		66,666,666		7.80
Public Shareholders	442,751,381			73.95		442,751,381				73.95			442,751,381		44.19	442,751,381			51.84

Total	598,767,047			100%		598,767,047				100.00			1,001,992,853		100.00	854,161,265			100.00

– 17 –

LETTER FROM THE BOARD

Notes:

89,300,000 Shares were owned by Mr. Cheng Yang personally and 49,000 Shares were owned by his wife.
This scenario is for illustrative purpose only and shall not occur. Under the terms and conditions of the Convertible Bonds, the Convertible Rights cannot be exercised by any Bondholder to the extent that if immediately after such conversion, the Bondholder, whether alone or together with party(ies) acting in concert with it will, directly or indirectly, control or be interested in over 29.90% of the issued share capital of the Company.

INFORMATION OF THE TARGET GROUP

The Target Company is an investment company incorporated in the BVI with limited liability. As at the Latest Practicable Date, it was wholly owned by the Vendor. As at the Latest Practicable Date, the corporate structure of the Target Group before the Restructuring:

==> picture [237 x 424] intentionally omitted <==

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

Vendor
100%
Target Company
100%
Longisland HK
100%
Beijing Times
100%
Longisland Beijing
Third Party Financial
Institution
100% 100%
Xi’an Hengye Xi’an Green River
----- End of picture text -----

– 18 –

LETTER FROM THE BOARD

Longisland HK is a limited liability company incorporated in Hong Kong and is an investment holding company; Beijing Times is a wholly foreign-owned enterprise established in the PRC and is an investment holding company; Longisland Beijing is a limited liability company established in the PRC and is an investment holding company; Xi’an Hengye is a limited liability company established in the PRC whose principal business is to develop the residential properties under the Xi’an Project; and Xi’an Green River is a limited liability company established in the PRC whose principal business is to develop the commercial properties under the Xi’an Project.

As of 15 January 2013, 100% equity interest in Xi’an Hengye and Xi’an Green River were held by Longisland Beijing. On 15 January 2013, before the Restructuring, Longisland Beijing signed an agreement (“ Agreement ”) with a third party financial institution (“ Third Party Financial Institution ”). On the same day, Xi’an Hengye and Xi’an Green River each signed a separate guarantee agreement in favour of the Third Party Financial Institution. Based on the Agreement, Longisland Beijing transferred 100% equity interest of Xi’an Hengye and Xi’an Green River to the Third Party Financial Institution as a form of guarantee and Longisland Beijing has the right to buy back the 100% equity interest of Xi’an Hengye and Xi’an Green River and release the abovementioned guarantee.

Longisland Beijing will complete the buy-back and release the guarantee during the Restructuring.

– 19 –

LETTER FROM THE BOARD

The Vendor will become the ultimate holder of the Target Group after the Restructuring and before the Completion. The corporate structure of the Target Group after the Restructuring and before the Completion:

==> picture [237 x 362] intentionally omitted <==

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

Vendor
100%
Target Company
100%
Longisland HK
100%
Beijing Times
100%
Longisland Beijing
100% 100%
Xi’an Hengye Xi’an Green River
----- End of picture text -----

– 20 –

LETTER FROM THE BOARD

Upon Completion, the Company will become the ultimate holder of the Target Group. The corporate structure of the Target Group upon Completion:

==> picture [237 x 361] intentionally omitted <==

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

The Company
100%
Target Company
100%
Longisland HK
100%
Beijing Times
100%
Longisland Beijing
100% 100%
Xi’an Hengye Xi’an Green River
----- End of picture text -----

INFORMATION OF THE XI’AN PROJECT

Xi’an Project is a project located in 西安市滻灞生態區 (Chanba Ecological District of Xi’an City, the PRC*) with the total land area of approximately 105,498 square meters and planned aboveground floor area of approximately 267,663 square meters. The Xi’an Project includes both commercial and residential constructions. The Xi’an Project is currently in a stage of early development and is undergoing the application process for construction.

There is an outstanding commitment in the sum of RMB210,000,000 to be paid by Xi’an Hengye in connection with the Xi’an Project.

– 21 –

LETTER FROM THE BOARD

DEVELOPMENT OF THE XI’AN PROJECT

The Board considers that the Acquisition is an excellent opportunity for the Group to tap into the property development business and believes that the Acquisition would enhance the competitive edge of the Group.

Development plan

Upon obtaining all the relevant land use right certificates and the granting of all the relevant construction permits, the Company intends to develop the Xi’an Project for (i) residential purposes with an aggregate approximate aboveground floor area of 165,863 sq.m.; and (ii) commercial purposes with an aggregate approximate aboveground floor area of 101,800 sq.m., including phase 1 of approximately 20,000 sq.m. commercial retail shops for sale and phase 2 of approximately 81,800 sq.m. commercial properties for rental purposes.

Development timetable

Barring unforeseeable circumstances, the Board currently expects that Xi’an Hengye to obtain the relevant construction permit for the residential-use land of the Xi’an Project in or around October 2013 and Xi’an Green River to obtain the same for the commercial-use land of the Xi’an Project in or around November 2013 and April 2014 for phases 1 and 2, respectively. Subject to that and the Completion, it is intended that the development will commence in or around October 2013 and will be completed in 2015 as envisaged according to the following indicative timetable:

			Commercial
Milestones	Residential	Phase 1		Phase 2
Commencement of	October 2013	November 2013		April 2014
construction
Commencement of	December 2013	January	2014	N/A
pre-sale
Completion of	August 2015	March 2015		August 2015
construction

– 22 –

LETTER FROM THE BOARD

Construction costs

The Company currently expects that the estimated development cost for the Xi’an Project to be approximately RMB986 million which will be supported by, among other things, internal resources. The Xi’an Project’s commercial and residential constructions will commence in November 2013 and October 2013, respectively. The pre-sale will commence in late 2013 and the Board currently expects that the proceeds from the pre-sale will be used for the cost of development of the remaining project. The estimated pre-sale cash inflows from both the commercial and residential properties approximate RMB108 million and RMB1,086 million for the financial year 2013 and 2014 respectively. The Xi’an Project is located in 中國西安市滻灞生態區 (Chanba Ecological District of Xi’an City, the PRC*) which provides scenic surroundings and the Company plans to develop high-end residential properties with an expected pre-sale price ranging approximately from RMB9,000 to RMB20,000 per square meter (including residential properties with commercial outlets) and commercial properties with an expected pre-sale price of approximately RMB20,000 per square meter.

Barring unforeseeable circumstances and for illustrative purpose only, the expected pre-sale schedule in terms of gross floor area and the breakdown of the development costs by financial year are set out as follows:

	Pre-sale schedule	in gross	floor area _(in square _	meters)
	2013	2014	2015	Total
Residential	12,000	82,250	71,613	165,863
Commercial	–	10,000	10,000	20,000

	12,000	92,250	81,613	185,863


	Development costs		(in RMB million)
	2013	2014	2015	Total
Pre-construction
costs	16	100	18	134
Foundation and
ancillary costs	–	19	82	101
Construction costs	–	460	291	751

	16	579	391	986

The above estimated development costs of the Xi’an Project does not include any capital requirement for the land cost, such as the outstanding land cost commitment of RMB210 million.

– 23 –

LETTER FROM THE BOARD

The Board believes the Xi’an Project would enhance the competitive edge of the Group and the rental income that will be generated from phase 2 of the commercial-use land would provide a source of income after completion of the Xi’an Project. In view of the above, the Board considers that the Acquisition is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Human resources for and expertise in property development

It is the plan of the Company to leverage on the experience in property development of the Target Group in the development of the Xi’an Project. Before Completion, the Target Group will continue to develop the Xi’an Project. During the time and prior to Completion, the Company will hire talented and experienced individuals appropriate for the Xi’an Project as and when appropriate.

FINANCIAL INFORMATION OF THE TARGET GROUP

Selected financial information of Xi’an Hengye and Xi’an Green River as extracted from their respective audited accounts for the two years ended 31 December 2011 and 2012 in accordance with the PRC generally accepted accounting principles and practices were as follows:

	For the year ended	For the year ended
Xi’an Hengye	31 December
	2011	2012
	RMB’000	RMB’000
Net (loss) before taxation	(239)	(303)
Net (loss) after taxation	(239)	(303)
	For the year ended
Xi’an Green River	31 December
	2011	2012
	RMB’000	RMB’000
Net (loss) before taxation	(2)	(7)
Net (loss) after taxation	(2)	(7)

The audited net asset value of Xi’an Hengye and Xi’an Green River as at 31 May 2013 were approximately RMB8,089,000 and RMB9,971,000, respectively.

– 24 –

LETTER FROM THE BOARD

A reconciliation of the net carrying value of the Properties per the audited management accounts of Xi’an Green River and Xi’an Hengye as at 31 May 2013 to the valuation of the Properties as at 31 July 2013 as set out in the Valuation Report is as follow:

	RMB’000
Valuation as at 31 July 2013 as set out in the Valuation Report	560,000
Less: net carrying value of the Properties in the balance sheets
of Xi’an Hengye and Xi’an Green River as at 31 May 2013	412,213
Valuation surplus	147,787

INFORMATION OF THE VENDOR

The Vendor is an investment holding company incorporated in the BVI with limited liability which is owned by Mr. Cheung, an Independent Third Party, as at the date of this circular.

Based on the information provided by Mr. Cheung, Mr. Cheung acquired the entire issued share capital of the Vendor from the original owner (the “ Original Owner ”) pursuant to an equity transfer agreement dated 8 June 2013 at a consideration of HK$370,000,000. According to the said equity transfer agreement, Mr. Cheung will provide his personal assets (as may be agreed between the parties which may include but not limited to the Convertible Bonds) to the Original Owner as security for the remaining consideration payable by Mr. Cheung to the Original Owner. The transactions contemplated under the said equity transfer agreement have been completed and the Completion is not conditional upon or dependent on the said equity transfer agreement in any respect.

So far as the Directors are aware, the Vendor and the Original Owner are Independent Third Parties.

– 25 –

LETTER FROM THE BOARD

POSSIBLE FINANCIAL EFFECTS OF THE ACQUISITION ON THE GROUP

Upon Completion, the Target Company will become a wholly-owned subsidiary of the Company and the financial results of the Target Company will be consolidated into the financial statements of the Company. Set out below is a summary of the unaudited pro forma financial information of the Group before Completion and the Enlarged Group after Completion, prepared on the basis set out in Appendix III to this circular:

	The Group	Enlarged Group
	before Completion	after Completion
	HK$’000	HK$’000
Total assets	1,222,622	1,861,199
Total liabilities	450,221	971,713
Net assets	772,401	889,486
Gearing ratio	19.5%	40.8%

In light of the future prospects of the Target Group, the Directors are of the view that the Acquisition would likely have a positive impact on the future turnover and earnings of the Enlarged Group.

After the completion of the Restructuring, all debts owed by any Target Group Company to the Vendor will be waived by the Vendor or otherwise assigned to other Target Group Companies before Completion. The Directors considered that the remaining liabilities (if any) are minimal and would not affect the Company’s assessment on the Acquisition.

As the above information is for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the results and financial position of the Enlarged Group for any future financial periods or dates.

REASONS FOR THE ACQUISITION

The Company is an investment holding company and its subsidiaries are principally engaged in property investment, property sub-leasing, licence fee collection business in the PRC, entertainment business, exhibition-related business and restaurant operations.

The Company has been actively seeking for investment opportunities to maximise the Shareholders’ interests. The Board considers that the Xi’an Project is a suitable investment opportunity and that the Acquisition would allow the Group to expand its core business and broaden its source of income. The Board is of the view that the terms of the Acquisition Agreement are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

IMPLICATIONS OF THE LISTING RULES

As certain applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules) exceed 25% but fall below 100%, the Acquisition constitutes a major transaction for the Company and is subject to approval by the Shareholders by way of poll pursuant to Chapter 14 of the Listing Rules at the SGM.

– 26 –

LETTER FROM THE BOARD

SGM

The SGM will be convened and held for the Shareholders at Rooms 2501-05, 25th Floor, China Resources Building, No. 26 Harbour Road, Wanchai, Hong Kong on 7 November 2013 at 4:00 p.m. to consider and, if thought fit, to approve the Acquisition Agreement and the transactions contemplated thereunder, including the issue of the Convertible Bonds together with the allotment and issue of the Conversion Shares pursuant to the exercise of the Conversion Rights. No Shareholder is required to abstain from voting in favour of the resolutions to be proposed in the SGM.

A notice convening the SGM is set out on pages 168 to 170 of this circular. Whether or not you intend to attend the SGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the office of the Company’s branch share registrar in Hong Kong, Tricor Secretaries Limited, 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, as soon as possible and in any event not less than 48 hours before the appointed time for holding the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM and any adjournment thereof (as the case may be) should you so wish.

VOTING BY POLL

In compliance with Rule 13.39(4) of the Listing Rules, save for resolutions which relate purely to procedural or administrative matters to be voted on by a show of hands, voting on the resolution to be proposed at the SGM shall be decided by way of a poll.

Bye-law 66 of the Company’s Bye-laws provides that on a poll, every member present in person or by proxy or in the case of a member being a corporation, by its duly authorised representative, shall have one vote for every Share of which he/she/it is the holder.

An explanation of the detailed procedures of conducting a poll will be provided to the Shareholders at the SGM. Tricor Secretaries Limited, the branch share registrar of the Company in Hong Kong, will serve as the scrutineer for the vote-taking. The Company will publish an announcement on the poll results on the respective websites of the Company at http://www.tricor.com.hk/webservice/000674 and the Stock Exchange at http://www.hkexnews.hk shortly after the conclusion of the SGM pursuant to Rule 13.39(5) of the Listing Rules.

RECOMMENDATION

The Directors (including the independent non-executive Directors) consider that the terms of the Acquisition Agreement and the transactions contemplated thereunder are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend that the Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Acquisition Agreement and transactions contemplated thereunder.

– 27 –

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

Your attention is also drawn to the additional information set out in the appendices to this circular and the Notice of the SGM.

Yours faithfully,

For and on behalf of the Board of Culture Landmark Investment Limited Cheng Yang Chairman

– 28 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. THREE YEAR FINANCIAL INFORMATION

Financial information on the Group for each of the three years ended 31 March 2013, 2012 and 2011 were disclosed in the annual reports of the Company for the financial years ended 31 March 2013, 2012 and 2011 respectively, which are published on both the website of the Stock Exchange (www.hkexnews.hk) and the website of the Company (www.tricor.com.hk/webservice/000674).

2. MATERIAL ACQUISITIONS SINCE LATEST PUBLISHED AUDITED ACCOUNTS

Since 31 March 2013 (being the date to which the latest published audited accounts of the Company have been made up), the Group has not made any material acquisitions.

3. INDEBTEDNESS STATEMENT

Borrowings

As at the close of business on 31 August 2013, being the latest practicable date for the purpose of preparing this indebtedness statement prior to the printing of this circular, the Enlarged Group had an outstanding borrowings of approximately HK$292,606,000, details of which are set out below:

	HK$’000
Bank and other borrowings, secured and guaranteed	113,738
Bank and other borrowings, unsecured and unguaranteed	12,568
Promissory notes, unsecured (Note)	37,191
Amounts due to non-controlling Shareholders, unsecured	98,989
Amounts due to related parties, unsecured	30,120

Note:

As at the close of business on 31 August 2013, the outstanding principal amounts of the promissory notes were HK$37,191,000. The promissory notes, which are non-interest bearing, were issued on 30 January 2013. The promissory notes will be redeemed on 29 January 2014. The carrying amount as at 31 August 2013, including effective interest expenses, was approximately HK$35,392,000.

Securities

As at 31 August 2013, Mr. Yang Lei (a director of certain subsidiaries of the Company) and a company beneficially owned by Mr. Yang Lei and his spouse respectively provided guarantees for certain bank loans of the Enlarged Group. Certain assets of Mr. Yang Lei were also pledged to secure the aforesaid bank loans of the Enlarged Group.

As at 31 August 2013, the Company provided guarantee to Golden Island Catering Group Company Limited, a wholly-owned subsidiary of the Company, for corporate credit cards limit up to HK$2,000,000.

– 29 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Save as disclosed above and apart from intra-group liabilities and normal trade and other payables, the Enlarged Group did not have any loan capital issued or agreed to be issued, debt securities issued and outstanding, authorised or otherwise created but unissued, term loans, other borrowings or indebtedness including liabilities under acceptances, acceptance credits, debentures, mortgages, charges, finance lease or hire purchase commitments, guarantees or other material contingent liabilities outstanding at the close of business on 31 August 2013.

4. WORKING CAPITAL

The Directors are satisfied after due and careful enquiry that taking into account the present internal financial resources of the Enlarged Group and the available banking facilities, in the absence of unforeseen circumstances, the Enlarged Group has sufficient working capital for its present requirements, that is, for at least twelve months from the date of this circular.

5. FINANCIAL AND TRADING PROSPECT OF THE ENLARGED GROUP

The Group is principally engaged in property investment, property sub-leasing, licence fee collection business in the PRC, entertainment business, exhibition-related business and restaurant operations.

It was the management’s task and intention to maximise the Shareholders’ interests and allocate the financial resources in the areas with higher investment returns, and the Group has been actively seeking for investment opportunities for that purpose. In view of China’s rapid growth in economy, and especially the growth of her per capita income in second-tier cities, the management of the Company is optimistic about the future of property market, and the investment in China’s property market is to be the Company’s future investment priorities. The Acquisition is the Group’s first and important step to enter into this market.

The Target Company is an investment company incorporated in the BVI with limited liability. After the Restructuring is completed, the Target Group will indirectly own the Xi’an Project through the Project Companies. Xi’an Hengye is a limited liability company established in the PRC whose principal business is to develop the residential properties under the Xi’an Project while Xi’an Green River is a limited liability company established in the PRC whose principal business is to develop the commercial properties under the Xi’an Project.

The Xi’an Project is a project located in 西安市滻灞生態區 (Chanba Ecological District of Xi’an City, the PRC*) with the total land area of approximately 105,498 square meters and planned aboveground floor area of approximately 267,663 square meters. The Xi’an Project is currently in a stage of early development and is undergoing the application process for construction.

According to the Valuation Report, the valuation of the Xi’an Project is RMB560,000,000 as at 31 July 2013 by the Valuer. The Consideration payable by the Group is considered by the Board as fair and reasonable and in the interests of the Group and the Shareholders as a whole.

The Directors are confident that the Acquisition will benefit the Group’s long term sustainable growth and create long term value for the Shareholders.

– 30 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Upon closing the Acquisition, the Group will continue to explore the other investment opportunities to enhance the Group’s business scale in the PRC property market and so as to broaden the income source of the Group.

6. MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Set out below is the management’s discussion and analysis extracted from the annual reports of the Group for the financial years ended 31 March 2011, 2012 and 2013 (modified as appropriate), respectively.

For the year ended 31 March 2011

Financial Review

Consolidated results

The turnover of the Group from continuing operations for the year ended 31 March 2011 was about HK$174 million, representing an increase of about 15% as compared to that of last year. The Group incurred a loss of about HK$288 million that year mainly due to the impairment loss of about HK$224 million in respect of goodwill, intangible asset and other assets arising from the acquisition of Hua Rong Sheng Shi Holding Limited (which holds a wholly-owned subsidiary and jointly controlled entities, 天合文化集團有限公司 (Tian He Wen Hua Group Holdings Limited) (“ Tian He ”) and its subsidiaries (together the “ HR Group* ”)).

Review

(a) Hotel operations

The Group owns 94% interest in 肇慶星湖俱樂部 (Star-Lake Club Zhaoqing) which owned and operated the hotel under the business name of Dynasty Hotel in Zhaoqing, the PRC, with 332 guest rooms, retail shops, restaurants, banquet room, health club and amenities including tennis court and swimming pool. The business recorded a turnover of HK$72 million and a loss of HK$25 million. The loss was mainly due to depreciation of its assets of HK$20 million and amortisation of payments for leasehold land held for own use under operating leases of about HK$4 million. This business had been affected by keen competition from other hotels during the year.

(b) Restaurant operations

The business of the Group’s Chiu Chau restaurant at Star House contributed operating profit of about HK$6 million to the Group for the year. The operation of the restaurant at Star House ceased in end of March 2011 as the Group disposed of the property.

In May 2011, the Group acquired the business of a hot pot restaurant under the name of “Number One Hot Pot (第一火鍋)” at Jaffe Road, Hong Kong. The Group is renovating the restaurant premises and the restaurant is expected to commence business soon.

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APPENDIX I

(c) Entertainment business

Baron Productions and Artiste Management Company Limited (“ Baron Productions ”), a 51% owned subsidiary engaged in providing services relating to production and artist management in the entertainment industry, incurred a loss of about HK$0.4 million.

Chance Music Limited (“ CML ”), a 60% owned subsidiary, engages in entertainment and related business and owns intellectual property rights to lyrics of various songs, recorded a loss of about HK$0.3 million. The Group had terminated its obligations to make further payment to the non-controlling shareholder of CML under an agreement dated 24 October 2007 and had demanded this non-controlling shareholder to buy back its 60% interest in CML at HK$15,000,000 pursuant to such agreement.

In February 2011, the Group acquired about 18.79% of the outstanding voting securities of Xinya Media Private Limited (“ Xinya ”), a company incorporated in Singapore with limited liability, for a total consideration of US$3 million. It is principally engaged in programming, broadcasting and operating a satellite entertainment television channel “ Xinya Azio ” in Singapore which covers audience in countries in North America, Europe and Asia, including China. It has a business plan to expand its penetration in the PRC. In April 2011, the Group increased its interest in the outstanding voting securities of Xinya to 22.27% for a total consideration of US$1 million. The Group intends to leverage Xinya’s broadcasting coverage, programming capability and networks established in the entertainment industry to broaden the Group’s content offering to its customers, expand licensing revenue sources and bolster content procurement ability.

(d) Property investment

The investment properties of the Group in Hong Kong and the PRC contributed rental income to the Group during the year. The investment property located at the commercial district of Guangzhou, the PRC has been leased for ten years from 9 October 2008.

During the year, the Group disposed of an investment property in Sheung Wan with a gain of about HK$28 million. Together with this gain, the business contributed a profit of about HK$58 million to the Group.

(e) Licence fee collection business

The Group entered into various agreements with owners of intellectual property rights of music works (the “ IP Rights ”) relating to the collection of licence fee for copyright of karaoke music works from karaoke operators in the PRC. The Group is entitled to receive a portion of the fee payment from karaoke operators in the PRC.

The Group acquired in April 2009 the HR Group, which is principally engaged in the provision of copyright licence fees settlement and collection services for karaoke music works and videos in the PRC.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the year, the licence fee collection business recorded a turnover of HK$44 million and a loss of HK$278 million. The loss was mainly due to impairment losses of about HK$224 million in respect of goodwill, intangible assets and other assets arising from the acquisition of the HR Group and depreciation of property, plant and equipment and amortisation of intangible assets and deferred expenditure of about HK$62 million.

Tian He was owned equally by 深圳市華融盛世投資管理有限公司 (Shenzhen Hua Rong Sheng Shi Investment Management Company Limited) (“ Shenzhen Hua Rong ”), a whollyowned subsidiary of the Company, and 北京中文發數字科技有限公司 (China Culture Development Digital Technology Co., Ltd.) (“ CCDDT ”). It had entered into a licensing agreement with CCDDT pursuant to which Tian He was granted an exclusive right to use CCDDT’s karaoke content management service system (the “ Karaoke CMS ”) to provide copyright transaction settlement services and the right to develop related value-added services in the PRC for a term of 10 years from 15 July 2007. The system connects its data centre to karaoke box to supervise and keep track of karaoke music videos played in the karaoke box.

The Group had experienced delays in rollout of copyright licence fees settlement and collection services in respect of karaoke music works and videos in various provinces in the PRC as a result of disagreement with CCDDT in respect of the operations and future development of the business. On 22 June 2011, Shenzhen Hua Rong started an arbitration proceedings in Beijing, the PRC (the “ Arbitration Proceeding ”) against CCDDT for its breach of the terms of a shareholders’ agreement dated 15 July 2007 (the “ Shareholders’ Agreement ”) and a share transfer agreement (the “ Share Transfer Agreement ”) signed in 2007 for the transfer of 20% of the registered capital of Tian He by Shenzhen Hua Rong to CCDDT and to seek for orders for the termination of the Shareholders’ Agreement, return of 20% interest in Tian He and damages of RMB10 million. The Group had prepared to cease provision of copyright licence fees settlement and collection services through the Karaoke CMS in December 2011.

(f) Provision of intellectual property enforcement services

In December 2010, the Group acquired 60.8% interest in 北京天語同聲信息技術有限公司 (Song Labs Co., Limited) (“ Song Labs ”), a company established in the PRC and principally engaged in the provision of intellectual property enforcement services in return for certain percentage of the licence fee collected from karaoke box. It had also entered into contracts with various owners of copyrights to audio-visual works for vocal accompaniment whereby it acquires the exclusive rights to, inter alia, grant licence to karaoke operators in the PRC the rights to replicate and play audio-visual works with vocal accompaniment. The acquisition allows the Group to expand its business to provision of intellectual property enforcement services in respect of karaoke music works in the PRC and to receive copyright fees as a result of Song Labs’ rights under such contracts.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Prospects

The Directors were optimistic about the future prospects of the entertainment industry in the PRC. The Group’s licence fee collection business in respect of karaoke copyright in the PRC was gradually yielding income to the Group. The Directors believed the provision of intellectual property enforcement services in respect of karaoke music works to karaoke operators in the PRC would broaden the income source of the Group.

The Group would continue its current principal activities of hotel operations, restaurant operations, licence fee collection business in the PRC, property investment and entertainment business. The Group’s financial position was strong with a net asset value of HK$889 million.

The management would look for suitable investment opportunities to expand the business of the Group.

Liquidity and financial resources

The Group finances its operations with internally generated resources. The Group maintains good business relationship with banks and has banking facilities available for future business development.

As at 31 March 2011, the Group had no bank borrowings. The gearing ratio of the Group, based on total borrowings to shareholders’ equity, was 0% (2010: 0%) as at 31 March 2011.

The Group was able to generate sufficient cash flow from its operations to fulfil its repayment obligations and meet the cash requirements for its day-to-day operations for the year. No financial instrument was used for hedging. The Group was not exposed to any exchange rate risk or any related hedges.

Charges

At 31 March 2011, the carrying value of investment properties, leasehold land and buildings, interests in leasehold land for own use under operating leases and land premium charged as security for the Group’s bank facilities of HK$0 (2010: HK$53 million) amounted to HK$0 (2010: HK$225 million).

Contingent liabilities

As at 31 March 2011, the Group had no material contingent liabilities.

For the year ended 31 March 2012

Financial Review

Consolidated results

The turnover of the Group for the year ended 31 March 2012 was about HK$299 million, representing an increase of about 72% as compared to that of the previous year. The increase was mainly due to the income from exhibition-related business and property sub-leasing business acquired during the year. The Group suffered a loss of about HK$311 million mainly due to significant provisions and impairment loss of goodwill and other assets.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Review

(a) Property investment

The investment properties of the Group in Hong Kong and the PRC contributed rental income to the Group during the year.

The investment property located at the commercial district of Guangzhou, the PRC has been leased for ten years from 9 October 2008.

During the year, the Group disposed of its property at Star House, Tsim Sha Tsui, Kowloon with a gain of about HK$96.6 million.

On 24 November 2011, the Group entered into a provisional sale and purchase agreement with an independent third party for the disposal of an investment property in Tsim Sha Tsui at a consideration of HK$101 million. On 30 April 2012, the disposal was completed and the Group leased back the property from 1 May 2012 to 31 August 2013. The Group was looking for suitable sub-tenant for the property.

On 7 February 2012, the Group entered into a provisional sale and purchase agreement with an independent third party for the disposal of an investment property in Sheung Wan at a consideration of HK$6.8 million. The transaction was completed on 20 April 2012.

(b) Property sub-leasing business

In July 2011, the Group acquired BoRen Cultural Development Limited (博仁文化發展有限公司) (“ BoRen ”), which holds 60% interest in three companies in the PRC principally engaged in sub-leasing of properties and facilities in Nanjing, the PRC. This business contributed income of HK$55 million and profit of HK$7 million to the Group during the year.

This business was expected to continue to contribute stable income to the Group in the future.

(c) Licence fee collection business

The Group entered into various agreements with owners of the IP Rights relating to the collection of licence fee for copyright of karaoke music works from karaoke operators in the PRC. The Group is entitled to receive a portion of the fee payment from karaoke operators in the PRC.

The Group is also engaged in the provision of copyright licence fees settlement and collection services for karaoke music works and videos in the PRC, and the provision of intellectual property enforcement services in respect of karaoke music works in the PRC in return of certain percentage of the licence fee collected from karaoke box.

Tian He was owned equally by Shenzhen Hua Rong and CCDDT. It had entered into a licensing agreement with CCDDT pursuant to which Tian He was granted an exclusive right to use CCDDT’s Karaoke CMS to provide copyright transaction settlement services and the

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

right to develop related value-added services in the PRC for a term of 10 years from 15 July 2007. The system connects its data centre to karaoke box to supervise and keep track of karaoke music videos played in the karaoke box.

As mentioned in the annual report for the year ended 31 March 2011, the Group had experienced delays in rollout of copyright licence fees settlement and collection services in respect of karaoke music works and videos in various provinces in the PRC as a result of disagreement with CCDDT in respect of the operation and future development of the business. On 22 June 2011, Shenzhen Hua Rong commenced the Arbitration Proceeding in Beijing, the PRC against CCDDT. On 23 February 2012, the arbitration hearing commenced and as at 31 March 2012, the Arbitration Proceeding was still continuing.

For the year, the business recorded a turnover of HK$74 million and a loss of HK$34 million. The loss was mainly due to an amortisation of deferred expenditure of about HK$44 million.

(d) Entertainment business

Baron Productions incurred a loss of about HK$0.4 million.

CML, which engages in entertainment and related business and owns intellectual property rights to lyrics of various songs, recorded a profit of about HK$0.2 million. The Group had terminated its obligations to make further payment to the non-controlling shareholder of CML under an agreement dated 24 October 2007 and had demanded this non-controlling shareholder to buy back its 60% interest in CML at HK$15 million pursuant to such agreement. The Group received deposit of HK$1 million from CML’s non-controlling shareholder as part of the share buy-back payment on 8 May 2012.

In February 2011, the Group acquired about 18.79% of the outstanding voting securities of Xinya. In April 2011, the Group and another shareholder of Xinya each entered into a subscription agreement to subscribe for 351,062 preference shares of Xinya at a consideration of about US$1 million. After the subscription, the Group’s equity interest in Xinya increased from 18.79% to 22.27%. The Group’s total investment in Xinya amounted to about HK$31 million. Xinya is principally engaged in programming, broadcasting and operating a satellite entertainment television channel “Xinya Azio” in Singapore which covers audience in countries in North America, Europe and Asia, including China. The Group adopted time-block swap arrangement in entering the PRC market. In November 2011, Xinya entered into an agreement with a media group in the Anhui Province to swap programs and bring in advertising benefits and as a stepstone to develop internet protocol television in entering the PRC market. However, due to unsatisfactory income and the high costs for exploring the market and its operations, Xinya had experienced cash flow problem. The shareholders failed to agree on the development plan and the funding arrangement of Xinya. On 30 April 2012, its shareholders passed a resolution for creditors’ voluntary winding up of Xinya. A liquidator had been appointed to wind up its affairs. The Group had made a provision of about HK$27 million for this investment.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

In December 2011, the Group acquired controlling interests in China Media and Films Holdings Limited (formerly KH Investment Holdings Limited) (“ China Media ”), a company listed on the Growth Enterprise Market of the Stock Exchange. China Media and its subsidiaries are principally engaged in artist management, film distribution and production, and the provision of infrared thermal imaging and thermography solutions and consultancy services. China Media contributed turnover of HK$6 million and recorded a loss of HK$3 million. The goodwill arising from the acquisition of China Media amounted to about HK$25 million as impaired during the year.

(e) Exhibition-related business

In May 2011, the Group completed the acquisition of China Resources Advertising & Exhibition Company Limited. It and its subsidiaries (the “ CRA Group ”) are principally engaged in exhibition-related business and act as an organiser and contractor for all kinds of exhibition events and meeting events mainly in Hong Kong. The CRA Group has developed over 20 years of relationship with the Hong Kong Trade Development Council (the “ HKTDC ”) and has become one of the major agents of Mainland China groups for their trade fairs, which are mostly organised by the HKTDC. Its other principal customers included various sub-councils of the China Council for the Promotion of International Trade in the PRC. This business contributed turnover of about HK$81 million and operating profit of about HK$5.7 million to the Group. However after the impairment of goodwill and intangible assets of HK$119 million, this business recorded net loss of about HK$114 million. The business was expected to continue to contribute stable income to the Group in the future.

(f) Hotel operations

The Group operated the Dynasty Hotel in Zhaoqing, the PRC. The business recorded a turnover of HK$71 million and a loss of HK$47 million. The loss was mainly due to the impairment of property, plant and equipment of HK$1.7 million, depreciation of its assets of HK$21 million and impairment and amortisation of payments for leasehold land held for own use under operating leases of about HK$20 million. This business had been affected by the keen competition from other hotels during the year.

(g) Restaurant operations

In May 2011, the Group acquired the business of a hot pot restaurant under the name of “Number One Hot Pot (第一火鍋)” at Jaffe Road, Hong Kong. The restaurant was renovated and commenced business under the Group on 18 October 2011. This business contributed a turnover of HK$2.6 million and incurred a loss of HK$7 million during the year. An impairment to fixed assets of HK$3.5 million was made during the year as the performance of the restaurant was unsatisfactory.

Prospects

The Group had increased its property leasing activities in the PRC by the acquisition of BoRen, which engages in sub-leasing of properties and facilities in Nanjing, the PRC. It had also invested in exhibition-related business by the acquisition of the CRA Group which engages in all kinds of exhibitions and meeting events mainly in Hong Kong.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group’s licence fee collection business in respect of karaoke copyright in the PRC and provision of intellectual property enforcement services in respect of karaoke music works to karaoke operators in the PRC were gradually yielding income to the Group.

The Directors were optimistic about the future prospects of the entertainment industry in the PRC. The acquisition of interest in China Media had strengthened the Group’s entertainment business. On 28 May 2012, the Group entered into a conditional agreement with Eternity Investment Limited (“ Eternity ”) for the disposal of approximately 29% interest in China Media (the “ Disposal of China Media Interests ”) for a consideration of about HK$51 million. The Disposal of China Media Interests was subject to the approval of the Shareholders. The Disposal of China Media Interests would enable the Group to form a strategic alliance with Eternity to jointly develop the film distribution business of China Media. It was expected that the expertise and connections in the film distribution industry provided by the alliance would enhance the business development of China Media.

The Group would continue its current activities of property investment, property sub-leasing, licence fee collection business in the PRC, entertainment business, exhibitionrelated business, hotel operations and restaurant operations.

The Group’s financial position was strong with a net asset value of HK$946 million. The management would look for suitable investment opportunities to expand the business of the Group.

Liquidity and financial resources

The Group finances its operations with internally generated resources. The Group maintains good business relationship with banks and has banking facilities available for future business development.

As at 31 March 2012, the Group had borrowings of HK$205,216,773. The gearing ratio of the Group, based on total borrowings to shareholders’ equity, was 22.5% (2011: 0%) as at 31 March 2012.

Charges

At 31 March 2012, the carrying value of a property as security for the Group’s bank facilities of HK$40 million (2011: HK$0 million) amounted to HK$90 million (2011: Nil).

At 31 March 2012, 587,000,000 ordinary shares of Cosmopolitan International Holdings Limited with carrying amount of HK$33,459,000 (2011: HK$0 million) which were classified as available-for-sale investments and a personal guarantee given by Cheng Yang, a director of the Company were used as security for a loan of HK$19 million (2011: Nil).

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Contingent liabilities

As at 31 March 2012, the Group had no material contingent liabilities.

For the year ended 31 March 2013

Financial Review

Consolidated results

The turnover and loss of the Group for the year ended 31 March 2013 were approximately HK$296 million and HK$83 million respectively as compared to HK$299 million and HK$311 million respectively of last year. The significant part of the loss was attributable to substantial impairment on assets held under the exhibition-related business, hotel business and entertainment business recorded for the year 2012. Further, following the conclusion of the Arbitration Proceeding during the year under review, the Group recorded an approximately HK$5 million gain on step acquisition of jointly controlled entities and HK$36 million gain on bargain purchase of 20% interests in the registered capital of Tian He.

Review

(a) Licence fee collection business

The Group entered into various agreements with owners of the IP Rights. By acquiring the IP rights, the Group would engage in the collection of licence fees for karaoke musical works from karaoke operators in PRC.

The Group also engages in the provision of copyright licence fees settlement and collection services for karaoke music works and videos in PRC, and the provision of intellectual property enforcement services in respect of karaoke music works in PRC in return for service fees to be collected from karaoke box.

In order to increase the market share of the Group in this industry in PRC, the Group has adopted an aggressive strategy and entered into separate agreements for the acquisitions of (i) an additional 8.47% equity interest in and the benefit of 50% of all amounts due to the minority shareholders of Welly Champ International Limited (“ Welly Champ ”); and (ii) the entire issued share capital of Media Sound Technology Limited (“ Media Sound ”).

Welly Champ is an investment holding company which holds 66.81% interests in Well Allied Investments Limited (“ Well Allied ”). Well Allied is principally engaged in the collection of licence fees for karaoke music works in the PRC.

Media Sound is an investment holding company holding certain interests in companies which principally engages in investment consulting, organisation of cultural and art exchange activities (excluding acting as intermediaries in performances), acting as music copyright agents and provision of intellectual property enforcement services.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Particulars of the acquisitions are set out in the Company’s announcements dated 30 April 2012, 9 May 2012 and 21 September 2012 and the circular dated 11 January 2013.

Apart from the acquisitions mentioned above, the Group’s investments in licence fee collection business were further strengthened following the conclusion of the Arbitration Proceeding. As previously disclosed in the Company’s 2012 annual report, Tian He was equally owned by Shenzhen Hua Rong and CCDDT. Tian He entered into a licensing agreement with CCDDT pursuant to which Tian He was granted an exclusive right to gain access to the Karaoke CMS owned by CCDDT to provide copyright transaction settlement services and to develop related value added services in PRC for a term of 10 years from 15 July 2007. The system connects its data centre to karaoke box to supervise and keep track of music videos played in karaoke box. There were delays in rollout of copyright licence fees settlement and collection services in respect of karaoke music works and videos in various provinces in PRC as a result of the disagreement with CCDDT in respect of the operation and future development of the business. On 22 June 2011, Shenzhen Hua Rong commenced the Arbitration Proceeding. The arbitration tribunal granted an arbitral award on 30 July 2012, in which it was ruled that the Shareholders’ Agreement and the Share Transfer Agreement would be terminated and CCDDT would also return the 20% interest to Shenzhen Hua Rong. The said transfer was completed during the year.

The licence fee enforcement business was disrupted intermittently as a result of the Arbitration Proceeding between the shareholders of Tian He, which adversely affected the revenue generated from the business. For the year under review, the business recorded a turnover of HK$65 million (2012: HK$74 million) and a profit of HK$42 million (2012: loss of HK$34 million). The decrease in loss of the business was attributable to the recognition of a gain on step acquisition of jointly controlled entities of approximately HK$5 million and a gain on bargain purchase of 20% interests in the registered capital of Tian He of approximately HK$36 million during the year. Also, there was a decrease in the amortisation of deferred expenditure as a result of a drop in payment to copyright holders during the year. Following the Arbitration Proceeding, the Directors were committed to improving the operation of copyright licence fee settlement and collection. The key strategies of the Group were: (i) to strengthen the licence fee collection teams for sourcing licences and arrange for fee collection in various provinces and cities in the PRC; (ii) to raise the income target of Tian He; (iii) to build up Tian He’s strategic partnership relations with other local partners; and (iv) to promote Tian He’s brand name and strengthen its brand recognition in the licence fee collection business in the PRC.

The Directors were confident of the business potential in the intellectual property enforcement services and the collection of copyright fees for content distribution of karaoke music works in the PRC. The Directors were of the view that the licence fee collection business would improve and generate positive cash inflow to the Group.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Exhibition-related business

The CRA Group is principally engaged in exhibition-related business. The CRA Group has acted as an organiser and contractor for exhibitions and meeting events held in Hong Kong. It has developed over 20-year relationship with the HKTDC and has become one of the major agents organising trade fairs for Mainland China groups whilst most of which were co-organised by the HKTDC. The client base is primarily PRC based including numerous sub-councils of the China Council for the Promotion of International Trade in the PRC. During the year under review, the CRA Group opened an art gallery in Hong Kong. The Directors believed that this new business would enhance the image and the variety of the Group’s exhibition-related business segment. Overall, the exhibition-related business contributed a turnover of approximately HK$78 million to the Group, including a turnover of HK$61 million generated from a function named “the Fashion Week” co-organised by the HKTDC. After taking into account the amortisation of intangible assets of HK$3 million, this business recorded a net profit of approximately HK$2 million. The Directors were of the view that the exhibition business would keep growing and contribute stable income to the Group in the foreseeable future.

(c) Entertainment business

Baron Productions incurred a loss of approximately HK$0.4 million during the year under review.

CML engages in entertainment and other related business and owns intellectual property rights in lyrics of various songs. During the year under review, a loss of approximately HK$0.1 million was recorded. Pursuant to an agreement dated 24 October 2007, the Group was no longer under an obligation to make further contributions to the non-controlling shareholder of CML and the said shareholder was required to buy back 60% interest in CML from the Group for a consideration of HK$15 million subject to terms and conditions contained in the agreement. In May 2012, the Group received a deposit of HK$1 million from the noncontrolling shareholder as part of the share buy-back payment. It was expected that the share buy-back exercise will be completed in the near future.

In December 2011, the Group acquired up to 74.95% interests in China Media. China Media and its subsidiaries are principally engaged in artist management, film distribution and production. In May 2012, the Group entered into a conditional agreement with Eternity for the disposal of approximately 29% interests in China Media for a consideration of approximately HK$51 million. The Disposal of China Media Interests was approved by the Shareholders in a special general meeting held on 10 July 2012. Following the Disposal of China Media Interests, the Group’s interests in China Media dropped to 45.95% and that China Media became an associated company of the Group. During the year, China Media contributed a turnover of HK$10 million to the Group and recorded a loss of HK$1 million while the share of loss of associate was amounted to HK$4 million.

The Directors believed that its entertainment business would further develop and these investments would gradually yield income to the Group.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(d) Hotel operations

The Group operated the Dynasty Hotel in Zhaoqing, the PRC. The business recorded a turnover of HK$58 million and a loss of HK$49 million. The loss was mainly attributable to the impairment of loss on property, plant and equipment of HK$1 million, depreciation of its assets of HK$16 million and impairment loss and amortisation of payments for leasehold land held for own use under operating leases of approximately HK$16 million in total. Owing to keen competition in the hotel industry, it was within the Director’s expectation that the operation of the hotel would remain challenging.

On 19 April 2013, the Group entered into a conditional share transfer and assignment of shareholder’s loan agreement with Eternal Nice (Hong Kong) Limited, an independent third party, for the disposal of Wellrich Investments Limited (“ Wellrich ”), a wholly-owned subsidiary of the Group which holds 94% of the registered capital of the Zhaoqing Star-Lake Club which in turn holds the Dynasty Hotel for a consideration of RMB150 million (subject to adjustment). The gain on disposal of Wellrich is estimated to be HK$26 million. The disposal of Wellrich was approved by the Shareholders on 25 June 2013 and it was expected that the transaction would be completed in July 2013.

(e) Property investment

During the year, the property investment segment of the Group contributed a rental income of HK$4 million and profit of HK$11 million. A gain of HK$13 million was also recorded on the disposal of three properties situated at Tsim Sha Tsui, Sheung Wan and Guangzhou.

On 24 November 2011, the Group entered into a provisional sale and purchase agreement with an independent third party for the disposal of an investment property situated at Tsim Sha Tsui for a consideration of HK$101 million. On 30 April 2012, the disposal was completed and the Group leased back the property for the period from 1 May 2012 to 31 August 2013.

On 7 February 2012, the Group entered into a provisional sale and purchase agreement with an independent third party for the disposal of an investment property situated at Sheung Wan for a consideration of HK$6.8 million. The transaction was completed on 20 April 2012.

On 12 December 2012, the Group entered into a sale and purchase agreement with independent third parties for the disposal of an investment property situated at Guangzhou for a consideration of approximately RMB69 million. The transaction was completed on 24 January 2013.

On 10 April 2013, the Group acquired an investment property in Jeju, Korea for a consideration of KRW850 million (approximately HK$6 million). The Group was actively looking for suitable tenant for the property.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group would intensify its investment in real property market, especially in the PRC. On 14 June 2013, the Group entered into 2 memoranda of understanding with Estate Fortune Limited and Bliss Zone Limited for its proposed investment in the Yixing Modern Life Plaza project, the Lianyungang Port Development Zone project and the Xi’an Project. The 2 memoranda of understanding are not legally binding save and except the provisions in relation to the payment of earnest moneys in the respective sums of HK$30 million and HK$20 million. Particulars thereof are more particularly set out in the announcement of the Company dated 14 June 2013. If the transactions contemplated thereunder shall materialise, the Group will allocate more substantive resources in the segment. The Directors were optimistic about the future of property investment market and would continue to explore attractive investment opportunity to strengthen the Group’s business in real property market.

(f) Restaurant operations

The Group operates Golden Island Bird’s Nest (Chiu Chau) Restaurant at Jaffe Road, Hong Kong and a wine bar and restaurant known as 珠海市紫御軒酒業有限公司 (Zhuhaishi Ziyuxuan Wine Company Limited*) in Zhuhai, the PRC. Owing to high operating costs and keen competition in the industry, it was within the Directors’ expectation that the operation of the restaurants shall remain challenging. For the year ended 31 March 2013, this business contributed a turnover of HK$4 million and incurred a loss of HK$6 million.

(g) Sub-leasing business

On 27 May 2011, the Company entered into an agreement with HaoRan Cultural Development Limited pursuant to which the Company had acquired the entire issued share capital of BoRen. Particulars of the transaction were announced on 27 May 2011. During the period under review, the sub-leasing business recorded a turnover and a loss of approximately HK$75 million and HK$1 million respectively.

BoRen holds indirect interests in a group of companies principally engaged in leasing of properties and facilities in Nanjing. The Company will receive compensation payment if the profit guarantee offered by the vendor and the guarantor under the agreement for the three financial years ended 31 December 2015 shall be less than RMB75 million. The compensation payment is, however, only payable if the Company shall procure to advance not less than RMB50 million to the group companies for each of the three financial years (totally RMB150 million).

The Company has not so far made any advancement to the group companies under the agreement with the vendor as the Company would like to focus its resources on investments which offer better prospects and return. The Company would be required to make the first advancement in September this year under the agreement.

Prospects

During the year, the Group settled the dispute with CCDDT following the conclusion of the Arbitration Proceeding and increased the investment notably in licence fee collection business in the PRC. The Directors are confident of the business potential in the intellectual property enforcement services and collection of copyright fees in the PRC. The overall licence fee collection business will gradually yield income to the Group.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Due to the adjustment of investment strategies, the Group disposed of several investment properties and the Dynasty Hotel in Zhaoqing. These disposal brought in positive cash flow and allowed the Group to reallocate the financial resources to other investment opportunities which may generate a better return. The Directors will continue to explore other potential investment opportunities so as to broaden the business horizon of the Company and the Directors do not rule out the possibility of making further investment in property market and hotel business in the foreseeable future if attractive investment opportunity arises.

Notwithstanding that net current liabilities of HK$7.4 million were recorded for the year ended 31 March 2013, the Group has a strong financial backup on strength of a net asset value of HK$772 million. The liquidity of the Group will be substantially improved upon receipt of the remaining balance of the sale proceeds generated from the disposal of Wellrich. The management will continue to look for suitable investment opportunities for the Group.

Liquidity and financial resources

The Group finances its operations with internally generated resources. The Group maintains good business relationship with banks and has sufficient banking facilities available for future business development.

As at 31 March 2013, the Group had borrowings of approximately HK$149 million (2012: HK$205 million). The gearing ratio of the Group was 19.5% (2012: 22.5%). Such ratio was calculated with reference to the total borrowings (being the sum of bank borrowings, other borrowings and the convertible bonds) over the Company’s shareholders’ equity.

The Group was able to generate sufficient cash flow from its operations to fulfill its repayment obligations and meet the cash requirements for its day-to-day operations for the year. No financial instrument was used for hedging. The Group was not exposed to any exchange rate risk or any related hedges.

Charges

As at 31 March 2013, Mr. Yang Lei (a director of certain subsidiaries of the Company) and a company beneficially owned by Mr. Yang and his spouse respectively provided guarantees for certain bank loans of the Group. Certain assets of Mr. Yang were also pledged to secure bank loans of the Group.

As at 31 March 2013, the Company provided guarantee to Golden Island Catering Group Company Limited, a wholly-owned subsidiary of the Company for corporate credit cards limit up to HK$2 million.

Save as disclosed above, the Group did not have any charges on assets as at 31 March 2013.

Contingent liabilities

As at 31 March 2013, the Group had no material contingent liabilities.

– 44 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

A. ACCOUNTANT’S REPORTS

(a) Accountant’s report on the Target Company and its subsidiaries, Longisland HK and Beijing Times (the “Longisland BVI Group”)

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23 October 2013

The Directors Culture Landmark Investment Limited Rooms 2501-2505, 25th Floor, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong

Dear Sirs,

We set out below our report on the financial information of Longisland Tourism Investment & Development Limited (the “Target Company”) and its subsidiaries as set out in note 12 of Section II below (hereinafter collectively referred to as the “Longisland BVI Group”) including the consolidated statements of financial position of the Longisland BVI Group as at 31 December 2010, 2011 and 2012 and 31 May 2013 and the statements of financial position of the Target Company as at 31 December 2010, 2011 and 2012 and 31 May 2013, the consolidated statements of comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows of the Longisland BVI Group for the period from 16 March 2010 (date of incorporation) to 31 December 2010, each of the years ended 31 December 2011 and 2012 and for the five months ended 31 May 2013 (the “Relevant Periods”) and notes thereto (hereinafter collectively referred to as the “Financial Information”), together with the unaudited consolidated financial information of the Longisland BVI Group including the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows of the Longisland BVI Group for the five months ended 31 May 2012 (the “31 May 2012 Corresponding Information”), prepared for inclusion in the circular issued by Culture Landmark Investment Limited (the “Company”) dated 23 October 2013 in connection with the proposed acquisition of the entire issued share capital of the Target Company by the Company (the “Proposed Acquisition”).

The Target Company was incorporated in the British Virgin Islands (the “BVI”) on 16 March 2010 with limited liability and an authorised share capital of US$50,000 divided into 50,000 ordinary shares of US$1 each. Its registered office is located at Palm Grove House, P.O. Box 438, Road Town, Tortola, British Virgin Islands. The Target Company is principally engaged in investment holding during the Relevant Periods.

– 45 –

APPENDIX II

FINANCIAL INFORMATION OF THE TARGET GROUP

At the date of this report, the Target Company has direct or indirect interests in subsidiaries as set out in note 12 of Section II below. All companies comprising the Longisland BVI Group adopt 31 December as their financial year end date. As at the date of this report, no audited financial statements of the Target Company have been prepared since its date of incorporation as there are no statutory audit requirements in the country of its jurisdiction. We have not acted as auditor of the Target Company nor its subsidiaries for the Relevant Periods referred to in this report.

For the purpose of this report, the sole director of the Target Company has prepared the financial statements of the Longisland BVI Group for the Relevant Periods (the “Underlying Financial Statements”) in accordance with the accounting policies set out in note 4 of Section II below which comply with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) based on the audited financial statements or, where appropriate, unaudited management accounts of the companies now comprising the Longisland BVI Group.

The Financial Information has been prepared by the sole director of the Target Company based on the Underlying Financial Statements. No adjustments on the Underlying Financial Statements for the Relevant Periods are considered necessary for the purpose of preparing the Financial Information.

The sole director of the Target Company is responsible for the contents of the circular including the preparation and the true and fair presentation of the Financial Information in accordance with the accounting policies set out in note 4 of Section II below which comply with HKFRSs, the applicable disclosure requirements of the Hong Kong Companies Ordinance and the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”), and for such internal control as the sole director of the Target Company determines is necessary to enable the preparation of the Financial Information that is free from material misstatement, whether due to fraud or error.

Our responsibility is to form an independent opinion on the Financial Information based on our procedures and to report our opinion thereon to you.

For the purpose of this report, we have carried out audit procedures in respect of the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing issued by the HKICPA and have examined the Financial Information and carried out appropriate procedures as we considered necessary in accordance with Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA.

– 46 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

OPINION

In our opinion, the Financial Information, for the purpose of this report, gives a true and fair view of the state of affairs of the Longisland BVI Group and of the Target Company as at 31 December 2010, 2011 and 2012 and 31 May 2013 and of the Longisland BVI Group’s losses and cash flows for each of the Relevant Periods in accordance with HKFRSs.

EMPHASIS OF MATTER

Without qualifying our opinion, we draw attention to note 3(b) of Section II below which indicates that the Longisland BVI Group had net current liabilities of HK$30,402, HK$36,307, HK$749,461 and HK$768,231 as at 31 December 2010, 2011 and 2012 and 31 May 2013 respectively while the Target Company had net current liabilities of HK$11,087, HK$16,791, HK$22,670 and HK$27,849 as at 31 December 2010, 2011 and 2012 and 31 May 2013 respectively. These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Longisland BVI Group’s and the Target Company’s ability to continue as a going concern.

CORRESPONDING FINANCIAL INFORMATION

For the purpose of this report, we have also performed a review of the 31 May 2012 Corresponding Information, which is prepared in accordance with the accounting polices set out in note 4 of Section II below which comply with HKFRSs, 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 sole director of the Target Company is responsible for the preparation and presentation of the 31 May 2012 Corresponding Information in accordance with the accounting policies set out in note 4 of Section II below which comply with HKFRSs, the applicable disclosure requirements of the Hong Kong Companies Ordinance and the Listing Rules. Our responsibility is to express a conclusion on the 31 May 2012 Corresponding Information based on our review. A review principally consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures to the 31 May 2012 Corresponding Information. 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 31 May 2012 Corresponding Information.

REVIEW CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the 31 May 2012 Corresponding Information, for the purpose of this report, is not prepared, in all material respects, in accordance with the same basis adopted in respect of the Financial Information.

– 47 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

I. FINANCIAL INFORMATION

Consolidated Statements of Comprehensive Income

		Period from
		16 March
		2010 (date of
		incorporation) to	Year ended			Five months ended
		31 December	31 December			31 May
	Note	2010	2011	2012		2012	2013
		HK$	HK$	HK$		HK$	HK$
					(Unaudited)
Other income	7	55	358	184,574		20		34
Administrative expenses		(30,465)	(144,951)	(956,591)		(364,308)	(213,818)
Loss before income tax
expense	8	(30,410)	(144,593)	(772,017)		(364,288)	(213,784)
Income tax expense	11	–	–	–		–		–
Loss for the period/year
attributable to owner
of the Target
Company		(30,410)	(144,593)	(772,017)		(364,288)	(213,784)
Other comprehensive
income for the
period/year
attributable to owner
of the Target
Company
Item that may be
reclassified
subsequently to profit
or loss
– Exchange differences
arising on translating
foreign operations		–	138,688	58,863		20,229	195,014
Total comprehensive
income for the
period/year
attributable to owner
of the Target
Company		(30,410)	(5,905)	(713,154)		(344,059)	(18,770)

– 48 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Consolidated Statements of Financial Position

						At
			At 31 December			31 May
	Note	2010		2011	2012	2013
		HK$		HK$	HK$	HK$
ASSETS AND LIABILITIES
Current assets
Other receivables	13	–		–	10,383,076	9,304,639
Amounts due from related
companies	14	–		10,138,874	–	–
Cash and cash equivalents	15	5,269,590		268,345	333,488	248,474
		5,269,590		10,407,219	10,716,564	9,553,113

Current liabilities
Accrued liabilities and other
payables	16	–		70,154	290,130	21,352
Amount due to holding
company	17	5,299,992		10,299,992	10,299,992	10,299,992
Amounts due to related
companies	17	–		73,380	875,903	–
		5,299,992		10,443,526	11,466,025	10,321,344

Net current liabilities		(30,402)		(36,307)	(749,461)	(768,231)
Total assets less current
liabilities/net liabilities		(30,402)		(36,307)	(749,461)	(768,231)


CAPITAL DEFICIENCIES
Share capital	18	8		8	8	8
Reserves		(30,410)		(36,315)	(749,469)	(768,239)
Capital deficiencies		(30,402)		(36,307)	(749,461)	(768,231)

– 49 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Statements of Financial Position

						At
			At 31 December			31 May
	Note	2010		2011	2012	2013
		HK$		HK$	HK$	HK$
ASSETS AND LIABILITIES
Non-current assets
Investments in subsidiaries	12	1		1	1	1

Current assets
Amount due from a subsidiary	14	5,141,429		10,136,749	10,136,749	10,136,749
Cash and cash equivalents	15	147,476		146,452	140,573	135,394
		5,288,905		10,283,201	10,277,322	10,272,143

Current liabilities
Amount due to holding
company	17	5,299,992		10,299,992	10,299,992	10,299,992
		5,299,992		10,299,992	10,299,992	10,299,992

Net current liabilities		(11,087)		(16,791)	(22,670)	(27,849)
Total assets less current
liabilities/net liabilities		(11,086)		(16,790)	(22,669)	(27,848)


CAPITAL DEFICIENCIES
Share capital	18	8		8	8	8
Reserves	19	(11,094)		(16,798)	(22,677)	(27,856)
Capital deficiencies		(11,086)		(16,790)	(22,669)	(27,848)

– 50 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Consolidated Statements of Changes in Equity

		Foreign
	Share	exchange	Accumulated
	capital	reserve		losses	Total
	HK$	HK$		HK$	HK$
		(note 19(b))		(note 19(a))
Issue of share capital upon
incorporation	8	–		–	8
Loss and total comprehensive income
for the period	–	–		(30,410)	(30,410)
At 31 December 2010 and
1 January 2011	8	–		(30,410)	(30,402)
Loss for the year	–	–		(144,593)	(144,593)
Exchange differences arising on
translating foreign operations	–	138,688		–	138,688
Total comprehensive income for the year	–	138,688		(144,593)	(5,905)
At 31 December 2011 and
1 January 2012	8	138,688		(175,003)	(36,307)
Loss for the year	–	–		(772,017)	(772,017)
Exchange differences arising on
translating foreign operations	–	58,863		–	58,863
Total comprehensive income for the year	–	58,863		(772,017)	(713,154)
At 31 December 2012 and
1 January 2013	8	197,551		(947,020)	(749,461)
Loss for the period	–	–		(213,784)	(213,784)
Exchange differences arising on
translating foreign operations	–	195,014		–	195,014
Total comprehensive income for the
period	–	195,014		(213,784)	(18,770)
At 31 May 2013	8	392,565		(1,160,804)	(768,231)


For the five months ended
31 May 2012
At 1 January 2012	8	138,688		(175,003)	(36,307)
Loss for the period	–	–		(364,288)	(364,288)
Exchange differences arising on
translating foreign operations	–	20,229		–	20,229
Total comprehensive income for the
period	–	20,229		(364,288)	(344,059)
At 31 May 2012 (Unaudited)	8	158,917		(539,291)	(380,366)

– 51 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Consolidated Statements of Cash Flows

		Period from
		16 March
		2010 (date of
		incorporation) to		Year	ended				Five months ended
	Note	31 December 2010		31 December 2011			2012		31 2012	May	2013
		HK$		HK$			HK$		HK$		HK$
								(Unaudited)
Cash flows from operating
activities
Loss before income tax
expense Adjustment for: Bank interest income	7	(30,410) (55)		(144,593) (358)		(772,017) (44)			(364,288) (20)		(213,784) (34)

Operating loss before working
capital changes (Increase)/decrease in other		(30,465)		(144,951)		(772,061)			(364,308)		(213,818)
receivables		–		–		(184,530)			–		1,296,196
Increase/(decrease) in accrued
liabilities and other
payables		–		70,154		145,752			358,625		(274,864)
Cash (used in)/generated from
operations Interest received		(30,465) 55		(74,797) 358		(810,839) 44			(5,683) 20		807,514 34

Net cash (used in)/generated
from operating activities		(30,410)		(74,439)		(810,795)			(5,663)		807,548
Cash flows from investing
activities
Increase in amounts due from
related companies		–	(10,138,874)				–		–		–
Net cash used in investing
activities		–	(10,138,874)				–		–		–

Cash flows from financing
activities
Proceeds from issue of share
capital upon incorporation Increase in amount due to	18	8		–			–		–		–
holding company Increase/(decrease) in amounts		5,299,992		5,000,000			–		–		–
due to related companies		–		73,380		875,903			–		(894,275)
Net cash generated from/(used
in) financing activities		5,300,000		5,073,380		875,903			–		(894,275)
Net increase/(decrease) in
cash and cash equivalents		5,269,590		(5,139,933)			65,108		(5,663)		(86,727)
Cash and cash equivalents at
beginning of the
period/year		–		5,269,590		268,345			268,345		333,488
Effect of exchange rate
changes on cash and cash
equivalents		–		138,688			35		13		1,713
Cash and cash equivalents at
end of the period/year,
representing cash and
bank balances		5,269,590		268,345		333,488			262,695		248,474

– 52 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

II. NOTES TO THE FINANCIAL INFORMATION AND THE 31 MAY 2012 CORRESPONDING INFORMATION

1. CORPORATE INFORMATION

The Target Company is a limited liability company incorporated in the BVI on 16 March 2010. Its registered office and its principal place of business are located at Palm Grove House, P.O. Box 438, Road Town, Tortola, British Virgin Islands and Suites 1605A, Office Tower, Convention Plaza, 1 Harbour Road, Waichai, Hong Kong respectively. The Target Company and its subsidiaries are principally engaged in investment holding. There were no significant changes in the nature of the Longisland BVI Group’s principal activities during the Relevant Periods.

The sole director considers that the Target Company’s immediate and ultimate holding company was Longisland Investment Group Ltd., a limited liability company incorporated in the BVI, during the Relevant Periods. On 12 June 2013, Bliss Zone Limited, a limited liability company incorporated in the BVI, became the Target Company’s immediate and ultimate holding company.

2. ADOPTION OF NEW OR AMENDED HKFRSs

All HKFRSs effective for the accounting period commencing from 1 January 2013, together with the relevant transitional provisions, have been adopted by the Longisland BVI Group in the preparation of the Financial Information and the 31 May 2012 Corresponding Information.

At the date of this report, certain new and amended HKFRSs have been published but are not yet effective, and have not been early adopted by the Longisland BVI Group.

Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities[1] HKFRS 9 Financial Instruments[2] HK (IFRIC) – Int 2 Levies[1]

1 Effective for annual periods beginning on or after 1 January 2014
2 Effective for annual periods beginning on or after 1 January 2015

The Longisland BVI Group is in the process of making an assessment of the potential impact of these pronouncements. The sole director of the Target Company so far concluded that the application of these pronouncements will have no material impact on the Longisland BVI Group’s results of operation and financial position.

3. BASIS OF PREPARATION

(a) Statement of compliance

The Financial Information and the 31 May 2012 Corresponding Information set out in this report have been prepared in accordance with all applicable HKFRSs issued by the HKICPA and have been consistently applied throughout the Relevant Periods. The Financial Information and the 31 May 2012 Corresponding Information also comply with the applicable disclosure requirements of the Hong Kong Companies Ordinance and the Listing Rules.

(b) Basis of measurement and going concern assumption

The Financial Information and the 31 May 2012 Corresponding Information have been prepared under the historical cost basis.

The Financial Information has been prepared on the going concern basis notwithstanding the Longisland BVI Group had net current liabilities of HK$30,402, HK$36,307, HK$749,461 and HK$768,231 as at 31 December 2010, 2011 and 2012 and 31 May 2013 respectively while the Target Company had net current liabilities of HK$11,087, HK$16,791, HK$22,670 and HK$27,849 as at 31 December 2010, 2011 and 2012 and 31 May 2013 respectively. These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Longisland BVI Group’s and the Target Company’s ability to continue as a going concern and therefore the Longisland BVI Group and the Target Company may not be able to realise their

– 53 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

assets and discharge their liabilities in the normal course of business. The sole director of the Target Company is of the opinion that taking into account the estimated future funds, the Longisland BVI Group and the Target Company have sufficient financial resources to meet their financial obligation as they fall due for the foreseeable future. Accordingly, the Financial Information has been prepared on a going concern basis.

(c) Functional and presentation currency

The Financial Information and the 31 May 2012 Corresponding Information are presented in Hong Kong dollars (“HK$”), which is the same as the functional currency of the Target Company.

4. SIGNIFICANT ACCOUNTING POLICIES

(a) Business combination and basis of consolidation

The Financial Information and the 31 May 2012 Corresponding Information comprise the financial statements of the Target Company and its subsidiaries. Inter-company transactions and balances between group companies together with unrealised profits are eliminated in full in preparing the Financial Information and the 31 May 2012 Corresponding Information. Unrealised losses are also eliminated unless the transaction provides evidence of impairment on the asset transferred, in which case the loss is recognised in profit or loss.

The results of subsidiaries acquired or disposed of during the period are included in the consolidated statements of comprehensive income from the dates of acquisition or up to the dates of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by other members of the Longisland BVI Group.

(b) Subsidiaries

A subsidiary is an entity (including a structured entity) controlled by the Target Company and/or its other subsidiaries. The Longisland BVI Group controls an investee when the Longisland BVI Group has (1) power over the investee, (2) exposure, or rights, to variable returns from its involvement with the investee and (3) the ability to affect those returns through its power over the investee (i.e., the existing rights that give the Longisland BVI Group the current ability to direct the relevant activities of the investee).

The Longisland BVI Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the elements of control described above.

In the Target Company’s statements of financial position, investments in subsidiaries are stated at cost less impairment loss. The results of subsidiaries are accounted for by the Target Company on the basis of dividend received and receivable.

(c) Impairment of non-financial assets

At the end of each of the Relevant Periods, the Target Company reviews the carrying amounts of the investments in subsidiaries to determine whether there is any indication that those assets have suffered an impairment loss or an impairment loss previously recognised no longer exists or may have decreased.

If the recoverable amount (i.e. the greater of the fair value less costs to sell and value in use) of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

– 54 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(d) Financial Instruments

(i) Financial assets

The Longisland BVI Group classifies its financial assets at initial recognition, depending on the purpose for which the asset was acquired. Financial assets at fair value through profit or loss are initially measured at fair value and all other financial assets are initially measured at fair value plus transaction costs that are directly attributable to the acquisition of the financial assets. Regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned.

Loans and receivables

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (trade debtors), and also incorporate other types of contractual monetary asset. Subsequent to initial recognition, they are carried at amortised cost using the effective interest method, less any identified impairment losses.

(ii) Impairment loss on financial assets

The Longisland BVI Group assesses, at the end of each of the Relevant Periods, whether there is any objective evidence that financial asset is impaired. Financial asset is impaired if there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that event has an impact on the estimated future cash flows of the financial asset that can be reliably estimated. Evidence of impairment may include:

(i) significant financial difficulty of the debtor;
(ii) a breach of contract, such as a default or delinquency in interest or principal payments;
(iii) granting concession to a debtor because of debtor’s financial difficulty; and
(iv) it becoming probable that the debtor will enter bankruptcy or other financial reorganisation.

For loans and receivables

An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. The carrying amount of financial asset is reduced through the use of an allowance account. When any part of financial asset is determined as uncollectable, it is written off against the allowance account for the relevant financial asset.

Impairment losses are reversed in subsequent periods when an increase in the asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to a restriction that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

(iii) Financial liabilities

Financial liabilities, including accrued liabilities and other payables and amounts due to holding company and related companies, are initially recognised at fair value, net of directly attributable transaction costs incurred, and are subsequently measured at amortised cost, using the effective interest method. The related interest expense is recognised within “finance costs” in the consolidated statements of comprehensive income.

(iv) Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial asset or liability, or where appropriate, a shorter period.

– 55 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(v) Equity instruments

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

(vi) Derecognition

The Longisland BVI Group derecognises a financial asset when the contractual rights to the future cash flows in relation to the financial asset expire or when the financial asset has been transferred and the transfer meets the criteria for derecognition in accordance with HKAS 39.

Financial liabilities are decognised when the obligation specified in the relevant contract is discharged, cancelled or expired.

(e) Revenue recognition

Service income is recognised when services are rendered.

Interest income is accrued on a time basis on the principal outstanding at the applicable interest rate.

(f) Income taxes

Income taxes for the period/year comprise current tax and deferred tax.

Current tax is based on the profit or loss from ordinary activities adjusted for items that are non-assessable or disallowable for income tax purposes and is calculated using tax rates that have been enacted or substantively enacted at the end of each of the Relevant Periods.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for tax purposes. Except for goodwill and recognised assets and liabilities that affect neither accounting nor taxable profits, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is measured at the tax rates appropriate to the expected manner in which the carrying amount of the asset or liability is realised or settled and that have been enacted or substantively enacted at the end of each of the Relevant Periods.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Longisland BVI Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Income taxes are recognised in profit or loss except when they relate to items recognised in other comprehensive income in which case the taxes are also recognised in other comprehensive income.

(g) Foreign currency

Transactions entered into by group entities in currencies other than the currency of the primary economic environment in which they operate (the “functional currency”) are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the end of reporting period. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

– 56 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period in which they arise. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised in other comprehensive income, in which cases, the exchange differences are also recognised in other comprehensive income.

On consolidation, income and expense items of foreign operations are translated into the presentation currency of the Longisland BVI Group at the average exchange rates for the period, unless exchange rates fluctuate significantly during the period, in which case, the rates approximating, to those ruling when the transactions took place are used. All assets and liabilities of foreign operations are translated at the rate ruling at the end of each of the Relevant Periods. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity as foreign exchange reserve (attributed to non-controlling interests as appropriate). Exchange differences recognised in the profit or loss of group entities’ separate or individual financial statements on the translation of long-term monetary items forming part of the Longisland BVI Group’s net investment in the foreign operation concerned are reclassified to other comprehensive income and accumulated in equity as foreign exchange reserve.

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are reclassified to the profit or loss as part of the profit or loss on disposal.

(h) Employee benefits

(i) Employee leave entitlements

Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the end of reporting period.

Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

(ii) Termination benefits

Termination benefits are recognised when, and only when, the Longisland BVI Group demonstrably commits itself to terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed formal plan which is without realistic possibility of withdrawal.

(iii) Post-employment benefits

Retirement benefits to employees are provided through several defined contribution plans.

The employees of the Longisland BVI Group’s subsidiaries that operate in the People’s Republic of China (the “PRC”) are required to participate in a government-managed retirement benefit schemes. These subsidiaries are required to contribute a fixed cost per employee to the government-managed retirement benefit schemes. The contributions are charged to profit or loss as they become payable.

(i) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Longisland BVI Group has a legal or constructive obligation arising as a result of a past event, which will probably result in an outflow of economic benefits that can be reasonably estimated.

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

– 57 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(j) Related parties

(i) A person or a close member of that person’s family is related to the Longisland BVI Group if that person:
(a) has control or joint control over the Longisland BVI Group;
(b) has significant influence over the Longisland BVI Group; or
(c) is a member of key management personnel of the Longisland BVI Group or the Target Company’s parent.
(ii) An entity is related to the Longisland BVI Group if any of the following conditions apply:
(a) the entity and the Longisland BVI Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others);
(b) 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);
(c) both entities are joint ventures of the same third party;
(d) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(e) the entity is a post-employment benefit plan for the benefit of the employees of the Longisland BVI Group or an entity related to the Longisland BVI Group;
(f) the entity is controlled or jointly controlled by a person identified in (i); or
(g) a person identified in (i)(a) has significant influence over the entity or is a member of 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 and include:

(i) that person’s children and spouse or domestic partner;
(ii) children of that person’s spouse or domestic partner; and
(iii) dependents of that person or that person’s spouse or domestic partner.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATED UNCERTAINTY

Estimates are evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The key assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

(a) Impairment loss on loans and receivables

The policy for impairment of loans and receivables of the Longisland BVI Group is based on the evaluation of collectability and ageing analysis of the loans and receivables and on management’s judgment. A considerable amount of judgment is required in assessing the ultimate realisation of these loans and receivables, including the current creditworthiness of each debtor. If the financial conditions of debtors of the Longisland BVI Group were to deteriorate, resulting in an impairment of their ability to make payments, additional impairment may be required.

– 58 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(b) Impairment of non-financial assets

The Longisland BVI Group assesses impairment at the end of each of the Relevant Periods by evaluating conditions specific to the Longisland BVI Group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates and assumptions about future events, which are subject to uncertainty and might materially differ from the actual results. In making these key estimates and judgments, the sole director takes into consideration assumptions that are mainly based on market condition existing at the end of each of the Relevant Periods and appropriate market and discount rates. These estimates are regularly compared to actual market data and actual transactions entered into by the Longisland BVI Group.

6. SEGMENT INFORMATION

The Longisland BVI Group did not generate any revenue during the Relevant Periods. No operating segment analysis is provided as the Longisland BVI Group has no business operation since the respective dates of incorporation of the Target Company and its subsidiaries.

7. OTHER INCOME

		Period from
		16 March
		2010
		(date of
	incorporation)
		to 31
		December	Year ended	31 December		Five months	ended 31 May
		2010	2011		2012	2012		2013
		HK$	HK$		HK$	HK$		HK$
						(Unaudited)
Service income		–	–		184,530	–		–
Bank interest income		55	358		44	20		34

		55	358		184,574	20		34

8. LOSS BEFORE INCOME TAX EXPENSE

		Period from
		16 March
		2010
		(date of
	incorporation)
		to 31
		December	Year ended	31 December		Five months	ended 31 May
		2010	2011		2012	2012		2013
		HK$	HK$		HK$	HK$		HK$
						(Unaudited)
Loss before income tax
expense is arrived at
after charging:
Auditor’s remuneration		–	–		–	–		–
Staff costs
−Wages and salaries		–	95,089		923,661	354,029		204,842

No compensation or any kind of benefit was paid to the Target Company’s sole director in respect of his services during the Relevant Periods.

– 59 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

9. HIGHEST PAID EMPLOYEES

For each of the Relevant Periods, the Longisland BVI Group employed two individuals (excluding the sole director). Details of the remuneration of the highest paid employees of the Longisland BVI Group for each of the Relevant Periods are as follows:

			Period from
			16 March
			2010
			(date of
			incorporation)
			to 31
			December	Year ended	31 December		Five months	ended 31 May
			2010	2011		2012	2012		2013
			HK$	HK$		HK$	HK$		HK$
							(Unaudited)
Wages	and	salaries	–	95,089		923,661	354,029		204,842

The remuneration of the highest paid employees fell within the band of nil to HK$1,000,000 for each of the Relevant Periods.

During the Relevant Periods, no remuneration was paid by the Longisland BVI Group to the sole director or any employees included in the highest paid employees as an inducement to join or upon joining the Longisland BVI Group or as compensation for loss of office. None of the persons, who were directors, waived or agreed to waive any emoluments during the Relevant Periods.

10. LOSS ATTRIBUTABLE TO SHAREHOLDER

Loss attributable to shareholder has been dealt with in the financial statements of the Target Company for each of the Relevant Periods as follows:

				Period from
				16 March
				2010
				(date of
				incorporation)
				to 31
				December	Year ended	31 December		Five months	ended 31 May
				2010	2011		2012	2012		2013
				HK$	HK$		HK$	HK$		HK$
								(Unaudited)
Loss	for	the	period/year	11,094	5,704		5,879	5,879		5,179

11. INCOME TAX EXPENSE

No provision for profits tax has been provided as the Longisland BVI Group did not have any estimated assessable profit for each of the Relevant Periods.

At the end of each of the Relevant Periods, there were no material unrecognised deferred tax assets or liabilities arising from any taxable temporary difference.

– 60 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

12. INVESTMENTS IN SUBSIDIARIES

Unlisted share, at cost

	December		May
2010	2011	2012	2013
HK$	HK$	HK$	HK$
1	1	1	1

Particulars of the Target Company’s subsidiaries during the Relevant Periods are as follows:

		Particular of
		issued
		ordinary
		share/	Percentage of
	Date and place of	paid-up	equity attributable to
Name	incorporation	capital	the Target		Company	Principal activities
			Directly		Indirectly
Longisland Travel	16 March 2010,	HK$1	100%		–	Investment holding
Investment &	Hong Kong
Development (HK)
Limited
(“Longisland HK”)
(note (a))
北京譽祥時代科技	3 March 2011,	HK$10,000,000		–	100%	Investment holding
有限公司	the PRC
(Beijing Yuxiang
Times Technology
Limited*)
(“Beijing
Yuxiang”) (note
(b))

The unofficial English translation is for identification purpose only
(a) No statutory financial statements have been prepared since its date of incorporation.
(b) The statutory financial statements prepared in accordance with the generally accepted accounting principles of the PRC for the period from 3 March 2011 (date of incorporation) to 31 December 2011 and for the year ended 31 December 2012 have been audited by Beijing Chichuang Certified Public Accountants Co., Ltd. (北京馳創會計師事務所有限責任公司).

13. OTHER RECEIVABLES

All other receivables of the Longisland BVI Group at the end of each of the Relevant Periods are non-interest bearing advances.

The sole director of the Target Company considers that the fair values of other receivables are not materially different from their carrying amounts because these amounts have short maturity periods on their inception.

14. AMOUNTS DUE FROM RELATED COMPANIES/A SUBSIDIARY

The amounts due were unsecured, interest-free and repayable on demand.

– 61 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

15. CASH AND CASH EQUIVALENTS

Cash at banks earned interest at floating rates based on daily bank deposit rates. Certain cash and bank balances held at the end of each of the Relevant Periods in the amounts of nil, HK$6,196, HK$81,672 and HK$3,592 as at 31 December 2010, 2011 and 2012 and 31 May 2013 were deposited in the banks and financial institutions in the PRC and denominated in RMB.

RMB is not freely convertible into foreign currencies. Under the PRC’s Foreign Exchange Control Regulations and Administration of Settlement and Sales and Payment of Foreign Exchange Regulations, the Longisland BVI Group is permitted to exchange RMB for foreign currencies through the banks that are authorised to conduct foreign exchange business.

16. ACCRUED LIABILITIES AND OTHER PAYABLES

		At 31 December		At 31 May
	2010	2011	2012	2013
	HK$	HK$	HK$	HK$
Accrued liabilities	–	70,154	74,845	–
Other payables	–	–	215,285	21,352
	–	70,154	290,130	21,352

The carrying amounts of current accrued liabilities and other payables are short-term in nature and hence their carrying values are considered a reasonable approximation of fair value.

17. AMOUNTS DUE TO HOLDING COMPANY AND RELATED COMPANIES

The amounts due were unsecured, interest-free and repayable on demand.

18. SHARE CAPITAL

		At 31 December		At 31 May
	2010	2011	2012	2013
	HK$	HK$	HK$	HK$
At beginning of the period/year	–	8	8	8
Issue of ordinary share upon
incorporation	8	–	–	–
At end of the period/year	8	8	8	8

The Target Company was incorporated with an authorised share capital of US$50,000 divided into 50,000 ordinary shares of US$1 each. At time of incorporation, 1 ordinary share of US$1 was issued to the subscriber.

– 62 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

19. RESERVES

Details of movements on the Target Group’s reserves are set out in the consolidated statements of changes in equity in Section I. Movements on the Target Company’s reserve are set out below:

	Accumulated
	losses	Total
	HK$	HK$
	(note a)
At 16 March 2010 (date of incorporation)	–	–
Loss and total comprehensive income for the period	(11,094)	(11,094)
At 31 December 2010 and 1 January 2011	(11,094)	(11,094)
Loss and total comprehensive income for the year	(5,704)	(5,704)
At 31 December 2011 and 1 January 2012	(16,798)	(16,798)
Loss and total comprehensive income for the year	(5,879)	(5,879)
At 31 December 2012 and 1 January 2013	(22,677)	(22,677)
Loss and total comprehensive income for the period	(5,179)	(5,179)
At 31 May 2013	(27,856)	(27,856)


For the five months ended 31 May 2012
At 1 January 2012	(16,798)	(16,798)
Loss and total comprehensive income for the period	(5,879)	(5,879)
At 31 May 2012 (Unaudited)	(22,677)	(22,677)

(a) Accumulated losses

The amount represents cumulative net losses recognised in the profit or loss.

(b) Foreign exchange reserve

The amount represents gains/losses arising on retranslating the net assets of foreign operations into Hong Kong dollars.

20. FINANCIAL RISK MANAGEMENT AND FAIR VALUE MEASUREMENTS

Exposure to credit, liquidity, interest rate and currency risks arises in the normal course of the Longisland BVI Group’s business.

Policy for managing these risks is set by the sole director. The policy for each of the above risks is described in more detail below.

(a) Credit risk

Credit risk refers to the risk that counterparties will default on their contractual obligations resulting in financial loss to the Longisland BVI Group. The Longisland BVI Group exposes to credit risk from loans and receivables. The Longisland BVI Group has adopted a credit policy to monitor and mitigate credit risk arising

– 63 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

from its debtors. Credit limit is regularly reviewed and approved by the sole director. The Longisland BVI Group assesses credit risk based on debtors’ past due records, trading history, financial conditions or credit ratings. The Longisland BVI Group is not exposed to concentration of credit risk.

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

(b) Liquidity risk

The Longisland BVI Group’s objective is to ensure there are adequate funds to meet commitments associated with its financial liabilities. Cash flows of the Longisland BVI Group are closely monitored by the sole director on an ongoing basis.

The contractual maturities of financial liabilities are shown as below:

The Longisland BVI Group

		Total
	Within 1 year	undiscounted	Carrying
	or on demand	amount	amount
	HK$	HK$	HK$
At 31 December 2010
Amount due to holding company	5,299,992	5,299,992	5,299,992
	5,299,992	5,299,992	5,299,992


		Total
	Within 1 year	undiscounted	Carrying
	or on demand	amount	amount
	HK$	HK$	HK$
At 31 December 2011
Accrued liabilities and other payables	70,154	70,154	70,154
Amount due to holding company	10,299,992	10,299,992	10,299,992
Amounts due to related companies	73,380	73,380	73,380
	10,443,526	10,443,526	10,443,526


		Total
	Within 1 year	undiscounted	Carrying
	or on demand	amount	amount
	HK$	HK$	HK$
At 31 December 2012
Accrued liabilities and other payables	290,130	290,130	290,130
Amount due to holding company	10,299,992	10,299,992	10,299,992
Amounts due to related companies	875,903	875,903	875,903
	11,466,025	11,466,025	11,466,025

– 64 –

APPENDIX II

FINANCIAL INFORMATION OF THE TARGET GROUP

		Total
	Within 1 year	undiscounted	Carrying
	or on demand	amount	amount
	HK$	HK$	HK$
At 31 May 2013
Accrued liabilities and other payables	21,352	21,352	21,352
Amount due to holding company	10,299,992	10,299,992	10,299,992
	10,321,344	10,321,344	10,321,344


The Target Company
		Total
	Within 1 year	undiscounted	Carrying
	or on demand	amount	amount
	HK$	HK$	HK$
At 31 December 2010
Amount due to holding company	5,299,992	5,299,992	5,299,992
	5,299,992	5,299,992	5,299,992


		Total
	Within 1 year	undiscounted	Carrying
	or on demand	amount	amount
	HK$	HK$	HK$
At 31 December 2011
Amount due to holding company	10,299,992	10,299,992	10,299,992
	10,299,992	10,299,992	10,299,992


		Total
	Within 1 year	undiscounted	Carrying
	or on demand	amount	amount
	HK$	HK$	HK$
At 31 December 2012
Amount due to holding company	10,299,992	10,299,992	10,299,992
	10,299,992	10,299,992	10,299,992


		Total
	Within 1 year	undiscounted	Carrying
	or on demand	amount	amount
	HK$	HK$	HK$
At 31 May 2013
Amount due to holding company	10,299,992	10,299,992	10,299,992
	10,299,992	10,299,992	10,299,992

– 65 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(c) Interest rate risk

The Longisland BVI Group is exposed to cash flow interest rate risk due to the fluctuation of the prevailing market interest rate on bank balances. The sole director of the Target Company considers that the Longisland BVI Group’s interest rate risk is minimal.

(d) Currency risk

The Longisland BVI Group mainly operates in Hong Kong and the PRC with most of the transactions settled in their respective functional currencies in which the group entities operate. Therefore, the Longisland BVI Group does not have significant exposure to risk resulting from changes in foreign currency exchange rates.

(e) Fair values

The fair values of the Longisland BVI Group’s financial assets and liabilities are not materially different from their carrying amounts because of the immediate or short term maturities.

21. SUMMARY OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES BY CATEGORY

The carrying amounts presented in the Longisland BVI Group’s consolidated statements of financial position and in the Target Company’s statements of financial position relate to the following categories of financial assets and financial liabilities:

The Longisland BVI Group

		At 31 December	At 31 December		At 31 May
	2010		2011	2012	2013
	HK$		HK$	HK$	HK$
Financial assets
Loans and receivables	5,269,590		10,407,219	10,716,564	9,553,113


		At 31 December			At 31 May
	2010		2011	2012	2013
	HK$		HK$	HK$	HK$
Financial liabilities
Financial liabilities measured at
amortised cost	5,299,992		10,443,526	11,466,025	10,321,344

– 66 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

The Target Company

		At 31 December	At 31 December		At 31 May
	2010		2011	2012	2013
	HK$		HK$	HK$	HK$
Financial assets
Loans and receivables	5,288,905		10,283,201	10,277,322	10,272,143


		At 31 December			At 31 May
	2010		2011	2012	2013
	HK$		HK$	HK$	HK$
Financial liabilities
Financial liabilities measured at
amortised cost	5,299,992		10,299,992	10,299,992	10,299,992

22. CAPITAL MANAGEMENT

The Longisland BVI Group’s objectives of managing capital are to safeguard the Longisland BVI Group’s ability to continue as a going concern in order to provide returns for shareholder and benefits for other stakeholders and to maintain an optimal capital structure to reduce cost of capital.

Saved as disclosed in note 3(b), in order to maintain or adjust the capital structure, the Longisland BVI Group may adjust the amount of dividends paid to shareholder, return capital to shareholder, issue new shares or sell assets to reduce debts.

The capital structure of the Longisland BVI Group consists of equity attributable to owner of the Target Company, comprising share capital and reserves. The amounts of capital deficiencies were HK$30,402, HK$36,307, HK$749,461 and HK$768,231 as at 31 December 2010, 2011 and 2012 and 31 May 2013 respectively.

III. EVENTS AFTER THE REPORTING DATE

On 12 July 2013, Beijing Yuxiang, a subsidiary of the Target Company, entered into an acquisition agreement to purchase 100% equity interests in 北京長島恒業企業管理有限公司 (Beijing Longisland Hengye Enterprise Management Limited*) (“Longisland Beijing”) at a consideration of RMB3,000,000. In the opinion of sole director of the Target Company, the initial accounting for the business combination is incomplete as the financial information of Longisland Beijing is not ready at this time.

Saved as disclosed above, no significant event has been noted for the Longisland BVI Group nor the Target Company in respect of any period subsequent to 31 May 2013.

IV. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared for the Longisland BVI Group nor the Target Company in respect of any period subsequent to 31 May 2013.

Yours faithfully,

BDO Limited

Certified Public Accountants

Alfred Lee

Practising Certificate Number P04960

Hong Kong

The unofficial English translation is for identification purpose only

– 67 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(b) Accountants’ report on Longisland Beijing and its subsidiaries, Xi’an Hengye and Xi’an Green River (the “Longisland Beijing Group”)

==> picture [76 x 61] intentionally omitted <==

==> picture [95 x 54] intentionally omitted <==

23 October 2013

The Directors

Culture Landmark Investment Limited Rooms 2501-2505, 25th Floor, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong

Dear Sirs,

We set out below our report on the financial information of 北京長島恒業企業管理有限公司 (Beijing Longisland Hengye Enterprise Management Limited*) (“Longisland Beijing”) and its subsidiaries as set out in note 12 of Section II below (hereinafter collectively referred to as the “Longisland Beijing Group”) including the consolidated statements of financial position of Longisland Beijing as at 31 December 2010, 2011 and 2012 and 31 May 2013 and the statements of financial position of Longisland Beijing as at 31 December 2010, 2011 and 2012 and 31 May 2013, the consolidated statements of comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows of the Longisland Beijing Group for the period from 5 November 2010 (date of establishment) to 31 December 2010, for each of the years ended 31 December 2011 and 2012 and for the five months ended 31 May 2013 (the “Relevant Periods”) and notes thereto (hereinafter collectively referred to as the “Financial Information”), together with the unaudited consolidated financial information of the Longisland Beijing Group including the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows of the Longisland Beijing Group for the five months ended 31 May 2012 (the “31 May 2012 Corresponding Information”), prepared for inclusion in the circular issued by Culture Landmark Investment Limited (the “Company”) dated 23 October 2013 in connection with the proposed acquisition of the entire issued share capital of Longisland Tourism Investment & Development Limited (the “Target Company”) by the Company (the “Proposed Acquisition”).

* The unofficial English translation is for identification purpose only

– 68 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Longisland Beijing was established in the People’s Republic of China (the “PRC”) on 5 November 2010 with a registered capital of RMB3,000,000. Its registered office is located at Club A-303, Zone A, Baiziyuan, No. 16 Baiziwan Road, Chaoyang District, Beijing, the PRC (北京市朝陽區百子灣路16號百子園A區會所A-303). Longisland Beijing is principally engaged in investment holding during the Relevant Periods.

At the date of this report, Longisland Beijing has direct interests in subsidiaries as set out in note 12 of Section II below. All companies comprising the Longisland Beijing Group adopt 31 December as their financial year end date. The statutory financial statements of Longisland Beijing prepared in accordance with the generally accepted accounting principles of the PRC for the period from 5 November 2010 (date of establishment) to 31 December 2010 have been audited by Beijing Shangyuandaohe Certified Public Accountants Co., Ltd. (北京上元道和會計師事務所有限公司). No audited financial statements for the years ended 31 December 2011 and 2012 have been prepared. We have not acted as auditor of Longisland Beijing nor its subsidiaries for the Relevant Periods referred to in this report.

For the purpose of this report, the sole director of Longisland Beijing has prepared the financial statements of the Longisland Beijing Group for the Relevant Periods (the “Underlying Financial Statements”) in accordance with the accounting policies set out in note 4 of Section II below which comply with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) based on the audited financial statements or, where appropriate, unaudited management accounts of the companies now comprising the Longisland Beijing Group.

The Financial Information has been prepared by the sole director of Longisland Beijing based on the Underlying Financial Statements. No adjustments on the Underlying Financial Statements for the Relevant Periods are considered necessary for the purpose of preparing the Financial Information.

The sole director of Longisland Beijing is responsible for the contents of the circular including the preparation and the true and fair presentation of the Financial Information in accordance with the accounting policies set out in note 4 of Section II below which comply with HKFRSs, the applicable disclosure requirements of the Hong Kong Companies Ordinance and the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”), and for such internal control as the sole director of Longisland Beijing determines is necessary to enable the preparation of the Financial Information that is free from material misstatement, whether due to fraud or error.

Our responsibility is to form an independent opinion on the Financial Information based on our procedures and to report our opinion thereon to you.

– 69 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

OPINION

In our opinion, the Financial Information, for the purpose of this report, gives a true and fair view of the state of affairs of the Longisland Beijing Group and of Longisland Beijing as at 31 December 2010, 2011 and 2012 and 31 May 2013 and of the Longisland Beijing Group’s losses and cash flows for each of the Relevant Periods in accordance with HKFRSs.

EMPHASIS OF MATTER

Without qualifying our opinion, we draw attention to note 3(b) of Section II below which indicates that the Longisland Beijing Group and Longisland Beijing had net current liabilities of RMB17,303,456 and RMB17,303,456 as at 31 May 2013 respectively. These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Longisland Beijing Group’s and Longisland Beijing’s ability to continue as a going concern.

CORRESPONDING FINANCIAL INFORMATION

For the purpose of this report, we have also performed a review of the 31 May 2012 Corresponding Information, which is prepared in accordance with the accounting policies set out in note 4 of Section II below which comply with HKFRSs, 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 sole director of Longisland Beijing is responsible for the preparation and presentation of the 31 May 2012 Corresponding Information in accordance with the accounting policies set out in note 4 of Section II below which comply with HKFRSs, the applicable disclosure requirements of the Hong Kong Companies Ordinance and the Listing Rules. Our responsibility is to express a conclusion on the 31 May 2012 Corresponding Information based on our review. A review principally consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures to the 31 May 2012 Corresponding Information. 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 31 May 2012 Corresponding Information.

REVIEW CONCLUSION

– 70 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

I. FINANCIAL INFORMATION

Consolidated Statements of Comprehensive Income

		Period from
		5 November
		2010 (date of
		establishment) to	Year ended		Five months ended
		31 December	31 December		31 May
	Note	2010	2011	2012	2012	2013
		RMB	RMB	RMB	RMB	RMB
					(Unaudited)
Other income	7	3,116	3,180	212	117		2
Administrative expenses		(21,253)	(274,969)	(480,321)	(45,700)	(426,445)
Loss on loss of control
of subsidiaries	22	–	–	–	–	(19,106,978)
Loss before
income tax expense	8	(18,137)	(271,789)	(480,109)	(45,583)	(19,533,421)
Income tax expense	11	–	–	–	–		–
Loss for the period/year
attributable to owner
of Longisland Beijing		(18,137)	(271,789)	(480,109)	(45,583)	(19,533,421)
Other comprehensive
income for the
period/year
attributable to owner
of Longisland Beijing		–	–	–	–		–
Total comprehensive
income for the
period/year
attributable to owner
of Longisland Beijing		(18,137)	(271,789)	(480,109)	(45,583)	(19,533,421)

– 71 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Consolidated Statements of Financial Position

			At 31 December		At 31 May
	Note	2010	2011	2012	2013
		RMB	RMB	RMB	RMB
ASSETS AND LIABILITIES
Current assets
Deposits for properties under
development, prepayments
and other receivables	13	–	32,300,586	33,510,279	53,284,911
Cash and cash equivalents	15	9,991,863	35,514	39,781	544
		9,991,863	32,336,100	33,550,060	53,285,455

Current liabilities
Other payables and borrowing	16	–	4,451	1,168,520	53,496,911
Amount due to holding
company	17	7,010,000	27,171,575	27,201,575	7,092,000
Amount due to a fellow
subsidiary	17	–	2,450,000	2,950,000	10,000,000
		7,010,000	29,626,026	31,320,095	70,588,911

Net current assets/(liabilities)		2,981,863	2,710,074	2,229,965	(17,303,456)
Total assets less current
liabilities/net
assets/(liabilities)		2,981,863	2,710,074	2,229,965	(17,303,456)


EQUITY/(CAPITAL
DEFICIENCIES)
Paid-up capital	18	3,000,000	3,000,000	3,000,000	3,000,000
Reserves		(18,137)	(289,926)	(770,035)	(20,303,456)
Total equity/(capital
deficiencies)		2,981,863	2,710,074	2,229,965	(17,303,456)

– 72 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Statements of Financial Position

			At 31 December		At 31 May
	Note	2010	2011	2012	2013
		RMB	RMB	RMB	RMB
ASSETS AND LIABILITIES
Non-current assets
Investments in subsidiaries	12	10,000,000	10,000,000	10,000,000	–

Current assets
Other receivables	13	–	–	–	53,284,911
Amount due from a subsidiary	14	–	–	1,000,000	–
Cash and cash equivalents	15	1,466	24,949	573	544
		1,466	24,949	1,000,573	53,285,455

Current liabilities
Other payables and borrowing	16	–	4,451	1,127,340	53,496,911
Amount due to holding
company	17	7,010,000	7,062,000	7,092,000	7,092,000
Amount due to a fellow
subsidiary	17	–	–	–	10,000,000
		7,010,000	7,066,451	8,219,340	70,588,911

Net current liabilities		(7,008,534)	(7,041,502)	(7,218,767)	(17,303,456)
Total assets less current
liabilities/net
assets/(liabilities)		2,991,466	2,958,498	2,781,233	(17,303,456)


EQUITY/(CAPITAL
DEFICIENCIES)
Paid-up capital	18	3,000,000	3,000,000	3,000,000	3,000,000
Reserves	19	(8,534)	(41,502)	(218,767)	(20,303,456)
Total equity/(capital
deficiencies)		2,991,466	2,958,498	2,781,233	(17,303,456)

– 73 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Consolidated Statements of Changes in Equity

	Paid-up	Accumulated
	capital	losses	Total
	RMB	RMB	RMB
Capital injection upon establishment	3,000,000	–	3,000,000
Loss and total comprehensive income
for the period	–	(18,137)	(18,137)
At 31 December 2010 and
1 January 2011	3,000,000	(18,137)	2,981,863
Loss and total comprehensive income
for the year	–	(271,789)	(271,789)
At 31 December 2011 and
1 January 2012	3,000,000	(289,926)	2,710,074
Loss and total comprehensive income
for the year	–	(480,109)	(480,109)
At 31 December 2012 and
1 January 2013	3,000,000	(770,035)	2,229,965
Loss and total comprehensive income
for the period	–	(19,533,421)	(19,533,421)
At 31 May 2013	3,000,000	(20,303,456)	(17,303,456)


For the five months ended
31 May 2012
At 1 January 2012	3,000,000	(289,926)	2,710,074
Loss and total comprehensive income
for the period	–	(45,583)	(45,583)
At 31 May 2012 (Unaudited)	3,000,000	(335,509)	2,664,491

– 74 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Consolidated Statements of Cash Flows

		Period from 5
		November 2010
		(date of
		establishment) to
		31 December	Year ended 31	December	Five months	ended 31 May
	Note	2010	2011	2012	2012	2013
		RMB	RMB	RMB	RMB	RMB
					(Unaudited)
Cash flows from operating
activities
Loss before income
tax expense		(18,137)	(271,789)	(480,109)	(45,583)	(19,533,421)
Adjustments for:
Bank interest income		(3,116)	(3,180)	(212)	(117)	(2)
Loss on loss of control of
subsidiaries		–	–	–	–	19,106,978

Operating loss before working
capital changes		(21,253)	(274,969)	(480,321)	(45,700)	(426,445)
(Increase)/decrease in deposits
for properties under
development, prepayments
and other receivables		–	(32,300,586)	(1,209,693)	(1,000,000)	(150,104,180)
Increase in other payables		–	4,451	1,164,069	995,549	13,299,647
Cash used in operations		(21,253)	(32,571,104)	(525,945)	(50,151)	(137,230,978)
Interest received		3,116	3,180	212	117	2

Net cash used in operating
activities		(18,137)	(32,567,924)	(525,733)	(50,034)	(137,230,976)

Cash flows from investing
activities
Acquisition of assets, net of
cash acquired	21	–	–	–	–	4,733
Loss of control of
subsidiaries, net
of cash loss	22	–	–	–	–	(10,046,405)

Net cash used in investing
activities		–	–	–	–	(10,041,672)

– 75 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

		Period from 5
		November 2010
		(date of
		establishment) to
		31 December	Year ended 31		December	Five months		ended 31 May
	Note	2010		2011	2012		2012		2013
		RMB		RMB	RMB		RMB		RMB
						(Unaudited)
Cash flows from financing
activities
Proceeds from capital
injection upon establishment		3,000,000		–	–		–		–
Increase/(decrease) in amount
due to holding company		7,010,000		20,161,575	30,000		30,000		(6,532,554)
Increase in amount
due to a fellow subsidiary		–		2,450,000	500,000		–		101,481,054
Increase in borrowing		–		–	–		–		55,141,077
Repayment of borrowing		–		–	–		–		(2,856,166)
Net cash generated from
financing activities		10,010,000		22,611,575	530,000		30,000		147,233,411
Net increase/(decrease) in
cash and cash equivalents		9,991,863		(9,956,349)	4,267		(20,034)		(39,237)
Cash and cash equivalents at
beginning of the
period/year		–		9,991,863	35,514		35,514		39,781
Cash and cash equivalents at
end of the period/year,
representing cash and
bank balances		9,991,863		35,514	39,781		15,480		544

– 76 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

II. NOTES TO THE FINANCIAL INFORMATION AND THE 31 MAY 2012 CORRESPONDING INFORMATION

1. CORPORATE INFORMATION

Longisland Beijing was established in the PRC on 5 November 2010. Its registered office and its principal place of business are located at Club A-303, Zone A, Baiziyuan, No. 16 Baiziwan Road, Chaoyang District, Beijing, the PRC (北京市朝陽區百子灣路16號百子園A區會所A-303). Longisland Beijing is principally engaged in investment holding.

The sole director considers that Longisland Beijing’s immediate and ultimate holding company were 長島 (北京) 投資有限公司 (Longisland (Beijing) Investment Company Limited*), a limited liability company established in the PRC, and Longisland Investment Group Ltd., a limited liability company incorporated in the British Virgin Islands, respectively during the Relevant Periods.

On 12 July 2013, 北京譽祥時代科技有限公司 (Beijing Yuxiang Times Technology Limited*) (“Beijing Yuxiang”), a limited liability company established in the PRC and indirectly owned by Longisland Tourism Investment & Development Limited, acquired 100% equity interests in Longisland Beijing. Since then, Longisland Beijing’s immediate and ultimate holding company become Beijing Yuxiang and Bliss Zone Limited, a limited liability company incorporated in the British Virgin Islands, respectively.

2. ADOPTION OF NEW OR AMENDED HKFRSS

All HKFRSs effective for the accounting period commencing from 1 January 2013, together with the relevant transitional provisions, have been adopted by the Longisland Beijing Group in the preparation of the Financial Information and the 31 May 2012 Corresponding Information.

At the date of this report, certain new and amended HKFRSs have been published but are not yet effective, and have not been early adopted by the Longisland Beijing Group.

Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities[1] HKFRS 9 Financial Instruments[2] HK (IFRIC) – Int 2 Levies[1]

1 Effective for annual periods beginning on or after 1 January 2014

2 Effective for annual periods beginning on or after 1 January 2015

The Longisland Beijing Group is in the process of making an assessment of the potential impact of these pronouncements. The sole director of Longisland Beijing so far concluded that the application of these pronouncements will have no material impact on the Longisland Beijing Group’s results of operation and financial position.

3. BASIS OF PREPARATION

(a) Statement of compliance

(b) Basis of measurement and going concern assumption

The Financial Information and the 31 May 2012 Corresponding Information have been prepared under the historical cost basis.

The unofficial English translation is for identification purpose only.

– 77 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

The Financial Information has been prepared on the going concern basis notwithstanding the Longisland Beijing Group and Longisland Beijing had net current liabilities of RMB17,303,456 and RMB17,303,456 as at 31 May 2013 respectively. These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Longisland Beijing Group’s and Longisland Beijing’s ability to continue as a going concern and therefore the Longisland Beijing Group and Longisland Beijing may not be able to realise their assets and discharge their liabilities in the normal course of business. The sole director of Longisland Beijing is of the opinion that taking into account the estimated future funds, the Longisland Beijing Group and Longisland Beijing had sufficient financial resources to meet their financial obligation as they fall due for the foreseeable future. Accordingly, the Financial Information has been prepared on a going concern basis.

(c) Functional and presentation currency

The Financial Information and the 31 May 2012 Corresponding Information are presented in Renminbi (“RMB”), which is the same as the functional currency of Longisland Beijing.

4. SIGNIFICANT ACCOUNTING POLICIES

(a) Business combination and basis of consolidation

The Financial Information and the 31 May 2012 Corresponding Information comprise the financial statements of Longisland Beijing and its subsidiaries. Inter-company transactions and balances between group companies together with unrealised profits are eliminated in full in preparing the Financial Information and the 31 May 2012 Corresponding Information. Unrealised losses are also eliminated unless the transaction provides evidence of impairment on the asset transferred, in which case the loss is recognised in profit or loss.

The results of subsidiaries acquired or disposed of during the period are included in the consolidated statements of comprehensive income from the effective dates of acquisition or up to the effective dates of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Longisland Beijing Group.

When the Longisland Beijing Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interest. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for in the same manner as would be required if the relevant assets or liabilities were disposed of.

(b) Subsidiaries

A subsidiary is an entity (including a structured entity) controlled by Longisland Beijing and/or its other subsidiaries. The Longisland Beijing Group controls an investee when the Longisland Beijing Group has (1) power over the investee, (2) exposure, or rights, to variable returns from its involvement with the investee and (3) the ability to affect those returns through its power over the investee (i.e., the existing rights that give the Longisland Beijing Group the current ability to direct the relevant activities of the investee).

The Longisland Beijing Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the elements of control described above.

In Longisland Beijing’s statements of financial position, investments in subsidiaries are stated at cost less impairment loss. The results of subsidiaries are accounted for by Longisland Beijing on the basis of dividend received and receivable.

(c) Impairment of non-financial assets

At the end of each of the Relevant Periods, Longisland Beijing reviews the carrying amounts of the investments in subsidiaries to determine whether there is any indication that those assets have suffered an impairment loss or an impairment loss previously recognised no longer exists or may have decreased.

– 78 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(d) Deposits for properties under development

Deposits for properties under development represented the payments for the property development projects. Deposits for properties under development are initially recognised at cost. Subsequent to initial recognition, deposits for properties under development are carried at cost less accumulated impairment losses.

(e) Financial Instruments

(i) Financial assets

The Longisland Beijing Group classifies its financial assets at initial recognition, depending on the purpose for which the asset was acquired. Financial assets at fair value through profit or loss are initially measured at fair value and all other financial assets are initially measured at fair value plus transaction costs that are directly attributable to the acquisition of the financial assets. Regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned.

Loans and receivables

(ii) Impairment loss on financial assets

The Longisland Beijing Group assesses, at the end of each of the Relevant Periods, whether there is any objective evidence that financial asset is impaired. Financial asset is impaired if there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that event has an impact on the estimated future cash flows of the financial asset that can be reliably estimated. Evidence of impairment may include:

(i) significant financial difficulty of the debtor;
(ii) a breach of contract, such as a default or delinquency in interest or principal payments;
(iii) granting concession to a debtor because of debtor’s financial difficulty; and
(iv) it becoming probable that the debtor will enter bankruptcy or other financial reorganisation.

For loans and receivables

– 79 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(iii) Financial liabilities

Financial liabilities, including other payables and amounts due to holding company and fellow subsidiaries, are initially recognised at fair value, net of directly attributable transaction costs incurred, and are subsequently measured at amortised cost, using the effective interest method. The related interest expense is recognised within “finance costs” in the consolidated statements of comprehensive income.

(iv) Effective interest method

(v) Equity instruments

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

(vi) Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. A financial guarantee contract issued by the Longisland Beijing Group and not designated as at fair value through profit or loss is recognised initially at its fair value less transaction costs that are directly attributable to the issue of the financial guarantee contract. Subsequent to initial recognition, the Longisland Beijing Group measures the financial guarantee contact at the higher of: (i) the amount determined in accordance with HKAS 37 Provisions, Contingent Liabilities and Contingent Assets ; and (ii) the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with HKAS 18 Revenue .

(vii) Derecognition

The Longisland Beijing Group derecognises a financial asset when the contractual rights to the future cash flows in relation to the financial asset expire or when the financial asset has been transferred and the transfer meets the criteria for derecognition in accordance with HKAS 39.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires.

(f) Revenue recognition

Interest income is accrued on a time basis on the principal outstanding at the applicable interest rate.

(g) Income taxes

Income taxes for the period/year comprise current tax and deferred tax.

– 80 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Longisland Beijing Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Income taxes are recognised in profit or loss except when they relate to items recognised in other comprehensive income in which case the taxes are also recognised in other comprehensive income.

(h) Employee benefits

(i) Employee leave entitlements

Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

(ii) Termination benefits

Termination benefits are recognised when, and only when, the Longisland Beijing Group demonstrably commits itself to terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed formal plan which is without realistic possibility of withdrawal.

(iii) Post-employment benefits

Retirement benefits to employees are provided through several defined contribution plans.

The employees of the Longisland Beijing Group’s subsidiaries that operate in the PRC are required to participate in a government-managed retirement benefit schemes. These subsidiaries are required to contribute a fixed cost per employee to the government-managed retirement benefit schemes. The contributions are charged to profit or loss as they become payable.

(i) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Longisland Beijing Group has a legal or constructive obligation arising as a result of a past event, which will probably result in an outflow of economic benefits that can be reasonably estimated.

(j) Related parties

(i) A person or a close member of that person’s family is related to the Longisland Beijing Group if that person:
(a) has control or joint control over the Longisland Beijing Group;
(b) has significant influence over the Longisland Beijing Group; or
(c) is a member of key management personnel of the Longisland Beijing Group or Longisland Beijing’s parent.
(ii) An entity is related to the Longisland Beijing Group if any of the following conditions apply:
(a) the entity and the Longisland Beijing Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others);

– 81 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(b) 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);
(c) both entities are joint ventures of the same third party;
(d) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(e) the entity is a post-employment benefit plan for the benefit of the employees of the Longisland Beijing Group or an entity related to the Longisland Beijing Group;
(f) the entity is controlled or jointly controlled by a person identified in (i); or
(g) a person identified in (i)(a) has significant influence over the entity or is a member of 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 and include:

(i) that person’s children and spouse or domestic partner;
(ii) children of that person’s spouse or domestic partner; and
(iii) dependents of that person or that person’s spouse or domestic partner.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATED UNCERTAINTY

(a) Impairment loss of loans and receivables

The policy for impairment of loans and receivables of the Longisland Beijing Group is based on the evaluation of collectability and ageing analysis of the loans and receivables and on management’s judgment. A considerable amount of judgment is required in assessing the ultimate realisation of these loans and receivables, including the current creditworthiness of each debtor. If the financial conditions of debtors of the Longisland Beijing Group were to deteriorate, resulting in an impairment of their ability to make payments, additional impairment may be required.

(b) Impairment of non-financial assets

The Longisland Beijing Group assesses impairment at the end of each of the Relevant Periods by evaluating conditions specific to the Longisland Beijing Group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates and assumptions about future events, which are subject to uncertainty and might materially differ from the actual results. In making these key estimates and judgments, the sole director takes into consideration assumptions that are mainly based on market condition existing at the end of each of the Relevant Periods and appropriate market and discount rates. These estimates are regularly compared to actual market data and actual transactions entered into by the Longisland Beijing Group.

(c) Impairment loss on deposits for properties under development

The carrying amounts of deposits for properties under development are reviewed periodically in order to assess whether the recoverable amounts have declined below the carrying amounts. These assets are tested for impairment whenever events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such a decline has occurred, the carrying amount is reduced to recoverable amount. The Longisland Beijing Group uses all readily available information in determining an amount that is a reasonable approximation of recoverable amount, including estimates based on reasonable and supportable assumption.

– 82 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

6. SEGMENT INFORMATION

The Longisland Beijing Group did not generate any revenue during the Relevant Periods. No operating segment analysis is provided as the Longisland Beijing Group has no business operation since the respective dates of establishment of Longisland Beijing and its subsidiaries.

7. OTHER INCOME

				Period from
				5 November
				2010
				(date of
			establishment)
				to 31
				December	Year ended	31 December		Five months	ended 31 May
				2010	2011		2012	2012		2013
				RMB	RMB		RMB	RMB		RMB
								(Unaudited)
Bank	interest	income		3,116	3,180		212	117		2

8. LOSS BEFORE INCOME TAX EXPENSE

		Period from
		5 November
		2010
		(date of
	establishment)
		to 31
		December	Year ended	31 December		Five months	ended 31 May
		2010	2011		2012	2012		2013
		RMB	RMB		RMB	RMB		RMB
						(Unaudited)
Loss before income
tax expense is arrived at
after charging:
Auditor’s remuneration		–	30,000		5,000	5,000		–
Loss on loss of control of
subsidiaries (note 22)		–	–		–	–		19,106,978
Staff costs
−Wages and salaries		–	12,402		196,226	47,619		93,034

No compensation or any kind of benefit was paid to Longisland Beijing’s sole director in respect of his services during the Relevant Periods.

– 83 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

9. HIGHEST PAID EMPLOYEES

For each of the Relevant Periods, the Longisland Beijing Group employed two individuals (excluding the sole director). Details of the remuneration of the highest paid employees of the Longisland Beijing Group for each of the Relevant Periods are as follows:

				Period from
				5 November
				2010
				(date of
			establishment)
				to 31
				December	Year ended	31 December		Five months	ended 31 May
				2010	2011		2012	2012		2013
				RMB	RMB		RMB	RMB		RMB
								(Unaudited)
Wages	and	salaries		–	12,402		196,226	47,619		93,034

The remuneration of the highest paid employees fell within the band of nil to HK$1,000,000 for each of the Relevant Periods.

During the Relevant Periods, no remuneration was paid by the Longisland Beijing Group to the sole director or any employees included in the highest paid employees as an inducement to join or upon joining the Longisland Beijing Group or as compensation for loss of office. None of the persons, who were directors, waived or agreed to waive any emoluments during the Relevant Periods.

10. LOSS ATTRIBUTABLE TO SHAREHOLDER

Loss attributable to shareholder has been dealt with in the financial statements of Longisland Beijing for each of the Relevant Periods as follows:

					Period from
					5 November
					2010
					(date of
				establishment)
					to 31
					December	Year ended	31 December		Five months	ended 31 May
					2010	2011		2012	2012		2013
					RMB	RMB		RMB	RMB		RMB
									(Unaudited)
Loss	for	the	period/year		8,534	32,968		177,265	40,582		20,084,689

11. INCOME TAX EXPENSE

No provision for profits tax has been provided as the Longisland Beijing Group did not have any estimated assessable profit for each of the Relevant Periods.

At the end of each of the Relevant Periods, there were no material unrecognised deferred tax assets or liabilities arising from any taxable temporary difference.

– 84 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

12. INVESTMENTS IN SUBSIDIARIES

		At 31 December		At 31 May
	2010	2011	2012	2013
	RMB	RMB	RMB	RMB
At beginning of the period/year	–	10,000,000	10,000,000	10,000,000
Establishment/acquisition of
subsidiaries	10,000,000	–	–	10,000,000
Loss of control of subsidiaries	–	–	–	(20,000,000)

At end of the period/year	10,000,000	10,000,000	10,000,000	–

Particulars of Longisland Beijing’s subsidiaries during the Relevant Periods are as follows:

			Percentage
			of equity
			attributable
		Particular of	to
	Date and place of	paid-up	Longisland
Name	establishment	capital	Beijing	Principal activities
			Directly
西安長島恒業置業有限公司	3 December 2010, the PRC	RMB10,000,000	100%	Real estate
(Xi’an Longisland Hengye				development in the
Properties Limited*) (“Xi’an				PRC
Hengye”) (note a)
西安長島綠河置業有限公司	14 April 2010, the PRC	RMB10,000,000	100%	Real estate
(Xi’an Longisland Green River				development in the
Properties Limited*) (“Xi’an				PRC
Green River”) (note b)

Notes:

(a) Xi’an Hengye was established by Longisland Beijing in 2010. The entire equity interests in Xi’an Hengye was transferred to a financial institution (the “Financial Institution”) in March 2013, details of which are set out in note 22(a).

The statutory financial statements of Xi’an Hengye prepared in accordance with the generally accepted accounting principles of the PRC for the period 3 December 2010 (date of establishment) to 31 December 2010 and for the years ended 31 December 2011 and 2012 have been audited by Shaanxi Xiqin Jinzhou Certified Public Accountants Co., Ltd. (陝西西秦金周會計師事務所有限責任公司).

On 30 October 2012, Longisland Beijing signed an agreement with an independent third party to pledge 55% and 45% equity interests in Xi’an Hengye to provide the loan guarantee to 北京長島新業企業管理有限公司 (Beijing Longisland Xinye Enterprise Management Limited), a fellow subsidiary, and 北京長島盛業企業管理有限公司 (Beijing Longisland Shengye Enterprise Management Limited), a fellow subsidiary, respectively. The pledge was subsequently released on 14 March 2013.

(b) The entire equity interests in Xi’an Green River was acquired in January 2013 and subsequently transferred to the Financial Institution in March 2013, details of which are set out in notes 21 and 22(b) respectively.

The statutory financial statements of Xi’an Green River prepared in accordance with the generally accepted accounting principles of the PRC for the period 14 April 2010 (date of establishment) to 31 December 2010 and for the years ended 31 December 2011 and 2012 have been audited by Shaanxi Xiqin Jinzhou Certified Public Accountants Co., Ltd. (陝西西秦金周會計師事務所有限責任公司).

The unofficial English transtation is for identification purpose only

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

13. DEPOSITS FOR PROPERTIES UNDER DEVELOPMENT, PREPAYMENTS AND OTHER RECEIVABLES

		At 31 December		At	31 May
	2010	2011	2012		2013
	RMB	RMB	RMB		RMB
Advances to Xi’an Hengye and
Xi’an Green River	–	–	–	52,284,911
Deposits for properties under
development	–	32,057,073	32,057,073		–
Prepayments	–	243,513	1,243,513		–
Other receivables	–	–	209,693	1,000,000

	–	32,300,586	33,510,279	53,284,911

All other receivables of the Longisland Beijing Group at the end of each of the Relevant Periods are non-interest advances.

The sole director of Longisland Beijing considers that the fair values of other receivables are not materially different from their carrying amounts because these amounts have short maturity periods on their inception.

14. AMOUNT DUE FROM A SUBSIDIARY

The amount due was unsecured, interest-free and repayable on demand.

15. CASH AND CASH EQUIVALENTS

Cash at banks earned interest at floating rates based on daily bank deposit rates. All cash and bank balances held at the end of each of the Relevant Periods were deposited in the banks and financial institutions in the PRC and denominated in RMB.

RMB is not freely convertible into foreign currencies. Under the PRC’s Foreign Exchange Control Regulations and Administration of Settlement and Sales and Payment of Foreign Exchange Regulations, the Longisland Beijing Group is permitted to exchange RMB for foreign currencies through the banks that are authorised to conduct foreign exchange business.

16. OTHER PAYABLES AND BORROWING

		At 31 December		At 31 May
	2010	2011	2012	2013
	RMB	RMB	RMB	RMB
Other payables	–	4,451	1,168,520	1,207,000
Loan from the Financial Institution
(note 22)	–	–	–	52,284,911

	–	4,451	1,168,520	53,496,911

Longisland Beijing had other payables of RMB4,451, RMB1,127,340 and RMB1,207,000 as at 31 December 2011, 31 December 2012 and 31 May 2013 respectively and loan from the Financial Institution of RMB52,284,911 as at 31 May 2013.

Other payables were unsecured, non-interest bearing and repayable on demand.

17. AMOUNT DUE TO HOLDING COMPANY/A FELLOW SUBSIDIARY

The amounts due were unsecured, interest-free and repayable on demand.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

18. PAID-UP CAPITAL

		At 31 December		At 31 May
	2010	2011	2012	2013
	RMB	RMB	RMB	RMB
At beginning of the period/year	–	3,000,000	3,000,000	3,000,000
Capital injection upon establishment	3,000,000	–	–	–
At end of the period/year	3,000,000	3,000,000	3,000,000	3,000,000

19. RESERVES

Details of movements on the Longisland Beijing Group’s reserves are set out in the consolidated statements of changes in equity in Section I. Movements on Longisland Beijing’s reserve are set out below:

	Accumulated
	losses	Total
	RMB	RMB
	(note a)
At 5 November 2010 (date of establishment)	–	–
Loss and total comprehensive income for the period	(8,534)	(8,534)
At 31 December 2010 and 1 January 2011	(8,534)	(8,534)
Loss and total comprehensive income for the year	(32,968)	(32,968)
At 31 December 2011 and 1 January 2012	(41,502)	(41,502)
Loss and total comprehensive income for the year	(177,265)	(177,265)
At 31 December 2012 and 1 January 2013	(218,767)	(218,767)
Loss and total comprehensive income for the period	(20,084,689)	(20,084,689)
At 31 May 2013	(20,303,456)	(20,303,456)


For the five months ended 31 May 2012
At 1 January 2012	(41,502)	(41,502)
Loss and total comprehensive income for the period	(40,582)	(40,582)
At 31 May 2012 (Unaudited)	(82,084)	(82,084)

(a) Accumulated losses

The amount represents cumulative net losses recognised in the profit or loss.

– 87 –

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APPENDIX II

20. COMMITMENTS

		At 31 December		At 31 May
	2010	2011	2012	2013
	RMB	RMB	RMB	RMB
Commitments for properties under
development
– contracted for but not provided	–	–	9,000,000	–

21. ACQUISITION OF ASSETS

On 14 January 2013, the Longisland Beijing Group acquired from a fellow subsidiary the entire interests in Xi’an Green River, the business of which has not yet commenced. Under Hong Kong Financial Reporting Standard 3 (Revised) “Business Combination” issued by the HKICPA, the acquisition is accounted for as acquisition of assets. As the acquisition is not accounted for as acquisition of business, no goodwill is arising.

	Cost of assets and
	liabilities at the
	date of acquisition
	RMB
Deposits for properties under development and prepayments	32,975,352
Cash and cash equivalents	4,733
Amount due to immediate holding company	(22,980,085)
	10,000,000

Consideration for the acquisition:
Amount due to a fellow subsidiary	10,000,000
	10,000,000

Net cash inflow arising on the acquisition:
Cash and cash equivalent acquired	4,733
	4,733

22. LOSS OF CONTROL OF SUBSIDIARIES

On 15 January 2013, Longisland Beijing signed an agreement (the “Agreement”) with the Financial Institution, pursuant to which Longisland Beijing obtained a loan, which was non-interest bearing and repayable on demand, of approximately RMB55 million from the Financial Institution and in return transferred 100% equity interests in Xi’an Hengye and Xi’an Green River to the Financial Institution as collateral to secure the repayment obligation. Longisland Beijing has the right to request the Financial Institution to transfer back the 100% equity interests in Xi’an Hengye and Xi’an Green River and release the financial guarantee as specified in note 23 (the “Right”), so long as Longisland Beijing repays the outstanding loan and fulfils certain requirements relating to other property development projects which financial arrangements have been made with the Financial Institution. The other property development projects are owned by then fellow subsidiaries of Longisland Beijing. These requirements are imposed on the exercise of the Right by Longisland Beijing as, by doing so, the Financial Institution expects the development progress of the other property development projects would be accelerated. In the opinion of the sole director of Longisland Beijing, the completion of these requirements is not controllable by Longisland Beijing as it is subject to local government approvals.

On 18 March 2013 and 4 March 2013, Longisland Beijing legally transferred 100% equity interests in Xi’an Hengye and Xi’an Green River to the Financial Institution. The sole director of Xi’an Hengye and Xi’an Green River was appointed by the Financial Institution on the same day.

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APPENDIX II

HKFRS 10, which is effective for annual periods beginning on or after 1 January 2013, identifies the concept of control as determining factor for whether an entity should be included in the consolidated financial statements of the parent company. An investor controls an investee when the investor has power over the investee, is exposed to or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. To determine whether control exists as at 31 May 2013, the Longisland Beijing Group has considered the following factors in accordance with HKFRS 10:

The power over an investee to direct the relevant activities that significantly affect the investee’s return was granted to the Financial Institution as 100% equity interests in Xi’an Hengye and Xi’an Green River have been transferred to the Financial Institution. The Financial Institution is able to appoint directors of Xi’an Hengye and Xi’an Green River, and thus is able to direct all major business decisions of Xi’an Hengye and Xi’an Green River. Further, the Financial Institution is able to cast the majority of votes at shareholder meetings.
The Financial Institution is the sole shareholder of Xi’an Hengye and Xi’an Green River as at 31 May 2013. The Financial Institution is exposed, or has rights, to variable returns from its involvement with Xi’an Hengye and Xi’an Green River as the Financial Institution’s returns from its involvement have the potential to vary as a result of Xi’an Hengye’s and Xi’an Green River’s performance.
The Financial Institution has the ability to use its power over Xi’an Hengye and Xi’an Green River to affect the amount of its returns as it exercises its power over Xi’an Hengye and Xi’an Green River on its own behalf and for its own benefit. The Financial Institution has complete decision making authority over Xi’an Hengye and Xi’an Green River and the Financial Institution’s decisions will significantly affect the amount of its returns.

As mentioned above, as Longisland Beijing cannot ensure fulfillment of the requirements relating to the other property development projects in which financial arrangements have been made with the Financial Institution in order to exercise the Right, Longisland Beijing does not have substative potential voting rights in Xi’an Hengye and Xi’an Green River as at 31 May 2013.

Based on the above assessment, the sole director of Longisland Beijing is of the view that Longisland Beijing lost the control in Xi’an Hengye and Xi’an Green River. Accordingly, Xi’an Hengye and Xi’an Green River were not accounted for as subsidiaries of Longisland Beijing for accounting purpose as at 31 May 2013.

(a) The net assets of Xi’an Hengye at the date of loss of control are as follows:

	RMB
Deposits for properties under development, prepayments and other receivables	54,450,768
Cash and cash equivalents	5,033,905
Other payables	(32,780,674)
Amounts due to related parties	(17,597,021)
	9,106,978
Loss on loss of control of subsidiary	(9,106,978)
Total consideration	–

Net cash outflow arising on loss of control:
Cash and cash equivalents	5,033,905
	5,033,905

– 89 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(b) The net assets of Xi’an Green River at the date of loss of control are as follows:

	RMB
Deposits for properties under development, prepayments and other receivables	161,929,450
Cash and cash equivalents	5,012,500
Other payables	(32,760,404)
Amount due to a related company	(124,181,546)
	10,000,000
Loss on loss of control of subsidiary	(10,000,000)
Total consideration	–

Net cash outflow arising on loss of control:
Cash and cash equivalents	5,012,500
	5,012,500

23. FINANCIAL GUARANTEE CONTRACTS

On 15 January 2013, each of Xi’an Hengye and Xi’an Green River, the subsidiaries of Longisland Beijing, signed agreements to provide corporate guarantees each to the extent of approximately RMB541,400,000 to the Financial Institution in connection with the loan facilities granted by the Financial Institution to fellow subsidiaries. Under the guarantees, Xi’an Hengye and Xi’an Green River would be liable to pay the Financial Institution if the Financial Institution is unable to recover the loans. As Longisland Beijing has lost its control over Xi’an Hengye and Xi’an Green River as disclosed in note 22, no provision for obligation under the guarantee contracts have been made as at 31 May 2013.

24. RELATED PARTY TRANSACTION

As mentioned in note 21, the Longisland Beijing Group acquired the entire interests in Xi’an Green River from a fellow subsidiary. The transaction is considered as related party transaction.

25. MAJOR NON-CASH TRANSACTION

On 13 January 2013, the Longisland Beijing Group acquired the entire interests in Xi’an Green River from a fellow subsidiary which was a non-cash transaction (note 21).

26. FINANCIAL RISK MANAGEMENT AND FAIR VALUE MEASUREMENTS

Exposure to credit, liquidity and interest rate risks arises in the normal course of the Longisland Beijing Group’s business.

Policy for managing these risks is set by the sole director. The policy for each of the above risks is described in more detail below.

(a) Credit risk

Credit risk refers to the risk that counterparties will default on their contractual obligations resulting in financial loss to the Longisland Beijing Group. The Longisland Beijing Group exposes to credit risk from loans and receivables. The Longisland Beijing Group has adopted a credit policy to monitor and mitigate credit risk arising from its debtors. Credit limit is regularly reviewed and approved by the sole director. The Longisland Beijing Group assesses credit risk based on debtors’ past due records, trading history, financial conditions or credit ratings. The Longisland Beijing Group is not exposed to concentration of credit risk.

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

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(b) Liquidity risk

The Longisland Beijing Group’s objective is to ensure there are adequate funds to meet commitments associated with its financial liabilities. Cash flows of the Longisland Beijing Group are closely monitored by the sole director on an ongoing basis.

The contractual maturities of financial liabilities are shown as below:

The Longisland Beijing Group

		Total
	Within 1 year	undiscounted	Carrying
	or on demand	amount	amount
	RMB	RMB	RMB
At 31 December 2010
Amount due to holding company	7,010,000	7,010,000	7,010,000
	7,010,000	7,010,000	7,010,000


		Total
	Within 1 year	undiscounted	Carrying
	or on demand	amount	amount
	RMB	RMB	RMB
At 31 December 2011
Other payables	4,451	4,451	4,451
Amount due to holding company	27,171,575	27,171,575	27,171,575
Amount due to a fellow subsidiary	2,450,000	2,450,000	2,450,000
	29,626,026	29,626,026	29,626,026


		Total
	Within 1 year	undiscounted	Carrying
	or on demand	amount	amount
	RMB	RMB	RMB
At 31 December 2012
Other payables	1,168,520	1,168,520	1,168,520
Amount due to holding company	27,201,575	27,201,575	27,201,575
Amount due to a fellow subsidiary	2,950,000	2,950,000	2,950,000
	31,320,095	31,320,095	31,320,095


		Total
	Within 1 year	undiscounted	Carrying
	or on demand	amount	amount
	RMB	RMB	RMB
At 31 May 2013
Other payables and borrowing	53,496,911	53,496,911	53,496,911
Amount due to holding company	7,092,000	7,092,000	7,092,000
Amount due to a fellow subsidiary	10,000,000	10,000,000	10,000,000
	70,588,911	70,588,911	70,588,911

– 91 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Longisland Beijing

		Total
	Within 1 year	undiscounted	Carrying
	or on demand	amount	amount
	RMB	RMB	RMB
At 31 December 2010
Amount due to holding company	7,010,000	7,010,000	7,010,000
	7,010,000	7,010,000	7,010,000


		Total
	Within 1 year	undiscounted	Carrying
	or on demand	amount	amount
	RMB	RMB	RMB
At 31 December 2011
Other payables	4,451	4,451	4,451
Amount due to holding company	7,062,000	7,062,000	7,062,000
	7,066,451	7,066,451	7,066,451


		Total
	Within 1 year	undiscounted	Carrying
	or on demand	amount	amount
	RMB	RMB	RMB
At 31 December 2012
Other payables	1,127,340	1,127,340	1,127,340
Amount due to holding company	7,092,000	7,092,000	7,092,000
	8,219,340	8,219,340	8,219,340


		Total
	Within 1 year	undiscounted	Carrying
	or on demand	amount	amount
	RMB	RMB	RMB
At 31 May 2013
Other payables and borrowing	53,496,911	53,496,911	53,496,911
Amount due to holding company	7,092,000	7,092,000	7,092,000
Amounts due to fellow subsidiaries	10,000,000	10,000,000	10,000,000

	70,588,911	70,588,911	70,588,911

(c) Interest rate risk

The Longisland Beijing Group is exposed to cash flow interest rate due to the fluctuation of the prevailing market interest rate on bank balances. The sole director of Longisland Beijing considers that the Longisland Beijing Group’s interest rate risk is minimal.

– 92 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(d) Fair values

The fair values of the Longisland Beijing Group’s financial assets and liabilities are not materially different from their carrying amounts because of the immediate or short term maturities.

27. SUMMARY OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES BY CATEGORY

The carrying amounts presented in the Longisland Beijing Group’s consolidated statements of financial position and in Longisland Beijing’s statements of financial position relate to the following categories of financial assets and financial liabilities:

The Longisland Beijing Group

		At 31 December	At 31 December		At 31 May
	2010		2011	2012	2013
	RMB		RMB	RMB	RMB
Financial assets
Loans and receivables	9,991,863		35,514	249,474	53,285,455


		At 31 December			At 31 May
	2010		2011	2012	2013
	RMB		RMB	RMB	RMB
Financial liabilities
Financial liabilities measured
at amortised cost	7,010,000		29,626,026	31,320,095	70,588,911


Longisland Beijing
		At 31 December			At 31 May
	2010		2011	2012	2013
	RMB		RMB	RMB	RMB
Financial assets
Loans and receivables	1,466		24,949	1,000,573	53,285,455


		At 31 December			At 31 May
	2010		2011	2012	2013
	RMB		RMB	RMB	RMB
Financial liabilities
Financial liabilities at
measured amortised cost	7,010,000		7,066,451	8,219,340	70,588,911

28. CAPITAL MANAGEMENT

The Longisland Beijing Group’s objectives of managing capital are to safeguard the Longisland Beijing Group’s ability to continue as a going concern in order to provide returns for owner and benefits for other stakeholders and to maintain an optimal capital structure to reduce cost of capital.

Saved as disclosed in note 3(b), in order to maintain or adjust the capital structure, the Longisland Beijing Group may adjust the amount of dividends paid to owner, return capital to owner, issue new shares or sell assets to reduce debts.

The capital structure of the Longisland Beijing Group consists of equity attributable to owner of Longisland Beijing, comprising capital and reserves. The amount of capital deficiencies was RMB17,303,456 as at 31 May 2013.

– 93 –

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APPENDIX II

III. EVENTS AFTER THE REPORTING DATE

No significant event has been noted for the Longisland Beijing Group nor Longisland Beijing in respect of any period subsequent to 31 May 2013.

IV. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared for the Longisland Beijing Group nor Longisland Beijing in respect of any period subsequent to 31 May 2013.

Yours faithfully,

BDO Limited

Certified Public Accountants

Alfred Lee

Practising Certificate Number P04960

Hong Kong

– 94 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(c) Accountant’s report on Xi’an Hengye

==> picture [76 x 61] intentionally omitted <==

==> picture [95 x 54] intentionally omitted <==

23 October 2013

The Directors Culture Landmark Investment Limited Rooms 2501-2505, 25th Floor, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong

Dear Sirs,

We set out below our report on the financial information of 西安長島恒業置業有限公司 (Xi’an Longisland Hengye Properties Limited*) (“Xi’an Hengye”) including the statements of financial position of Xi’an Hengye as at 31 December 2010, 2011 and 2012 and 31 May 2013, the statements of comprehensive income, the statements of changes in equity and the statements of cash flows of Xi’an Hengye for the period from 3 December 2010 (date of establishment) to 31 December 2010, for each of the years ended 31 December 2011 and 2012 and for the five months ended 31 May 2013 (the “Relevant Periods”) and notes thereto (hereinafter collectively referred to as the “Financial Information”), together with the unaudited financial information of Xi’an Hengye including the statement of comprehensive income, the statement of changes in equity and the statement of cash flows of Xi’an Hengye for the five months ended 31 May 2012 (the “31 May 2012 Corresponding Information”), prepared for inclusion in the circular issued by Culture Landmark Investment Limited (the “Company”) dated 23 October 2013 in connection with the proposed acquisition of the entire issued share capital of Longisland Tourism Investment & Development Limited (the “Target Company”) by the Company (the “Proposed Acquisition”).

Xi’an Hengye was established in the People’s Republic of China (the “PRC”) on 3 December 2010 with a registered capital of RMB10,000,000. Its registered office is located at Room 3B22, 3rd Floor, Zone B, Chanba Commercial Centre, No. 1 Chanba Road, Chanba Ecological District, Xi’an, Shaanxi, the PRC (陝西省西安滻灞生態區滻灞大道1號滻灞商務中心B段三層3B22號). Xi’an Hengye is principally engaged in real estate development during the Relevant Periods. Xi’an Hengye adopts 31 December as its financial year end date. The statutory financial statements of Xi’an Hengye prepared in accordance with the generally accepted accounting principles of the PRC for the period from 3 December 2010 (date of

* The unofficial English translation is for identification purpose only

– 95 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

establishment) to 31 December 2010 and for the years ended 31 December 2011 and 2012 have been audited by Shaanxi Xiqin Jinzhou Certified Public Accountants Co., Ltd. (陝西西秦金周會計師事務所有限責任公司). We have not acted as auditor of Xi’an Hengye for the Relevant Periods referred to in this report.

For the purpose of this report, the sole director of Xi’an Hengye has prepared the financial statements of Xi’an Hengye for the Relevant Periods (the “Underlying Financial Statements”) in accordance with the accounting policies set out in note 4 of Section II below which comply with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) based on the audited financial statements or, where appropriate, unaudited management accounts of Xi’an Hengye.

The Financial Information has been prepared by the sole director of Xi’an Hengye based on the Underlying Financial Statements. No adjustments on the Underlying Financial Statements for the Relevant Periods are considered necessary for the purpose of preparing the Financial Information.

The sole director of Xi’an Hengye is responsible for the contents of the circular including the preparation and the true and fair presentation of the Financial Information in accordance with the accounting policies set out in note 4 of Section II below which comply with HKFRSs, the applicable disclosure requirements of the Hong Kong Companies Ordinance and the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”), and for such internal control as the sole director of Xi’an Hengye determines is necessary to enable the preparation of the Financial Information that is free from material misstatement, whether due to fraud or error.

Our responsibility is to form an independent opinion on the Financial Information based on our procedures and to report our opinion thereon to you.

OPINION

In our opinion, the Financial Information, for the purpose of this report, gives a true and fair view of the state of affairs of Xi’an Hengye as at 31 December 2010, 2011 and 2012 and 31 May 2013 and of its losses and cash flows for each of the Relevant Periods in accordance with HKFRSs.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

CORRESPONDING FINANCIAL INFORMATION

For the purpose of this report, we have also performed a review of the 31 May 2012 Corresponding Information, which is prepared in accordance with the accounting policies set out in note 4 of Section II below which comply with HKFRSs, 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 sole director of Xi’an Hengye is responsible for the preparation and presentation of the 31 May 2012 Corresponding Information in accordance with the accounting policies set out in note 4 of Section II below which comply with HKFRSs, the applicable disclosure requirements of the Hong Kong Companies Ordinance and the Listing Rules. Our responsibility is to express a conclusion on the 31 May 2012 Corresponding Information based on our review. A review principally consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures to the 31 May 2012 Corresponding Information. 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 31 May 2012 Corresponding Information.

REVIEW CONCLUSION

– 97 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

I. FINANCIAL INFORMATION

Statements of Comprehensive Income

		Period from
		3 December
		2010 (date of
		establishment) to	Year ended		Five months ended
		31 December	31 December		31 May
	Note	2010	2011	2012	2012	2013
		RMB	RMB	RMB	RMB	RMB
					(Unaudited)
Other income	7	2,400	3,047	182	99	1,389
Administrative expenses		(12,003)	(241,868)	(303,026)	(5,100)	(1,360,936)
Loss before income tax
expense	8	(9,603)	(238,821)	(302,844)	(5,001)	(1,359,547)
Income tax expense	9	–	–	–	–		–
Loss for the period/year
attributable to owner
of Xi’an Hengye		(9,603)	(238,821)	(302,844)	(5,001)	(1,359,547)
Other comprehensive
income for the
period/year
attributable to owner
of Xi’an Hengye		–	–	–	–		–
Total comprehensive
income for the
period/year
attributable to owner
of Xi’an Hengye		(9,603)	(238,821)	(302,844)	(5,001)	(1,359,547)

– 98 –

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APPENDIX II

Statements of Financial Position

			At 31 December		At 31 May
	Note	2010	2011	2012	2013
		RMB	RMB	RMB	RMB
ASSETS AND LIABILITIES
Current assets
Properties under development	10	–	–	–	255,245,192
Deposits for properties under
development, prepayments
and other receivables	11	–	32,300,586	33,510,279	11,019,409
Cash and cash equivalents	12	9,990,397	10,565	39,208	34,112
		9,990,397	32,311,151	33,549,487	266,298,713

Current liabilities
Other payables	13	–	–	41,180	255,121,528
Amount due to immediate
holding company	14	–	–	1,000,000	–
Amount due to intermediate
holding company	14	–	20,109,575	20,109,575	–
Amounts due to fellow
subsidiaries	14	–	2,450,000	2,950,000	3,088,000

		–	22,559,575	24,100,755	258,209,528

Net current assets		9,990,397	9,751,576	9,448,732	8,089,185

Total assets less current
liabilities/net assets		9,990,397	9,751,576	9,448,732	8,089,185


EQUITY
Paid-up capital	15	10,000,000	10,000,000	10,000,000	10,000,000
Reserves		(9,603)	(248,424)	(551,268)	(1,910,815)
Total equity		9,990,397	9,751,576	9,448,732	8,089,185

– 99 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Statements of Changes in Equity

	Paid-up	Accumulated
	capital	losses	Total
	RMB	RMB	RMB
Capital injection upon establishment	10,000,000	–	10,000,000
Loss and total comprehensive income
for the period	–	(9,603)	(9,603)
At 31 December 2010 and
1 January 2011	10,000,000	(9,603)	9,990,397
Loss and total comprehensive income
for the year	–	(238,821)	(238,821)
At 31 December 2011 and
1 January 2012	10,000,000	(248,424)	9,751,576
Loss and total comprehensive income
for the year	–	(302,844)	(302,844)
At 31 December 2012 and
1 January 2013	10,000,000	(551,268)	9,448,732
Loss and total comprehensive income
for the period	–	(1,359,547)	(1,359,547)
At 31 May 2013	10,000,000	(1,910,815)	8,089,185


For the five months ended
31 May 2012
At 1 January 2012	10,000,000	(248,424)	9,751,576
Loss and total comprehensive income
for the period	–	(5,001)	(5,001)
At 31 May 2012 (Unaudited)	10,000,000	(253,425)	9,746,575

– 100 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Statements of Cash Flows

	Period from
	3 December 2010
	(date of
	establishment) to	Year	ended		Five months ended
	31 December	31 December			31	May
	2010	2011		2012	2012		2013
	RMB	RMB		RMB	RMB		RMB
					(Unaudited)
Cash flows from operating
activities
Loss before income tax expense	(9,603)	(238,821)		(302,844)	(5,001)		(1,359,547)
Adjustments for:
Bank interest income	(2,400)	(3,047)		(182)	(99)		(1,389)
Write-off of prepayment	–	–		–	–		1,000,000
Operating loss before working
capital changes	(12,003)	(241,868)		(303,026)	(5,100)		(360,936)
Increase in deposits for
properties under development,
prepayments and other
receivables	–	(32,300,586)		(1,209,693)	–		(23,754,322)
Increase/(decrease) in other
payables	–	–		41,180	–		(41,180)
Cash used in operations	(12,003)	(32,542,454)		(1,471,539)	(5,100)		(24,156,438)
Interest received	2,400	3,047		182	99		1,389

Net cash used in operating
activities	(9,603)	(32,539,407)		(1,471,357)	(5,001)		(24,155,049)

Cash flows from financing
activities
Proceeds from capital injection
upon establishment	10,000,000	–		–	–		–
Increase in amount due to
immediate holding company	–	–		1,000,000	–		–
Increase/(decrease) in amount
due to intermediate holding
company	–	20,109,575		–	–		(6,532,554)
Increase in amounts due to
fellow subsidiaries	–	2,450,000		500,000	–		30,682,507

Net cash generated from
financing activities	10,000,000	22,559,575		1,500,000	–		24,149,953
Net increase/(decrease) in cash
and cash equivalents	9,990,397	(9,979,832)		28,643	(5,001)		(5,096)
Cash and cash equivalents at
beginning of the period/year	–	9,990,397		10,565	10,565		39,208
Cash and cash equivalents at
end of the period/year,
representing cash and bank
balances	9,990,397	10,565		39,208	5,564		34,112

– 101 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

II. NOTES TO THE FINANCIAL INFORMATION AND THE 31 MAY 2012 CORRESPONDING INFORMATION

1. CORPORATE INFORMATION

Xi’an Hengye was established in the PRC on 3 December 2010. Its registered office and its principal place of business are located at Room 3B22, 3rd Floor, Zone B, Chanba Commercial Centre, No. 1 Chanba Road, Chanba Ecological District, Xi’an, Shaanxi, the PRC (陝西省西安滻灞生態區滻灞大道1號滻灞商務中心B段三層3B22號). Xi’an Hengye is principally engaged in real estate development.

The sole director considers that Xi’an Hengye’s immediate and ultimate holding company were 北京長島恒業企業管理有限公司 (Beijing Longisland Hengye Enterprise Management Limited*) (“Longisland Beijing”), a limited liability company established in the PRC, and Longisland Investment Group Ltd., a limited liability company incorporated in the British Virgin Islands, respectively during the Relevant Periods. On 18 March 2013, a financial institution (the “Financial Institution”), a limited company incorporated in the PRC, obtained 100% equity interests in Xi’an Hengye and became Xi’an Hengye’s immediate and ultimate holding company.

2. ADOPTION OF NEW OR AMENDED HKFRSs

All HKFRSs effective for the accounting period commencing from 1 January 2013, together with the relevant transitional provisions, have been adopted by Xi’an Hengye in the preparation of the Financial Information and the 31 May 2012 Corresponding Information.

At the date of this report, certain new and amended HKFRSs have been published but are not yet effective, and have not been early adopted by Xi’an Hengye.

Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities[1] HKFRS 9 Financial Instruments[2] HK (IFRIC) – Int 2 Levies[1]

1 Effective for annual periods beginning on or after 1 January 2014

2 Effective for annual periods beginning on or after 1 January 2015

Xi’an Hengye is in the process of making an assessment of the potential impact of these pronouncements. The sole director of Xi’an Hengye so far concluded that the application of these pronouncements will have no material impact on Xi’an Hengye’s results of operation and financial position.

3. BASIS OF PREPARATION

(a) Statement of compliance

(b) Basis of measurement

The Financial Information and the 31 May 2012 Corresponding Information have been prepared under the historical cost basis.

(c) Functional and presentation currency

The Financial Information and the 31 May 2012 Corresponding Information are presented in Renminbi (“RMB”), which is the same as the functional currency of Xi’an Hengye.

The unofficial English translation is for identification purpose only.

– 102 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

4. SIGNIFICANT ACCOUNTING POLICIES

(a) Properties under development

Properties under development are initially recognised at cost, and subsequently at the lower of cost and net realisable value. The cost of properties comprises land costs, development expenditure, professional fees and borrowing costs capitalised. Land costs include prepaid lease payments representing up-front payments to acquire long-term interests in lessee-occupied properties. Net realisable value represents the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

(b) Deposits for properties under development

(c) Financial instruments

(i) Financial assets

Xi’an Hengye classifies its financial assets at initial recognition, depending on the purpose for which the asset was acquired. Financial assets at fair value through profit or loss are initially measured at fair value and all other financial assets are initially measured at fair value plus transaction costs that are directly attributable to the acquisition of the financial assets. Regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned.

Loans and receivables

(ii) Impairment loss on financial assets

Xi’an Hengye assesses, at the end of each of the Relevant Periods, whether there is any objective evidence that financial asset is impaired. Financial asset is impaired if there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that event has an impact on the estimated future cash flows of the financial asset that can be reliably estimated. Evidence of impairment may include:

(i) significant financial difficulty of the debtor;
(ii) a breach of contract, such as a default or delinquency in interest or principal payments;
(iii) granting concession to a debtor because of debtor’s financial difficulty; and
(iv) it becoming probable that the debtor will enter bankruptcy or other financial reorganisation.

For loans and receivables

– 103 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(iii) Financial liabilities

Financial liabilities, including other payables and amounts due to immediate holding company, intermediate holding company and fellow subsidiaries, are initially recognised at fair value, net of directly attributable transaction costs incurred, and are subsequently measured at amortised cost, using the effective interest method. The related interest expense is recognised within “finance costs” in the statements of comprehensive income.

(iv) Effective interest method

(v) Equity instruments

Equity instruments issued by Xi’an Hengye are recorded at the proceeds received, net of direct issue costs.

(vi) Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. A financial guarantee contract issued by Xi’an Hengye and not designated as at fair value through profit or loss is recognised initially at its fair value less transaction costs that are directly attributable to the issue of the financial guarantee contract. Subsequent to initial recognition, Xi’an Hengye measures the financial guarantee contact at the higher of: (i) the amount determined in accordance with HKAS 37 Provisions, Contingent Liabilities and Contingent Assets ; and (ii) the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with HKAS 18 Revenue .

(vii) Derecognition

Xi’an Hengye derecognises a financial asset when the contractual rights to the future cash flows in relation to the financial asset expire or when the financial asset has been transferred and the transfer meets the criteria for derecognition in accordance with HKAS 39.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires.

(d) Revenue recognition

Interest income is accrued on a time basis on the principal outstanding at the applicable interest rate.

(e) Income taxes

Income taxes for the period/year comprise current tax and deferred tax.

– 104 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is measured at the tax rates appropriate to the expected manner in which the carrying amount of the asset or liability is realised or settled and that have been enacted or substantively enacted at the end of each of the Relevant Periods.

Income taxes are recognised in profit or loss except when they relate to items recognised in other comprehensive income in which case the taxes are also recognised in other comprehensive income.

(f) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when Xi’an Hengye has a legal or constructive obligation arising as a result of a past event, which will probably result in an outflow of economic benefits that can be reasonably estimated.

(g) Related parties

(i) A person or a close member of that person’s family is related to Xi’an Hengye if that person:
(a) has control or joint control over Xi’an Hengye;
(b) has significant influence over Xi’an Hengye; or
(c) is a member of key management personnel of Xi’an Hengye or Xi’an Hengye’s parent.
(ii) An entity is related to Xi’an Hengye if any of the following conditions apply:
(a) the entity and Xi’an Hengye are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others);
(b) 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);
(c) both entities are joint ventures of the same third party;
(d) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(e) the entity is a post-employment benefit plan for the benefit of the employees of Xi’an Hengye or an entity related to Xi’an Hengye;
(f) the entity is controlled or jointly controlled by a person identified in (i); or
(g) a person identified in (i)(a) has significant influence over the entity or is a member of 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 and include:

(i) that person’s children and spouse or domestic partner;
(ii) children of that person’s spouse or domestic partner; and
(iii) dependents of that person or that person’s spouse or domestic partner.

– 105 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATED UNCERTAINTY

Impairment loss on loans and receivables

The policy for impairment of loans and receivables of Xi’an Hengye is based on the evaluation of collectability and ageing analysis of the loans and receivables and on management’s judgment. A considerable amount of judgment is required in assessing the ultimate realisation of these loans and receivables, including the current creditworthiness of each debtor. If the financial conditions of debtors of Xi’an Hengye were to deteriorate, resulting in an impairment of their ability to make payments, additional impairment may be required.

Provision for properties under development

Xi’an Hengye assesses the recoverable amounts of properties under development according to their forecast net realisable value, taking into account costs to completion based on budget and past experience and net sales value based on prevailing and expected market conditions. Provision is made when events or changes in circumstances indicate that the carrying amounts may not be realised. The assessment requires the use of estimation.

Impairment loss on deposits for properties under development

The carrying amounts of deposits for properties under development are reviewed periodically in order to assess whether the recoverable amounts have declined below the carrying amounts. These assets are tested for impairment whenever events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such a decline has occurred, the carrying amount is reduced to recoverable amount. Xi’an Hengye uses all readily available information in determining an amount that is a reasonable approximation of recoverable amount, including estimates based on reasonable and supportable assumption.

6. SEGMENT INFORMATION

On adoption of HKFRS 8, Xi’an Hengye has identified its operating segments and prepared segment information based on the regular internal financial information reported to Xi’an Hengye’s sole director for his decisions about resources allocation to Xi’an Hengye’s business components and review of these components’ performance. There is only one single business component/reportable segment in the internal reporting to the sole director, which is real estate development business. Xi’an Hengye’s assets and capital expenditure are principally attributable to this business component.

No separate analysis of segment information by geographical segment is presented as Xi’an Hengye’s revenue, assets and capital expenditure are principally attributable to a single geographical region, which is the PRC.

7. OTHER INCOME

				Period from
				3 December
				2010
				(date of
			establishment)
				to 31
				December	Year ended	31 December		Five months	ended 31 May
				2010	2011		2012	2012		2013
				RMB	RMB		RMB	RMB		RMB
								(Unaudited)
Bank	interest	income		2,400	3,047		182	99		1,389

– 106 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

8. LOSS BEFORE INCOME TAX EXPENSE

		Period from
		3 December
		2010
		(date of
	establishment)
		to 31
		December	Year ended	31 December		Five months	ended 31 May
		2010	2011		2012	2012		2013
		RMB	RMB		RMB	RMB		RMB
						(Unaudited)
Loss before income tax
expense is arrived at
after charging:
Auditor’s remuneration		–	8,000		5,000	5,000		–
Written-off of prepayment		–	–		–	–		1,000,000

Written-off of prepayment represented the written off of prepayment relating to the design fee of a theme park. As the theme park project had been suspended, the prepayment was written off during the period.

No compensation or any kind of benefit was paid to Xi’an Hengye’s sole director in respect of his services during the Relevant Periods. During the Relevant Periods, no remuneration was paid by Xi’an Hengye to the sole director as an inducement to join or upon joining Xi’an Hengye or as compensation for loss of office. None of the persons, who were directors, waived or agreed to waive any emoluments during the Relevant Periods. Xi’an Hengye did not employ any staff during the Relevant Periods.

9. INCOME TAX EXPENSE

No provision for profits tax has been provided as Xi’an Hengye did not have any estimated assessable profit for each of the Relevant Periods.

At the end of each of the Relevant Periods, there were no material unrecognised deferred tax assets or liabilities arising from any taxable temporary difference.

10. PROPERTIES UNDER DEVELOPMENT

					December		At	31 May
				2010	2011	2012		2013
				RMB	RMB	RMB		RMB
Additions	of	land	cost	–	–	–	255,245,192

At 31 May 2013, the balance represented the land use rights with aggregated carrying amount of RMB255,245,192 which was acquired by Xi’an Hengye from 西安世園投資(集團)有限公司 on 13 January 2013. The land is restricted for residential use with a 67-year lease term.

11. DEPOSITS FOR PROPERTIES UNDER DEVELOPMENT, PREPAYMENTS AND OTHER RECEIVABLES

		At 31 December		At 31 May
	2010	2011	2012	2013
	RMB	RMB	RMB	RMB
Deposits for properties under
development	–	32,057,073	32,057,073	–
Prepayments	–	243,513	1,243,513	10,994,909
Other receivables	–	–	209,693	24,500

	–	32,300,586	33,510,279	11,019,409

– 107 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

All other receivables of Xi’an Hengye at the end of each of the Relevant Periods are non-interest bearing advances.

The sole director of Xi’an Hengye considers that the fair values of other receivables are not materially different from their carrying amounts because these amounts have short maturity periods on their inception.

12. CASH AND CASH EQUIVALENTS

RMB is not freely convertible into foreign currencies. Under the PRC’s Foreign Exchange Control Regulations and Administration of Settlement and Sales and Payment of Foreign Exchange Regulations, Xi’an Hengye is permitted to exchange RMB for foreign currencies through the banks that are authorised to conduct foreign exchange business.

13. OTHER PAYABLES

Other payables at 31 May 2013 mainly represented the accrued cost of land acquisition amounted to RMB210,000,000 and the advances from Longisland Beijing of RMB27,524,507. The balances were unsecured, non-interest bearing and repayable on demand.

14. AMOUNTS DUE TO IMMEDIATE HOLDING COMPANY/INTERMEDIATE HOLDING COMPANY/FELLOW SUBSIDIARIES

The amounts due were unsecured, interest-free and repayable on demand.

15. PAID-UP CAPITAL

		At 31 December	At 31 December		At	31 May
	2010		2011	2012		2013
	RMB		RMB	RMB		RMB
At beginning of the period/year	–		10,000,000	10,000,000	10,000,000
Capital injection upon establishment	10,000,000		–	–		–
At end of the period/year	10,000,000		10,000,000	10,000,000	10,000,000


COMMITMENTS
		At 31 December			At	31 May
	2010		2011	2012		2013
	RMB		RMB	RMB		RMB
Commitments for properties under
development
– contracted for but not provided	–		–	9,000,000	7,952,000

16. COMMITMENTS

17. FINANCIAL GUARANTEE CONTRACTS

On 15 January 2013, Xi’an Hengye signed agreements to provide corporate guarantee to the extent of approximately RMB541,400,000 to the Financial Institution in connection with the loan facilities granted by the Financial Institution to fellow subsidiaries. Under the guarantee, Xi’an Hengye would be liable to pay the Financial Institution if the Financial Institution is unable to recover the loans. As 31 May 2013, no provision for Xi’an Hengye’s obligation under the guarantee contracts has been made as the sole director considered that it was not probable that the repayment of the loans would be in default.

18. RELATED PARTY TRANSACTION

On 18 March 2013, the Financial Institution became the holding company of Xi’an Hengye. The financial guarantee provided by Xi’an Hengye as disclosed in note 17 is considered as related party transaction.

– 108 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

19. FINANCIAL RISK MANAGEMENT AND FAIR VALUE MEASUREMENTS

Exposure to credit, liquidity and interest rate risks arises in the normal course of Xi’an Hengye’s business.

Policy for managing these risks is set by the sole director. The policy for each of the above risks is described in more detail below.

(a) Credit risk

Credit risk refers to the risk that counterparties will default on their contractual obligations resulting in financial loss to Xi’an Hengye. Xi’an Hengye exposes to credit risk from loans and receivables. Xi’an Hengye has adopted a credit policy to monitor and mitigate credit risk arising from its debtors. Credit limit is regularly reviewed and approved by the sole director. Xi’an Hengye assesses credit risk based on debtors’ past due records, trading history, financial conditions or credit ratings. Xi’an Hengye is not exposed to concentration of credit risk.

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

(b) Liquidity risk

Xi’an Hengye’s objective is to ensure there are adequate funds to meet commitments associated with its financial liabilities. Cash flows of Xi’an Hengye are closely monitored by the sole director on an ongoing basis.

The contractual maturities of financial liabilities are shown as below:

		Total
	Within 1 year	undiscounted	Carrying
	or on demand	amount	amount
	RMB	RMB	RMB
At 31 December 2011
Amount due to intermediate holding
company	20,109,575	20,109,575	20,109,575
Amounts due to fellow subsidiaries	2,450,000	2,450,000	2,450,000

	22,559,575	22,559,575	22,559,575


		Total
	Within 1 year	undiscounted	Carrying
	or on demand	amount	amount
	RMB	RMB	RMB
At 31 December 2012
Other payables	41,180	41,180	41,180
Amount due to immediate holding
company	1,000,000	1,000,000	1,000,000
Amount due to intermediate holding
company	20,109,575	20,109,575	20,109,575
Amounts due to fellow subsidiaries	2,950,000	2,950,000	2,950,000

	24,100,755	24,100,755	24,100,755

– 109 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

		Total
	Within 1 year	undiscounted	Carrying
	or on demand	amount	amount
	RMB	RMB	RMB
At 31 May 2013
Other payables	255,121,528	255,121,528	255,121,528
Amounts due to fellow subsidiaries	3,088,000	3,088,000	3,088,000

	258,209,528	258,209,528	258,209,528

As mentioned in note 17, Xi’an Hengye has entered into financial guarantee contracts in which it has guaranteed the Financial Institution the repayment of loans granted to the former fellow subsidiaries. Xi’an Hengye has the obligation to compensate the Financial Institution for the loss it would suffer if the former subsidiaries fail to repay. Xi’an Hengye’s maximum exposure under the financial guarantee contracts was approximately RMB541,400,000 as at 31 May 2013.

(c) Interest rate risk

Xi’an Hengye is exposed to cash flow interest rate risk due to the fluctuation of the prevailing market interest rate on bank balances. The sole director of Xi’an Hengye considers that Xi’an Hengye’s interest rate risk is minimal.

(d) Fair values

The fair values of Xi’an Hengye’s financial assets and liabilities are not materially different from their carrying amounts because of the immediate or short term maturities.

20. SUMMARY OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES BY CATEGORY

The carrying amounts presented in Xi’an Hengye’s statements of financial position relate to the following categories of financial assets and financial liabilities:

		At 31 December	At 31 December		At 31 May
	2010		2011	2012	2013
	RMB		RMB	RMB	RMB
Financial assets
Loans and receivables	9,990,397		10,565	248,901	58,612


		At 31 December			At 31 May
	2010		2011	2012	2013
	RMB		RMB	RMB	RMB
Financial liabilities
Financial liabilities measured at
amortised cost	–		22,559,575	24,100,755	258,209,528

21. CAPITAL MANAGEMENT

Xi’an Hengye’s objectives of managing capital are to safeguard Xi’an Hengye’s ability to continue as a going concern in order to provide returns for owner and benefits for other stakeholders and to maintain an optimal capital structure to reduce cost of capital.

In order to maintain or adjust the capital structure, Xi’an Hengye may adjust the amount of dividends paid to owner, return capital to owner, issue new shares or sell assets to reduce debts.

The capital structure of Xi’an Hengye consists of equity attributable to owner of Xi’an Hengye, comprising capital and reserves.

– 110 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

III. EVENTS AFTER THE REPORTING DATE

No significant event has been noted for Xi’an Hengye in respect of any period subsequent to 31 May 2013.

IV. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared for Xi’an Hengye in respect of any period subsequent to 31 May 2013.

Yours faithfully,

BDO Limited

Certified Public Accountants

Alfred Lee

Practising Certificate Number P04960

Hong Kong

– 111 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(d) Accountant’s report on Xi’an Green River

==> picture [76 x 61] intentionally omitted <==

==> picture [95 x 54] intentionally omitted <==

23 October 2013

The Directors Culture Landmark Investment Limited Rooms 2501-2505, 25th Floor, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong

Dear Sirs,

We set out below our report on the financial information of 西安長島綠河置業有限公司 (Xi’an Longisland Green River Properties Limited*) (“Xi’an Green River”) including the statements of financial position of Xi’an Green River as at 31 December 2010, 2011 and 2012 and 31 May 2013, the statements of comprehensive income, the statements of changes in equity and the statements of cash flows of Xi’an Green River for the period from 14 April 2010 (date of establishment) to 31 December 2010, for each of the years ended 31 December 2011 and 2012 and for the five months ended 31 May 2013 (the “Relevant Periods”) and notes thereto (hereinafter collectively referred to as the “Financial Information”), together with the unaudited financial information of Xi’an Green River including the statement of comprehensive income, the statement of changes in equity and the statement of cash flows of Xi’an Green River for the five months ended 31 May 2012 (the “31 May 2012 Corresponding Information”), prepared for inclusion in the circular issued by Culture Landmark Investment Limited (the “Company”) dated 23 October 2013 in connection with the proposed acquisition of the entire issued share capital of Longisland Tourism Investment & Development Limited (the “Target Company”) by the Company (the “Proposed Acquisition”).

Xi’an Green River was established in the People’s Republic of China (the “PRC”) on 14 April 2010 with a registered capital of RMB10,000,000. Its registered office is located at Room 3B22, 3rd Floor, Zone B, Chanba Commercial Centre, No. 1 Chanba Road, Chanba Ecological District, Xi’an, Shaanxi, the PRC (陝西省西安滻灞生態區滻灞大道1號滻灞商務中心B段三層 3B22號). Xi’an Green River is principally engaged in real estate development during the Relevant Periods. Xi’an Green River adopts 31 December as its financial year end date. The statutory financial statements of Xi’an Green River prepared in accordance with the generally accepted accounting principles of the PRC for the period from 14 April 2010 (date of

* The unofficial English translation is for identification purpose only

– 112 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

establishment) to 31 December 2010 and for the years ended 31 December 2011 and 2012 have been audited by Shaanxi Xiqin Jinzhou Certified Public Accountants Co., Ltd. (陝西西秦金周會計師事務所有限責任公司). We have not acted as auditor of Xi’an Green River for the Relevant Periods referred to in this report.

For the purpose of this report, the sole director of Xi’an Green River has prepared the financial statements of Xi’an Green River for the Relevant Periods (the “Underlying Financial Statements”) in accordance with the accounting policies set out in note 4 of Section II below which comply with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) based on the audited financial statements or, where appropriate, unaudited management accounts of Xi’an Green River.

The Financial Information has been prepared by the sole director of Xi’an Green River based on the Underlying Financial Statements. No adjustments on the Underlying Financial Statements for the Relevant Periods are considered necessary for the purpose of preparing the Financial Information.

The sole director of Xi’an Green River is responsible for the contents of the circular including the preparation and the true and fair presentation of the Financial Information in accordance with the accounting policies set out in note 4 of Section II below which comply with HKFRSs, the applicable disclosure requirements of the Hong Kong Companies Ordinance and the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”), and for such internal control as the sole director of Xi’an Green River determines is necessary to enable the preparation of the Financial Information that is free from material misstatement, whether due to fraud or error.

Our responsibility is to form an independent opinion on the Financial Information based on our procedures and to report our opinion thereon to you.

OPINION

In our opinion, the Financial Information, for the purpose of this report, gives a true and fair view of the state of affairs of Xi’an Green River as at 31 December 2010, 2011 and 2012 and 31 May 2013 and of its losses and cash flows for each of the Relevant Periods in accordance with HKFRSs.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

CORRESPONDING FINANCIAL INFORMATION

For the purpose of this report, we have also performed a review of the 31 May 2012 Corresponding Information, which is prepared in accordance with the accounting policies set out in note 4 of Section II below which comply with HKFRSs, 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 sole director of Xi’an Green River is responsible for the preparation and presentation of the 31 May 2012 Corresponding Information in accordance with the accounting policies set out in note 4 of Section II below which comply with HKFRSs, the applicable disclosure requirements of the Hong Kong Companies Ordinance and the Listing Rules. Our responsibility is to express a conclusion on the 31 May 2012 Corresponding Information based on our review. A review principally consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures to the 31 May 2012 Corresponding Information. 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 31 May 2012 Corresponding Information.

REVIEW CONCLUSION

– 114 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

I. FINANCIAL INFORMATION

Statements of Comprehensive Income

		Period from
		14 April 2010
		(date of
		establishment) to	Year ended			Five months ended
		31 December	31 December			31	May
	Note	2010	2011	2012		2012		2013
		RMB	RMB	RMB		RMB		RMB
					(Unaudited)
Other income	7	2,145	1,443	81		74		1,170
Administrative expenses		(18,365)	(3,897)	(7,560)		(5,000)		(3,849)
Loss before income tax
expense	8	(16,220)	(2,454)	(7,479)		(4,926)		(2,679)
Income tax expense	9	–	–	–		–			–
Loss for the period/year
attributable to owner of
Xi’an Green River		(16,220)	(2,454)	(7,479)		(4,926)		(2,679)
Other comprehensive
income for the
period/year attributable
to owner of Xi’an
Green River		–	–	–		–			–

Total comprehensive
income for the
period/year attributable
to owner of Xi’an
Green River		(16,220)	(2,454)	(7,479)		(4,926)		(2,679)

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Statements of Financial Position

			At 31 December	At 31 December	At 31 May
	Note	2010	2011	2012	2013
		RMB	RMB	RMB	RMB
ASSETS AND LIABILITIES
Current assets
Deposits for properties under
development and
prepayments	10	–	32,949,199	32,949,199	163,967,596
Amounts due from fellow
subsidiaries	11	9,980,000	–	–	3,088,000
Cash and cash equivalents	12	3,780	80,212	4,733	12,567,522
		9,983,780	33,029,411	32,953,932	179,623,118

Current liabilities
Other payables	13	–	–	–	169,651,950
Amount due to immediate
holding company	14	–	23,048,085	22,980,085	–
		–	23,048,085	22,980,085	169,651,950

Net current assets		9,983,780	9,981,326	9,973,847	9,971,168

Total assets less current
liabilities/net assets		9,983,780	9,981,326	9,973,847	9,971,168


EQUITY
Paid-up capital	15	10,000,000	10,000,000	10,000,000	10,000,000
Reserves		(16,220)	(18,674)	(26,153)	(28,832)
Total equity		9,983,780	9,981,326	9,973,847	9,971,168

– 116 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Statements of Changes in Equity

	Paid-up	Accumulated
	capital	losses	Total
	RMB	RMB	RMB
Capital injection upon establishment	10,000,000	–	10,000,000
Loss and total comprehensive income
for the period	–	(16,220)	(16,220)
At 31 December 2010 and
1 January 2011	10,000,000	(16,220)	9,983,780
Loss and total comprehensive income
for the year	–	(2,454)	(2,454)
At 31 December 2011 and
1 January 2012	10,000,000	(18,674)	9,981,326
Loss and total comprehensive income
for the year	–	(7,479)	(7,479)
At 31 December 2012 and
1 January 2013	10,000,000	(26,153)	9,973,847
Loss and total comprehensive income
for the period	–	(2,679)	(2,679)
At 31 May 2013	10,000,000	(28,832)	9,971,168


For the five months ended
31 May 2012
At 1 January 2012	10,000,000	(18,674)	9,981,326
Loss and total comprehensive income
for the period	–	(4,926)	(4,926)
At 31 May 2012 (Unaudited)	10,000,000	(23,600)	9,976,400

– 117 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Statements of Cash Flows

	Period from
	14 April 2010
	(date of
	establishment) to	Year ended		Five months ended
	31 December	31 December		31 May
	2010	2011	2012	2012		2013
	RMB	RMB	RMB	RMB		RMB
				(Unaudited)
Cash flows from operating
activities
Loss before income tax
expense Adjustment for: Bank interest income	(16,220) (2,145)	(2,454) (1,443)	(7,479) (81)	(4,926) (74)		(2,679) (1,170)
Operating loss before working
capital changes Increase in deposits for	(18,365)	(3,897)	(7,560)	(5,000)		(3,849)
properties under
development and
prepayments	–	(32,949,199)	–	–	(131,018,397)
Cash used in operations Interest received	(18,365) 2,145	(32,953,096) 1,443	(7,560) 81	(5,000) 74	(131,022,246) 1,170

Net cash used in operating
activities	(16,220)	(32,951,653)	(7,479)	(4,926)	(131,021,076)
Cash flows from investing
activities
(Increase)/decrease in amounts
due from fellow subsidiaries Net cash (used in)/generated	(9,980,000)	9,980,000	–	–		(3,088,000)
from investing activities	(9,980,000)	9,980,000	–	–		(3,088,000)
Cash flows from financing
activities
Proceeds from capital injection
upon establishment Increase in other payables Increase/(decrease) in amount	10,000,000 –	– –	– –	– –		– 121,911,461
due to immediate holding
company Increase in amount due to	–	23,048,085	(68,000)	(75,000)		–
fellow subsidiaries	–	–	–	–		24,760,404

Net cash generated from/
(used in) financing activities	10,000,000	23,048,085	(68,000)	(75,000)		146,671,865
Net increase/(decrease) in
cash and cash equivalents	3,780	76,432	(75,479)	(79,926)		12,562,789
Cash and cash equivalents at
beginning of the
period/year	–	3,780	80,212	80,212		4,733
Cash and cash equivalents at
end of the period/year,
representing cash and bank
balances	3,780	80,212	4,733	286		12,567,522

– 118 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

II. NOTES TO THE FINANCIAL INFORMATION AND THE 31 MAY 2012 CORRESPONDING INFORMATION

1. CORPORATE INFORMATION

Xi’an Green River was established in the PRC on 14 April 2010. Its registered office and its principal place of business are located at Room 3B22, 3rd Floor, Zone B, Chanba Commercial Centre, No. 1 Chanba Road, Chanba Ecological District, Xi’an, Shaanxi, the PRC (陝西省西安滻灞生態區滻灞大道1號滻灞商務中心B段三層3B22號). Xi’an Green River is principally engaged in real estate development.

The sole director considers that Xi’an Green River’s immediate and ultimate holding company were 長島(西安)置業有限公司 (Longisland (Xi’an) Properties Limited*), a limited liability company established in the PRC, and Longisland Investment Group Ltd., a limited liability company incorporated in the British Virgin Islands, respectively during the Relevant Periods.

On 14 January 2013, Xi’an Green River’s immediate holding company became 北京長島恒業企業管理有限公司 (Beijing Longisland Hengye Enterprise Management Limited*) (“Longisland Beijing”), a limited liability company established in the PRC. The sole director of Xi’an Green River considers the ultimate holding company of Xi’an Green River was Longisland Investment Group Ltd.

On 4 March 2013, a financial institution (the “Financial Institution”), a limited company established in the PRC, obtained 100% equity interests in Xi’an Green River and became Xi’an Green River’s immediate and ultimate holding company.

2. ADOPTION OF NEW OR AMENDED HKFRSs

All HKFRSs effective for the accounting period commencing from 1 January 2013, together with the relevant transitional provisions, have been adopted by Xi’an Green River in the preparation of the Financial Information and the 31 May 2012 Corresponding Information.

At the date of this report, certain new and amended HKFRSs have been published but are not yet effective, and have not been early adopted by Xi’an Green River.

Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities[1] HKFRS 9 Financial Instruments[2] HK (IFRIC) – Int 2 Levies[1]

1 Effective for annual periods beginning on or after 1 January 2014

2 Effective for annual periods beginning on or after 1 January 2015

Xi’an Green River is in the process of making an assessment of the potential impact of these pronouncements. The sole director of Xi’an Green River so far concluded that the application of these pronouncements will have no material impact on Xi’an Green River’s results of operation and financial position.

3. BASIS OF PREPARATION

(a) Statement of compliance

(b) Basis of measurement

The Financial Information and the 31 May 2012 Corresponding Information have been prepared under the historical cost basis.

(c) Functional and presentation currency

The Financial Information and the 31 May 2012 Corresponding Information are presented in Renminbi (“RMB”), which is the same as the functional currency of Xi’an Green River.

– 119 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

4. SIGNIFICANT ACCOUNTING POLICIES

(a) Deposits for properties under development

(b) Financial instruments

(i) Financial assets

Xi’an Green River classifies its financial assets at initial recognition, depending on the purpose for which the asset was acquired. Financial assets at fair value through profit or loss are initially measured at fair value and all other financial assets are initially measured at fair value plus transaction costs that are directly attributable to the acquisition of the financial assets. Regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned.

Loans and receivables

(ii) Impairment loss on financial assets

Xi’an Green River assesses, at the end of each of the Relevant Periods, whether there is any objective evidence that financial asset is impaired. Financial asset is impaired if there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that event has an impact on the estimated future cash flows of the financial asset that can be reliably estimated. Evidence of impairment may include:

(i) significant financial difficulty of the debtor;
(ii) a breach of contract, such as a default or delinquency in interest or principal payments;
(iii) granting concession to a debtor because of debtor’s financial difficulty; and
(iv) it becoming probable that the debtor will enter bankruptcy or other financial reorganisation.

For loans and receivables

(iii) Financial liabilities

Financial liabilities, including other payables and amounts due to immediate holding company, are initially recognised at fair value, net of directly attributable transaction costs incurred, and are subsequently measured at amortised cost, using the effective interest method. The related interest expense is recognised within “finance costs” in the statements of comprehensive income.

– 120 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(iv) Effective interest method

(v) Equity instruments

Equity instruments issued by Xi’an Green River are recorded at the proceeds received, net of direct issue costs.

(vi) Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. A financial guarantee contract issued by Xi’an Green River and not designated as at fair value through profit or loss is recognised initially at its fair value less transaction costs that are directly attributable to the issue of the financial guarantee contract. Subsequent to initial recognition, Xi’an Green River measures the financial guarantee contact at the higher of: (i) the amount determined in accordance with HKAS 37 Provisions, Contingent Liabilities and Contingent Assets ; and (ii) the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with HKAS 18 Revenue .

(vii) Derecognition

Xi’an Green River derecognises a financial asset when the contractual rights to the future cash flows in relation to the financial asset expire or when the financial asset has been transferred and the transfer meets the criteria for derecognition in accordance with HKAS 39.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires.

(c) Revenue recognition

Interest income is accrued on a time basis on the principal outstanding at the applicable interest rate.

(d) Income taxes

Income taxes for the period/year comprise current tax and deferred tax.

Income taxes are recognised in profit or loss except when they relate to items recognised in other comprehensive income in which case the taxes are also recognised in other comprehensive income.

(e) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when Xi’an Green River has a legal or constructive obligation arising as a result of a past event, which will probably result in an outflow of economic benefits that can be reasonably estimated.

– 121 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(f) Related parties

(i) A person or a close member of that person’s family is related to Xi’an Green River if that person:
(a) has control or joint control over Xi’an Green River;
(b) has significant influence over Xi’an Green River; or
(c) is a member of key management personnel of Xi’an Green River or Xi’an Green River’s parent.
(ii) An entity is related to Xi’an Green River if any of the following conditions apply:
(a) the entity and Xi’an Green River are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others);
(b) 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);
(c) both entities are joint ventures of the same third party;
(d) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(e) the entity is a post-employment benefit plan for the benefit of the employees of Xi’an Green River or an entity related to Xi’an Green River;
(f) the entity is controlled or jointly controlled by a person identified in (i); or
(g) a person identified in (i)(a) has significant influence over the entity or is a member of 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 and include:

(i) that person’s children and spouse or domestic partner;
(ii) children of that person’s spouse or domestic partner; and
(iii) dependents of that person or that person’s spouse or domestic partner.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATED UNCERTAINTY

Impairment loss on loans and receivables

The policy for impairment of loans and receivables of Xi’an Green River is based on the evaluation of collectability and ageing analysis of the loans and receivables and on management’s judgment. A considerable amount of judgment is required in assessing the ultimate realisation of these loans and receivables, including the current creditworthiness of each debtor. If the financial conditions of debtors of Xi’an Green River were to deteriorate, resulting in an impairment of their ability to make payments, additional impairment may be required.

– 122 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Impairment loss on deposits for properties under development

The carrying amounts of deposits for properties under development are reviewed periodically in order to assess whether the recoverable amounts have declined below the carrying amounts. These assets are tested for impairment whenever events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such a decline has occurred, the carrying amount is reduced to recoverable amount. Xi’an Green River uses all readily available information in determining an amount that is a reasonable approximation of recoverable amount, including estimates based on reasonable and supportable assumption.

6. SEGMENT INFORMATION

On adoption of HKFRS 8, Xi’an Green River has identified its operating segments and prepared segment information based on the regular internal financial information reported to Xi’an Green River’s sole director for his decisions about resources allocation to Xi’an Green River’s business components and review of these components’ performance. There is only one single business component/reportable segment in the internal reporting to the sole director, which is real estate development business. Xi’an Green River’s assets and capital expenditure are principally attributable to this business component.

No separate analysis of segment information by geographical segment is presented as Xi’an Green River’s revenue, assets and capital expenditure are principally attributable to a single geographical region, which is the PRC.

7. OTHER INCOME

			Period from
			14 April
			2010
			(date of
			establishment)
			to 31
			December	Year ended	31 December		Five months	ended 31 May
			2010	2011		2012	2012		2013
			RMB	RMB		RMB	RMB		RMB
							(Unaudited)
Bank	interest	income	2,145	1,443		81	74		1,170

8. LOSS BEFORE INCOME TAX EXPENSE

	Period from
	14 April
	2010
	(date of
	establishment)
	to 31
	December	Year ended	31 December		Five months	ended 31 May
	2010	2011		2012	2012		2013
	RMB	RMB		RMB	RMB		RMB
					(Unaudited)
Loss before income tax
expense is arrived at
after charging:
Auditor’s remuneration	–	–		5,000	5,000		–

No compensation or any kind of benefit was paid to Xi’an Green River’s sole director in respect of his services during the Relevant Periods. During the Relevant Periods, no remuneration was paid by Xi’an Green River to the sole director as an inducement to join or upon joining Xi’an Green River or as compensation for loss of office. None of the persons, who were directors, waived or agreed to waive any emoluments during the Relevant Periods. Xi’an Green River did not employ any staff during the Relevant Periods.

– 123 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

9. INCOME TAX EXPENSE

No provision for profits tax has been provided as Xi’an Green River did not have any estimated assessable profit for each of the Relevant Periods.

At the end of each of the Relevant Periods, there were no material unrecognised deferred tax assets or liabilities arising from any taxable temporary difference.

10. DEPOSITS FOR PROPERTIES UNDER DEVELOPMENT AND PREPAYMENTS

		At 31 December		At 31 May
	2010	2011	2012	2013
	RMB	RMB	RMB	RMB
Deposits for properties under
development	–	32,725,880	32,725,880	156,967,745
Prepayments	–	223,319	223,319	6,999,851
	–	32,949,199	32,949,199	163,967,596

11. AMOUNTS DUE FROM FELLOW SUBSIDIARIES

The amounts due were unsecured, interest-free and repayable on demand.

12. CASH AND CASH EQUIVALENTS

RMB is not freely convertible into foreign currencies. Under the PRC’s Foreign Exchange Control Regulations and Administration of Settlement and Sales and Payment of Foreign Exchange Regulations, Xi’an Green River is permitted to exchange RMB for foreign currencies through the banks that are authorised to conduct foreign exchange business.

13. OTHER PAYABLES

Other payables at 31 May 2013 mainly represented the amount due to former holding company and the advances from Longisland Beijing of RMB24,760,404. The balances were unsecured, non-interest bearing and repayable on demand.

14. AMOUNTS DUE TO IMMEDIATE HOLDING COMPANY

The amounts due were unsecured, interest-free and repayable on demand.

15. PAID-UP CAPITAL

		At 31 December		At 31 May
	2010	2011	2012	2013
	RMB	RMB	RMB	RMB
At beginning of the period/year	–	10,000,000	10,000,000	10,000,000
Capital injection upon establishment	10,000,000	–	–	–
At end of the period/year	10,000,000	10,000,000	10,000,000	10,000,000

– 124 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

16. COMMITMENTS

		At 31 December		At	31 May
	2010	2011	2012		2013
	RMB	RMB	RMB		RMB
Commitments for properties under
development
– contracted for but not provided	–	–	–	5,296,000

17. FINANCIAL GUARANTEE CONTRACTS

On 15 January 2013, Xi’an Green River signed agreements to provide corporate guarantee to the extent of approximately RMB541,400,000 to the Financial Institution in connection with the loan facilities granted by the Financial Institution to fellow subsidiaries. Under the guarantee, Xi’an Green River would be liable to pay the Financial Institution if the Financial Institution is unable to recover the loans. As 31 May 2013, no provision for Xi’an Green River’s obligation under the guarantee contracts has been made as the sole director considered that it was not probable that the repayment of the loans would be in default.

18. RELATED PARTY TRANSACTION

On 4 March 2013, the Financial Institution became the holding company of Xi’an Green River. The financial guarantee provided by Xi’an Green River as disclosed in note 17 is considered as related party transaction.

19. FINANCIAL RISK MANAGEMENT AND FAIR VALUE MEASUREMENTS

Exposure to credit, liquidity and interest rate risks arises in the normal course of Xi’an Green River’s business.

Policy for managing these risks is set by the sole director. The policy for each of the above risks is described in more detail below.

(a) Credit risk

Credit risk refers to the risk that counterparties will default on their contractual obligations resulting in financial loss to Xi’an Green River. Xi’an Green River exposes to credit risk from loans and receivables. Xi’an Green River has adopted a credit policy to monitor and mitigate credit risk arising from its debtors. Credit limit is regularly reviewed and approved by the sole director. Xi’an Green River assesses credit risk based on debtors’ past due records, trading history, financial conditions or credit ratings. Xi’an Green River is not exposed to concentration of credit risk.

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

– 125 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(b) Liquidity risk

Xi’an Green River’s objective is to ensure there are adequate funds to meet commitments associated with its financial liabilities. Cash flows of Xi’an Green River are closely monitored by the sole director on an ongoing basis.

The contractual maturities of financial liabilities are shown as below:

			Total
	Within 1 year		undiscounted	Carrying
	or on	demand	amount	amount
		RMB	RMB	RMB
At 31 December 2011
Amount due to immediate holding
company	23,048,085		23,048,085	23,048,085


			Total
	Within 1 year		undiscounted	Carrying
	or on	demand	amount	amount
		RMB	RMB	RMB
At 31 December 2012
Amount due to immediate holding
company	22,980,085		22,980,085	22,980,085


			Total
	Within 1 year		undiscounted	Carrying
	or on	demand	amount	amount
		RMB	RMB	RMB
At 31 May 2013
Other payables	169,651,950		169,651,950	169,651,950

As mentioned in note 17, Xi’an Green River has entered into financial guarantee contracts in which it has guaranteed the Financial Institution the repayment of loans granted to the former fellow subsidiaries. Xi’an Green River has the obligation to compensate the Financial Institution for the loss it would suffer if the former subsidiaries fail to repay. Xi’an Green River’s maximum exposure under the financial guarantee contracts was approximately RMB541,400,000 as at 31 May 2013.

(c) Interest rate risk

Xi’an Green River is exposed to cash inflow interest rate risk due to the fluctuation of the prevailing market interest rate on bank balances. The sole director of Xi’an Green River considers that Xi’an Green River’s interest rate risk is minimal.

(d) Fair values

The fair values of Xi’an Green River’s financial assets and liabilities are not materially different from their carrying amounts because of the immediate or short term maturities.

– 126 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

20. SUMMARY OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES BY CATEGORY

The carrying amounts presented in Xi’an Green River’s statements of financial position relate to the following categories of financial assets and financial liabilities:

		At 31 December	At 31 December		At 31 May
	2010		2011	2012	2013
	RMB		RMB	RMB	RMB
Financial assets
Loans and receivables	9,983,780		80,212	4,733	15,655,522


		At 31 December			At 31 May
	2010		2011	2012	2013
	RMB		RMB	RMB	RMB
Financial liabilities
Financial liabilities measured at
amortised cost	–		23,048,085	22,980,085	169,651,950

21. CAPITAL MANAGEMENT

Xi’an Green River’s objectives of managing capital are to safeguard Xi’an Green River’s ability to continue as a going concern in order to provide returns for owner and benefits for other stakeholders and to maintain an optimal capital structure to reduce cost of capital.

In order to maintain or adjust the capital structure, Xi’an Green River may adjust the amount of dividends paid to owner, return capital to owner, issue new shares or sell assets to reduce debts.

The capital structure of Xi’an Green River consists of equity attributable to owner of Xi’an Green River, comprising capital and reserves.

III. EVENTS AFTER THE REPORTING DATE

No significant event has been noted for Xi’an Green River in respect of any period subsequent to 31 May 2013.

IV. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared for Xi’an Green River in respect of any period subsequent to 31 May 2013.

Yours faithfully,

BDO Limited

Certified Public Accountants

Alfred Lee

Practising Certificate Number P04960

Hong Kong

– 127 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

B. MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET GROUP

Upon completion of Restructuring, the Target Group consists of the Target Company, Longisland HK, Beijing Times, Longisland Beijing, Xi’an Hengye and Xi’an Green River.

(a) The Target Company, Longisland HK and Beijing Times (the “Longisland BVI Group”)

The Target Company, Longisland HK and Beijing Times were incorporated on 16 March 2010, 16 March 2010 and 3 March 2011, respectively.

The Target Company is an investment company incorporated in the BVI and is wholly owned by the Vendor. Longisland HK is a limited liability company incorporated in Hong Kong and is an investment holding company. Beijing Times is a wholly foreign-owned enterprise established in the PRC and is an investment holding company.

Beijing Times acquired 100% equity interest of Longisland Beijing and Longisland Beijing became the 100% subsidiary of Beijing Times in July 2013.

Since Beijing Times acquired 100% equity interest of Longisland Beijing in July 2013, as at 31 December 2010, 31 December 2011, 31 December 2012 and 31 May 2013, only the Target Company, Longisland HK and Beijing Times were included in the Target Group.

i. For the five months ended 31 May 2013

Liquidity and financial resources

Except the amounts due from/to shareholder and related parties, which were also the major financial resources, the Longisland BVI Group did not have other loans or borrowings as at 31 May 2013.

Contingent liabilities

The Longisland BVI Group had no contingent liabilities or litigation as at 31 May 2013.

Exposure to fluctuations in exchange rates

No exposure to fluctuations in exchange rates during the five months ended 31 May 2013 were noted.

Gearing ratio

The gearing ratio (total borrowings/total equity) for the Longisland BVI Group was nil as there was no outstanding borrowings as at 31 May 2013 (31 December 2012: nil).

– 128 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Charges on assets

As at 31 May 2013, there were no charges on the assets of the Longisland BVI Group .

Acquisition and disposal of subsidiaries and associated companies

The Longisland BVI Group had no acquisition and disposal of subsidiaries and associated companies during the five months ended 31 May 2013.

Employee and remuneration

The Longisland BVI Group did not employ any staff as at 31 May 2013, however, staff costs of HK$204,842 were allocated from its related companies for the five months ended 31 May 2013 (for the five months ended 31 May 2012: HK$354,029).

Looking forward

The Target Company will be involved in developing the Xi’an Project through the Project Companies after the completion of Restructuring.

ii. For the year ended 31 December 2012

Liquidity and financial resources

Except the amounts due from/to shareholder and related parties, which were also the major financial resources, the Longisland BVI Group did not have other loans or borrowings as at 31 December 2012.

Contingent liabilities

The Longisland BVI Group had no contingent liabilities or litigation as at 31 December 2012.

Exposure to fluctuations in exchange rates

No exposure to fluctuations in exchange rates during the year ended 31 December 2012 were noted.

Gearing ratio

The gearing ratio (total borrowings/total equity) for the Longisland BVI Group was nil as there was no outstanding borrowings as at 31 December 2012 (2011: nil).

– 129 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Charges on assets

As at 31 December 2012, there were no charges on the assets of the Longisland BVI Group.

Acquisition and disposal of subsidiaries and associated companies

The Longisland BVI Group had no acquisition and disposal of subsidiaries and associated companies during the year ended 31 December 2012.

Employee and remuneration

The Longisland BVI Group did not employ any staff as at 31 December 2012, however, staff costs of HK$923,661 were allocated from its related companies for the year ended 31 December 2012 (2011: HK$95,089).

iii. For the year ended 31 December 2011

Liquidity and financial resources

Except the amounts due from/to shareholder and related parties, which were also the major financial resources, the Longisland BVI Group did not have other loans or borrowings as at 31 December 2011.

Contingent liabilities

The Longisland BVI Group had no contingent liabilities or litigation as at 31 December 2011.

Exposure to fluctuations in exchange rates

No exposure to fluctuations in exchange rates during the year ended 31 December 2011 were noted.

Gearing ratio

The gearing ratio (total borrowings/total equity) for the Longisland BVI Group was nil as there was no outstanding borrowings as at 31 December 2011 (2010: nil).

Charges on assets

As at 31 December 2011, there were no charges on the assets of the Longisland BVI Group.

Acquisition and disposal of subsidiaries and associated companies

The Longisland BVI Group had no acquisition and disposal of subsidiaries and associated companies during the year ended 31 December 2011.

– 130 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Employee and remuneration

The Longisland BVI Group did not employ any staff as at 31 December 2011, however, staff costs of HK$95,089 were allocated from its related companies for the year ended 31 December 2011(2010: nil).

iv. For the period from the date of incorporation to 31 December 2010

Liquidity and financial resources

Except the amounts due from/to shareholder and related parties, which were also the major financial resources, the Longisland BVI Group did not have other loans or borrowings as at 31 December 2010.

Contingent liabilities

The Longisland BVI Group had no contingent liabilities or litigation as at 31 December 2010.

Exposure to fluctuations in exchange rates

No exposure to fluctuations in exchange rates during the period from the date of incorporation to 31 December 2010 were noted.

Gearing ratio

The gearing ratio (total borrowings/total equity) for the Longisland BVI Group was nil as there was no outstanding borrowings as at 31 December 2010.

Charges on assets

As at 31 December 2010, there were no charges on the assets of the Longisland BVI Group.

Acquisition and disposal of subsidiaries and associated companies

The Longisland BVI Group had no acquisition and disposal of subsidiaries and associated companies during the period from the date of incorporation to 31 December 2010.

Employee and remuneration

The Longisland BVI Group did not employ any staff as at 31 December 2010 and there was no employee remuneration payment.

– 131 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(b) Longisland Beijing Group

Longisland Beijing is a limited liability company established on 5 November 2010 in the PRC and is an investment holding company.

Longisland Beijing acquired 100% equity interest of Xi’an Green River on 14 January 2013.

On 15 January 2013, Longisland Beijing signed the Agreement with the Third Party Financial Institution. Based on the Agreement (as defined in Appendix I to this circular), Longisland Beijing transferred 100% equity interest of Xi’an Hengye and Xi’an Green River to the Third Party Financial Institution as a form of guarantee and Longisland Beijing has the right to buy back the 100% equity interest of Xi’an Hengye and Xi’an Green River and release the guarantee. Longisland Beijing will complete the buy-back and release the guarantee during the Restructuring.

Longisland Beijing became the 100% subsidiary of Beijing Times in July 2013.

i. For the five months ended 31 May 2013

Liquidity and financial resources

As at 31 May 2013, Longisland Beijing Group’s financial resources included the amounts due from/to shareholder and related parties, and the non-interest bearing, repayable on demand, loan from the Third Party Financial Institution.

Contingent liabilities

Longisland Beijing Group had no contingent liabilities or litigation as at 31 May 2013.

Exposure to fluctuations in exchange rates

No exposure to fluctuations in exchange rates during the five months ended 31 May 2013 were noted.

Gearing ratio

The gearing ratio (total borrowings/total equity) for Longisland Beijing Group was -302% (31 December 2012: nil).

Charges on assets

Longisland Beijing charged its entire equity interest in Xi’an Hengye in favour of the Third Party Financial Institution in November 2012. As at 14 March 2013, the charge has been released. Apart from the mentioned charges, as at 31 May 2013, there were no other charges on the assets of Longisland Beijing Group.

– 132 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Acquisition and disposal of subsidiaries and associated companies

Longisland Beijing acquired 100% equity interest of Xi’an Green River on 14 January 2013.

On 15 January 2013, Longisland Beijing signed the Agreement with the Third Party Financial Institution. Based on the Agreement, Longisland Beijing transferred 100% equity interest of Xi’an Hengye and Xi’an Green River to the Third Party Financial Institution as a form of guarantee and Longisland Beijing has the right to buy back the 100% equity interest of Xi’an Hengye and Xi’an Green River and release the guarantee. Longisland Beijing will complete the buy-back and release the guarantee during the Restructuring.

Employee and remuneration

Longisland Beijing Group did not employ any staff as at 31 May 2013, however, staff costs of RMB93,034 were allocated from its related companies for the five months ended 31 May 2013 (for the five months ended 31 May 2012: RMB47,619).

Looking forward

Longisland Beijing Group will be involved in developing the Xi’an Project through the Project Companies after the completion of Restructuring.

ii. For the year ended 31 December 2012

Liquidity and financial resources

Except the amounts due from/to shareholder and related parties, which were also the major financial resources, Longisland Beijing Group did not have other loans or borrowings as at 31 December 2012.

Contingent liabilities

Longisland Beijing Group had no contingent liabilities or litigation as at 31 December 2012.

Exposure to fluctuations in exchange rates

No exposure to fluctuations in exchange rates during the year ended 31 December 2012 were noted.

Gearing ratio

The gearing ratio (total borrowings/total equity) for Longisland Beijing Group was nil as there was no outstanding borrowings as at 31 December 2012 (2011: nil).

– 133 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Charges on assets

In November 2012, Longisland Beijing charged its entire equity interest in Xi’an Hengye in favour of the Third Party Financial Institution. Apart from the mentioned charges, as at 31 December 2012, there were no other charges on the assets of Longisland Beijing Group.

Acquisition and disposal of subsidiaries and associated companies

Longisland Beijing Group had no acquisition and disposal of subsidiaries and associated companies during the year ended 31 December 2012.

Employee and remuneration

Longisland Beijing Group did not employ any staff as at 31 December 2012, however, staff costs of RMB196,226 were allocated from its related companies for the year ended 31 December 2012 (2011: RMB12,402).

iii. For the year ended 31 December 2011

Liquidity and financial resources

Except the amounts due from/to shareholder and related parties, which were also the major financial resources, Longisland Beijing Group did not have other loans or borrowings as at 31 December 2011.

Contingent liabilities

Longisland Beijing Group had no contingent liabilities or litigation as at 31 December 2011.

Exposure to fluctuations in exchange rates

No exposure to fluctuations in exchange rates during the year ended 31 December 2011 were noted.

Gearing ratio

The gearing ratio (total borrowings/total equity) for Longisland Beijing Group was nil as there was no outstanding borrowings as at 31 December 2011 (2010: nil).

Charges on assets

As at 31 December 2011, there were no charges on the assets of Longisland Beijing Group.

– 134 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Acquisition and disposal of subsidiaries and associated companies

Longisland Beijing Group had no acquisition and disposal of subsidiaries and associated companies during the year ended 31 December 2011.

Employee and remuneration

Longisland Beijing Group did not employ any staff as at 31 December 2011, however, staff costs of RMB12,402 were allocated from its related companies for the year ended 31 December 2011 (2010: nil).

iv. For the periods from the date of establishment to the 31 December 2010

Liquidity and financial resources

Except the amounts due from/to shareholder and related parties, which were also the major financial resources, Longisland Beijing Group did not have other loans or borrowings as at 31 December 2010.

Contingent liabilities

Longisland Beijing Group had no contingent liabilities or litigation as at 31 December 2010.

Exposure to fluctuations in exchange rates

No exposure to fluctuations in exchange rates during the period from the date of establishment to 31 December 2010 were noted.

Gearing ratio

The gearing ratio (total borrowings/total equity) for Longisland Beijing Group was nil as there was no outstanding borrowings as at 31 December 2010.

Charges on assets

As at 31 December 2010, there were no charges on the assets of Longisland Beijing Group.

Acquisition and disposal of subsidiaries and associated companies

Longisland Beijing Group had no acquisition and disposal of subsidiaries and associated companies during the period from the date of establishment to 31 December 2010.

– 135 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Employee and remuneration

Longisland Beijing Group did not employ any staff as at 31 December 2010 and there was no employee remuneration payment.

(c) Xi’an Hengye

Xi’an Hengye is a limited liability company established in the PRC on 3 December 2010 and its principal business is to develop residential properties under the Xi’an Project. Upon completion of the Restructuring, Xi’an Hengye will be a 100% subsidiary of Longisland Beijing.

The Xi’an Project is a project located in 西安市滻灞生態區 (Chanba Ecological District of Xi’an City, the PRC*) with the total land area of approximately 105,498 square meters and planned aboveground floor area of approximately 267,663 square meters. The Xi’an Project includes both commercial and residential constructions. The Xi’an Project is currently in a stage of early development and is undergoing the application process for construction.

i. For the five months ended 31 May 2013

As at 31 May 2013, Xi’an Hengye was not included in the Target Group. During the period ended 31 May 2013, save as acquiring the land in 西安市滻灞生態區 (Chanba Ecological District of Xi’an City, the PRC), Xi’an Hengye had no other business activities.

Liquidity and financial resources

Except the amounts due from/to former shareholders, related parties and former related parties, which were also the major financial resources, Xi’an Hengye did not have other loans or borrowings as at 31 May 2013.

Contingent liabilities

As at 31 May 2013, Xi’an Hengye had no contingent liabilities or litigation.

Exposure to fluctuations in exchange rates

No exposure to fluctuations in exchange rates during the five months ended 31 May 2013 were noted.

Gearing ratio

As at 31 May 2013, the gearing ratio (total borrowings/total equity) for Xi’an Hengye was nil as there was no outstanding borrowings (31 December 2012: nil).

– 136 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Charges on assets

As at 31 May 2013, there were no charges on the assets of Xi’an Hengye.

Acquisition and disposal of subsidiaries and associated companies

There was no material acquisition or disposal of subsidiaries and associated companies for the five months ended 31 May 2013.

Employee and remuneration

Xi’an Hengye did not employ any staff as at 31 May 2013 and there was no employee remuneration payment.

Looking forward

Xi’an Hengye will develop the residential properties under the Xi’an Project.

ii. For the year ended 31 December 2012

As at 31 December 2012, Xi’an Hengye was not included in the Target Group. During the year ended 31 December 2012, Xi’an Hengye had no business activity.

Liquidity and financial resources

Except the amounts due from/to shareholders and related parties, which were also the major financial resources, Xi’an Hengye did not have other loans or borrowings as at 31 December 2012.

Contingent liabilities

As at 31 December 2012, Xi’an Hengye had no contingent liabilities or litigation.

Exposure to fluctuations in exchange rates

No exposure to fluctuations in exchange rates during the year ended 31 December 2012 were noted.

Gearing ratio

As at 31 December 2012, the gearing ratio (total borrowings/total equity) for Xi’an Hengye was nil as there was no outstanding borrowings (2011: nil).

Charges on assets

As at 31 December 2012, there were no charges on the assets of Xi’an Hengye.

– 137 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Acquisition and disposal of subsidiaries and associated companies

There was no material acquisition or disposal of subsidiaries and associated companies for the year ended 31 December 2012.

Employee and remuneration

Xi’an Hengye did not employ any staff as at 31 December 2012 and there was no employee remuneration payment.

iii. For the year ended 31 December 2011

As at 31 December 2011, Xi’an Hengye was not included in the Target Group. During the year ended 31 December 2011, Xi’an Hengye had no business activity.

Liquidity and financial resources

Except the amounts due from/to shareholders and related parties, which were also the major financial resources, Xi’an Hengye did not have other loans or borrowings as at 31 December 2011.

Contingent liabilities

As at 31 December 2011, Xi’an Hengye had no contingent liabilities or litigation.

Exposure to fluctuations in exchange rates

No exposure to fluctuations in exchange rates during the year ended 31 December 2011 were noted.

Gearing ratio

As at 31 December 2011, the gearing ratio (total borrowings/total equity) for Xi’an Hengye was nil as there was no outstanding borrowings (2010: nil).

Charges on assets

As at 31 December 2011, there were no charges on the assets of Xi’an Hengye.

Acquisition and disposal of subsidiaries and associated companies

There was no material acquisition or disposal of subsidiaries and associated companies for the year ended 31 December 2011.

– 138 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Employee and remuneration

Xi’an Hengye did not employ any staff as at 31 December 2011 and there was no employee remuneration payment.

iv. For the period from the date of establishment to 31 December 2010

As at 31 December 2010, Xi’an Hengye was not included in the Target Group. During the period ended 31 December 2010, Xi’an Hengye had no business activity.

Liquidity and financial resources

Except the amounts due from/to shareholders and related parties, which were also the major financial resources, Xi’an Hengye did not have other loans or borrowings as at 31 December 2010.

Contingent liabilities

As at 31 December 2010, Xi’an Hengye had no contingent liabilities or litigation.

Exposure to fluctuations in exchange rates

No exposure to fluctuations in exchange rates during the period from the date of establishment to 31 December 2010 were noted.

Gearing ratio

As at 31 December 2010, the gearing ratio (total borrowings/total equity) for Xi’an Hengye was nil as there was no outstanding borrowings.

Charges on assets

As at 31 December 2010, there were no charges on the assets of Xi’an Hengye.

Acquisition and disposal of subsidiaries and associated companies

There was no material acquisition or disposal of subsidiaries and associated companies for the period from the date of establishment to 31 December 2010.

Employee and remuneration

Xi’an Hengye did not employ any staff as at 31 December 2010 and there was no employee remuneration payment.

– 139 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(d) Xi’an Green River

Xi’an Green River is a limited liability company established in the PRC on 14 April 2010 and its principal business is to develop commercial properties under the Xi’an Project. Upon completion of the Restructuring, Xi’an Green River will be a 100% subsidiary of Longisland Beijing.

The Xi’an Project is a project located in 西安市滻灞生態區 (Chanba Ecological District of Xi’an City, the PRC*) with the total land area of approximately 105,498 square meters and planned aboveground floor area of approximately 267,663 square meters. The Xi’an Project includes both commercial and residential constructions. The Xi’an Project is currently in a stage of early development and is undergoing the application process for construction.

i. For the five months ended 31 May 2013

As at 31 May 2013, Xi’an Green River was not included in the Target Group. During the period ended 31 May 2013, save as acquiring the land in 西安市滻灞生態區 (Chanba Ecological District of Xi’an City, the PRC), Xi’an Green River had no other business activities.

Liquidity and financial resources

Except the amounts due from/to former shareholders, related parties and former related parties, which were also the major financial resources, Xi’an Green River did not have other loans or borrowings as at 31 May 2013.

Contingent liabilities

As at 31 May 2013, Xi’an Green River had no contingent liabilities or litigation.

Exposure to fluctuations in exchange rates

No exposure to fluctuations in exchange rates during the five months ended 31 May 2013 were noted.

Gearing ratio

As at 31 May 2013, the gearing ratio (total borrowings/total equity) for Xi’an Green River was nil as there was no outstanding borrowings (31 December 2012: nil).

Charges on assets

As at 31 May 2013, there were no charges on the assets of Xi’an Green River.

Acquisition and disposal of subsidiaries and associated companies

There was no material acquisition or disposal of subsidiaries and associated companies for the five months ended 31 May 2013.

– 140 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Employee and remuneration

Xi’an Green River did not employ any staff as at 31 May 2013 and there was no employee remuneration payment.

Looking forward

Xi’an Green River will develop the commercial properties under the Xi’an Project.

ii. For the year ended 31 December 2012

As at 31 December 2012, Xi’an Green River was not included in the Target Group. During the year ended 31 December 2012, Xi’an Green River had no business activity.

Liquidity and financial resources

Except the amounts due from/to shareholders and related parties, which were also the major financial resources, Xi’an Green River did not have other loans or borrowings as at 31 December 2012.

Contingent liabilities

As at 31 December 2012, Xi’an Green River had no contingent liabilities or litigation.

Exposure to fluctuations in exchange rates

No exposure to fluctuations in exchange rates during the year ended 31 December 2012 were noted.

Gearing ratio

As at 31 December 2012, the gearing ratio (total borrowings/total equity) for Xi’an Green River was nil as there was no outstanding borrowings (2011: nil).

Charges on assets

As at 31 December 2012, there were no charges on the assets of Xi’an Green River.

Acquisition and disposal of subsidiaries and associated companies

There was no material acquisition or disposal of subsidiaries and associated companies for the year ended 31 December 2012.

– 141 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Employee and remuneration

Xi’an Green River did not employ any staff as at 31 December 2012 and there was no employee remuneration payment.

iii. For the year ended 31 December 2011

As at 31 December 2011, Xi’an Green River was not included in the Target Group. During the year ended 31 December 2011, Xi’an Green River had no business activity.

Liquidity and financial resources

Except the amounts due from/to shareholders and related parties, which were also the major financial resources, Xi’an Green River did not have other loans or borrowings as at 31 December 2011.

Contingent liabilities

As at 31 December 2011, Xi’an Green River had no contingent liabilities or litigation.

Exposure to fluctuations in exchange rates

No exposure to fluctuations in exchange rates during the year ended 31 December 2011 were noted.

Gearing ratio

As at 31 December 2011, the gearing ratio (total borrowings/total equity) for Xi’an Green River was nil as there was no outstanding borrowings (2010: nil).

Charges on assets

As at 31 December 2011, there were no charges on the assets of Xi’an Green River.

Acquisition and disposal of subsidiaries and associated companies

There was no material acquisition or disposal of subsidiaries and associated companies for the year ended 31 December 2011.

Employee and remuneration

Xi’an Green River did not employ any staff as at 31 December 2011 and there was no employee remuneration payment.

– 142 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

iv. For the period from the date of establishment to the 31 December 2010

As at 31 December 2010, Xi’an Green River was not included in the Target Group. During the period ended 31 December 2010, Xi’an Green River had no business activity.

Liquidity and financial resources

Except the amounts due from/to shareholders and related parties, which were also the major financial resources, Xi’an Green River did not have other loans or borrowings as at 31 December 2010.

Contingent liabilities

As at 31 December 2010, Xi’an Green River had no contingent liabilities or litigation.

Exposure to fluctuations in exchange rates

No exposure to fluctuations in exchange rates during the period from the date of establishment to 31 December 2010 were noted.

Gearing ratio

As at 31 December 2010, the gearing ratio (total borrowings/total equity) for Xi’an Green River was nil as there was no outstanding borrowings.

Charges on assets

As at 31 December 2010, there were no charges on the assets of Xi’an Green River.

Acquisition and disposal of subsidiaries and associated companies

There was no material acquisition or disposal of subsidiaries and associated companies for the period from the date of establishment to 31 December 2010.

Employee and remuneration

Xi’an Green River did not employ any staff as at 31 December 2010 and there was no employee remuneration payment.

– 143 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

A. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Introduction

The following unaudited pro forma consolidated statement of financial position of the Enlarged Group as at 31 March 2013 (the “Unaudited Pro Forma Financial Information”) has been prepared in accordance with Rule 4.29 of the Listing Rules for the purpose of illustrating the effect on the financial position of the Enlarged Group as if the acquisition of entire issued share capital of the Target Company by the Group (the “Acquisition”) had been completed on 31 March 2013. The Unaudited Pro Forma Financial Information has been prepared for illustrative purpose only, and because of its nature, it may not give a true picture of the Enlarged Group’s financial position following completion of the Acquisition.

The Unaudited Pro Forma Financial Information has been prepared based on:

(a) the audited consolidated statement of financial position of the Group as at 31 March 2013 which has been extracted from the audited annual report of the Group for the year ended 31 March 2013;
(b) the audited consolidated statements of financial position of the Longisland BVI Group (as defined in Appendix II in the circular) and the Longisland Beijing Group (as defined in Appendix II in the circular) and the audited statements of financial position of Xi’an Hengye and Xi’an Green River as at 31 May 2013 which have been extracted from Appendix II to this circular; and
(c) after taking into account of the unaudited pro forma adjustments relating to the Acquisition that are (i) directly attributable to the Acquisition and not relating to future events or decisions; and (ii) factually supportable.

The Unaudited Pro Forma Financial Information is based on a number of assumptions, estimates and uncertainties. Accordingly, the Unaudited Pro Forma Financial Information does not purport to describe the actual financial position of the Enlarged Group that would have been attained had the Acquisition been completed on 31 March 2013. The Unaudited Pro Forma Financial Information does not purport to predict the future financial position of the Enlarged Group.

– 144 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

	The	Enlarged	Group	HK$						168,792,296	136,695,872					185,742,412	3,190,298	160,959,057		176,857,942		63,134,384		895,372,261	895,372,261
		Pro forma	adjustment	HK$	Note 11	and 12
		Pro forma	adjustment	HK$	Note 10
		Pro forma	adjustment	HK$	Note 9													63,220,127
		Pro forma	adjustment	HK$	Note 8
		Pro forma	adjustment	HK$	Note 7
		Pro forma	adjustment	HK$	Note 6

		Xi’an	Green River	HK$	Note 5					–	–					–	–	–		–		–			–
		Xi’an	Hengye	HK$	Note 4					–	–					–	–	–		–		–			–

The	Longisland	Beijing	Group	HK$	Note 3					–	–					–	–	–		–		–			–

	The	Longisland	BVI Group	HK$	Note 2					–	–					–	–	–		–		–			–

			The Group	HK$	Note 1					168,792,296	136,695,872					185,742,412	3,190,298	97,738,930		176,857,942		63,134,384		832,152,134
							Assets	Non-current assets	Property, plant and	equipment	Intangible assets	Payments for	leasehold land	held for own use	under operating	leases	Deferred expenditure	Goodwill	Available-for-sale	investments	Interests in	associates	Total non-current	assets

– 145 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

	The	Enlarged	Group	HK$					4,449,740	505,765,177	32,125,422		174,054,957			196,978,823	9,825,808			825,280		2,953,533		–		7,833		37,756,090	964,742,663		1,083,609	965,826,272	1,861,198,533
		Pro forma	adjustment	HK$	Note 11	and 12																						(150,000,000)
		Pro forma	adjustment	HK$	Note 10
		Pro forma	adjustment	HK$	Note 9					185,457,986
		Pro forma	adjustment	HK$	Note 8																			(3,875,131)				(15,813,791)
		Pro forma	adjustment	HK$	Note 7								(66,867,235)															(683)
		Pro forma	adjustment	HK$	Note 6								(9,304,639)															(248,474)
		Xi’an	Green River	HK$	Note 5				–	–	–		8,784,114			196,978,823	–			–		–		3,875,131		–		15,770,983	225,409,051		–	225,409,051	225,409,051
		Xi’an	Hengye	HK$	Note 4				–	320,307,191	–		13,828,256			–	–			–		–		–		–		42,808	334,178,255		–	334,178,255	334,178,255
The	Longisland	Beijing	Group	HK$	Note 3				–	–	–		66,867,235			–	–			–		–		–		–		683	66,867,918		–	66,867,918	66,867,918
	The	Longisland	BVI Group	HK$	Note 2				–	–	–		9,304,639			–	–			–		–		–		–		248,474	9,553,113		–	9,553,113	9,553,113
			The Group	HK$	Note 1				4,449,740	–	32,125,422		151,442,587			–	9,825,808			825,280		2,953,533		–		7,833		187,756,090	389,386,293		1,083,609	390,469,902	1,222,622,036
							Current assets	Convertible loan	notes Properties under	development	Inventories	Trade and other	receivables	Deposits for	properties under	development	Deferred expenditure	Amounts due from	non-controlling	interests	Amounts due from	related parties	Amounts due from	fellow susidiaries	Amount due from an	associate	Cash and cash	equivalents		Assets classified as	held for sale	Total current assets	Total assets

– 146 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

	The	Enlarged	Group	HK$						362,134,883			105,877,403		37,900,742		–		–	102,901,297	46,507,925	5,607,650	660,929,900				545,486		661,475,386		304,350,886		1,199,723,147
		Pro forma	adjustment	HK$	Note 11	and 12
		Pro forma	adjustment	HK$	Note 10
		Pro forma	adjustment	HK$	Note 9
		Pro forma	adjustment	HK$	Note 8					(269,519,238)							(3,875,131)
		Pro forma	adjustment	HK$	Note 7					(1,520,939)							(12,549,000)		(8,899,751)		(65,612,335)
		Pro forma	adjustment	HK$	Note 6					(21,352)									(10,299,992)
		Xi’an	Green River	HK$	Note 5					212,896,232			–		–		–		–	–	–	–	212,896,232				–		212,896,232		12,512,819		12,512,819
		Xi’an	Hengye	HK$	Note 4					320,152,006			–		–		3,875,131		–	–	–	–	324,027,137				–		324,027,137		10,151,118		10,151,118
The	Longisland	Beijing	Group	HK$	Note 3					1,520,939			–		–		12,549,000		8,899,751	–	65,612,335	–	88,582,025				–		88,582,025		(21,714,107)		(21,714,107)
	The	Longisland	BVI Group	HK$	Note 2					21,352			–		–		–		10,299,992	–	–	–	10,321,344				–		10,321,344		(768,231)		(768,231)
			The Group	HK$	Note 1					98,605,883			105,877,403		37,900,742		–		–	102,901,297	46,507,925	5,607,650	397,400,900				545,486		397,946,386		(7,476,484)		824,675,650
							Liabilities	Current liabilities	Trade and other	payables	Amounts due to non-	controlling	shareholders	Amounts due to	related parties	Amounts due to	fellow subsidiaries	Amount due to	holding company	Bank borrowings	Other borrowings	Current tax liabilities		Liabilities associated	with assets	classified as held	for sale	Total current	liabilities	Net current	(liabilities)/assets	Total assets less	current liabilities

– 147 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III


	The	Enlarged	Group	HK$					211,598,000		42,373		98,596,913		310,237,286	971,712,672		889,485,861							29,938,352	853,950,368	883,888,720		5,597,141			889,485,861
		Pro forma	adjustment	HK$	Note 11	and 12			211,598,000																	117,085,000
		Pro forma	adjustment	HK$	Note 10																				(26,478,008)	26,296,409
		Pro forma	adjustment	HK$	Note 9								46,364,497
		Pro forma	adjustment	HK$	Note 8
		Pro forma	adjustment	HK$	Note 7
		Pro forma	adjustment	HK$	Note 6

		Xi’an	Green River	HK$	Note 5				–		–		–		–	212,896,232		12,512,819							11,352,000	1,160,819	12,512,819		–			12,512,819
		Xi’an	Hengye	HK$	Note 4				–		–		–		–	324,027,137		10,151,118							11,643,000	(1,491,882)	10,151,118		–			10,151,118

The	Longisland	Beijing	Group	HK$	Note 3				–		–		–		–	88,582,025		(21,714,107)							3,483,000	(25,197,107)	(21,714,107)		–			(21,714,107)

	The	Longisland	BVI Group	HK$	Note 2				–		–		–		–	10,321,344		(768,231)							8	(768,239)	(768,231)		–			(768,231)

			The Group	HK$	Note 1				–		42,373		52,232,416		52,274,789	450,221,175		772,400,861							29,938,352	736,865,368	766,803,720		5,597,141			772,400,861

							Non-current	liabilities	Convertible bonds	Provision for long	service payments	Deferred tax	liabilities	Total non-current	liabilities	Total liabilities	NET ASSETS/	(LIABILITIES)	Capital and	reserves	attributable to	owners of the	Company	Share capital/	Paid-up capital	Reserves		Non-controlling	interests	TOTAL EQUITY/	(CAPITAL	DEFICIENCY)

– 148 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Notes:

The amounts are extracted from the audited consolidated statement of financial position of the Group for the year ended 31 March 2013 set out on pages 38 to 39 of the 2013 annual report of the Company as mentioned in Appendix I to this circular.
The amounts are extracted from the accountant’s report on the Longisland BVI Group (as defined in Appendix II to this circular) as set out in Appendix II(a) to this circular. The Longisland Beijing Group was acquired by a wholly-owned subsidiary of the Target Company in July 2013.
The amounts are extracted from the accountant’s report on the Longisland Beijing Group (as defined in Appendix II to this circular) as set out in Appendix II(b) to this circular.
The amounts are extracted from the accountant’s report on Xi’an Hengye (as defined in the circular) as set out in Appendix II(c) to this circular. As mentioned on page 19, Longisland Beijing will complete the buy-back during the Restructuring (as defined in the circular).
The amounts are extracted from the accountant’s report on Xi’an Green River (as defined in the circular) as set out in Appendix II(d) to this circular. As mentioned on page 19, Longisland Beijing will complete the buy-back during the Restructuring (as defined in the circular).
The adjustment represents the elimination of assets and liabilities of the Longisland BVI Group as, pursuant to the Acquisition Agreement (as defined in the circular), subject to Completion (as defined in the circular), the Vendor (as defined in the circular) agreed to waive or settle all receivables and payables recognised before Completion, save for those in relation to the property project for the Group’s future development after Completion.
The adjustment represents the elimination of assets and liabilities of the Longisland Beijing Group as, pursuant to the Acquisition Agreement, subject to Completion, the Vendor agreed to waive or settle all receivables and payables recognised before Completion, save for those in relation to the property project for the Group’s future development after Completion.
The adjustment represents the elimination of assets and liabilities of Xi’an Hengye and Xi’an Green River as, pursuant to the Acquisition Agreement, subject to Completion, the Vendor agreed to waive or settle all receivables and payables recognised before Completion, save for those in relation to the property project for the Group’s future development after Completion.

– 149 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Under Hong Kong Financial Reporting Standard 3 (Revised) “Business Combinations” issued by the Hong Kong Institute of Certified Public Accountants, the acquisition of Target Group (as defined in the circular) will be accounted for using acquisition method. Assuming that the Acquisition is completed on 31 March 2013, an analysis of the fair values of the identifiable assets and liabilities of the Target Group as at 31 March 2013, the corresponding carrying amounts immediately before the Acquisition and the fair value adjustments are as follows:

follows:
					Carrying
					values of
		Xi’an			identifiable
	Xi’an	Green	Pro forma	Fair value	assets and
	Hengye HK$	River HK$	adjustments HK$	adjustments HK$	liabilities HK$
			Note 8	Note 9
Properties under development Deposits for properties under	320,307,191	–		185,457,986	505,765,177
development	–	196,978,823			196,978,823
					702,744,000#
Trade and other receivables	13,828,256	8,784,114			22,612,370
Amount due from fellow
subsidiaries Cash and cash equivalents Other payables Amounts due to fellow	– 42,808 (320,152,006)	3,875,131 15,770,983 (212,896,232)	(3,875,131) (15,813,791) 269,519,238		– – (263,529,000)*
subsidiaries Deferred tax liabilities	(3,875,131) –	– –	3,875,131	(46,364,497)	– (46,364,497)^

	10,151,118	12,512,819			415,462,873(a)


Consideration for the Acquisition: Cash					150,000,000
Issue of Convertible Bonds
– Liability component – Equity component				211,598,000 117,085,000	328,683,000
					478,683,000(b)

Goodwill (b) – (a)					63,220,127

As indicated in the Valuation Report (as defined in the circular) issued by Savills Valuation and Professional Services Limited (“Savills”), the fair value of the Property (as defined in the circular) was RMB560,000,000 (approximately HK$702,744,000) on 31 July 2013.
Other payables represents the accrued cost of land acquisition amounting to RMB210,000,000 (approximately HK$263,529,000). Pursuant to the Acquisition Agreement, subject to Completion, the other payables will not be settled by the Vendor before Completion as the other payables relate to the property project for the Group’s future development after Completion.
^ The deferred tax liabilities represents the aggregate deferred tax impact on fair value adjustments in relation to properties under development of HK$185,457,986 with the PRC enterprise income tax rate of 25% thereon.
The adjustment represents the elimination of issued share capital and pre-acquisition of reserves of the Target Company, Longisland Beijing, Xi’an Hengye and Xi’an Green River.
Pursuant to the Acquisition Agreement, a sum of HK$250,000,000 of the Consideration will be satisfied by way of issue of the Convertible Bonds (as defined in the circular) to the Vendor. For the purpose of preparing the Unaudited Pro Forma Financial Information, the Group has engaged Savills to perform a valuation on the fair value of the Convertible Bonds and the valuation date is 31 March 2013. Based on the valuation report, the fair value of the liability component of the Convertible Bonds was calculated by discounting the future cash flows at the effective interest rate of 11%. The fair value of HK$211,598,000 is credited under non-current liabilities since the maturity date of the Convertible Bonds will be made on the date falling on the third anniversary of the Issue Date (as defined in the circular). The fair value of the Conversion Rights (as defined in the circular) of the Convertible Bonds was calculated by the binomial option pricing model. The fair value of HK$117,085,000 is credited as convertible bonds reserve under shareholders’ equity. The issue of the Convertible Bonds is a non-cash transaction.
Pursuant to the Acquisition Agreement, a sum of HK$150,000,000 of the Consideration will be satisfied by cash.
For the purpose of presenting the Unaudited Pro Forma Financial Information, Renminbi is translated into Hong Kong dollars at the exchange rate of RMB1 to HK$1.2549, which is the prevailing exchange rate on 31 May 2013.

– 150 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

B. REPORT FROM THE REPORTING ACCOUNTANT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP INCLUDED IN A CIRCULAR

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, from the independent reporting accountant, BDO Limited, Certified Public Accountants, Hong Kong.

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INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION INCLUDED IN A CIRCULAR

TO THE DIRECTORS OF CULTURE LANDMARK INVESTMENT LIMITED

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of Culture Landmark Investment Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”), and Longisland Tourism Investment & Development Limited (the “Target Company”) and its subsidiaries, Longisland Travel Investment & Development (HK) Limited, 北京譽祥時代科技有限公司, 北京長島恒業企業管理有限公司, 西安長島恒業置業有限公司 and 西安長島綠河置業有限公司 (collectively referred to as the “Target Group”) to be acquired by the Company (collectively referred to as the “Enlarged Group”) prepared by the directors of the Company (the “Directors”) for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma statement of assets and liabilities as at 31 March 2013 and related notes (the “Unaudited Pro Forma Financial Information”) as set out on pages 144 to 150 of the Company’s circular dated 23 October 2013, in connection with the proposed acquisition of the entire issued share capital of the Target Company (the “Acquisition”) by the Company. The applicable criteria on the basis of which the Directors have compiled the Unaudited Pro Forma Financial Information are described in Section A of Appendix III set out on page 144 of the Company’s circular dated 23 October 2013. The Unaudited Pro Forma Financial Information has been compiled by the Directors to illustrate the impact of the Acquisition on the Group’s financial position as at 31 March 2013 as if the Acquisition had taken place at 31 March 2013. As part of this process, information about the Group’s financial position has been extracted by the Directors from the Group’s consolidated financial statements for the year ended 31 March 2013, on which an annual report has been published.

– 151 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Directors’ Responsibility for the Unaudited Pro Forma Financial Information

The Directors are responsible for compiling the Unaudited Pro Forma Financial Information in accordance with Rule 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”).

Reporting Accountant’s Responsibilities

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

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 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 accountant complies with ethical requirements and plans and performs procedures to obtain reasonable assurance about whether the Directors have compiled the Unaudited Pro Forma Financial Information in accordance with Rule 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the Unaudited 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 Unaudited Pro Forma Financial Information.

The purpose of Unaudited Pro Forma Financial Information included in a circular is solely to illustrate the impact of a significant event or transaction on 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 Acquisition at 31 March 2013 would have been as presented.

– 152 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

A reasonable assurance engagement to report on whether the Unaudited 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 Unaudited 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 Unaudited Pro Forma Financial Information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountant’s judgment, having regard to the reporting accountant’s understanding of the nature of the Group, the event or transaction in respect of which the Unaudited Pro Forma Financial Information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the Unaudited Pro Forma Financial Information.

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 Unaudited Pro Forma Financial Information has been properly compiled by the Directors of the Company on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to Rule 4.29(1) of the Listing Rules.

BDO Limited

Certified Public Accountants

Alfred Lee

Practising Certificate Number P04960

Hong Kong, 23 October 2013

– 153 –

VALUATION REPORT

APPENDIX IV

The following is the text of a letter and a valuation certificate received from Savills Valuation and Professional Services Limited, an independent property valuer, prepared for the purpose of incorporation in this circular in connection with its valuation as at 31 July 2013 of the Property to be acquired by the Company.

The Directors Culture Landmark Investment Limited Rooms 2501-2505, 25th Floor China Resources Building No. 26 Harbour Road Wanchai Hong Kong

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23 October 2013

Dear Sirs,

Re: 3 parcels of land (Land Nos CB3-6-140, CB3-6-141 and CB3-6-142) located at East of Shibo Avenue, Chanba Ecological District, Xi’an, Shaanxi Province, the People’s Republic of China (the “Property”)

In accordance with the instructions from Culture Landmark Investment Limited (hereinafter referred to as the “Company”) for us to value the Property held by 西安長島恒業置業有限公司 (Xi’an Longisland Hengye Properties Limited) (“Xi’an Hengye”) and 西安長島綠河置業有限公司 (Xi’an Longisland Green River Properties Limited) (“Xi’an Green River”) in the People’s Republic of China (the “PRC”), we confirm that we have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the value of the Property as at 31 July 2013 (“Date of Valuation”) for the purpose of this circular.

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

Market value is understood as the value of an asset or liability estimated without regard to costs of sale and purchase (or transaction) and without offset for any associated taxes or potential taxes.

– 154 –

APPENDIX IV

VALUATION REPORT

In valuing the Property which is held for future development by Xi’an Hengye and Xi’an Green River, we have adopted the direct comparison approach by making reference to the comparable sales transactions as available in the market assuming sales with the benefit of vacant possession.

We have been provided with copies of extracts of the title documents relating to the Property in the PRC, such as the State-owned Land Use Rights Certificates and the Construction Land Planning Permits. However, we have not searched the original documents to verify the ownership or to ascertain the existence of any amendments which may not appear on the copies handed to us. We have relied on the legal opinion issued by the Company’s PRC legal adviser, Commerce & Finance Law Offices, regarding the title to the Property.

We have relied to a considerable extent on the information given by the Company and have accepted advice given by the Company on such matters as planning approvals or statutory notices, easements, tenures, particulars of occupancy, development scheme, site and floor areas and all other relevant matters. Dimensions, measurements and areas included in the valuation certificate are based on the information contained in the documents provided to us and are therefore only approximations. No on-site measurements have been taken. We have no reason to doubt the truth and accuracy of the information provided to us by the Company, which is material to our valuation. We were also advised by the Company that no material facts have been omitted from the information provided. As advised by the Company, there are no investigations, notices, pending litigation or breaches of law against the Property.

We have inspected the Property. During the course of our inspection, we did not note any serious defects. No structural survey has been made and we are therefore unable to report on whether the Property is free from rot, infestation or any other structural defects. No tests were carried out on any of the services. Site inspection was carried out during the period from 27 April 2013 to 30 April 2013 by our Mr. Ken J Liu, who is both a China Real Estate Appraiser and a China Land Valuer.

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

Our valuation is prepared in compliance with the requirements contained in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and in accordance with the HKIS Valuation Standards (2012 Edition) published by The Hong Kong Institute of Surveyors.

– 155 –

VALUATION REPORT

APPENDIX IV

Unless otherwise stated, all money amounts are stated in Renminbi (“RMB”).

Our valuation certificate is attached herewith.

Yours faithfully,

For and on behalf of

Savills Valuation and Professional Services Limited

Anthony C K Lau

MRICS MHKIS RPS(GP)

Director

Note: Mr. Lau is a qualified surveyor and has over 20 years’ experience in the valuation of properties in Hong Kong and the PRC.

– 156 –

VALUATION REPORT

APPENDIX IV

VALUATION CERTIFICATE

Property

3 parcels of land (Land Nos CB3-6140, CB3-6-141 and CB3-6-142) located at East of Shibo Avenue, Chanba Ecological District, Xi’an, Shaanxi Province, the PRC

Description and tenure

The Property is located at the Ecological District, which is to be developed into an administrative and financial centre of Xi’an. Developments in the neighbourhood comprise mainly commercial and residential projects which are under construction.

The Property comprises 3 parcels of land with a total site area of approximately 105,498.39 sq.m. (1,135,585 sq.ft.).

Market value in Particulars of existing state as at occupancy 31 July 2013

As at the Date of RMB560,000,000 Valuation, the (please refer to Property was a Note (6)) vacant site.

According to the information provided by the Company, the Property is proposed to be developed into a large-scale commercial and residential development (the “Development”) with a total planned aboveground floor area of approximately 267,663 sq.m. (2,881,125 sq.ft.), the breakdown of which is as follows:

	Approximate	Approximate
Use	Aboveground Floor
	Area
	(sq.m.)	(sq.ft.)
Residential	165,863	1,785,350
Retail	101,800	1,095,775

Total	267,663	2,881,125

As advised by the Company, the Development is scheduled for completion in or around August 2015.

The land use rights of the Property have been granted for terms due to expire on 29 May 2050 and 29 May 2080 for commercial and residential uses respectively.

– 157 –

VALUATION REPORT

APPENDIX IV

Notes :

(1) Pursuant to the following State-owned Land Use Rights Transfer Contracts entered into between Xi’an Shiyuan Investment Group Co., Ltd. (西安世園投資(集團)有限公司) (the “Transferor”) and Xi’an Hengye and Xi’an Green River (the “Transferees”) on 10 January 2013, the land use rights of the Property with a total site area of approximately 158.249 mu (approximately 105,499.86 sq.m.) have been transferred to Xi’an Hengye and Xi’an Green River at a total consideration of RMB412,212,937. Details of the said contracts are as follows:

				Land Use Term	Approximate
No.	Contract No.	Transferee	Land Usage	Expiry Date	Site Area
					(mu)
(i)	Shi Yuan Si He Tong Zi	Xi’an	Residential	2080-05-29	69.776
	(世園司合同字) (2013) 012	Hengye
(ii)	Shi Yuan Si He Tong Zi	Xi’an Green	Commercial	2050-05-29	58.731
	(世園司合同字) (2013) 013	River
(iii)	Shi Yuan Si He Tong Zi	Xi’an	Residential	2080-05-29	29.742
	(世園司合同字) (2013) 014	Hengye
	Total				158.249

The considerations of (i), (ii) and (iii) are RMB179,184,370, RMB156,967,745 and RMB76,060,822, respectively.

(2) Pursuant to three Documents – No. Xi Chanba Fa (2013) 65, No. Xi Chanba Fa (2013) 66 and No. Xi Chanba Fa (2013) 69 (西滻灞發[2013]65號、西滻灞發[2013]66號、西滻灞發[2013]69號), all issued by the Administrative Committee of Chanba Ecological District of Xi’an City (西安滻灞生態區管理委員會) on 3 April 2013 and 7 April 2013, the construction of the Property is required to be completed by March 2016.
(3) Pursuant to the following State-owned Land Use Rights Certificates issued by the People’s Government of Xi’an, the land use rights of two parcels of land of the Property with a total site area of approximately 66,345.39 sq.m. have been granted to Xi’an Hengye for a term due to expire on 29 May 2080 for residential use. Details of the said certificates are as follows:

No.	Certificate No.	Approximate Site Area
		(sq.m.)
(i)	Xi Chan Ba Guo Yong (西滻灞國用) (2013 Chu (出)) No. 060	46,517.23
(ii)	Xi Chan Ba Guo Yong (西滻灞國用) (2013 Chu (出)) No. 062	19,828.16
		66,345.39

(4) Pursuant to the following Construction Land Planning Permits issued by Xi’an Planning Bureau (西安市規劃局) on 17 July 2013, the land use rights of the Property with a total site area of approximately 158.249 mu (approximately 105,499.86 sq.m.) and a total aboveground floor area of approximately 267,663 sq.m. were approved for construction. Details of the said permits are as follows:

					Approximate
				Approximate	Aboveground
No.	Permit No.	Land User	Land Usage	Site Area	Floor Area
				(mu)	(sq.m.)
(i)	Chan Ba Gui Di Zi (滻灞	Xi’an	Residential	29.742	49,570
	規地字) No. (2013) 037	Hengye
(ii)	Chan Ba Gui Di Zi (滻灞	Xi’an	Residential	69.776	116,293
	規地字) No. (2013) 038	Hengye
(iii)	Chan Ba Gui Di Zi (滻灞	Xi’an Green	Commercial	58.731	101,800
	規地字) No. (2013) 039	River

	Total			158.249	267,663

– 158 –

VALUATION REPORT

APPENDIX IV

(5) As advised by the Company, the estimated development cost will be in the region of RMB986 million.
(6) As advised by the Company, the outstanding consideration for the transactions of the sites under the contract nos. (i) and (iii) of Note (1) in the sum of RMB210,000,000 has not been settled as at the Date of Valuation as the payment date is not due. We have not taken into account such amount when undertaking our valuation.
(7) We have been provided with a legal opinion on the title to the Property issued by the Company’s PRC legal adviser, Commerce & Finance Law Offices, which contains, inter alia, the following information:
(i) the State-owned Land Use Rights Transfer Contracts of the Property are legal and valid;
(ii) Xi’an Hengye has obtained the State-owned Land Use Rights Certificates of the two parcels of land as mentioned in Note (3) and is entitled to transfer, lease, mortgage or by other legal means dispose of such land use rights in accordance with the laws of the PRC;
(iii) Xi’an Hengye shall settle the outstanding consideration for the transactions of the sites in the sum of RMB210,000,000 in accordance with the payment schedule as stipulated in the contracts nos. (i) and (iii) of Note (1);
(iv) the consideration for the transaction as mentioned in item (ii) of Note (1) has been fully paid and there is no legal impediment for Xi’an Green River to obtain the State-owned Land Use Rights Certificate. After obtaining this certificate, Xi’an Green River is entitled to transfer, lease, mortgage or by other legal means dispose of the land use rights of such parcel of land in accordance with the laws of the PRC; and
(v) the Property is not subject to any mortgages or encumbrances.

– 159 –

GENERAL INFORMATION

APPENDIX V

1. RESPONSIBILITY STATEMENT

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

2. CAPITAL STRUCTURE

A capital reorganisation (the “ Capital Reorganisation ”) was completed on 16 October 2012 in the following manner: (i) every twenty (20) existing shares of HK$0.05 each in both the issued and unissued share capital of the Company were consolidated (the “ Share Consolidation ”) into one (1) consolidated share of HK$1.00 (“ Consolidated Share ”); (ii) immediately following the Share Consolidation, the issued share capital of the Company was reduced through a cancellation of (a) any fractional Consolidated Share in the share capital of the Company that may arise as a result of the Share Consolidation; (b) the paid-up capital of the Company to the extent of HK$0.95 on each of the Consolidated Share so that the nominal value of each issued Consolidated Share was reduced from HK$1.00 to HK$0.05 so as to form a new share with nominal value of HK$0.05 each (the aforesaid capital reduction to be referred to as the “ Capital Reduction ”); and (c) immediately following the Share Consolidation each unissued Consolidated Share in the authorised but unissued share capital of the Company was subdivided into 20 shares so that the nominal value of each unissued Consolidated Share was reduced from HK$1.00 to HK$0.05 each.

Following the Capital Reorganisation, the Company has 598,767,047 issued Shares of HK$0.05 each, all fully paid or credited as fully paid. The credit arising from the Capital Reduction amounted to approximately HK$569 million was used to set off against the accumulated losses of the Company.

– 160 –

GENERAL INFORMATION

APPENDIX V

3. SHARE CAPITAL

The authorised and issued share capital of the Company as at the Latest Practicable Date and immediately following the issue of the Conversion Shares will be as follows (assuming no further Shares are issued under the Convertible Bonds or the warrants of the Company and no Shares are repurchased by the Company after the Latest Practicable Date up to the date of issue of the Conversion Shares):

Authorised:

HK$

20,000,000,000	Shares as at the Latest Practicable Date	1,000,000,000
_Issued and fully _	paid or credited as fully paid:
598,767,047	existing Shares in issue	29,938,352.35
1,001,992,853	Shares to be in issue following the issue of the	50,099,642.65
	Conversion Shares (assuming that the
	Conversion Rights have been exercised in full)
	(Note 1)
854,161,265	Shares to be in issue following the issue of the	42,708,063.25
	Conversion Shares (assuming that the
	Conversion Rights have been exercised up to
	conversion limit)

Issued and fully paid or credited as fully paid:

Note:

This scenario is for illustrative purpose only and shall not occur. Under the terms and conditions of the Convertible Bonds, the Conversion Rights cannot be exercised by any Bondholder to the extent that if immediately after such conversion, the Bondholder, whether alone or together with party(ies) acting in concert with it will, directly or indirectly, control or be interested in over 29.90% of the issued share capital of the Company.

The Conversion Shares shall rank pari passu in all aspects, including all rights as to dividend, voting and interest in capital, among themselves and with all other Shares in issue on the date of issue.

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GENERAL INFORMATION

APPENDIX V

4. DISCLOSURE OF DIRECTOR’S INTERESTS

As at the Latest Practicable Date, the interests or short positions of the Directors and the chief executive of the Company and their respective associates in the Shares, underlying Shares and debentures of the Company and its Associated Corporations 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 deemed or taken to have under such provisions of the SFO); (b) to be and were recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO; or (c) to otherwise be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers adopted by the Company (the “ Securities Code ”), were as follows:

(I) Interests in the Company

		Long	positions in the Shares	and	underlying Shares	underlying Shares
		Number of	Convertible Bonds/			Approximate
		Shares	Share options			percentage of
Name of		Personal	Corporate Personal			total issued
Director	Capacity	interests	interests interests		Total	Shares
Cheng Yang	Beneficial	89,349,000	–	–	89,349,000	14.92
	Owner	(Note 1)

Note:

89,300,000 Shares were owned by Mr. Cheng Yang personally and 49,000 Shares were owned by his wife.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and the chief executive of the Company and their respective associates had or was deemed to have any interests, in the long position or short position in the Shares, underlying Shares and debentures of the Company or any of its Associated Corporations which was 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 in which he/she was taken or deemed to have under such provisions of the SFO); (b) which was required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (c) which was required, pursuant to the Securities Code, to be notified to the Company and the Stock Exchange.

5. DIRECTORS’ SERVICE CONTRACT

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with the Company or any other member of the Group which will not expire or is not determinable by the employer within one year without payment of compensation (other than statutory compensation).

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GENERAL INFORMATION

APPENDIX V

6. DIRECTORS’ INTERESTS IN THE GROUP’S ASSETS OR CONTRACTS OR ARRANGEMENTS SIGNIFICANT TO THE GROUP

As at the Latest Practicable Date:

(a) none of the Directors had any interest, direct or indirect, in any asset which had, since 31 March 2013, been acquired or disposed of by, or leased to, the Company or any member of the Group, or were proposed to be acquired or disposed of by, or leased to, the Company or any member of the Group; and
(b) none of the Directors was materially interested in any contract or arrangement entered into by any member of the Group subsisting at such date and which was significant in relation to the businesses of the Group.

7. MATERIAL ADVERSE CHANGE

The Directors confirm that as at the Latest Practicable Date, there was no material adverse change in the financial or trading position or outlook of the Group since 31 March 2013.

8. LITIGATION

As at the Latest Practicable Date, none of the members of the Enlarged Group was engaged in any material litigations or claims and no litigation or claim of material importance was pending or threatened by or against any member of the Enlarged Group.

9. QUALIFICATIONS AND CONSENTS OF EXPERTS

The following are the qualifications of the experts who have been named in this circular and whose advice or opinion is contained in this circular:

Name	Qualification
Savills Valuation and Professional	Professional Surveyor
Services Limited
BDO Limited	Certified Public Accountants

As at the Latest Practicable Date, BDO Limited and Savills Valuation and Professional Services Limited did not have any shareholding, direct or indirect, in any member of the Group or any right or option, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, BDO Limited and Savills Valuation and Professional Services Limited did not have any direct or indirect interest in any assets which have been acquired or disposed of by or leased to any member of the Group or were proposed to be acquired or disposed of by or leased to any member of the Group since 31 March 2013.

BDO Limited and Savills Valuation and Professional Services Limited have given and not withdrawn their written consents to the issue of this circular with the inclusion herein of their letters and reference to their name, in the form and context in which they appear.

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GENERAL INFORMATION

APPENDIX V

10. DIRECTORS’ INTERESTS IN COMPETING BUSINESSES

As at the Latest Practicable Date, none of the Directors and their respective associates has engaged in any business that competes or may compete with the business of the Group, or has any other conflict of interest with the Group.

11. MATERIAL CONTRACTS

Within the two years immediately preceding the date of this circular and ending on the Latest Practicable Date, the following material contracts (not being contracts entered into in the ordinary course of business) have been entered into by any member of the Group:

(a) a provisional sale and purchase agreement dated 24 November 2011 between Golden Island Bird’s Nest Chiu Chau Restaurant (Causeway Bay) Limited (“ Golden Island ”) (as vendor) and Lucky Forever Limited (as purchaser) and a deed of assignment dated 30 April 2012 between the parties relating to the sale and purchase of a property in Hong Kong at the price of HK$101 million;
(b) a subscription agreement dated 22 December 2011 between the Company (as issuer) and Eternity Investment Limited (“ Eternity ”) (as subscriber) pursuant to which the Company issued to Eternity the convertible bonds whose terms were modified by a deed of variation dated 28 May 2012 between the parties;
(c) a bought and sold note dated 30 December 2011 between New Asia Media Development Limited (“ New Asia Media ”) (as purchaser) and T.M. Nominees Limited, nominee of Aikford Financial Services Limited (as vendor), relating to the sale and purchase of 119,032,839 shares of KH Investment Holdings Limited (“ KH Shares ”) for a consideration of HK$41,661,493.65;
(d) a bought and sold note dated 30 December 2011 between New Asia Media (as purchaser) and Splendor Glow Limited (as vendor) relating to the sale and purchase of 112,967,161 KH Shares for a consideration of HK$39,538,506.35;
(e) a facility letter dated 30 December 2011 between New Asia Media, the Company (as guarantor) and REORIENT Financial Markets Limited (“ REORIENT ”) relating to the provision by REORIENT of a loan facility for a maximum amount of HK$31,980,397.75 to fund the unconditional mandatory cash offers (the “ Offers ”) by the Group for the securities of KH Investment Holdings Limited (details of which are set out in the joint announcement of New Asia Media, the Company and KH Investment Holdings Limited dated 16 January 2012);
(f) a placing agreement dated 30 December 2011 between New Asia Media, the Company and REORIENT relating to the placing by REORIENT, on a best effort basis, of up to 104,103,571 KH Shares and convertible loan notes acquired under the Offers;

– 164 –

GENERAL INFORMATION

APPENDIX V

(g) a provisional sale and purchase agreement dated 7 February 2012 between World Honour Investments Limited (a wholly-owned subsidiary of the Company) and Golden Linker Holdings Limited (金佳集團有限公司) and a deed of assignment dated 20 April 2012 between the parties relating to the sale and purchase of a property in Hong Kong for a total cash consideration of HK$6.8 million;
(h) an agreement dated 30 April 2012 between the Company (as purchaser) and Long Sincere International Limited (as vendor) and Wang Wei for the Company’s acquisition of 10 shares of US$1 each (representing 4.235% of the issued share capital) of, and the benefit of 50% of all amounts as at the completion date due from, Welly Champ International Limited (“ Welly Champ ”) for an aggregate consideration of HK$9 million in cash;
(i) an agreement dated 30 April 2012 between the Company (as purchaser) and Rise Jumbo Limited (as vendor) and Li Bin as varied by a supplemental agreement dated 9 May 2012 between the parties for the Company’s acquisition of 10 shares of US$1 each (representing 4.235% of the issued share capital) of, and the benefit of 50% of all amounts as at the completion date due from, Welly Champ for an aggregate consideration of HK$9 million in cash;
(j) a memorandum of agreement dated 25 May 2012 between Witty Idea Finance Company Limited (“ Witty Idea ”) (as lender) and Parklane International Holdings Limited (“ Parklane ”) (as borrower) relating to a loan advanced by the lender to the borrower in the principal amount of HK$22,500,000 and a pledge of shares of stock dated 25 May 2012 between the parties relating to the pledge of 50,000,000 shares of Wah Nam International Holdings Limited (Stock Code:159);
(k) a sale and purchase agreement of KH Shares dated 28 May 2012 between the Company (as vendor) and Eternity (as purchaser) relating to 146,640,000 KH Shares for a total consideration of HK$51,324,000;
(l) a loan agreement and memorandum dated 19 September 2012 between Kingston Finance Limited (as lender) and the Company (as borrower) relating to the provision by the lender to the borrower of a loan facility in the principal amount of HK$30,000,000 for the Company’s own use;
(m) an acquisition agreement dated 21 September 2012 between the Company (as purchaser), Lau Wang Tai, Wendy (“ Ms. Lau ”) and Tsang Yat Loi (“ Mr. Tsang ”) (as vendors) relating to the sale and purchase of 2 ordinary shares of Media Sound Technology Limited for a total consideration of HK$55,896,400;
(n) a deed of undertaking dated 21 November 2012 between the Company and Ms. Lau relating to Ms. Lau’s undertaking to indemnify the Company and/or 北京潤通融和投資顧問有限公司 (Beijing Runtong Ronghe Investment Consulting Company Limited) (“ PRC Company* ”) for debt in the amount of RMB3,000,000 owed by the PRC Company to creditors who are Independent Third Parties;

– 165 –

GENERAL INFORMATION

APPENDIX V

(o) a transfer of shares and shareholders’ loan agreement dated 12 December 2012 between Wise Mark Group Limited (“ Wise Mark ”) (as vendor), the Company (as the vendor’s guarantor), Huo Jianwen (“ Mr. Huo ”), Ng Shuk Jing (“ Ms. Ng ”) and Cheung Kam Po, Alex (“ Alex Cheung ”) (as purchasers) relating to the disposal of 5% of the entire issued share capital of Shenzhen Land Company Limited (“ Target Shares ”) and 5% of the shareholder’s loan of approximately HK$3,860,000 (“ Target Loan ”) by Wise Mark to Mr. Huo, the disposal of 90% of the Target Shares and 90% of the Target Loan by Wise Mark to Ms. Ng, and the disposal of 5% of the Target Shares and 5% of the Target Loan by Wise Mark to Alex Cheung for a total consideration of RMB69,310,000;
(p) a deed of undertaking dated 21 December 2012 between the Company, Yeung Raymond WC (“ Mr. Yeung ”) and Mr. Tsang relating to the beneficial ownership of shares held by Mr. Tsang;
(q) a deed of assignment of debt dated 24 January 2013 between Wise Mark (as assignor), Mr. Huo, Ms. Ng, Alex Cheung (as assignees), and Shenzhen Land Company Limited (“ Shenzhen Land ”) (as target company) relating to the assignment of loan of HK$3,860,000 of Shenzhen Land to assignees;
(r) a deed of tax indemnity dated 30 January 2013 between Ms. Lau, Mr. Tsang, Mr. Yeung (as indemnifiers) and the Company relating to tax indemnity given by indemnifiers in favour of the Company;
(s) a sale and purchase of property agreement dated 15 April 2013 between Kai Han Asia Pacific (Holdings) Limited (“ Kai Han ”) (as purchaser) and Baek, Young Eh (as vendor) relating to the purchase of a property located at Dongso 979, Gamsanri 980 St., Andeokmyun, Seogwipo City, Jeju Special Self-Governing Province for a consideration of 150,000,000 KRW;
(t) a sale and purchase of property agreement dated 15 April 2013 between Kai Han (as purchaser) and Baek, Jong Gil (as vendor) relating to the purchase of a property located at Gamsanri 980-1 St. Andeokmyun, Seogwipo City, Jeju Special SelfGoverning Province for a consideration of 700,000,000 KRW;
(u) a conditional share transfer and assignment of shareholders’ loan agreement dated 19 April 2013 between the Company (as vendor) and Eternal Nice (Hong Kong) Limited (佳永(香港)有限公司) (as purchaser) relating to the disposal of the entire issued share capital of Wellrich Investments Limited and the shareholder’s loan for a total consideration of RMB150,000,000;
(v) a supplemental loan agreement signed between Witty Idea (as lender) and Parklane (as borrower) on 24 May 2013 relating to an extension of repayment date of the loan mentioned in paragraph (j) above for a six-month period to 25 November 2013; and
(w) the Acquisition Agreement.

– 166 –

GENERAL INFORMATION

APPENDIX V

12. GENERAL

(a) The registered office of the Company is situated at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.
(b) The head office and principal place of business of the Company in Hong Kong is located at Rooms 2501-05, 25th Floor, China Resources Building, No. 26 Harbour Road, Wanchai, Hong Kong.
(c) The company secretary of the Company is Mr. Chan Wai, which is a member of the Hong Kong Institute of Certified Public Accountants, the Association of Chartered Certified Accountants and Institute of Chartered Accountants in England & Wales.
(d) The Company’s branch share registrar and transfer office in Hong Kong is Tricor Secretaries Limited, at 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.
(e) In case of any discrepancy, the English text of this circular shall prevail over the Chinese text.

13. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at Rooms 2501-05, 25th Floor, China Resources Building, No. 26 Harbour Road, Wanchai, Hong Kong, during normal business hours on Business Days from the date of this circular up to and including 7 November 2013:

(a) the Memorandum of Association and Bye-laws of the Company;
(b) the annual reports of the Company for the three years ended 31 March 2013, 2012 and 2011;
(c) the accountants’ reports on the financial information of the Group for the three years ended 31 March 2013, 2012 and 2011 prepared by BDO Limited;
(d) the accountants’ reports on the financial information of the Target Group for the years ended 31 December 2011 and 2012 and for five months ended 31 May 2013 prepared by BDO Limited, the text of which is set out in Appendix II to this circular and the related statement of adjustments;
(e) the report from BDO Limited on the unaudited pro forma financial information of the Enlarged Group, the text of which is set out in Appendix III to this circular;
(f) the Valuation Report from Savills Valuation and Professional Services Limited, the text of which is set out in Appendix IV to this circular;
(g) the valuation report on the fair value of the Convertible Bonds from Savills Valuation and Professional Services Limited as referred to in Appendix III to this circular;
(h) the written consents from the experts as referred to under the section headed “Qualifications and Consents of Experts” in this appendix;
(i) the material contracts referred to in the section headed “Material Contracts” in this appendix; and
(j) this circular.

– 167 –

NOTICE OF THE SGM

CULTURE LANDMARK INVESTMENT LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 674)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting (the “ SGM ”) of members (the “ Members ”) of Culture Landmark Investment Limited (the “ Company ”) will be held at Rooms 2501-05, 25th Floor, China Resources Building, No. 26 Harbour Road, Wanchai, Hong Kong on 7 November 2013 at 4:00 p.m. for the purpose of considering and, if thought fit, passing, with or without amendments, the following resolutions as ordinary resolutions of the Company (unless otherwise indicated, capitalised terms used in this notice and the following resolutions shall have the same meanings as those defined in the circular of the Company dated 23 October 2013:

ORDINARY RESOLUTIONS

To approve the Acquisition:

“ THAT :

(a) the sale and purchase agreement (the “ Acquisition Agreement ”) entered into between the Company as purchaser and Bliss Zone Limited as vendor (the “ Vendor ”) dated 1 August 2013 in relation to the acquisition (the “ Acquisition ”) of the entire issued share capital of Longisland Tourism Investment & Development Limited (the “ Sale Share ”) at a consideration of HK$400,000,000 (a copy of which has been produced to the meeting and initialled by the chairman of the meeting for the purpose of identification) and the terms thereof be and are hereby approved, confirmed and ratified;
(b) the Acquisition by the Company on the terms set out in the Acquisition Agreement be and is hereby approved;
(c) the issue of the convertible bonds (the “ Convertible Bonds ”) in the principal amount of HK$250,000,000 by the Company to the Vendor or its nominee pursuant to and upon the terms of the Acquisition Agreement be and is hereby approved;
(d) the issue and allotment of new ordinary shares (the “ Conversion Shares ”) of HK$0.05 each in the share capital of the Company from time to time upon exercise of the conversion rights (the “ Conversion Rights ”) attaching to the Convertible Bonds be and is hereby approved;

– 168 –

NOTICE OF THE SGM

(e) all other transactions contemplated under the Acquisition Agreement be and are hereby approved; and
(f) any Director be and is hereby authorised to implement and take all steps and do all such acts and things and execute all such agreements (including under seal, where appropriate) which he/they consider(s) necessary, desirable or expedient for the purpose of giving effect to and/or complete the sale and purchase of the Sale Share under the Acquisition Agreement and the transactions contemplated thereunder, including but not limited to the issue of the Convertible Bonds, the issue and allotment of the Conversion Shares from time to time upon exercise of the Conversion Rights under the Convertible Bonds, and, where required, any amendment of the terms of the Acquisition Agreement and/or the Convertible Bonds as required by, or for the purposes of obtaining the approval of, the relevant authorities or to comply with all applicable laws, rules and regulations.”

By Order of the Board Culture Landmark Investment Limited Cheng Yang Chairman

Hong Kong, 23 October 2013

Registered Office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Principal Place of Business in Hong Kong: Rooms 2501-05, 25th Floor China Resources Building No. 26 Harbour Road Wanchai Hong Kong

– 169 –

NOTICE OF THE SGM

Notes:

(i) A Member entitled to attend and vote at the SGM convened by the above notice (the “ Notice ”) or its adjourned meeting (as the case may be) is entitled to appoint one proxy to attend and on a poll to vote on his behalf in accordance with the Bye-laws of the Company. A proxy needs not be a Member.
(ii) Where there are joint holders of any Shares, any one of such joint holders may attend and vote at the SGM or its adjourned meeting (as the case may be), either personally or by proxy, in respect of such Share as if he/she/it was solely entitled thereto, but if more than one of such joint holders be present at the SGM or its adjourned meeting (as the case may be) personally or by proxy, that one of the said persons so present whose name stands first on the register of members in respect of such Share shall alone be entitled to vote in respect thereof.
(iii) The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power of attorney or authority, must be lodged with the Company’s branch share registrar in Hong Kong, Tricor Secretaries Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong for registration not less than 48 hours before the time appointed for holding the SGM or its adjourned meeting (as the case may be) and in default, the proxy will not be treated as valid.
(iv) Completion and return of the form of proxy will not preclude a Member from attending the meeting and voting in person at the SGM or any of its adjourned meeting thereof if he/she/it so desires. If a Member attends the meeting after having deposited the form of proxy, his/her/its form of proxy shall be deemed to be revoked.
(v) To ascertain the entitlements to attend and vote at the SGM, Members must lodge the relevant transfer document(s) and share certificate(s) at the office of the Company’s branch registrar in Hong Kong no later than 4:00 p.m. on 6 November 2013 for registration.
(vi) In compliance with Rule 13.39(4) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”), voting on the resolution proposed in the Notice shall be decided by way of a poll at the SGM.
(vii) If a tropical cyclone warning signal no. 8 or above, or a “black” rainstorm is in effect at any time after 8:00 a.m. on the date of the SGM, the SGM will be postponed. The Company will post an announcement on the respective websites of the Company (http://www.tricor.com.hk/webservice/000674) and the Stock Exchange (http://www.hkexnews.hk) to notify Members of the date, time and place of the rescheduled SGM.

If a tropical cyclone warning signal no. 8 or above, or a “black” rainstorm warning signal is lowered or cancelled at or before 8:00 a.m. on the date of the SGM and where conditions permit, the SGM will be held as scheduled. The SGM will also be held as scheduled when an amber or red rainstorm warning signal is in force.

Members should decide whether or not they would attend the SGM under any bad weather condition having considered their own situations and if they do so, they are advised to exercise care and caution.

(viii) Members are advised to read the circular of the Company dated 23 October 2013 which contains information concerning the resolution to be proposed at the SGM.

As at the date of this circular, the executive Directors of the Company are Mr. Cheng Yang, Mr. Li Weipeng and Ms. Lei Lei; and the independent non-executive Directors are Mr. Tong Jingguo, Mr. Yang Rusheng and Mr. So Tat Keung.

– 170 –

AI assistant

Weiye Holdings Limited — Proxy Solicitation & Information Statement 2013

50009_rns_2013-10-22_a1a470e2-f580-432e-95a0-7a45018517db.pdf

CULTURE LANDMARK INVESTMENT LIMITED

MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF LONGISLAND TOURISM INVESTMENT & DEVELOPMENT LIMITED INVOLVING THE ISSUE OF CONVERTIBLE BONDS

Financial adviser to Culture Landmark Investment Limited

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

CULTURE LANDMARK INVESTMENT LIMITED

MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF LONGISLAND TOURISM INVESTMENT & DEVELOPMENT LIMITED INVOLVING THE ISSUE OF CONVERTIBLE BONDS AND NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

LETTER FROM THE BOARD

ACQUISITION AGREEMENT

Principal terms of the Acquisition Agreement

Assets to be acquired

Consideration

Basis of the Consideration

Conditions Precedent

Completion

CONVERTIBLE BONDS

LETTER FROM THE BOARD

(1) Principal amount

(2) Interest

(3) Maturity Date

(4) Conversion

LETTER FROM THE BOARD

(5) Conversion Price

(6) Adjustments of the Conversion Price

(7) Conversion Shares

(8) Transferability

(9) Voting rights at general meeting

(10) Status

(11) Redemption

SHAREHOLDING STRUCTURE OF THE COMPANY

INFORMATION OF THE TARGET GROUP

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

INFORMATION OF THE XI’AN PROJECT

DEVELOPMENT OF THE XI’AN PROJECT

Development plan

Development timetable

Construction costs

LETTER FROM THE BOARD

Human resources for and expertise in property development

FINANCIAL INFORMATION OF THE TARGET GROUP

INFORMATION OF THE VENDOR

POSSIBLE FINANCIAL EFFECTS OF THE ACQUISITION ON THE GROUP

REASONS FOR THE ACQUISITION

IMPLICATIONS OF THE LISTING RULES

SGM

VOTING BY POLL

RECOMMENDATION

ADDITIONAL INFORMATION

1. THREE YEAR FINANCIAL INFORMATION

2. MATERIAL ACQUISITIONS SINCE LATEST PUBLISHED AUDITED ACCOUNTS

3. INDEBTEDNESS STATEMENT

Borrowings

Note:

Securities

APPENDIX I

4. WORKING CAPITAL

5. FINANCIAL AND TRADING PROSPECT OF THE ENLARGED GROUP

6. MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

For the year ended 31 March 2011

Financial Review

Consolidated results

Review

(a) Hotel operations

(b) Restaurant operations

(c) Entertainment business

(d) Property investment

(e) Licence fee collection business

APPENDIX I

(f) Provision of intellectual property enforcement services

Weiye Holdings Limited Proxy Solicitation & Information Statement 2013