益華百貨控股有限公司 Yi Hua Department Store Holdings Limited (Incorporated in the Cayman Islands with Limited Liability)

益華百貨控股有限公司 Yi Hua Department Store Holdings Limited (incorporated in the Cayman Islands with limited liability)

Stock Code: 2213

Placing and Public Offer

Sponsor

Kingsway Capital Limited

Joint Bookrunners and Joint Lead Managers

Kingsway Financial Services Group Limited Upbest Securities Company Limited IMPORTANT

If you are in any doubt about any of the contents of this prospectus, you should obtain independent professional advice.

Yi Hua Department Store Holdings Limited ̡ ശ ϵ ஬ છ ٰ Ϟ ࠢ ʮ ू (incorporated in the Cayman Islands with limited liability) LISTINGONTHEMAINBOARDOF THESTOCKEXCHANGEOFHONGKONGLIMITED BY WAY OF PLACING AND PUBLIC OFFER Number of Offer Shares : 90,000,000 Shares (subject to the Adjustment Option) Number of Placing Shares : 81,000,000 Shares (subject to reallocation and the Adjustment Option) Number of Public Offer Shares : 9,000,000 Shares (subject to reallocation) Offer Price : Not more than HK$1.40 per Offer Share and expected to be not less than HK$1.00 per Offer Share (payable in full on application plus brokerage of 1%, SFC transaction levy of 0.003% and Stock Exchange trading fee of 0.005% and subject to refund) Nominal value per Share : HK$0.01 Stockcode : 2213

Sponsor

Kingsway Capital Limited

Joint Bookrunners and Joint Lead Managers

Kingsway Financial Services Group Limited Upbest Securities Company Limited

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this prospectus, 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 prospectus.

A copy of this prospectus, having attached thereto the documents specified in the section headed “Documents delivered to the Registrar of Companies in Hong Kong and available for inspection” in Appendix V to this prospectus, has been registered by the Registrar of Companies in Hong Kong as required by Section 342C of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission of Hong Kong and the Registrar of Companies in Hong Kong take no responsibility for the contents of this prospectus or any of the other documents referred to above. The Offer Price is expected to be determined by an agreement between our Company and the Joint Bookrunners on the Price Determination Date. The Price Determination Date is expected to be on or about Monday, 2 December 2013 or such other date or time as may be agreed between the Company and the Joint Bookrunners but in any event, not later than Wednesday, 4 December 2013. The Offer Price will be not more than HK$1.40 per Offer Share and is expected to be not less than HK$1.00 per Offer Share, unless otherwise announced. Applicants for the Offer Shares are required to pay, on application, the maximum Offer Price of HK$1.40 for each Offer Share together with brokerage of 1%, SFC transaction levy of 0.003% and Stock Exchange trading fee of 0.005%, subject to refund if the Offer Price should be lower than HK$1.40 (the maximum Offer Price). The Joint Bookrunners, with the consent of our Company, may reduce the indicative Offer Price range below that as stated in this prospectus (which is HK$1.00 to HK$1.40) at any time prior to the morning of the last day for lodging applications under the Public Offer. In such event, our Company will, as soon as practicable following the decision to make such reduction, and in any event not later than the morning of the last day for lodging applications under the Public Offer, cause to be published in The Standard (in English) and the Hong Kong Economic Times (in Chinese) an announcement and to be posted on the website of the Stock Exchange (www.hkexnews.hk) and on the website of our Company (www.yihua.com.cn) of such change. If applications for the Public Offer Shares have been submitted, then even if the indicative Offer Price range is so reduced, such applications cannot be subsequently withdrawn. If, for whatsoever reason, our Company and the Joint Bookrunners are unable to reach an agreement at or prior to 12:00 noon on Wednesday, 4 December 2013 or such other date or time as may be agreed between our Company and the Joint Bookrunners, the Share Offer will not become unconditional and will lapse immediately. In such event, our Company will issue an announcement to be published in The Standard (in English) and the Hong Kong Economic Times (in Chinese). Prospective investors of the Share Offer should note that the Share Offer will not proceed if either (i) the Sponsor; or (ii) the Joint Bookrunners together terminates the obligations of the Underwriters under the Underwriting Agreements if any of the events set out in the section headed “Underwriting – Grounds for termination” of this prospectus occurs prior to 8:00 a.m. on the Listing Date. It is important that you refer to the section headed “Underwriting” of this prospectus for further details. Prior to making an investment decision, prospective investors should carefully consider all of the information set out in this prospectus, including, without limitation, the risk factors set out in the section headed “Risk factors” of this prospectus.

26 November 2013 EXPECTED TIMETABLE Note 1

If there is any change in the following expected timetable of the Share Offer, we will issue an announcement in Hong Kong to be published in English in The Standard and in Chinese in the Hong Kong Economic Times and to be posted on the website of the Company at www.yihua.com.cn and the website of the Stock Exchange at www.hkexnews.hk.

Application lists of the Public Offer open (Note 2) ...... 11:45a.m.on Friday, 29 November 2013

Latest time for lodging WHITE and YELLOW Application Forms and to give electronic application instructions to HKSCC (Note 3) ...... 12:00 noon on Friday, 29 November 2013

Application lists of the Public Offer close ...... 12:00 noon on Friday, 29 November 2013

Expected price determination date (Note 4) ...... Monday, 2 December 2013

Announcement of (i) the Offer Price; (ii) the indication of the level of interest in the Placing; (iii) the level of applications in the Public Offer; (iv) the basis of allotment of Public Offer Shares under the Public Offer; and (v) the number of Offer Shares reallocated, if any, between the Public Offer and the Placing to be published on the Stock Exchange’s website at www.hkexnews.hk and the Company’s website at www.yihua.com.cn onorbefore ...... Tuesday, 10 December 2013

Results of allocation in the Public Offer will be available at www.tricor.com.hk/ipo/result with a “search by ID” function ...... Tuesday, 10 December 2013

Announcement of results of allotment of the Public Offer (with success applicants’ identification document numbers, where applicable) available through a variety of channels as described in the section headed “How to apply for the Public Offer Shares – Publication of Results” of this prospectus ...... Tuesday, 10 December 2013

Despatch of share certificates in respect of wholly or partially successful applications on or before (Notes 5, 6, 7, 8) ...... Tuesday, 10 December 2013

Despatch of refund cheques in respect of wholly successful (if applicable) and wholly or partially unsuccessful applications on or before (Notes 6 and 7) . . . . .Tuesday, 10 December 2013

Dealings in the Shares on the Main Board of the Stock Exchange expected to commence on ...... 9:00 a.m. on Wednesday, 11 December 2013

– i – EXPECTED TIMETABLE Note 1

Notes:

1. All dates and times refer to Hong Kong local dates and times, except as otherwise stated. Details of the structure of the Share Offer, including its conditions, are set out in the “Structure of the Share Offer” in this prospectus.

2. If there is a “black” rainstorm warning or a tropical cyclone warning signal number 8 or above in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Friday, 29 November 2013, the application lists will not open or close on that day. Further information is set forth in “How to apply for the Public Offer Shares – Effect of bad weather conditions on the opening of the application lists” in this prospectus.

3. Applicants who apply for the Public Offer Shares by giving electronic application instructions to HKSCC should refer to the section headed “How to apply for the Public Offer Shares – Applying by giving electronic application instructions to HKSCC via CCASS” of this prospectus.

4. Please note that the Price Determination Date, being the date on which the Offer Price is to be determined, is expected to be on or about Monday, 2 December 2013 and, in any event, not later than Wednesday, 4 December 2013. If, for any reason, the Offer Price is not agreed between the Company and the Joint Bookrunners, the Share Offer will not proceed and will lapse. Notwithstanding that the Offer Price may be less than the maximum offer price of HK$1.40 per Share, applicants must pay the maximum offer price of HK$1.40 per Share at the time of application, plus brokerage of 1%, SFC transaction levy of 0.003% and Stock Exchange trading fee of 0.005%, but will be refunded the surplus application monies, without interest, as provided in the section headed “How to apply for the Public Offer Shares” of this prospectus.

5. Share certificates for the Offer Shares are expected to be issued on Tuesday, 10 December 2013 but will only become valid certificates of title at 8:00 a.m. on Wednesday, 11 December 2013 provided that (i) the Public Offer has become unconditional in all respects and (ii) neither of the Underwriting Agreements has been terminated. If the Public Offer does not become unconditional or either of the Underwriting Agreements is terminated, we will make an announcement as soon as possible.

6. Refund cheques will be issued in respect of wholly or partially unsuccessful applications pursuant to the Public Offer and also in respect of wholly or partially successful applications in the event that the final Offer Price is less than the price payable on application. Part of the applicant’s Hong Kong identity card number or passport number, or, if the applicant is made by joint applicants, part of the Hong Kong identity card number or passport number of the first named applicant, provided by the applicant(s) may be printed on the refund cheque, if any. Such data would also be transferred to a third party for refund purposes. Bank may require verification of an applicant’s Hong Kong identity card number or passport number before encashment of the refund cheque. Inaccurate completion of an applicant’s Hong Kong identity card number or passport number may lead to delay in encashment of or may invalidate the refund cheque.

7. Applicants who have applied on WHITE Application Forms for 1,000,000 or more Public Offer Shares under the Public Offer and have provided all information required by their Application Forms, may collect their refund cheque(s) (if applicable) and/or share certificate(s) (if applicable) in person from our Hong Kong Branch Share Registrar, Tricor Investor Services Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, between 9:00 a.m. to 1:00 p.m. on Tuesday, 10 December 2013. Applicants being individuals who is eligible personal collection must not authorise any other person to make collection on their behalf. Applicants being corporations is eligible for personal collection must attend by their authorised representatives bearing letters of authorisation from their corporations stamped with the corporation’s chop. Identification and (where applicable) authorisation documents acceptable to our Hong Kong Branch Share Registrar, Tricor Investor Services Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong must be produced at the time of collection.Applicants who have applied on YELLOW Application Forms for 1,000,000 or more Public Offer Shares under the Public Offer may collect their refund cheques, if any, in person but may not elect to collect their share certificates, which will be deposited into CCASS for the credit of their designated CCASS Participant’s stock account or CCASS Investor Participant’s stock account, as appropriate. The procedures for collection of refund cheques for YELLOW Application Form applicants are the same as those for WHITE Application Form applicants.

8. Uncollected share certificates and refund cheques will be despatched by ordinary post at the applicants’ own risk to the addresses specified in the relevant Application Forms. Further information is set out in the section headed “How to apply for the Public Offer Shares – Despatch/Collection of share certificates and refund monies” of this prospectus.

– ii – EXPECTED TIMETABLE Note 1

For details of the structure of the Share Offer, including its conditions, please see the section headed “Structure of the Share Offer” of this prospectus.

It is important that prospective investors of the Offer Shares should note that either (i) the Sponsor; or (ii) the Joint Bookrunners together is/are entitled to terminate the Underwriting Agreement by notice in writing to us upon the occurrence of any of the events set forth under the section headed “Underwriting – Underwriting arrangements and expenses – Grounds for termination” of this prospectus at any time up to 8:00 a.m. on the Listing Date. Such events include, without limitation, any act of God, war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike or lockout. It is important that prospective investors should refer to the section headed “Underwriting” of this prospectus for further details.

You should rely only on the information contained in this prospectus and the related Application Forms to make your investment decision. The Company has not authorised anyone to provide you with information that is different from what is contained in this prospectus and the related Application Forms. Any information or representation not made in this prospectus and the related Application Forms must not be relied upon by you as having been authorised by the Company, the Sponsor, the Joint Bookrunners, their respective directors or affiliates of any of them or any other person or parties involved in the Share Offer.

– iii – CONTENTS

This prospectus is issued by us solely in connection with the Share Offer and does not constitute an offer to sell or a solicitation of an offer to buy any security other than the Offer Shares offered by this prospectus pursuant to the Share Offer. This prospectus may not be used for the purpose of, and does not constitute, an offer or invitation in any other jurisdiction or in any other circumstances. No action has been taken to permit a public offering of the Offer Shares or the distribution of this prospectus in any jurisdiction other than Hong Kong.

You should rely only on the information contained in this prospectus and the related Application Forms to make your investment decision.

We have not authorised anyone to provide you with information that is different from what is contained in this prospectus and the related Application Forms. Any information or representation not contained or made in this prospectus and the related Application Forms must not be relied on by you as having been authorised by us, the Sponsor, the Joint Bookrunners, any of their respective directors or any other person or party involved in the Share Offer.

Please note that the totals set forth in the tables in this prospectus may differ from the sum of individual items in such tables due to rounding.

Page

Expected timetable ...... i

Contents ...... iv

Summary ...... 1

Definitions ...... 14

Glossary of technical terms ...... 30

Forward-looking statements ...... 31

Risk factors ...... 33

Waivers from strict compliance with the Listing Rules ...... 63

Information about this prospectus and the Share Offer ...... 65

Directors and parties involved in the Share Offer ...... 68

Corporate information ...... 72

– iv – CONTENTS

Industry overview ...... 75

Regulations ...... 92

History and development ...... 105

Business ...... 129

Connected transactions ...... 209

Relationship with the Controlling Shareholders ...... 238

Directors, senior management and staff ...... 248

Substantial Shareholders ...... 263

Share capital ...... 265

Financial information ...... 268

Future plans and use of proceeds ...... 350

Underwriting ...... 354

Structure of the Share Offer ...... 363

How to apply for the Public Offer Shares ...... 372

Appendix I – Accountant’s report ...... I-1

Appendix II – Unaudited pro forma financial information ...... II-1

Appendix III – Summary of the constitution of the Company and Cayman Islands Company Law ...... III-1

Appendix IV – Statutory and general information ...... IV-1

Appendix V – Documents delivered to the Registrar of Companies in Hong Kong and available for inspection ...... V-1

– v – SUMMARY

This summary aims to give you an overview of the information contained in this prospectus. As it is a summary, it does not contain all the information that may be important to you. You should read this prospectus in its entirety before you decide to invest in the Offer Shares. There are risks associated with any investment. Some of the particular risks in investing in the Offer Shares are set out in the section headed “Risk factors” of this prospectus. You should read that section carefully before you decide to invest in the Offer Shares.

OVERVIEW

We are a long established department store chain based in Shiqi, Zhongshan City with over 18 years of history, principally operating in Guangdong Province and Shandong Province in the PRC and are expanding to Jiangsu Province, the PRC. According to Euromonitor Reports, we ranked six amongst the top ten mixed retailers in Guangdong Province, the PRC in terms of retail sales value (excluding sales tax) in 2012. Furthermore, we are the only one of such top ten mixed retailers in Guangdong Province, the PRC which focus exclusively on second-tier and third-tier cities of Guangdong Province, the PRC. We positioned our stores in the market as a department store with contemporary ambience targeting the middle and upper income segments. As at the Latest Practicable Date, our retail network consists of 13 Stores, comprising ten department stores and three community stores covering a total of over 279,770 sq.m. of retail space.

In the past 18 years of our development, we have leveraged on the growth of the PRC retail industry and developed “ूശϵ஬” (Yihua Department Store) as a well-known retail brand in Guangdong Province, the PRC.

We have been adopting the strategy of avoiding to establish our stores in the big cities like municipalities and provincial capitals (where retail industry is characterised by homogenisation and intense competition) and focusing our stores in prefecture-level cities (ή ॴ̹) which are in the growing stage of their economic development and have better business development potential. Starting up new departmental stores in new development areas at relatively competitive costs (e.g. lower rental costs) allows us to capture the opportunities offered in the location by the developing nascent market, growth in population, the ever-improving quality and standards of living, and therefore greater customer demand while controlling our operating expenses. As the region matures, our stores together with other existing or future businesses in our vicinity will attract pedestrian flow to our mutual benefit. Some of the complementary business may include those owned by the Yihua Investment Group.

In the past, we have devoted ourselves in operating department store chain under the well-known brand name of “ूശϵ஬” (Yihua Department Store) and looking forward, we will adopt the strategy of establishing more department stores and community stores in those cities in the PRC, which, we believe, could offer promising market potential in terms of long-term sustainable consumer spending and economic growth.

– 1 – SUMMARY

Our Group is committed to upholding integrity in conducting our business and as such our Group received, among others, the following awards and recognitions:

;(Well-known brand of Guangdong Province*” (ᄿ؇޲ഹΤਠᅺ“ •

;(͜Άุڦ͜൙ᄆ"""ॴڦTriple A Credit Rating Enterprise*” (Άุ“ •

• “Trustworthy Enterprise of Zhongshan City, Guangdong Province for continuous 15 ;(͜Άุڦyears*” (ஹᚃɤʞϋᄿ؇޲eʕʆ̹ςΥΝࠠ

ਕБุɤԳఊ؂ܝNationalAfter-sale Service Industry’s Top 10 Entities*” (Ό਷ਯ“ • З); and

• “Top 50 Chain Enterprises in Guangdong” in 2010 and 2012* ( 2010ϋʿ2012ϋܓ .(ᄿ؇ஹᕁʞɤ੶Άุ

For the year ended 31 December 2012 and the five months ended 31 May 2013, our revenue from continuing operations were approximately RMB678.9 million and approximately RMB302.4 million respectively. Our profit attributable to equity holders of the Company for the same periods were approximately RMB42.6 million and approximately RMB12.3 million respectively.

We intend to open a new Store in Guangdong Province in 2014. However, we also intend to expand our networks in and outside of Guangdong Province after Listing. We also intend to open two new Stores in Jiangsu Province and Shandong Province, the PRC, which are expected to commence business one after another in 2014 and 2015.

OURCOMPETITIVESTRENGTHS–HIGHLIGHTS

We believe that the following are our key competitive strengths:

• our “ूശϵ஬” (Yihua Department Store) brand is trusted by customers, the PRC industry bodies and governmental bodies

• we are experienced in store locations selection and expansion

• we can benefit from economies of scale of our 13 Stores, such as stronger bargaining power with our direct suppliers and concessionaires, and cost efficiency in marketing and operational management

• we have an experienced and stable management team leading and motivating our staff

– 2 – OUR RETAIL NETWORK

Existing stores

The following table sets out certain information of our 13 existing Stores.

Year of Sections located in commencement Connected the store as at the transactions Latest Practicable Location in the PRC of business Aggregate GFAApproximate duration of lease(s) Date (City, Province) operation (Note 1)(earliest expiry year of relevant(Note lease) 2) (Note 3) Stores (sq.m.) (approx.)

Department Store Zhongshan store (main store) • DepartmentZhongshan, store Guangdong 1995 48,121 18 years 8 months (1 September 2008 to 30 April 2027) • Electrical appliance 18 years 8 months (1 September 2008 to 30 April 2027) • Supermarket 4 years 2 months (12 March 2013 to 31 May 2017) C • Furniture 4 years 2 months (12 March 2013 to 31 May 2017) C

1 year and 9 months (12 March 2013 to 31 December(Note 2014) 4) C SUMMARY 10 years (1 September 2012 to 31 August 2022) C 1 year and 9 months (20 March 2013 to 31 December(Note 2014) 4) C –

– 3 Guzhen store • Department storeZhongshan, Guangdong 2006 14,789 12 years 6 months (1 July 2006 to 31 December 2018) • Electrical appliance 11 years 5 months (1 July 2006 to 30 November(Note 2017) 5) • Supermarket 10 years (1 January 2010 to 31 December 2019) C

Qingyuan store • Department storeQingyuan, Guangdong 2003 17,647 15 years and 1 month (1 April 2003 to 30 April 2018) • Electrical appliance 6 years 3 months (1 February 2012 to 30 April 2018) 6 years 2 months (1 March 2012 to 30 April 2018) • Supermarket 4 years 7 months (1 October 2013 to 30 April 2018)

Jiangmen store • Department storeJiangmen, Guangdong 2004 56,910 17 years 1 month (16 June 2006 to 25 July 2023) C C • Electrical appliance 10 years (17 September 2009 to 16 September 2019) • Supermarket • Furniture

Shaoguan store • Department storeShaoguan, Guangdong 2008 30,006 15 years 5 months (10 September 2008 to 28 February 2024) • Electrical appliance • Supermarket

Taiyangcheng store • Department store Zhongshan, Guangdong 2013 17,432 15 years 6 months (20 October 2012 to 18 April 2028)

Yangchun store • Department store Yangchun, Guangdong 2013 8,480 10 years (5 February 2013 to 4 February 2023) Year of Sections located in commencement Connected the store as at the transactions Latest Practicable Location in the PRC of business Aggregate GFAApproximate duration of lease(s) Date (City, Province) operation (Note 1)(earliest expiry year of relevant(Note lease) 2) (Note 3) Stores (sq.m.) (approx.)

Tai’anstore(Longtan) • DepartmentstoreTai’an, Shandong 2013 14,967 20 years (16 June 2013 to 15 June 2033) • Supermarket

Yingde store • Department storeYingde, Guangdong 2013 13,800 12 years (29 June 2013 to 28 June 2025) • Supermarket

Yangjiang store • Department storeYangjiang, Guangdong 2013 46,093 15 years (1 July 2013 to 30 June 2028) • Supermarket 15 years (1 July 2013 to 30 June 2028) • Furniture

Community Store Jiangnan store • Supermarket Zhongshan, Guangdong 2010 3,689 15 years (1 October 2010 to 30 September 2025)

Hetang store • Supermarket Jiangmen, Guangdong 2011 6,966 15 years (1 June 2011 to 31 May 2026) • Electrical appliance SUMMARY Fusha store • Supermarket Zhongshan, Guangdong 2012 870 2 years 8 months (1 May 2012 to 31 December 2014) C – – 4

Note 1: The approximate figure of the total retail space excludes the GFA of the premises in the leases which relate to temporary commercial area, offices, car parking spaces and staff quarters. Note 2: These leases are for commercial purposes and where our Stores are located. There are situations where multiple leases are entered into in regards to a department store. Reasons include but are not limited to situations when additional leases for nearby or adjoining parts of the premises are entered into after signing of the initial lease but while the initial lease is still operative or when the premises being leased have different owners. Note 3: Those marked with “C” are connected transactions set out in the section headed “Connected transactions” of this prospectus. Note 4: The properties include an additional area at Level 5 (with aggregate GFA of approximately 2,497 sq.m.) and Unit 901 (with GFA of approximately 1,888 sq.m.) of West Wing and Unit 501 (with GFA of approximately 1,063 sq.m.) of East Wing which terms all expire on 31 December 2014 (for details, please refer to the section headed “Connected Transactions – Non-exempt continuing connected transactions – Tenancy agreements with Guangdong Yihua Management” and the paragraphs “(a) First Tenancy Agreements” and “(b) Second Tenancy Agreements” of this prospectus.) Note 5: We expect that we will not renew this lease upon expiry due to issues concerning defective title of the relevant property. For further details, please refer to the section headed “Business – Leased property” of this prospectus. SUMMARY

New stores to be opened

The following table sets out the location and the tentative business operation commencement time of our three new Stores.

Tentative Location in the PRC commencement timing Stores (City, Province) (Note)

Department Store Zhenjiang store Zhenjiang, Jiangsu First quarter 2014 Enping store Jiangmen, Guangdong Third quarter 2014 Tai’an store (Taishan) Tai’an, Shandong Second quarter 2015

Note: Lease agreements have not yet been entered into for Zhenjiang store, Enping store and Tai’an store (Taishan) and therefore the respective GFA and duration are yet to be determined.

OPERATIONAL STRUCTURE

Department stores

(i) department store section, which offers an extensive variety of merchandise, including watches, jewelries, cosmetics, handbags, leather goods, and children’s products, clothing, shoes, textiles, sports wear and beddings;

(ii) supermarket section, trading under the brand “Yihua Lejia Supermarket” (ूശᆀ࢕ ൴̹), which offers mainly daily essential products such as food and beverages, perishables and other household products; and

(iii) electrical appliances section, trading under the brand “Yihua Sihai Electrical Appliance Centre” (ूശ̬ऎཥኜ), which offers a variety of electrical appliances ranging from large household electrical appliances (such as refrigerators, washing machines, air conditioners, televisions, kitchen appliances etc.) to small household electrical appliances (such as rice cookers, hair dryers, toasters etc.).

We have established in 2013 the fourth section, the furniture section trading under the brand “Yihua Shijia” (ूശ˰࢕) in Zhongshan store (main store), Yangjiang store and Jiangmen store as at the Latest Practicable Date. We have registered the trademarks in the PRC for “YiHua SiHai Electrical Appliance Centre” (ूശ̬ऎཥኜ) and “YiHua LeJia Supermarket” (ूശᆀ࢕൴̹).

Community stores

Our community store offers mainly daily essential products such as food and beverages, perishables, other household products and small household electrical appliances. There are only supermarket section and small household electrical appliances section at these community stores due to retail space constraint.

– 5 – Business model

Revenue breakdown and financial performance

The tables below set out our revenue and gross profit margin, analysed by business segments for the Track Record Period.

For the year ended 31 December For the five months ended 31 May

2010 2011 2012 2013

Department Electrical GrossDepartment Electrical GrossDepartment Electrical GrossDepartmental Electrical Gross storeSupermarketappliances profit storeSupermarketappliances profit storeSupermarketappliances profit storeSupermarketappliance profit Revenue segment segmentsegmentmargin Total segment segmentsegmentmargin Total segment segmentsegmentmargin Total segment segmentsegment Furnituremargin Total

RMB’000 RMB’000 RMB’000RMB’000 RMB’000 RMB’000 RMB’000RMB’000 RMB’000 RMB’000 RMB’000RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Direct sales 5,941 231,852 179,029 416,8223,500 277,34912.3% 194,365 475,2146,204 266,18614.9% 146,943 419,3334,590 114,81416.0% – 62,706 182,110 16.3% Concessionaire sales132,009 7,130 7,333 146,472 100% 167,146 11,791 10,296 189,233 100%4,896 181,441 5,356– 15,569 96,179 11,845 100% 208,855 100% 85,927 Management fee and service income from

operations 27,972 2,044 2,799 32,815 100%2,179 4,023 30,938 37,140 100%6,031 4,479 28,397 38,907 100%3,290 1,393 13,007 251 17,941SUMMARY 100% Rental income 6,352 2,185 558 9,0959,775 100%2,505 1,219 13,4997,725 100%2,564 1,492 11,7812,913 100%1,830 900 526 6,169 100% –

– 6 Total 172,274 243,211 189,719 605,204 39.6% 211,359 293,824 209,903 715,086 43.5% 223,767 290,350 164,759 678,876 48.1% 106,437 124,830 70,355 777 302,399 49.6%

Gross profit margin97.7% 19.7% 13.1%98.8% 39.6% 21.7% 18.1%97.9% 43.5% 23.8% 23.5%96.5% 48.1% 24.5% 22.6% 100% 49.6%

Our revenue was mainly derived from (i) direct sales; (ii) commission from concessionaires; (iii) rental income from our shop tenants at our stores; and (iv) management fee and service income from operations.

During the Track Record Period, revenue of our Group was mainly derived from our supermarket segment, whereas our gross profit was mainly derived from our department store segment. Revenue from our department store segment was mainly generated as commission income from concessionaires, which does not require us to incur costs for purchase of and changes in inventories, we therefore maintained a high level of gross profit margin for our department store segment.

Our revenue from the department store segment, which was primarily in the form of commission income from concessionaire sales was in an increasing trend during the Track Record Period. The higher revenue in 2011 and 2012 was mainly due to (i) the increase in sales of our existing stores; and (ii) the increase in the commission as a percentage of concessionaires sales we charge our concessionaires. We have recorded a higher revenue from our department store segment for the five months ended 31 May 2013 than the five months ended 31 May 2012 mainly due to (i) the increase in sales of gold products due to the decrease in the price of gold; (ii) the increase in sales of cosmetics upon the launching of a cosmetic brand in our main store; and (iii) the sales in our new Taiyangcheng store and Yangchun store. SUMMARY

The increase in revenue from supermarket segment, which primarily in the form of direct sales, in 2011 was mainly due to (i) the inflation in the PRC; and (ii) our increased promotion activities for our supermarket section. Our revenue from supermarket segment decreased by approximately 1.2% in 2012, and decreased by approximately 0.4% for the five months ended 31 May 2013 compared to the five months ended 31 May 2012 was mainly due to (i) the decrease in group purchases in view of the market environment in Guangdong Province, the PRC; and (ii) there were other supermarkets commenced business near our stores, which had intensified the market competition and affected our sales in supermarket segment.

The increase in revenue from electrical appliances segment, which primarily in the form of direct sales, in 2011 was mainly due to (i) the end of the Change of the Old for New Program in 2011; and (ii) the inflation in the PRC. Our revenue subsequently decreased slightly in 2012, mainly due to (i) the end of the Change of the Old for New Program in 2011 reduced the demand of electrical products as the relevant sales already occurred in 2011; and (ii) bearish properties markets in the PRC also reduced the demand of household appliance from new house owners. Our revenue from direct sales of electrical appliances segment reduced by approximately 1.2% for the five months ended 31 May 2013 compared to the five months ended 31 May 2012 mainly due to competition from online retailers with cheaper products.

Our gross profit margins for supermarket segment and electrical appliances segment were in an increasing trend during the Track Record Period. The increase in gross profit margin for supermarket segment and electrical appliances segment in 2011 and 2012 was mainly due to our increasing bargaining power from our direct suppliers. Besides, our direct suppliers from electrical appliances segment decreased the cost of goods supplied to us in 2012 so as to provide initiative to our stores to promote their products and stimulate sales after the termination of the Change of the Old for New Program in 2011. The increase in our revenue from concessionaire sales of supermarket segment also contribute to a higher gross profit margin in 2012.

Our gross profit margin for direct sales of goods increased from approximately 12.3% in 2010 to approximately 14.9% in 2011 and further increased to approximately 16.0% in 2012. The increase was mainly attributable to the increase in gross profit and gross profit margin for supermarket segment and electrical appliances segment for the corresponding period. We have recorded a lower gross profit margin for direct sales for the five months ended 31 May 2013 compared to the five months ended 31 May 2012 mainly attributable to the significant increase in sales of our gold products, which has a lower gross profit margin generally compared to other products.

Net profit margin before interest and tax and net profit margin vary among the market participants due to certain factors, including segment allocation (allocation among department store segment, supermarket segment, electrical appliances segment and furniture segment) and the revenue nature (allocation among revenue from direct sales of goods, commissions from concessionaire sales, management fee and service income from operations and rental income). Generally, the revenue from department segment commissions from concessionaire sales would have higher profit margin. Comparing our Group, which has a higher revenue from electrical appliances segment and supermarket segment than department store segment, with some of the market participants, which may have a higher revenue from department store, our Group may have comparatively lower net profit margin before interest and tax and net profit margin.

– 7 – SUMMARY

KEY OPERATIONAL AND FINANCIAL DATA

The tables below present summary of financial information for the periods indicated and should be read in conjunction with our financial information in Appendix I of this prospectus.

Highlight of combined statements of comprehensive income

Five months Year ended 31 December ended 31 May 2010 2011 2012 2013 RMB’000 % RMB’000 % RMB’000 % RMB’000 %

Revenue 605,204 100.0% 715,086 100.0% 678,876 100.0% 302,399 100.0% Gross profit 239,808 39.6% 310,773 43.5% 326,686 48.1% 149,888 49.6% Operatingprofit 45,665 7.5% 68,300 9.6% 58,686 8.6% 19,277 6.4% Profit for the year/period 30,530 5.0% 49,167 6.9% 43,643 6.4% 13,562 4.5% Profit for the year/period attributable to equity holders of theCompany 31,208 5.2% 49,189 6.9% 42,565 6.3% 12,304 4.1%

Highlight of combined balance sheets

As at As at 31 December 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Total non-current assets 122,141 121,332 140,141 169,683 Total current assets 374,024 487,921 514,666 414,580 Total current liabilities 495,515 538,999 556,575 451,155 Net current liabilities (121,491) (51,078) (41,909) (36,575) Total non-current liabilities 4,771 25,208 9,543 30,857 Net (liabilities)/assets (4,121) 45,046 88,689 102,251

For the three years ended 31 December 2012, our revenue from continuing operations was approximately RMB605.2 million, approximately RMB715.1 million and approximately RMB678.9 million respectively, representing a CAGR of approximately 5.9%. Our gross profit was approximately RMB239.8 million, approximately RMB310.8 million and approximately RMB326.7 million for the three years ended 31 December 2012 respectively, representing a CAGR of approximately 16.7%. Meanwhile, our revenue from continuing operations and our gross profit for the five months ended 31 May 2013 were approximately RMB302.4 million and approximately RMB149.9 million respectively.

Our profit for the year ended 31 December 2011 increased by approximately 61.0%, mainly due to the increases in our revenue was higher than the increase in our purchase of and changes in inventories and higher other operating expenses. Our profit for the year ended 31 December 2012 decreased by approximately 11.2%, primarily due to the decrease in revenue and the increase in employee benefit expenses. We have recorded an increase in revenue of approximately 3.6% but a decrease in profit of approximately 43.0% for the five months ended 31 May 2013 compared to the five months ended 31 May 2012. Such decrease in profit was primarily due to (i) higher employee benefit expenses; (ii) higher operating lease rental expense and property management fee; and (iii) listing expenses.

– 8 – SUMMARY

Our net current liabilities position as at 31 December 2010, 2011 and 2012 and 31 May 2013 was primarily attributable our business nature. Our business nature is such that majority of our liabilities are short term, in particular our (1) trade and other payables; and (2) advances received from customers mainly in connection with Consumption Cards. Coupled with our (i) comparatively lower level of inventories, as we only carry inventories for our direct sales and not for our concessionaire sales; and (ii) trade receivables of our Group is relatively small compared to its sale, as we are primarily a cash-based business, the combination of which resulted in our net current liabilities position as at 31 December 2010, 2011 and 2012 and 31 May 2013. Our Directors are of the view that having net current liabilities position is not uncommon for department store business and we may continue to maintain a net current liabilities position after Listing.

During the Track Record Period and as at the Latest Practicable Date, we issued Consumption Cards to our customers as a payment method for merchandises in our stores. There have been recent articles concerning corrupt practices where pre-paid cards (which are common in the department stores industry) are used by third parties to bribe others. During the Track Record Period, we were not a party to any litigations involving the use by third parties of our Consumption Cards for purposes of bribery or corruption. Our Consumption Card is merely a payment method and not the determinant of our sales. In accordance with the Administrative Opinion and the Administrative Measures for Pre-paid Cards, the unused value of our Consumption Cards do not expire. We therefore did not recognise any revenue upon expiry of Consumption Cards during the Track Record Period. All unused value of Consumption Cards were recorded as advances from customers on our balance sheet, and therefore the amount of advances from customers of our Group continues to increase in the event of the unused value of Consumption Cards increases.

Our Directors are also of the view that we did not and will not rely on the cash flow from our Consumption Cards to finance the operations of our Group because (i) our major cash inflow was Gross Sale Proceeds, of which were mostly in the form of cash, credit cards and debit cards rather than Consumption Cards; and (ii) we could not rely on the cash flow from our Consumption Cards as the net cash flow from our Consumption Cards tends to fluctuate. Our Directors considered that our Group is able to maintain sufficient cash flow for our daily operation needs and would not be material adverse impact on our main business operation in the event that our Company ceases the issuance of Consumption Cards.

ADJUSTMENT OPTION AND STABILISATION

In connection with the Share Offer and pursuant to the Placing Underwriting Agreement, we expect to grant either an Over-allotment Option (which is exercisable at any time from the date of this prospectus to the last Business Day prior to the Listing Date) or an Offer Size Adjustment Option (exercisable at any time from the Listing Date until the date falling the 30th day after the last day for the lodging of applications under the Public Offer) to the Joint Bookrunners but not both.

If the final Offer Price as agreed between the Joint Bookrunners and the Company is less than HK$1.12 and as a result, the size of the Share Offer is less than HK$100 million, the Joint Bookrunners can only exercise the Offer Size Adjustment Option to cover over-allocations under the Share Offer and there will be no stabilisation action. Otherwise, if the agreed final Offer Price is equal to or more than HK$1.12 and as a result, the size of the Share Offer is equal to or more than HK$100 million, the Joint Bookrunners can only exercise the Over-allotment Option to cover over-allocations under the Share Offer. For further details of the Adjustment Option and stabilisation, please refer to the section headed “Structure of the Share Offer” of this prospectus.

– 9 – SUMMARY

LEGALCOMPLIANCEANDLITIGATION

Historically, our Group had certain non-compliance and litigation, details of which together with the rectification steps taken and the future preventative measures to be adopted are discussed in detail in the section headed “Business – Legal compliance and litigation – Non-compliant incidents” of this prospectus. In particular, the issuance of Consumption Cards, as a form of pre-paid cards are subject to number of laws, regulations and rules as set out in the section headed “Regulations – Provisions on pre-paid cards” of this prospectus. To ensure compliance, we have registered as a pre-paid card issuer with Zhongshan Branch of the MOFCOM on 29 March 2013 and Guangdong Branch of the MOFCOM on 6 June 2013 and our Consumption Card policy are designed in accordance with such laws, regulations and rules as set out in the section headed “Business” of this prospectus.

RELATIONSHIPWITHCONTROLLINGSHAREHOLDERS

Our business is enhanced by the synergy with businesses of the Yihua Investment Group and the proximity of some of our stores to their business. The synergy will be maintained by Mr. Chen, an executive Director, and Mr. Chen Daren and Mr. Lu, being non-executive Directors, who are also directors of the Yihua Investment Group. We have also entered into certain connected transactions including but not limited to lease of properties for our Group’s operations and their management and certain cooperation agreements in respect of VIP cards between Guangdong Yihua Department Store and certain members of Yihua Investment Group (for details, please refer to the sections headed “Connected Transactions” and “Relationship with Controlling Shareholders” in this prospectus) which will continue after Listing.

RECENTDEVELOPMENTOFOURGROUPSUBSEQUENTTOTHETRACK RECORDPERIOD

After the Track Record Period but prior to Listing, Guangdong Yihua Department Store, our principal operating subsidiary, declared a special dividend in the amount of approximately RMB64 million. This amount was fully settled prior to Listing by a decrease in the amount due from Yihua Investment.

Based on our Group’s unaudited combined management accounts, our total revenue and gross profit for the nine months ended 30 September 2013 were approximately RMB469.0 million and approximately RMB264.3 million respectively.

Furthermore, we commenced operation and incurred costs for five new stores (being Taiyangcheng store, Yangchun store, Tai’an store (Longtan), Yingde store and Yangjiang store) in 2013 and expect to commence two new stores (being Zhenjiang store and Enping store) in 2014. Our operations are currently all conducted on leased premises. For each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013, our operating lease rental expense and property management fee amounted to approximately RMB48.7 million, approximately RMB66.2 million, approximately RMB72.4 million and approximately RMB38.2 million respectively, representing approximately 8.1%, approximately 9.3%, approximately 10.7% and approximately 12.6% to our revenue respectively. Furthermore, based on the aforesaid operating lease rental expenses and property management fees and the aggregate GFA of the leases area as at 31 December 2010, 2011 and 2012 and 31 May 2013, we estimate that our rental and management expenses per GFA were approximately RMB253.8/sq.m., approximately RMB331/sq.m., approximately RMB360.5/sq.m. and RMB416.8/sq.m. for each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013 respectively. In the past, the parties agreed that no rental needed to be paid for the First Tenancy Agreements (as defined and described in the section “Connected transactions – Non-exempt continuing connected transactions – Tenancy agreements with Guangdong Yihua Management” of this prospectus) and for some leases, the parties agreed to rental which were lower than prevailing market rent. However, we may not be able to benefit from such agreements in the future and we may not be able to enter into new leases or renew leases for our current stores on favourable terms. With the commencement of our new stores, it is expected that our operating lease rental expense and property management fee will continue to increase and may represent a higher rate to our revenue, which may affect our profitability in the future.

– 10 – SUMMARY

The total amount of listing expenses, commissions together with SFC transaction levy and the Stock Exchange trading fee that will be borne by us in connection with the Share Offer is estimated to be approximately HK$23.5 million (based on the mid-point of our indicative price range of the Share Offer), of which approximately HK$9.6 million is expected to be capitalised after the Listing. The remaining estimated listing expenses amounted to approximately HK$13.9 million, including (i) approximately HK$3.5 million, approximately HK$1.3 million and approximately HK$4.3 million were recognised during the years ended 31 December 2011 and 2012 and the five months ended 31 May 2013 respectively; and (ii) approximately HK$9.1 million is expected to be charged to the consolidated statement of comprehensive income of our Group for the year ending 31 December 2013. The prepayment balance related to listing as at 31 May 2013 was approximately HK$3.0 million. The estimated listing expenses of our Group are subject to adjustments based on the actual amount of expenses incurred/to be incurred by our Company upon the completion of the Listing.

Except as noted above, our Directors confirmed that up to the Latest Practicable Date, there had been no material adverse change in the financial or trading position or prospects since 31 May 2013 and there had been no event since 31 May 2013 which would materially affect the information shown in the combined financial information included in the Accountant’s Report set forth in Appendix I to this prospectus.

OFFER STATISTICS

Based on an Offer Based on an Offer Price of HK$1.00 Price of HK$1.40 per Offer Share per Offer Share

Market capitalisation at Listing (Note 1) HK$360.0 million HK$504.0 million Historical price/earnings multiple 6.65 times 9.31 times (Note 2) Unaudited pro forma adjusted net HK$0.58 HK$0.67 tangible asset value per Share (Note 3) Offer size Initially 25% (excluding Shares to be offered pursuant to the exercise of the Adjustment Option) of the enlarged issued share capital of the Company Offer structure Approximately 10% Public Offer (subject to adjustment) and approximately 90% Placing (subject to reallocation and the Adjustment Option) Adjustment Option Up to 15% of the number of Offer Shares initially available under the Share Offer Offer Price per Offer Share Not more than HK$1.40 and expected to be not less than HK$1.00 per Offer Share Board lot 2,000 Shares

Notes:

1. The market capitalisation is based on 360,000,000 Shares expected to be in issue immediately following completion of the Share Offer and the Capitalisation Issue and assuming that the Adjustment Option is not exercised.

– 11 – SUMMARY

2. The historical price/earnings multiple is calculated based on the profit attributable to equity holders of the Company of RMB42,565,000 for the year ended 31 December 2012, the respective Offer Price of HK$1.00 and HK$1.40 per Share and assuming that 360,000,000 Shares, comprising Shares in issue as at the date of this prospectus and Shares to be issued pursuant to the Share Offer and the Capitalisation Issue, had been in issue throughout the year.

3. The unaudited pro forma adjusted net tangible asset value per Share has been arrived at after the adjustments referred to in the section headed “Financial Information” of this prospectus, the respective Offer Price range of HK$1.00 and HK$1.40 per Share and on the basis of 360,000,000 Shares in issue immediately after completion of the Share Offer and the Capitalisation Issue but does not take into account any Shares which may be issued upon the exercise of any options which may be granted under the Share Option Scheme.

USEOFPROCEEDS

Assuming an Offer Price of HK$1.20 per Offer Share, being the mid-point of the proposed Offer Price range of HK$1.00 to HK$1.40 per Offer Share, the net proceeds from the Share Offer, after deducting the underwriting fees and related expenses payable by us in connection with the Share Offer, are estimated to be approximately HK$84 million (assuming the Adjustment Option is not exercised). Our Directors presently intend to apply such net proceeds of the Share Offer as follows:

Expected starting time of Approximate the use of Approximate proportion to the net proceeds amount of the net proceeds for capital net proceeds from the expenditure to be used Share Offer (HK$ million)

– For newly opened department store in Yangjiang (Note) December 2013 10 12% – For opening of new department store in Zhenjiang January 2014 36 43% – For opening of a new department store in Enping October 2014 24 28% – For upgrading our existing information and technology systems January 2014 6 7% – General working capital of our Group – 8 10%

Note: Yangjiang store commenced business in October 2013. The aforementioned part of the proceeds will be used for settling outstanding expenditures including but not limited to renovation expenses.

For more details on our use of proceeds, please refer to the section headed “Future plans and use of proceeds” of this prospectus.

– 12 – SUMMARY

SHAREHOLDERS’INFORMATION

Immediately after completion of the Capitalisation Issue and the Share Offer, Mr. Chen Daren will, through Jaguar Asian, own approximately 57.81% of the Shares (assuming the Adjustment Option is not exercised and taken no account of the Shares which may be issued pursuant to the exercise of any option that may be granted under the Share Option Scheme) or approximately 50.27% of the Shares (assuming the Adjustment Option is exercised in full and taken no account of the Shares which may be issued pursuant to the exercise of any option that may be granted under the Share Option Scheme). Accordingly, Jaguar Asian and Mr. Chen Daren are our Controlling Shareholders.

Mr. Chen Daren is a non-executive Director and his brother, Mr. Chen, is an executive Director and chairman of our Company. Mr. Chen Zhengtao (௓͍ௗ) is the nephew of Mr. Chen Daren and the son of Mr. Chen. Mr. Chen Daren and his associates are interested in Yihua Investment Group and other companies, details of which are set out in the section headed “Relationship with the Controlling Shareholders – Personal investments in businesses held by Mr. Chen Daren and his associates” of this prospectus.

During the Track Record Period, our Group entered into certain transactions with Yihua Investment Group in our ordinary course of business, some of which will continue after Listing and constitute continuing connected transactions of our Company under the Listing Rules. Details of the continuing connected transactions between our Group and Yihua Investment Group are set out in the section headed “Connected transactions” of this prospectus.

DIVIDENDANDDIVIDENDPOLICY

Prior to Listing, Guangdong Yihua Department Store, our principal operating subsidiary, declared a special dividend in the amount of approximately RMB64 million and has fully settled the payment with our internal financial resources prior to the date of this prospectus. The special dividend to Shunyi Industrial and Yihua Investment did not have any significant impact on the cash outflow of our Group as Shunyi Industrial waived its own entitlement and the dividend payment to Yihua Investment was ultimately fully settled by a decrease in the amount due from Yihua Investment to our Group.

The historical dividend payments of our subsidiaries in the PRC should not be regarded as an indicator of our future dividend policy.

RISK FACTORS

There are risks associated with your investment in the Offer Shares including (i) we may not be able to purchase or lease suitable sites for our new stores or renew our leases (especially our short term leases) for our current stores on favourable terms; and (ii) during the Track Record Period, our Company recorded net current liabilities of approximately RMB121.5 million, approximately RMB51.1 million, approximately RMB41.9 million and approximately RMB36.6 million respectively as at 31 December 2010, 2011 and 2012 and 31 May 2013 and gearing ratios of approximately 202.1%, approximately 53.1% and approximately 49.5% respectively as at 31 December 2011, 2012 and 31 May 2013.

The above risks are not the only significant risks and you should read the entire section headed “Risk Factors” of this prospectus carefully before you decide to invest in the Offer Shares.

– 13 – DEFINITIONS

In this prospectus, unless the context otherwise requires, the following terms and expressions have the following meanings.

“Adjustment Option” Offer Size Adjustment Option or the Over-allotment Option

“affiliate” in relation to a body corporate, any subsidiary undertaking or parent undertaking of such body corporate, and any subsidiary undertaking of any such parent undertaking for the time being

ཥɿϞࠢʮ̡ (Zhongshan AnlixinڦAnlixin Electronics” ʕʆ̹τл“ Electronics Limited*), a company established in the PRC with limited liability on 18 November 1998 which is owned as to 60% and 40% by Mr. Lu, a non-executive Director, and Mr. Xu Chenghai (ࢱϓऎ) is a shareholder and director of certain members of the Yihua Investment Group

“Application Form(s)” WHITE application form(s) and YELLOW application form(s) or, where the context so requires, any of them to be used in connection with the Public Offer

“Articles” or “Articles of the amended and restated articles of association of our Associations” Company, adopted on 12 November 2013, a summary of which is set forth in Appendix III to this prospectus, and as amended from time to time

“associate(s)” has the meaning ascribed thereto under the Listing Rules

“Board” the board of Directors

“business day” any day (other than Saturday, Sunday or public holiday) on which banks in Hong Kong are generally open for normal banking business

“BVI” the British Virgin Islands

“Canton Sky” Canton Sky Holdings Limited (˂ຽණྠϞࠢʮ̡), a company incorporated in Hong Kong with limited liability on 21 July 2000, was a shareholder of Intelligence Link prior to the Reorganisation and is ultimately controlled by Mr. Chen Daren

– 14 – DEFINITIONS

“Capitalisation Issue” the allotment and issue of 269,990,000 Shares to be made upon the capitalisation of certain sums standing to the credit of the share premium account of our Company as referred to in the section headed “Statutory and general information – A. Further information about the Company and its subsidiaries – 3. Resolutions in writing of all Shareholders passed on 12 November 2013” in Appendix IV to this prospectus

“CCASS” the Central Clearing and Settlement System established and operated by HKSCC

“CCASS Clearing Participant” a person admitted to participate in CCASS as a direct clearing participant or general clearing participant

“CCASS Custodian Participant” a person admitted to participate in CCASS as a custodian participant

“CCASS Investor Participant” a person admitted to participate in CCASS as an investor participant who may be an individual or joint individuals or a corporation

“CCASS Participant” a CCASS Clearing Participant, a CCASS Custodian Participant or a CCASS Investor Participant

“Change of the Old for New (࢕ཥ˸ᔚ౬อ݁ഄ), a program launched by the State Program” Council in June 2009. Pursuant to this program, a 10% rebate, subject to cap, on the retail price will be granted to qualified consumers who replace their selected existing household electrical appliances for new ones at an authorised sales enterprise

Circular No. 59” ᗫ׵ආɓӉҷආձሜ዆ٜટҳ༟̮ි၍ଣ݁ഄٙஷ“ ٝ (the Notice of SAFE on Further Improvement and Adjustment of Foreign Exchange Administration Policies on Direct Investment*) issued in November 2012 by SAFE

೻ҳ༟ڏCircular No. 75” ᗫ׵ྤʫ֢͏ஷཀྤ̮तࣿͦٙʮ̡ፄ༟ʿ“ ၍ଣϞᗫਪᕚٙஷٝ(the Notice of SAFE onි̮ Foreign Exchange Administration for Financing and Return Investments by Domestic Residents through Special-Purpose Overseas Companies) issued in October 2005 by SAFE

– 15 – DEFINITIONS

“Companies Law” or “Cayman the Companies Law (as revised) of the Cayman Islands, Companies Law” as amended, supplemented or otherwise modified from time to time

“Companies Ordinance” the Companies Ordinance (Chapter 32 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time

“Company” Yi Hua Department Store Holdings Limited (ूശϵ஬છ Ϟࠢʮ̡), an exempted company incorporated in theٰ Cayman Islands with limited liability on 20 April 2012

“Compliance Adviser Agreement” the Compliance Adviser Agreement to be entered into on or about 25 November 2013 entered into between Kingsway Capital Limited and our Company pursuant to Rule 3A.19 of the Listing Rules

“Connected Person(s)” has the meaning ascribed thereto under the Listing Rules

“Consumption Cards” cards issued by our Group in various denominations in Renminbi and can only be used in the Stores for the purchase of goods or services

“Controlling Shareholders” has the meaning ascribed thereto under the Listing Rules and, in the case of our Company, currently means Mr. Chen Daren and Jaguar Asian

“CSRC” ʕ਷ᗇՎ္ຖ၍ଣ։ࡰึ (China Securities Regulatory Commission)

“Deed of Indemnity” the deed of indemnity dated 19 November 2013 and executed by Mr. Chen Daren, a Controlling Shareholder, in favour of our Company, particulars of which are set out in the section headed “Statutory and general information – D. Other information – 2. Estate duty and indemnity” in Appendix IV to this prospectus

“Deed of Non-competition” the deed of non-competition undertaking dated 19 November 2013 and executed by Mr. Chen Daren, Mr. Chen, Mr. Lu, Mr. Fan, Mr. Lin Guangzheng and Mr. Su Weibing in favour of our Company, particulars of which are set out in the section headed “Relationship with the Controlling Shareholders – Deed of Non-competition” of this prospectus

– 16 – DEFINITIONS

“Director(s)” or “our Directors” the director(s) of our Company

“Eaglepass Developments” EAGLEPASS DEVELOPMENTS LIMITED, a company incorporated in the BVI on 14 June 2000, which is a Substantial Shareholder of our Company and owned as to 15.66% and 84.34% by Mr. Lu and Gain Profit respectively

“EIT” enterprise income tax the PRC Enterprise) ج੻೼הEIT Law” ʕശɛ͏΍ձ਷Άุ“ Income Tax Law*) enacted on 16 March 2007 by the PRC National People’s Congress and became effective on 1 January 2008

Է (theૢ݄ྼج੻೼הEIT Rules” ʕശɛ͏΍ձ਷Άุ“ Regulation on the Implementation of the Enterprise Income Tax Law of the PRC*) enacted on 28 November 2007 and became effective on 1 January 2008

”Euromonitor” Euromonitor International Asia (Pte) Ltd., an independent market research firm referred to in the section headed “Industry overview” of this prospectus

“Fortune Sky” Fortune Sky Development Limited (๿˂೯࢝Ϟࠢʮ̡), a company incorporated in Hong Kong with limited liability on 7 July 2000, was a shareholder of Intelligence Link prior to the Reorganisation and is ultimately controlled by Mr. Chen Daren, our non-executive Director and a Controlling Shareholder

“Gain Profit” Gain Profit Management Limited (ूʺ၍ଣϞࠢʮ̡), a company incorporated in the BVI on 28 May 2013, which is a Substantial Shareholder of our Company and wholly owned by Yinglifeng Developments

“Group”, “we”, “our” or “us” our Company and its subsidiaries at the relevant time or, where the context refers to any time prior to our Company becoming the holding company of our present subsidiaries, such subsidiaries and the businesses carried on by such subsidiaries or (as the case may be) our predecessors, and “we”, “our” or “us” shall be construed accordingly

– 17 – DEFINITIONS

Guangdong Guang Zhi Lian” ᄿ؇ᄿʘᑌਠ൱Ϟࠢʮ̡ (Guangdong Guang Zhi Lian“ Trading Limited*), a company established in the PRC with limited liability on 24 April 1998 which is owned by Independent Third Parties. Save for being the former joint venture partner of our Group through its interest in Shaoguan Yihua Department Store and Shaoguan Central Management, it is an Independent Third Party

Guangdong Yihua Department ᄿ؇ूശϵ஬Ϟࠢʮ̡ (Guangdong Yihua Department“ Store” Store Limited*), a company established in the PRC with limited liability on 24 October 1994, which is a wholly- owned subsidiary of our Company

Guangdong Yihua Management” ᄿ؇ूശᄿఙ၍ଣϞࠢʮ̡ (Guangdong Yihua Plaza“ Management Limited*), a company established in the PRC with limited liability on 10 March 2006 and which is owned as to 60% by Yihua Investment, 10% by Mr. Xu Chenghai (ࢱϓऎ), 10% by Mr. Fan, 10% by Mr. Lu and 10% by Mr. Chen Zhengtao (௓͍ௗ), nephew of Mr. Chen Daren and son of Mr. Chen

“Guzhen Yihua Department ʕʆ̹̚ᕄूശϵ஬Ϟࠢʮ̡ (Zhongshan Guzhen Yihua Store” Department Store Limited*), a company established in the PRC with limited liability on 29 March 2006, which is a wholly-owned subsidiary of our Company

“Guzhen Yihua Trading” ʕʆ̹̚ᕄूശਠุ၍ଣϞࠢʮ̡ (Zhongshan Guzhen Yihua Trading Management Limited*), a company established in the PRC with limited liability on 30 December 2004, which is in the process of deregistration

“HKFRS” Hong Kong Financial Reporting Standards

“HKSCC” Hong Kong Securities Clearing Company Limited, a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited

“HKSCC Nominees” HKSCC Nominees Limited

“HK$” and “HK cents” Hong Kong dollars and cents, respectively, the lawful currency of Hong Kong

– 18 – DEFINITIONS

“Hong Kong” the Hong Kong Special Administrative Region of the PRC

“Hong Kong Branch Share Tricor Investor Services Limited, the Hong Kong branch Registrar” share registrar of our Company

“Independent Third Party(ies)” an individual(s) or a company(ies) who or which is/ are not connected with (within the meaning of the Listing Rules) any Directors, chief executive or Substantial Shareholders, of our Company, its subsidiaries or any of their respective associates

“Intelligence Link” Intelligence Link Limited (౽ᗡண௪Ϟࠢʮ̡), a company incorporated in Hong Kong with limited liability on 3 May 1994 which is a wholly-owned subsidiary of our Company

“Internal Control Adviser” Baker Tilly Hong Kong Business Services Limited

“Issuing Mandate” the general unconditional mandate given to our Directors by our shareholders relating to the issue of Shares, particulars of which are set forth in the section headed “Statutory and general information – A. Further information about the Company and its subsidiaries – 3. Resolutions in writing of all Shareholders passed on 12 November 2013” in Appendix IV to this prospectus

“Jaguar Asian” JAGUAR ASIAN LIMITED, a company incorporated in the BVI on 4 July 2000, which is a Controlling Shareholder of our Company and wholly owned by Mr. Chen Daren

ശϵ஬Ϟࠢʮ̡ (Jiangmen Yihua Departmentू̹ژJiangmen Yihua Department Ϫ“ Store” Store Limited*), a company established in the PRC with limited liability on 24 August 2004, which is a wholly- owned subsidiary of our Company

“Joint Bookrunners” or “Joint Kingsway Financial and Upbest Securities Lead Managers”

– 19 – DEFINITIONS

“Kingsway Financial” Kingsway Financial Services Group Limited, one of the Joint Bookrunners and Joint Lead Managers under the Listing and a corporation licensed under the SFO to engage in Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities) and Type 9 (asset management) of the regulated activities (as defined under the SFO)

Langcheng Trading” ʕʆ̹ࣦ༐൱׸Ϟࠢʮ̡ (Zhongshan Langcheng“ Trading Limited*), a company established in the PRC with limited liability on 22 June 2007 is owned by Independent Third Parties, and is, save for being a former shareholder of Lonwalk Mould, an Independent Third Party

“Latest Practicable Date” 19 November 2013, being the latest practicable date prior to the printing of this prospectus for the purpose of ascertaining certain information contained in this prospectus

“Listing” listing of the Shares on the Main Board of the Stock Exchange

“Listing Date” the date on which trading in the Shares on the Main Board of the Stock Exchange commences

“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

“Lonwalk Mould” ʕʆ̹ࣦശᅼՈ෧ࣘϞࠢʮ̡ (Zhongshan Lonwalk Mould Plastic Co. Ltd.*), a company established in the PRC with limited liability on 16 October 2000, which is a wholly-owned subsidiary of our Company

၍ଣϞࠢʮ̡ (Zhongshan LonwalkุيLonwalk Property Management” ʕʆ̹ࣦശᅼՈ“ Property Management Limited*), a company established in the PRC with limited liability on 13 December 2012, which was disposed of as part of the Reorganisation and is wholly owned by Yihua Investment

“Main Board” 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

– 20 – DEFINITIONS

M&A Rules” ᗫ׵̮਷ҳ༟٫ԻᒅྤʫΆุٙ஝֛ (the Rules on” Merger or Acquisition of Domestic Enterprises by Foreign Investors in the PRC*) promulgated by MOFCOM, the State-owned Assets Supervision and Administration Commission (਷Ϟ༟ପ္ຖ၍ଣ։ࡰึ), SAT, SAIC, CSRC and SAFE on 8 August 2006. It became effective on 8 September 2006 and was further revised on 22 June 2009.

“Memorandum” or the amended and restated memorandum of association of “Memorandum of Association” our Company, adopted on 12 November 2013, a summary of certain provisions of which is set out in Appendix III to this prospectus, as amended from time to time

“Mentor Asia” Mentor Asia Limited, a company incorporated in BVI with limited liability on 15 June 2000, which is wholly- owned by our Company

“MOF” ʕശɛ͏΍ձ਷ৌ݁௅ (the Ministry of Finance of the PRC)

“MOFCOM” ʕശɛ͏΍ձ਷ਠਕ௅ (the Ministry of Commerce of the PRC) and its delegated authorities

“Mr. Chen” Mr. Chen Jianren (௓਄ʠ), who is an executive Director and chairman of our Company and brother of Mr. Chen Daren

“Mr. Chen Daren” Mr. Chen Daren (௓༺ʠ), who is a Controlling Shareholder, non-executive Director and brother of Mr. Chen

“Mr. Fan” Mr. Fan Xinpei (ߪอ੃), who is a Substantial Shareholder of our Company, executive Director and chief executive officer of our Company

“Mr. Lu” Mr. Lu Hanxing (௔ဏጳ), who is a non-executive Director

– 21 – DEFINITIONS

“Offer Price” the final offer price per Offer Share (exclusive of brokerage of 1.0%, SFC transaction levy of 0.003% and Stock Exchange trading fee of 0.005%) which will be not more than HK$1.40 and is expected to be not less than HK$1.00, such price to be determined in the manner as further described in the section headed “Structure of the Share Offer – Price payable on application” of this prospectus

“Offer Shares” the Placing Shares and the Public Offer Shares, together with, where relevant, any additional Shares to be issued pursuant to the exercise of the Adjustment Option

“Offer Size Adjustment Option” the option to be granted by us to the Joint Bookrunners, to require us to allot and issue up to an aggregate of 13,500,000 additional new Shares representing 15% of the initial number of our Offer Shares, at the Offer Price, to cover over-allocations in the Placing, subject to the terms of the Placing Underwriting Agreement

“Over-allotment Option” the option to be granted by us to the Joint Bookrunners, to require us to allot and issue up to an aggregate of 13,500,000 additional new Shares representing 15% of the initial number of our Offer Shares, at the Offer Price, to, among other things, cover over-allocations in the Placing and/or to satisfy the obligation of the Joint Bookrunners to return securities borrowed under the Stock Borrowing Agreement, subject to the terms of the Placing Underwriting Agreement

“PBOC” ʕ਷ɛ͏ვБ (the People’s Bank of China), the central bank of China

“Placing” the conditional placing of the Placing Shares by the Placing Underwriters on behalf of our Company for cash at the Offer Price with institutional, professional and private investors, details of which are described in the section headed “Structure of the Share Offer” of this prospectus

– 22 – DEFINITIONS

“Placing Shares” the 81,000,000 new Shares initially being offered by our Company for subscription at the Offer Price under the Placing, subject to Adjustment Option and re-allocation as described in the section headed “Structure of the Share Offer” of this prospectus

“Placing Underwriters” the underwriters of the Placing whose names are set out in the section headed “Underwriting – Placing Underwriters” of this prospectus

“Placing Underwriting the conditional placing underwriting agreement relating Agreement” to the Placing, which is expected to be entered into on or about the Price Determination Date among our Company, the Controlling Shareholders, the Sponsor, the Joint Bookrunners and the Placing Underwriters

“PRC” or “China” the People’s Republic of China, and for the purpose of this prospectus (including geographical reference mentioned herein), and except where the context otherwise requires, excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan

“PRC Legal Advisers” JunZeJun Law Offices, our legal advisers as to the PRC law

“Price Determination Agreement” the agreement to be entered into between our Company and the Joint Bookrunners on or about the Price Determinate Date to record and fix the Offer Price

“Price Determination Date” the date, expected to be on or before 2 December 2013, or such later date as may be agreed between the Joint Bookrunners and our Company, on which the Offer Price is fixed for the purpose of the Share Offer and in any event no later than 4 December 2013

“Public Offer” the offer to the public in Hong Kong for subscription of the Public Offer Shares at the Offer Price, on and subject to the terms and conditions stated in this prospectus and in the Application Forms, details of which are described in the section headed “Structure of the Share Offer” of this prospectus and the related Application Forms

– 23 – DEFINITIONS

“Public Offer Shares” the 9,000,000 new Shares initially being offered by our Company for subscription at the Offer Price under the Public Offer, subject to reallocation as mentioned in the section headed “Structure of the Share Offer” of this prospectus

“Public Offer Underwriters” the underwriters of the Public Offer whose names are set out in the section headed “Underwriting – Public Offer Underwriters” of this prospectus

“Public Offer Underwriting the conditional public offer underwriting agreement Agreement” dated 25 November 2013 relating to the Public Offer and entered into among our Company, the Controlling Shareholders, the Sponsor, the Joint Bookrunners and the Public Offer Underwriters

Qingyuan Yihua Department ૶Ⴣ̹۬ᄿఙूശϵ஬Ϟࠢʮ̡ (Qingyuan City Plaza“ Store” Yihua Department Store Limited*), a company established in the PRC with limited liability on 16 October 2003, which is a wholly-owned subsidiary of our Company

“Reorganisation” the corporate reorganisation of our Group prior to the issue of this prospectus, details of which are set out in the section headed “History and development – Corporate Reorganisation” of this prospectus

“Repurchase Mandate” the general unconditional mandate to repurchase Shares given to our Directors by our shareholders, particulars of which are set forth in the section headed “Statutory and general information – A. Further information about the Company and its subsidiaries – 3. Resolutions in writing of all Shareholders passed on 12 November 2013” included in Appendix IV to this prospectus

“RMB” Renminbi, the lawful currency of the PRC

Ruichang Industrial ʕʆ̹๿׹ྼุ೯࢝Ϟࠢʮ̡ (Zhongshan Ruichang” Development” Industrial Development Limited*) which is owned as to 90% and 10% by Yihua Investment and Shunyi Industrial respectively

“SAFE” ʕശɛ͏΍ձ਷਷࢕̮ි၍ଣ҅ (the State Administration of Foreign Exchange of the PRC)

– 24 – DEFINITIONS

“SAIC” ʕശɛ͏΍ձ਷਷࢕ʈਠБ݁၍ଣᐼ҅ (the State Administration for Industry and Commerce of the PRC)

“SAT” ʕശɛ͏΍ձ਷਷࢕೼ਕᐼ҅ (the State Administration of Taxation of the PRC)

“SFC” the Securities and Futures Commission of Hong Kong

“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time

“Shaoguan Central Management” ჭᗫ̹ʕᐑᄿఙ၍ଣϞࠢʮ̡ (Shaoguan Central Plaza Management Limited*), a company established in the PRC with limited liability on 28 September 2006, which was disposed of as part of the Reorganisation and is wholly owned by Independent Third Parties

ਕϞࠢʮ̡ (Shaoguan Wujiang؂ุيිڦϪਜ؛Shaoguan Xinhui Property ჭᗫ̹“ Management” Xinhui Property Management Service Limited*), a company established in the PRC with limited liability on (τڿMarch 2011 is wholly-owned by He Guan’an (О 9 and besides being formerly wholly owned by Shaoguan Central Management prior to its disposal as part of the Reorganisation, is an Independent Third Party

“Shaoguan Yihua Department ჭᗫ̹ूശϵ஬Ϟࠢʮ̡ (Shaoguan Yihua Department Store” Store Limited*), a company established in the PRC with limited liability on 3 August 2007, which is owned as to 59% and 41% by Guangdong Yihua Department Store and Independent Third Parties respectively and is a non-wholly owned subsidiary of our Company

“Share(s)” ordinary share(s) with nominal value of HK$0.01 each in the share capital of the Company

“Shareholder(s)” holder(s) of the Share(s)

“Share Offer” the Placing and the Public Offer

– 25 – DEFINITIONS

“Share Option Scheme” the share option scheme conditionally adopted by the Company on 12 November 2013 and summarised in the section headed “Statutory and general information – D. Other information – 1. Share Option Scheme” in Appendix IV to this prospectus

“Shunyi Industrial” ʕʆ̹නूྼุ೯࢝Ϟࠢʮ̡ (Zhongshan Shunyi Industrial Development Limited*), a company established in the PRC with limited liability on 12 August 2003, which is owned as to 90% by Mr. Chen Daren and the remaining 10% by Mr. Yu Huaxing (Яശጳ), being Mr. Chen’s brother-in-law and a shareholder and director of certain members of the Yihua Investment Group

“Sponsor” Kingsway Capital Limited, the sponsor for the Listing and a corporation licensed under the SFO to engage in Type 1 (dealing in securities) and Type 6 (advising on corporate finance) of the regulated activities (as defined under the SFO)

ɽึ੬ਕ։ࡰึ (Standingڌ˾Standing Committee” ʕശɛ͏΍ձ਷Ό਷ɛ͏“ Committee of the National People’s Congress of the PRC)

“Stock Borrowing Agreement” the stock borrowing agreement which is expected to be entered into on or about the Price Determination Date between the Controlling Shareholders and the Joint Bookrunners pursuant to which the Joint Bookrunners may borrow up to 13,500,000 Shares from the Controlling Shareholders for the purpose of covering over-allocation in the Placing

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“Stores” department stores and community stores operated by us on premises owned or leased by us

– 26 – DEFINITIONS

“Subor Electronics” ʕʆ̹ʃᚡˮཥɿʈุϞࠢʮ̡ (Zhongshan Subor Electronics Industry Co., Ltd.*), a company established in the PRC with limited liability on 19 August 1994, was disposed of as part of the Reorganisation and is owned as 60%, 20% and 20% by Canton Concord Enterprises Limited, Shunyi Industrial and Ruichang Industrial Development respectively. Mr. Chan Kuong Ian (௓ᄿʠ), brother of Mr. Chen and Mr. Chen Daren, is interested in Canton Concord Enterprises Limited

“Subsidiary(ies)” has the meaning ascribed thereto under the Companies Ordinance

“Substantial Shareholder(s)” has the meaning ascribed thereto under the Listing Rules

“Tai’an Yihua Commercial” इτूശਠุϞࠢʮ̡ (Tai’an Yihua Commercial Limited*), a company established in the PRC with limited liability on 10 December 2012, which is a wholly-owned subsidiary of our Company

Taiyangcheng Yihua Department ʕʆ̹˄ජ۬ूശϵ஬Ϟࠢʮ̡ (Zhongshan Taiyangcheng“ Store” Yihua Department Store Limited*), a company established in the PRC with limited liability on 9 November 2012, which is a wholly-owned subsidiary of our Company

“Takeovers Code” the Code on Takeovers and Mergers and Share Repurchases issued by the SFC, as amended, supplemented or otherwise modified from time to time

“Track Record Period” the period comprising the three years ended 31 December 2012 and the five months ended 31 May 2013

“Underwriters” the Placing Underwriters and the Public Offer Underwriters

“Underwriting Agreements” the Placing Underwriting Agreement and the Public Offer Underwriting Agreement

“Upbest Securities” Upbest Securities Company Limited, one of the Joint Bookrunners and Joint Lead Managers under the Listing and a corporation licensed under the SFO to engage in Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) of the regulated activities (as defined under the SFO)

– 27 – DEFINITIONS

“US” or “United States” the United States of America

“US$” or “U.S. dollars” United States dollars, the lawful currency of the US

“Valuer” Jones Lang LaSalle Corporate Appraisal and Advisory Limited, an independent professional property valuer

“WHITE Application Form(s)” the application form(s) for use by the public who require(s) such Public Offer Shares to be issued in the applicant’s or applicants’ own name(s)

“Yangchun Yihua Department ජ݆̹ूശϵ஬Ϟࠢʮ̡ (Yangchun Yihua Department Store” Store Limited*), a company established in the PRC with limited liability on 28 September 2012, which is a wholly- owned subsidiary of our Company

“Yangjiang Yihua Department ජϪ̹ूശϵ஬Ϟࠢʮ̡ (Yangjiang Yihua Department Store” Store Limited*), a company established in the PRC with limited liability on 28 January 2013, which is a wholly- owned subsidiary of our Company

“YELLOW Application Form(s)” the application form(s) for use by the public who require(s) such Public Offer Shares to be deposited directly into CCASS

Yangjiang Yihua Shijia” ජϪ̹ूശ˰࢕࢕֢Ϟࠢʮ̡ (Yangjiang Yihua Shijia Jiaju“ Limited*) a company established in the PRC with limited liability on 6 May 2013, which is a wholly-owned subsidiary of our Company

Yihua Investment” ᄿ؇ूശණྠҳ༟Ϟࠢʮ̡ (Guangdong Yihua Group“ Investment Company Limited*), a company established in the PRC with limited liability on 29 October 2002, which is owned as to 49.6% by Shunyi Industrial, 28.22% by Mr. Lu, 11.09% by Mr. Chen Zhengtao and 11.09% by Mr. Chen Daren

“Yihua Investment Group” Yihua Investment and its subsidiaries

“Yingde Yihua Department Store” ߵᅃ̹ूശϵ஬Ϟࠢʮ̡ (Yingde Yihua Department Store Limited*), a company established in the PRC with limited liability on 11 December 2012, which is a wholly-owned subsidiary of our Company

– 28 – DEFINITIONS

“Yinglifeng Developments” ʕʆ̹ޮлᔮਠ൱೯࢝Ϟࠢʮ̡ (Zhongshan Yinglifeng Trading Developments Limited*), a company established in the PRC with limited liability on 23 May 2013, which is a Substantial Shareholder of our Company and owned as to 66.33%, 9.62%, 9.62%, 4.81%, 4.81% and 4.81% by Mr. Fan, Mr. Lin Guangzheng, Mr. Su Weibing, Ms. Wang Guping, Ms. Zhang Rong and Mr. Luo Chengwen respectively, being our Directors or members of senior management

“Zhenjiang Yihua Department ᕄϪूശϵ஬Ϟࠢʮ̡ (Zhenjiang Yihua Department Store Store” Limited*), a company established in the PRC with limited liability on 5 June 2013, which is a wholly-owned subsidiary of our Company

“Zhongshan Yihua Management” ʕʆ̹ूശᄿఙ၍ଣϞࠢʮ̡ (Zhongshan Yihua Plaza Management Company Limited*), a company established in the PRC with limited liability on 1 April 2003, which is in the process of deregistration

Zhongshan Yihua Shijia” ʕʆ̹ूശ˰࢕࢕֢Ϟࠢʮ̡ (Zhongshan Yihua Shijia“ Jiaju Limited*), a company established in the PRC with limited liability on 11 September 2012, which is a wholly- owned subsidiary of our Company

“%” percent.

Unless the context requires otherwise, translation of US$, HK$ and RMB is made in this prospectus, for illustration purpose only, at the rates of US$1.00 = HK$7.7523 and RMB0.7863 = HK$1.00 respectively.

No representation is made that any amount in HK$, US$, and RMB could have been or could be converted at the above rates or at any other rates or at all.

For ease of reference, the English translation of a Chinese company name, or vice versa, has been provided for identification purpose only.

– 29 – GLOSSARYOFTECHNICALTERMS

This glossary contains explanations of certain terms used in this prospectus in connection with the Company and its business. These terminologies and their given meanings may not correspond to those standard meanings and usage adopted in the industry.

“CAGR” Compound annual growth rate

“GDP” gross domestic product

“GFA” gross floor area

“Gross Sale Proceeds” the gross proceeds received or receivable by us from direct sales, concessionaire sales and proceeds collected from customers on behalf of leasees (inclusive of value added tax)

“POS” Point(s) of Sale, the cashier system which uses swiping and reading record cards or credit cards for payment of merchandises in stores

“sq. m.” or “m2” square metres

– 30 – FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements, including, but without limitation to, the words and expressions such as “aim”, “expect”, “believe”, “plan”, “intend”, “anticipate”, “may”, “seek”, “will”, “would” and “could” and the negative of these words or other similar expressions or statements, in particular, in the sections headed “Business”, “Financial information” and “Future plans and use of proceeds” in this prospectus in relation to future events, business or other performance and development, the future development of our Group’s industry and the future development of the general economy of our Group’s key markets and globally.

These statements are based on numerous assumptions regarding our Group’s present and future business strategy and the environment in which our Group will operate in the future. These forward-looking statements reflecting our Group’s current views with respect to future events are not a guarantee of future performance and are subject to certain risks, uncertainties and assumptions, including the risk factors described in this prospectus and the following:

• our Group’s business and operating strategies and our Group’s ability to implement such strategies;

• our Group’s capital expenditure and expansion plans;

• our Group’s ability to further develop and manage our Group’s expansion projects as planned;

• our Group’s operations and business prospects;

• various business opportunities that our Group may pursue;

• our Group’s financial position;

• the availability and costs of bank loans and other forms of financing;

• our Group’s dividend policy;

• the regulatory environment of our Group’s industry in general;

• the performance and future developments of our Group’s industry;

• changes in political, economic, legal and social conditions in the regions where our Group operates including but without limitation the PRC;

• changes in competitive conditions and our Group’s ability to compete under these conditions;

• changes in currency exchange rates; and

• other factors beyond our Group’s control.

– 31 – FORWARD-LOOKING STATEMENTS

Subject to the requirements of the applicable laws, rules and regulations, our Company does not have any obligation to update or otherwise revise the forward-looking statements in this prospectus, whether as a result of new information, future events or otherwise. As a result of these and other risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus might not occur in the way our Company expects, or at all. Accordingly, you should not place undue reliance on any forward-looking information. All forward-looking statements contained in this prospectus are qualified by reference to the cautionary statements set out in this section. In this prospectus, statements of or references to the intentions of our Company or any of our Directors are made as at the date of this prospectus. Any such intentions may potentially change in light of future developments.

– 32 – RISK FACTORS

Prospective investors in the Offer Shares should consider carefully all of the information set forth in this prospectus and, in particular, the following risks in connection with an investment in the Company. The business, results of operations, financial conditions and future prospectus of our Group could be materially and adversely affected by any of these risks. The trading price of the Shares could decline due to any of these risks and you may lose all or part of your investment.

RISKSRELATINGTOOURBUSINESS

Our strategy for growth is dependent on our ability to implement our expansion plans without hindrance while maintaining our current market position.

Our growth prospects are tied to our plans to tap into new retail markets in the PRC while reinforcing our strong market position within Guangdong Province, the PRC and relatively new store in Shandong Province, the PRC including our 13 Stores currently in operation, which include:

Location in the PRC Stores (City, Province)

Department store

Zhongshan store Zhongshan, Guangdong (main store) Guzhen store Zhongshan, Guangdong Qingyuan store Qingyuan, Guangdong Shaoguan store Shaoguan, Guangdong Jiangmen store Jiangmen, Guangdong Taiyangcheng store Zhongshan, Guangdong Yangchun store Yangchun, Guangdong Tai’an store (Longtan) Tai’an, Shandong Yingde store Yingde, Guangdong Yangjiang store Yangjiang, Guangdong

Community store

Jiangnan store Zhongshan, Guangdong Hetang store Jiangmen, Guangdong Fusha store Zhongshan, Guangdong

We aim to establish our presence across the PRC and commence business one after another in 2014 and 2015 for the following three new Stores:

Location in the PRC Stores (City, Province)

Department store Zhenjiang store Zhenjiang, Jiangsu Enping store Jiangmen, Guangdong Tai’an store (Taishan) Tai’an, Shandong

– 33 – RISK FACTORS

This strategy for growth is largely dependent on a number of factors, some of which are beyond our control, including but are not limited to:

Expanding

• purchasing or leasing suitable sites on favourable terms;

• finding sufficient funding and other resources for our expansion plans;

• obtaining all required governmental approvals, licences and permits on a timely basis; and

• expanding and adopting new potential businesses in a way which provide synergy to our existing business;

Adapting

• providing quality goods at attractive prices in order to maintain our profitability and market image;

• adapting to new markets and changes according to consumer tastes and demands;

• adjusting our current sales, logistics and management networks to integrate new department stores or changes in business strategies; and

• promoting our stores, addressing customer concerns and responding to media stories;

Maintaining

• relying on our senior management and hiring, training and retaining sufficient number of other skilled staff for our operations;

• maintaining the balance between the level of inventory supplies to satisfy customers without storing too much inventory;

• forging and preserving the beneficial arrangements with our current and prospective direct suppliers and concessionaires; and

• controlling costs without jeopardising the image of our stores and the goods sold therein.

Failure to manage any of these factors may affect not only the results of our expansion strategies but also our current market position which, as a result, may materially affect our business and financial condition.

– 34 – RISK FACTORS

We may not be able to purchase or lease suitable sites for new stores or renew our leases (especially our short term leases) for our current stores on favourable terms.

The success of our business is largely dependent on our ability to secure suitable locations at favourable terms to operate our stores. A suitable location is characterised by, among other factors, accessibility to potential customers, carparks, accommodating spaces for further expansions and our design plans, being a developing area with future growth potential. Besides finding such locations, we also need to secure the site on favourable terms either through ownership or leases. Currently and except as set out in the section headed “Business – Property – Owned property” of this prospectus, we secure locations for our stores mainly by leases. In the past few years, the costs of leasing premises for our stores have increased. Our operations are currently all conducted on leased premises. For each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013, our operating lease rental expense and property management fee amounted to approximately RMB48.7 million, approximately RMB66.2 million, approximately RMB72.4 million and approximately RMB38.2 million respectively, representing approximately 8.1%, approximately 9.3%, approximately 10.7% and approximately 12.6% to our revenue respectively. Furthermore, based on the aforesaid operating lease rental expenses and property management fees and the aggregate GFA of the leases area as at 31 December 2010, 2011 and 2012 and 31 May 2013, we estimate that our rental and management expenses per GFA were approximately RMB253.8/sq.m., approximately RMB331/sq.m., approximately RMB360.5/sq.m. and RMB416.8/sq.m. for each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013 respectively. Furthermore, during the Track Record Period, we benefited from certain rent free periods under our leases which either continue or has since expired. Our Directors anticipate that, as the economic growth of the PRC continues, demand for prime locations will remain robust and regardless, the rent free periods enjoyed by us will expire and therefore the property price and rental cost for suitable locations to operate our stores will increase, which may adversely affect our profitability.

We continue searching for suitable locations for our expansion strategy. Acquiring such premises could incur significant capital expenditure both in terms of the acquisition cost and ancillary costs such as construction costs. Alternatively, we may lease new locations.

As at the Latest Practicable Date, we have a total of 38 leases of which:

• 26 leases relate to the premises for our 13 Stores. Out of the 26 leases, five are short term leases with terms less than five years and where part of Zhongshan store (main store), Qingyuan store and Fusha community store are located (for details, please refer to the section headed “Business – Our operations – Retail network – Current stores” of this prospectus);

• one lease relate to the premise for our logistics centre in Zhongshan City, Guangdong Province, the PRC, of which will expire in June 2014; and

• eight leases relate to the premises for our staff quarters only, of which the earliest expiry dates are in November and December 2013 relating to three leases. We expect two of these will be renewed and one will not be renewed upon expiry.

– 35 – RISK FACTORS

If we fail to renew any of those leases, we may have to relocate or shut down our operations at those premises. Furthermore, upon the expiry of those leases, if we are unable to renew such leases on terms and conditions favourable to us, in particular at rents favourable or otherwise acceptable to us, we may be required to relocate to other locations, in which case, we will incur substantial additional costs for such relocation.

For further details relating to the properties owned and leased by our Group, please refer to the section headed “Business – Property” of this prospectus.

Any damage to our brand may adversely affect our business.

We believe that part of our business success derives from our customers’awareness of and their continued positive reception towards our brand of “ूശϵ஬” or “Yihua Department Store”. Furthermore, market acceptance of our brand is essential for successful expansion and may affect the profitability of our operations from the establishment of new stores in developing areas.

Although we have registered the trademarks of “ूശϵ஬” or “Yihua Department Store” and certain other intellectual property rights (details of material trademarks registered or in the process of registrations are set out in the section headed “Statutory and general information – B. Further information about the business of the Group – 2. Intellectual property rights of the Group” inAppendix IV to this prospectus), there is no assurance that this is sufficient to protect our trademarks and trade names from current or future infringement.

For example, we do not currently have intellectual property rights over the name “ूശ” or “Yihua” and therefore cannot control third party uses of this name. As at the Latest Practicable Date, certain private companies owned by Mr. Chen Daren, one of our Controlling Shareholders, has limited number of contexts used the name “Yihua” and/or “ूശ” as set out in the section headed “Relationship with the Controlling Shareholders” of this prospectus.

If there is any negative publicity, disputes or complaints affecting third parties, including the use by Mr. Chen Daren, the Yihua Investment Group or their respective associates in their respective businesses which use “Yihua” and/or “ूശ” name, it may confuse customers and have an adverse effect on our brand, and therefore our Group’s business and prospects may be adversely affected.

Most of our stores are currently located in Guangdong Province, the PRC and during the Track Record Period, all of our revenue is generated from our stores in Guangdong Province, the PRC and particularly a substantial part of which in Zhongshan City.

As at the Latest Practicable Date, we operated 13 Stores which have commenced business and 12 of which are located in Guangdong Province, the PRC. During the Track Record Period, all of our revenue from continuing operations was generated from our stores in Guangdong Province, the PRC. For each of the years ended 31 December 2010, 2011 and 2012 and for the five months ended 31 May 2013, our revenue generated from the stores located in Guangdong

– 36 – RISK FACTORS

Province, the PRC was approximately RMB605.2 million, approximately RMB715.1 million, approximately RMB678.9 million and approximately RMB302.4 million respectively, representing our entire revenue during such period. As such, our operations and profitability are heavily dependent on the economic and social conditions of Guangdong Province, the PRC, and particularly Zhongshan City.

If there were any material adverse changes in the social and economic conditions in the area including:

• natural disasters, epidemics, other acts of god or breakdown in the transportation system, which may disrupt our inventory supplies;

• change in local government policies, rules or regulations, which may lead to an increase in our operating costs; or

• a sudden downturn in the economy or consumer demands which may lead to a decrease in our profits and materially affect our business and expansion strategy, business and profitability of our Group may be adversely affected.

We rely on our VIP customers for a substantial portion of our sales.

We rely on a substantial portion of our sales on VIP customer including ordinary VIP card members; VIP gold card members; and VIP platinum card members. VIP platinum cards are issued by the Yihua Investment Group. As at the Latest Practicable Date, there were 138,619 ordinary VIP card members, 9,261 VIP gold card members and 2,209 VIP platinum card members.

For each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013, the Gross Sale Proceeds from VIP customers were approximately RMB538.8 million, approximately RMB698.5 million, approximately RMB586.0 million and approximately RMB271.3 million respectively, representing approximately 34.4%, approximately 36.2%, approximately 30.8% and approximately 30.2% of the total Gross Sale Proceeds respectively. This figure does not account for any Gross Sale Proceeds from purchases by VIP customers where they did not present their VIP cards and this figure partly overlaps with the Gross Sale Proceeds from sales involving payment by Consumption Cards where such VIP customers’ purchase involves payment by Consumption Cards.

There is no assurance that VIP customers of our Group or the Yihua Investment Group will continue to visit and purchase merchandise at our Stores. If they fail to continue purchasing at our Stores, our business and operations may be materially and adversely affected.

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We may not find sufficient funding and other resources for our expansion plans.

In order to establish a new store or new business, we may need to incur a substantial initial cost for acquiring property, building and renovating, hiring and training sufficient staff, adapting our network, overseeing the construction and operations at the new location and marketing. There may also be additional costs from delays in the completion of the aforesaid or arising from changes to the compliance requirements under the PRC laws and regulations. After establishment, there is no guarantee that it will be profitable or as profitable as we anticipate and/or a period may elapse between commencement and operations until it becomes profitable.

Given the uncertainties in the financial market conditions, we may not be able to obtain sufficient resources to fund both our current business operations and also our future expansion plans. If we do not obtain sufficient financing or there is a delay in the financing or such financing is not on terms and conditions favourable to us, our expansion plans may be adversely affected.

We may experience an adverse change in our financial results for year ending 31 December 2013 which is attributable to the listing expenses incurred in relation to the Share Offer, increase in rental expenses and expenses relating to opening of new stores.

We had incurred listing expenses and charged to the combined statements of comprehensive income of approximately HK$3.5 million, approximately HK$1.3 million and approximately HK$4.3 million for the years ended 31 December 2011 and 2012 and the five months ended 31 May 2013 respectively. Our Directors currently estimate that our Group will incur listing expenses in relation to the Share Offer recognised in the consolidated statement of comprehensive income for the year ending 31 December 2013 in the amount of approximately HK$9.1 million. Such amount of listing expenses is a current estimate for reference only, and the final amount is subject to adjustment based on audit and changes in variables and assumptions.

Furthermore, we had incurred and may continue to incur expenses due to increase in rental expenses and for opening of new stores (for details, please refer to the section headed “Financial information – General factors affecting our results of operations and financial position – Expansion plans of our network may need significant capital expenditure” of this prospectus).

Our Directors expect that we may experience an adverse change in our financial results for the year ending 31 December 2013, which is attributable to this significant non-recurring item of listing expenses incurred in relation to the Share Offer.

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The failure to obtain or renew any or all the required governmental approvals, licences and permits on a timely basis could materially and adversely affect our existing business operations or expansion plans.

We are primarily engaged in the operation of a department store chain, which includes operations of supermarket, and complementary businesses such as sales of pharmaceuticals, salt, tobacco and medical device. We are required to obtain and hold relevant licenses, approvals and permits in regards to the aforesaid as detailed in the section headed “Regulations – Provisions on licences” of this prospectus.

We may not successfully obtain or renew such approvals, licenses or permits relating to our department stores, supermarkets, and sales of pharmaceuticals, salt, tobacco and medical device now or in the future and even if obtained or renewed, it may not be on a timely basis. Additionally, we may not be able to satisfy the requirements for such approvals, licenses or permits in the future. Failure to obtain and renew such licenses may result in fines, sanctions and being ordered to cease our operations in such stores. Any unexpected delays in our obtaining or renewing the aforesaid would also materially and adversely affect our existing business operations or expansion plans.

We are expanding and adopting new potential businesses in a way which provide synergy to our existing business and may not succeed.

Although our main business is the operations of a department store chain, we may expand our business to include other businesses, which we believe will provide a synergy to our main business.

Given that we have not had substantial experiences in these new businesses, we are facing the following risks:

• we may have insufficient experience or expertise in operating these new businesses;

• we may be unable to provide customers with the quality of products or adequate levels of service generally expected from these new businesses;

• we may not be able to compete effectively with more established competitors or new entrants with more resources or experience in such new businesses; and

• these businesses may not be accepted by our customers or meet our profitability expectations.

If we fail to address the above, our business, operations and reputation may be adversely affected.

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We may not be able to adapt to new markets and changes according to consumer tastes and demands in a timely manner.

The product mix and price range of our department stores and supermarkets are dependent upon our direct suppliers, concessionaires and shop tenants. We continuously monitor their performance so as to generate a greater customer flow to our stores, achieve a higher profitability and create a more prestigious image for our brand. If we are unable to maintain a suitable product mix for our customers at attractive prices, our sales and reputation may be adversely affected.

If we open our store in a new location with unexpected local preferences or there is a change in consumer tastes, we may not be able to adapt to such changes timely and as a result, we might be lack in desired goods and/or have an oversupply of inventory and our profitability and image would be adversely affected.

We may not succeed in promoting our stores, addressing customer concerns and responding to media stories.

Our success in attracting customers is dependent on the promotion of our existing and new stores. Our customers may be deterred from shopping in our stores for a variety of reasons. Our promotional events may not be sufficiently appealing but incur substantial costs on our operations. We may fail to address the problems raised by our customers on a timely basis. We may also fail to respond effectively to negative media stories involving safety or quality of our products sold, which may damage our relationship with our customers and suppliers. As a result, our reputation, brand and the results of our operations may be adversely affected.

The expiry of the Change of the Old for New Program and the change in any other favourable government policies may materially affect our operations.

During the Track Record Period, we have benefited from the promulgation of the Change of the Old for New Program by the PRC government. We were one of the retailers appointed as authorised sales enterprises under the Change of the Old for New Program in Guangdong Province, the PRC and since 2009 we have been appointed as an authorised collection enterprise under the said program. We believe that we have benefited substantially from the Change of the Old for New Program in capturing new customers and strengthening our relationships with old customers.

The Change of the Old for New Program was only a short term incentive policy and was implemented from June 2009 on a trial basis for one year by the PRC government. According to the Letter of MOFCOM, MOF and Ministry of Environmental Protection regarding the Promotion Program of the Change Old for New Program of Household Electrical Appliances issued by MOFCOM, MOF and Ministry of Environmental Protection of the PRC on 1 January 2010 which became effective on 1 June 2010, the Change of the Old for New Program was extended in provinces and cities including Guangdong and Shenzhen provisionally until 31 December 2011.

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As the Change of the Old for New Program has expired and there is no other similar incentive policy promulgated by the PRC government, we cease to benefit from the increased sale of electrical appliance from this policy and our profitability may be materially affected.

We rely on our key management personnel and our ability to hire, train and retain sufficient talented staff for our business operations and expansion plans.

Since the commencement of our operation, we have relied on our experienced senior management team led by Mr. Chen and Mr. Fan and along with our other executive Directors Mr. Su Weibing and Mr. Lin Guangzheng, each has over 18 years of experience in the PRC retail market. Meanwhile, most of our senior management have over eight years of experience working in the PRC retail market. Further information on our Directors and senior management is set out in the section headed “Directors, senior management and staff” of this prospectus. If we are not able to maintain such personnel or find suitably experienced personnel for replacement on a timely basis, our operations and the implementation of our strategies may be materially disrupted.

Furthermore, the running of our current operations and new stores will rely on our ability to hire, train and retain sufficient talented personnel in a timely manner. As such employees are in demand by competitors who may provide better remunerations, we may not succeed in keeping enough talented personnel to manage and run our current and future operations. In the event that we have insufficient numbers of skilled personnel, our business operation and expansion plans may be adversely affected.

Changes in the labour laws, rules and regulations in the PRC may materially and adversely affect our operations.

As at the 30 September 2013, we employed approximately 2,085 employees in the PRC. In recent years, average labour costs in the PRC have increased due to recent policies of the PRC government to raise the minimum wage for workers which resulted in an increase in our employee benefit expenses for the year ended 31 December 2011. On 29 June 2007, the PRC the) جgovernment promulgated a new labour law, namely, ʕശɛ͏΍ձ਷௶ਗΥΝ Labour Contract Law of the PRC*) (the “New Labour Law”), which became effective on 1 January 2008 and was further amended on 28 December 2012.

The New Labour Law imposes greater liabilities on employers and makes it more costly for employers to reduce the size of their workforce. In the event we decide to significantly change or decrease our workforce in the PRC, the New Labour Law could materially and adversely affect our ability to enact such changes in a manner that is most advantageous to our circumstances or in a timely and cost effective manner, thus our results of operations could be materially and adversely affected. During the Track Record Period, compliance with the New Labour Law had generally increased our staff costs. Going forward, we are of the view that

– 41 – RISK FACTORS staff costs will continue to increase, which is in line with the economic growth in the PRC, and therefore compliance with the New Labour Law will continue to have a material adverse effect on our Group. Further changes in the labour laws, rules and regulations similar to the New Labour Law may be promulgated by the PRC government in the future and our operations may be materially and adversely affected.

Our operating cost may be increased due to the provision of staff benefits as required by the PRC government.

As from 1994, we have provided certain social insurance in accordance with the relevant PRC rules and regulations. Starting from April 2012, we have also begun contributing to housing provident funds for our employees for the period from 1 January 2012 to 31 March 2012 and have since been making contributions up to the Latest Practicable Date. As at the Latest Practicable Date, we made contributions towards pension insurance, medical insurance, unemployment insurance, injury insurance, maternity insurance and housing provident funds. For the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013, employee benefit expenses as a percentage of our revenue were approximately 8.0%, approximately 8.1%, approximately 11.2% and approximately 12.7%. In the event that the local governments further expand the scope or increase the rate of employee social insurance plans or the housing provident fund, our operating costs would increase, thereby affecting our competitiveness and profitability.

We may not be able to maintain the balance between the levels of supplies to satisfy customers without storing too much inventory.

The profitability of our operations depends on having sufficient supplies of desired products to satisfy consumer demand while maintaining the minimum amount of inventory to decrease our warehousing and storage costs.

As at 31 December 2010, 2011 and 2012 and 31 May 2013, we had an inventory balance of approximately RMB79.7 million, approximately RMB100.1 million, approximately RMB93.8 million and approximately RMB79.4 million respectively, representing approximately 16.1%, approximately 16.4%, approximately 14.3% and approximately 13.6% of the total assets respectively. Furthermore, our inventory turnover days were approximately 78.4 days, approximately 81.2 days, approximately 100.5 days and approximately 85.7 days for each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013 respectively.

We may not achieve optimal level of inventory such that there may be either a shortage of goods or overstocking of merchandise with the resulting costs for storage and our operations and profitability may be materially and adversely affected.

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We may fail to maintain beneficial arrangements with our current and prospective direct suppliers, concessionaires and shop tenants.

We maintain our relationships with our direct suppliers so as to ensure a stable supply of products. We also try to attract more brand names as concessionaires or shop tenants in our department stores. Our business and future prospects therefore depend heavily on whether we are able to maintain such beneficial arrangements with our direct suppliers, concessionaires and shop tenants. We cannot assure that such arrangements could be continued and if we are unable to do so, our supply of products and concessionaires may be affected and thereby, our profitability will be adversely affected.

For establishment of new stores outside Guangdong Province, the PRC, our existing direct suppliers and concessionaires may be unwilling or unable to supply their products or establish their presence at these new stores due to various reasons, such as additional costs, nature of their products not suitable for long distance transportation or restriction on their territorial distributorship. If we are unable to maintain our arrangements with our direct suppliers and concessionaires or find replacement for our direct suppliers and concessionaires with acceptable terms and conditions, our revenue and profitability may be adversely affected.

Generally, we have agreements with a term of one year to two years with our direct suppliers and concessionaires. Our agreements with shop tenants for leasing of shops in our stores are usually for a term of one year or with longer terms ranging from eight to ten years for more established shop tenants. Competition is intense among department store and other shopping malls for popular brands and products. We cannot assure you that such direct suppliers, concessionaires and shop tenants will not terminate the agreement or choose to renegotiate the current terms of the agreement. In the event that such agreements are terminated and we are unable to find suitable replacements, our reputation and profitability may suffer.

We are subject to certain risks in relation to the transportation of our supply of products which materially and adversely affect our business.

Our business depends heavily on receiving sufficient inventory on a timely basis. Factors beyond our control such as natural disasters, pandemics, adverse weather conditions, riots, labour strikes, mishandling of products, or a problem with the third-party transport operators delivering the goods may adversely affect the quality of our goods and/or the transportation and communication systems that we rely on in our business. There is no assurance that we have sufficient inventory outstanding or that we will be able to procure an alternative source of supply to satisfy the demand from time to time. Such disruptions would delay or prevent us from getting the products we need and we may face material write-offs or other losses. As a result, our business, competitiveness and reputation will be adversely affected.

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We may be involved in litigation in relation to defectives goods sold at our stores.

Under the existing PRC laws and regulations (details of which are set out in the section headed “Regulations – Law on tort liability” of this prospectus), manufacturers who produce or vendors who sell defective goods in the PRC may incur liability for loss or injury caused by such goods. Furthermore, consumers in the PRC are becoming more conscious of the quality of the products especially in regards to food products in the PRC, where scandals revolving around harmful ingredients, additives and preservatives are well known.

We may be involved in litigation regarding defective goods sold at our stores especially in regards to certain promotional events such as our food and culture festivals. As there is no law of the PRC requiring or general market practice regarding product liability insurance, we do not have such insurance. In the event a claim is brought against us in regards to defective products, our financial position and reputation may be adversely affected.

We may have insufficient insurance coverage against future claims, losses and liabilities.

In accordance with the PRC laws and regulations and general market practice in the PRC retail industry, we have insurance covering risks over loss or damage of properties, employer liabilities, cash and automobiles and certain public liabilities in respect of our business. However, our Group does not maintain insurance against all the risks associated with our operations due to various reasons, including some risks that are generally not covered by insurers in their insurance standard policies or would have only minimal impact to our Group or would involve in substantial amount of premium not commercially justifiable. Our Group does not have insurance coverage over the aforesaid risks in view of such insurance coverage not being generally available in the PRC. Therefore, we may not have sufficient insurance coverage for all future claims, losses, and liabilities and if they occur, our financial results may be adversely affected. Further, there is no assurance that our Group will be able to renew the existing insurance policies on commercially reasonable terms and conditions, or at all.

We may be involved in litigation over third party intellectual property rights.

In the ordinary course of business, concessionaires and shop tenants may sell their products and we may sell products from third party suppliers in our stores. These products may be susceptible to claims by third parties as infringing their intellectual property rights. In the event that their claims are successful, we may be held under the PRC laws to be jointly liable to pay damages, discontinue such sales and/or other penalties.

During the Track Record Period, we had three legal proceedings in which Guangdong Yihua Department Store was named as one of the defendants for selling products in our department store that infringed the plaintiffs’ intellectual property rights. In one case, the products being sold were stationeries and small toys imprinted with cartoon figures (the “First Case”); in the second case, the products being sold were music CD and DVD (the “Second Case”); and in the third case, the products being sold were luggage bags (the “Third Case”). Those products were supplied by Independent Third Party suppliers or sold by an Independent

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Third Party concessionaire at our store. The parties to First Case and Second Case reached out-of-court settlements and subsequently the plaintiffs had withdrawn their respective legal claims while in the Third Case, the defendants won on appeal and therefore Guangdong Yihua Department Store did not have to pay any sum. In the First Case, Guangdong Yihua Department Store agreed to pay approximately RMB31,600 and the supplier agreed to pay approximately RMB10,600 to the plaintiff but both amounts were settled by the supplier. In the Second Case, the supplier paid RMB30,000 to the plaintiff and Guangdong Yihua Department Store was not required to pay any sum. There is no assurance that we will not receive similar intellectual property claims in the future. In the event that such claims are brought against us, the costs to defend against such claims and the damage to our reputation could materially affect our financial condition and business.

Some of our leased premises in the PRC are subject to certain specific risks.

Some of our stores are operating on sites with legal title which may be lacking or defective. As at the Latest Practicable Date, we leased the premises, on which the following stores are located from lessors which have not provided us with building ownership certificates relating to the aforesaid properties:

• part of the Guzhen department store (approximately 6,590 sq.m. of 14,789 sq.m of area used for commercial purpose);

• Jiangnan and Fusha community stores; and

• Yingde and Tai’an store (Longtan) department stores which commenced operations in June 2013.

Our PRC Legal Advisers have advised us that, if third parties who purport to be property owners challenge our right to lease or use these properties, we could be subject to potential disputes. Titles to these properties could be challenged and, if successful, these challenges could impair the operations of our retail outlets on such properties and we may need to relocate. For details, please refer to the section headed “Business – Property – Leased Property” of this prospectus.

As at the Latest Practicable Date, the business operations of our Company had not been disrupted due to the lack of title certificates or proof of authorisation from the lessors for the properties leased by us. If however such disputes arises and we were forced to relocate, our business operations in the above store, would be disrupted or suspended, and our financial condition and results of operations may be affected.

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Our business operations may be adversely affected by any failure or slowdown of our information technology systems.

We have installed a number of information technology systems to support our day-to-day business operations of our Stores, logistics centre and back offices, including POS, inventory management, customer loyalty program, financial and administration and human resources. These information technology systems are essential to ensure the efficiency of our business operation. Any system failure or slowdown may cause interruption and have adverse effect on our business. In particular, we cannot guarantee that there will not be interruptions to our business during any maintenance, check-up or upgrade of our information and technology systems. We intend to use part of the net proceeds from the Share Offer to upgrade our information and technology system as mentioned in the section headed “Future plans and use of proceeds” of this prospectus.

Furthermore, according to arrangements with a mobile telecommunications service provider, being an Independent Third Party, clients of the said provider may purchase merchandise at our main store and Guzhen store only by using an e-card or redeeming the bar code in the phone text issued by the aforesaid provider. If our information technology systems are unable to verify, recognise or accurately record arrangements involving either the e-card or the redemption methods, our operations may be adversely affected. For details concerning this arrangement, please refer to the section headed “Business – Marketing and promotion – Customer loyalty programs – Promotional arrangements with a mobile telecommunications service provider” of this prospectus.

We were not in full compliance with certain Hong Kong and the PRC laws and regulations during the Track Record Period.

We were not in full compliance with certain Hong Kong and the PRC laws and regulations during the Track Record Period. The non-compliance incidents include (i) issuance of Consumption Cards as a form of pre-paid cards; (ii) non-registration of lease agreements; (iii) defective titles; (iv) inter-company loans with interest; (v) opening accounts and full payment of housing provident funds; (vi) other administrative notices and (vii) non-compliance of section 122 of the Companies Ordinance. For details of the non-compliance incidents, please refer to the section headed “Business – Legal compliance and litigation – Non-compliant incidents” of this prospectus.

Any future judgment or penalty against us in respect of these non-compliance incidents could have an adverse effect on our reputation, cash flow and results of operations. For the risks associated with items (ii), (iv) and (vii) above, please see the subsections headed “Some of our lease agreements have not been registered with the relevant authorities.”, “Inter- company loans with interest.” and “Our Group has failed to register and open housing provident fund accounts for its employees and to make contribution to the said accounts prior to March 2012.” respectively of this section.

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Some of our lease agreements have not been registered with the relevant authorities.

As at the Latest Practicable Date, our Group operated a total of 13 Stores and has a logistics centre storage spaces, offices, car packing spaces and staff quarters. Except as set out in the section headed “Business – Property – Owned property” of this prospectus, our 13 Stores were located in properties leased by our Group.

According to the relevant PRC laws and regulations, a lease agreement shall be registered with the relevant authority within 30 days after the lease agreement is entered into. If the lease agreement is not registered, the relevant authority is entitled to request the parties to the lease agreement to rectify the situation within a prescribed time limit. If the parties still fail to register the lease agreement, they may be subject to a fine in the range of RMB1,000 to RMB10,000 for each lease agreement not registered. Our PRC Legal Advisers have advised us that the failure to register the lease will not affect the validity of the lease agreements.

With respect to 38 lease agreements entered into by our Group, 9 lease agreements have not been registered with the relevant PRC governmental authority as at the Latest Practicable Date. Therefore, our Group may be subject to a maximum fine of RMB90,000.

As at the Latest Practicable Date, our Directors confirmed that they were not aware of any administrative action having been taken by the relevant PRC authorities against our Group in respect of our Group’s lease non-registration. However, there is no assurance that the relevant authority will not take any actions in regards to the non-registration of the aforementioned lease agreements.

For further details of this non-compliant incident and remedial measures, please refer to the section headed “Business – Legal compliance and litigation – Non-compliant incidents” of this prospectus.

Inter-company loans with interest.

During the Track Record Period, Jiangmen Yihua Department Store granted certain loans to Yihua Investment at an annual interest with details as follows:

• loans amounted to approximately RMB20.0 million, approximately RMB50.0 million, nil and nil for each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013 and borne interest at approximately 6.03%, approximately 4.85%, approximately 9.00% and nil per annum; and

• interest income of approximately RMB1.9 million, approximately RMB2.9 million, approximately RMB1.0 million and nil from such loans for each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013.

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As advised by our PRC Legal Advisers, the loans do not breach any PRC laws or administrative regulations but fall within the category of unauthorised loans under the General Rules for Loans. As advised by our PRC Legal Advisers, the General Rules is a rule of a government department, not laws or administrative regulations. According to the General Rules for Loans, the PBOC may (i) impose on the lender a fine equivalent to one to five times of its income derived from such loan transactions; and (ii) suppress such lending activity. Based on the aggregate amount of RMB1.9 million of interest income from 1 September 2011 to 31 December 2012 and our Directors confirming that no interest income from such lending activities was received from 1 January 2013 to the Latest Practicable Date, the potential maximum fine of RMB9.6 million. As advised by our PRC Legal Advisers, there is a limitation period of two years for such claim and therefore, no penalty should be made in respect of the interests received prior to 30 June 2011.

As at the Latest Practicable Date, the loan and relevant interests has been fully repaid.

We have received confirmations from the relevant branch of PBOC, since the establishment of Jiangmen Yihua Department Store (being 24 August 2004) and up to 31 May 2013, there is no administrative action taken against Jiangmen Yihua Department Store and Jiangmen Yihua Department Store did not breach any relevant laws, regulations or rules. We are advised by our PRC Legal Advisers that the abovementioned authority is competent to give such confirmations and based on such confirmations, the risk of the fine is low and there is no risk of the suppression of the lending activity.

As at the Latest Practicable Date, our Directors confirmed that they were not aware of any administrative action having been taken by the relevant PRC authorities against our Group in respect of inter-company loans. However, there is no assurance that the PBOC will not impose a fine or take any actions in regards to the aforementioned loan.

Our Group has failed to register and open housing provident fund accounts for its employees and to make contribution to the said accounts prior to March 2012.

We have registered, opened accounts and made contributions to the housing provident funds as required by the PRC laws and regulation in April 2012. In April 2012, contributions were also been made for the period from 1 January 2012 to 31 March 2012 and have since been making contributions up to the Latest Practicable Date.

Our PRC Legal Advisers have advised that, according to the relevant PRC laws and regulations, failure to open accounts for our employees and to contribute to the housing provident funds prior to April 2012 by our Group could be subject to a rectification order by the competent housing fund management centre and a fine of RMB10,000 to RMB50,000. Failure in payment of the housing provident fund in time or any underpayment thereof can also be subject to a rectification order by the competent housing fund management centre which will also be entitled to apply to the people’s court for enforcement.

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As at the Latest Practicable Date, our Directors confirmed that no administrative action has been taken against us for not contributing to the housing provident funds prior to April 2012. We have received confirmations from or through interviews with the relevant local housing fund management centres for the below mentioned six PRC subsidiaries, which were not newly established during the Track Record Period that:

(i) in relation to Guangdong Yihua Department Store, Guzhen Yihua Department Store and Lonwalk Mould, no administrative action has been taken against them, nor is there any dispute concerning their payment. The relevant local housing fund management centre is of the view that Guangdong Yihua Department Store, Guzhen Yihua Department Store and Lonwalk Mould are in compliance with the relevant PRC laws and regulations for the housing provident funds;

(ii) in relation to Qingyuan Yihua Department Store for the period commencing from 1 January 2010 to 31 December 2010, the relevant local housing fund management centre is of the view that the housing provident fund requirements were not mandatory in Qingyuan until after January 2011; and

(iii) in relation to Jiangmen Yihua Department Store, Qingyuan Yihua Department Store and Shaoguan Yihua Department Store for the period commencing from 1 January 2012, no administrative action has been taken against them, nor is there any dispute concerning their payment. The relevant local housing fund management centres are of the view that Jiangmen Yihua Department Store, Qingyuan Yihua Department Store and Shaoguan Yihua Department Store are in compliance with the relevant PRC laws and regulations for the housing provident funds.

We are advised by our PRC Legal Advisers that each of the relevant housing fund management centres mentioned above are competent to give such confirmations.

Based on the above reasons, our PRC Legal Advisers are of the following views concerning the risk that the relevant local housing fund management centres requiring payment of additional housing provident funds:

(a) risk for the aforesaid payment for Guangdong Yihua Department Store, Guzhen Yihua Department Store and Lonwalk Mould is low as indicated by item (i) above;

(b) risk for the aforesaid payment for Qingyuan Yihua Department Store prior to January 2011 is low as indicated by item (ii) above; and

(c) risk for the aforesaid payment for Jiangmen Yihua Department Store, Qingyuan Yihua Department Store and Shaoguan Yihua Department Store in 2012 is low as indicated by item (iii) above.

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There is no assurance that any relevant PRC authority will not impose administrative penalty or the employees will not bring claims against our Group in connection with non-compliance above in particular for Qingyuan Yihua Department Store in 2011 and Jiangmen Yihua Department Store and Shaoguan Yihua Department Store in 2010 and 2011, which may adversely affect the business and results of our Group.

Our historical performance may not be regarded as an indication of our future performance.

We experienced significant growth mainly attributable to the increase in profit from continuing operations during the Track Record Period. Our profit had improved from a profit from continuing operations of approximately RMB32.5 million for the year ended 31 December 2010 to a profit of approximately RMB50.3 million for the year ended 31 December 2011. Subsequently, our profit from continuing operations had declined to a profit of approximately RMB42.5 million for the year ended 31 December 2012, representing a decrease of approximately 15.5%. Furthermore, our profit from continuing operations of approximately RMB23.5 million for the five months ended 31 May 2012 had declined to a profit of approximately RMB12.7 million for the five months ended 31 May 2013, representing a decrease of approximately 46.0%. Such performance may not be indicative that our Group will attain similar performance in the future. There is no assurance that our Group’s business will continue to grow at such a rate as being comparable to that during the Track Record Period and our Group will be able to maintain continued growth through organic growth and implementation of our business strategies.

We recorded net current liabilities during the Track Record Period, high gearing ratio in 2011 and a negative operating cash flow for the five months ended 31 May 2013.

As at 31 December 2010, 2011 and 2012 and 31 May 2013, our Company recorded net current liabilities of approximately RMB121.5 million, approximately RMB51.1 million, approximately RMB41.9 million and approximately RMB36.6 million respectively. For details, please refer to the section headed “Financial information – Net current liabilities and working capital sufficiency” of this prospectus. As at 31 December 2011, our gearing ratio, defined as total debts, including payables incurred not in the ordinary course of business, divided by total equity was approximately 202.1% primarily due to the extra borrowings obtained from bank for approximately RMB50.0 million in 2011. Our gearing ratios as at 31 December 2012 and 31 May 2013 were only approximately 53.1% and approximately 49.5% respectively. We may in the future incur current liabilities or have high gearing ratio that result in the reporting of such for any given financial period due to factors including but not limited to changes in current assets, such as trade and other receivables, investments in trading securities and cash and fluctuations in items such as trade and other payables, current tax liabilities, and financial guarantee obligations.

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Although we seek to manage our working capital, we cannot assure you that we will be able to match the timing and amounts of our cash inflows with the timing and amounts of our payment obligations and other cash outflows. As a result, there could be a period during which we experience net cash outflow. For example, we had recorded net cash used for the five months ended 31 May 2013 of approximately RMB7.9 million (for details of the cause, please refer to the section headed “Financial Information” of this prospectus).

Our ability to obtain additional financing will depend on a number of factors, including our financial condition, results of operations and cash flow, changes in monetary policies, changes in costs of financing and interest rates, prevailing economic and capital market conditions and regulatory requirements. If we cannot obtain sufficient or additional funding on acceptable terms or if we encounter significant working capital requirements or cash outflows, we may not have sufficient liquidity or the credit capacity to meet all of our needs for cash including repayment on bank borrowings, and hence, may be subject to claims or litigation by lenders or suppliers. In such a case, our financial condition may be adversely affected and we may not be able to successfully implement our business strategies which could also adversely affect our business and prospects.

Wrongdoing by our employees and/or third parties using our Consumption Cards may harm our business.

We issue Consumption Cards which are a form of currency substitutes and may be used for the purchase of merchandise in our Stores. The issue of pre-paid cards is a common practice in the PRC for department stores. There have been news articles concerning corrupt practices where pre-paid cards are used by third parties to bribe others. We are unable to prevent third parties from such practices and may therefore be involved in or associated with litigation concerning such bribery or corruption by our staff and/or third parties using our Consumption Card.

Such wrongdoing may harm our reputation and if we are deemed to be responsible for such misconduct, we could be required to pay damages or fines. We may be unable to prevent, detect or deter all such instances of bribery or corruption and other misconduct. Such instances committed against our interests, which may include past acts that have gone undetected or future acts, may also have a material adverse effect on our business, results of operation and financial condition.

– 51 – RISK FACTORS

RISKS RELATING TO THE RETAIL INDUSTRY IN THE PRC

We operate in a highly competitive industry and face increasing competition from online retailers.

As the PRC retail industry is a highly competitive industry, we face constant pressures from small domestic stores, retailers to larger and possibly international operators of supermarkets, hypermarkets and department stores. These competitors may be able to provide lower prices, higher quality goods, additional services, coupled with a better location, greater experience in retailing, stronger relationships with direct suppliers and concessionaires, more extensive capital resources, a more advance customer database and logistics systems as well as stronger brand recognition.

Furthermore, e-commerce has developed rapidly in the PRC along with the significant increase in the number of Internet users. There are currently a large number of online sales platforms and online retailers in a wide range of product categories catering to consumers across the PRC. Online retailers may sell the same products at discounted prices as they generally have lower fixed costs compared with physical stores. We face increasing competition from online retailers and there is not guarantee that our customers would not choose online retailers due to their pricing advantage.

Our attempts to remain competitive in the market by our promotional events and loyalty programs may not succeed and may increase our costs. Additionally, if our attempts to remain competitive fail and our market share shrinks, our business and financial condition may be adversely affected.

Our success may be affected by the PRC’s economy and consumer confidence.

The PRC’s economy may affect consumer spending patterns, which in turn may affect the sales at our stores. During the Track Record Period, all of our revenue was derived from the PRC.

Despite the rapid growth in GDP and per capita disposable income have strengthened consumers’ purchasing power in the PRC, we cannot assure that such growth will continue in the future. In addition, the impact on the inflation in the PRC may affect consumer spending patterns, which could materially and adversely affect our business, financial condition and results of operations. According to the National Bureau of Statistics of the PRC, the change in the Consumer Price Index (CPI) from the previous year across all products was 2.6% in 2012. Any economic downturn in the PRC could affect the consumer spending patterns, thereby may materially and adversely affect our business, financial condition and results of operations and our future prospects.

– 52 – RISK FACTORS

Our customer’s demands are affected by seasonality.

During the year, consumer spending patterns in the PRC tend to fluctuate depending on the season. In our experience, we generally record higher sales during major holidays and festivals such as New Year holiday, Chinese New Year holiday, the Labour Day holiday, Mid-Autumn Festival and the National Day holiday. Therefore, unexpected events such as adverse weather conditions during such periods may greatly affect our financial results.

Our operations may be affected by the outbreak of any severe infectious disease in the PRC.

Our operations may be affected by the outbreak of any severe infectious diseases in the PRC. Past occurrences or the fear of outbreaks (such as concerning Severe Acute Respiratory Syndrome (“SARS”), H1N1 influenza (“H1N1”), Influenza A virus H7N9 (“H7N9”) and avian flu (“H5N1”)) may have a material and adverse effect on consumer spending and business sentiments in the PRC in general. Since all our operations are currently in the PRC, any slowdown or contraction in economic activity in the PRC may material and adversely affect our financial condition and growth prospects. Furthermore, if any of our direct suppliers, concessionaires or our stores are suspect of being a source for such disease or any of our employees or customers are suspected of having contracted such diseases, we may suffer a temporary suspension of our retail operations and the affect on our operations that entails.

Our business is subject to a wide variety of laws, rules and regulations.

Our business is subject to a wide range of laws, rules and regulations including, but not limited to, those relating to pricing, consumer protection, product quality, food safety and public safety (for details, please refer to the section headed “Regulations” of this prospectus for further information). We may be required to obtain applicable licenses, fulfill certain requirements and relevant local regulatory authorities may conduct periodic inspections or inquiries to ensure compliance by our business. If we fail to comply with any applicable laws, rules and regulations, we may be subject to fines, penalties or other administrative sanctions, litigation or our licenses may be revoked or suspended which may materially or adversely affect our operations and financial condition.

– 53 – RISK FACTORS

RISKS RELATING TO THE PRC

Significant changes to the business, financial and legal conditions of the PRC may materially and adversely affect our operations and future prospects.

Generally, the PRC’s economy is considered a centrally planned economy and therefore differs from other developed economies in a number of ways including:

• its structure; • control of foreign exchange; and

• level of government involvement; • allocation of resources.

• growthrate;

Our operations are located in the PRC and all of our revenue are derived from the PRC. Therefore, any significant changes to the business, financial and legal conditions of the PRC may materially and adversely affect our operations and future prospects.

There are significant ambiguities relating to the interpretation and enforcements of the PRC laws, rules and regulations.

All of our operations are conducted in the PRC. The PRC legal system is based on written statutes and prior court decisions can only be cited as reference. Since 1979, the PRC government has been developing a comprehensive system of laws, rules and regulations in relation to economic matters, such as foreign investment, corporate organisation and governance, commerce, taxation and trade.

However, due to the fact that these laws, rules and regulations have not been fully developed, and because of the limited volume of published cases and their non-binding nature, the interpretation and enforcement of these laws, rules and regulations involve some degree of uncertainties with respect to the outcome of any legal action that may be taken against us in the PRC.

The PRC regulations relating to acquisitions of the PRC companies by offshore holding companies may limit our ability to acquire the PRC companies and may materially and adversely affect the implementation of our acquisition strategies as well as our business and prospects.

The M&A Rules, which became effective on 8 September 2006 and revised on 22 June 2009, provide the rules with which foreign investors must comply should they seek to (i) purchase the equities of the shareholders of a domestic non-foreign-invested enterprise, or subscribe to the increased capital of a domestic non-foreign-invested enterprise, and thus change the domestic non-foreign invested enterprise into a foreign-funded enterprise, or (ii) set up foreign-funded enterprises to acquire assets from domestic enterprises, or to procure

– 54 – RISK FACTORS acquisitions of assets from domestic enterprises and set up foreign-invested enterprises by contribution of such acquired assets. The M&A Rules stipulate that the business scope upon acquisition of domestic enterprises must conform to the ̮ਠҳ༟ପุܸኬͦ፽ (Catalogue for the Guidance of Foreign Investment Industries*) issued by the National Development and Reform Commission and the MOFCOM. The M&A Rules also provide the takeovers procedures for equity interest in domestic enterprises.

Our PRC Legal Advisers have advised us that there are uncertainties as to how the M&A Rules will be interpreted or implemented. If we decide to acquire a PRC enterprise, we cannot assure you that we or the owners of such PRC enterprise can successfully complete all necessary approval requirements under the M&A Rules. This may restrict our ability to implement our acquisition strategies and may materially and adversely affect our business and prospects.

Future fluctuations in foreign exchange rates and government control in currency conversion may materially and adversely affect our Company’s ability to remit dividends.

Most of our revenue and expenditures are denominated in Renminbi, which is currently not a freely convertible currency. We will require foreign currencies for dividend payment (if any) to our Shareholders.

The value of the Renminbi is subject to changes in the PRC government’s policies and depends to a large extent on domestic and international economic and political developments, as well as supply and demand in the local market. For instance, in the PRC, since 1994, the conversion of the Renminbi into foreign currencies, including the Hong Kong and US dollars, has been based on rates set by the PBOC. Since 1994, the official exchange rate for the conversion of Renminbi to US dollars was generally stable. The PRC government, however, has, with effect from 21 July 2005, reformed the exchange rate regime by moving into a managed floating exchange regime based on market supply and demand with reference to a basket of currencies. On 21 July 2005, this revaluation resulted in the Renminbi appreciating against the US dollar and Hong Kong dollar by approximately 2%. On 23 September 2005, the PRC government widened the daily trading band for Renminbi against non-US dollar currencies from 1.5% to 3.0% to improve the flexibility of the new foreign exchange system. On 20 June 2010, the PBOC announced that it intends to further reform the Renminbi exchange rate regime by enhancing the flexibility of the Renminbi exchange rate.

In the event there be significant changes in the exchange rates of US dollars or Hong Kong dollars against Renminbi, our Company’s ability to make dividend payments in foreign currencies may be materially and adversely affected. In addition, any significant change in the exchange rates of the Renminbi against the Hong Kong dollar could materially and adversely affect the value of our Company’s dividends, which would be funded by Renminbi but paid in Hong Kong dollars.

– 55 – RISK FACTORS

The PRC regulation of loans and direct investment by offshore holding companies to the PRC entities may delay or prevent us from using proceeds we receive from the Share Offer to make loans or additional capital contributions to our PRC subsidiaries.

ഐ˹˕ږOn 29 August 2008, the SAFE promulgated ᗫ׵ҁഛ̮ਠҳ༟Άุ̮ි༟͉ ၍ଣϞᗫุਕ዁Ъਪᕚٙஷٝ (the Notice of the General Department of the SAFE onි Improving on Relevant Business Operations Issues Concerning Improving the Administration of the Payment and Settlement of Foreign Exchange Capital of Foreign-Invested Enterprises*) (“Notice 142”), which regulates the conversion by a foreign-invested enterprise of foreign capital currency into Renminbi by restricting the use of converted Renminbi.

The Notice 142 requires that the Renminbi funds converted from the foreign currency capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the applicable governmental authority and may not be used for equity investments within the PRC unless specifically provided for otherwise. In addition, the SAFE strengthened its supervision over the flow and use of Renminbi funds converted from the foreign currency capital of a foreign-invested enterprise. The use of such Renminbi capital may not be changed without the SAFE’s approval, and may not, in any case, be used to repay or prepay Renminbi loans if such loans are outstanding. Violations of the Notice 142 will result in severe penalties, such as heavy fines set out in the relevant foreign exchange control regulations.

As an offshore holding company of our PRC subsidiaries, our Company may make loans to our PRC subsidiaries, or we may make additional capital contributions to our PRC subsidiaries by utilising the proceeds we receive from the Share Offer. However, we cannot assure you that we will be able to obtain these government registrations or approvals on a timely basis, if at all, with respect to our future loans or capital contributions to our PRC subsidiaries or any of their respective subsidiaries. If we fail to receive such registrations or approvals, our ability to use the proceeds received from the Share Offer and to fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and ability to expand our business.

Our Company relies principally on dividends paid by our subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to pay dividends to us could have a material adverse effect on our ability to conduct our business.

Our Company is a holding company and relies principally on dividends paid by our subsidiaries for cash requirements, including the funds necessary to service any debt it may incur. If any of our subsidiaries incurs debt in its own name in the future, the instruments governing the debt may restrict dividends or other distributions on its equity interest to our Company.

Under the new EIT Law and implementation regulations issued by the State Council, the PRC income tax at the rate of 10% is applicable to dividends paid by the PRC enterprises to “non-resident enterprises” (enterprises that do not have an establishment or place of business

– 56 – RISK FACTORS in the PRC, or that have such establishment or place of business but the relevant income is not effectively connected with the establishment or place of business) subject to the application of any relevant income tax treaty that the PRC has entered into. Any dividend that our Company or any subsidiary considered a “non-resident enterprise” receives from our PRC subsidiaries shall be subject to the PRC taxation at the 10% rate (or lower treaty rate).

We may be deemed to be a PRC tax resident under the EIT Law and be subject to the PRC taxation on our income.

הEIT Law*) and ʕശɛ͏΍ձ਷Άุ) ج੻೼הUnder the ʕശɛ͏΍ձ਷Άุ ,Է (EIT Rules*) both of which were implemented on 1 January 2008ૢ݄ྼج੻೼ enterprises established outside the PRC whose “de facto management bodies” are located in the PRC are considered “resident enterprises” and will generally be subject to a uniform 25% EIT on their worldwide income. Under the EIT Rules which took effect on 1 January 2008, “de facto management bodies” are defined as bodies that have material and overall management control over the production and operation, personnel, accounts and properties of an enterprise. Substantially all of our management is currently based in the PRC, and may remain in the PRC. Therefore, we may be treated as a PRC resident enterprise for EIT purposes and thus be subject to EIT of 25% on our worldwide income.

However, a PRC resident enterprise is exempted from tax on dividend income received from qualified resident enterprises. The tax consequences of such treatment are currently unclear, as they will depend on the implementation regulations and how local tax authorities apply or enforce the EIT Law and the EIT Rules. Our business, financial condition and operating results may be materially and adversely affected if we are subject to the PRC taxation on our worldwide income.

During the financial year ended 31 December 2010 and up to the Latest Practicable Date, in preparation for the Share Offer, our Group underwent the Reorganisation (for more details of the Reorganisation, please refer to the section headed “History and development – Corporate reorganisation” of this prospectus.)

੻೼၍ଣٙஷٝ (Notice onה੻Άุה֢͏ΆٰุᛆᔷᜫڢPursuant to theᗫ׵̋੶ Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises (“Circular No. 698”) issued by the SAT on 10 December 2009 with retroactive effect from 1 January 2008, where a foreign investor transfers its indirect equity interest in a PRC resident enterprise by disposing of its equity interests in an overseas holding company (an “Indirect Transfer”), and such overseas holding company is located in a tax jurisdiction that (i) has an effective tax rate less than 12.5%; or (ii) does not tax foreign income of its residents, the foreign investor shall report to the competent tax authority of the PRC resident enterprise this Indirect Transfer. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of avoiding PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC withholding tax at a rate of up to 10%. Circular No. 698 also provides that, where a non-PRC resident enterprise transfers

– 57 – RISK FACTORS its equity interests in a PRC resident enterprise to its related parties at a price lower than the fair market value, the relevant tax authority has the power to make a reasonable adjustment to the taxable income of the transaction.

We intend to make the relevant submission required to be made by us in connection with the Reorganisation prior to the Listing. The SAT is entitled to redefine the nature of such indirect equity transfer and impose EIT on the seller of the foreign target company if it determines that such indirect transfer is carried out without reasonable commercial intention and evades EIT by abusing corporate structures.

However, it is currently unclear how the relevant PRC tax authorities will implement or enforce the above notices and whether such EIT on capital gains will be subject to any further change. In case we are required to pay the EIT on capital gains by the relevant PRC tax authorities, our tax liability may increase and our business, financial condition and operating results may be materially and adversely affected.

Failure to comply with the SAFE regulations relating to the establishment of offshore special purpose vehicles by the PRC residents may adversely affect our business operations.

In October 2005, SAFE issued Circular No. 75, which took effect on 11 November 2005. The Circular No. 75 requires domestic residents of the PRC (including individuals who habitually reside within the PRC due to economic interests) to register with and obtain approvals from SAFE before establishing or controlling any company outside the PRC for the purpose of capital financing with assets or equities of the PRC companies, referred to therein as a “special purpose company.” In addition, any PRC resident who is a shareholder of an offshore special purpose company is required to amend its SAFE registration within 30 working days after any major change in the share capital of the offshore special purpose company without any return investment being made, such as any increase or decrease in share capital, stock right assignment or exchange, consolidation or subdivision of shares, investment with long term stock rights or credits, or provision of guaranty to a foreign party.

Our PRC Legal Advisers are of the opinion that Mr. Chen Daren and Mr. Lu who are the PRC individual residents need to submit the applications to the SAFE Guangdong Branch for foreign exchange registration, and Yinglifeng Developments who is a PRC resident legal person needs to submit the application to the SAFE Guangdong Zhongshan Branch for foreign exchange registration. Details of Circular No. 75 and foreign exchange registration are set out in the section headed “Regulations – Provisions on foreign exchange management and dividend distribution – Circular No. 75 and Circular No. 59” of this prospectus.

Mr. Chen Daren and Mr. Lu have registered and filed in respect of their respective interests on 24 April 2012 to the relevant SAFE governmental authorities and such relevant registration and filing was completed on 29 May 2012. Our PRC Legal Advisers have advised us that Mr. Chen Daren and Mr. Lu have complied with all of the requirements under Circular No. 75.

– 58 – RISK FACTORS

The SAFE Guangdong Zhongshan Branch has confirmed and our PRC Legal Advisers have advised that based upon the completion of the above, we have complied with the applicable PRC laws, regulations and rules on foreign exchange registration.

However, we may not at all times be fully informed of the identities of all our Shareholders who are the PRC residents and we do not have control over our Shareholders. As such, we cannot assure you that all of our PRC resident beneficial owners will comply with Circular No. 75 and Circular No. 59. Failure of our beneficial owners who are the PRC residents to register or amend their SAFE registrations in a timely manner pursuant to Circular No. 75 and Circular No. 59 or failure of future Shareholders who are the PRC residents to comply with the registration requirements set out in Circular No. 75 and its implementation rules may subject such beneficial owners and/or our PRC subsidiaries to fines and legal sanctions and may also limit our ability to contribute additional capital to our PRC subsidiaries, limit the ability of our PRC subsidiaries to distribute dividends to us or otherwise materially and adversely affect our business.

Failure to comply with the PRC regulations in respect of the registration of our PRC resident employees’ share options may subject such employees or us to fines and legal or administrative sanctions. the Measures for the Administration of Individual) جPursuant to ࡈɛ̮ි၍ଣ፬ Foreign Exchange*) which was adopted on 25 December 2006 by the PBOC, ࡈɛ̮ි၍ଣ the Implementation Rules of the Administration The Notice of the State) ۆ୚݄ྼج፬ Administration of Foreign Exchange on Issuing the Detailed Rules for the Implementation of the Measures for the Administration of Individual Foreign Exchange*) issued on 5 January by the SAFE (the “Individual Foreign Exchange Rules”) and ਷࢕̮ි၍ଣ҅ᗫ׵ྤʫ 2007 ࡈɛਞၾྤ̮ɪ̹ʮٰ̡ᛆዧᎸࠇྌ̮ි၍ଣϞᗫਪᕚٙஷٝ (Circular of the SAFE on Relevant Issues Concerning the Foreign Exchange Administration of the Involvement of Domestic Individuals in the Share Incentive Schemes of Overseas Listed Companies*) (“Circular No. 7”), which was promulgated by the SAFE on 15 February 2012 and became effective on the same date, the PRC residents who are granted shares or share options by an overseas listed company according to its employee share option or share incentive plan are required, through the PRC subsidiary of such overseas listed company or other qualified PRC agents, to register with SAFE and complete certain other procedures related to the share option or other share incentive plan.

Foreign exchange income from the sale of shares or dividends distributed by the overseas listed company must be remitted into the PRC. In addition, the overseas listed company or its PRC subsidiary or other qualified PRC agent is required to appoint an asset manager or administrator and a custodian bank, as well as open foreign currency accounts to handle transactions relating to the share option or other share incentive plan.

– 59 – RISK FACTORS

Our PRC resident employees who will be granted share options, or PRC option holders, together with us, will be subject to these rules upon the Listing of our Shares. In order to comply with the requirements of the Individual Foreign Exchange Rules and Circular No. 7, we will require our domestic employees to obtain approval from the SAFE or its local branches when they participate in the Share Option Scheme. If we or our PRC option holders fail to comply with these rules, we or our PRC option holders may be subject to fines and sanctions.

It may be difficult to effect service of process upon us or our Directors who live in the PRC or to enforce judgments against us in the PRC.

A majority of our subsidiaries are established in the PRC and all of our executive Directors and senior management reside except for our company secretary within the PRC, and substantially all of our assets are located within the PRC. It may not be possible to effect service of process outside the PRC upon us or such directors, supervisors or members of senior management, including with respect to matters arising under applicable state securities laws.

The PRC does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with many other countries. On 14 July 2006, the PRC and Hong Kong signed the “Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region Pursuant to Choice of Court Agreements Between Parties ৫޴ʝႩ̙ձੂБ຅ԫɛ՘ᙄ၍ᒍٙ͏ਠԫࣩ΁кجConcerned” (ᗫ׵ʫήၾ࠰ಥतйБ݁ਜ Ӕٙτર). However, only if such final judgment granted by Hong Kong courts and which fulfills certain criteria are recognised by certain PRC courts.

RISKSRELATINGTOTHESHAREOFFER

There has been no prior public market for the Shares and an active trading market may not develop.

Prior to completion of the Share Offer, there has been no public market for the Shares. Therefore, there may not be an active trading market for the Shares and the trading price of the Shares may fluctuate significantly. The Offer Price range has been determined through negotiation between our Company and the Joint Bookrunners and the final Offer Price may not be indicative of the price at which the Shares will be traded following completion of the Share Offer. In addition, there can be no assurance that an active trading market for the Shares will develop, or, if it does develop, that it will be sustained following completion of the Share Offer, or that the trading price of the Shares will not decline below the Offer Price.

We cannot assure investors that the trading price of the Shares may decline or be subject to significant volatility in response to, among others, the following factors:

• our future operating results;

• changes in the analysis and recommendations of securities analysts;

– 60 – RISK FACTORS

• announcements made by us or our competitors;

• changes in investors’ perception of our Group and the investment environment generally;

• developments in the retail industry;

• changes in the laws, rules and regulations in the PRC;

• the liquidity of the market for the Shares; and

• general economic and other factors including in Zhongshan, Guangdong Province, the PRC or the world.

Sale of old Shares or issuance of new Shares may decrease the value of your investment.

Some of our Shares currently issued or to be issued before the Listing and held by the Controlling Shareholders and certain existing Shareholders, will be subject to contractual and/or legal restrictions on resale pursuant to the Listing Rules or in accordance with the Underwriting Agreements for a period of time after completion of the Share Offer (for details, please refer to the section headed “Underwriting” of this prospectus). After these restrictions lapse or if they are waived or breached, sales or arrangements to sell our Shares, or the possibility of such sales by the Controlling Shareholders could negatively impact the market price of our Shares and our ability to raise equity capital in the future.

In addition, we may need to raise additional funds in the future to finance our business expansion, whether related to existing operations or new acquisitions. If additional funds are raised through our issuance of new Shares or other securities other than on a pro rata basis to the then existing Shareholders, then (i) the percentage ownership of those existing Shareholders may be reduced, and they may experience subsequent dilution, and/or (ii) such newly issued securities may have rights, preferences or privileges superior to those of our Shares of the existing Shareholders.

There can be no guarantee as to the accuracy of certain statements and statistics from official and industry sources in this prospectus relating to the PRC’s economy and the retail industry in the PRC may not be fully reliable.

We rely on certain statements and statistics in regards to the PRC including with respect to the economy, the retail sector and other matters as set out from various official, unofficial and industry sources and data from Euromonitor.

We cannot guarantee the quality or reliability of these official and industry sources as the statements and statistics contained therein have not been independently verified by us, the Sponsor, the Joint Bookrunners or any of their or our Directors, affiliates, agents, employees or advisers. We therefore make no representation as to the accuracy of such facts and statistics from these sources, which may not be consistent with other information compiled within or outside the PRC.

– 61 – RISK FACTORS

In case of any errors in the source, ineffective collection methods or discrepancies between difference sources or other problems, the statements and statistics in this prospectus in regards to the PRC including in regards to the economy, the retail sector and other matters may be inaccurate or may not be comparable to similar statistics and thus should not be unduly relied upon. Investors should therefore exercise due caution on relying on such statements or statistics.

Except as also disclosed in this prospectus, investors should exercise caution in relying on information in the media coverage regarding the Share Offer.

Prior to the publication of this prospectus and subsequently but prior to the completion of the Share Offer, there may be media coverage regarding us and the Share Offer and matters connected thereto. Investors should rely solely upon the information contained in this prospectus and we do not accept any responsibility for the accuracy and completeness of any media coverage nor the fairness or appropriateness of any forecasts, views and opinions from media coverage relating to our Share, the Share Offer or us. To the extent that such statements are inconsistent with the information in this prospectus, we disclaim them. Accordingly, investors are urged to exercise caution when making investment decision on any information not contained in this prospectus.

– 62 – WAIVERSFROMSTRICTCOMPLIANCEWITHTHELISTINGRULES

CONNECTEDTRANSACTIONS

Certain subsidiaries of the Company have entered into and are expected to continue certain transactions with certain connected persons of the Company. Some of these transactions will constitute partially exempt or non-exempt continuing connected transactions of the Company under the Listing Rules upon the Listing. The Company has applied to the Stock Exchange for a waiver from the strict compliance with the requirements regarding the announcements requirement and in certain cases, independent shareholders’ approval requirement in respect of such non-exempt continuing connected transactions under Chapter 14A of the Listing Rules. The details of such continuing connected transactions and waivers are set out in the section headed “Connected transactions” of this prospectus.

MANAGEMENTPRESENCE

Pursuant to Rule 8.12 of the Listing Rules, the Company is required to have a sufficient management presence in Hong Kong and at least two of the executive Directors must ordinarily reside in Hong Kong. Our head office and substantially all of our business operations are based, managed and conducted in the PRC. Currently, all of our executive Directors, Mr. Chen, Mr. Fan, Mr. Su Weibing, Mr. Lin Guangzheng, all of non-executive Directors, Mr. Chen Daren, Mr. Lu, two of our independent non-executive Directors, Mr. Sun Hong and Mr. Xu Yinzhou are ordinarily resident in the PRC and not ordinarily resident in Hong Kong. We do not contemplate in the foreseeable future that we will have a sufficient management presence in Hong Kong for purposes of satisfying the requirements under Rule 8.12 of the Listing Rules.

Therefore, we have applied to the Stock Exchange for a waiver from compliance with the requirements under Rule 8.12 of the Listing Rules, and the Stock Exchange has granted such waiver on the following conditions:

(i) we have appointed two authorised representatives pursuant to Rule 3.05 of the Listing Rules, who will act as our principal channel of communication with the Stock Exchange and, together with other Directors will ensure that the Company comply with the Listing Rules at all times. The two authorised representatives appointed are Mr. Fan, an executive Director and chief executive officer of the Company, and Mr. Tse Wing York, the company secretary of the Company and who is ordinarily resident in Hong Kong. Each of the authorised representatives will be available to meet with the Stock Exchange within a reasonable time frame upon the request of the Stock Exchange and will be readily contactable by telephone, facsimile and email (if applicable). Each of the two authorised representatives is authorised to communicate with the Stock Exchange in his sole capacity on our behalf;

– 63 – WAIVERSFROMSTRICTCOMPLIANCEWITHTHELISTINGRULES

(ii) each of the authorised representatives has means to contact all members of our Board (including the independent non-executive Directors) promptly at all times as and when the Stock Exchange wishes to contact our Directors for any matters. To enhance the communication between the Stock Exchange, the authorised representatives and our Directors, we will implement a policy that (a) each executive Director, non-executive Directors and independent non-executive Director will have to provide their respective office phone numbers, mobile phone numbers, fax numbers and email addresses (if applicable) to the authorised representatives; (b) in the event that an executive Director, non-executive Director or independent non-executive Director expects to travel or is out of office, he will have to provide the phone number of the place of his accommodation to the authorised representatives; and (c) all the executive Directors, non-executive Director, independent non-executive Directors and authorised representatives have provide their office phone numbers, mobile phone numbers, fax numbers and email addresses (if applicable) to the Stock Exchange;

(iii) each of the Directors (including the independent non-executive Directors), who are not ordinarily resident in Hong Kong have confirmed that they possess valid travel documents to visit Hong Kong for business purposes and would be able to come to Hong Kong and meet the Stock Exchange within a reasonable period; and

(iv) in compliance with Rule 3A.19 of the Listing Rules, our Company will appoint a compliance adviser to act as an additional channel of communication with the Stock Exchange for the period commencing on the Listing Date and ending on the date on which the Company complies with Rule 13.46 of the Listing Rules in respect of its financial results for the first full financial year commencing after the Listing Date.

– 64 – INFORMATIONABOUTTHISPROSPECTUSANDTHESHAREOFFER

DIRECTORS’RESPONSIBILITYFORTHECONTENTSOFTHISPROSPECTUS

This prospectus, for which our Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Companies Ordinance, the Securities and Futures (Stock Market Listing) Rule (Chapter 571V of the Laws of Hong Kong) and the Listing Rules for the purpose of giving information to the public with regard to us. Our Directors, having made all reasonable enquiries, confirmed that to the best of their knowledge and belief, the information contained in this prospectus is accurate and complete in all material aspects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this prospectus misleading.

UNDERWRITING

The Share Offer comprises the Placing and the Public Offer. The Share Offer is an offer by the Company of 9,000,000 Shares under the Public Offer (subject to reallocation) and 81,000,000 Shares under the Placing (subject to reallocation and the Adjustment Option), in each case at the Offer Price. Details of the structure of the Share Offer are set out in the section headed “Structure of the Share Offer” of this prospectus. This prospectus and the Application Forms relating thereto set out the terms and conditions of the Share Offer.

The Share Offer is sponsored by the Sponsor and, managed by the Joint Bookrunners.

In the event that the Company and the Joint Bookrunners are unable to reach an agreement on the Offer Price on or before 12:00 noon on Monday, 2 December 2013 or such other date or time as may be agreed between the Company and the Joint Bookrunners, and in any event no later than 4 December 2013, the Share Offer will not become unconditional and will lapse immediately. Further details about the Underwriters and the Underwriting arrangements are set out in the section headed “Underwriting” of this prospectus.

OFFERSHARESTOBEOFFEREDINHONGKONGONLY

No action has been taken in any jurisdiction other than Hong Kong to permit a public offering of the Offer Shares or the general distribution of this prospectus and/or the Application Forms in any jurisdiction other than Hong Kong. Accordingly, this prospectus may not be used for the purpose of, and does not constitute, an offer or invitation in any other jurisdiction or in any circumstances in which such offer or invitation is not authorised or to any person to whom it is unlawful to make an unauthorised offer or invitation. The distribution of this prospectus and the offering of the Offer Shares in other jurisdictions are subject to restrictions and may not be made except as permitted under the applicable securities laws of such jurisdictions and pursuant to registration with or authorisation by the relevant securities regulatory authorities or an exemption therefrom. The Offer Shares are offered solely on the basis of the information contained and representations made in this prospectus. No person is authorised in connection with the Share Offer to give any information, or to make any representation not contained in this prospectus, and any information or representation not contained herein must not be relied upon as having been authorised by the Company, the Sponsor, the Joint Bookrunners, the Underwriters, any of their respective directors or any other person or parties involved in the Share Offer.

– 65 – INFORMATIONABOUTTHISPROSPECTUSANDTHESHAREOFFER

APPLICATIONFORLISTINGOFTHESHARESONTHESTOCKEXCHANGE

The Company has applied to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Shares in issue, the Shares to be issued as mentioned in this prospectus (including any Shares which may be issued pursuant to the exercise of the Adjustment Option or the options which may be granted under the Share Option Scheme).

No part of the Company’s share or loan capital is listed or dealt in on any other stock exchange. At present, the Company is not seeking or proposing to seek the listing of or permission to deal in its share or loan capital on any other stock exchange.

STAMP DUTY

All Offer Shares will be registered on the Company’s branch register of members maintained in Hong Kong. Only Shares registered in the Company’s branch register of members maintained in Hong Kong may be traded on the Stock Exchange. Dealings in Shares registered in the Company’s branch register of members maintained in Hong Kong will be subject to Hong Kong stamp duty.

PROFESSIONALTAXADVICERECOMMENDED

If you are unsure about the taxation implications of subscribing for or purchasing, holding or disposing of or dealing in the Offer Shares, you should consult your professional advisers. None of the Company, the Sponsor, the Joint Bookrunners, their respective directors and any other person involved in the Share Offer accepts responsibility for any tax effects on, or liability of, any person or holders of Shares resulting from subscribing for, purchasing, holding or disposing of or dealing in the Offer Shares.

PROCEDUREFORAPPLICATIONFORTHEPUBLICOFFERSHARES

The procedure for application for the Public Offer Shares is set out in the section headed “How to apply for the Public Offer Shares” of this prospectus and on the relevant Application Forms.

STRUCTUREOFTHESHAREOFFER,ADJUSTMENTOPTIONAND STABILISATION

Details of the structure of the Share Offer, including conditions of the Share Offer, the Adjustment Option and the stabilisation exercise are set out in the section headed “Structure of the Share Offer” of this prospectus.

– 66 – INFORMATIONABOUTTHISPROSPECTUSANDTHESHAREOFFER

SHARESWILLBEELIGIBLEFORADMISSIONINTOCCASS

If the Stock Exchange grants the listing of, and permission to deal in, the Shares on the Stock Exchange and the Company complies with the stock admission requirements of HKSCC, the Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the date of commencement of dealings in the Shares on the Stock Exchange or such other date HKSCC chooses. Investors should seek the advice of their stockbroker or other professional adviser for details of those settlement arrangements as such arrangements will affect their rights, interest and liabilities.

Settlement of transactions between participants of the Stock Exchange is required to take place in CCASS on the second business day after any trading day.

All necessary arrangements have been made for the Shares to be admitted to CCASS.

All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

COMMENCEMENTOFDEALINGSINTHESHARES

Dealings in the Shares on the Stock Exchange are expected to commence at 9:00 a.m. on Wednesday, 11 December 2013.

The Shares will be traded in board lots of 2,000 Shares each.

CURRENCY TRANSLATIONS

In this prospectus, unless otherwise stated, certain amounts denominated in Renminbi and US dollars have been translated into Hong Kong dollars at an exchange rate of RMB0.7863 = HK$1.00 or HK$7.7523 = US$1.00, respectively, for illustration purpose only. Such conversions shall not be construed as representations that amounts in Renminbi or US dollars were or could have been or could be converted into Hong Kong dollars at such rates or any other exchange rates on the relevant dates.

ROUNDING

Certain amounts and percentage figures included in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures preceding them.

LANGUAGE

If there is any inconsistency between the Chinese names and their English translations, the Chinese names shall prevail and vice versa. The English translation of the names in Chinese or another language which are marked with “*” and the Chinese translation of names in English which are marked with “*” are for identification purpose only.

– 67 – DIRECTORS AND PARTIES INVOLVED IN THE SHARE OFFER

DIRECTORS

Name Residential address Nationality

Executive Directors:

Chen Jianren (௓਄ʠ) 130 Sunwen Middle Road, Shiqi District Chinese (Chairman) Zhongshan City, Guangdong Province the PRC

Fan Xinpei (ߪอ੃) Room 2302, Block H Chinese Century Luxury Courtyard, East District Zhongshan City, Guangdong Province the PRC

Su Weibing (ᘽਃж) Room 201, Block 1, Qiushige Chinese 7 Chenghua Road, Shiqi District Zhongshan City, Guangdong Province the PRC

Έ͍) Room 501, Block 5,YijingYuanYihe Chinese؍) Lin Guangzheng Shanzhuang, Shiqi District Zhongshan City, Guangdong Province the PRC

Non-executive Directors:

Chen Daren (௓༺ʠ) House No.3, District A10, Chinese Yuangyangcheng Zhongshan City, Guangdong Province the PRC

Lu Hanxing (௔ဏጳ) 6 Yajun Street, Haocheng Road Chinese Zhongshan City, Guangdong Province the PRC

– 68 – DIRECTORS AND PARTIES INVOLVED IN THE SHARE OFFER

Name Residential address Nationality

Independent Non-executive Directors:

Sun Hong (࢑ݳ) Room 601, Block C, 1 Qingyun Chinese (formerly Sun Xiong (࢑ඪ)) Street Guangyuan East Road Tianhe District, Guangzhou City Guangdong Province the PRC

Xu Yinzhou (ࢱΙψ) Room 1104, Block 34 Chinese Tonghe Kaishi Road, Baiyun District Guangzhou City, Guangdong Province the PRC

Leung Wai Kwan (૑ၪё) FlatB,19thFloor,BlockT5 Chinese The Legend 23 Tai Hang Drive, Tai Hang Hong Kong

PARTIES INVOLVED IN THE SHARE OFFER

Sponsor Kingsway Capital Limited 7th Floor, Tower 1, Lippo Centre 89 Queensway Hong Kong

Joint Bookrunners and Joint Lead Kingsway Financial Services Group Managers Limited 7th Floor, Tower 1, Lippo Centre 89 Queensway Hong Kong

Upbest Securities Company Limited 2nd Floor, Wah Kit Commercial Centre 302 Des Voeux Road Central Hong Kong

Public Offer Underwriters and Kingsway Financial Services Group Placing Underwriters Limited 7th Floor, Tower 1, Lippo Centre 89 Queensway Hong Kong

Upbest Securities Company Limited 2nd Floor, Wah Kit Commercial Centre 302 Des Voeux Road Central Hong Kong

– 69 – DIRECTORS AND PARTIES INVOLVED IN THE SHARE OFFER

Legal advisers to the Company As to Hong Kong law Anthony Siu & Co. Unit 2205A, 22nd Floor Nine Queen’s Road Central Hong Kong

As to the PRC law JunZeJun Law Offices 6th Floor, South Tower Financial Street Centre 9 Financial Street, Xicheng Beijing, the PRC

As to Cayman Islands law Appleby 2206-19 Jardine House 1 Connaught Place, Central, Hong Kong

Legal advisers to the Sponsor, the Joint As to Hong Kong law Bookrunners, the Joint Lead Managers Peter C. Wong, Chow & Chow and the Underwriters Suite 1604-6, 16th Floor ICBC Tower 3 Garden Road, Central, Hong Kong

As to PRC law Jun He Law Offices Suite 20C Shenzhen Development Bank Tower No. 5047 Shennan Road Shenzhen, the PRC

– 70 – DIRECTORS AND PARTIES INVOLVED IN THE SHARE OFFER

Auditor and reporting accountant PricewaterhouseCoopers Certified Public Accountants 22nd Floor, Prince’s Building Central, Hong Kong

Property valuer Jones Lang LaSalle Corporate Appraisal and Advisory Limited 6th Floor, Three Pacific Place 1 Queen’s Road East Hong Kong

Internal control adviser Baker Tilly Hong Kong Business Services Limited 2nd Floor 625 King’s Road North Point, Hong Kong

Receiving bank The Bank of East Asia, Limited 10 Des Voeux Road Central Hong Kong

– 71 – CORPORATE INFORMATION

Registered office Clifton House 75 Fort Street P.O. Box 1350 Grand Cayman KY1-1108 Cayman Islands

Headquarters and principal place of Yihua Century Square business in the PRC Zhongshan 3rd Road Zhongshan City, Guangdong Province the PRC

Principal place of business in Hong Kong Unit 2205A, 22nd Floor Nine Queen’s Road Central Hong Kong

Company secretary Tse Wing York, CPA

Compliance adviser Kingsway Capital Limited 7th Floor, Tower 1, Lippo Centre 89 Queensway Hong Kong

Authorised representatives Fan Xinpei Room 2302, Block H Century Luxury Courtyard East District, Zhongshan City Guangdong Province the PRC

Tse Wing York, CPA 706 Wah Cheung House Wah Fu Estate Aberdeen Hong Kong

Audit Committee Sun Hong Xu Yinzhou Leung Wai Kwan (Chairman)

Remuneration Committee Fan Xinpei Sun Hong Xu Yinzhou (Chairman) Leung Wai Kwan

– 72 – CORPORATE INFORMATION

Nomination Committee Chen Jianren (Chairman) Sun Hong Xu Yinzhou Leung Wai Kwan

Principal share registrar and transfer Appleby Trust (Cayman) Ltd. office Clifton House 75 Fort Street P.O. Box 1350 Grand Cayman KY1-1108 Cayman Islands

Hong Kong branch share registrar and Tricor Investor Services Limited transfer office 26th Floor Tesbury Centre 28 Queen’s Road East Wanchai, Hong Kong

Principal bankers Industrial and Commercial Bank of China Zhongshan sub-branch 92 Songyuan Road, East District Zhongshan City, Guangdong Province the PRC

Ping An Bank Zhongshan sub-branch 6th Floor, Tower 1, Central Plaza 1 Xingzheng Road, East District Zhongshan City, Guangdong Province the PRC

Postal Savings Bank of China Qingyuan Branch, Yanjiang sub-branch Building 1, Block 2 1 Yanjiang Road North Qingcheng District, Qingyuan City Guangzhou, Guangdong Province the PRC

China Guangfa Bank Guzhen sub-branch Lot 5-6, Liufang Garden, District B Zhongxing Road, Guzhen Zhongshan City, Guangdong Province the PRC

– 73 – CORPORATE INFORMATION

Bank of Communications Ground Floor, Fuye Guangcheng 16 Fuhua Road, West District Zhongshan City, Guangdong Province the PRC

Agricultural Bank of China Jiangmen sub-branch 9 Ying Bin Avenue West Jiangmen, Guangdong Province the PRC

Website www.yihua.com.cn

(information on this website does not form part of this prospectus)

– 74 – INDUSTRY OVERVIEW

This section contains information and statistics relating to the industry in which we operate. It contains certain statistics, industry data or other information relating to the industry that we have extracted from official government publications and research reports published by Euromonitor. We believe that the sources of such information are appropriate sources for such information and have taken reasonable care in extracting and reproducing such information. We have no reason to believe that such information is false or misleading or that any fact has been omitted that would render such information false or misleading. The information has not been independently verified by us, the Sponsor, the Joint Bookrunners, any of their respective directors, officers, affiliates, advisers or representatives, or any other party involved in the Share Offer and no representation is given as to its accuracy. The information and statistics may not be consistent with other information and statistics compiled within or outside the PRC.

ABOUTTHISSECTION

General

This section contains information extracted from two research reports, namely “Retailing in China 2012” dated January 2013 (the “Euromonitor Report”) and “Retailings in Guangdong Province” compiled in February 2013 (the “Euromonitor Guangdong Report”), together the “Euromonitor Reports”. Both reports were prepared by Euromonitor, an independent market research firm with industry experience in conducting research for consumer market. The Euromonitor Report analyses the market for retailing in the PRC and was prepared in the ordinary course of business of Euromonitor, purchased for approximately US$1,900 and not commissioned by us. In addition, we have commissioned Euromonitor to prepare the Euromonitor Guangdong Report with an estimated fee of approximately US$41,000 plus out-of-pocket expenses.

Except for (a) the Taiyangcheng store and the Yangchun store with only department store section; (b) the Tai’an store (Longtan) and the Yingde store with department store section and supermarket section; and (c) Yangjiang store with department store, supermarket and furniture sections, our department stores generally have three sections, which are (i) the department store section; (ii) the supermarket section; and (iii) the electrical appliances section. The furniture section, also known as “Yihua Shijia” (ूശ˰࢕) which was established in 2013 is currently only in Zhongshan store (main store), Yangjiang store and Jiangmen store. The discussions in respect of the mixed retailers, grocery retailers, electronics and appliance specialist retailers and furniture and homeware retailers in the PRC from the Euromonitor Reports are applicable to our department store section, supermarket section, electrical appliances section and furniture section respectively. According to the Euromonitor Reports, we ranked six amongst the top ten mixed retailers in Guangdong Province, the PRC in terms of retail sales value (excluding sales tax) in 2012. Furthermore, we are the only one of such top ten mixed retailers in Guangdong Province, the PRC which focus exclusively on second-tier and third-tier cities of Guangdong Province, the PRC.

– 75 – INDUSTRY OVERVIEW

Research methodology

Euromonitor, founded in 1972, is a private independent provider of business intelligence on industries, countries and consumers. Euromonitor conducts its research in accordance to the guidelines and practices set by European Society for Opinion and Marketing Research, an international and independent market research association.

Euromonitor primarily undertook both secondary research and primary research to prepare the Euromonitor Reports.

• Secondary research

Euromonitor began with an assessment of as much relevant background information as is publicly available through sources covering:

• Authority statistics, reports and/or databases, etc. • Trade associations and other semi-official sources, etc. • Company financials and annual reports. • Independent analysts’ and research group’s reports. • National and local trade press.

• Storechecks

Store checks are an integral part of its methods for retailing industries. The results, combined with the findings of desk research, provide a basis for identifying areas of questioning to take forward into the trade interviews.

• Primary research

To generate an industry consensus and provide perspective on the market size and growth for the China retail market, Euromonitor conducted trade interviews with multiple organisations such as trade associations, store-based retailers and non-store based retailers.

• Data validation and integrity assessment

Euromonitor used multiple secondary and primary sources to validate any data or information collected. Furthermore, a test of each respondent’s information and views against those of others is applied to ensure reliability and to eliminate bias by Euromonitor.

Assumption for growth and forecast

With respect to our forecasts, Euromonitor uses what is referred to as a judgment aided method.

• Its analysts look at what is happening in the current marketplace, the short-term future plans (e.g. reported/anticipated new industry development) as well as the macro-economic outlook in order to estimate forecast growth rates.

– 76 – INDUSTRY OVERVIEW

• Euromonitor also seeks to gain consensus with the trade players (government officials, trade associations, distributors, retailers, e-commerce, etc) who are asked to contribute their opinion on how the market is likely to develop.

• Euromonitor works across a number of consumer sectors and have a picture of the competing forces within a wider market place.

• Euromonitor looks comparatively across countries and consider the likelihood of trends in one country being mirrored in another. Therefore, when an industry trend is developed in a country, Euromonitor looks at per capita spending/volume consumption and growth rates in similar countries.

• Euromonitor observed how trends have evolved in the past and how much faster moving the current product cycle with the impact on future trends. Euromonitor uses its databases on population and economic forecast data to understand how the market will perform at macro level.

• Its forecasts, as with other parts of the dataset, are cross checked at a number of levels:

• For each country, its research managers discuss with the analyst how data was built, estimates made and forecasts developed. Euromonitor works across a number of product sectors and have a picture of the competing forces within a wider market place.

• Similar checks are then conducted at regional level, that that sets of countries are cross checked against each other within a given region.

• A final check is done at global level by its central team.

• Below is a non-exhaustive list of the factors that are taken into consideration in building its forecast data:

• Political trends • Economic trends • Social trends • Technological trends • Competitive environment • Related industry dynamics like beauty and personal care, apparel, consumer appliances, consumer electronics, etc.

– 77 – INDUSTRY OVERVIEW

GROSSDOMESTICPRODUCTOFGUANGDONGPROVINCEANDTHEPRC

The table below sets out nominal GDP, GDP per capita and per capita disposable income of Guangdong Province and the PRC respectively between 2007 and 2012:

GDP of the PRC and Guangdong Province for 2007 to 2012

2007 2008 2009 2010 2011 2012

Guangdong Province Nominal GDP (RMB billion) 3,178 3,680 3,948 4,601 5,321 5,700 GDP per capita (RMB) 33,272 37,638 39,436 44,736 50,807 54,000 Per capita disposable income (RMB) 17,699 19,733 21,575 23,898 26,897 30,227

The PRC Nominal GDP (RMB billion) 26,581 31,405 34,090 40,151 47,288 51,932 GDP per capita (RMB) 20,169 23,708 25,608 30,015 35,181 38,354 Per capita disposable income (RMB) 13,786 15,781 17,175 19,109 21,810 24,565

Source: National Bureau of Statistics of China

The table below sets out the forecasted nominal GDP and GDP real growth of Guangdong Province and the PRC respectively for 2013 to 2015:

Forecasted GDP of the PRC and Guangdong Province for 2013 to 2015

2013F 2014F 2015F

Guangdong Province Nominal GDP (RMB billion) 6,317 6,975 7,685 GDP real growth 8.0% 7.6% 7.3%

The PRC Nominal GDP (RMB billion) 56,878 65,075 70,126 GDP real growth 8.2% 8.0% 7.2%

Source: Euromonitor Reports. Forecasted figures are estimated by Euromonitor. Euromonitor forecasted by their database and based on 12th 5 year plan.

THEMIXEDRETAILERSINTHEPRC

For the purposes of study in the Euromonitor Reports, the retailing market has been defined such that department stores is categorised under mixed retailers in the PRC. Mixed retailers, led by department stores, are important and traditional shopping venues for consumers in the PRC, and registered 14.8% current value growth in 2012, outperforming the total retailing growth in the PRC.

– 78 – INDUSTRY OVERVIEW

Trends

According to the Euromonitor Reports, the overall retailing market in the PRC continued to have robust current value growth in 2012. This was mainly attributable to the growing disposable incomes arising from steady GDP growth and locals are changing attitudes towards consumption, particularly young consumers are getting more open attitudes towards spending money. Nevertheless, mixed retailers experienced slower value growth in 2012 as compared to 2011. This was mainly due to the unclear global economic outlook and the decelerating economy in the PRC.

As one of traditional and the most important retailing channels in the PRC, mixed retailers accounted for over 10% of total retailing value in 2012, with the category being dominated by department stores. Their presence and penetration in the local market have won department stores a leading position among local consumers. In most higher-tier cities, department stores have a more premium market positioning than hypermarkets, while in lower-tier cities and towns, department stores are frequently patronised for daily necessities, such as apparel and electronic appliances.

The total selling space of mixed retailers experienced volume growth of 9% in 2012, mainly contributed by the more aggressive investment of mixed retailers to improve the shopping environment for local consumers. To stay competitive in the retailing market, mixed retailers, especially department store operators, usually incorporate food service outlets into their selling space, where customers can take a rest after shopping in the store. The wider ranges of product offered also requires bigger selling space for display.

The following table illustrates the value of sales, number of stores and average sales value per selling space in Guangdong Province and the PRC respectively from 2007 to 2012.

Value of sales, number of stores and average sales value per selling space for the mixed retailers

Guangdong Province: 2007 2008 2009 2010 2011 2012

Value of sales (RMB billion) 53.8 60.1 66.4 77.4 89.1 99.9 Number of stores (units) 443 447 458 490 521 543 Average sales value per selling space (RMB per sq.m.) 9,264.9 10,062.6 10,715.5 11,402.0 12,065.6 12,730.1

The PRC: 2007 2008 2009 2010 2011 2012

Value of sales (RMB billion) 498.6 571.3 636.5 748.7 868.3 996.8 Number of stores (’000 units) 6.1 6.4 6.6 7.1 7.6 8.1 Average sales value per selling space (RMB per sq.m.) 7,939.1 8,617.3 9,176.5 9,764.3 10,332.6 10,901.8

Source: Euromonitor Reports

– 79 – INDUSTRY OVERVIEW

According to the Euromonitor Reports, the mixed retail industry in the PRC is forecasted to continue to grow. The table below demonstrates the forecasted value of sales, number of stores and average sales value per selling space in Guangdong Province and the PRC respectively of the mixed retail sector in the PRC.

Forecasted value of sales, number of stores and average sales value per selling space for the mixed retailers

Guangdong Province: 2013F 2014F 2015F 2016F 2017F

Value of sales (RMB billion) 108.7 117.6 126.9 136.3 145.8 Number of stores (units) 563 582 600 618 637 Average sales value per selling space (RMB per sq.m.) 13,079.6 13,417.7 13,755.2 14,032.8 14,270.1

The PRC: 2013F 2014F 2015F 2016F 2017F

Value of sales (RMB billion) 1,135.6 1,286.7 1,452.6 1,630.8 1,821.2 Number of stores (’000 units) 8.6 9.1 9.5 9.9 10.4 Average sales value per selling space (RMB per sq.m.) 11,477.4 12,073.6 12,713.7 13,364.4 14,039.4

Source: Euromonitor Reports

Competitive landscape

Department stores are having fierce competition in the major cities in the PRC. In line with the highly fragmented business environment, the top market participants do not have any dominance in the industry. The table below demonstrates the company shares of the mixed retailers in Guangdong Province and the PRC respectively between 2010 and 2012 according to the Euromonitor Reports:

Mixed retailers market shares for 2010 to 2012

Guangdong Province:

Brand Ranking 2010 2011 2012 %%%

Rainbow Department Store Co., Ltd. (˂ࠀਠఙ) 1 11.0 12.1 11.6 Guangzhou Grandbuy Co., Ltd. (ᄿϵٰ΅) 2 7.0 6.5 4.6 Maoye International Holdings Ltd (ุ߱਷ყ) 3 4.2 4.4 4.1 Guangzhou Friendship Group Co., Ltd. (ᄿψʾሒ) 4 4.1 4.5 4.0 ϵ஬) 5 3.2 3.2 3.2۬ئ˂) .Guangdong Teemall Department Store Co., Ltd Our Group 6 1.0 1.1 1.0 Guangzhou Mopark Department Store Co., Ltd. (ᅙ೮ϵ஬) 7 1.0 0.9 0.9 Shirble Department Store Holdings (China) Ltd (๋ᘒϵ஬) 8 1.1 1.1 0.7 Beijing Wangfujing Department Store Co., Ltd. (ˮִʜϵ஬) 9 0.6 0.6 0.7 Jiahua Stores Holdings Ltd (Գശϵ஬) 10 0.7 0.5 0.5 Others 66.0 65.0 68.7

Total 100.0 100.0 100.0

Source: Euromonitor Reports

– 80 – INDUSTRY OVERVIEW

The PRC:

Brand 2010 2011 2012 % % %

Dashang Group 1.8 2.1 2.0 Parkson Retail Group Ltd 1.9 1.9 1.8 Beijing Wangfujing Department Store (Group) Co., Ltd. 1.8 1.9 1.7 Golden Eagle Retail Group Ltd 1.5 1.7 1.7 Shanghai Bailian Group Co., Ltd. 1.6 1.6 1.5 Intime Department Store (Group) Co., Ltd. 1.2 1.3 1.4 Chongqing Department Store Co., Ltd. 1.2 1.3 1.3 New World Department Store China Ltd 1.0 1.3 1.2 Maoye International Holdings Ltd 1.0 1.2 1.1 Van’s Department Store Co., Ltd. 0.6 0.8 1.0 Silver Plaza Group Co., Ltd. 0.9 1.0 1.0 Rainbow Department Store Co., Ltd. 0.8 0.9 0.9 Wuhan Department Store Group Co., Ltd. 0.8 0.8 0.8 Guangzhou Grandbuy Co., Ltd. 0.7 0.8 0.7 Liqun Group 0.8 0.8 0.7 Far Eastern Group 0.6 0.7 0.7 Nanjing Central Emporium (Group) Stocks Co., Ltd. 0.6 0.6 0.5 Hefei Department Store Group Co., Ltd. 0.5 0.5 0.5 Hunan Friendship & Apollo Commercial Co., Ltd. 0.4 0.5 0.4 Guangzhou Friendship Group Co., Ltd. 0.5 0.5 0.4 Others 79.9 78.0 78.5

Total 100.0 100.0 100.0

Source: Euromonitor Reports

According to Euromonitor Reports, the top ten mixed retailers in the PRC had an aggregated market share of approximately 14.7% in 2012 in terms of retail value excluding sales taxes.

Market share and reliance on suppliers

To the best knowledge and belief of our Directors, the aggregate Gross Sale Proceeds of our department store section to the total value of sales of mixed retailer industry in Guangdong Province and the PRC for the year ended 31 December 2012 (in terms of total gross sale amount) were approximately 1.0% and approximately 0.1% respectively. On the other hand, due to the industry nature, department stores have no reliance on single supplier in general.

Prospects

According to the Euromonitor Reports, mixed retailers are expected to continue with strong growth, with a constant value CAGR of 12.5% over the forecast period. Ongoing urbanisation, rising disposable incomes and the increasing penetration of chained operations into lower-tier cities and affluent rural areas will be the major driving forces. Department stores will remain the dominant format in mixed retailers, in view of their reputation of wide product ranges and market positioning.

– 81 – INDUSTRY OVERVIEW

The boom in internet retailing is a major threat to mixed retailers, as many local consumers have gradually accepted on-line shopping, which is more convenient, with products sold at more competitive prices. To cater to this new consumer trend, many mixed retailers have already ventured into internet retailing themselves, but they still faced the problem of how outlet sales and on-line sales can complement each other.

Amid the fiercer market competition, department store operators are expected to focus on lower-tier cities and affluent rural areas to tap into the consumption potential in lower-tier markets for further expansion. In higher-tier cities, operators are likely to emphasise optimising the merchandise mix and revamping their existing outlets to achieve better revenue. Department stores are likely to transform existing outlets in two major directions: into a specialist department store or a one-stop shopping mall.

Promotion and marketing are likely to be strengthened by department store operators, especially during the festival seasons. Each important festival, such as the National Day holiday and Chinese New Year, are strong sales periods for stores, contributing a significant proportion of annual revenue. Private label lines, which usually offer higher profit margins for department stores, are expected to be focused on by many industry players over the forecast period. The operational mode change from leasing to central procurement for department stores is also expected to boost the development and sales of private label lines.

THE GROCERY RETAILERS IN THE PRC

For the purposes of study in the Euromonitor Reports, the retailing market has been defined such that supermarket is categorised under grocery retailers in the PRC. According to the Euromonitor Reports, sales in grocery retailers were achieved by different channel, of which supermarket was the largest channel, represented approximately 44.7%, 45.5% and 46.4% of sales value in the grocery retailers in the PRC in 2010, 2011 and 2012 respectively.

Trends

According to the Euromonitor Reports, 38.5% of total retailing value of sales in the PRC is contributed by grocery retailers. Grocery retailers had recorded a current value growth of 8.2% in 2012, which were mainly due to (i) supportive government policies, such as introducing modern retailing into rural areas; (ii) ongoing urbanisation; (iii) rising household incomes; (iv) chained operators penetrating further into inland areas of the PRC and supplying a wide range of consumer goods at competitive prices; and (v) rising purchasing power in second- and other lower-tier cities. Nevertheless, modern grocery retailers in first-tier cities are experiencing fierce competition in an increasingly saturated market.

Amid the unstable outlook for the global economy and the deceleration in the economic growth of the PRC, grocery retailers registered a slightly weaker performance in 2012 compared to 2011, especially among multinationals, which have tended to adopt a more conservative expansion strategy in the PRC by focusing on optimising outlet operation or integrating resources instead of outlet expansion into lower-tier cities.

– 82 – INDUSTRY OVERVIEW

Supermarket is the largest retailing format in grocery retailers in value of sales terms in the PRC, representing 73% of total sales for modern grocery retailers and 46% for total grocery retailers in 2012. With an earlier market entry and many domestic operators in local markets, supermarkets have been increasingly accepted by consumers in the PRC as a venue for grocery shopping, given their cleaner environment and wider in product variety compared to traditional grocery retailers. Value of sales of supermarkets rose by over 10% in 2012, outperforming grocery retailers overall.

Grocery sales in the PRC contributed 40% and 39% of the total retailing in the PRC in 2011 and 2012 respectively. The value share for grocery retailers in store-based retailing also saw a slight decline from 42% in 2011 to 41% in 2012. This is mainly because market competition from non-grocery retailers, including internet retailers, became increasingly fierce. Grocery retailers therefore put stronger emphasis on fresh produce so as to differentiate their operations. Besides, consumers’ changing shopping patterns have also played a part in decline in value share for grocery retailers. In higher-tier cities, many young households prefer to shop for groceries in hypermarkets on a weekly basis, leading to double-digit value growth of grocery sales in hypermarkets. As supermarkets are usually located near residential neighbourhoods, which grocery sales dominate, supermarkets had recorded a share of 95% in 2012, as they frequently patronised by nearby residents for their grocery needs.

The table below demonstrates the sales value of the whole grocery retail industry and supermarkets sector in Guangdong Province and the PRC respectively from 2007 to 2012.

Value of sales of grocery retail industry and supermarkets sector

Guangdong Province: 2007 2008 2009 2010 2011 2012

Groceryretailindustry(RMBbillion) 288.6 309.6 327.8 356.4 388.1 410.4 of which: supermarkets sector (RMB billion) 123.1 133.9 143.8 159.4 176.5 190.4

The PRC: 2007 2008 2009 2010 2011 2012

Grocery retail industry (RMB billion) 2,466.7 2,737.8 2,920.2 3,205.4 3,516.6 3,805.8 of which: supermarkets sector (RMB billion) 1,036.5 1,183.7 1,280.8 1,433.2 1,599.4 1,765.4

Source: Euromonitor Reports

– 83 – INDUSTRY OVERVIEW

According to the Euromonitor Reports, the whole grocery retail industry and supermarkets sector are expected to continue to grow. The table below illustrates the forecasted sales value of the whole grocery retail industry and supermarkets sector in Guangdong Province and the PRC respectively:

Forecasted value of sales of grocery retail industry and supermarkets sector

Guangdong Province: 2013F 2014F 2015F 2016F 2017F

Grocery retail industry (RMB billion) 427.6 446.1 465.5 485.7 506.8 ofwhich:supermarketssector(RMBbillion) 202.0 214.2 226.9 239.9 253.5

The PRC: 2013F 2014F 2015F 2016F 2017F

Grocery retail industry (RMB billion) 4,034.7 4,284.7 4,551.9 4,834.8 5,136.1 of which: supermarkets sector (RMB billion) 1,908.5 2,061.1 2,221.9 2,390.8 2,570.1

Source: Euromonitor Reports

Competitive landscape

According to the Euromonitor Report, the competition in the grocery retailing market is extremely fragmented. The top market participants do not have any dominance in the industry. The table below demonstrates the company shares of the grocery retail sector in Guangdong Province and the PRC respectively between 2010 and 2012 according to the Euromonitor Report:

Grocery retailers market shares for 2010 to 2012

Guangdong Province:

Brand Ranking 2010 2011 2012 %%%

China Resources Enterprise, Co., Ltd. (ശᆗ௴ุ) 1 2.5 2.8 2.9 Wal-Mart (China) Investment Co., Ltd. (Ӝဧီ) 2 1.4 2.2 2.2 Guangdong AEON (͑׶) 3 1.6 1.5 1.7 Shenzhen A-Best Supermarket Co., Ltd. (อɓԳ) 4 1.3 1.2 1.1 Carrefour (China) Hypermarket Co., Ltd. (࢕ᆀ၅) 5 1.2 1.0 1.1 Guangdong Jiarong Supermarket Co., Ltd. (ྗ࿲) 6 0.9 0.9 1.0 Renrenle Commercial Group Co., Ltd. (ɛɛᆀ) 7 0.9 0.9 0.9 0.8 0.8 0.9 8 (ڀCP Lotus Corp (ɥ໶ᇳ A.S. Watson Group (֡Ѕˤ) 9 0.9 0.9 0.7 Metro Group (௥ᅃᎲ) 10 0.3 0.5 0.7 Others 88.1 87.3 86.9

Total 100.0 100.0 100.0

Source: Euromonitor Reports

– 84 – INDUSTRY OVERVIEW

The PRC:

Brand 2010 2011 2012 % % %

China Resources Enterprise Co., Ltd. 2.3 2.5 2.7 Sun Art Retail Group Ltd – 1.9 2.1 Wal-Mart (China) Investment Co., Ltd. 1.1 1.5 1.6 Lianhua Supermarket Holdings Co., Ltd. 1.4 1.4 1.4 Carrefour (China) Hypermarket Co., Ltd.. 1.2 1.1 1.0 Shanghai Nong Gong Shang Supermarket Co., Ltd. 0.8 0.8 0.8 Yonghui Superstores Co., Ltd. 0.4 0.5 0.6 Shenzhen A-Best Supermarket Co., Ltd. 0.5 0.5 0.5 Wumart Stores Inc 0.4 0.4 0.5 Tesco China Co., Ltd. 0.4 0.4 0.4 Wenfeng Great World Chain Development Corp 0.4 0.4 0.4 Wuhan Zhongbai Group Co., Ltd. 0.4 0.3 0.4 CP Lotus Corp 0.5 0.4 0.3 Renrenle Commercial Group Co., Ltd. 0.3 0.3 0.3 Beijing Hualian Hypermarket Co., Ltd. 0.3 0.3 0.3 China Petroleum & Chemical Corp 0.2 0.2 0.3 Chongqing Department Store Co., Ltd. 0.2 0.2 0.3 Internationale Spar Centrale BV 0.1 0.2 0.2 Lotte Shopping Co., Ltd. 0.2 0.2 0.2 Dashang Group 0.1 0.2 0.2 Trust-Mart Co., Ltd. 0.4 0.1 – Auchan (China) Investment Co. Ltd 1.7 – – Others 86.9 86.3 85.6

Total 100.0 100.0 100.0

Source: Euromonitor Reports

According to Euromonitor Reports, the top ten grocery retailers in the PRC had a combined market share of approximately 11.6% in 2012 in terms of retail value excluding sales taxes.

Market share and reliance on suppliers

To the best knowledge and belief of our Directors, the Gross Sale Proceeds of our supermarket section to the total value of sales of supermarket industry in Guangdong Province and the PRC for the year ended 31 December 2012 (in terms of value of sales defined by the Euromonitor Reports) were approximately 0.1% and approximately 0.01% respectively. Due to the industry nature, it is no reliance on single supplier in general.

Prospects

According to Euromonitor Reports, grocery retailers are expected to maintain a healthy value CAGR of 9.4% over the forecast period, driven mainly by the steady demand for grocery shopping and rising demand for better living standards among average consumers. Growing purchasing power and steady economic growth will fuel growth in grocery retailing over the

– 85 – INDUSTRY OVERVIEW forecast period. The PRC central government’s emphasis on domestic consumption to boost the economy is also expected to be a driving force for the robust growth in retailing, including grocery retailing, which is expected to represent over one third of total retailing value in 2017.

Amid the intensifying market competition, especially in higher-tier cities, as well as the supportive PRC government policies, grocery retailers are expected to penetrate further into lower-tier cities or more inland areas in the PRC. Furthermore, grocery retailers are likely to come up with more customer-centric services for consumers.

Supermarkets will continue to be the dominant grocery retailing format in the forecast period, with 73.1% of the total value of sales of modern grocery retailers and 50% of grocery retailers’ sales by 2017, and a CAGR of 11% in constant value terms between 2012 and 2017. The vigorous growth of supermarkets will continue to marginalise traditional grocery retailers over the forecast period, especially given the PRC government’s scheme to transform traditional grocery retailers into modern retailers. Traditional grocery retailers are expected to see a stagnant value CAGR of 4.4% in the forecast period, mainly driven by growth in less developed areas where modern retailing has not yet gained a presence.

ELECTRONICSANDAPPLIANCESPECIALISTRETAILERSINTHEPRC

According to the Euromonitor Reports, the market of electronics and appliance specialist retailing is separately categorised under retailing industry in the PRC. Although the market outlook was gloomy with value of sales of approximately at RMB855 billion in 2012, the number of stores grew at a significantly slower pace of 6% in 2012, compared to 14% in 2011. However, this niche market is still expected to grow at a healthy value of CAGR of 10.9% over the forecast period from 2013 to 2017.

Trends

Based on the Euromonitor Reports, the current value growth of electronics and appliance specialist retailing market was significantly lower at only 7% in 2012, as compared to the double-digit growth in 2011. Other than reduction in inflation, the major reasons for the slowdown in growth were the uncertain global economic outlook and the slowdown in economic growth in the PRC. The bearish property market also contributed to less vigorous sales growth for electronics and appliance specialist retailers in 2012. Such declining growth of this niche market was evident by many leading chained operators adopted rather conservative expansion plans in opening new stores during 2012.

Importantly, the Change of the Old for New Program, which had stimulated the domestic sales of consumer appliances in 2010 and 2011, expired on 31 December 2011. Accordingly, the end of such program led to a slump in growth of the electronics and appliance specialist retailing market in 2012.

– 86 – INDUSTRY OVERVIEW

In a deeper analysis on the competitors of the electronics and appliance specialist retailing market, domestic players have a clear leadership position in such market in the PRC. All of the top ten companies are local payers. The better knowledge and application of local resources, a more profound understanding of the local market plus an established logistics distribution system are among the key factors in their success.

The tables below demonstrate the actual and forecasted value of sales, number of stores and average sales value per selling space of the electronics and appliance specialist retailers in Guangdong Province and the PRC respectively:

Value of sales, number of stores and average sales value per selling space for electronic and appliance specialist retailers

Guangdong Province: 2007 2008 2009 2010 2011 2012

Value of sales (RMB billion) 66.5 72.8 78.7 89.7 101.6 106.1 Number of stores (unit) 3,416 3,968 4,430 5,056 5,709 5,934 Average sales value per selling space (RMB per sq.m.) 20,084.6 19,574.4 19,396.4 19,228.9 19,095.3 18,958.7

The PRC: 2007 2008 2009 2010 2011 2012

Value of sales (RMB billion) 486.6 559.5 609.9 701.4 800.9 855.3 Number of stores (’000 units) 28.2 34.4 38.7 44.6 50.7 54.0 Average sales value per selling space (RMB per sq.m.) 18,705.7 18,230.1 18,064.4 17,908.7 17,784.1 17,656.8

Source: Euromonitor Reports

Forecasted value of sales, number of stores and average sales value per selling space for electronics and appliance specialist retailers

Guangdong Province: 2013F 2014F 2015F 2016F 2017F

Value of sales (RMB billion) 112.0 118.2 124.3 130.5 136.9 Number of stores (unit) 6,170 6,395 6,629 6,859 7,097 Average sales value per selling space (RMB per sq.m.) 19,044.8 19,170.0 19,241.3 19,310.0 19,358.6

The PRC: 2013F 2014F 2015F 2016F 2017F

Value of sales (RMB billion) 952.3 1,059.4 1,176.3 1,303.6 1,441.0 Number of stores (’000 units) 58.1 62.5 67.1 71.9 76.9 Average sales value per selling space (RMB per sq.m.) 18,056.2 18,467.9 18,888.8 19,317.2 19,735.2

Source: Euromonitor Reports

– 87 – INDUSTRY OVERVIEW

Competitive Landscape

The electronics and appliance specialist retailing market in the PRC is quite fragmented, with the top ten players jointly representing over 28.1% of total retail value of sales in 2012. None of the remaining players in the market accounted for more than 1% of total value of sales in the same year. Chain operators grew robustly over the period from 2007 to 2012 continued to consolidate such market with rising market share. The table below demonstrates the company shares of the electronics and appliance specialist retailing sector in Guangdong Province and the PRC between 2010 and 2012 according to the Euromonitor Reports:

Electronics and appliance specialist retailers market share for 2010 to 2012

Guangdong Province:

Brand Ranking 2010 2011 2012 %%%

GOME Electrical Appliances Holding Ltd 1 16.1 15.0 14.3 Suning Commerce Group Co., Ltd. 2 10.9 11.4 10.6 Zhongyu Telecom Group Co., Ltd.* 3 1.7 1.8 2.2 Shenzhen Sundan Holdings Co., Ltd.* 4 2.3 1.9 1.9 Shenzhen Hengbo Commerce Co., Ltd.* 5 1.7 1.4 1.6 Guangzhou Grandbuy Electrical Appliances Co., Ltd.* 6 1.0 0.9 1.3 Guangdong Dadi Telecom Service Co., Ltd.* 7 1.2 1.0 1.2 Dongguan Shishang Electrical Appliances Co., Ltd.* 8 1.0 1.0 1.1 Guangzhou Panyu Shayuan Group Co., Ltd.* 9 0.3 0.4 0.4 Our Group 10 0.3 0.3 0.2 Others 63.4 64.9 65.1

Total 100.0 100.0 100.0

Source: Euromonitor Reports

The PRC:

Brand 2010 2011 2012 % % %

Suning Appliance Co., Ltd. 10.2 10.7 10.6 GOME Electrical Appliances Holding Ltd 9.8 10.0 8.4 Hisap High Technology Corp 2.9 2.8 3.1 Jiangsu Five Star Appliance Co., Ltd. 1.8 1.7 1.8 Dashang Group 1.5 1.4 1.5 China Paradise Electronics Retail Ltd 1.1 1.1 0.9 Dazhong Electrical Appliance Co., Ltd. 0.9 0.8 0.8 Chongqing Department Store Co., Ltd. 0.5 0.5 0.5 Hefei Department Store Group Co., Ltd. 0.2 0.2 0.3 Wuhan Zhongbai Group Co., Ltd. 0.1 0.2 0.2 Others 71.0 70.6 71.9

Total 100.0 100.0 100.0

Source: Euromonitor Reports

– 88 – INDUSTRY OVERVIEW

Market share and reliance on suppliers

To the best knowledge and belief of our Directors, the total sales revenue of our electrical appliance segment to the total value of sales of electronics and appliance specialist retailing market in Guangdong Province and the PRC for the year ended 31 December 2012 in terms of value of sales defined by Euromonitor were approximately 0.2% and 0.03% respectively. Due to the industry nature, it is no reliance on single supplier in general.

Prospects

Electronics and appliance specialist retailers are expected to grow by a healthy value CAGR of 8% over the forecast period from 2013 to 2017, boosted by the gradually recovering domestic economy as well as other potential upcoming consumption stimulation policies.

Chained operators grew robustly over the period from 2007 to 2012 and continue to consolidate the electronics and appliance specialist retailing market with rising market share. In view of the possibly intensifying market competition, electronics and appliance specialist retailers are likely to accelerate their growth in internet retailing over the forecast period from 2013 to 2017. Some leading players are expected to continue its mergers and acquisitions of other on-line platforms, in order to consolidate and expand its product portfolio.

THEFURNITUREANDHOMEWARESSTORESINTHEPRC

According to the Euromonitor Reports, the market of furniture and homewares stores in the PRC record current value growth of approximately 15% in 2012. The fragment market of furniture and homewares stores was historically affected by the real estate market with many small local players active in the regional market. The value sales of market of furniture and homewares stores increased from approximately RMB603.9 billion for the year ended 31 December 2011 to approximately RMB694.5 billion for the year ended 31 December 2012. The number of outlets increased from approximately 125,900 for the year ended 31 December 2011 to approximately 136,900 for the year ended 31 December 2012.

Trends and prospects

In spite of the control over the real estate market by the relevant authorities, demand for properties, mainly from newly-weds and ongoing urbanisation, underpinned vigorous growth in the furniture and homewares market in 2012. In addition to demand from new households, the upgrade requirements of existing households also fuelled the growth.

Overall, the market for furniture and homewares stores is highly fragmented, with many small local players active in the regional market. The top five market participants jointly represented less than 3% of total value sales in 2012.

– 89 – INDUSTRY OVERVIEW

In view of the boom in internet retailing, many furniture and homewares stores have established their own on-line platforms. Through these on-line platforms, furniture and homewares stores have enhanced their brand awareness among consumers, in addition to increasing sales.

Furniture and homewares stores are expected to register a value CAGR of approximately 9% in the forecast period, driven mainly by demand for real estate. Ongoing urbanisation will contribute to the upbeat property market in the PRC, which will translate into demand for furniture and homewares products over the forecast period.

The table below sets out the actual and forecasted value of sales, number of stores, average sales value per selling space for the furniture and homewares stores in the PRC:

Value of sales, number of stores and average sales value per selling space for furniture and homewares stores

The PRC 2007 2008 2009 2010 2011 2012

Valueofsales(RMBbillion) 355.1 385.2 443.0 518.4 603.9 694.5 Numberofstores(’000units) 89.3 94.6 102.7 114.5 125.9 136.9 Average sales value per selling space (RMB per sq.m.) 10,505.9 10,700.0 11,301.0 11,702.0 12,224.7 12,766.5

Source: Euromonitor Reports

Forecasted value of sales, number of stores and average sales value per selling space for furniture and homewares stores

The PRC 2013 2014 2015 2016 2017

Value of sales (RMB billion) 767.4 843.3 921.8 1,002.0 1,083.1 Number of stores (’000 units) 147.8 158.6 169.0 178.7 187.7 Average sales value per selling space (RMB per sq.m.) 12,875.8 13,013.9 13,225.3 13,522.3 13,868.1

Source: Euromonitor Reports

– 90 – INDUSTRY OVERVIEW

Competitive Landscape

The market of furniture and homewares stores in the PRC is highly fragmented, with the top ten players jointly representing less than 10% of total retail value of sales in 2012. None of market participants accounted for more than 1% of total value of sales in the same year. The table below demonstrates the company shares of market of furniture and homewares stores in the PRC between 2010 and 2012 according to the Euromonitor Reports:

Furniture and homewares stores market share for 2010 to 2012

2010 2011 2012 % % %

IKEA (China) Investment Co., Ltd. 0.8 0.9 0.9 Shanghai Luolai Home Textile Co., Ltd. 0.5 0.6 0.6 Shenzhen Fuanna Bedding & Furnishing Co., Ltd. 0.4 0.5 0.5 Hunan Mendale Home Textile Co., Ltd. 0.4 0.5 0.5 Shanghai Shuixing Home Textile Co., Ltd. 0.5 0.5 0.5 Markor International Furniture Co., Ltd. 0.2 0.2 0.2 Ningbo Beyond Home Textile Co., Ltd. 0.1 0.1 0.1 China Orient Home Co., Ltd. 0.1 0.1 0.1 Tupperware China Co., Ltd. 0.1 0.1 0.1 Dashang Group 0.1 0.1 0.1 Others 96.8 96.4 96.4

Total 100 100 100

Source: Euromonitor Reports

Market share and reliance on suppliers

Our Group started furniture business since April 2013. Due to the industry nature, it is not reliant on a single supplier in general.

– 91 – REGULATIONS

OVERVIEW

Our business is generally subject to the laws and regulations of the PRC government and this section summarises the main PRC laws and regulations relating to our operations. Except as set out in the section headed “Business – Legal compliance and litigation – Non-compliant incidents” of this prospectus, during the Track Record Period and up to the Latest Practicable Date, we have complied with all applicable laws and regulations in all material respects, and have obtained all permits and licenses as required for our business operations.

LAWSANDREGULATIONSONFOREIGN-OWNEDENTERPRISES the Wholly) جForeign-owned enterprises are subject toʕശɛ͏΍ձ਷̮༟Άุ Foreign-owned Enterprise Law of the PRC*) promulgated on 12 April 1986 and amended on the Rules for the) ۆ୚݄ྼجOctober 2000, andʕശɛ͏΍ձ਷̮༟Άุ 31 Implementation of the Wholly Foreign-owned Enterprise Law of the PRC*) promulgated on 12 December 1990 and amended on 12 April 2001. A wholly foreign-owned enterprise is a limited company established under the Wholly Foreign-owned Enterprise Law of the PRC. A wholly foreign-owned enterprise is a legal entity with the capacity to bear civil liabilities, enjoy civil rights and to own, use and sell properties independently. The registered capital of a wholly foreign-owned enterprise must be contributed by foreign investors. The liability of a foreign investor is limited to the amount of the registered capital for which it agrees to subscribe. According to the relevant laws and regulations of the PRC, foreign investors are allowed to pay the amount of the registered capital periodically, and the registered capital must be injected within the specified period as approved by the MOFCOM (or its authorised organisations).

LAWS AND REGULATIONS ON LABOUR SERVICES

(*the Labour Contract Law of the PRC) جPursuant to ʕശɛ͏΍ձ਷௶ਗΥΝ promulgated on 29 June 2007 and came into effect on 1 January 2008 and amended on 28 December 2012, (i) if the employee works for the employer for more than one month, while the employer does not enter into labour contract with the employee within one year, the employer shall pay twice of the wages to the employee. Where the employee works for the employer for more than one year without labour contract, the parties are deemed to have entered into a non-fixed term labour contract; (ii) an employee who meet certain criteria, including having worked for the same employer for ten years or above, may require to enter into a non-fixed term labour contract with the employer; (iii) the employee must comply with the relevant trade secrets or competitive provisions; (iv) the scope of circumstances in which the employer must make legitimate compensation to the employee has been expanded; (v) a maximum limit of amount that the employee can seek compensation from the employer for breach of contract has been set; (vi) the employee can terminate the labour contract if the employer fails to contribute to the social insurance fund for the employee according to law; (vii) an employer who receives “deposit” from the employee as security will be fined up to RMB2,000; and (viii) an employer who deliberately deprive the employee of any part of his salary must make full payment of the salary to the employee, together with a compensation amounting to 50% to 100% of the deprived amount of the salary.

– 92 – REGULATIONS the PRC Social Insurance Law), promulgated) جᎈڭPursuant to ʕശɛ͏΍ձ਷ٟึ by the Standing Committee of the National People’s Congress on 28 October 2010 which became ᎈ൬ᅄᖮᅲБૢԷ (the Interim Regulations on theڭeffective on 1 July 2011 and ٟึ Collection and Payment of Social Security Funds) promulgated by the State Council and became effective on 22 January 1999, employers are required to contribute, on behalf of their employees, to a number of social insurance funds, including funds for basic pension insurance, unemployment insurance, basic medical insurance, occupational injury insurance and maternity leave insurance. Under the circumstance where an employer fails to pay social insurance funds in full amount, it might be subject to a rectification order by competent authorities and a daily late fee at the rate of 0.05% of the outstanding amount from the due date might be imposed. In addition, if it fails to make such payment in full amount within the prescribed time limit, a fine in the amount of one to three times of the outstanding payment might be imposed.

၍ଣૢԷ (the Regulations on the Administration of HousingږʮጐגPursuant to И Provident Fund) promulgated by the State Council and became effective on 3 April 1999 which was amended on 24 March 2002, employers are required to contribute, on behalf of their employees, to the housing provident funds. Failure in the registration or the opening of accounts for employees might be subject to a rectification order by the competent housing fund management centre and a fine between RMB10,000 and RMB50,000. Failure in payment of the housing provident fund in time or any underpayment thereof shall be subject to a rectification order by the competent housing fund management centre.

LAW ON PRICE

(”the Price Law of the PRC*) (the “Price Law) جPursuant toʕശɛ͏΍ձ਷ᄆࣸ issued by the National People’s Congress of the PRC on 29 December 1997 and came into effect on 1 May 1998, determination of prices must be in line with the law of value; prices of most commodities and services shall be determined by the market, and prices of a small number of commodities and services can be government-guided prices or government-set prices. Market-regulated prices mean those prices determined independently by the providers of commodities and services (“Providers”), and formed through market competition. Government-guided prices mean those prices determined by the Providers in accordance with the baseline prices and their range of fluctuations are set by competent price administrative departments or other government departments concerned based on the provision of the Price Law. Government-set prices mean those prices determined by the competent price administrative departments or other government departments concerned in accordance with the Price Law.

The Price Law further provides that when necessary the government may enforce government-guided or government-set prices for the prices of the following commodities and services:

(i) the prices of a small number of commodities vital for the economic development and people’s life;

(ii) the prices of a small number of commodities the resources of which are rare;

– 93 – REGULATIONS

(iii) the prices of commodities under natural monopoly management;

(iv) the prices of essential public utilities; and

(v) the prices of essential public welfare services.

LAW ON PRODUCT QUALITY

(*the Product Quality Law of the PRC) جPursuant toʕശɛ͏΍ձ਷ପۜሯඎ promulgated by the Standing Committee on 22 February 1993 and amended on 8 July 2000, both the manufacturer and the seller shall be responsible for the quality of products. Quality of products shall be inspected, and shall comply with the national and industrial standards. The Product Quality Law of the PRC stipulates that a supervision and inspection system with on-site inspections as the main way of checking shall be implemented. If any of the products are found to be non-compliant, during any of the monitoring and inspection process in accordance with this law, the manufacturer and the seller will be ordered to rectify within the time limit as specified by the product quality inspection administrative authority which is in charge of supervision and inspection. The seller shall be responsible for product repair, replacement or refund in any of the following circumstances, and if the product has caused any damage to the user or consumer, the seller shall compensate for the relevant loss: (i) the product fails to play its function and the seller has not explained this in advance; (ii) the product does not meet the quality standard of the product itself or as indicated by its packaging label; (iii) the quality of the product does not match with that of the product description or its sample and so on. After repair, replacement, refund or compensation by the seller according to the Product Quality Law of the PRC, if the liability is on the part of the manufacturer or another seller supplying such products, the seller is entitled to claim from the manufacturer or supplier for its loss.

LAW ON TORT LIABILITY the Tort Liability Law of the PRC*) which) جᛆப΂ڧPursuant toʕശɛ͏΍ձ਷ was promulgated by the Standing Committee on 26 December 2009 and became effective on 1 July 2010, producers are liable for damages caused by defects in their products and sellers are liable for damages attributable to their fault. If the defects are caused by the fault of third parties such as the transporter or storekeeper, producers and sellers are entitled to claim for compensation from these third parties after paying the compensation amount. The producers and sellers are obligated to take remedial measures such as issuing warnings or recalling the products in a timely manner if defects are found in products that are in circulation. If the products are manufactured and sold with known defects that cause death or severe personal injury to others, the infringed person has the right to claim punitive compensation.

LAWS AND REGULATIONS ON TRADEMARKS the PRC Trademark Law*) adopted by the Standing) جBothʕശɛ͏΍ձ਷ਠᅺ Է(theૢ݄ྼجCommittee in 1982 (as amended), andʕശɛ͏΍ձ਷ਠᅺ Implementation Regulation of the PRC Trademark Law*) adopted by the State Council in 2002

– 94 – REGULATIONS give protection to the holders of registered trademarks. The Trademark Office under the SAIC (the “Trademark Office”) handles trademark registrations and grants a term of ten (10) years to registered trademarks, renewable every ten (10) years. Where a registered trademark is assigned, the assignor and assignee shall conclude a contract for the assignment, and jointly file an application with the Trademark Office. The assignee shall guarantee the quality of the goods on which the registered trademark is used. Trademark license agreements must be filed with the Trademark Office or its regional counterparts.

PROVISIONSONPRE-PAIDCARDS

Generally, the PRC laws and regulations prohibit the printing, sale, purchase and use of token coupons as substitutes for Renminbi for circulation in the PRC market. The main laws and regulations relating to such prohibitions includes, among others, (a)਷ਕ৫፬ʮᝂᗫ׵ Վٙஷٝ (the Notice on Prohibition of Issuing and Using TokenيԴ͜΢၇˾࿆ᒅ׳ຫ˟೯ Coupons) issued by the General Office of the State Council on 1 May 1995; (b)ᗫ׵ຫ˟Ι ,Վٙஷٝ (the Notice on Prohibition of PrintingيႡe೯ਯeᒅ൯ձԴ͜΢၇˾࿆ᒅ Selling, Purchasing and Using Tokens Coupons) issued by the State Council on 4 April 1993; the Law of the People’s Bank of the PRC) issued by) جc)ʕശɛ͏΍ձ਷ʕ਷ɛ͏ვБ) the National People’s Congress on 18 March 1995 (subsequently amended on 27 December 2003); (d)ʕശɛ͏΍ձ਷ɛ͏࿆၍ଣૢԷ (the Ordinance for the Administration of Renminbi of the PRC) issued by the State Council on 3 February 2000; and (e)ᗫ׵ᘌຫ೯ ஷٝ (the Emergency Notice on Prohibition of Issuing andܢԴ͜΢၇˾࿆Վ(̔)ٙၡ׳ Using Tokens (Cards), or the “Emergency Notice”) promulgated by the State Economic and Trade Commission, Office of Correcting Industrial Improper Practice of the State Council and the PBOC on 19 January 2001.

In the department store context, pre-paid cards issued may be interpreted as a form of ׌ሯႩ֛ٙՌ (the Letter on Identification of Shopping̔يtoken coupons” asᗫ׵࿁ᒅ“ Cards) issued by the PBOC on 5 July 2000 defines “token coupon” as (i) having a certain amount of money; (ii) being used for indefinite or limited time period, i.e., the validity has certain time span; (iii) being used within a limited scope to purchase unspecified goods; and (iv) having no name record and no return for loss. As an example, the “shopping card” issued in some department stores of Xiamen were interpreted as falling within the definition of token coupon and therefore, there was a prohibition to print, sell, purchase or use such shopping cards or gift cards.

However, on 23 May 2011, the PBOC, the PRC Ministry of Supervision (ʕശɛ͏΍ձ ਷္࿀௅), the MOF, the MOFCOM, the SAT, the SAIC and the PRC National Bureau of ˹Corruption Prevention (ʕശɛ͏΍ձ਷਷࢕ཫԣၵ઻҅) jointly issued ᗫ׵஝ᇍਠุཫ ၍ଣٙจԈ (the Administration Opinion on Regulating the Administration for̔ Commercial Pre-paid Cards*) (the “Administration Opinion”), which recognised the benefits of pre-paid cards in general and set out general requirements governing the issue of pre-paid cards. Pre-paid cards are generally divided into two categories (i) ‘multi-purpose’ pre-paid cards (issued by specialised card issuers, which can be used across different regions, industries or entities); and (ii) ‘single-purpose’ pre-paid cards (issued by commercial enterprises, which can only be used to purchase commodities or services from that particular issuing enterprise or within chain stores with the same brand name as such issuing enterprise).

– 95 – REGULATIONS

༊Б) (Administrative)جThe MOFCOM promulgated ఊ͜௄ਠุཫ˹̔၍ଣ፬ Measures for Single-purpose Commercial Pre-paid Cards (For Trial Implementation)*) (the “Administrative Measures for Pre-paid Cards”) on 21 September 2012 and came into effect on 1 November 2012, which reiterated and expanded upon the requirements to be satisfied by the issuers of the ‘single purpose’ pre-paid cards. The Administrative Measures for Pre-paid Cards further defines ‘single-purpose’ pre-paid cards to include prepayment vouchers issued by enterprises engaged in retail industry, hotel and catering industry, and resident service industry, which could only be used in such enterprises, the group of which such enterprises are members, or the same franchise system of such enterprises. The PRC Legal Advisers confirm that all of the Consumption Cards fall within the category of ‘single purpose’pre-paid cards and therefore governed by the Administrative Measures for Pre-paid Cards.

The Administration Opinion and Administrative Measures for Pre-paid Cards distinguish the requirements of non-recorded pre-paid cards and recorded pre-paid cards. Although these two terms are not clearly defined in the regulations and rules, it is generally understood that ‘non-recorded pre-paid cards’ are pre-paid cards where the purchaser’s details are not recorded except in the circumstance set out below and ‘recorded pre-paid cards’are pre-paid cards where the purchaser’s details are always recorded. The main requirements under the Administration Opinion with additional requirements under the Administrative Measures for Pre-paid Cards are summarised below:

Recorded pre-paid Non-recorded pre-paid cards cards

Administration Opinion

Maximum face value not exceed RMB1,000 not exceed RMB5,000* (Note)

Threshold of purchaser’s In the event of the purchase of Record purchaser’s details to be recorded non-recorded commercial pre-paid details. card with face value of less than RMB1,000 each but in an aggregate value of RMB10,000 or more at a time, the issuer is required to record the purchaser’s details.

Note*: Pre-paid cards with face value over RMB5,000 are not allowed under the Administration Opinion.

– 96 – REGULATIONS

Recorded pre-paid Non-recorded pre-paid cards cards

Payment method and The following purchases must be by bank transfer instead of registration of purchase by cash: details (a) an entity purchasing, on that occasion, pre-paid cards with aggregate face value of RMB5,000 or more at a time; and

(b) an individual purchasing, on that occasion, pre-paid cards with aggregate face value of RMB50,000 or more at a time.

In such bank transfer cases, the issuer needs to record the name of the purchaser, the relevant account numbers and the amount of transfer.

Invoice requirement The issuer shall provide invoice for the sale of pre-paid cards according to the relevant laws and regulations, in particular, the relevant requirements of ʕശɛ͏΍ձ਷೯ୃ၍ଣ፬ the Measures on Administration of the Invoices of the) ج PRC*)

Limitations to expiry Expiration period shall not be less No expiration period than three years. However, the allowed. relevant laws and regulations also require the issuer to renew the expired pre-paid cards with the unused value for the cardholders. Therefore, the issuer shall not recognise any revenue upon expiry of pre-paid cards.

– 97 – REGULATIONS

Recorded pre-paid Non-recorded pre-paid cards cards

Administrative Measures for Pre-paid Cards

Registration of issuers Issuers who issued pre-paid cards prior to the Administrative of pre-paid cards Measures for Pre-paid Cards becoming effective must register with the relevant authority within 90 days since the effective day of the Administrative Measures for Pre-paid Cards.

Issuers who begin issuing pre-paid cards after the Administration Measures for Pre-paid Cards becoming effective must register with the relevant authority within 30 days since they start issuing pre-paid cards. Otherwise, the relevant authority is entitled to request the issuing enterprise to rectify the situation within a prescribed time limit. If such enterprise still fail to register, it may be subject to a fine in the range of RMB10,000 to RMB30,000.

Reserve account As part of the above registration procedure, the certain kinds of issuers shall establish a commercial bank account as escrow account and shall enter into a capital management π၍՘ᙄ) with the depository bank. As aږagreement (༟ group issuer of pre-paid cards, the deposit amount shall not be less than 30% of the outstanding amount of the aggregate unused value of pre-paid cards in the preceding quarter. As an alternative, all or part of this deposit may be in the form of bank guarantee or surety insurance.

Additional details to be Based on the threshold of which require purchaser’s details to recorded be recorded under the Administration Opinion, the issuer is also require (a) purchaser to present his/her valid identity documents to the issuer; and (b) issuer to record the names, valid identity certificate numbers and contact details of such purchaser.

Additional requirement An entity or individual not purchasing pre-paid cards on site for payment method must also purchase by bank transfer instead of by cash. Similar to the other bank transfer cases, the issuer must also record the name of the purchaser, the relevant account numbers and the amount of transfer.

Maintenance of data Data collected for purposes of the pre-paid cards must be maintained for at least five years.

– 98 – REGULATIONS

PROVISIONSONLICENCES the Measure of Administration of Food) جAccording to࠮ۜݴஷ஢̙ᗇ၍ଣ፬ Circulation Permit*) issued and implemented by the SAIC on 30 July 2009, and ʕശɛ͏ the Food Safety Law of PRC*) issued by the Standing Committee on 28) ج΍ձ਷࠮ۜτΌ February 2009 and implemented on 1 June 2009, the seller of food shall obtain the Food Circulation Permit. The Food Circulation Permit obtained by a food seller earlier is still valid until its expiration date.

A department store also needs to apply for other business licences and approvals upon the request of the relevant governmental departments. For example, fire safety inspection of the building where a department store is to be operated is required and approval from the relevant fire department has to be obtained before commencement of business.

A Pharmaceutical Trade Permit is valid for a term of five years, and any renewal application should be submitted to the relevant authority within six months before expiry. The validity period of a Tobacco Monopoly Permit varies, with a maximum of five years, and should be renewed 30 days before its expiry. A Salt Retail Permit is subject to a inspection system, which requires the licence holder to be inspected within a prescribed period of time. A Medical Device Operation Enterprise Permit is valid for a term of five years and should be renewed within six months before its expiry. A Food Circulation Permit for food sales is valid for a term of three years, and any renewal application should be submitted to the relevant authority 30 days before its expiry. A Motorway Transportation Operation Permit is usually valid for a term of four years and should be renewed 10 days before its expiry.

A Wood Operation Permit of Guangdong Province is valid for a term of three years and the renewal application should be submitted to the relevant authority 30 days prior to its expiry.

PROVISIONSONHOUSELEASING

Administrative Measures for Commodity House) جॡ༣၍ଣ፬܊גPursuant toਠۜ Leasing*) promulgated by the Ministry of Housing and Urban-rural Construction on 1 December 2010 and came into effect on 1 February 2011, a lease agreement shall be registered with the relevant authority within 30 days after the lease agreement is entered into. If the lease agreement is not registered, the relevant authority is entitled to request the parties to the lease agreement to rectify the situation within a prescribed time limit. If the parties still fail to register the lease agreement, they may be subject to a fine in the range of RMB1,000 to RMB10,000 for each lease agreement not registered.

– 99 – REGULATIONS

PROVISIONSONACQUISITIONOFDOMESTICENTERPRISESBYFOREIGN INVESTORS

The six ministries and commissions including the MOFCOM, the State-owned Assets Supervision and Administration Commission (਷Ϟ༟ପ္ຖ၍ଣ։ࡰึ), SAT, SAIC, CSRC and SAFE promulgated ᗫ׵̮਷ҳ༟٫ԻᒅྤʫΆุٙ஝֛ (the Rules on Merger or Acquisition of Domestic Enterprises by Foreign Investors in the PRC*) (the “M&A Rules”) on 8 August 2006, which came into effect on 8 September 2006 and amended in 22 June 2009, to regulate the mergers and acquisitions of domestic enterprises by foreign investors. An offshore special purpose vehicle established for the purpose of listing and is controlled by a Chinese company or individual directly or indirectly (a “special purpose vehicle”, or a “SPV”) must obtain approval from CSRC prior to the listing and trading of its securities on any overseas stock exchange. Specific applications of the M&A Rules are subject to further interpretation by the relevant authorities.

Pursuant to the M&A Rules, “to take over a domestic enterprise by a foreign investor” means a foreign investor purchases the share interests of a domestic non-foreign-owned enterprise (“domestic company”) or subscribes for the increased share capital of a domestic company by agreement, so as to turn the domestic company into a foreign-owned enterprise; or a foreign investor establishes a foreign-owned enterprise to purchase and operate the assets of a domestic company by agreement, or a foreign investor purchases the assets of a domestic company by agreement, and then invests such assets into a foreign-owned enterprise which operates such assets.

TAXFOROVERSEASINDIRECTTRANSFEROFPRCEQUITYINTERESTS

੻೼ה੻Άุה֢͏ΆٰุᛆᔷᜫڢOn 10 December 2009, the SAT issuedᗫ׵̋੶ ၍ଣٙஷٝ (the Notice on Strengthening the Management on Enterprise Income Tax for Non-resident Enterprises Equity Transfer*) (the “Circular No. 698”), which became effective retrospectively on 1 January 2008. The Circular No. 698 clarified how the capital gains should be calculated regarding the equity transfer of a resident enterprise by non-resident enterprises directly or indirectly. For transfers of equity interest in a PRC resident enterprise between related parties, the PRC tax authorities have the discretion to make adjustment to the taxable capital gains, if the transfer price is deemed not being determined on an arm’s length basis. In addition, it requires that the seller of the foreign target company (which holds, directly or indirectly, equity interest in a PRC resident enterprise) to make a submission to the PRC tax authorities within 30 days after signing of the equity transfer agreement, if certain conditions are met.

– 100 – REGULATIONS

PROVISIONSONFOREIGNEXCHANGEMANAGEMENTANDDIVIDEND DISTRIBUTION

Foreign Currency Exchange

Pursuant toʕശɛ͏΍ձ਷̮ි၍ଣૢԷ (the Foreign Exchange Administration Regulations*) promulgated by the State Council in January 1996 and came into effect in April 1996 (and updated on 5 August 2008), the Renminbi is freely convertible to pay for current accounts, including that of the trade and service related foreign exchange transactions and dividend payments, but does not include expenditure on capital accounts which includes that of the direct investments, loans or securities investments outside the PRC. The Renminbi is freely convertible for expenditure on capital accounts only if prior approval from SAFE is obtained. According to the Foreign Exchange Management Regulations, a foreign invested enterprise in the PRC can purchase foreign currencies for trade and service related foreign exchange transactions without approval from SAFE, but it must submit the commercial documentations in relation to such transactions for verification. A company may reserve foreign currencies (subject to the maximum limit as approved by SAFE) for repayment of debts in foreign currencies or for payment of dividends. However, the relevant PRC government which has significant discretion in the implementation of regulations may limit or abolish the ability of foreign invested enterprises to purchase or reserve foreign currencies in the future. In addition, foreign exchange transactions involving direct investments, loans or securities investments outside the PRC are subject to the limitations of the SAFE and approval from which must be obtained.

ഐි၍ଣϞᗫ˹˕ږOn 29 August 2008, SAFE issuedᗫ׵ҁഛ̮ਠҳ༟Άุ̮ි༟͉ ਕ዁Ъਪᕚٙஷٝ (the Circular on Relevant Operating Issues concerning theุ Improvement of Administration of Payment and Settlement of Foreign Currency Capitals of Foreign-invested Enterprises*) (the “Circular No. 142”). According to Circular No. 142, the Renminbi obtained from the settlement of foreign currency capital of a foreign-invested enterprise must be used within the business scope approved by governmental authorities and cannot be used for domestic equity investment, unless otherwise permitted by the PRC laws or regulations. When an enterprise intends to repay a loan in Renminbi with the Renminbi obtained from the settlement of its foreign currency capital, it must submit as a statement that the loan has been used in accordance with a contract and within the business scope approved by the regulatory authorities.

Dividend distribution

The principal regulations governing distribution of dividends of wholly foreign invested the Company Law of the PRC*) promulgated) جcompanies include ʕശɛ͏΍ձ਷ʮ̡ by the Standing Committee on 27 October 2005 and became effective as of 1 January 2006, (*the Wholly Foreign Owned Enterprise Law of the PRC) جʕശɛ͏΍ձ਷̮༟Άุ adopted by the National People’s Congress on 12 April 1986 and amended on 31 October 2000, the Wholly Foreign Owned Enterprise Law) ۆ୚݄ྼجandʕശɛ͏΍ձ਷̮༟Άุ Implementation Rules of the PRC*) promulgated by Foreign Trade and Economic Cooperation Bureau on 12 December 1990 and amended on 12 April 2001.

– 101 – REGULATIONS

Under these laws and regulations, foreign invested enterprises in the PRC may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, foreign investment enterprises in China are required to allocate at least 10% of their respective accumulated profits after tax each year, if any, to fund certain reserve funds unless these accumulated reserves have reached 50% of the registered capital of the enterprises. These reserves are not distributable as cash dividends.

Circular No. 75 and Circular No. 59

Pursuant to Circular No. 75 of SAFE promulgated on 21 October 2005, (i) a PRC resident must register the overseas equity financing (including the convertible bond financing) at the local branch of SAFE prior to the establishment or control of an oversea SPV; (ii) if a PRC resident invests the assets or share interests of a local enterprise into an oversea SPV, or to finance overseas after investing such assets or share interests into the oversea SPV, such PRC resident must register his interests and changes thereof in the oversea SPV at the local branch of SAFE; and (iii) if an oversea SPV conducts any significant matters (for example, acquisition or changes in ownership) outside the PRC, the PRC resident must register such changes at the local branch of SAFE within 30 days from occurrence of such matters.

Under the relevant rules, failure to comply with the registration procedures set forth in Circular No. 75 may result in restrictions being imposed on the foreign exchange activities of the relevant onshore company, including the increase of its registered capital, the payment of dividends and other distributions to its offshore parent or affiliate and the capital inflow from the offshore entity, and may also subject the relevant PRC residents to penalties under the PRC foreign exchange administration regulations.

Since May 2007, SAFE issued a series of guidance to its local branches with respect to the operational process for SAFE registration, including without limitation Circular No. 59 which came into effect on 17 December 2012. The guidance standardised more specific and stringent supervision on the registration required by the SAFE notice. For example, the guidance imposes obligations on onshore subsidiaries of an offshore entity to make true and accurate statements to local SAFE authorities in case there is any shareholder or beneficial owner of the offshore entity who is a PRC citizen or resident. Untrue statements by the onshore subsidiaries will lead to potential liability for the subsidiaries, and in some instances, for their legal representatives and other individuals.

Circular No. 7

Pursuant to ਷࢕̮ි၍ଣ҅ᗫ׵ྤʫࡈɛਞၾྤ̮ɪ̹ʮٰ̡ᛆዧᎸࠇྌ̮ි၍ଣϞ ᗫਪᕚٙஷٝ (Circular of the SAFE on Relevant Issues Concerning the Foreign Exchange Administration of the Involvement of Domestic Individuals in the Share Incentive Schemes of Overseas Listed Companies*) (“Circular No. 7”) issued on 15 February 2012 by the SAFE, the PRC residents who are granted shares or share options by an overseas listed company according to its share incentive schemes are required to entrust a domestic agency to centrally handle relevant matters such as the foreign exchange registration, the account opening, and the fund transfer and exchange; and the matters of the above Individuals such as option exercises, purchases and sales of relevant stocks or equities, and relevant fund transfers shall be centrally handled by an overseas institution.

– 102 – REGULATIONS

CHANGEOFTHEOLDFORNEWPROGRAM

Program duration and geographic scope

For the purpose of stimulating domestic spending and improving the efficiency of energy ආᓒɽʫცོᎸӛԓ࢕ཥ˸ᔚ౬อڮژconsumption, ਷ਕ৫፬ʮᝂᗫ׵ᔷ೯೯࢝ҷࠧ։ഃ௅ ࣩٙஷٝ(਷፬೯[2009]44໮) (Notice on Change of the Old for New Program in˙݄ྼ Motor Vehicles and Home Appliances Industry to Boost Domestic Consumption issued by the General Office of the State Council of the PRC on behalf of the PRC National Development and Reform Commission and other authorities (No. 44 of 2009 of the General Office of State Council of the PRC)*) was promulgated and implemented on 1 June 2009 which was followed Implementation Rules on the Home Appliances) جby the issuance of ࢕ཥ˸ᔚ౬อྼ݄፬ Change of the Old for the New Program*) (“Implementation Rules on Change of the Old for New Program”) on 28 June 2009 by the State Development and Reform Commission, the Ministry of Finance, the MOFCOM, the Ministry of Industry and Information Technology, the Ministry of Environmental Protection, the SAIC, and the General Administration of Quality Supervision, Inspection and Quarantine.

Pursuant to the Implementation Rules on the Change of the Old for New Program, the policy was provisionally implemented in Beijing, Tianjin, Shanghai, Jiangsu Province, Zhejiang Province, Shandong Province, Guangdong Province, Fuzhou and Changsha between ᚐ௅ᗫ׵Ι೯࢕ڭJune 2009 and 31 May 2010. According to the ਠਕ௅eৌ݁௅eᐑྤ 1 ཥ˸ᔚ౬อપᄿʈЪ˙ࣩٙՌ (Letter of the MOFCOM, the Ministry of Finance and the Ministry of Environmental Protection regarding the Promotion of the Home Appliances Change of the Old for New Program*) issued by the MOFCOM, the Ministry of Finance and the Ministry of Environmental Protection on 31 May 2010, the Change of the Old for New Program has been extended in provinces and cities including Guangdong Province until 31 December 2011 and expanded to other provinces including Hunan. The Change of the Old for New Program expired on 31 December 2011.

Qualified consumers

Under the program, home residents or legal persons in the areas where the program is implemented may enjoy rebates of up to 10% of the sale price of home appliances subject to a fixed maximum amount from the government for exchanging their old home appliances for new ones. In addition, the identity of the person/entity exchanging the old home appliance(s) must be the same as the one purchasing the new home appliance(s). Persons who have enjoyed subsidies under the ࢕ཥɨඊ໾൨݁ഄ (Home Appliance Subsidy Program for Rural Areas*) are not qualified for the subsidies under this program.

– 103 – REGULATIONS

Eligibility of authorised sales enterprises

Authorised sales enterprises are required to fulfill the following major criteria to be eligible as set out in the Implementation Rules on Change of the Old for New Program: (i) comprehensive sales network in the areas where the authorised sales enterprise is located; (ii) technological capability for recording and examining relevant information through the information system of the Change of the Old for New Program; (iii) relatively strong capacity in warehousing and delivery; (iv) capability of providing comprehensive after-sales services including delivery, installation, calibration testing and maintenance; and (v) good business and credit record in the past three years.

By presenting the certificates of the Change of the Old for New Program and other relevant documents showing the delivery of old appliances to the relevant home appliances recycling enterprises, qualified consumers are entitled to purchase new home appliances from authorised sales enterprises at a price equivalent to the normal selling price minus the rebate. Authorised sales enterprises are entitled to reimbursement of the amount of such rebates from the relevant authorities. The major duties of an authorised sales enterprises include: (a) selling their products at normal market prices and providing good after-sales and delivery services; (b) complying with the relevant regulations under the Change of the Old for New Program; (c) offering sales of the five types of products, namely, air conditioner, television, refrigerator, washing machine and personal computer; (d) undertaking promotional and sales activities; and (e) being responsible for problems that may arise during the sales process.

Category of products and maximum amount of subsidies

Qualified consumers may enjoy either a 10% rebate or a fixed amount of subsidies in respect of five categories of home appliances (whichever is lower):

Maximum amount of subsidies per Category of products product (RMB)

Air conditioner 350 Television 400 Refrigerator 300 Washing machine 250 Personal computer 400

– 104 – HISTORY AND DEVELOPMENT

HISTORY AND CORPORATE STRUCTURE

GENERAL

Our Company was incorporated under the laws of the Cayman Islands on 20 April 2012 in anticipation of the Listing. As part of the corporate reorganisation for the Listing and the Share Offer, our Company will become the holding company of our Group after the Reorganisation. Please refer to the paragraphs below headed “Our corporate structure” and “Corporate reorganisation” in this section for more information relating to our corporate structure and the Reorganisation.

In particular, after the Reorganisation:

• Shaoguan Central Management and Zhongshan Yihua Management, being subsidiaries of our Group during the Track Record Period were disposed of and will be deregistered respectively; and

• Jiangmen Yihua Department Store and Guzhen Yihua Department Store, being non-wholly owned subsidiaries of our Group became wholly owned subsidiaries; and

• The shareholders of Guzhen Yihua Department Store and Jiangmen Yihua Department Store (namely Mr. Fan Xinpei, Mr. Lin Guangzheng, Mr. Su Weibing, Ms. Wang Guping, Ms. Zhang Rong and Mr. Luo Chengwen, collectively the “Six Shareholders”), other than Guangdong Yihua Department Store, are also accounted for as equity holders of the Company (i.e. Yi Hua Department Store Holdings Limited) in our Group’s financial information for the following reasons:

(1) the Company is owned by Mr. Chen Daren, Mr. Lu Hanxing and Six Shareholders (collectively the “Ultimate Shareholders”) after the Reorganisation and as part of the Reorganisation, the Six Shareholders transfer their equity interests in Guzhen Yihua Department Store and Jiangmen Yihua Department Store to Guangdong Yihua Department Store, a wholly-owned subsidiary of our Group, and become the shareholders of the Company. It is estimated that such transfer will not ultimately involve any cash in/out flow; and

(2) generally, non-controlling interest is the equity in a subsidiary not attributable, directly or indirectly, to a parent (i.e. the Company). As the reporting entity is the Company, profit attributable to the Company’s equity holders, i.e. the Ultimate Shareholders, would include the Six Shareholders’ interests in Guzhen Yihua Department Store and Jiangmen Yihua Department Store.

– 105 – HISTORY AND DEVELOPMENT

OUR HISTORY

Our history can be traced back to October 1994 when Guangdong Yihua Department Store (formerly known as Zhongshan Yihua Department Store Limited (ʕʆ̹ूശϵ஬Ϟࠢʮ̡)), a principal operating subsidiary of our Group, was established as a limited liability company under the PRC laws in Zhongshan City, Guangdong Province, the PRC. Our first department store, main store in the Zhongshan, commenced operation in May 1995. Over the years, we have developed ourselves into a department store chain under the well-known brand name of “ूശϵ஬” (Yihua Department Store), with a retail network comprising ten department stores and three community stores in the PRC.

Capitalising on our success in department store operation, we commenced our electrical appliance retail business under the brand name “ूശ̬ऎཥኜ” (Yihua Sihai Electrical Appliance Centre) in September 1997 and our supermarket business under the brand name “ू ശᆀ࢕൴̹” (Yihua Lejia Supermarket) in July 2000, to offer a complementary mix of merchandise and products to our customers. We have established in 2013 the fourth section, the furniture section, under the brand name “Yihua Shijia” (ूശ˰࢕) in Zhongshan store (main store), Yangjiang store and Jiangmen store.

As an ancillary service to our electrical appliance (and in some cases, non-fresh goods for the supermarket businesses), we established our logistics centre in Zhongshan City, Guangdong Province, the PRC in October 2003 to centralise the management of the logistics and delivery of merchandise. The logistics centre has a total GFA of approximately 8,000 sq.m. with its own transportation and logistics system.

The followings are the important milestones in our business development:

1994 October Guangdong Yihua Department Store was established in Zhongshan City, Guangdong Province, the PRC.

1995 May Ourfirstdepartmentstore,Zhongshanstore(mainstore), formally commenced business in Shiqi, Zhongshan City, Guangdong Province, the PRC.

1997 September Our first electrical appliance centre, Yihua Sihai Electrical Appliance Centre, formally commenced business in Shiqi, Zhongshan City, Guangdong Province, the PRC.

2000 July Our first supermarket, Yihua Lejia Supermarket, was established and formally commenced business in Shiqi, Zhongshan City, Guangdong Province, the PRC.

– 106 – HISTORY AND DEVELOPMENT

2003 January Our Yihua Sihai Electrical Appliance Centre formally commenced business in Guzhen, Zhongshan City, Guangdong Province, the PRC.

October Our logistics center was established in Shiqi, Zhongshan City, Guangdong Province, the PRC.

December Our Qingyuan store formally commenced business in Qingyuan City, Guangdong Province, the PRC.

2004 September Phase I of our Jiangmen store formally commenced business in Jiangmen City, Guangdong Province, the PRC.

2006 March Our Guzhen store formally commenced its business in Guzhen, Zhongshan City, Guangdong Province, the PRC.

2008 August Phase II of our Jiangmen store formally commenced business in Jiangmen City, Guangdong Province, the PRC.

September Our Shaoguan store formally commenced business in Shaoguan City, Guangdong Province, the PRC.

2010 September Our Jiangnan community store formally commenced business in Guzhen, Zhongshan City, Guangdong Province, the PRC.

2011 September Our Hetang community store formally commenced business in Jiangmen City, Guangdong Province, the PRC.

2012 April Our Fusha community store formally commenced business in Fusha, Zhongshan City, Guangdong Province, the PRC.

2013 January OurTaiyangchengstoreformallycommenceditsbusiness in Zhongshan City, Guangdong Province, the PRC.

February Our Yangchun store formally commenced business in Yangchun City, Guangdong Province, the PRC.

– 107 – HISTORY AND DEVELOPMENT

April Our first furniture section, Yihua Shijia, was established and formally commenced its business in Shiqi, Zhongshan City, Guangdong Province, the PRC.

June Our Tai’an department store (Longtan) and Yingde department store formally commenced business in Tai’an, Shandong Province, the PRC and Yingde, Guangdong Province, the PRC respectively.

October Our Yangjiang store formally commenced its business in Yangjiang City, Guangdong Province, the PRC.

As at the Latest Practicable Date, our retail network occupied a total GFA of more than 279,770 sq. m. and offered an aggregate of over 1,000 different brands of quality products ranging from luxurious products to daily necessities.

OUR CORPORATE STRUCTURE

The following sets forth the corporate development of the subsidiaries of our Group since their respective dates of incorporation and prior to the Reorganisation.

Guangdong Yihua Department Store

Guangdong Yihua Department Store, established on 24 October 1994 as a limited liability company under the laws of the PRC, is a principal operating subsidiary of our Group, currently operating the main store in Zhongshan City, Guangdong Province, the PRC. Upon incorporation, Guangdong Yihua Department Store was owned as to 80% of its equity interest by Zhongshan Taili Development Limited (ʕʆ̹इɢ೯࢝Ϟࠢʮ̡) (“Taili Development”) (and 20% of its equity interest by Zhongshan Yihua Group Limited (ʕʆ̹׋ശණྠϞࠢʮ̡ (“Zhongshan Yihua Group”). Both Taili Development and Zhongshan Yihua Group were collectively-owned enterprises (ණ᜗ՓΆุ) in the PRC. Mr. Fan was the legal representative during its establishment in 1994. Mr. Chen was subsequently elected as its legal representative in June 1999 and among the directors on the board of directors included, among others, Mr. Έ͍) (“Mr. Lin”). Currently, besides the historical؍) Chen and Mr. Lin Guangzheng relationships set out above, Taili Development is an Independent Third Party and Zhongshan Yihua Group is owned as to 5%, 10%, 10%, 10% and 65% by Mr. Xu Chenghai (ࢱϓऎ), Mr. Lu, Mr. Fan, Mr. Chen Zhengtao (being Mr. Chen’s son), and Mr. Chen Daren respectively.

(Upon the approval by the Zhongshan Municipal People’s Government (ʕʆ̹ɛ͏ִ݁ and State-owned Assets Administration Bureau of Zhongshan City (ʕʆ̹਷Ϟ༟ପ၍ଣ҅), Zhongshan Yihua Group had undergone a series of reform since 2000. On 19 July 2004, 20% equity interest in Guangdong Yihua Department Store owned by Zhongshan Yihua Group was ርϞࠢʮ̡). For a consideration ofשopenly auctioned off by Huaxia Auction Limited (ശࢀ RMB125,000, which is the auction price in the competitive open auction, Shunyi Industrial successfully acquired such 20% equity interest in Guangdong Yihua Department Store on 4

– 108 – HISTORY AND DEVELOPMENT

August 2004 and said consideration was settled. Guangdong Yihua Department Store was then owned as to 80% of its equity interest by Taili Development and 20% of its equity interest by Shunyi Industrial. Shunyi Industrial is owned as to 90% and 10% by Mr. Chen Daren and Mr. Yu Huaxing (Яശጳ) (being Mr. Chen’s brother-in-law).

On 28 May 2008, Yihua Investment acquired 80% equity interest in Guangdong Yihua Department Store from Taili Development at the consideration of RMB8,000,000. The consideration was determined with reference to the then registered capital of Guangdong Yihua Department Store and was settled by setting off a debt of equivalent amount due from Taili Development to Yihua Investment. After the acquisition, Guangdong Yihua Department Store was owned as to 80% of its equity interest by Yihua Investment and 20% of its equity interest by Shunyi Industrial. At that time, the business operation of Guangdong Yihua Department Store was financed by cash generated from its operating activities and the credit facilities and borrowings maintained with the banks and financial institutions.

On 14 December 2009, Yihua Investment transferred 80% equity interest in Guangdong Yihua Department Store to Mr. Chen Daren at the consideration of RMB8,000,000 and Shunyi Industrial transferred 20% equity interest in Guangdong Yihua Department Store to Mr. Gao Weimin (৷މ͏) (“Mr. Gao”) at the consideration of RMB2,000,000. On 22 December 2009, Mr. Chen Daren transferred 80% equity interest in Guangdong Yihua Department Store to Yihua Investment at the consideration of RMB8,000,000, and Mr. Gao transferred 10% equity interest in Guangdong Yihua Department Store to Yihua Investment at the consideration of RMB1,000,000 and 10% equity interest in Guangdong Yihua Department Store to Shunyi Industrial at the consideration of RMB1,000,000. The consideration was determined with reference to the then registered capital of Guangdong Yihua Department Store. The transfer of 20% equity interest in Guangdong Yihua Department Store to Mr. Gao (who was a director of Guangdong Yihua Department Store at that time) was originally intended to be an incentive arrangement so as to keep Mr. Gao’s personal benefit in line with the growth of Guangdong Yihua Department Store by receiving dividend payment as a registered shareholder of Guangdong Yihua Department Store. Subsequent to the transfer of 20% equity interest in Guangdong Yihua Department Store, Mr. Gao and Guangdong Yihua Department Store agreed to terminate such arrangement as Mr. Gao intended to cease day to day management of Guangdong Yihua Department Store (and resigned officially as a director of Guangdong Yihua Department Store in October 2011 to pursue his own business interests), and then Mr. Gao transferred back 20% equity interest in Guangdong Yihua Department Store pursuant to the instructions of Mr. Chen Daren, of which 10% equity interest was transferred to Yihua Investment and 10% equity interest to Shunyi Industrial. No consideration for the transfer and the transfer back were set-off against each other and no money had been paid by Mr. Gao to Guangdong Yihua Department Store (or vice versa) in connection with the aforesaid transfer or transfer back. Save for the historical relationships set out above, Mr. Gao is an Independent Third Party.

Immediately before Guangdong Yihua Department Store was transferred to Lonwalk Mould pursuant to the Reorganisation, Guangdong Yihua Department Store was owned as to 90% of its equity interest by Yihua Investment and 10% of its equity interest by Shunyi Industrial.

– 109 – HISTORY AND DEVELOPMENT

Guzhen Yihua Department Store

Guzhen Yihua Department Store, established on 29 March 2006 as a limited liability company under the laws of the PRC, is a principal operating subsidiary of our Group, which currently operating the Guzhen store and the Jiangnan community store. Upon its establishment, Guzhen Yihua Department Store was owned as to 90% of its equity interest by Zhongshan Yihua Management and as to 10% of its equity interest by Mr. Su Weibing (ᘽਃ ж) (“Mr. Su”).

On 18 November 2010, Zhongshan Yihua Management transferred (i) 70% equity interest in Guzhen Yihua Department Store to Guangdong Yihua Department Store, (ii) 9% equity interest to Mr. Fan, (iii) 6% equity interest to Mr. Lin, (iv) 3% equity interest to Ms. Wang Guping (ˮ̚ջ) (“Ms. Wang”), and (v) 2% equity interest to Ms. Zhang Rong (ੵႂ) (“Ms. Zhang”), at the consideration of RMB3,500,000, RMB450,000, RMB300,000, RMB150,000, RMB100,000 respectively. On the same day, Mr. Su transferred 3% equity interest in Guzhen Yihua Department Store to Mr. Luo Chengwen (ᖯϓ˖) (“Mr. Luo”) and 1% equity interest to Ms. Zhang at the consideration of RMB150,000 and RMB50,000 respectively. The consideration was determined with reference to the then registered capital of Guzhen Yihua Department Store and was settled by the transferees. Since then, such shareholding structure of Guzhen Yihua Department Store was maintained up to immediately prior to the Reorganisation.

Mr. Fan, Mr. Su and Mr. Lin are executive Directors, and Ms. Wang, Ms. Zhang and Mr. Luo are members of senior management of our Company. Please refer to the section headed “Directors, senior management and staff” of this prospectus for more details about them.

Qingyuan Yihua Department Store

Qingyuan Yihua Department Store, established on 16 October 2003 as a limited liability company under the laws of the PRC, is a principal operating subsidiary of our Group, which currently operating the Qingyuan store. Upon its establishment, Qingyuan Yihua Department Store was owned as to 90% of its equity interest by Qingyuan City Plaza Management Limited ૶Ⴣ̹۬ᄿఙ຾ᐄ၍ଣϞࠢʮ̡) (“Qingyuan City Plaza Management”), 5.5% of its equity) interest by Qingyuan Jiashun Property Investment Limited (૶Ⴣ̹ྗනໄุҳ༟Ϟࠢʮ̡) ຾ᐄ၍ଣุيformerly known as Qingyuan Jiashun Property Management Limited (૶Ⴣྗන) Ϟࠢʮ̡)) (“Qingyuan Jiashun Property Investment”) and 4.5% of its equity interest by Guangdong Yihua Department Store. Save for the historical relationships set out above, Qingyuan City Plaza Management and Qingyuan Jiashun Property Investment are Independent Third Parties.

On 28 July 2005, the shareholders of Qingyuan Yihua Department Store passed a resolution approving (i) the transfer by Qingyuan City Plaza Management of 90% equity interest in Qingyuan Yihua Department Store to Zhongshan Yihua Management at the consideration of RMB1.00; (ii) the transfer by Qingyuan Jiashun Property Investment of 5.5% equity interest in Qingyuan Yihua Department Store to Mr. Luo (who was a deputy general manager of Qingyuan Yihua Department Store) at the consideration of RMB1.00; and (iii) the transfer by Guangdong Yihua Department Store of 4.5% equity interest in Qingyuan Yihua Department Store to Mr. Luo at the consideration of RMB1.00. The transfers were at nominal

– 110 – HISTORY AND DEVELOPMENT consideration because at that time Qingyuan Yihua Department Store had net liabilities. The transfer of 90% equity interest to Zhongshan Yihua Management was because Guangdong Yihua Department Store wished to hold the equity interest in Qingyuan Yihua Department Store through Zhongshan Yihua Management (a management company). At that time, the PRC Companies Law required that a PRC incorporated company must have at least two shareholders. The transfer of 10% equity interest to Mr. Luo was for administration purpose and compliance with the then PRC Companies Law requirement. The said requirement for at least two shareholders was subsequently abolished after the new PRC Companies Law took effect on 1 January 2006.

On 5 January 2011, Mr. Luo transferred 10% equity interest in Qingyuan Yihua Department Store to Guangdong Yihua Department Store at nominal consideration of RMB2.00 and Zhongshan Yihua Management transferred 90% equity interest to Guangdong Yihua Department Store at nominal consideration of RMB1.00. The said equity interests were transferred to Guangdong Yihua Department Store to streamline the shareholding structure of Qingyuan Yihua Department Store. During the period when Mr. Luo was holding the 10% equity interest in Qingyuan Yihua Department Store, no dividend was paid to Mr. Luo. After the aforesaid transfers of equity interests and up to the Latest Practicable Date, Qingyuan Yihua Department Store was wholly owned by Guangdong Yihua Department Store.

Jiangmen Yihua Department Store

Jiangmen Yihua Department Store, established on 24 August 2004 as a limited liability company under the laws of the PRC, is a principal operating subsidiary of our Group, which currently operating the Jiangmen store and the Jiangmen Hetang community store. Upon establishment and up to immediately prior to the Reorganisation, Jiangmen Yihua Department Store was owned as to 90% of its equity interest by Guangdong Yihua Department Store and 10% of its equity interest by Mr. Fan.

Shaoguan Yihua Department Store

Shaoguan Yihua Department Store, established on 3 August 2007 as a limited liability company under the laws of the PRC, is a principal operating non-wholly owned subsidiary of our Group, which currently operating the Shaoguan store. Upon its establishment, Shaoguan Yihua Department Store was owned as to 51% of its equity interest by Guangdong Guang Zhi Lian and as to 49% of its equity interest by Zhongshan Yihua Management. Save for being the joint venture partner of our Group through its interest in Shaoguan Yihua Department Store and Shaoguan Central Management, Guangdong Guang Zhi Lian is an Independent Third Party.

On 19 March 2009, Guangdong Guang Zhi Lian transferred 10% equity interest in Shaoguan Yihua Department Store to Mr. Fan at the consideration of RMB500,000. The consideration was determined with reference to the then registered capital of Shaoguan Yihua Department Store and was settled by Mr. Fan.

On 4 May 2010, Guangdong Guang Zhi Lian transferred 16% equity interest in Shaoguan Yihua Department Store to Ms. Zhu Muqiong (ϡᅉᖘ) (“Ms. Zhu”) at the consideration of RMB800,000. The consideration was determined with reference to the then registered capital of Shaoguan Yihua Department Store and was settled by Ms. Zhu. Save for her interest in Shaoguan Yihua Department Store and Shaoguan Central Management, Ms. Zhu is an Independent Third Party.

– 111 – HISTORY AND DEVELOPMENT

On 25 November 2010, Zhongshan Yihua Management transferred 49% equity interest in Shaoguan Yihua Department Store to Guangdong Yihua Department Store at the consideration of RMB2,450,000. The consideration was determined with reference to the then registered capital of Shaoguan Yuhua Department Store and was settled by Guangdong Yihua Department Store.

After the aforesaid transfers of equity interests and up to immediately prior to the completion of the Reorganisation (but taking into account the transfer of Guangdong Guang Zhi Lian’s transfer of its 25% equity interests in Shaoguan Yihua Department Store to Ms. Zhu in or around March 2013), Shaoguan Yihua Department Store was owned as to 49% of its equity interest by Guangdong Yihua Department Store, 41% of its equity interest by Ms. Zhu and 10% of its equity interest by Mr. Fan.

Zhongshan Yihua Management

Zhongshan Yihua Management was established on 1April 2003 under the laws of the PRC as a limited liability company, is principally involved in property rental management. Upon its establishment, Zhongshan Yihua Management was owned as to 50% of its equity interest by Guangdong Yihua Department Store, 15% of its equity interest by Mr. Fan and 35% of its equity interest by Mr. Luo.

On 29 June 2005, Mr. Luo transferred 5%, 10% and 10% equity interest in Zhongshan Yihua Management respectively to Guangdong Yihua Department Store, Mr. Lin and Mr. Su at the consideration of RMB25,000, RMB50,000 and RMB50,000 respectively. The consideration was determined with reference to the then registered capital of Zhongshan Yihua Management and was settled by the transferees.

On 26 August 2005, Guangdong Yihua Department Store transferred 5% equity interest in Zhongshan Yihua Management to Mr. Fan at the consideration of RMB25,000. On 17 February 2006, Zhongshan Yihua Management increased its share capital to RMB5,000,000 and Mr. Su transferred 5% equity interest in Zhongshan Yihua Management to Mr. Fan at the consideration of RMB250,000 and Mr. Luo transferred 5% equity interest in Zhongshan Yihua Management to Mr. Lin at the consideration of RMB250,000. Both of the considerations was determined with reference to the then registered capital of Zhongshan Yihua Management and were settled. The following is the shareholding structure of Zhongshan Yihua Management after the aforesaid transfers of equity interests and up to immediately prior to the Reorganisation:

Guangdong Yihua Department Store 50% Mr. Fan 25% Mr. Lin 15% Mr. Su 5% Mr. Luo 5%

Zhongshan Yihua Management is in the process of deregistration as detailed in the paragraph headed “Corporate Reorganisation – Disposal and deregistration of certain subsidiaries” of this section.

– 112 – HISTORY AND DEVELOPMENT

Shaoguan Central Management

Shaoguan Central Management, established on 28 September 2006 under the laws of the PRC as a limited liability company, is principally involved in property rental management. Upon its establishment, Shaoguan Central Management was owned as to 51% of its equity interest by Guangdong Guang Zhi Lian and as to 49% of its equity interest by Zhongshan Yihua Management.

On 9 March 2009, Guangdong Guang Zhi Lian transferred 10% equity interest in Shaoguan Central Management to Mr. Fan at the consideration of RMB50,000. The consideration was determined based on the then registered capital of Shaoguan Central Management and was settled.

On 20 May 2010, Guangdong Guang Zhi Lian transferred 16% equity interest in Shaoguan Central Management to Ms. Zhu at the consideration of RMB80,000. The consideration was determined based on the then registered capital of Shaoguan Central Management and was settled. The following is the shareholding structure of Shaoguan Central Management after the aforesaid transfers of equity interests and up to immediately prior to the Reorganisation:

Zhongshan Yihua Management 49% Guangdong Guang Zhi Lian 25% Ms. Zhu 16% Mr. Fan 10%

Shaoguan Central Management was disposed to an Independent Third Party on 18 November 2013 as part of the Reorganisation, details of which are set out in the paragraph headed “Corporate Reorganisation – Disposal and deregistration of certain subsidiaries” of this section.

Shaoguan Xinhui Property Management

Shaoguan Xinhui Property Management, established on 9 March 2011 as a limited liability company under the laws of the PRC. Upon its establishment, Shaoguan Xinhui Property Management was wholly owned by Shaoguan Central Management. Shaoguan Xinhui Property Management is principally engaged in property management business.

Shaoguan Xinhui Property Management was disposed of as part of the Reorganisation, details of which are set out in the paragraph headed “Corporate reorganisation − Disposal and deregistration of certain subsidiaries” of this section.

Guzhen Yihua Trading

Guzhen Yihua Trading was established on 30 December 2004 under the law of PRC as a limited liability company, and is principally engaged in property rental management. Upon establishment, Guzhen Yihua Trading was owned as to 60% of its equity interest by Guangdong Yihua Department Store and as to 40% of its equity interest by Zhongshan Yihua Management.

– 113 – HISTORY AND DEVELOPMENT

On 5 January 2006, Guangdong Yihua Department Store transferred 15% equity interest in Guzhen Yihua Trading to Mr. Lin and 15% equity interest to Mr. Su at the consideration of RMB75,000 each. Meanwhile, Zhongshan Yihua Management transferred 5% equity interest to Mr. Lin and 5% equity interest to Mr. Su at the consideration of RMB25,000 each. The consideration was determined with reference to the then registered capital of Guzhen Yuhua Trading and was settled by the transferees. The following is the shareholding structure of Guzhen Yihua Trading after the aforesaid transfers of equity interests and up to immediately prior to the Reorganisation:

Guangdong Yihua Department Store 30% Zhongshan Yihua Management 30% Mr. Su 20% Mr. Lin 20%

Guzhen Yihua Trading is in the process of deregistration as detailed in the paragraph headed “Corporate Reorganisation – Disposal and deregistration of certain subsidiaries” of this section.

Lonwalk Mould

Lonwalk Mould was established on 16 October 2000 under the laws of the PRC as a sino-foreign joint venture. The business scope of Lonwalk Mould includes manufacturing of plastics and mould products, electronic products (including computer, cord phone etc.) of which 100% of these products for export to foreign countries; and construction plastics, plastic alloy, metal wear (plating process), of which 30% of these products are for local sales. Upon its establishment, Lonwalk Mould was owned as to 60% of its equity interest by Zhongshan Yihua Group and 40% of its equity interest by Intelligence Link. The registered capital of Lonwalk Mould had increased from RMB3,000,000 to RMB4,750,000 and subsequently to RMB8,000,000 on 15 November 2000 and 3 April 2001 respectively.

On 15 November 2001, Zhongshan Yihua Group had agreed to transfer 30% of the equity (interest of Lonwalk Mould to Zhongshan Langsu Trading Limited (ʕʆ̹ࣦ෧൱׸Ϟࠢʮ̡ (“Langsu Trading”). Lonwalk Mould was then owned as to 40%, 30% and 30% by Intelligence Link, Zhongshan Yihua Group and Langsu Trading respectively. On 12 December 2001, the registered capital of Lonwalk Mould had subsequently increased to RMB12,000,000 with its shareholding structure remained unchanged. Save for the historical relationships set out above, Langsu Trading is an Independent Third Party.

On 2 September 2002, Zhongshan Yihua Group had agreed to transfer its remaining 30% of equity interest of Lonwalk Mould to Anlixin Electronics at the consideration of RMB3,000,000.

In September 2002, the registered capital of Lonwalk Mould had further increased to RMB40,000,000. Intelligence Link and Langsu Trading further injected capital of RMB19,600,000 and RMB8,400,000 respectively to Lonwalk Mould.

– 114 – HISTORY AND DEVELOPMENT

On 13 August 2007, Langsu Trading had agreed to transfer 30% of the equity interest of Lonwalk Mould to Langcheng Trading at the consideration of RMB12,000,000, which was based on the then registered capital of Lonwalk Mould.

෧ϞࠢءOn 5 December 2011, Lonwalk Mould sold its machineries to ʕʆ̹ࣦശᅼՈ ʮ̡ (Zhongshan Lonwalk Mould Zhusu Limited*), who is an Independent Third Party, at the consideration of RMB8,934,100 by reference to net book value of the property, plant and equipment with a small premium. As our Group will concentrate on the operation of department store, our Group decided to dispose of its other assets. The following is the shareholding structure of Lonwalk Mould after the aforesaid transfers of equity interests and up to immediately prior to the Reorganisation:

Intelligence Link 61% Langcheng Trading 30% Anlixin Electronics 9%

Intelligence Link

Intelligence Link was incorporated on 3 May 1994 under the law of Hong Kong as an investment holding company. Upon incorporation, Intelligence Link was owned as to 50% of its issued share capital by Mr. Lee Ping (ҽ̻) and 50% of its issued share capital by Toply Holdings Limited, both being Independent Third Parties.

In May 2004, Mr. Lee Ping transferred his 50% shareholding in Intelligence Link to Canton Sky at the par value; and Toply Holdings Limited transferred their 50% shareholding in Intelligence Link to Fortune Sky at the par value.

The following is the shareholding structure of Intelligence Link after the aforesaid transfers of equity interests and up to immediately prior to the Reorganisation:

Canton Sky 50% Fortune Sky 50%

Subor Electronics

Subor Electronics was established on 19 August 1994 as a limited liability company under the laws of the PRC. Prior to its disposal on 16 May 2012, Subor Electronics was owned as to 60%, 20% and 20% of its equity interest by Intelligence Link, Shunyi Industrial and Ruichang Industrial Development respectively. Ruichang Industrial Development is owned as to 90% and 10% by Yihua Investment and Shunyi Industrial respectively.

Subor Electronics was disposed of as part of the Reorganisation, details of which are set out in the paragraph headed “Corporate reorganisation – Disposal and deregistration of certain subsidiaries” of this section. Subor Electronics is principally engaged in manufacturing of home use TV game machine; Chinese and English learning machines; video game tapes; VCD machine; interactive conversation learning machines. Thirty percent of its products are for domestic sales.

– 115 – HISTORY AND DEVELOPMENT

Zhongshan Yihua Shijia

Zhongshan Yihua Shijia was established on 11 September 2012 as a limited liability company under the laws of the PRC, and is an operating subsidiary of our Group, which currently operating the furniture section in the Zhongshan store (main store). Upon its establishment, Zhongshan Yihua Shijia was wholly owned by Guangdong Yihua Department Store.

Yangchun Yihua Department Store

Yangchun Yihua Department Store was established on 28 September 2012 as a limited liability company under the laws of the PRC, and is an operating subsidiary of our Group, which currently operating the Yangchun store. Upon its establishment, Yangchun Yihua Department Store was wholly owned by Guangdong Yihua Department Store.

Taiyangcheng Yihua Department Store

Taiyangcheng Yihua Department Store was established on 9 November 2012 as a limited liability company under the laws of the PRC, and is an operating subsidiary of our Group, which currently operating the Taiyangcheng store. Upon its establishment, Taiyangcheng Yihua Department Store was wholly owned by Guangdong Yihua Department Store.

Yingde Yihua Department Store

Yingde Yihua Department Store was established on 11 December 2012 as a limited liability company under the laws of the PRC, and is an operating subsidiary of our Group, which currently operating the Yingde store. Upon its establishment, Yingde Yihua Department Store was wholly owned by Guangdong Yihua Department Store.

Tai’an Yihua Commercial

Tai’an Yihua Commercial was established on 10 December 2012 as a limited liability company under the laws of the PRC, and is an operating subsidiary of our Group, which currently operating the Tai’an store (Longtan) and expected to operate the Tai’an store (Taishan). Upon its establishment, Tai’an Yihua Commercial was wholly owned by Guangdong Yihua Department Store.

Yangjiang Yihua Shijia

Yangjiang Yihua Shijia was established on 6 May 2013 as a limited liability company under the laws of the PRC, and is expected to operate the furniture section of the Yangjiang store. Upon its establishment, Yangjiang Yihua Shijia was wholly owned by Zhongshan Yihua Shijia.

– 116 – HISTORY AND DEVELOPMENT

Yangjiang Yihua Department Store

Yangjiang Yihua Department Store was established on 28 January 2013 as a limited liability company under the laws of the PRC, and is currently operating the Yangjiang store. Upon its establishment, Yangjiang Yihua Department Store was wholly owned by Guangdong Yihua Department Store.

Zhenjiang Yihua Department Store

Zhenjiang Yihua Department Store was established on 5 June 2013 as a limited liability company under the laws of the PRC, and is expected to operate the Zhenjiang store. Upon its establishment, Zhenjiang Yihua Department Store was wholly owned by Guangdong Yihua Department Store.

Previously disposed of company: Guangdong Yihua Management

Guangdong Yihua Management was established on 10 March 2006 as a limited liability company under the laws of the PRC and was previously owned as to 50% by Guangdong Yihua Department Store.

On 12 October 2010, Guangdong Yihua Department Store transferred 50% equity interest in Guangdong Yihua Management to Yihua Investment at the consideration of RMB2,500,000. The consideration was determined with reference to the then registered capital of Guangdong Yihua Management.

Since Guangdong Yihua Management is principally involved in property leasing and management service, which is not our core business and in order to streamline our Group’s structure, Guangdong Yihua Department Store disposed of its interests in Guangdong Yihua Management.

Lonwalk Property Management

Lonwalk Property Management was established on 13 December 2012 as a limited liability company under the laws of the PRC. Upon its establishment, Lonwalk Property Management was owned as to 70% of its equity interest by Lonwalk Mould and 30% of its equity interest by Yihua Investment.

Lonwalk Property Management was disposed of as part of the Reorganisation, details of which are set out in the paragraph headed “Corporate reorganisation − Disposal and deregistration of certain subsidiaries” of this section. Lonwalk Property Management’s business scope is property management.

– 117 – HISTORY AND DEVELOPMENT

The following diagram sets out the shareholding structure as at 6 March 2012:

Mr. Chen Daren Mr. Yu Huaxing

90% 10%

Mr. Chen Mr. Chen Shunyi Industrial Mr. Lu Zhengtao Daren (PRC) 28.22% 11.09% 11.09% 49.6%

Yihua Investment (PRC) 90% 10%

Guangdong Yihua Department Store (PRC)

70% 100% 50% 90% 49% Guzhen Yihua Jiangmen Yihua Shaoguan Yihua Qingyuan Yihua Zhongshan Yihua Department Department Department Department Management Store Store Store Store (PRC) (PRC) (PRC) (PRC) (PRC) (Note 2) (Note 1) (Note 3) (Note 4) 49% 30% 30% Shaoguan Central Guzhen Yihua Management Trading (PRC) (PRC) (Note 5) (Note 6) 100% Shaoguan Xinhui Property Management (PRC)

Notes:

(1) The remaining shareholders are Mr. Fan with 9% shareholding, Mr. Lin with 6% shareholding, Mr. Su with 6% shareholding, Ms. Wang with 3% shareholding, Mr. Luo with 3% shareholding and Ms. Zhang with 3% shareholding. Mr. Fan, Mr. Lin and Mr. Su are all executive Directors and Ms. Wang, Mr. Luo and Ms. Zhang are all members of our senior management.

(2) The remaining shareholders are Mr. Fan with 25% shareholding, Mr. Lin with 15% shareholding, Mr. Su with 5% shareholding and Mr. Luo with 5% shareholding.

(3) The remaining shareholder is Mr. Fan with 10% shareholding.

(4) The remaining shareholders are Guangdong Guang Zhi Lian with 25% shareholding, Ms. Zhu Muqiong with 16% shareholding and Mr. Fan with 10% shareholding.

(5) The remaining shareholders are Guangdong Guang Zhi Lian (an Independent Third Party) with 25% shareholding, Ms. Zhu Muqiong (an Independent Third Party) with 16% shareholding and Mr. Fan with 10% shareholding.

(6) The remaining shareholders are Mr. Su with 20% shareholding and Mr. Lin with 20% shareholding.

– 118 – HISTORY AND DEVELOPMENT

Mr. Chen Mr. Lu Daren 50% 50% 100% 100%

Eaglepass Developments Mentor Asia Jaguar Asian (BVI) (BVI) (BVI)

40% 60% 50% 50%

Canton Sky Fortune Sky (HK) (HK)

50% 50%

Intelligence Link

(HK)

Subor Electronic Mr. Zhou Daquan Ms. Pan Lifang Mr. Lu Mr. Xu Chenghai (PRC) 周大全潘莉芳 (Note) 69% 31% 60% 40% 60%

Langcheng Trading Anlixin Electronics (PRC) (PRC) 30% 61% 9%

Lonwalk Mould (PRC)

Note: The remaining shareholders are Shunyi Industrial with 20% shareholding and Ruichang Industrial Development with 20% shareholding. Ruichang Industrial Development is owned as to 90% and 10% by Yihua Investment and Shunyi Industrial respectively.

CORPORATE REORGANISATION

We reorganised our corporate structure in preparation for and in connection with the Listing and the Share Offer. Following the Reorganisation, our Company became the holding company of our Group. The Reorganisation included the principal corporate restructuring steps as set out below.

Our Company

Our Company was incorporated in the Cayman Islands on 20 April 2012 with an authorised share capital of HK$380,000.00 divided into 38,000,000 Shares of par value HK$0.01 each. Reid Services Limited subscribed for one Share. On the same day, the said one Share was transferred to Eaglepass Developments, and two Shares in our Company were allotted and issued fully paid, to Jaguar Asian.

Pursuant to the resolutions in writing of all Shareholders passed on 12 November 2013, the authorised share capital of the Company was increased from HK$380,000.00 divided into 38,000,000 Shares of par value HK$0.01 each to HK$7,780,000 divided into 778,000,000 Shares of par value HK$0.01 each by the creation of an additional 740,000,000 Shares. On 20 November 2013, 7,706 Shares were allotted and issued, credited as fully paid, to Jaguar Asian, and 2,291 Shares was allotted and issued, credited as fully paid, to Eaglepass Developments.

– 119 – HISTORY AND DEVELOPMENT

Acquisition of Lonwalk Mould by Intelligence Link

On 7 March 2012, Intelligence Link acquired 30% and 9% of Lonwalk Mould, from Langcheng Trading and Anlixin Electronics respectively at the consideration of RMB8,400,000 and RMB2,520,000. After the acquisition, Lonwalk Mould has become a wholly owned subsidiary of Intelligence Link.

Incorporation of subsidiaries for new stores

For purposes of the new stores, the following new subsidiaries were established:

– On 11 September 2012, Zhongshan Yihua Shijia was established and wholly owned by Guangdong Yihua Department Store.

– On 28 September 2012, Yangchun Yihua Department Store was established and wholly owned by Guangdong Yihua Department Store.

– On 9 November 2012, Taiyangcheng Yihua Department Store was established and wholly owned by Guangdong Yihua Department Store.

– On 10 December 2012, Tai’an Yihua Commercial was established and wholly owned by Guangdong Yihua Department Store.

– On 11 December 2012, Yingde Yihua Department Store was established and wholly owned by Guangdong Yihua Department Store.

– On 28 January 2013, Yangjiang Yihua Department Store was established and wholly owned by Guangdong Yihua Department Store.

– On 6 May 2013, Yangjiang Yihua Shijia was established and wholly owned by Zhongshan Yihua Shijia.

– On 5 June 2013, Zhenjiang Yihua Department Store was established and wholly owned by Guangdong Yihua Department Store.

Incorporation of a domestic company to invest in Gain Profit

In order to fulfill the registration under the SAFE regulations, the following companies were incorporated:

– On 23 May 2013, Mr. Fan, Mr. Lin, Mr. Su, Ms. Wang, Ms. Zhang and Mr. Luo established Yinglifeng Developments as a limited liability company under the laws of the PRC with contribution of RMB66,330, RMB9,620, RMB9,620, RMB4,810, RMB4,810, RMB4,810 respectively which are equivalent to 66.33%, 9.62%, 9.62%, 4.81%, 4.81%, 4.81% of shareholdings.

– 120 – HISTORY AND DEVELOPMENT

– On 28 May 2013,Yinglifeng Developments as a sole shareholder incorporated a BVI company, Gain Profit. Gain Profit is authorised to issue 5,000 shares of par value US$1.00 each.

– On 5 July 2013, Yinglifeng Developments completed the foreign exchange registration for domestic institution directly investing overseas according to Circular No. 59. Furthermore, Yinglifeng Developments will file and complete such filing with the relevant MOFCOM governmental authority in respect of its indirect interest in Eaglepass Developments prior to Listing.

Mr. Fan Mr. Su Mr. Lin Mr. Luo Ms. Zhang Ms. Wang

66.33% 9.62% 9.62% 4.81% 4.81% 4.81%

Yinglifeng Developments (PRC)

100%

Gain Profit (BVI)

Reorganisation of shareholdings in Guzhen Yihua Department Store, Jiangmen Yihua Department Store and Shaoguan Yihua Department Store

To streamline the shareholding structure of our Group in preparation for the Listing, the following operating subsidiaries of our Group underwent the following reorganisation of shareholdings:

– On 13 November 2013, Guangdong Yihua Department Store completed the acquisition of 10% equity interest of Jiangmen Yihua Department Store from Mr. Fan at the consideration of RMB500,000. The consideration was determined with reference to the then registered capital of Jiangmen Yihua Department Store and was settled by Guangdong Yihua Department Store on 20 November 2013. After such acquisition, Jiangmen Yihua Department Store became a wholly-owned subsidiary of Guangdong Yihua Department Store.

– On 14 November 2013, Guangdong Yihua Department Store completed the acquisition of 9%, 6%, 6%, 3%, 3% and 3% (in aggregate of 30%) equity interest of Guzhen Yihua Department Store from Mr. Fan, Mr. Lin, Mr. Su, Ms. Wang, Ms. Zhang and Mr. Luo respectively at the consideration of RMB450,000, RMB300,000, RMB300,000, RMB150,000, RMB150,000 and RMB150,000 respectively. The consideration was determined with reference to the then registered capital of Guzhen Yihua Department Store and was settled by Guangdong Yihua Department Store on 20 November 2013. After such acquisition, Guzhen Yihua Department Store became a wholly-owned subsidiary of Guangdong Yihua Department Store.

– On 18 November 2013, Guangdong Yihua Department Store completed the acquisition of 10% equity interest of Shaoguan Yihua Department Store from Mr. Fan at the consideration of RMB500,000. The consideration was determined with

– 121 – HISTORY AND DEVELOPMENT

reference to the then registered capital of Shaoguan Yihua Department Store and was settled by Guangdong Yihua Department Store on 20 November 2013. After such acquisition, Shaoguan Yihua Department Store was owned as to 59% of its equity interest by Guangdong Yihua Department Store and 41% of its equity interest by Ms. Zhu.

Disposal and deregistration of certain subsidiaries

To simplify the corporate structure of our Group in preparation for the Listing, (except for the retention of Lonwalk Mould an holding company holding Guangdong Yihua Department Store) and to focus on the Group’s core business of operation as department stores, the Group underwent the following reorganisation, whereby certain subsidiaries were disposed of and deregistered:

– On 16 May 2012, Intelligence Link completed the transfer of its 60% shareholdings in Subor Electronics to Canton Concord Enterprises Limited at the consideration of RMB10,920,000. The consideration was determined with reference to a premium over the net asset value of Subor Electronics. Canton Concord Enterprises Limited is owned as to 0.01%, 0.01% and 99.98% by Mr. Ho Siu Pui, Mr. Lee Ping, both being Independent Third Parties and Higson Holdings Limited. Higson Holdings Limited is wholly owned by Mr. Chan Kuong Ian, brother of Mr. Chen and Mr. Chen Daren. The reason for disposal of the interest in Subor Electronics to Canton Concords Enterprises Limited is for our Group to concentrate on the business operation of department store.

– On 23 July 2012, Shaoguan Central Management completed the transfer of its 100% ڿequity interest of Shaoguan Xinhui Property Management to Mr. He Guan’an (О τ), who is an Independent Third Party, at the consideration of RMB500,000. The reason for disposal of the interest in Shaoguan Xinhui Property Management to Mr. He Guan’an is for our Group to concentrate on the business operation of department store.

– On 8 November 2013, Lonwalk Mould completed the transfer of its 70% equity interest of Lonwalk Property Management to Yihua Investment at the consideration of RMB28,000,000. The consideration was determined with reference to the registered capital of Lonwalk Property Management. The reason for disposal of the interest in Lonwalk Property Management to Yihua Investment is for our Group to concentrate on the business operation of department store.

– On 15 November 2013, Guangdong Yihua Department Store completed the acquisition of 25%, 15%, 5%, and 5% (in aggregate of 50%) equity interest of Zhongshan Yihua Management from Mr. Fan, Mr. Lin, Mr. Su and Mr. Luo at the consideration of RMB1,250,000, RMB750,000, RMB250,000 and RMB250,000 respectively. After such acquisition, Zhongshan Yihua Management has become a wholly-owned subsidiary of Guangdong Yihua Department Store.

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– On 18 November 2013, Zhongshan Yihua Management and Mr. Fan completed the transfer of their 49% and 10% equity interest of Shaoguan Central Management to an Independent Third Party at the consideration of RMB245,000 and RMB50,000 respectively. The consideration was determined with reference to the then registered share capital of Shaoguan Central Management and our PRC Legal Advisers are of the view that there is no legal impediment to the aforesaid transfer. The reason for the disposal of the minority interest in Shaoguan Central Management to an Independent Third Party is to concentrate on the business operation of department stores.

– Pursuant to applications submitted on 19 November 2013 with the relevant authorities, Zhongshan Yihua Management and Guzhen Yihua Trading are in the process of de-registration. The Directors confirm that each of these companies are currently inactive and do not carry on business. The PRC Legal Advisers are of the view that assuming no objection from the tax authorities or creditors (i) the de-registration process is subject to the circumstances and the process generally takes six months to one year from application; and (ii) it is not currently aware of any material legal impediment for de-registration.

Mr. Chen Daren Mr. Yu Huaxing

90% 10%

Shunyi Industrial Mr. Lu Mr. Chen Zhengtao (PRC)

%22.82 11.09% 11.09% %6.94

Yihua Investment (PRC)

90% 10%

Guangdong Yihua Department Store (PRC)

100% %001 %001 59%

Guzhen Yihua Qingyuan Yihua Jiangmen Yihua Shaoguan Yihua Department Store Department Store Department Store Department Store (PRC) (PRC) (PRC) (PRC) 100%

Yangchun Yihua Yingde Yihua Taiyangcheng Yihua Zhongshan Yihua Department Store Department Store Department Store Shijia (PRC) (PRC) (PRC) (PRC)

100%

Zhenjiang Yihua Tai’an Yihua 100% Yangjiang Yihua Yangjiang Yihua Department Store Commercial Department Store Shijia (PRC) (PRC) (PRC) (PRC)

%001 %03 Zhongshan Yihua Guzhen Yihua Trading Management (PRC) (Note) (PRC)

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Note: The remaining shareholders are Zhongshan Yihua Management with 30% shareholding, Mr. Lin with 20% shareholding and Mr. Su with 20% shareholding.

Changes in the shareholding in Intelligence Link and its shareholders

To streamline the shareholding structure of Intelligence Link and its shareholders, the following reorganisation of shareholdings took place:

– On 10 April 2012, Intelligence Link allotted 9,998 shares to Mentor Asia at an aggregate consideration of HK$9,998.

– On 24April 2012, MentorAsia acquired one share, being 0.01% interest of the total issued share capital of Intelligence Link from Fortune Sky at the consideration of HK$861.2569. At the direction of Fortune Sky, Mentor Asia issued and allotted 7,707 shares, being 77.07% on a fully-diluted basis of Mentor Asia, to Jaguar Asian for full satisfaction of the said consideration.

– On 24April 2012, MentorAsia acquired one share, being 0.01% interest of the total issued share capital of Intelligence Link from Canton Sky at the consideration of HK$861.2569. At the direction of Canton Sky, Mentor Asia issued and allotted 2,292 shares, being 22.92% on a fully-diluted basis of Mentor Asia, to Eaglepass Developments for full satisfaction of the said consideration.

– On 24 April 2012, Mr. Chen Daren transferred his shareholding of one share of Mentor Asia to Jaguar Asian.

– Mentor Asia then act as the intermediate holding company of the proposed listed group.

– On 10 November 2013, Eaglepass Developments issued 9,998 shares and allotted 4,999 shares to each of Mr. Lu and Mr. Chen Daren.

– On 20 November 2013, Mr. Chen Daren transferred 5,000 shares of Eaglepass Developments at the consideration of RMB5,097,568 to Gain Profit and Mr. Lu transferred 3,434 shares of Eaglepass Developments at the consideration of RMB3,501,010 to Gain Profit.

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The following diagram sets out the shareholding structure of Intelligence Link immediately after completion of the above steps:

Mr. Fan Mr. Su Mr. Lin Mr. Luo Ms. Zhang Ms. Wang

66.33% 9.62% 9.62% 4.81% 4.81% 4.81%

Yinglifeng Developments (PRC)

100% Mr. Lu

Gain Profit 15.66% (BVI) Mr. Chen Daren 84.34%

100%

Eaglepass Developments Jaguar Asian (BVI) (BVI)

22.92% 77.08%

Mentor Asia (BVI)

100% Intelligence Link (HK)

100% Lonwalk Mould (PRC)

Acquisition of Guangdong Yihua Department Store by Lonwalk Mould

On 19 November 2013, Lonwalk Mould acquired 90% of the equity interest in Guangdong Yihua Department Store from Yihua Investment at the consideration of RMB33,120,000.

On 19 November 2013, Lonwalk Mould acquired 10% of the equity interest in Guangdong Yihua Department Store from Shunyi Industrial at the consideration of RMB3,680,000.

After the completion of the above acquisitions, Guangdong Yihua Department Store became a wholly-owned subsidiary of Lonwalk Mould.

Acquisition of Mentor Asia by our Company

On 20 November 2013, the shareholders of Mentor Asia, viz, Jaguar Asian and Eaglepass Developments, both transferred 7,708 and 2,292 shares in Mentor Asia to our Company in return for 7,706 and 2,291 new shares in our Company respectively.

The agreement relating to the sale and purchase of shares in Mentor Asia is signed on 20 November 2013.

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The following diagram sets out the shareholding structure of our Company immediately after completion of the Reorganisation:

Mr. Fan Mr. Su Mr. Lin Mr. Luo Ms. Zhang Ms. Wang

66.33% 9.62% 9.62% 4.81% 4.81% 4.81%

Yinglifeng Developments (PRC)

100% Mr. Lu

Gain Profit 15.66% (BVI) Mr. Chen Daren 84.34% 100% Eaglepass Developments Jaguar Asian (BVI) (BVI)

22.92% 77.08%

Our Company (Cayman Islands)

100%

Mentor Asia (BVI)

100%

Intelligence Link (HK)

100%

Lonwalk Mould (PRC)

100% Guangdong Yihua Department Store (PRC)

100% 100% 100% 59% Guzhen Yihua Qingyuan Yihua Jiangmen Yihua Shaoguan Yihua Department Store Department Store Department Store Department Store (PRC) (PRC) (PRC) (PRC) (Note 1) 100%

Yangchun Yihua Yingde Yihua Taiyangcheng Yihua Zhongshan Yihua Department Store Department Store Department Store Shijia (PRC) (PRC) (PRC) (PRC)

100% 100% Zhenjiang Yihua Tai’an Yihua Yangjiang Yihua Yangjiang Yihua Department Store Commercial Department Store Shijia (PRC) (PRC) (PRC) (PRC)

100% 30% Zhongshan Yihua Guzhen Yihua Trading Management (PRC) (Note 2) (PRC)

Note 1: The remaining shareholder is Ms. Zhu Muqiong with 41% shareholding.

Note 2: The remaining shareholders are Zhongshan Yihua Management with 30% shareholding, Mr. Lin with 20% shareholding and Mr. Su with 20% shareholding.

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The following diagram sets out the shareholding structure of our Company immediately after completion of the Share Offer and the Capitalisation Issue (without taking into account any shares which may be issued upon the exercise of theAdjustment Option or any share option granted under the Share Option Scheme):

Mr. Fan Mr. Su Mr. Lin Mr. Luo Ms. Zhang Ms. Wang

66.33% 9.62% 9.62% 4.81% 4.81% 4.81%

Yinglifeng Developments (PRC)

100% Mr. Lu

Gain Profit 15.66% (BVI) Mr. Chen Daren 84.34% 100% 100% Eaglepass Developments Jaguar Asian public shareholders (BVI) (BVI)

17.19% 57.81% 25%

Our Company (Cayman Islands)

100%

Mentor Asia ((BVI)

100%

Intelligence Link (HK)

100%

Lonwalk Mould (PRC)

100%

Guangdong Yihua Department Store (PRC)

100% 100% 100% 59% Guzhen Yihua Qingyuan Yihua Jiangmen Yihua Shaoguan Yihua Department Store Department Store Department Store Department Store (PRC) (PRC) (PRC) (PRC) (Note 1) 100%

Yangchun Yihua Yingde Yihua Taiyangcheng Yihua Zhongshan Yihua Department Store Department Store Department Store Shijia (PRC) (PRC) (PRC) (PRC)

100% 100% Zhenjiang Yihua Tai’an Yihua Yangjiang Yihua Yangjiang Yihua Department Store Commercial Department Store Shijia (PRC) (PRC) (PRC) (PRC)

100% 30% Zhongshan Yihua Management Guzhen Yihua Trading (PRC) (PRC) (Note 2)

Note 1: The remaining shareholder is Ms. Zhu Muqiong with 41% shareholding.

Note 2: The remaining shareholders are Zhongshan Yihua Management with 30% shareholding, Mr. Lin with 20% shareholding and Mr. Su with 20% shareholding.

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COMPLIANCEWITHAPPLICABLEPRCLAWS

The M&A Rules

Our PRC Legal Advisers have advised that the M&A Rules are not applicable (for details of the M&A Rules, please refer to the section headed “Regulations – Provisions on acquisition of domestic enterprises by foreign investors” of this prospectus) to the Reorganisation and the Listing, as Lonwalk Mould has been established as a foreign invested limited liability company upon approval of competent commerce authorities and has obtained all necessary permits, licenses and completed registration and filings, before 8 September 2006, the date from which the M&A Rules became effective.

SAFE registration

Our PRC LegalAdvisers are of the opinion that Mr. Chen Daren and Mr. Lu who are PRC individual residents need to submit the applications to the SAFE Guangdong Branch for foreign exchange registration, and Yinglifeng Developments who is a PRC resident legal person needs to submit the application to the SAFE Guangdong Zhongshan Branch for foreign exchange registration. Details of Circular No. 75 and foreign exchange registration are set out in the section headed “Regulations – Provisions on foreign exchange management and dividend distribution – Circular No. 75 and Circular No. 59” of this prospectus.

Yinglifeng Developments has registered and filed in respect of its interest in Gain Profit on 1 July 2013 to the relevant SAFE governmental authority and such relevant registration and filing was completed on 5 July 2013. Furthermore, Yinglifeng Developments will file and complete such filing with the relevant MOFCOM governmental authority in respect of its indirect interest in Eaglepass Developments prior to Listing. As Circular No. 7 regulates the PRC residents who are granted shares or share options under a share incentive scheme and as at the Latest Practicable Date, no share options have been granted under the Share Option Scheme, our PRC Legal Advisers confirm registration under Circular No. 7 is not currently necessary.

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OVERVIEW

We are a long established department store chain based in Shiqi, Zhongshan city with over 18 years of history, principally operating in Guangdong Province and Shandong Province, the PRC and are expanding to Jiangsu Province, the PRC. According to Euromonitor, we ranked six amongst the top ten mixed retailers in Guangdong Province, the PRC in terms of retail sales value (excluding sales tax) in 2012. Furthermore, we are the only one of such top ten mixed retailers in Guangdong Province, the PRC which focus exclusively on second-tier and third-tier cities of Guangdong Province, the PRC. We positioned our stores in the market as a department store with contemporary ambience targeting the middle and upper income segments. As at the Latest Practicable Date, our retail network consists of 13 Stores, comprising ten department stores and three community stores covering a total of over 279,770 sq.m. of retail space.

In the past 18 years of our development, we have leveraged on the growth of the PRC retail industry and developed “ूശϵ஬”(:JIVB %FQBSUNFOU 4UPSF) as a retail brand in the Guangdong Province, the PRC. After the commencement of our business operations in Zhongshan in 1995, we have focused on second and third tier cities instead of first-tier cities as our current strategy is to focus on the local market and not the regional market. Having due consideration of the development pattern of the retail industry as well as the PRC’s macroeconomic trends and policy environment, we have been adopting the strategy of avoiding to establish our stores in the big cities like municipalities and provincial capitals (whose retail industry is characterised by homogenisation and intense competition) and focusing our stores in those prefecture-level citiesήॴ̹ which are in the growing stage of their economic development and have better business development potential. Our Company believes this is also in line with the industry trend. According to Euromonitor Report, one of the trends and major driving forces for mixed retailers is the increasing penetration of chained operations into lower-tier cities and affluent rural areas.

Starting up new departmental stores in new development areas at relatively competitive costs (e.g. lower rental costs) allows us to capture the opportunities offered in the location by the developing nascent market, growth in population, the ever-improving quality and standards of living, and therefore greater customer demand while controlling our operating expenses. As the region matures, our stores together with other existing or future businesses in our vicinity will attract pedestrian flow to our mutual benefit. Some of the complementary business includes those owned by the Yihua Investment Group. In terms of operation, we adopt the model of integrating trendy department store (with supermarket, electrical appliance and furniture sections) with dining, entertainment, leisure services into a megacity complex. In the past, our development has been achieved by leveraging our growth with the growth and urbanisation of those cities where our stores are located.

We offer an extensive collection of merchandise in our stores, ranging from luxuries such as watches and jewelries to daily necessities such as electrical appliances, groceries, apparel, cosmetics, textiles, sport wear, beddings, children’s products and household products. With a collection of local and international branded merchandise at our stores combined with a cozy ambience that pampers customers, we aim to provide a pleasant shopping experience.

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Except for (a) Taiyangcheng store and Yangchun store with only department store section; (b) Tai’an store (Longtan) and Yingde store with department store and supermarket sections; and (c) Yangjiang store with department store, supermarket and furniture sections, our department stores generally have three sections, which are (i) the department store section; (ii) the supermarket section, also known as “Yihua Lejia Supermarket” (ूശᆀ࢕൴̹); (iii) the electrical appliances section, also known as “Yihua Sihai Electrical Appliance Centre” (ूശ ̬ऎཥኜ). The furniture section, also known as “Yihua Shijia” (ूശ˰࢕) which was established in 2013 is currently only in Zhongshan store (main store), Yangjiang store and Jiangmen store. Our Directors believe that having separate sections in our stores enhances the merchandise mix in our stores. Coupled with other complimentary retail and service outlets, our stores could create an one-stop shopping experience and form an integrated trendy department store with dining, entertainment and leisure service.

In establishing new stores, our management team actively participates in the form of giving ideas based on their past experience in various stages of development, which we believe had effectively reduced the renovation expenses and expedited the business commencement of our new stores. Consistent with our business strategy in starting up new departmental stores in relatively less developed areas, we therefore are able to have a relatively competitive rental cost for such stores due to the establishment in relatively under-developed areas. We believe that by establishing stores at new development areas at relatively competitive costs is critical to our success and long-term growth. Our Directors are of the view that by not establishing our stores in highly developed areas with established customer base, our stores are able to enjoy a relatively competitive start-up cost initially and subsequently able to capture higher profit growth potential as the customer flow as well as the living quality and condition improve in the area.

We have been actively devoting ourselves in operating department store chain under the well-known brand name of “ूശϵ஬” (Yihua Department Store) and looking forward, we will adopt the business development strategy of establishing more department stores and community stores in those cities in the PRC, which, we believe, could offer promising market potential in terms of long-term sustainable consumer spending and economic growth.

Our Group is committed to upholding our integrity in conducting our business and as such our Group gained recognition from the local community, the PRC industry bodies and governmental bodies alike receiving, among others, the following awards and recognitions:

;(Well-known brand of Guangdong Province*” (ᄿ؇޲ഹΤਠᅺ“ •

;(͜Άุڦ͜൙ᄆAAAॴڦTriple A Credit Rating Enterprise*” (Άุ“ •

• “Trustworthy Enterprise of Zhongshan City, Guangdong Province for continuous 15 ;(͜Άุڦyears*” (ஹᚃɤʞϋᄿ؇޲eʕʆ̹ςΥΝࠠ

ਕБุɤԳఊ؂ܝNationalAfter-sale Service Industry’s Top 10 Entities*” (Ό਷ਯ“ • З); and

• “Top 50 Chain Enterprises in Guangdong” in 2010 and 2012* (2010ϋʿ2012ϋܓ .(ᄿ؇ஹᕁʞɤ੶Άุ

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We also built strong ties with our consumers by supporting the local community through organising and participating in various local community services. For details of our other awards and recognitions relating to business and social welfare, please see the paragraph headed “Awards and recognitions” of this section.

Under the guidance of our stable and experienced management and the well-established relationship with various distinguished international and the PRC domestic brands, our operations had grown from our first department store in Zhongshan in 1995 to 13 Stores across different cities in Guangdong Province and Shandong Province in the PRC as at the Latest Practicable Date. We expect to open three new Stores one in each of Guangdong Province, Jiangsu Province and Shandong Province, the PRC, which are expected to commence business one after another in 2014 and 2015.

OURCOMPETITIVESTRENGTHS

We believe that the following are our key competitive strengths.

Our “ूശϵ஬” (Yihua Department Store) brand is trusted by customers, the PRC industry bodies and governmental bodies

We have established and operated under our well-known brand “ूശϵ஬” (Yihua Department Store) which is trusted by customers, the PRC industry bodies and governmental bodies alike as a symbol of quality. Our Group has received numerous awards and recognitions including:

;(Well-known brand of Guangdong Province*” (ᄿ؇޲ഹΤਠᅺ“ •

;(͜Άุڦ͜൙ᄆAAAॴڦTriple A Credit Rating Enterprise*” (Άุ“ •

• “Trustworthy Enterprise of Zhongshan City, Guangdong Province for continuous 15 ;(͜Άุڦyears*” (ஹᚃɤʞϋᄿ؇޲eʕʆ̹ςΥΝࠠ

ਕБุɤԳఊ؂ܝNationalAfter-sale Service Industry’s Top 10 Entities*” (Ό਷ਯ“ • З); and

• “Top 50 Chain Enterprises in Guangdong” in 2010 and 2012* (2010ϋʿ2012ϋܓ ,(ᄿ؇ஹᕁʞɤ੶Άุ for details of our many other awards and recognitions, please see the paragraph headed “Awards and Recognitions” of this section.

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We engaged in various brand-building activities such as food and culture festivals and functions with celebrities at our stores. We believe our “ूശϵ஬” (Yihua Department Store) brand and our store positioning enable our customers to differentiate our stores from our competitors’, thereby continue to attract customers to our stores.

Through the experience gained from our store operations, we understand the demands of the local community and are able to optimise our positioning in each market where we operate so as to further expand our market share in the existing markets. Leveraging on our established history, brand recognition and quality service, we believe that we are well-positioned to capture potential gains in the PRC retail industry.

Experienced in store locations selection and expansion

We have substantial experience in choosing suitable locations with a great potential for future development.

Our management team actively participates based on their past experience from the early design stage to the later construction of the commercial complex at Jiangmen, the PRC, so as to develop the structures and fixtures of the buildings in accordance with our specific needs for our retail business. We believe such participation had effectively reduced the renovation expenses and expedited the business commencement of our Jiangmen store.

We believe that by establishing stores at new development areas at relatively competitive costs is critical to our success and long-term growth. Our Directors are of the view that by not establishing our stores in highly developed areas with established customer base, our stores are able to enjoy a relatively competitive start-up cost initially, and subsequently able to capture the opportunities offered by the increasing working opportunities, growing population, the ever-improving quality and standards of living arising from the area, thereby creating greater customer demand.

In line with our business strategy, we continue operate stores in cities in the PRC, where we believe could offer economic growth prospects.

Innovative promotional activities and established community ties

We are pioneers in our marketing and promotional campaigns by trying new ways to reach our customers including:

• having a long established customer loyalty program with VIP cards program before the year 2000;

• providing free holiday tours to certain VIP card members to have one-stop for food, accommodation, entertainment and shopping experience at our other stores;

• establishing our own magazine “Grace & Fashion” since the year 2007; and

• hosting food and culture festivals in conjunction with foreign consulates located in the PRC.

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For further details and some of our other marketing and promotional activities, please refer to the sub-paragraph headed “Marketing and promotion” of this section.

We also are committed to social welfare. Our Group and its employees actively participate in a number of community, charitable and social activities, including the hosting in of the ӡʇήቤɓմϋ່ርݺਗ (Charity Sale Event for the first anniversary of the Great 2009 Sichuan Earthquake*) and the participating in 2012 of the ʕʆฉഛຬɛБ (Ten Thousands Charity Walk at Zhongshan*). Furthermore, our Group has partnered with various vocational schools in the PRC to provide training opportunities for their students as well as sponsor education funds for the said schools.

Offering an extensive range of quality merchandise

We offer an extensive collection of merchandise in our stores, ranging from luxury products to daily necessities. Our stores have a collection of local and international branded merchandise combined with a cozy ambience that pampers customers, with the aim to providing them with a pleasant shopping experience.

We currently have over 1,000 brands at our stores and we often reassess our brand portfolio. We also review the reception of each concessionaire periodically by monitoring its respective monthly sales figures. Our merchandising strategy is adjusted from time to time so as to keep abreast of the changing needs and tastes of our customers and cater to the latest market conditions.

We believe that the prices for products in our stores are relatively competitive especially in regards to those merchandise (such as electrical appliances, beddings and children’s products and daily necessities) which are sourced directly from manufacturers. In regards to products sourced from distributors or agents, we normally include a term in the contract with the supplier which allows us to adjust the retail price to the same level as the price offered to other customers of such distributors or agents for the same product in a given area.

Economies of scale

Currently, with a chain of 13 Stores in Guangdong Province and Shandong Province, the PRC, we enjoy and are in the process of increasing economies of scale. We enjoy the following strengths:

• stronger bargaining power with our direct suppliers, concessionaires and third parties in general;

• shared benefit from brand awareness and promotional activities;

• shared benefit from customer loyalty;

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• greater collection of customer preferences and consumer trends data through our loyalty programs and sales figures; and

• cost effectiveness in marketing, operational, logistic, training and management.

Experienced and stable management team leading and motivating our staff

We are led by an experienced and stable management team, most of our executive Directors have been with us within a year of our our inception. All of our executive Directors have over 18 years of experience working in the PRC retail market, while most of our senior management have over eight years of experience working in the PRC retail market. Owing to this experience, our management team, comprising our executive Directors and senior management, possesses substantial experience in tapping new potential markets, establishing ties to local communities, sourcing merchandises, customers trends and spending behaviours, supplier and concessionaire management as well as operating and expanding our retail network and department store chain within and beyond Guangdong Province, the PRC.

Furthermore, we believe that our staff is one of the keys to our success. In order to ensure the quality of our service up to our customers’ satisfaction, we have a standardised employee training program for all of our employees and the sales persons of our concessionaires. We have established an assessment and incentive system based on their personal performance to motivate our employees to provide quality services which meet the expectation of our customers. For further details, please refer to the paragraph headed “Staff and training” of this section.

OUR BUSINESS STRATEGIES

Details of our Group’s future plans are set out in the section headed “Future plans and use of proceeds” of this prospectus.

OUR OPERATIONS

Retail network

Current stores

As at the Latest Practicable Date, our retail network consists of 13 Stores (ten department stores and three community stores) under the brand name of “ूശϵ஬” (Yihua Department Store) at eight cities in Guangdong Province and Shandong Province in the PRC. We intend to open three new Stores one in each of Guangdong Province, Jiangsu Province and Shandong Province, the PRC, which are expected to commence business one after another in 2014 and 2015. The following map illustrates the geographic distribution of our stores in operation and to be opened as at the Latest Practicable Date.

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Shandong Jiangsu

Guangdong Taishan, in Tai’an Longtan in Tai’an

Shaoguan

Yingde

Qingyuan

Hetang Jiangmen Zhenjiang Yangchun Enping Fusha Yangjiang in Zhongshan Taiyangcheng in Zhongshan

Jiangnan in Zhongshan Zhongshan Guzhen in (main store) Zhongshan Logistic centre in Zhongshan

Department stores and community stores New stores Logistic centre in Zhongshan

The following table sets out the geographical location, date of commencement of business operation, GFA and duration of the leases of the Stores.

Sections located in Location in Year of Approximate the store as at the the PRC commencement Aggregate duration of lease(s) Connected Latest Practicable (City, of business GFA (earliest expiry year of transactions Stores Date Province) operation (Note 1) relevant lease) (Note 2) (Note 3) (sq.m.) (approx.)

Department Store Zhongshan store • Department store Zhongshan, 1995 48,121 18 years 8 months (main store) • Electrical appliance Guangdong (1 September 2008 to • Supermarket 30 April 2027) • Furniture 18 years 8 months (1 September 2008 to 30 April 2027)

4 years 2 months C (12 March 2013 to 31 May 2017)

1 year and 9 months C (12 March 2013 to 31 December 2014) (Note 4)

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10 years C (1 September 2012 to 31 August 2022)

1 year and 9 months C (20 March 2013 to 31 December 2014) (Note 4)

Guzhen store • Department store Zhongshan, 2006 14,789 12 years 6 months • Electrical appliance Guangdong (1 July 2006 to • Supermarket 31 December 2018)

11 years 5 months (1 July 2006 to 30 November 2017) (Note 5)

10 years C (1 January 2010 to 31 December 2019)

Qingyuan store • Department store Qingyuan, 2003 17,647 15 years and 1 month • Electrical appliance Guangdong (1 April 2003 to • Supermarket 30 April 2018)

6 years 3 months (1 February 2012 to 30 April 2018)

6 years 2 months (1 March 2012 to 30 April 2018)

4 years 7 months (1 October 2013 to 30 April 2018)

Jiangmen store • Department store Jiangmen, 2004 56,910 17 years 1 month C • Electrical appliance Guangdong (16 June 2006 to • Supermarket 25 July 2023) • Furniture 10 years C (17 September 2009 to 16 September 2019)

Shaoguan store • Department store Shaoguan, 2008 30,006 15 years 6 months • Electrical appliance Guangdong (10 September 2008 to • Supermarket 28 February 2024)

Taiyangcheng • Department store Zhongshan, 2013 17,432 15 years 6 months store Guangdong (20 October 2012 to 18 April 2028)

Yangchun store • Department store Yangchun, 2013 8,480 10 years Guangdong (5 February 2013 to 4 February 2023)

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Tai’an store • Department store Tai’an, 2013 14,967 20 years (Longtan) • Supermarket Shandong (16 June 2013 to 15 June 2033)

Yingde store • Department store Yingde, 2013 13,800 12 years • Supermarket Guangdong (29 June 2013 to 28 June 2025)

Yangjiang store • Department store Yangjiang, 2013 46,093 15 years • Supermarket Guangdong (1 July 2013 to • Furniture 30 June 2028)

15 years (1 July 2013 to 30 June 2028)

Community Store Jiangnanstore • Supermarket Zhongshan, 2010 3,689 15 years Guangdong (1 October 2010 to 30 September 2025)

Hetang store • Supermarket Jiangmen, 2011 6,966 15 years • Electrical appliance Guangdong (1 June 2011 to 31 May 2026)

Fushastore • Supermarket Zhongshan, 2012 870 2 years 8 months C Guangdong (1 May 2012 to 31 December 2014)

Notes:

1. The approximate figure of the total retail space excludes the GFA of the premises in the leases which relate to temporary commercial area, offices, car parking spaces and staff quarters.

2. These leases are for commercial purposes and where our Stores are located. There are situations where multiple leases are entered into in regards to a department store. Reasons including but not limited to situations when additional leases for nearby or adjoining parts of the premises are entered into after signing of the initial lease but while the initial lease is still operative or when the premises being leased have different owners.

3. Those marked with “C” are connected transactions set out in the section headed “Connected transactions” of this prospectus.

4. The properties include an additional area at Level 5 (with aggregate GFA of approximately 2,497 sq.m.) and Unit 901 (with GFA of approximately 1,888 sq.m.) of West Wing and Unit 501 (with GFA of approximately 1,063 sq.m.) of East Wing which terms all expire on 31 December 2014 (for details, please refer to the section headed “Connected transactions – Non-exempt continuing connected transactions – Tenancy agreements with Guangdong Yihua Management” and the paragraphs “(a) First Tenancy Agreements” and “(b) Second Tenancy Agreements” of this prospectus.)

5. We expect that we will not renew this lease upon expiry due to issues concerning defective title of the relevant property. For further details, please refer to the section headed “Business – Leased property” of this prospectus.

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Our operations are currently all conducted on leased premises.As at the Latest Practicable Date, the total GFA of our stores were approximately 279,770 sq.m. In relation to the properties where our stores are located, we have entered into various leases ranging from one year and nine months to 20 years. The earliest expiry date for such leases is 31 December 2014.

Going forward, our Group will continue its strategy of setting up and operating our stores on leased premises. We believe such arrangements are appropriate and commercially reasonable so that our Group could focus its capital resources on its core business in operating its department store chain and not to tie up its funds for constructing self-owned premises. Before opening new stores, our management will consider different factors, including (i) feasibility study on the related costs; (ii) local features such as pedestrian flow and market demand; and (iii) local government policies especially establishment of new development zones.

We believe that the location selection for our new stores is crucial to the success of our operation. We therefore cautiously consider the following major factors:

• pedestrian flow, accessibility, vehicle traffic flow, population density;

• potential growth of local population;

• development potential and future trends (e.g. local government policies especially establishment of new development zones);

• estimated consumption power of the local community;

• start up costs, profitability and payback period; and

• proximity of competitors in the vicinity.

For further details about our properties, please see the paragraph headed “Property” of this section. For further details concerning the risk that we may not be able to renew our leases or enter into leases on the same terms particularly for our short term leases, please refer to the section headed “Risk factors – We may not be able to purchase or lease suitable sites for new stores or renew our leases (especially our short term leases) for our current stores on favourable terms” of this prospectus.

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The following table sets out the revenue from our current Stores in operation during the Track Record Period:

For the year ended 31 December Five months ended 31 May Stores (Note1) 2010 2011 2012 2012 2013 RMB’ RMB’ RMB’ RMB’ RMB’ million million million million million

Zhongshan store (main store) (Note 4) 174.5 202.9 183.2 77.9 86.9 Guzhen stores (Note 2) 91.8 111.1 117.8 50.3 48.1 Qingyuan store 105.7 124.1 121.0 53.3 47.4 Jiangmen stores (Note 3) 169.0 192.2 179.6 78.3 77.5 Shaoguan store 53.1 76.8 77.2 34.3 37.1 Taiyangcheng store – – – – 3.5 Yangchun store – – – – 1.0

Notes:

(1) Taiyangcheng store, Yangchun store, Tai’an store (Longtan), Yingde store and Yangjiang store formally commenced business in January 2013, February 2013, June 2013 and June 2013 and October 2013 respectively and therefore no revenue was recorded during the above periods.

(2) Guzhen stores includes both Guzhen department store and Jiangnan community store.

(3) Jiangmen stores includes both Jiangmen department store and Hetang community store.

(4) Zhongshan store (main store) includes both Zhongshan store (main store) and Fusha community store. Fusha community store commenced business in April 2012 and therefore no revenue was recorded in 2010 and 2011.

Expansion of retail network

We plan to continue expanding our retail network by solidifying our presence in Guangdong Province and branching out into other locations in the PRC. The capital expenditure and start-up costs of each of the following stores which formally commenced business during the Track Record Period are as follows:

Capital expenditure and start-up costs (Note) RMB’ million

Department store

Taiyangcheng store 2.4 Yangchun store 0.5 Tai’an (Longtan) store 16.1 Yingde store 1.8 Yangjiang store (Note) 45.7

Community store

Jiangnan store 5.8 Hetang store 11.5 Fusha store 1.2

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Note: The capital expenditure and start-up costs are based on the costs incurred prior to the end of the month in which the store formally commences business. For further explanation, please refer to the section headed “Financial information – Capital expenditures” of this prospectus. The capital expenditure of the above five new department stores was approximately RMB61.1 million in 2013.

Yangjiang store commenced business in October 2013 and some of the related capital expenditure and start-up costs were incurred after 31 May 2013.

From our past experience with the Guzhen Yihua Department Store, Qingyuan Yihua Department Store, Jiangmen Yihua Department Store and Shaoguan Yihua Department Store, we estimate that the period for our abovementioned department stores which formally commenced business during the Track Record Period to start making a profit to be around two to four years.

We funded such expenditures by internally generated resources except for part of the outstanding expenditures for opening Yangjiang store as set out below.

New stores

We aim to establish our presence across the PRC and formally commence business one after another in 2014 (instead of at the same time) for two new department stores and in 2015 for one new department store.

Certain outstanding expenditures from the establishment of Yangjiang store which commenced business in October 2013 and the establishment of the new Zhenjiang store and Enping store will be financed from net proceeds from the Share Offer (for further details, please refer to the section headed “Future plans and use of proceeds” of this prospectus.)

The following table sets out the location and tentative business operation commencement timing of our three new stores:

Tentative Location in the PRC commencement timing Stores (City, Province) (Note)

Department store Zhenjiang store Zhenjiang, Jiangsu First quarter 2014 Enping store Jiangmen, Guangdong Third quarter 2014 Tai’an store (Taishan) Tai’an, Shandong Second quarter 2015

Note: Lease agreements have not yet been entered into for Zhenjiang store, Enping store and Tai’an store (Taishan) and therefore the respective GFA and duration are yet to be determined.

Upon the commencement of operations of the above stores based on the tentative commencement timing, we will become an operator of 16 Stores (13 department stores and three community stores) by the end of the second quarter 2015.

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Operational structure

Retail focus

Our retail business is mainly focused on the operation of department stores. We positioned our stores to target customers of middle and upper income segment in cities with high and rapid growing per capita disposable income in the PRC. We therefore offer a collection of local and international branded merchandise at our stores combined with a cozy ambience that pampers customers, with the aim to providing them with a pleasant shopping experience.

With a strong emphasis on our market position, we have set up our stores to cater to the needs of our target customers. All of our stores adopt a consistent interior design with the aim to distinguish our brand name of “ूശϵ஬” (Yihua Department Store) from our competitors. Meanwhile, the floor layout and merchandise/branding mix of each of our stores at each location were selected or may change in accordance with the local consumption preferences. All of our department stores are equipped with facilities, including securities and fire monitoring system, point-of-sales check-out system, centralised air conditioning, escalators etc., which are in line with the general standard for operating a unified department store chain.

Department stores

Our department stores are generally divided into sections based on the categories of merchandise. We offer an extensive collection of merchandise in our stores, ranging from luxuries such as watches and jewelries to daily necessities such as electrical appliances, groceries, apparel, cosmetics, textiles, sport wear, beddings, children’s products and household products.

Except for (a) Taiyangcheng store and Yangchun store with only department store section; (b) Tai’an store (Longtan) and Yingde store with department store section and supermarket section; and (c) Yangjiang store with department store, supermarket and furniture sections, our department stores generally have three sections, which are (i) the department store section; (ii) the supermarket section, also known as “Yihua Lejia Supermarket” (ूശᆀ࢕൴̹); and (iii) the electrical appliances section, also known as “Yihua Sihai Electrical Appliance Centre” (ू ശ̬ऎཥኜ). The furniture section, also known as “Yihua Shijia” (ूശ˰࢕) which was established in 2013 is currently only in Zhongshan store (main store), Yangjiang store and Jiangmen store.

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(A) Department store section

The department store section offers an extensive variety of merchandise, including watches, jewelries, cosmetics, handbags, leather goods, and children’s products, clothing, shoes, textiles, sports wear and beddings. All of our department stores have a department store section currently in operation.

We believe that our market positioning is the key to the success of our department stores section. The crucial component of this approach lies in the branding and merchandise selection. We aim to provide our target customers with a selection of merchandise including local and international brands.

We believe that one of our competitive advantages is our ability to refine our merchandise selection and store layout to better meet the needs and tastes of our customers.

(B) “Yihua Lejia Supermarket” (ूശᆀ࢕൴̹)

The supermarket section offers mainly daily essential products such as food and beverages, perishables and other household products.

Our supermarkets have a strong commitment to food quality and safety. In order to ensure on-going strict compliance with the requirements of the national “Food Sanitation Law*”࠮ we have imposed stringent checking procedures for our food supplies and ,جሊ͛ۜ established a quality assurance system. As a result, we have obtained certain awards in respect of food safety, such as “Guangdong Province Food and Drug Quality-Assured Model Entity*” ːʈ೻ͪᇍఊЗ). We believe that such awards will strengthen the trust of׳ᄿ؇޲࠮ۜᖹۜ) our customers in our supermarkets’ merchandise, thereby contribute positively to our operation results and business expansion.

In order to have a broader mix of quality merchandise for our supermarkets, we have been introducing local food of different countries to our customers with the objective to recommend the food products from the countries of origin. Several food and culture festivals for countries such as Australia, South Korea, Canada, United States, Japan, Malaysia, Taiwan and United Kingdom have been held at our stores. The management of our Company believes such food and culture festivals could not only attract greater customer flow to our stores, but also enable our supermarkets to offer a wider product range to our customers.

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The electrical appliances section offers a variety of electrical appliances ranging from large household electrical appliances (such as refrigerators, washing machines, air conditioners, televisions, kitchen appliances etc.) to small household electrical appliances (such as rice cookers, hair dryers, toasters etc.).

The electrical appliances section has service and maintenance centres to provide after sales services to our customers. In certain cases, we or our suppliers also provide free delivery services for large household electrical appliances, coupled with installation and on-site operation guide services, so as to ensure our customers understand the functions of their new electrical appliances.

(D) “Yihua Shijia” (ूശ˰࢕)

The furniture section was newly established in 2013 and offers a range of furniture and furnishing items to satisfy different furnishing needs and preferences of our customers. We receive rental income from leasing certain allocated areas in our furniture section of our store to furniture retailers. As at the Latest Practical Date, only Zhongshan store (main store), Yangjiang store and Jiangmen store have furniture section.

As at the Latest Practicable Date, we offered merchandises from over 1,000 brands through our department stores. Our Directors believe that having department store section and in certain cases, supermarket section, electrical appliances section and furniture section enhances the merchandise mix in such department stores. Coupled with other complimentary retail and service outlets, restaurants (such as internationally renowned fast-food chains), coffee shops and specialty retailers (namely stores specialising in a certain category or brand of merchandise) in our department stores, we believe that we create an one-stop shopping experience. We further believe that such an integrated department store with dining, entertainment and leisure service for our customers, broadens our potential customer base and increases pedestrian flow to our stores.

Going forward, in response to circumstances, including but not limited to the size of our premises, local competition and market trends, we may adjust our operational structure such as by establishing additional sections for catering other product categories.

Community stores

As at the Latest Practicable Date, we have three community stores being Jiangnan store, Hetang store and Fusha store with retail space of approximately 3,689 sq.m., approximately 6,966 sq.m. and approximately 870 sq.m. respectively. Our target customers of these community stores are primarily the local residents in the surrounding area. These community stores therefore offer mainly daily essential products such as food and beverages, perishables, other household products and small household electrical appliances. There are only supermarket section and small household electrical appliances section at these community stores due to retail space constraint.

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SALES

Product selection

We offered merchandises from over 1,000 brands through our stores as at the Latest Practicable Date. Our business relations department at Zhongshan headquarters is principally responsible for the formulation of overall guidelines for (i) the negotiation of the major terms of the arrangements with certain concessionaires and direct suppliers of the key brands; (ii) merchandise mix; and (iii) product presentation and space allocation of different brands for our stores.

Negotiations of key brands are performed by the business relations department of Zhongshan headquarters. For other brands, especially local brand concessionaires and domestic suppliers, the business relations department of each individual store negotiates, finalises and executes definitive agreements for their respective stores as many brands and suppliers have different distributors in each geographical area.

The selection of direct suppliers and concessionaires is based on the overall guidelines from the Zhongshan headquarters and subsequently we tailor the types and merchandise mix at our stores according to the consumer preferences and demands in different localities. During our selection process, we have a standard evaluation procedure so as to take into account the following factors:

• legality – the direct suppliers/concessionaires have to obtained all the valid licenses and relevant certificates;

• market position of the direct suppliers/concessionaires in the cities we operate;

• suitability of merchandise to local needs;

• quality of the products (especially for the food suppliers);

• price competitiveness of merchandise;

• compatibility of the direct suppliers/concessionaires with our image and our brand name of “ूശϵ஬” (Yihua Department Store);

• historical results of the direct suppliers/concessionaires;

• financial stability of the direct suppliers/concessionaires; and

• future growth potential of such brand name/product.

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We have standard form of concessionaire and direct supplier agreements. For certain leading brand direct suppliers and concessionaires, however, we enter into the standard forms of agreements provided by these companies. The concessionaire and direct supplier agreements usually have a term of one year to two years. Having such a short term agreement provides flexibility to our stores for our brand portfolio management. Furthermore, the contractual credit terms offered to us by concessionaires is usually a week after our month-end reconciliation of accounts. Payments to our direct suppliers generally range from before receiving the merchandise to a contractual credit period of up to 45 days from the day we sell the merchandise to the customers in our stores. Our Company confirmed that there was no material disputes between our Group and its concessionaires and direct suppliers concerning delayed payments during the Track Record Period and up to the Latest Practicable Date.

In order to cater to the changing consumer preference, current economic conditions as well as the local competitive environment, we persistently review and adjust our brand portfolio and space allocation of different brands at our stores. We believe that quality of our direct suppliers and concessionaires plays an important role in our merchandising strategy. Our business relations team oversees the quality of the merchandise supplied so as to ensure strict adherence to quality standard. We will also constantly identify potential new suppliers and concessionaires by attending local and international expos as well as evaluate the performance of our existing direct suppliers and concessionaires.

We pay particular attention on the reception by consumers of the products of each concessionaire by periodically monitoring their respective monthly sales figures. We adopt a system known as “͋ЗଇӖՓ” (Elimination of the Bottom*). In the event a concessionaire under performs by reference to the sales of concessionaires of similar products and continues to under-perform, we will consider terminating or not renewing the relevant concessionaire agreement upon its expiry. The management of our Company believes that such policy could ensure all of our merchandises are well received by the market at each of our stores.

Based on the guidelines from the Zhongshan headquarters, the business operations department of each individual store will arrange the product presentation and space allocation of different brands at the respective stores in order to effectively meet the local needs and preferences of our customers. Adjustments on the location and area of different brands at each store will be made according to different factors, including the performance result of the direct supplier’s or concessionaire’s products. In practice, we have discretion concerning the aforesaid in regards to our direct suppliers.

In respect to agreements with concessionaire, subject to our approval, certain rights are provided to our concessionaires for product display and a certain space allocation in our stores. However, we may provide input on the product presentation of concessionaires. We may discuss relocation or adjustments of brands after the expiry of the agreements with concessionaires given that their agreements are generally one to two years. Every store will be inspected by a representative from the business relations team of Zhongshan headquarters on a bi-weekly basis. Both the business relations team of Zhongshan headquarters and the local team have close interaction so as to ensure that the management of our Company is aware of the latest sales figures for each store, thereby adjust our merchandising strategy if necessary.

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Private label merchandise

We also offer a few self-owned branded “ूശϵ஬” (Yihua Department Store) merchandises. As at the Latest Practicable Date, our private label merchandises include lighters, paper cups, green bags, gift wrapper and tissue paper.

All the manufacturers of these private label merchandises are original equipment manufacturers (“OEM”). These manufacturers, being Independent Third Parties, manufacture the products with the brand name of “Yihua Department Store”. During our selection process for the OEM, we adopt a standard evaluation procedure similar to our other suppliers or concessionaires so as to as to ensure strict adherence to our quality standards.

We believe that the introduction of our private label merchandises principally serve to promote our brand and currently contributes very insignificantly (being only approximately RMB0.39 million (0.06% of our revenue), RMB0.63 million (0.09% of our revenue) and approximately RMB0.2 million (0.07% of our revenue) for the years ended 31 December 2011 and 2012 and the five months ended 31 May 2013 respectively). However, in the future it may provides our customers with alternative merchandise at different price points and through cooperating directly with the manufacturers, we are able to reduce intermediary costs and advertising costs, thereby increasing the profitability of our Group.

Business models

General

Our revenue is mainly derived from direct sales, commission from concessionaires, rental income from tenancy agreements with shop tenants at our stores and other sources of income (including management consultancy fees). By adopting different business models, our Group is able to adjust its model configuration which suit our Group’s situation and thereby increase profits.

The following table illustrates breakdown of our revenue during the Track Record Period:

Year ended 31 December Five months ended 31 May 2010 2011 2012 2012 2013 RMB’000 %RMB’000 %RMB’000 %RMB’000 %RMB’000 %

Direct sales of goods 416,822 68.9% 475,214 66.5% 419,333 61.8% 182,498 62.5 182,110 60.2% Commission income from concessionaires 146,472 24.2% 189,233 26.5% 208,855 30.8% 87,725 30.1 96,179 31.8% Management fee and service income from operations 32,815 5.4% 37,140 5.2% 38,907 5.7% 17,356 5.9 17,941 5.9% Rentalincome 9,095 1.5% 13,499 1.8% 11,781 1.7% 4,214 1.5 6,169 2.1%

605,204 100.0% 715,086 100.0% 678,876 100.0% 291,793 100% 302,399 100.0%

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For further details concerning our arrangements with our direct suppliers, concessionaires, shop tenants and in regards to other sources of income, please refer to the paragraph headed “Management and operations” of this section.

Direct sales

As at the Latest Practicable Date, we have only entered into contracts with local entities and therefore do not have any overseas direct suppliers.

For our supermarket section, merchandises such as grocery products, house cleaning products and personal care products are under direct sales arrangements. Payments are generally made to our direct suppliers upon receiving the merchandise or after a relevant contractual credit period, which is up to 45 days from the day we sell the merchandise in our stores. The ownership of the merchandise are transferred from our suppliers to us upon the completion of our purchase. We have a quality assurance procedure to be carried out upon delivery of merchandise at our logistics centre and/or each of our stores so as to ensure the quality and safety of our merchandises. We generally require our direct suppliers to provide us with a return and exchange policy to deal with defective products. However, certain agreements with larger suppliers may only include goods return rebate instead of a return policy for defective products.

For our electrical appliances section, payments are generally made to our direct suppliers either before receiving the merchandise or only after receiving unpaid merchandise of a specified value (e.g. payment only after RMB20,000 or more of unpaid merchandise is ordered and received). The ownership of the electrical appliance are then transferred from our suppliers to us upon delivery of these merchandises. There are designated teams responsible for checking the physical condition of the electrical appliance at the logistics centre and/or at each store. Generally, defective product are returnable to such suppliers.

For direct sales items, we set our retail prices with reference to the suggested retail prices of direct suppliers. We also undertake market research on pricing to ensure that our price is competitive as well as being within our expected range of profit margins.

We monitor the sales of our merchandises in our stores and adjust the product portfolio according to the popularity of each product. We also periodically select merchandises to be offered at a discount in promotional sales or in an area dedicated to discounted products, adjust our product categories and our promotional policies according to the respective sales volume, product expiry and model obsoleteness. The direct suppliers, at their own initiatives, may also have sales discount on their selective merchandises for a certain period, and in such situations, the suppliers typically bear the discount cost.

We had a limited number of claims for defective merchandises under direct sales arrangements and such claims, whether on an individual or an aggregate basis are not considered material during the Track Record Period. For larger suppliers, the goods return rebate has been able to cover the cost for such defective merchandises during the Track Record Period. Furthermore, excluding cases dealt with by the supplier directly, our Company estimates that the aggregate fines from such claims owed by our Group during the Track

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Record Period was approximately RMB12,200. Except for such cases, our Company is not aware of any other material cases which were not similarly indemnified by the supplier during the Track Record Period.

Considering (i) we are selective in choosing our direct suppliers with good product quality and (ii) during the pre-sale process, we perform an inspection of the goods upon acceptance of delivery and other internal control measures, based on our experience, our Directors considered that there were no abnormally high volume of return of goods observed during the Track Record Period.

For direct sales arrangements, the management of our Company is of the view that formulation of merchandising plans is important to ensure effective management of inventory levels and cash flow sufficiency. Based on the management’s experience, we have made merchandising plans after taking into consideration our historical and budgeted sales, gross profit margins, current economic condition, expected product demand and future market trend. Our merchandising plans are then reviewed and modified regularly so as to ensure an appropriate merchandise mix, improve inventory control and to enhance working capital sufficiency.

Concessionaire sales

The following table sets out the number of our Group’s concessionaires during the Track Record Period and the relevant additions and termination/non-renewal by sections:

Year ended Five months ended 31 December 31 May 2010 2011 2012 2012 2013

Opening balance at the beginning of the year/period 684 703 715 715 734 Additions 157 161 148 53 65 Department store 143 128 128 49 51 Electrical appliance 6 15 13 4 13 Supermarket 8 18 7 – 1 (Terminations/ Non-renewal) (Note) (138) (149) (129) (56) (45) Department store (124) (126) (103) (51) (35) Electricalappliance (8) (15) (13) (1) (7) Supermarket (6) (8) (13) (4) (3) Closing balance at the end of the year/period 703 715 734 712 754

Note: The figures relate to concessionaire whose contracts were terminated or not-renewed by concessionaires for reason of (i) having the lowest Gross Sale Proceeds for the category of products sold at such store during a specific period of time under the Elimination of the Bottan System; (ii) terminated at the request of the concessionaire in accordance with the terms of the agreement; or (iii) non-renewal by us after changing the product composition of our store in response to consumer demand or future growth potential. There were no material disagreement in relation to such terminations or non-renewals.

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Furthermore, the following table sets out a breakdown of the number of our Group’s concessionaires by broad product categories as at 31 May 2013:

As at 31 May 2013 (Note)

Categories Electronic and home appliances 116 Clothes, apparel and bedding and sports wear 453 Jewelries, watches 29 Food and beverages and utensils 48 Daily necessities, stationary goods and cosmetic goods 108 Total 754

Note: To the best knowledge and belief of our Directors, the total figure is determined on the basis that (i) companies in the same group are counted as a single concessionaire; and (ii) multiple companies not in the same group but which are distributors of the same brand are counted separately.

Under concessionaire sales arrangements, we arrange for specific concessionaires to occupy a certain allocated space in our store for the establishment of their own sales counter for their own branded merchandise. In return, we charge the concessionaires fees calculated as a percentage of the gross sale amount (generally ranging from 7% to 31%) comprising the following (or a combination thereof) general fees: (i) commission; (ii) rental income; (iii) management fee; (iv) warehousing fee; and/or (v) advertising and promotional fee. The concessionaire fees are determined principally on the size of their allocated area, the strength of their brand, the length of our relationship, the expected or past profits of the concessionaire and our respective bargaining power. In particular, management fee is collected for administrative services provided such as cleaning services of the department store, promotional activities, security and maintenance services. Upon the expiry of the concessionaire agreement, we may renegotiate the concessionaire fees.

We generally do not impose a minimum sales target for our concessionaires. However, our standard form agreement with concessionaires include a term that we may terminate the agreement under a clause in our standard form concessionaire agreement in the event such concessionaire has the lowest sales revenue for the category of products sold at such store during a specific period of time.

Our concessionaires consist of both brand owners and distributors (including franchisees or licensees) or agents. Our concessionaire sales mainly comprise jewelries, watches, apparels, footwear, cosmetics, textiles, sport wear, beddings and children’s products etc. The relationship with each of our top five concessionaires during the Track Record Period is for a period of at least six years.

We enter into concessionaire agreement with concessionaires and the said agreements usually specify the type(s) of merchandises that are allowed to be sold by the concessionaires in our store(s). Meanwhile, the concessionaires retain their right to set the prices for their merchandise.

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Our standard concessionaire agreements also provide representations by concessionaires that their products comply with all laws, including intellectual property laws and product quality laws. Furthermore, the concessionaires are required to indemnify us for all our expenses and losses associated with their defective merchandises and some of the concessionaires are required to keep a quality assurance deposits with us, from which we are allowed to make deductions under certain pre-determined circumstances (such as where there is a loss from defective goods or customer complaint). During the Track Record Period, we deducted approximately RMB12,064, approximately RMB18,434, approximately RMB14,563 and approximately RMB5,941 from quality assurance deposits for each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013 respectively. We are also allowed to deal with any customer complaints at our discretion and concessionaires are required to cooperate with us in any of our actions taken.

The concessionaires have the right, subject to our prior approval and at their own cost, to design, decorate and renovate their respective counters and/or designated areas in accordance with our guidelines. We have established our guidelines in respect of design, decoration and renovation by the concessionaires so as to maintain a consistent interior design of our stores and to preserve our image. We provide basic facilities, including air-conditioning, basic lighting, cleaning, cashier service, security and maintenance services etc. The concessionaires normally pay for their own costs, including but not limited to, electricity usage, credit card handling fees and other promotion fees.

For further details concerning our agreements with our concessionaires, please refer to the sub-paragraph headed “Standard Form Agreements – (B) Agreements with Concessionaires” of this section.

The concessionaires are generally responsible for hiring their own sales staff but they must conform to our management standards. In order to maintain the quality of service at our stores, we provide these sales staff with training and require such sales staff to abide by our guidelines, have the right to manage them and may request the concessionaires to replace any sales staff at our stores in the event that such personnel do not meet our stores’ standards.

We monitor closely the merchandise mix, quality and services provided by our concessionaires. All product liabilities in respect of any concession products are borne by the concessionaires. Furthermore, we regularly communicate with and provide feedback to our concessionaires, such as exchanging our views and recommendations, among other things, relating to their sales performance, marketing and promotion strategies. In the event a concessionaire under performs by reference to the sales of concessionaires of similar products and it continues to under perform, we will consider terminating or not renewing the relevant concessionaire agreement upon its expiry. The management of our Company believes that such policy could ensure all of our merchandises are well received by the market at each of our stores.

As a measure to minimise collection risks, we collect the gross proceeds from the sales of merchandises from the concessionaires. All payments for concessionaire sales are transacted at our cashier desks.At the agreed intervals for payment, typically on a monthly basis, we remit the Gross Sale Proceeds (after deducting all relevant fees and expenses owed to us) to the concessionaires.

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Concessionaires may organise their own promotional activities at their counters or designated areas at our stores after getting our permission. When the concessionaire has promotional events in other third party stores in the same vicinity as our stores, we normally request such concessionaires to have the same promotion at our store and the concessionaires bear the associated discount costs.

Concessionaire arrangements enable us to offer a comprehensive range of merchandise to our customers. Our Directors believe that the presence of concessionaires in our stores can enhance our brand image and attractiveness of our stores generally. In addition, under the concessionaire agreements, we do not bear selling costs, risks and costs of inventory management, including the risks associated with obsolete merchandise.

Rental income from shop tenants

The following table sets out the number of our Group’s shop tenants during the Track Record Period and the additions and termination/non-renewal of shop tenants by sections:

Year ended Five months ended 31 December 31 May 2010 2011 2012 2012 2013

Opening balance at the beginning of the year/period 124 118 140 140 125

Additions 9 51 30 9 3 Department store 2 5 9 4 0 Electrical appliance 0 4 5 2 0 Supermarket 7 42 16 3 3

(Terminations/ Non-renewal) (15) (17) (17) (2) (7) Department store (6) (8) (3) (1) (1) Electrical appliance 0 (2) (2) (1) 0 Supermarket (9) (7) (12) 0 (6)

(Change from tenants to concessionaires) 0 (12) (28) (8) (2) Department store 0 (11) (22) (8) (2) Electrical appliance 0 0 0 0 0 Supermarket 0 (1) (6) 0 0

Closing balance at the end of the year/period 118 140 125 139 119

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With the aim of providing a complete ambience to create a pleasant shopping experience for our customers, we allocate space in certain areas of our stores to lease to businesses that complement our retail business.

We receive rental income from the leasing of certain allocated areas of our stores to restaurants (such as internationally renowned fast-food chains) and specialty retailers. Except for restaurants, there is no general difference in the products offered by tenants as compared with concessionaires. However, unless requested by the tenant, we may enter into an arrangement with the party as a shop tenant instead of as a concessionaire where we customise the terms of the contract based on the specific circumstances because the standard form contract with concessionaires may not be suitable. For example, if the party does not have an established relationship with us or who does not have a clear track record and therefore it is more beneficial to us to only collect fixed rental instead of concessionaires fees calculated as a percentage of the gross sale amount. In certain cases, the relationship with a party upon expiry of the arrangements as a shop tenant is continued as a concessionaire arrangement. As at the Latest Practicable Date, all the shop tenants are Independent Third Parties. We have an additional arrangement with some of these shop tenants besides the fixed rental income, whereby we are entitled to a certain percentage of their profits. These arrangements may be subject to certain restrictions or conditions such as profit sharing for sales on certain brands only or only after an agreed minimum profit is obtained by the shop tenant.

We may also receive contingent rental income, being income from temporary and seasonal leases of certain spaces in our store to conduct promotional activities such as showing the latest fashions for a concessionaire selling clothing.

Management consultancy fees

Besides operating our Stores, we have also entered into a management consultancy agreement on 1 July 2010 with an Independent Third Party but the said agreement was terminated on 30 September 2012. Under the terms of that agreement, we offered consultancy services in relation to a managed store. In return, we were entitled to certain management consultancy fees. For details on the terms of our management consultancy agreement, please refer to the paragraph headed “Management and operations – Agreements for management consultancy services” of this section.

For each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013, the revenue from management consultancy fees amounted to approximately RMB1.1 million, approximately RMB0.5 million, approximately RMB0.4 million and nil respectively.

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Pricing

Generally for direct sales items, we set the prices of the merchandise with reference to the suggested retail prices of the direct suppliers. Meanwhile, concessionaires set the prices of their merchandise.

Our general pricing policy is affected by a number of factors including but not limited to (i) prices for similar goods offered by our competitors; (ii) prices of the goods sold to us by the supplier(s); (iii) any suggested prices by the supplier(s); (iv) our expected profit margins; and (v) where applicable, the Pricing Law of the PRC (for further details, please refer to the section headed “Regulations – Law on price” of this prospectus).

Customers

Our customers include individual retail customers and corporate customers. Customers generally pay for merchandise at our stores by cash, debit cards, credit cards, Consumption Cards or under the method set out in the section headed “Business – Marketing and promotion – Customer loyalty programs – Promotional arrangements with a mobile telecommunications service provider” of this prospectus.

As we are principally engaged in the retail market, none of our customers individually accounted for more than 1.0% of our revenue. None of our Directors, chief executive or any of their respective associates or, so far as our Directors are aware, any Shareholder who owns 5% or more of our issued share capital had any interest in any of our five largest customers during the Track Record Period.

Direct suppliers

Most of our direct sales are for the supermarket section and the electrical appliances section. We have entered into arrangements with our direct suppliers such that generally either (i) we receive the products periodically, in particular goods for the supermarket section; or (ii) we receive a certain amount of products which we store in the warehouse, in particular goods for the electrical appliances section. The products are generally delivered by the direct suppliers to our stores or the logistic centre. In certain cases concerning large household electrical appliances, the supplier may deliver directly to our customers. For each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013, our top five direct suppliers, in aggregate accounted for approximately 21.5%, approximately 21.4%, approximately 21.8% and approximately 21.8% respectively and our single largest direct supplier accounted for approximately 5.6%, approximately 5.0%, approximately 5.7% and approximately 6.7% of our total purchases respectively. None of our Directors, chief executive or any of their respective associates or, so far as our Directors are aware, any Shareholder who owns 5% or more of our issued share capital as at the Latest Practicable Date had any interest in any of our five largest suppliers during the Track Record Period.

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MANAGEMENTANDOPERATIONS

Centralised management system

Our Group has adopted a centralised approach in managing our business, which our Directors and senior management at Zhongshan headquarters, is primarily responsible for overall business planning and strategies, operational and administrative guidelines formulation as well as supervision on the implementation of such guidelines, resources allocations, merchandises and branding reviews, pricing policy, contract review and legal matters. Negotiations of key brands are also performed by the business relations department of Zhongshan headquarters.

Other general operations (including shop design and construction, customer service and communication, staff training and management, security and surveillance, advertisement and promotion) are carried out by our business operations department from our headquarters in Zhongshan. Our Directors believe that this centralised approach allows us to: (i) maintain the quality of service in all of our stores; (ii) coordinate promotional activities in all of our stores; (iii) optimise resource utilisation within our Group; (iv) limit legal and operational risks; and (v) negotiate with third parties from a stronger bargaining position and therefore on better terms as representative of our entire retail network and not just for individual stores.

The local operation teams at each store meanwhile focus on daily operations, local marketing, establishment and maintenance of relationship with local direct suppliers and concessionaires as well as the relevant local government authorities under the supervision of the Zhongshan headquarters. In particular, we maintain the flexibility at each store to set the merchandise mix in accordance with local consumer preferences, demands and competition. The management of our Company believes that such approach allows individual stores to make business adjustments dynamically so as to cater to the changing local business environment.

Section-based operational management

However, we also wish to be responsive to changes and have therefore adopted a section-based operational management system whereby we have separate departments governing each of the department store section, supermarket section, electrical appliances section and furniture section in our retail network. Each of these four departments set outs guidelines governing its own section in our respective stores and may take on different strategies (i) to take advantage of nationwide trends and changing consumer tastes concerning products sold in such section; and (ii) to apply techniques learnt from the success and failures of individual stores to other stores. Our agreements with direct suppliers and concessionaires are generally short term agreements ranging from one year to two years which allows each department to adopt new strategies with greater flexibility (for further details regarding the general terms with our direct suppliers and concessionaires, please refer to the paragraph headed “Management and operations – Standard form agreements” of this section).

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Each of the departments governing the department store section, supermarket section, electrical appliances section and furniture section is in charge of formulating business targets and plans and establishing internal memoranda listing out operational and administrative rules for the relevant section in each store to follow. Regular meetings are held by the section heads in each store to discuss day-to-day operations, quality control and customer concerns and to develop strategies across the retail network.

Standard form agreements

We have adopted a standard form of agreements for direct suppliers and concessionaires. We require such standard forms as a general foundation for the terms with our direct suppliers and concessionaires to ensure consistent practice, control legal risk and minimise administrative expenses.

Any deviations from our standard form agreements are generally reviewed by the relevant head of the department store section, supermarket section or electrical appliances section from the Zhongshan headquarters. For agreements with certain leading brand direct suppliers and concessionaires, however, we enter into the standard form agreements provided by these companies after review and approval by our headquarters and making certain amendments to protect our interests. This includes certain top suppliers whose standard form agreements relate to pre-payment for their products.

(A) Agreements with direct suppliers

Agreements with direct suppliers are usually for a term of one year and generally contains the following terms and conditions:

Products

The general brands and/or products to be supplied.

Consideration

We generally source the merchandise from the direct suppliers and then sell such merchandise at our stores to customers. In some other cases, agreements with direct supplier may contain provisions where we will enjoy a better price discount or a rebate if certain sales targets are achieved by us.

In regards to products sourced from a distributor or agent, we normally include a term which allows us to adjust the retail price to the same level as the price offered to other customers of such distributor or agent for the same product in a given area.

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Promotional expenses

We provide an option for our direct suppliers to receive from us basic promotional services of their products and/or brand by payment of an annual fee. Our direct suppliers may choose not to receive such service or they may enter into a supplemental agreement with us for additional promotional services with the scope and fee to be agreed between the parties.

Pricing policy

In general, there are no specific term regarding the selling prices for the products.

Return and exchange policy

In general, we are allowed to return or exchange the products provided by the supplier(s) (i) due to quality issue; (ii) if the product is close to expiry date; or (iii) in case of damage in its packaging.

Guarantee and indemnity

Our suppliers guarantee that their products comply with the latest laws and regulations in the PRC in respect of quality, safety, import procedures, tax, etc. and have not infringe third party intellectual rights. If there is any breach of the guarantee, the responsibility will be solely on the supplier and it is required to indemnify us of all our expenses and losses relating thereto.

Termination

We are entitled to terminate our agreements with the supplier(s) if: (i) they fail to provide us with sufficient products according to our order; or (ii) they provide the same products to third parties at lower prices and refuse to pay us the price difference. If the supplier wishes to terminate the agreement, it must provide us with 60 days prior notice and make payment of any of our outstanding fees.

In the case of direct suppliers of our supermarket section, we usually do not receive commission. In some limited cases, agreements with large direct suppliers may only contain a goods return rebate instead of a return policy for defective products.

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(B) Agreements with concessionaires

Agreements with concessionaires may vary based on whether their products are in our department store section, supermarket section or electrical appliances section. These agreements are usually for a term of one year to two years and generally contains the following terms and conditions:

Products

The general brands and/or products to be sold.

Consideration

Generally, the concessionaire is charged a total amount calculated as a percentage of the gross sale amount comprising the following (or a combination thereof) general fees: (i) commission; (ii) rental income; (iii) management fee; (iv) warehousing fee; and (v) advertising and promotional fee.

In relation to a supermarket concessionaire, we may include a minimum total fee which we should receive based on the size of the area allocated to their products in our store. The concessionaire is required to pay us the difference if the actual total fee charged by us during the year is less than the minimum amount.

In relation to an electrical appliance concessionaire, we may require additional payments if certain sales targets are achieved for its products.

In relation to a department store concessionaire, we may include an annual minimum gross sale amount which our percentage commission will be based on, in case the actual annual gross sales amount is lower than the aforesaid minimum amount.

As a measure to minimise collection risks, all concessionaire sales are transacted at our cashier desks. At the agreed intervals for payment, typically on a monthly basis, we remit the Gross Sale Proceeds (after deducting all relevant fees and expenses owed to us) to the concessionaires.

Pricing policy

The concessionaire set the prices for its products. However, to maintain our competitiveness in the market, the concessionaire has the obligation to adopt a standard pricing policy for their merchandises with other third party shops in the same area which sell their brand.

The concessionaire will give special discounts on their standard price merchandise to our VIP cardholders. Furthermore, the concessionaire has a general obligation to participate in our promotional sales events with details of the arrangement to be agreed between us.

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Renovation

The concessionaire is generally allowed (at their own costs) to design their own counters and/or designated areas with our prior approval. If we require general renovation in our stores, the concessionaire is also required to cooperate and participate in our renovation works.

Guarantee and indemnity

Our concessionaires guarantee that their products comply with the latest laws and regulations in the PRC in respect of quality, safety, import procedures, tax etc. They are also required to provide certain licences and permits to evidence that their products are eligible for sale and evidence of the aforesaid compliance with laws and regulations of the ڭPRC. The concessionaire is required to comply with theʕശɛ͏΍ձ਷ऊ൬٫ᛆू Law of the PRC on Protection of Consumer Rights and Interests*) and in the case) جᚐ of an electrical appliance,௅ʱਠۜࡌଣһ౬ৗ஬ப΂஝֛ (Provisions on the Liability for the Repair, Replacement and Return of Some Commodities*) in relation to their products.

Furthermore, our concessionaires are solely responsible and agree to indemnify us for failing to meet applicable rules and regulations and/or infringement of third party intellectual property rights. In relation to an electrical appliance concessionaire, it is required to handle any quality issues with their products within 15 days of our notice and assist us to settle the issue within 60 days.

Termination

We are entitled to terminate our agreements with concessionaires if: (i) such concessionaire has the lowest sales revenue for the category of products sold at such store during a specific period of time; or (ii) infringement of third party intellectual property rights. Furthermore, if either party breaches the terms of the agreement, the other party is entitled to terminate the agreement.

In some cases, agreements with these concessionaires may contain clauses such as varying commission rates charged depending on the type of merchandise sold by such concessionaire such as in the case of jewelry.

Agreements with tenants

Our agreements with shop tenants for leasing of shops in our stores are usually for a term of one year or with longer terms ranging from eight to ten years for more established shop tenants. We generally charge rent and the amount of which is determined principally on the size of their allocated space, the strength of their brand and the products provided, the length of our relationship and our respective bargaining power.

In some cases, agreements with these shop tenants may contain special clauses. In case of one shop tenant, there is a clause restricting our ability to sub-lease to that shop tenant’s competitors in the industry with regards to our specific stores.

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Agreements for management consultancy services

Our wholly-owned subsidiary Guangdong Yihua Department Store was responsible for providing services for this managed store owned by the aforesaid Independent Third Party. Under the terms of such agreements, we offered consultancy services in relation to this managed store including during the early stages, employment and training of staff, relations of concessionaires and direct suppliers similar to those who supply our stores, store design and layout, sale and promotional strategies. Prior to the opening of such managed store, we were required to have leased over 95% of the business area to concessionaires similar to those in our stores. Such managed store is permitted to use our “ूശϵ஬” (Yihua Department Store) brand under a license for two years with a right to extend this term for another one to three years.

In return, we were generally entitled to management consultancy fees based on certain one-off fees and annual fees as well as other fees to be agreed by the parties. The one-off fee is mainly for the information technology system for the operation of the store. The annual fee mainly consists of: (i) license fee for use of our “ूശϵ஬” (Yihua Department Store) brand; and (ii) 1.5% of total revenue of the managed store (subject to different rates for certain products and exclusion of certain businesses).

As at the Latest Practicable Date, (i) our Group does not have any outstanding liabilities or obligations under the management consultancy agreement; and (ii) the managed store has ceased using the “ूശϵ஬” (Yihua Department Store) brand.

Store management

Generally, our headquarters in Zhongshan or section-based department issues operational guidelines for each individual store to follow and coordinates multi-store promotional activities such as the anniversary of our first stores establishment. Individual stores are allowed to adapt to local circumstances such as store specific promotional activities. We also monitor the performance of individual stores and require store managers to report the sales performance and operation proposals to our headquarters on a monthly basis.

Hours of operations are typically between 9:30 a.m. to 9:30 p.m. from Sunday to Thursday and 9:30 a.m. to 10:30 p.m. from Friday to Saturday. The number of full-time staff (excluding staff employed by our concessionaires) is different from store to store ranging from 40 to 503 employees as at 30 September 2013. The majority of our staff are sales personnel at our direct sales counters as well as support and administrative staff. Each individual store is governed by a store manager in charge of operations and day-to-day management of such store.

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Collection

We have cashier desks operated and controlled by our own staff in our stores to collect payments for merchandises. In order to minimise collection risks, payment from customers at our stores are collected at these cashier desks. As each of the merchandise has a unique item code, our cashiers input the model or item code into our computerised record keeping system when customers make purchase(s) at our store and our system records such purchase(s) as sales data for our Group.

The following shows the breakdown of the aggregate amount of Gross Sale Proceeds and the proceeds from the issuance of a portion of new Consumption Cards by different payment method during the Track Record Period:

Payment method (Note) Year ended 31 December Five months ended 31 May 2010 2011 2012 2012 2013 RMB’ RMB’ RMB’ RMB’ RMB’ million % million % million % million % million %

Cash 538.5 33.0 582.0 29.8 574.7 30.2 254.1 30.0 241.4 26.9 Credit cards and debit cards 722.7 44.3 890.1 45.6 959.9 50.4 416.5 49.2 466.4 52.0 Consumption Cards 291.5 17.9 420.4 21.6 350.4 18.4 174.4 20.6 182.3 20.3 Others 77.6 4.8 58.1 3.0 18.4 1.0 1.9 0.2 7.1 0.8

Total 1,630.3 100.0 1,950.6 100.0 1,903.4 100.0 846.9 100.0 897.2 100.0

Note: Amountsincludetheaggregatepaymentsreceivedeitherincashorcreditcardsanddebitcardsorbank transfer for the issuance of a portion of new Consumption Cards of approximately RMB63.8 million, approximately RMB19.8 million, approximately RMB0.9 million, approximately RMB44,000 and approximately RMB0.7 million respectively for the year ended 31 December 2010, 2011 and 2012 and for the five months ended 31 May 2012 and 2013.

Our customers mainly made payments by credit cards and debit cards during the Track Record Period. Other payments include mainly payment by e-card and phone text, rebates or subsidies received from the PRC government in respect of the Change of the Old for New Program and payment by bank transfers.

As a retail business is cash-based in nature, we have implemented strict policies and procedures to ensure necessary records in relation to cash flow and sales receipts. For instance, cash receipts will be deposited into our banks accounts on a daily basis. A daily reconciliation will be carried out by each store’s cashier department to reconcile our sales data with cash and credit card receipts in order to confirm the revenue generated and that there are no discrepancies between the sales data with cash receipts and credit card receipts.

In addition, surveillance cameras and our securities staff in our stores monitor the safety of our store.

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Theft by employee

(A) Background

Our Group had a case of theft by an employee involving cash of an aggregate amount of approximately RMB4.0 million. The employee involved was a senior staff of the cashier’s office of our Jiangmen store from 2005 to 2012. By abusing her position and keeping all the keys to access the safe box, she misappropriated approximately RMB4.0 million. The incident was discovered during our Company’s self-assessment for preparation of Listing, upon her confession in 2012 and upon discovery, our Group had reported the case to the police department. The employee was charged and sentenced by court to an imprisonment of nine years and her employment was terminated.

(B) Internal control review

Baker Tilly Hong Kong Business Services Limited is the internal control adviser engaged by our Group. Internal Control Adviser is part of Baker Tilly Hong Kong which is an affiliate of Baker Tilly International. Internal Control Adviser is mainly engaged in providing a broad range of corporate governance and risk advisory, internal audit, and internal controls regulatory compliance services to its clients including listed companies and companies preparing for listing in Hong Kong. The key members of the engagement team from Internal Control Adviser are qualified accountants and internal auditors.

The Internal Control Adviser first conducted an internal control review in January 2012 and it was found that our Group did not have a set of standardised policies and procedures in place which resulted in a non-standardised internal control practices adopted in different stores.

The Internal Control Adviser identified a number of areas for internal control system improvements in our Company’s cash management function as follows:

(1) in regards to the Zhongshan store (main store), Jiangmen store and Guzhen store, cash counts were performed without the count sheets properly maintained to evidence the work done.

(2) during the process of the cash counts performed by the Internal Control Adviser, it was noted that cash journals at Jiangmen store and Guzhen store were not updated in a timely manner, and thus, physical cash balance and the balance as per the cash journals could not be reconciled on the spot.

(3) there was a lack of segregation of duties with regard to the safekeeping of cash in the safe in respect of Jiangmen store.

(4) the internal control adviser also noted that for the Jiangmen store and the Guzhen store, bank reconciliation was not properly performed (i.e. not performed in a timely manner and/or individual items not fully reconciled).

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In order to strengthen the internal control measures over cash collection management and segregation of duties and to prevent the theft incident from occurring again, the Internal Control Adviser then made certain recommendations set out below.

After the incident and as advised by an internal control adviser, our Group adopted a number of remedial measures in May 2012 including but not limited to:

(i) office cashier of each location should provide daily updates of a cash journal (coupled with original bank-in slips) which will be reviewed by designated responsible personnel;

(ii) concerning segregation of duties over custody of cash, key and password to safes are kept by different designated personnel and passwords are changed regularly;

(iii) withdrawal process of cash out of safe will be attended by at least two designated personnel;

(iv) office cashier of each location should deposit the sales proceeds into our Company’s bank account at least once daily, and the related documents are passed to the accounting department on a daily basis for accounting records;

(v) regular and surprise cash counts are performed with the participation of parties which are independent of the cashier function, and cash count reports are passed to management regularly for review and such reports will be presented to the Board, including the independent non-executive Directors upon Listing; and

(vi) for all bank-ins, the finance personnel review and check against all relevant documents. The finance personnel review “cash journal”, “POS statements”, “cashier report”, “fund-in slips” (cashier’s copy), and original bank-in slips on a daily basis to ensure that there is no error or irregularity, and then update the bank account on the ledger at least once daily.

During the follow-up review fieldwork carried out in May 2012, January 2013, June 2013, and October 2013, the Internal Control Adviser found that management of our Company had implemented these recommendations. Based on the adoption of the written policy concerning the above, the adequate segregation of duties, the performance of regular reconciliation and the relevant supervisory review, the Internal Control Adviser is of the view that the follow-up results were satisfactory, adequate and effective under Rule 3A.15(5) of the Listing Rules.

Based on the reasons behind the theft, the findings of the Internal Control Adviser, and the implementation of the remedial measures as at the Latest Practicable Date, the Sponsor confirms, not being an expert on internal control, that the measures are effective in preventing similar theft incidents from recurring.

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To the best knowledge of our Directors, during the Track Record Period, our Group has no record of material theft of any property of our Group by any employee of our Group other than the aforesaid incident.

(D) Internal control procedures to identify and resolve discrepancies/errors in the daily reconciliation

Taking into account the need for adequate segregation of duties, set out below is the general work flow after the adoption of internal control measures in May 2012 concerning procedures to identify and resolve discrepancies and errors in the daily reconciliation by different parties:

Step 1: check by cashier and • End of work day, floor cashiers performs cash supervisor count in presence of floor supervisor. • Supervisor prints out POS statements and checks if cash collected matches statement. • Discrepancies, if any, are identified, and in case cash counted is less than amount on POS statement, relevant floor cashier may need to make up shortage in cash. • If no discrepancy is found, floor cashier will sign POS statement and prepare a fund-in slip. • Fund-in slip together with cash collected deposited into safe deposit box to be delivered to office cashier on next day.

Step 2: review by office • On next day, safe deposit box delivered to the cashier cashier office. • The office cashier opens the safe deposit box to verify the amount of cash received by counting the cash and checking the amount with the fund-in slip. • Discrepancies, if any, are identified, and the office cashier will follow up with the relevant floor cashier and supervisor immediately, for example, if the amount on the fund-in slip was incorrectly stated. • If no discrepancy is found, the office cashier will sign the fund-in slip, keeping the cash and a copy of the fund-in slip with the other copy of the fund-in slip given back to the floor cashier for proof of receipt.

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Step 3: review by accounting • All fund-in slips follow the above procedures clerk and after they are all collected and confirmed, the fund-in slips will be delivered by the office cashier to the accounting clerk to perform reconciliation with the cashiers’ report, which has the floor cashiers’ names, the daily sales figures, and the amount of cash/Consumption Cards received. • If there is any missing fund-in slip or any discrepancy between the fund-in slips and the cashiers’ report, the accounting clerk will follow up with the relevant floor cashier and supervisor immediately.

Step 4: review by accounting • After reconciliation is satisfactorily performed supervisor by the accounting clerk, sales proceeds are deposited daily by either the office cashier or the bank cashier. • At the end of the working day, the accounting supervisor will review the cash journal, bank account ledger, original bank-in slips, the cashiers’ report and will follow-up with the relevant floor cashier, office cashier and bank cashier. • Surprise and regular cash counts are performed by the accounting supervisor and the accounting manager to ensure accuracy of cash in hand and cash journal with immediate follow-up with office cashier if discrepancy is found.

(E) Additional recommendations

Furthermore, the Internal Control Adviser has recommended the following enhanced measures in order to strengthen the internal control measures over prevention of bribery and money laundering in relation to the issuance of Consumption Cards:

Prevention of bribery

1. All Consumption Cards issued as gifts given out to external parties should be approved by, at least, two management executives, before issuing and giving out the Consumption Cards as gifts. Moreover, at the time of giving out the Consumption Cards as gifts, management must assess whether the gifts are given to external parties with justifiable and reasonable cause(s) (e.g. alignment with general commercial practices and/or custom, on the occasion of the following events, including but not limited to, annual dinner prizes, Company’s anniversary celebration, or festive gifts) and the Consumption Cards as gifts should be at reasonable amount (which should not contravene the requirements of the anti- bribery laws of the PRC) before management approval is made. Currently, the upper limit on the gift of Consumption Cards of our Group is RMB5,000 per recipient per year.

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2. Keeping and retention of the records for the Consumption Cards given out to external parties as gifts (e.g. date of issue, amount and serial number of the Consumption Cards given out, and details of the recipients, name and signature of approvers, etc.) for sufficiently long period of time (e.g. seven years).

3. Rule of proper segregation of duties should be strictly observed by our Group (i.e. the requisitioner for Consumption Cards as gifts to be given out to external parties should not be the one to do the approval, and in this respect, approval should be made by two of the other management executives). After management approval is sought, the issuing and giving out of Consumption Cards should be done by a designated responsible department with the participation of the accounts department to ensure that there are proper segregation of duties and proper records as audit trail.

4. Updates and training as to the requirements and development of the PRC laws and regulations in relation to anti-bribery should be provided to the responsible personnel of our Group on a regular basis.

5. The records for the consumption cards given out to external parties as gifts (e.g. date of issue, amount and serial number of the consumption cards given out, and details of the recipients, name and signature of approvers, etc.) should be regularly reviewed by the internal control committee on a bi-monthly basis, and if thought necessary, follow-up action needs to be taken by the internal control committee which has full and adequate access to the board of Directors, including independent non-executive Directors, as well as external professional consultants, including but not limited to, legal advisers, compliance advisers, external auditors and internal control consultants.

Prevention of money-laundering

1. For direct single purchase of the Consumption Cards by the customers at an amount exceeding the upper limit (which is pre-determined by management of our Group by reference to the general commercial practices and/or customs and the requirements of the anti-money laundering laws of the PRC) or direct multiple purchases of the Consumption Cards by the same customers at an accumulated amount exceeding the upper limit within a certain period of time (e.g. a week/month) (which is pre-determined by management of our Group by reference to the general commercial practices and/or customs and the requirements of the anti-money laundering laws of the PRC), personal particulars of the customer concerned need to be obtained and recorded on a register in relation to purchases of the Consumption Cards. Details need to be recorded include name of the customer concerned and number of his/her personal identity document, date of purchases, as well as amount and serial number of the Consumption Cards involved, etc.).

2. Keeping and retention of the register in relation to purchases of the Consumption Cards exceeding the upper limit for direct single purchase or direct multiple purchases within a certain period of time (e.g. a week/month) for sufficiently long period of time (e.g. seven years).

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3. Updates and training as to the requirements and development of the PRC laws and regulations in relation to anti-money laundering activities (large-sum purchases of Consumption Cards, suspicious transactions, etc.) should be provided to the responsible personnel of our Group on a regular basis.

4. The register in relation to purchases of the Consumption Cards exceeding the upper limit for direct single purchase or direct multiple purchases within a certain period of time (e.g. date of issue, amount and serial number of the Consumption Cards given out, name of the customer concerned and number of his/her personal identity document, name and signature of approvers, etc.) should be regularly reviewed by the internal control committee on a monthly basis, and if thought necessary, follow-up action (e.g. reporting to the relevant authorities, etc.) needs to be taken by the internal control committee which has full and adequate access to the board of Directors, including independent non-executive Directors, as well as external professional consultants, including but not limited to, legal advisers, compliance advisers, external auditors and internal control consultants.

Our Group implemented these recommendations in March 2013. During the follow-up review fieldwork carried out in June 2013 and October 2013, the Internal Control Adviser found that the management of our Company had implemented or adopted the policies. Based on the adoption of the written policy concerning the above, the adequate segregation of duties and the relevant supervisory review, the Internal Control Adviser is of the view that the follow-up results were satisfactory, adequate and effective under Rule 3A.15(5) of the Listing Rules.

In addition to the abovementioned recommended internal control measures, please also refer to on-going measures for this issue and the Track Record Period non-compliances as set out in the sub-paragraph headed “Legal compliance and litigation – On-going compliance” of this section.

Customer service

In accordance with our customer-oriented services, we provide direct communication channels for customers’ suggestions or complaints through our customer service centres in all of our department stores, customer hotline or customer service email. Furthermore in certain cases, we offer free delivery for certain electrical appliances/large items to locations near our department store, free gift wrapping, installation and adjustment services for electrical appliances, item repair, refund and exchange guarantees for certain items to ensure customer satisfaction.

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Fire safety compliance

As part of our measures to ensure fire safety compliance, we generally conduct mock fire drills at least once a year. As part of our staff training for new recruits, they receive fire safety training with additional training at least once a year. From time to time, our staff (or other designated individuals appointed by the landlord or other responsible party) patrol to ensure fire exits to our Stores which are kept open are indeed open. Furthermore, to ensure that fire safety passages are not blocked, our Company in certain cases would have signs on the floor warning viewers not to leave obstructions in the area.

During the Track Record Period, our Group encountered certain fire-safety non- compliance incidents. Two such incidents in 2012 related to an inspection by relevant inspectors at our Zhongshan store (main store) which discovered obstructions in fire-safety hallway and Guzhen store which discovered damage to and unfamiliarity with certain fire safety equipment. Another incident in 2013 related to an inspection by relevant inspectors at our Zhongshan store (main store) which fire exit door was closed but should be kept open and the arrangement between landlord and tenants involving inspection and security of such door. Our Directors are of the view that such incidents were not material given that they were since rectified and no material fine was imposed on our Group.

Expansion strategy

We intend to expand our retail network beyond Guangdong Province, the PRC to other regions of the PRC. As at the Latest Practicable Date, we have 13 Stores (ten department stores and three community stores). We aim to establish our presence across the PRC and commence business in 2014 for two new Stores and in 2015 one new Store (for the location of our new stores, please refer to the paragraph “Our operations – Retail network – New stores” of this section).

In the future, we will continue to enter into leases for operating new stores. Before opening new stores, our management will therefore cautiously consider the following major factors:

• pedestrian flow, accessibility, vehicle traffic flow, population density;

• potential growth of local population;

• development potential and future trends (e.g. local government policies especially establishment of new development zones);

• estimated consumption power of the local community;

• start up costs, profitability and payback period; and

• proximity of competitors in the vicinity.

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For our current plans to operate two new stores, please refer to the section headed “Future plans and use of proceeds” of this prospectus.

We adopt long term approach in establishing new store locations and are heavily influenced by local government policies especially establishment of new development zones. We are early movers in entering into tenancy deals in new development areas, which may allow us to enter into longer leases on favourable terms.

Furthermore, we may seek to expand our network by acquiring or entering into joint ventures with existing department stores or retain chain operations. For purposes of assessing a potential acquisition target, we may take into account location, market share, operation quality, financial condition and the reputation of its brand name.

Logistics management, quality and inventory control

Logistics management

Our logistics centre in Zhongshan currently supports our six department stores (excluding Taiyangcheng store, Yangchun store, Tai’an store (Longtan) and Yangjiang store) and three community stores. It generally serves as our warehouse for merchandise in our electrical appliances section and in some cases, for merchandise in our supermarket section (non-fresh goods).

Our logistics centre comprises a total area of approximately 8,000 sq.m. We have commenced the use of the logistics centre since 2003. As the premises on which the logistics centre is located is leased and will expire in 2014, we may not be able to renew our leases or enter into leases on the same terms particularly for our short term leases, please refer to the section headed “Risk factors – We may not be able to purchase or lease suitable sites for new stores or renew our leases (especially our short term leases) for our current stores on favourable terms.” of this prospectus.

Our own fleet of vehicles delivers merchandise from our logistics centre to each store at least once a day. They also deliver electrical appliances purchased at our stores to our customers at close proximity. The current location of our logistics centre with the aforesaid stores is sufficiently close to allow us to replenish our stocks and adequately respond to customers demands in a comparatively short period of time.

Quality and inventory control

(A) Quality control

We need to have quality merchandise in sufficient quantities for our daily business. To ensure the quality of our merchandise, we focus on pre-sale stage to control the quality of our products. Our concessionaires and suppliers play an important role in ensuring the quality standard of the products sold at our stores.

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Set out below is a general overview of the quality assurance system:

Pre-sale

Selection • We are selective in choosing our direct suppliers and concessionaires under our procurement strategy.

• Suppliers: We maintain an approved suppliers list and purchase goods from the suppliers according to such list. An evaluation process is performed before adding new suppliers on this list. A quarterly review of this approved suppliers list is performed so as to ensure the under-performed suppliers in respect of product quality are removed from such list in a timely manner.

• Concessionaires: Product quality for goods sold by the concessionaire is principally the responsibility of the relevant concessionaire as per the terms of our concessionaire agreements generally. Concessionaires have to provide product quality assurance to us and are responsible in the event of any claims arise from the quality of their products.

Inspection and testing • Another step taken during the pre-sale process includes an inspection of the goods upon acceptance of delivery to our store. Relevant staff will inspect the types of products for the supermarket section and the electrical appliances section to ensure it matches the description and whether the products are in good condition. The relevant staff in the supermarket section also checks the expiry dates of the products, whether there is a quality standard label on the products and performs sample checking on the weight of the goods to the weight stated on the packaging.

• After inspection of the goods with their relevant labeling, the relevant goods are immediately and properly stored. Our staff regularly monitors that the refrigeration devices are operational at all times.

• We pay particular attention to quality issues concerning supermarket goods. For example, we currently have an experienced team of seven members responsible for checking the quality of the supermarket goods in Jiangmen store.

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• Due to the variety of products offered and the quality assurance systems of our suppliers, we rely primarily on applicable regulatory testing (as represented by the quality standard label) and our own testing, in certain cases such as with quality of vegetables, on sampling basis.

Recording and addressing • From time to time, we may receive complaints from complaints customers or government authorities concerning the quality of our products.

• When this occurs, our staff will investigate the relevant products and the specific incidents to consider what, if any, follow-up measures are necessary. The Store manager is generally informed of the incident. If the staff considers the relevant concessionaire, supplier or shop tenant to be wholly or partly responsible, we will generally require such party to rectify the issue or indemnify us for any rectification measures. Our staff will also consider whether there need to be restriction or recall of the same product or other products from such concessionaire, supplier or shop tenant based on the issues identified in the complaint.

• Records of the complaints including status and rectification measures are generally kept for at least one year after it has been fully addressed and/or rectified. We will also review such records in considering whether to renew our agreement with the concessionaire, supplier or shop tenant.

Post-sale • Direct communication channels for customers’ suggestions or complaints through our customer service centres, customer hotline or customer service email.

• We offer installation and adjustment services for electrical appliances, item repair, refund and exchange guarantees for certain items to ensure customer satisfaction.

• On-going review and in certain cases, termination of the relationship with relevant concessionaire, supplier or shop tenant with persistent quality issues.

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(B) Inventory control

To ensure sufficient quantities of our merchandise, we have adopted the “safety stock level” (being a policy of keeping a level of extra stock to prevent being out of stock) and “first in first out” inventory policies, which allows us to maintain an optimal level of stock at our stores in relation to direct sales. With respect to concessionaire sales, we do not bear any inventory risk. During the Track Record Period, we did not have a material amount of obsolete inventory. Therefore, no stock provision is made during Track Record Period. Furthermore, our inventory risk is reduced due to (i) the inventory policies set out in this section; (ii) our ability to reduce aged inventories by various methods (such as organise promotional activities for selling such goods); and (iii) the exchange policies set out in the agreements with suppliers, which we require our suppliers to provide for defective or expired stocks. Our average stock turnover for each of the years ended 31 December 2010, 2011 and 2012 and for the five months ended 31 May 2013 was approximately 78.4 days, approximately 81.2 days, approximately 100.5 days and approximately 85.7 days respectively.

Storage time

Inventory is stored at our logistics centre and at our individual stores. Generally, the logistic centre serves two purposes, which are (i) for managing the stock level in the different stores in our network and therefore there is a short period of time from receipt at logistic centre to delivery to individual stores; and (ii) for storage of popular products or products purchased in bulk to save costs. In general, only certain merchandises for our supermarket section (excluding fresh foods and perishables) and electrical appliances section are kept in our logistics centre for a short period ranging from one to three days before being delivered to our individual stores. In limited situations, where we have ordered a substantially large quantity of particular merchandises in the anticipation that its price will rise, the merchandises will be kept in the logistics centre for longer periods.

Record keeping and inventory checks

During inventory checks, if the merchandise is acceptable, our staff then records the relevant information relating to the merchandise such as the name of the relevant supplier, quantity of goods, identification code, expiry date into our computerised record keeping system. The quality of goods is checked again when the merchandise is delivered to individual stores from the logistics centre and prior to displaying on the shelf. Generally, we conduct regular monthly scheduled inventory checks as to the quantity and quality of the inventory at our logistics centre and individual stores throughout the year. An inventory analysis is conducted monthly and reported to the procurement department for their formulation in procurement strategy.

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At our individual stores, our staff performs a daily morning inventory check and makes a request to our logistics centre or supplier(s) if more stock is needed for a merchandise during the day. Using our computerised record keeping system, we can check the location and quantities of inventory and analyse our inventory movement to improve our procurement strategy. During the Track Record Period, we did not have a material amount of obsolete inventory. Therefore, no stock provision is made during Track Record Period. Generally, under the terms of our agreements with the direct suppliers, we may return and exchange such items (i) due to quality issue; (ii) if the product is close to expiry date; or (iii) in case of damage in its packaging. To minimise inventory loss, we perform a stock take for electrical appliances section every month, and for supermarket section every half-year to determine if there is any discrepancy between the amount recorded in our system with the inventory actually in our stores and logistics centre.

As there is no PRC law mandatorily requiring us to maintain insurance for product liability, we have not maintained any such insurance in line with market practice.

From time to time, certain products of our concessionaire or suppliers may not strictly comply with the relevant PRC laws, rules and regulations as inspected by relevant government authorities and we may receive a (i) complaint; (ii) be required to destroy the products; and/or (iii) may be fined. We did not have any material product returns/recall or complaints against our Company’s products and/or service quality during the Track Record Period and up to the Latest Practicable Date.

MARKETINGANDPROMOTION

Marketing

We adopt a number of marketing and promotional activities (i) to ensure prospective and repeat customers are updated on our promotional activities; (ii) as part of our customer- oriented services; and (iii) to promote our ‘Yihua Department Store’ brand with our customers and the local community.

Our website

Our website, www.yihua.com.cn, serves as a communication channel with our customers by displaying our store information, promotional events and display for some of our merchandise. The website also contains various functions for our VIP members. Customers can also communicate with us through the customer service email listed on our website.

Our magazine ‘Grace & Fashion’

We have our own quarterly magazine ‘Grace & Fashion’ since the year 2007, which sets out market trends, our promotional events and activities. There is an advertising agency, being an Independent Third Party, engaged by us for the publishing of this magazine. The magazine is distributed in our Stores or delivered to VIP customers for free principally for promotional purposes and increase awareness of our customers to our activities.

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Promotional events

For purposes of promoting sale, increasing customer loyalty and reducing inventory risks, we engage in a number of sales, promotional and other events. These include general seasonal and festival sales such as New Year, Chinese New Year, Labour Day, Mid-autumn Festival and National Day and the anniversary of our first store. Furthermore, individual stores may host different sales event such as for their individual store anniversary or in accordance with local practice. During such sales promotions, we usually provide direct discounts on purchases, gifts, our Consumption Cards and certain free services.

Generally, we have the right to initiate and set such sales and promotional events and the suppliers and concessionaires agree to participate. However, the costs involved from providing discount in such events, (i) are borne by us in the case of direct suppliers; and (ii) are negotiated on case by case basis in the case of concessionaires.

Furthermore, we host a number of other promotional events such as fashion shows and food and culture festivals. Our food and culture festivals are usually hosted by us in conjunction with foreign consulates in the PRC, which allows foreign products to have exposure in the PRC while allowing us to test our customers reception to these products. If a product is well received by our customers during these events, we subsequently approach the relevant supplier to enter into a formal supply agreement.

Media information release

Besides information displayed on our website and through our magazine, we provide brochure and leaflets concerning our merchandise and promotional events in our stores and issued to our VIP members by post. We also run advertising campaigns on television, radio, newspapers and magazines, public posters, light boxes to create greater awareness of our brand and our stores.

Community service and social welfare

One of the keys to our Group’s success is our connection to the local community and our deep commitment to social welfare. Our Group has hosted and participated in a number of community service events and social activities such as the hosting in 2009 of the ӡʇήቤɓ (*մϋ່ርݺਗ (Charity Sale Event for the first anniversary of the Great Sichuan Earthquake and the participating in 2012 of the ʕʆฉഛຬɛБ (Ten Thousands Charity Walk at Zhongshan*).

Furthermore, our Group has partnered with various vocational schools in the PRC to provide training opportunities for their students as well as sponsor education funds for said schools.

For the awards and recognitions we have received from our participation in such events and activities, please refer to the paragraph headed “Awards and recognitions – Community welfare” of this section.

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Customer loyalty programs

In order to promote loyalty to the ‘Yihua Department Store’ brand and to foster a long-term relationship with our customers, we launched our Consumption Cards and our VIP cards before the year 2000. Details of such customer loyalty programs are set out below.

VIP cards

Our VIP cards program allows cardholders to gain points based on the amount spent at our Stores and can be used in our Stores. Our VIP cards program enrolled customers into one of two categories: (i) ordinary VIP card members; and (ii) VIP gold card members. There is also a VIP platinum card issued by the Yihua Investment Group, whose members enjoy the same general benefits at our stores as our VIP customers. Based on the category, enrolled customers receive different privileges including discounts on merchandise purchases, certain free services and also benefits in our Stores and the businesses of the Yihua Investment Group including, among others, operation of hotels, restaurants, car parks as well as free holiday tours organised by us. The points collected on VIP cards can be used according to the terms and conditions of VIP cards from time to time, and mainly exchanged for (i) Consumption Cards (currently at a conversion rate of RMB100 of Consumption Card per 10,000 points) with points collected at a rate of 0.5 point in the electrical appliances section and supermarket section and 1 point in the department store section for each RMB1 spent; (ii) gifts; or (iii) shopping bags. VIP bonus liabilities are recognised as a liability under deferred revenue at fair value and as at 31 December 2010, 2011 and 2012 and for the five months ended 31 May 2013, our deferred revenue balance amounted to approximately RMB2.7 million, approximately RMB2.9 million, approximately RMB3.6 million and approximately RMB4.2 million respectively. Based on the aforesaid historical amount, the Directors believe that the redemption of VIP points will not have a material impact on the Group’s operations.

As at the Latest Practicable Date, there were 138,619 ordinary VIP card members, 9,261 VIP gold card members and 2,209 VIP platinum card members. For further details concerning other benefits we share with the Yihua Investment Group, please refer to the section headed “Relationship with the Controlling Shareholders” of this prospectus.

Our Company maintains records relating to our VIP cardholders and the conversion of VIP card points collected into Consumption Cards. During the application process for VIP cards, applicants are required to provide their identification document number, address and contact number. During the process for conversion of VIP card points collected into Consumption Cards, our staffs check to verify the VIP cardholder’s status by requiring the VIP cardholder to present his/her identification document again for verification with the information recorded in our database relating to the VIP customer. Then, a slip is printed out from our computer system, which contains the VIP cardholder’s name, identification document number and the number of Consumption Cards redeemed and the cardholder is required to check the details and then sign on the said slip. This slip is kept by us for record keeping purposes.

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For each of the years ended 31 December 2010, 2011 and 2012 and for the five months ended 31 May 2013, the Gross Sale Proceeds from VIP customers was approximately RMB538.8 million, approximately RMB698.5 million and approximately RMB586.0 million and approximately RMB271.3 million respectively, representing approximately 34.4%, approximately 36.2%, approximately 30.8% and approximately 30.2% of the total Gross Sale Proceeds respectively. This figure does not account for any Gross Sale Proceeds from purchases by VIP customers where they did not present their VIP cards and this figure partly overlaps with the Gross Sale Proceeds from sales involving payment by Consumption Cards where such VIP customers’ purchase involves payment by Consumption Cards.

In the initial sale transaction when the VIP customers buy products from our store, the receipt was divided into two parts, namely the revenue related to that product and the award points gained from the same transaction. The award points portion will be recognised as a liability under deferred revenue at their fair value. When our customers redeem the gift, the cost of the gift is charged to our profit or loss account and the relevant balance of inventory on our balance sheet is reduced. Deferred revenue is recognised as revenue when the points are redeemed for gifts and is classified as advances from customers when the points are redeemed for Consumption Cards.

The tables below set out the award points redeemed by the redemption method during Track Record Period.

Five months ended Year ended 31 December 31 May 2010 2011 2012 2012 2013 (’000) (’000) (’000) (’000) (’000)

Redemption for Consumption Cards (Note 1) 73,330 306,840 255,860 119,630 113,640 Redemption for shopping bags 472 1,250 82 31 40 Redemption for other gifts (Note 2) 94 399 385 331 4,712 73,896 308,489 256,327 119,992 118,392

Unit: VIP Card Points

Note 1: Currently at a conversion rate of RMB100 of Consumption Card per 10,000 points with points collected at a rate of 0.5 point in the electrical appliances section and supermarket section and 1 point in the department store section for each RMB1 spent.

Note 2: Other gifts mainly comprises of bed sheets, bath towels, food containers, hangers and tissue paper boxes.

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Pursuant to four cooperation agreements in respect of VIP cards between Guangdong Yihua Department Store and certain members of Yihua Investment Group, Guangdong Yihua Department Store is responsible for the manufacture and promotion of the VIP cards (including the VIP platinum cards issued by Yihua Investment Group). For details of the agreements, please refer to the section headed “Connected transactions – Exempt continuing connected transactions – (a) Cooperation agreements in respect of VIP cards” of this prospectus. Our Company and Yihua Investment Group do not share the profit and costs of cross-sale of merchandise or services offered in relation to the VIP customers.

Generally, any person can apply for our general VIP card by submitting an application with their personal information (and presentation of their identity card or providing a copy thereof) and paying a fee. The VIP cards expire after three years but can be renewed by the payment of a fee or having spent a certain amount at our stores prior to the cards’ expiry. Any VIP cardholder who has accumulated sufficient points or spent more than a certain amount during the term of the VIP card can be upgraded to our VIP gold cardholder status.

Consumption Cards

Our Group started issuing our Consumption Cards before the year 2000. Our Consumption Cards are issued by Guangdong Yihua Department Store and can be used in all of our Stores (which are department stores and which have commenced business) for the purchase of merchandise. Consumption Cards are issued under one of five methods: (i) bought by our customers; (ii) after a certain amount of Consumption Cards is bought, additional Consumption Cards are issued for free (e.g. after RMB10,000 of Consumption Cards are bought at a time, RMB200 of Consumption Cards will be issued for free and such RMB10,200 of Consumption Cards will also be subject to regulatory requirements); (iii) issued after our customers have accumulated and converted a certain number of points on their VIP cards (currently at a conversion rate of RMB100 of Consumption Card per 10,000 points with points collected at a rate of 0.5 point in the electrical appliances section and supermarket section and 1 point in the department store section for each RMB1 spent); (iv) issued for free for promotional purposes; or (v) bought by entities for their staff benefit or promotional arrangements.

The issuance of Consumption Cards under methods (i), (ii) and (v) above where payment is involved prior to the issue of the pre-paid cards is subject to certain regulatory requirements. For details, please refer to the section headed “Regulations – Provisions on pre-paid cards” of this prospectus. Meanwhile, Consumption Cards issued under methods (iii) and (iv) where no payment is involved prior to the issue of the pre-paid cards, are not subject to such regulatory requirements.

As advised by our PRC Legal Advisers, our issuance of the pre-paid cards prior to the Administration Opinion was not in compliance with the laws and regulations, which generally prohibit the printing, sale, purchase and use of token coupons as substitutes for Renminbi for circulation in the PRC market. Therefore, the relevant branch of the PBOC is entitled to order us to stop issuing the Consumption Cards and impose a maximum aggregate fine up to RMB200,000 on us for issuing such pre-paid cards under the Law of the People’s Bank of the PRC.

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Our PRC Legal Advisers are of the view that such PRC laws and regulations are regulatory in nature and the penalty for the non-compliance with such laws and regulations are administrative in nature, therefore no criminal liability or criminal punishment will be involved. Our PRC Legal Advisers have further advised us that the above PRC laws and regulations do not provide any measures to the relevant authority to order the issuer of such cards to redeem all the outstanding pre-paid cards, or to require us to refund the relevant income generated from the funds of the pre-paid cardholders. Furthermore, based on our PRC Legal Advisers’ telephone consultation with the PBOC at municipal level, the order to stop issuing and fine under the Law of the People’s Bank of the PRC are generally, in practice, imposed on issuers who recognise the value of expired pre-paid cards as revenue. Based on the confirmation of our Directors that we had never recognised any revenue upon expiry of our Consumption Cards, our PRC Legal Advisers believe that the risk of penalty imposed on our Group is remote and it is unlikely that the relevant branch of the PBOC will retrospectively penalise our Group in respect of such non-compliance.

As at the Latest Practicable Date, all our Consumption Cards are single purpose prepaid cards and we have both non-recorded pre-paid cards (i.e. Consumption Cards in various denominations from RMB10 up to and including RMB1,000) and recorded pre-paid cards (i.e. Consumption Cards in denomination of RMB2,000 only). Pursuant to or in compliance with the requirements under the Administration Opinion and the Administrative Measures for Pre-paid Cards, which allow issuing pre-paid cards,

(a) we sets limits on the face value of our Consumption Cards;

(b) we completed our registration as a pre-paid card issuer with Zhongshan Branch of the MOFCOM on 29 March 2013 and Guangdong Branch of the MOFCOM on 6 June 2013;

(c) we record the purchaser’s name, valid identity certificate numbers and contact details when an individual/entity purchases (i) our recorded pre-paid cards; and (ii) non-recorded pre-paid cards but in an aggregate value of RMB10,000 or more at a time;

(d) we established an escrow account and entered into a capital management agreement π၍՘ᙄ) with a depositary bank. The deposit requirement is satisfied partlyږ༟) by deposit into the escrow account and partly by a bank guarantee;

(e) for bank transfers, we record relevant transfer details in accordance with the Administration Opinion and the Administrative Measures for Pre-paid Cards;

(f) we set an end date on each batch of the physical cards.After a new batch of physical cards becoming effective, cardholders are allowed to exchange the old cards upon presentation for new cards with the unused value of the previous cards. The unused value of the Consumption Cards therefore do not expire as we provide a renewal service for our Consumption Cards; and

(g) we will maintain the abovementioned Consumption Card purchasers’ data for at least five years, as required under the Administrative Measures for Pre-paid Cards.

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Our PRC Legal Advisers advise that the Consumption Cards issued by our Group have already fully complied with the requirements of the Administration Opinion upon the issuance of the Administration Opinion on 23 May 2011 and continue to comply up to the Latest Practicable Date. The PRC Legal Advisers further advise that saved for registering Guangdong Yihua Department Store as a pre-paid card issuer within 90 days of the Administrative Measures for Pre-paid Cards becoming effective, our Group fully complied with the requirements of the Administrative Measures for Pre-paid Cards upon it becoming effective on 1 November 2012 and continued to comply up to the Latest Practicable Date. As set out in the sub-paragraph headed “Non-compliant incidents” of this section, based on our enquiries to Zhongshan Branch of the MOFCOM, Guangdong Branch of the MOFCOM was finalising the details for the implementation of the registration system and therefore we are unable to register in a timely manner. Guangdong Yihua Department Store had subsequently registered as a pre-paid card issuer with (i) Zhongshan Branch of the MOFCOM on 29 March 2013; and (ii) Guangdong Branch of the MOFCOM on 6 June 2013.

Under the Administration Opinion and the Administrative Measures for Pre-Paid Cards, we may be required to register the data of customers in certain circumstances as set out in the section headed “Regulations – Provisions on pre-paid cards” of this prospectus. The PRC Legal Advisers confirm that as at the Latest Practicable Date except for the provisions in the Administrative Measures for Pre-paid Cards for maintenance of data of customers of pre-paid cards for at least five years, there is currently no other material and relevant PRC laws, regulations and rules concerning maintenance of personal data collected by our Group.

In view of

(i) the PBOC, as the competent authority in charge of issuance of the token coupon under the laws and regulations of the PRC which prohibited the printing, sale, purchase and use of token coupons, has subsequently jointly issued the Administration Opinion allowing the issue of pre-paid cards;

(ii) our issuance of Consumption Cards has already fully complied with the requirements of the Administration Opinion upon the issuance of the Administration Opinion on 23 May 2011 and continue to comply up to the Latest Practicable Date;

(iii) completion of our registration as a pre-paid card issuer pursuant to the Administrative Measures for Pre-paid Cards and thereby we have fully complied with the Administrative Measures for Pre-paid Cards;

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(iv) the written confirmations from Zhongshan Branch of the MOFCOM, being the competent authority, has confirmed Guangdong Yihua Department Store since its establishment in October 1994 to the date of confirmation in 5 November 2013 complied with national and local laws, regulations and rules concerning the supervision of market circulation (̹ఙݴஷ၍ଣ) (which includes those governing pre-paid cards as a currency substitute circulating in the market) and did not receive any material penalty relating thereto. Furthermore, based on the PRC Legal Advisers’ telephone consultation with the relevant authorities at provincial and municipal level, it is unlikely that the aforesaid confirmations obtained will be challenged or revoked by higher level authorities; and

(v) we did not recognise the outstanding payables of expired pre-paid cards as our revenue,

our PRC Legal Advisers advised that the risk of the penalty imposed on us in regards to the non-compliance up to the Latest Practicable Date for the issuance of such Consumption Cards is remote and our Group can continue to issue the Consumption Cards pursuant to the Administrative Opinion and the Administrative Measures for Pre-paid Cards.

After the Consumption Card is bought by our customer, cash received from the issuance of such pre-paid Consumption Cards constitutes prepayment from our customers and increases advances from customers on our balance sheet, but will be recognised as revenue when revenue recognition criteria is met. In accordance with the Administrative Opinion and the Administrative Measures for Pre-paid Cards, the unused value of our Consumption Cards do not expire. We therefore did not recognise any revenue upon expiry of Consumption Cards during the Track Record Period. All unused value of Consumption Cards were recorded as advances from customers on our balance sheet.

Consumption Cards are issued under staff benefit or promotional arrangements with other companies based on general order by such entities. These arrangements generally involve the issuance of the Consumption Cards for staff benefits or under the customer loyalty programs of such companies. For an example of such program, please refer to the paragraph headed “Promotional arrangements with a mobile telecommunications service provider” below.

During the Track Record Period and as at the Latest Practicable Date, our Group issued Consumption Cards and we intend to continue issuing Consumption Cards after the Listing. For each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013, we issued 964,740, 1,045,301, 1,020,517 and 415,598 Consumption Cards (including both new cards and renewal of expired cards) respectively and 810,570, 1,102,383, 841,292 and 451,276 Consumption Cards were used respectively.

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The Consumption Cards are re-designed from time to time (currently three year intervals) with an end date set on each batch of physical cards to identify when the Consumption Cards are issued. Having new batches of physical cards every interval is a fraud prevention strategy so as to enable more updated technology with best practise for maximum protection to be imbedded to our Consumption Cards, while the end date encourages our customers to adopt the newest batch. After a new batch of physical cards becoming effective, cardholders are allowed to exchange the old cards upon presentation for new cards with the unused value of the previous cards. Since payments received from sales of Consumption Cards are recorded as advances from customers, the consequence of Consumption Cards caused advances from customers of our Group continues to increase in the event of the amount of unused value of the Consumption Cards increases.

For each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013, the Gross Sale Proceeds from sales involving payment by Consumption Cards was approximately RMB291.5 million, approximately RMB420.4 million, approximately RMB350.4 million and approximately RMB182.3 million respectively, representing approximately 17.9%, approximately 21.6%, approximately 18.4% and approximately 20.0% of the total Gross Sale Proceeds respectively. This figure partly overlaps with Gross Sale Proceeds from purchases by VIP customers where such VIP customers’ purchase involves payment by Consumption Cards.

Furthermore, the table below set out the value of the cards for the Consumption Cards issued and used during the Track Record Period.

Five months ended Year ended 31 December 31 May 2010 2011 2012 2012 2013 Value of Value of Value of Value of Value of cards cards cards cards cards RMB’ RMB’ RMB’ RMB’ RMB’ million million million million million Opening balance as at beginning of the year/period 121.1 164.6 153.3 153.3 216.6

During the period Consumption Cards issued 335.0 409.1 413.7 135.4 167.4 (Consumption Cards used) (291.5) (420.4) (350.4) (174.4) (182.3) Closing balance as at the end of the year/period 164.6 153.3 216.6 114.3 201.7

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Promotional arrangements with a mobile telecommunications service provider

Since 2007, we have, pursuant to annual agreements with a mobile telecommunications service provider, being an Independent Third Party, been involved in their promotional arrangement with its clients. Under this arrangement, clients of the provider may purchase merchandises at our main store and Guzhen store only by using the e-card or redeeming the bar code in the phone text both issued by the provider. The e-card contains a value in Renminbi which is set by the provider and the amount spent each time by its holder is deducted from the balance of the pre-paid amount on the e-card. The phone text includes an individual bar code which is recognised by our POS system and redeemed as a value in Renminbi when used to make purchases. The value unused upon redemption is considered spent and therefore can only be used on a single transaction. Alternatively, the amount in the e-card and the phone-text method may be exchanged for Consumption Cards.

For each of the years ended 31 December 2010, 2011 and 2012 and for the five months ended 31 May 2013, the Gross Sale Proceeds from arrangements with the mobile telecommunications service provider involving the payment directly with e-card or the phone text method was approximately RMB7.5 million, approximately RMB2.3 million and approximately RMB1.2 million and approximately RMB1.0 million respectively, representing approximately 0.5%, approximately 0.1%, approximately 0.1% and approximately 0.1% of the total Gross Sale Proceeds respectively.

Our information technology systems records the total value of these purchases involving either of these two methods and after a monthly reconciliation between our Group’s and the provider’s records, the provider settles the sales amount subject to a percentage discount if the amount is above a specified amount.

Furthermore, the relevant agreements with the mobile telecommunications service provider in regards to e-cards and phone text redemption methods are usually for a term of one year and generally contains the terms that: (i) products sold by our Group comply with relevant quality standards and our Group will be liable for any issues arising from the quality of such products; (ii) certain non-competition clauses relating to entering into similar arrangements with the providers’ competitors; and (iii) entitling the provider to terminate the agreement if our Group fails to meet certain minimum quality standards set by the provider.

Similar to sales to other customers, if there are quality issues concerning the products sold under the promotional arrangement with the mobile telecommunications service provider, we will seek indemnity from the relevant concessionaire and suppliers.

SEASONALITY

During the year, consumer spending patterns in the PRC tend to fluctuate depending on the season. In our experience, we generally record higher sales during major holidays and festivals such as New Year holiday, the Chinese New Year holiday, the Labour Day holiday, Mid-Autumn Festival and the National Day holiday. Our sales are therefore affected by seasonal factors. In the past, we usually adjust our level of inventory before these periods so as to accommodate the increase in demand and we therefore did not experience any shortage of merchandise supply.

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INFORMATIONANDTECHNOLOGYSYSTEM

Our information and technology system governs many aspects of our business and operations. We have our own information technology department (with an information technology departments in each store) and as at 30 September 2013 employed a total of 32 full-time employees to manage our systems. Our Directors believe that our system is important for monitoring and analysing the efficiency of our operations and ensuring its maintenance especially as our retail networks expands. Therefore, we intend to improve our information and sales system as mentioned in the section headed “Future plans and use of proceeds – Upgrade our information and technology systems” of this prospectus. After receiving the net proceeds from the Share Offer, our Company will begin seeking quotations from vendors in regards to the upgrade and we expect that we will start using part of the net proceeds allocated for this purpose in January 2014.

As at the Latest Practicable Date, each of our 13 Stores in operation has an on-site server to record financial and operation data on a real-time basis. The data from our individual stores are sent to and compiled at the central server in our headquarters in Zhongshan City, Guangdong Province, the PRC on a regular basis. Our management and relevant departments are then able to access and analyse the data in the operation of our stores and the development of future strategies.

Retail management, financial management and VIP card management systems

Our retail management system governs our basic day-to-day retail operation including purchases, sales, storage, direct suppliers and concessionaires management, sales and purchase budgeting, audits and settlements. This system recognises price adjustments to the retail price due to our special promotions and VIP card or other discounts as well as payments under the e-card or redemption methods under our arrangements with a mobile telecommunications service provider as set out in the section headed “Business – Marketing and promotions – Customer loyalty programs – Promotional arrangements with a mobile telecommunications service provider” of this prospectus.

By gathering data from our retail management system and using our financial management system, our employees can generate daily, monthly and annual sales or financial reports of among other things, our revenue, profits, units price as well as conduct necessary operational analysis. Another key aspect of our financial management system is the use of our POS system, which records sales and generates invoices, to assist our staff in their daily reconciliation of sales figures.

We have also established a system to manage our VIP customer information including: VIP cards management, communication with VIP customers; VIP spending analysis; and VIP gifts, promotions and discounts management. Furthermore, to ensure the protection of personal information of our VIP customers, we limit the access of such information to certain staff only.

– 182 – BUSINESS

Contingency plan

We have established a contingency plan in the event of systems breakdown and power failure and to ensure swift recovery of all systems in our stores. Our contingency plan includes a back-up server (with an independent power supply) in all of our stores to record store sales during power failures. We have a team to implement our contingency in case of contingencies. Each store is provided with detailed contingency, internal assessment and reporting and recovery procedures. We have not experienced any material breakdown or interruption in our information system, which resulted in prolonged or serious loss or significant damage in the past.

STAFF AND TRAINING

Employee

As at 30 September 2013, we had approximately 2,085 full-time employees. For the experience and qualifications of our Directors and senior management and other details regarding our employees, please refer to the section headed “Directors, senior management and staff” of this prospectus. We have established certain policies in regards to different categories of employees including for their training, assessment and benefits. Our Directors are of the view that we have maintained a good relationship with our employees and furthermore, confirm that during the Track Record Period, we did not have any material labour disputes with our employees.

Training

In order to ensure the quality of our service to our customers and their satisfaction, we have a standardised employee training program for all of our employees (including generally the staff of our concessionaires). This includes a detailed three days induction programme for all new recruits to familiarise themselves with our corporate culture, operational system, fire safety and the expected level of services to be provided to our customers. All existing employees are also required to undergo continuous skill development training from time to time. Furthermore, our senior management and certain promising employees are invited to attend training courses and programs organised by universities or professing training organisations to further enhance their knowledge and skills. The Directors believe that the training of new staff and the ongoing training of our current staff is the key to maintaining our customer-oriented services and attracting customers to our stores.

Assessment

We have established an assessment and incentive system based on their personal performance to reduce our staff attrition rates and motivate our employees to provide the quality services which our customers expect. Our Directors believe that as our employee comprehend the promotional opportunity available, they will be more likely to remain with us and are more likely to maintain and improve the level of customer service.

– 183 – BUSINESS

Benefits

As from 1994, we have provided certain social insurance to our employees in the PRC in accordance with the relevant PRC rules and regulations. Starting from April 2012, we have also begun contributing housing provident funds for our employees including for the period from 1 January 2012 to 31 March 2012. As at the Latest Practicable Date, we made contributions towards such pension insurance, medical insurance, unemployment insurance, injury insurance, maternity insurance and housing provident fund.

Except for certain housing provident issues as detailed in the sub-paragraph headed “Legal compliance and litigation – Non-compliant incidents” of this section, we were in compliance with all material local labour and employment regulations. In order to ensure on-going compliance of our Group including in relation to prevent future non-compliance with material local labour and employment regulations, we have adopted certain measures as at set in the sub-paragraph headed “Legal compliance and litigation – On-going compliance” of this section.

INSURANCE

Although we do not have insurance for product liability, we generally require the relevant concessionaire, supplier and in certain cases, shop tenant to indemnify us under the relevant agreement(s) where the products sold or supplied by it infringe a third party’s intellectual property rights. During the Track Record Period, we had three legal proceedings in which Guangdong Yihua Department Store was named as one of the defendants for selling products in our department store that infringed the plaintiffs’ intellectual property rights. In one case, the products being sold were stationeries and small toys imprinted with cartoon figures (the “First Case”); in the second case, the products being sold were music CD and DVD (the “Second Case”); and in the third case, the products being sold were luggage bags (the “Third Case”). Those products were supplied by Independent Third Party suppliers or sold by an Independent Third Party concessionaire at our store. The parties to First Case and Second Case reached out-of-court settlements and subsequently the plaintiffs had withdrawn their respective legal claims, while in the Third Case, the defendants won on appeal and therefore Guangdong Yihua Department Store did not have to pay any sum. In the First Case, Guangdong Yihua Department Store agreed to pay approximately RMB31,600 and the supplier agreed to pay approximately RMB10,600 to the plaintiff but both amounts were settled by the supplier. In the Second Case, the relevant supplier paid RMB30,000 to the plaintiff and Guangdong Yihua Department Store was not required to pay any sum.

Our Directors confirmed that the amount of insurance coverage taken out is typical for similar operations and sufficient for us.

– 184 – BUSINESS

COMPETITION

The PRC retail industry, particularly in regards to department store operators, is a highly competitive industry. We face constant pressures from small domestic stores and retailers to larger stores and, with the result of the PRC’s accession to the World Trade Organisation, possibly international operators of supermarkets, hypermarkets and department stores. Our stores target customers of middle and upper income segment in cities with high and rapid growing per capita disposable income in the PRC. Our key competitors are local and foreign department stores in the vicinity of our stores which: (i) sell similar merchandise at similar price levels; (ii) provide the same level of customer service; and/or (iii) promote and market their stores in a similar fashion. We may also face competition from our concessionaires and suppliers if they operate their own stores in the vicinity of our stores.

Although we adopt a number of measures to remain competitive, we compete, among other, for customers, suitable locations, suppliers and concessionaires and qualified employees. Competitive pressures may therefore affect our continuing operations and future expansion strategies. For further discussion concerning the risks in connection with our competitive environment, please refer to the section headed “Risk factors” particularly “Risk factors – We operate in a highly competitive industry and face increasing competition from online retailers” of this prospectus.

In particular, though our Company faces competition from online retailers, it is of the view that though our Company faces competition from online retailers in all cities (including second-tier and third tier cities where we operate) such direct competition is limited. We believe the competition is limited mainly due to the following:

(i) our department stores target the middle and upper income segments by providing a physical shopping experience to our customers (including the ability to examine and try the physical products (e.g. fitting of cloths or tasting of sample foods) and to enjoy special events hosted by us such as our food and culture festivals which are not generally available for online shopping);

(ii) we believe our quality assurance system such as staff inspection is especially important for our target customers in relation to goods such as fresh produce;

(iii) through a physical shop, we are able to provide additional services which we believe our target customers value such as post-sales service (e.g. item repair, refund and exchange guarantees for certain items) and direct communication channels for customers’ suggestions or complaints through our staff or the customer service centres in our department stores. In recognition of such service, we won in 2011, the ਕБุɤԳఊ؂ܝNational After-sale Service Industry’s Top 10 Entities*” (Ό਷ਯ“ З); and

(iv) a substantial portion of our sales are from repeat customers, being our VIP customers, which we believe through our customer loyalty program feels a connection to our stores.

– 185 – BUSINESS

Going forward, our Group will focus on our distinct strengths as set out above, we will also adopt the following strategies:

(i) during negotiations with and as a point to consider in choosing concessionaires and direct suppliers, we will discuss whether they will provide us with certain geographic exclusivity for agreed products and requiring that online retailers whom they sell such agreed products to comply with such exclusivity arrangement;

(ii) through invitation of shop tenants to located themselves in our stores and considering attractive businesses in the vicinity when developing new stores such as restaurants, movie theatres and other entertainment venues, aim to create the megacity complex with dining, entertainment, leisure services and increase our customers’ shopping experience; and

(iii) use our media information release through our website, magazine, brochure and leaflets concerning our merchandise and promotional events to strengthen our bond our customers and consider shopping with us before online retailers.

Although our Group does not currently have any plans to construct an online retailing platform, we may explore this area or other opportunities in the future.

LEGALCOMPLIANCEANDLITIGATION

Indemnification by a Controlling Shareholder of our Group’s non-compliance

Pursuant to the Deed of Indemnity, Mr. Chen Daren, one of our Controlling Shareholders, has undertaken to indemnify and keep fully indemnified our Group, amongst others, against any claims, demands, costs, expenses, fines, penalty, charges and losses including but not limited to:

• issuance of Consumption Cards as a form of pre-paid cards;

• non-registration of lease agreements;

• defective title;

• registering and opening accounts and full payment of housing provident fund;

• inter-company loans with interest; and

• non-compliance with section 122 of the Companies Ordinance. as detailed below.

– 186 – Our PRC Legal Advisers advised that based on the following factors, the risk of penalty (including retrospective penalty) to be imposed on us for the issuance of such Consumption Cards is remote and our Group can continue to issue the Consumption Cards pursuant to the Administrative Opinion and the Administrative Measures for Pre-paid Cards: (i) the PBOC, as the competent authority in charge of issuance of the token coupon under the laws and regulations of the PRC which prohibited the printing, sale, purchase and use of token coupons, has subsequently jointly issued the Administration Opinion allowing the issue of pre-paid cards;

The relevant branch of the(ii) PBOC our issuance of Consumption Cards has already fully complied with the may order the enterprises who issue the token coupon to stoprequirements of the Administration Opinion upon the issuance of the issuing token coupon and imposeAdministration Opinion on 23 May 2011 and continue to comply up to a maximum aggregate fine upthe to Latest Practicable Date; RMB200,000 on such enterprises under the Law of the People’s Bank of the PRC. (iii) completion of our registration as a pre-paid card issuer pursuant to the Administrative Measures for Pre-paid Cards and thereby we have fully If the issuer failed to register thecomplied with the Administrative Measures for Pre-paid Cards; pre-paid cards with the relevant Non-compliant incidents branch of MOFCOM within 90 days upon the Administrative(iv) based on our PRC Legal Advisers’ telephone consultation with the PBOC Measures for Pre-paid Cards at municipal level, the order to stop issuing and fine under the Law of the During the Track Record Period, our Group has failed to comply with certainbecoming applicable effective, laws the relevant and regulations in the PRC and Hong Kong, a As a group issuer of pre-paid People’s Bank of the PRC are generally, in practice, imposed on issuers authority is entitled to requestwho recognise the value of expired pre-paid cards as revenue. Based on summary of such material non-compliances are set outcard, below: Guangdong Yihua the issuer to rectify the situation Department Store is the only the confirmation of our Directors that we had never recognised any within a prescribed time limit.revenue If upon expiry of our Consumption Cards; and enterprise which needs to beLegalsuch issuer consequences, still fail to register, it registered and it had completedthemay potential be subject maximum to a finein penalty the Rectificationthe registration measures, with (i) Zhongshan currentandrange financial of RMB10,000 effect to Analysis(v) the written of the confirmations risk to the Company from Zhongshan Branch of the MOFCOM, statusBranch and of the provisions MOFCOM onRMB30,000. 29 Summary of non-compliance incidents and reasons March 2013; and (ii) Guangdong being the competent authority, has confirmed Guangdong Yihua Department Store since its establishment in October 1994 to the date of Issuance of Consumption Cards as a form of pre-paid cards Branch of the MOFCOM onBased 6 on the above, the relevant Incident:Before the year 2000 and up to the Latest Practicable Date, ourJune Group 2013. issued confirmation in 5 November 2013 complied with national and local laws, branch of PBOC may impose theregulations and rules concerning the supervision of market circulation ( maximum fine up to ̹ Consumption Cards. The issuance of Consumption Cards as a formOur of pre-paid PRC Legal cards Advisers was advise prohibited until the Administration Opinion came into effect in May 2011. RMB200,000 on us and orderఙݴஷ၍ଣ us ) (which includes those governing pre-paid cards as a currency that (i) our Consumption Cardsto stop issuing the Consumption are in compliance with the substitute circulating in the market) and did not receive any material fines Furthermore, we were not able to register Guangdong Yihua Department Store as a pre- Cards and the relevant branchrelating of thereto. Furthermore, based on our PRC Legal Advisers’ Administration Opinion andMOFCOM may impose the paid card issuer within 90 days pursuant to the Administrative MeasuresAdministrative for Pre-paid Measures for Pre- telephone consultation with the relevant authorities at provincial and Cards, which was effective on 1 November 2012. Based on our enquiries to Zhongshan maximum fine up to RMB30,000municipal level, it is unlikely that the aforesaid confirmations obtained paid Cards as at the Latest on us. Branch of the MOFCOM, Guangdong Branch of the MOFCOM wasPracticable finalising the Date; details (ii) the relevant will be challenged or revoked by higher level authorities. for the implementation of the registration system and therefore we arePRC unable laws toand register regulations in neither a timely manner. provide any measures to order the issuer to redeem all the Reasons:Our Directors are of the view that irrespective of the regulatoryoutstanding restrictions pre-paid in cards nor to the PRC, it is a common practice in the PRC for department storesrequire to issue to pre-paid refund cardsthe relevant and cessation of the issuing of the Consumption Cards will put the Groupincome at generated a competitive from the funds disadvantage to our peers. Furthermore, they are of the view that theof relevant the pre-paid authorities cardholders; and have recognised this practice as indicated from (i) the fact that up to(iii) the the Latest risk Practicable of penalty for the Date, we did not receive any order or were not aware of any administrativeissuance action of pre-paid having cards prior to BUSINESS been taken by the relevant PRC authorities against our Group in respectthe Administration of our Group’s Opinion to be – issue and sale of the Consumption Cards and instead received writtenimposed confirmations on our Group from is remote.

8 – 187 the relevant branch of MOFCOM accepting such practice; and (ii) asBased detailed on the in the above advice and section headed “Regulations – Provisions on pre-paid cards” of thisthat prospectus, Mr. Chen the Daren, PRC one of our laws and regulations which have been prohibited such pre-paid cardsControlling have been Shareholders, reinterpreted by the Administration Opinion and the Administrativeindemnified Measures for our Pre-paid Group for such Cards to acceptance of such pre-paid cards subject to the satisfactionpenalty of the pursuant requirements to the Deed of thereunder. Indemnity, no provision therefore was made for this non-compliance. We have not received any written confirmations from the relevant authorities concerning such non-registration of leases.

Furthermore, the majority of relevant landlords have agreed to indemnify us if Our PRC Legal Advisers havethere is any penalty imposed on us for such non-compliance. our Group is also advised us that the failure tonegotiating with the lessors for the registration of the lease agreements or register the lease will not affectinclusion of clauses in the lease agreements which would oblige the lessors to the validity of the lease procure registration of the lease agreements upon their renewal. agreements.

If the lease agreement is not registered within 30 days after the signing, the relevant authority Legalis entitled consequences, to request the parties As at the Latest Practicable Date, theof the potential lease agreement maximum to penalty rectify Rectification9 of 38 lease agreementsmeasures, current ofand the financial effect Analysis of the risk to the Company status and provisions the situation within a prescribed Summary of non-compliance incidents and reasons properties leased and occupied by time limit. If the parties still fail our Group had not been registered to register the lease agreement,Our PRC Legal Advisers confirm that the relevant branch of MOFCOM is with the relevant authorities in competent in giving such confirmations and it is unlikely that such they may be subject to a fine in accordance with the PRC laws and confirmations will be challenged or revoked by higher level authorities. Non-registration of lease agreements the range of RMB1,000 to regulations. Out of the 9 lease RMB10,000 for each lease Incident:As at the Latest Practicable Date, certain lease agreements signedagreements, in relation the landlords to of four agreement not registered. our leased premises in the PRC have not been registered or filed withlease relevant agreements authorities have not obtained the building ownership within 30 days after the signing thereof in accordance with the applicable PRC laws. Therefore, the maximum fine is certificates and two lease estimated to be RMB90,000. Reason(s):Our Group has devoted considerable effort to arrange for theagreements registration are of with the Connected Person of our Group. lease agreements. However, we are unable to register the lease agreements without the relevant landlord’s assistance and after our request, certain landlords have still failed to Given that (i) certain landlords register or file the lease agreements. There are two un-registered leases relating to the have agreed to indemnify us if Connected Persons of our Group, of which (i) lease relating to the Fusha store was not there is any penalty imposed for able to be registered due to lack of building ownership certificate (for the current status of such non-compliance; and (ii) Mr. the rectification, please refer to the paragraph headed “Leased Property” of this section); Chen Daren, one of our and (ii) lease relating to part of the Guzhen store was not able to be registered as the said Controlling Shareholders, lease is a sub-leased property and the relevant landlord, being the Connected Person of our indemnified our Group for such Group is unable to register lease without assistance of the property owner from whom such penalty pursuant to the Deed of landlord is leasing. We understand that after requests to the property owner, it still has not Indemnity, no provision was made registered or filed the relevant lease agreement. However, based on our PRC Legal for this non-compliance. Advisers’ view that the failure to register the lease will not affect the validity of the lease BUSINESS agreements, we intend to continue using such premises despite the lack of lease

– registration as at the Latest Practicable Date. 8 – 188 We have received written confirmations from the relevant branch of PBOC, to of Jiangmen Yihua Department Store (being 24 August جॡ༣ΥΝ٧ॸࣩ΁Ո᜗Ꮠ͜܊ג৫ᗫ׵ᄲଣ۬ᕄجAccordingsince the establishment௰৷ɛ͏ 2004) and up to 31 May 2013, there is no administrative action taken against ߰ʍਪᕚٙ༆ᙑJiangmen Yihua(Interpretation Department Store of the and Supreme Jiangmen People’s Yihua Court Department on Several Store didܛ Issuesnot breach concerning any relevant the Application laws, regulations of Law or in rules. the Trial of Cases about Disputes over Lease Contracts on Urban Buildings*), the People’s Court of the PRC generallyWe are advised recognised by our the PRC validity Legal of Advisers a lease agreement that the abovementioned where the landlord authority has obtainedis competent the construction to give such work confirmations planning and permit it is and unlikely the building that such construction As set out in the section headedhadconfirmations complied withwill be the challenged terms set forth or revoked in the byconstruction higher level work authorities planning and “RiskLegal factors”consequences, of this prospectus,permit.based on Given such that confirmations, (i) all of the the properties risk of the without fine is building minimal. ownership the potential maximum penaltycertificates mentioned below have the construction work planning permit; and Rectification measures, currentasAccording at the Latest to the Practicable General Rules Date, ifand we financial were forced effect to relocate(ii)AnalysisAs due at the the respective of Latest the riskPracticable landlords to the CompanyofDate, the the said Directors properties confirmed had been that verified they wereas the not Forstatus the and current provisions status of thefor Loans, the PBOC may (i)legalaware owners of any through administrative the obtained action permits havingbeen and certificates taken by the of relevant the said PRC Summary of non-compliance incidents and reasons toimpose the title on the defect, lender our a business fine rectification, please refer tooperations the in the relevant stores,properties,authorities againstour PRC our Legal Group Advisers in respect are of of the inter-company view that the loans. relevant landlords Defective title sub-paragraph headed “Leasedequivalent to one to five timeshave of the right to lease the premises to us and the lease agreements are valid Incident:During the Track Record Period, the landlords of the properties for Jiangnan wouldits income be disrupted derived from or suspended, such property” of this section. and our financial conditionand and enforceable. community store, Fusha community store and Yingde store and Tai’an store (Longtan) and loan transactions; and (ii) resultssuppress of such operations lending may activity. be part of our Guzhen store, where we conduct our business operationsFurthermore,As have at the not Latest provided Mr. Practicable Chen us Daren,affected. Date, one In the event of forcedAs at the Latest Practicable Date, our Directors are not aware of any dispute with building ownership certificates relating to the aforesaid properties.ofthe our loan For Controlling andfurther relevant details Shareholders, interests concerning the ownership of the premises without ownership certificates. relocation,Furthermore, our as Directors advised by our concerning such properties including the status of obtaining buildingindemnifiedhave ownership been fully our repaid Group and in relation thereestimated is that the time and Inter-companycertificates, please loans refer with to interest the sub-paragraph headed “Leased property”tono the dispute of costs this for section. of the rectification loans andPRC its Legal Advisers, there is a aggregatelimitation costperiod required of two for years for Incident:During the Track Record Period, Jiangmen Yihua Departmentpursuantinterests. Store granted to the Deed of Indemnity.relocation of the operations in Reason(s): We entered into the lease agreements based on our understanding that the such claim and therefore, no certain loans to Yihua Investment with details as follows: thepenalty aforesaid should properties be made are in Given that (i) our PRC Legalapproximately two months and landlord has the right to lease the property and are the actual legal ownersAdvisers to are the of property. the view thatrespect the of the interests received • loans amounted to RMB20 million, RMB50 million, nil and nil respectively as at 31 approximatelyprior to 30 June RMB6.1 2011. million risk of fine for the said inter-respectively. December 2010, 2011 and 2012, and the five months ended 31 Maycompany 2013 loanand borne is minimal; and (ii) Mr. Chen Daren, one of ourBased on the aggregate amount interest at approximately 6.03%, approximately 4.85%, approximately 9.00% and nil of RMB1.9 million of interest per annum respectively; Controlling Shareholders, indemnified our Group for suchincome from 1 September 2011 fine pursuant to the Deed ofto 31 December 2012 and the • highest amount of loans during the years ended 31 December 2010,Indemnity, 2011 and no provision 2012 wasDirectors made confirming that no for this non-compliance. interest income from such and the five months ended 31 May 2013 was approximately RMB35 million, lending activities was received approximately RMB50 million, approximately RMB50 million and nil respectively; from 1 January 2013 to the and Latest Practicable Date, the potential maximum fine is RMB9.6 million. • interest income of approximately RMB1.9 million, approximately RMB2.9 million, approximately RMB1.0 million and nil respectively from such loans for each of the three years ended 31 December 2010, 2011, 2012 and the five months ended 31 May BUSINESS 2013. –

8 – 189 As advised by our PRC Legal Advisers, the loans do not breach any PRC laws or administrative regulations but fall within the category of unauthorised loans under the General .which is a rule of a government departmentۆRules for Loans൲ಛஷ

Reason(s):The reason for the loan was to better utilise certain unused funds by Jiangmen Yihua Department Store. We received written confirmations from the competent housing fund management centres that Guangdong Yihua Department Store, Guzhen Yihua Department Store, Lonwalk Mould, Qingyuan Yihua Department Store, Jiangmen Yihua Department Store and Shaoguan Yihua Department Store were in compliance with the relevant PRC laws and regulations for the housing provident funds during the Track Record Period except as noted below.

The written confirmations did not cover the entire Track Record Period (Qingyuan Yihua Department Store in 2011, Jiangmen Yihua Department Store and Shaoguan Yihua Department Store in 2010 and 2011 are not covered) as we did not make payment during such periods.

Based on written confirmations from and through interviews with the relevant local housing fund management centres, our PRC Legal Advisers are of the view that According to the relevant PRC laws and regulations, failure(a) to the risk for rectification order on Guangdong Yihua Department Store, open accounts for our employees and to contribute to the housingGuzhen Yihua Department Store and Lonwalk Mould for payment of provident funds for the periodsoutstanding housing provident fund is low; prior to 2012 by our Group are therefore subject to a rectification order by the (b) the risk for rectification order on Qingyuan Yihua Department Store competent housing fund payment of outstanding housing provident fund prior to January 2011 is management centre to rectify low; and within a prescribed time limit.

If the employer fails to open(c) the risk for rectification order on Jiangmen Yihua Department Store and Legalsuch accounts consequences, within such the potential maximum penaltyShaoguan Yihua Department Store payment of outstanding housing Rectification measures, currentandprescribed financial time effect limit, a fineAnalysis inprovident of the fund risk in 2012to the is Company low. In April 2012, we opened accountsthe range of RMB10,000 to Summary of non-compliance incidents and reasons status and provisions of the housing provident fundRMB50,000 and will be imposed for made housing provident funds Opening of accounts and full payment of housing provident fund failure to open the account.We are advised by our PRC Legal Advisers that each of the relevant housing Incident:We did not open accounts of the housing provident fund for ourcontribution employees for and employees from 1 January 2012 to 31 March 2012. provident fund management centres mentioned above are competent to give such had not made any such contributions prior to 2012. In relation to the failure inconfirmations and it is unlikely that such confirmations will be challenged or payment of the housing provident Since April 2012 and up to the revoked by higher level authorities. We estimate aggregate outstanding housing provident fund payment amount incurred fund in time or any Latest Practicable Date, weunderpayment have thereof, our PRC ,෧Ϟࠢʮ̡ January 2013ءduring the Track Record Period (where we have not received confirmationsmade housing from the provident fund Pursuant to an undertaking dated 31ʕʆ̹ࣦശᅼՈ competent authorities) to be RMB1.5 million. Legal Advisers confirm that there payments for the relevant is no other penalty besides (Zhongshan Lonwalk Mould Zhusu Limited*) has agreed to indemnify Lonwalk employees. Mould concerning among others, non-compliance arising from incorporation of Reason(s):Our understanding that opening accounts and contributions of housing payment of the outstanding amount under the rectificationLonwalk Mould to the date of the undertaking. provident fund are still in the promotional stage for the non-public enterprisesAs we have in not second- received anyorder. tier cities such as Zhongshan, Jiangmen, Qingyuan and Shaoguan, Guangdongrectification Province, orders from the the PRC. competent housing fund Therefore the potential management centres, we haveconsequence not for the non- paid the outstanding housingcompliance during Track Record provident fund amount priorPeriod to is expected to be 2012. payments of RMB1.5 million, being the outstanding amount and Based on written confirmationsthe fine of RMB50,000. from the competent housing fund management centers and the indemnification under the Deed of Indemnity, provisions are made for this non-compliance in regards to BUSINESS Jiangmen Yihua Department Store,

– Qingyuan Yihua Department Store

9 – 190 and Shaoguan Yihua Department Store only. Provisions of approximately RMB0.5 million, approximately RMB1.0 million and nil respectively were made for the aforesaid for the year ended 31 December 2010, 2011 and 2012. We have not received any written confirmations from the relevant authority Asconcerning payment such is already non-compliance made, our incident. PRC Legal However, Advisers the are High of the Court view of that Hong thereKong is has no granted risk concerning order on 28the October identified 2013 non-compliance. for the extension of time to lay A director who fails to take all LegalPursuant consequences, to the Confirmationthe said accounts and those accounts are duly laid at the annual general reasonable steps to comply with thefrom potential the relevant maximum authority, penaltymeeting we of Intelligence Link on 8 July 2013. RectificationAs at the Latest measures, Practicable currentandwerethe Date, requirements financial subject to effect a is fine liable of toAnalysis a of the risk to the Company Summary of non-compliance incidents and reasons statuswe have and fully provisions paid the fine.RMB110,000maximum fine and of HK$300,000which has sinceand may been be paid. sentenced to Other administrative notices Because of the above payment,imprisonment no for up to 12 In our due diligence investigations of Lonwalk Mould for matters duringprovision the Track was made Record for thismonths. non- Period and pursuant to a confirmation dated 15 January 2013 (“Confirmation”)compliance. from Zhongshan Customs House of the PRC, we received notice that in 2010, Lonwalk Mould claimed certain tax exemptions for duty free materials but when the relevant authorities checked to verify this claim, it did not provide sufficient explanation as to the whereabouts of certain duty free materials and it was fined. Application has been made to the Reason(s): During the Track Record Period, Lonwalk Mould was notHigh wholly Court owned under by section our 122(1B) ControllingNon-compliance Shareholders of section and 122 its of management the Companies was not Ordinance in our completeof the control Companies and Ordinance for Incident:From incorporation and up to the discovery of the non-compliance in 2012, the adequate records might not have been kept. an extension of time on the laying directors of Intelligence Link did not cause the profit and loss accountof accounts and balance on 13 sheet June 2013. The of Intelligence Link to be made up and laid before its shareholder atHigh each Court annual of general Hong Kong granted meeting in accordance to section 122 of the Companies Ordinance. the aforesaid order on 28 October 2013. The High Court of Hong Reason(s):The directors of Intelligence Link were under the misunderstandingKong granted that the the order on 28 requirement was inapplicable in cases where there was only one shareholder.October 2013 Furthermore, which allowed the the management of Intelligence Link relied on the company secretarialrequirement firm which under served section 122(1) as company secretary of Intelligence Link for the performance of administrativeof the Companies duties. Ordinance to lay the previous profit and loss accounts of Intelligence Link at its past general meetings from 1994 to 2012 be substituted to a requirement to lay the said Accounts at the annual general BUSINESS meeting of Intelligence Link held

– on 8 July 2013. 9 – 191 Furthermore, we are currently seeking a suitable replacement for the company secretary of Intelligence Link.

Based on the above reasons and indemnification under the Deed of Indemnity, no provision was made for this non-compliance. BUSINESS

On-going compliance

In order to ensure ongoing compliance with any laws, rules and regulations as aforesaid as recommended by the Internal Control Adviser and to prevent future occurrences of the incident set out in the paragraph “Theft by employee” of this section, we have implemented the following internal control measures:

• in relation to lease registration compliance, our Group has set up and maintained a register of lease agreements with particulars including registration status. During negotiations for signing new lease agreements, our management works more closely with our staff to require and monitor the landlord’s registration and filings of the lease agreements in accordance with the applicable PRC laws. Furthermore, where we have the landlord’s consent, we undertake to register and file future lease agreements;

• in relation to properties with defective title, we will perform the measures set out in the sub-paragraph headed below “Independent non-executive Directors’ approval and other measures concerning defective title” of this section;

• in relation to quality standard issues, our Company will keep adequate records of any notice of penalty from government authorities concerning any sub-standard goods of concessionaires or suppliers which are brought to its attention and which are sold in or supplied to our stores;

• prior to Listing we established an internal control committee, comprising Mr. Leung Wai Kwan, Ms. Wang Guping and Mr. Zhang Tianguo, a part-time consultant with the PRC legal experience (for details of the duties of the committee, the experience of Mr. Zhang and reasons for appointing Ms. Wang, please refer to the section headed “Directors, senior management and staff – Internal control committee” of this prospectus), to update our Group and advise on the effectiveness of the internal control system of our Group. Ms. Wang Guping, a member of our senior management has been appointed as our internal compliance adviser. Ms. Wang is responsible for implementation of recommendations and generally for managing and overseeing matters in connection with regulatory compliance with our PRC operations. This committee (including Ms. Wang) will have access to external professional advisers retained by us from time to time as necessary including legal counsels, auditors and other advisers;

• we have appointed Baker Tilly Hong Kong Business Services Limited, an independent internal control adviser upon Listing to perform further detailed evaluation of the adequacy and effectiveness of our internal control system, recommend action plans for improvements in areas (which include compliance functions and the matters set out in the paragraph “Management and operations – Store management – Theft by employee” of this section) under their review;

• we will appoint Kingsway Capital Limited as our compliance adviser upon Listing to advise our Group on compliance matters in accordance with Rule 3A.19 of the Listing Rules;

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• our Group adopted a number of internal control measures to strengthen our internal controls over cash collection management and segregation of duties to prevent future incidents of theft from employees as well as enhanced measures concerning bribery and money laundering involving Consumption Cards as set out in the paragraph headed “Management and operations – Store management – Theft by employee” of this section;

• our audit committee will periodically review our compliance records and internal control measures and disclose their review results and confirmation on our compliance record in our annual reports; and

• our Directors have received training on duties and obligations as Directors under the Listing Rules. Furthermore, on 5 July 2013, the executive Directors as well as the members of the internal control committee and certain members of senior management received training from the Company’s legal adviser to reinforce their knowledge on the non-compliances issues as set out in this prospectus specifically the legal requirements and proper procedures and on 11 July 2013, the executive and non-executive Directors as well as the members of the internal control committee received training by representatives of Hong Kong’s Independent Commission Against Corruption on 11 July 2013. We will develop training programs, with the assistance of the external PRC legal counsel, to update relevant employees on the applicable PRC laws and regulations including, but not limited to the relevant PRC laws, rule and regulations on pre-paid cards and anti-corruption awareness training, lease agreements, inter-company loans, laws on social insurance and housing provident fund respectively.

Independent non-executive Directors’ approval and other measures concerning defective title

In relation to properties with defective title, we will perform due diligence on properties prior to leasing them so as to ensure that the landlord is the real owner and has the right to lease the property in accordance with the PRC laws, rules and regulations. Before entering into future leases where the owner has not provided the building ownership certificates, we will seek approval from all our independent non-executive Directors. For purposes of deliberating on whether to grant such approval, our independent non-executive Directors will consider the background on the case including but not limited to (i) whether the purported landlord is the legal owner; (ii) whether the lease agreement will be valid and enforceable; and (iii) the circumstances leading to the defective title. Our executive Directors (with assistance from relevant staff) will seek relevant information concerning the defective title and provide it to our independent non-executive Directors. Furthermore, our independent non-executive Directors will have access to PRC legal counsel (and where deemed appropriate by them, other professional advisers and experts) to address their queries and such PRC legal counsel will be engaged to issue a report on the reason for the title defect, verification that the purported landlords are the legal owners of the property and investigate the expected timetable for rectification in the title defect. We will also disclose the leases which should have but not yet obtained building ownership certificates in our annual and interim report and any material updates on the status on the obtaining of the building ownership certificates. In case there is

– 193 – BUSINESS a material delay in landlord’s expected timetable for rectification of the title defect, our independent non-executive Directors will seek reasons for the delay and consider possible action by our Group including legal options under the terms of the relevant lease.

The Internal Control Adviser’s, the Directors’ and the Sponsor’s views

The Internal Control Adviser has reviewed and made suggestions on the measures relating to the incident concerning theft by employee (including issues such as cash collection management, segregation of duties, bribery and money laundering involving Consumption Cards) and the aforesaid non-compliance incidents. As at the Latest Practicable Date, our Group has implemented the measures to the satisfaction of the Internal Control Adviser.

Our Directors are of the view, and the Sponsor concurs, that having considered (i) the suggested and enhanced measures offered by the Internal Control Adviser and the implementation of such measures to the Internal Control Adviser’s recommendations; (ii) the training to relevant employees from time to time on relevant laws, rules and regulations; and (iii) our Group’s responsible teams (the audit committee, the internal control committee and internal compliance adviser) with support from external professional advisers (the Internal Control Adviser, the compliance adviser and external counsel), the various internal control measures adopted by our Group are and should be adequate and effective under Rule 3A.15(5) of the Listing Rules.

Litigation

From time to time, we may also become involved in legal proceedings (primarily customer claims, labour claims and supplier claims) which are common in the industry and in the ordinary course of business. Our Directors confirmed that during the Track Record Period, none of these proceedings, individually or in aggregate had, and there are no legal proceedings or arbitrations, pending or threatened, against us (including but not limited to labour disputes) or any of our Directors that could have a material adverse effect on our financial condition or results of operation.

INTELLECTUALPROPERTYRIGHTS

Trademarks

We have relied on our brand name “Yihua Department Store” which is registered as a trademark and owned by our Group.

As at the Latest Practicable Date, we have:

• registered 60 trademarks in the PRC and have applied for the registration of 46 trademarks in the PRC; and

• registered four trademarks and have applied for the registration of one trademark in Hong Kong.

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Domain name

We are the registrant of the domain name www.yihua.com.cn.

For details of our registered trademarks, trademark applications, domain name and other intellectual properties, please refer to the section headed “Statutory and general Information – B. Further information about the business of the Group – 2. Intellectual property rights of the Group” in Appendix IV to this prospectus.

Our Directors confirms that as at the Latest Practicable Date, they are not aware of any material infringement of our intellectual property rights nor were there any material litigation or material disputes involving our intellectual property rights that we used during the Track Record Period in the PRC and Hong Kong.

AWARDS AND RECOGNITIONS

Business

Due to our established history in Guangdong Province, the PRC and particularly in Zhongshan City, we have received numerous awards and recognition concerning our business some of which are listed below:

Year Awards/Accreditations Issued by

2013 “Top 50 Chain Enterprises of Guangdong Province Chain Store Guangdong, 2012*” Association* (ᄿ؇ஹᕁʞɤ੶Άุ) (ᄿ؇޲ஹᕁ຾ᐄ՘ึܓ2012ϋ)

2012 “Top 100 National Fair Trade China General Chamber of Wholesalers (Honesty) Commerce* Enterprise*” (ʕ਷ਠุᑌΥึ) Άุ China Consumer Protection(ڦΌ਷ཧਯਠʮ̻ʹ׸(༐) ɓϵ੶) Foundation* and (ึږᚐऊ൬٫ਿڭʕ਷) National Wholesalers and Suppliers Fair Trade (Honesty) Grading Committee* (ڦΌ਷ཧਯਠԶᏐਠʮ̻ʹ׸(༐) (൙ᄆݺਗଡ଼ᔌ։ࡰึ

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Year Awards/Accreditations Issued by

2011 “Top 50 Chain Enterprises of Guangdong Province Chain Store Guangdong, 2010*” Association* (ᄿ؇ஹᕁʞɤ੶Άุ) (ᄿ؇޲ஹᕁ຾ᐄ՘ึܓ2010ϋ)

“Trustworthy Enterprise of Guangdong Province Industry and Zhongshan City, Guangdong Commerce Administration Province for continuous 15 Bureau* years*” (ᄿ؇޲ʈਠБ݁၍ଣ҅) and ஹᚃɤʞϋᄿ؇޲eʕʆ̹ςΥ Zhongshan City Industry and) ͜Άุ) Commerce AdministrationڦΝࠠ Bureau* (ʕʆ̹ʈਠБ݁၍ଣ҅)

“National After-sale Service China General Chamber of Industry’s Top 10 Entities*” Commerce* (ਕБุɤԳఊЗ) (ʕ਷ਠุᑌΥึ؂ܝΌ਷ਯ) China Consumer Protection Foundation* (ึږᚐऊ൬٫ਿڭʕ਷) National Assessment Committee for Merchandise After-Sale Services* (ਕ൙ᄆ։ࡰึ؂ܝΌ਷ਠۜਯ)

2010 “Well-known brand of Guangdong Guangdong Province Well-known Province*” Brand Evaluation Committee* (ᄿ؇޲ഹΤਠᅺ) (ᄿ؇޲ഹΤਠᅺႩ֛։ࡰึ)

“Triple A Credit Rating China General Chamber of Enterprise*” Commerce* (͜Άุ) (ʕ਷ਠุᑌΥึڦ͜൙ᄆAAAॴڦΆุ)

“National Advance Enterprise of China General Chamber of Quality and Efficiency in Commerce* Commerce*” (ʕ਷ਠุᑌΥึ) (Ό਷ਠุሯඎࣖूۨ΋ආΆุ)

2009 “Top 10 National Fair Dealing China General Chamber of Entities*” Commerce* (Ό਷ʮ̻ʹ׸БุɤԳఊЗ) (ʕ਷ਠุᑌΥึ) PRC Enterprises Newspaper Office* ,ʕ਷Άุజٟ) and) National Determination of Fair Dealing for Retailers and Suppliers Organising Committee* Ό਷ཧਯਠԶᏐਠʮ̻ʹ׸൙ᄆ) (ݺਗଡ଼ᔌ։ࡰึ

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Year Awards/Accreditations Issued by

2006-2008 “Model Trusted Enterprise of Guangdong Province Enterprises Guangdong Province*” Confederation* ᇍΆุ) (ᄿ؇޲ΆุᑌΥึ) andͪڦᄿ؇޲༐) Guangdong Province Entrepreneurs Association* (ᄿ؇޲Άุ࢕՘ึ)

2006 “Key Logistics Enterprises of Zhongshan Economic Zhongshan City*” and Trade Bureau* (ʕʆ̹ݴஷᎲ᎘Άุ) (ʕʆ̹຾᏶൱׸҅)

2001 “National Youth of Civilisation Communist Youth League Entity*” Centralised Domestic Trade *ϋ˖׼໮) BureauڡΌ਷) (ʕ̯਷࢕਷ʫ൱׸҅ྠڡ΍)

2000 “Trusted and Rights Protected China Consumer Association (Entity*” (ʕ਷ऊ൬٫՘ึ (ၪᛆఊЗڦ༐)

Product quality and safety

In recognition of our commitment to product quality and safety of the merchandise sold in our stores, we have received awards and recognition, some of which are listed below:

Year Awards/Accreditations Issued by

2004 “Guangdong Province Food and Guangdong Food Profession Drug Quality-Assured Model Union* (Entity*” (ᄿ؇޲࠮ۜБุ՘ึ ːʈ೻ͪᇍఊ Guangdong Pharmaceutical׳ᄿ؇޲࠮ۜᖹۜ) З) Profession Association* (ᄿ؇޲ᔼᖹБุ՘ึ)

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Community welfare

Besides maintaining our business, we are also committed to contributing to the local community where our stores are located. Set out below are some of the awards and recognitions we have received for our community service activities:

Year Awards/Accreditations Issued by

2011 “Enthusiasm on Charity – Caring Zhongshan People’s Government for Healthy Development of the Eastern District Office* (Youth*” (ʕʆ̹ɛ͏ִ݁؇ਜ፬ԫஈ The Communist Youth League of (ڗϋ਄ੰϓˇڡᆠːʮू{ᗫฌ) China, Zhongshan Eastern District Working Committee* (ʕʆ̹؇ਜʈЪ։ࡰึྠڡ΍) Youth Volunteer Service Team of Zhongshan Eastern District* ਕʈЪ່)ϋқᗴ٫ڡʕʆ̹؇ਜ) (ਕᐼඟ؂(٫

2010 “Hundred Enterprise Helping Disability Working Committee of Hundred Family of Poor and Zhongshan People’s Government* Disability – Caring Enterprise*” (ʕʆ̹ɛ͏ִ݁ಞशɛʈЪ։ࡰ (ϵ࢕ΆุᏍҧϵ˒மѢಞश࢕ࢬ ึ) (ݺਗฌːΆุ

2004 “Contributory Award on Zhongshan Leading Team Office Supporting Province Committee on Poverty* and Province Government on 10 (ʕʆ̹ҧமჯኬʃଡ଼፬ʮ܃) Fund Raising Activities*” Zhongshan Administration for *޲։޲ִ݁ɤධ͏ːʈ೻෍ Industry and Commerceܵ˕) (࣏ݺਗ্ᘠᆤ) (ʕʆ̹ʈਠБ݁၍ଣ҅ Zhongshan Individual Worker Association* (ʕʆ̹ࡈ᜗௶ਗ٫՘ึ) Zhongshan Private Enterprise Association* (ʕʆ̹ӷᐄΆุ՘ึ)

1999 “Respect the Elderly Caring Entity Zhongshan Elderly Working of Zhongshan*” Committee* (ʕʆ̹యϼหϼฌːఊЗ) (ʕʆ̹ϼᙧʈЪ։ࡰึ)

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PROPERTY

As at the Latest Practicable Date, our 13 Stores, logistics centre and staff quarters were located in properties leased by our Group. As at the Latest Practicable Date, our 13 Stores currently in operation occupy an aggregate lettable area of approximately 330,816 sq.m. (of which approximately 279,770 sq.m. is retail space).

Owned property

During the Track Record Period and up to 6 June 2013, we owned Level 1 of West Wing of Yihua Commercial Centre located at Zhongshan 3rd Road, East District, Zhongshan City, Guangdong Province, the PRC (“West Wing Level 1”), a floor on which our electrical appliances section of our main store in Zhongshan is located. We also own and will continue to own after Listing staff quarters located at Units 302-303, Block G, Furong Garden, Zhongshan 2nd Road, Shiqi District, Zhongshan City, Guangdong Province, the PRC.

To reflect the actual circumstance where West Wing Level 1 was historically treated as being owned by Yihua Investment, we assigned the right of West Wing Level 1 to Yihua Investment, being a member of the Yihua Investment Group. After completion of the assignment on 7 June 2013, the relevant connected party leased this property back to us (further details of which are set out in the section headed “Connected transactions – III. Non-exempt continuing connected transactions” of this prospectus).

On 20 June 2012 and as part of the Reorganisation (further details of which are set out in the section headed “History and development – Corporate reorganisation” of this prospectus), we transferred ownership of the aforementioned staff quarters from Zhongshan Yihua Management to Guangdong Yihua Department Store prior to Zhongshan Yihua Management’s expected deregistration (for further details, please refer to the section headed “History and development – Corporate reorganisation – Disposal and deregistration of certain subsidiaries” of this prospectus).

Leased property

As at the Latest Practicable Date, we entered into 38 lease agreements in the PRC with an aggregate lettable area of approximately 330,816 sq.m. These lease agreements are entered into with Independent Third Parties except as set out in the section headed “Connected transactions – III. Non-exempt continuing connected transactions” of this prospectus).

In regards to our stores in operation, four of our Stores have an individual GFA of 30,000 sq.m. or more, five of our Stores have an individual GFA of over 10,000 sq.m but less than 30,000 sq.m., while four of our remaining Stores have an individual GFA of less than 10,000 sq.m.. Our logistics centre is also on leased premises and occupies a total area of approximately 8,000 sq.m..

We intend to enter into a lease agreements for premises in Hong Kong for use as our principal place of business in Hong Kong. As at the Latest Practicable Date, we have not entered into any agreement relating thereto.

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Except as set out in the paragraphs headed “Legal compliance and litigation – Non-compliant incidents” of this section, all of said leased agreements have been registered with the relevant PRC authorities.

The following table sets out a summary of the property interests rented and occupied by our Group. It should be noted that some of our leases may include more than one of the below properties:

No. Description/Location Lessee/Sub-lessee Lettablearea Usage Note (sq.m.) (approx.)

(1) Portion of the podium of Century Guangdong Yihua 23,443.83 Commercial (i) Plaza located at Zhongshan 3rd Department Store Road, East District, Zhongshan City, Guangdong Province, the PRC

(2) Portion of the podium of Century Guangdong Yihua 6,500.00 Commercial (i) Plaza located at Zhongshan 3rd Department Store Road, East District, Zhongshan City, Guangdong Province, the PRC

(3) Portion of Level 2, Levels 3 to 6 of Guangdong Yihua 7,956.38 Storage and office (i), (ii) a logistics centre located beside Department Store Linggang Memorial arch, Linggang Village, Torch Development District, Zhongshan City, Guangdong Province, the PRC

(4) Levels 1 to 2 of West Wing of Yihua Guangdong Yihua 5,115.25 Commercial (i) Commercial Center located at Department Store Zhongshan 3rd Road, East District, Zhongshan City, Guangdong Province, the PRC

(5) Level 5 of West Wing of Yihua Guangdong Yihua 2,497.35 Commercial (i) Commercial Center located at Department Store Zhongshan 3rd Road, East District, Zhongshan City, Guangdong Province, the PRC

(6) Room 901, Level 9 of West Wing of Guangdong Yihua 1,888.38 Office (i) Yihua Commercial Center located at Department Store Zhongshan 3rd Road, East District, Zhongshan City, Guangdong Province, the PRC

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No. Description/Location Lessee/Sub-lessee Lettablearea Usage Note (sq.m.) (approx.)

(7) Levels 1 to 3 of East Wing ofYihua Guangdong Yihua 4,444.38 Commercial (i) Commercial Center, Zhongshan 3rd Department Store Road, East District, Zhongshan City Guangdong Province, the PRC

(8) Room 501 of East Wing of Yihua Guangdong Yihua 1,063 Commercial (i) Commercial Center located at Department Store Zhongshan 3rd Road, East District, Zhongshan City, Guangdong Province, the PRC

(9) Levels 3 to 4 of West Wing of Yihua Zhongshan Yihua 5,056.76 Commercial (i) Commercial Center located at Shijia Zhongshan 3rd Road, East District, Zhongshan City, Guangdong Province, the PRC

(10) Portion of Levels 1 to 3 of Guangdong Yihua 17,431.68 Department Store (i) Taiyangcheng Commercial Center, Department Store Haibangcun Torch Development District Zhongshan City, Guangdong Province, the PRC

(11) Retail 3 of Level 1 of Guangchang Qingyuan Yihua 43.83 Commercial and (i) 3rd Street of Qingyuan City Square Department Store department store No. 18 Xianfeng Mid Road, Qingcheng District, Qingyuan City, Guangdong Province, the PRC

(12) Retail Unit 7 of Guangchang 3rd Qingyuan Yihua 43.23 Commercial and (i) Street of Qingyuan City Square No. Department Store department store 18 Xianfeng Mid Road, Qingcheng District, Qingyuan City, Guangdong Province, the PRC

(13) Retail Unit 8 of Guangchang 3rd Qingyuan Yihua 42.70 Commercial and (i) Street of Qingyuan City Square No. Department Store department store 18 Xianfeng Mid Road, Qingcheng District, Qingyuan City, Guangdong Province, the PRC

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No. Description/Location Lessee/Sub-lessee Lettablearea Usage Note (sq.m.) (approx.)

(14) Units 3, 5, 6 of Guangchang 3rd Qingyuan Yihua 374.26 Commercial (i) Street of Qingyuan City Square No. Department Store 18 Xianfeng Mid Road, Qingcheng District, Qingyuan City, Guangdong Province, the PRC

(15) Portion of Levels 1 to 3 of Qingyuan Yihua 16,442.95 Commercial (i) Qingyuan City Square No. 18 Department Store Xianfeng Mid Road, Qingcheng District, Qingyuan City, Guangdong Province, the PRC

(16) Portion of the terrace of Level 2 of Qingyuan Yihua 163.68 Commercial (i) Qingyuan City Square Department Store No. 18 Xianfeng Mid Road, Qingcheng District, Qingyuan City, Guangdong Province, the PRC

(17) Units 714, 715 and 813 of Block 2 Qingyuan Yihua 264.59 Staffquarter (i) located at Fengyuan Road, Department Store Qingcheng District, Qingyuan City, Guangdong Province, the PRC

(18) Units 405, 505, 605, 705 and 805 of Qingyuan Yihua 586.25 Staffquarter (i) Block West Six located at North Department Store Door Street, Qingcheng District, Qingyuan City, Guangdong Province, the PRC

(19) Basement 1, Levels l and 2 of Jiangmen Yihua 27,900.46 Commercial, (i) podium building, Levels 2 to 4 of Department Store office, staff annex building, No. 118 Yingbin quarter, storage Avenue Road, Pengjiang District, Jiangmen City, Guangdong Province, the PRC

(20) Part of Basement 1, Levels 1 to 3 of Jiangmen Yihua 40,177.81 Commercial and (i) Jinhui Century Square, No. 116 Department Store car parking Yingbin Avenue, Pengjiang District, spaces Jiangmen City, Guangdong Province, the PRC

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No. Description/Location Lessee/Sub-lessee Lettablearea Usage Note (sq.m.) (approx.)

(21) Portion of Basement 1 of Jinhui Jiangmen Yihua 19,585.11 Car parking spaces (ii) Century Square, No. 116 Yingbin Department Store (Building: and temporary Avenue, Pengjiang District, 3,944.86 commercial area Jiangmen City, Guangdong Province, Land: the PRC and an open area of level 1 15,640.25) of No. 118 Yingbin Avenue, Pengjiang District, Jiangmen City, Guangdong Province, the PRC

(22) Levels 1 to 3 and a unit of Level 5 Jiangmen Yihua 8,031.30 Commercial, staff (i) of a building No. 1 Ruifeng Road Department Store quarter and and Levels 1 to 3 of office Power supply station, Liangcunshi, Hetang Town, Pengjiang District, Jiangmen City, Guangdong Province, the PRC

(23) Level 1 of Jiangnan Hai’an Garden Guzhen Yihua 3,689.00 Commercial (ii), (iii) located at Jinnan Road, Jiangnan Department Store Village, Guzhen Town, Zhongshan City, Guangdong Province, the PRC

(24) Level 2 of a composite building Guzhen Yihua 6,590.00 Commercial (ii), (iii) located at Liufang Village, Department Store Zhongxing Avenue, Guzhen Town, Zhongshan City, Guangdong Province, the PRC

(25) Levels 1 and 2 and portion of level Guzhen Yihua 4,129.10 Commercial (ii) 3 of Section B of Zhongshan Department Store Guzhen International Hotel located at Zhongxing Avenue, Guzhen Town, Zhongshan City, Guangdong Province, the PRC

(26) Portion of Level 3 of Section B of Guzhen Yihua 4,650 Commercial and (ii) Zhongshan Guzhen International Department Store office Hotel located at Zhongxing Avenue, Guzhen Town, Zhongshan City, Guangdong Province, the PRC

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No. Description/Location Lessee/Sub-lessee Lettablearea Usage Note (sq.m.) (approx.)

(27) Levels 1 to 4 portion of level 5 to 6 Shaoguan Yihua 30,005.62 Commercial (i) of podium of Central Square, Department Store No. 50 Huimin South Road, Wujiang District, Shaoguan City, Guangdong Province, the PRC

(28) Units 12E and C located at No. 19 Shaoguan Yihua 132.41 Staffquarter (i) Huimin South Road, Wujiang Department Store District, Shaoguan City, Guangdong Province, the PRC

(29) Unit 0301 of Block 58 located at Shaoguan Yihua 108.92 Staffquarter (i) Huimin South Road, Wujiang Department Store District, Shaoguan City, Guangdong Province, the PRC

(30) Unit 204 of North Level 1, No. 98 Shaoguan Yihua 73.08 Staffquarter (i) Huimin South Road, Wujiang Department Store District, Shaoguan City, Guangdong Province, the PRC

(31) Portion of Level 1 of Guomao Yihao Guangdong Yihua 870 Commercial (ii), (iii) Hotel located at the side of Weimin Department Store Road of Dongfu Road, Fusha Town, Zhongshan City, Guangdong Province, the PRC

(32) Portion of Level 3 of Qingyuan City Qingyuan Yihua 536.83 Commercial (i) Square, No. 18 Xianfeng Mid Road Department Store Qingcheng District, Qingyuan City, Guangdong Province, the PRC

(33) Levels 1 and 2 of Victory Plaza, east Guangdong Yihua 13,800 Department store (ii), (iii) of Heping Road, south of Fuqiang Department Store East Road, Yingde City, Guangdong Province, the PRC

(34) Portion of Blocks 1 and 2 of Yangjiang Yihua 27,987 Commercial and (i) a construction, No. 318 Dongfeng Department Store car parking 4th Road, Yangdong County, spaces Yangjiang City, Guangdong Province, the PRC

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No. Description/Location Lessee/Sub-lessee Lettablearea Usage Note (sq.m.) (approx.)

(35) Portion of Blocks 1 and 2 of Yangjiang Yihua Shijia 18,888 Commercial (i) a construction, No. 318 Dongfeng 4th Road, Yangdong County, Yangjiang City, Guangdong Province, the PRC

(36) Levels 1 and 2 of Yangchun Guangdong Yihua 8,480 Departmentstore (i) International Exhibition Composite Department Store Building located at East Lake East Road, Yangchun City, Guangdong Province, the PRC

(37) A commercial building located at Guangdong Yihua 21,432.4 Commercial, (iii) Xujialou Community, Longtan Road, Department Store storage and car Tai’an City, Shandong Province, the parking spaces PRC

(38) An office unit of an office building Guangdong Yihua 40.04 Office (ii) located at west of Tonggang Road, Department Store Zhenjiang Xin District, Zhenjiang City, Jiangsu Province, the PRC

(39) Levels 3 and 6 of East Block No. 15 Yingde Yihua 140 Staffquarter (i) Jianshe Road, Yingcheng Yingde Department Store City, Guangdong Province, the PRC

(40) Room 302, Block 9, Meigui Yuan, Zhenjiang Yihua 90 Staffquarter (i) Xin City, Yinshan, Department Store New District of Zhenjiang

(41) Room 305, Block 141, Tonggang Zhenjiang Yihua 120 Staffquarter (i) Road, Jingang Commercial Plaza, Department Store New District of Zhenjiang

Total: 330,815.58

Notes:

According to the PRC Legal Advisers: (i) for property number 1, 2, 4 to 20, 22, 27 to 30, 32, 34 to 36 and 39 to 41, the relevant lease agreements are legal and valid and they are binding on both sides of the leasehold. Our Group has the rights to occupy and use the property in accordance with the relevant lease agreements under the protection of the PRC laws; (ii) for property number 3, 21, 25, 26 and 38, despite of the lack of the lease registration, there is no influence to the validity of the relevant lease agreements subject to analysis if note (iii) is applicable; (iii) the lessors of property number 23, 24, 31, 33 and 37 have not provided us with building ownership certificates from the relevant authorities. For further details, please refer to the status of the rectification and the analysis below.

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As at the Latest Practicable Date, we have not been provided with the building ownership certificates from the relevant landlords of some of the properties where our stores are located. The rental under the leases for such properties are all according to or lower than prevailing market rates. Based on the oral confirmation from the relevant landlords, such properties (except for part of Guzhen store as set out below), are part of larger construction projects with different parts in various stages of development. The final acceptance process by the relevant authority will generally be made upon the completion of whole construction project and the building ownership certificate will be applied for after the final acceptance process and other procedures. Nevertheless based on our understanding, such properties currently comply with state and local laws and construction standards, compulsory safety and disaster prevention construction standards. The relevant landlords have further confirmed that they are entitled to lease the properties to us and undertake to compensate us for the potential economic losses we may suffer as result of the title defect of such properties. Our PRC Legal Advisers have advised that we have been given an indemnity in relation to the above compensation undertaking from the relevant landlords pursuant to the relevant confirmation letters issued by them or the relevant lease agreements.

߰ʍਪᕚܛجॡ༣ΥΝ٧ॸࣩ΁Ո᜗Ꮠ͜܊ג৫ᗫ׵ᄲଣ۬ᕄجAccording to௰৷ɛ͏ ٙ༆ᙑ (Interpretation of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Cases about Disputes over Lease Contracts on Urban Buildings*) which was published in July 2009, the People’s Court of the PRC generally recognised the validity of a lease agreement where the landlord has obtained the construction work planning permit and the building construction had complied with the terms set forth in the construction work planning permit. Given that (i) all of the properties without building ownership certificates mentioned below have the construction work planning permit; and (ii) the respective landlords of the said properties had been verified as the legal owners through the obtained permits and certificates of the said properties, the PRC Legal Advisers are of the view that the relevant landlords have the right to lease the premises to us and the lease agreements are valid and enforceable.

Details of the properties without building ownership certificates and on which our stores are located are as follows:

• Jiangnan store is a community store with a total GFA of approximately 3,689 sq.m. retail space. The landlord obtained the land use right certificate, the construction work planning permit and the fire safety certificate. However, the landlord has not completed the final acceptance process for the whole construction project where the property is located and thus has not obtained the building ownership certificate. The landlord estimated that the building ownership certificate will be obtained by December 2013. For the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013, the revenue from Jiangnan store was approximately RMB3.0 million, approximately RMB7.3 million, approximately RMB8.7 million and approximately RMB3.1 million respectively.

– 206 – BUSINESS

• Fusha store is a community store with a total GFAof approximately 870 sq.m. retail space. The landlord obtained the land use right certificate, the construction work planning permit and the fire safety certificate. However, the landlord has not completed the final acceptance process for the whole construction project where the property is located and thus has not obtained the building ownership certificate. The landlord estimated that the building ownership certificate will be obtained by December 2013. For the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013, that the revenue from Fusha store was nil, nil, approximately RMB2.5 million and approximately RMB1.0 million respectively.

• Yingde store is a department store with a total GFA of approximately 13,800 sq.m. retail space. The landlord obtained the land use right certificate, the construction work planning permit, the fire safety certificate and completed the final acceptance process for the whole construction project. However, the landlord has not obtained the building ownership certificate. The landlord estimated that the building ownership certificate will be obtained by December 2013. Yingde store commenced operation in June 2013.

• Tai’an (Longtan) store is a department store with a total GFA of approximately 14,967 sq.m. retail space. The landlord obtained the land use right certificate, the construction work planning permit and the fire safety certificate. However, the landlord has not completed the final acceptance process for the whole construction project where the property is located and thus has not obtained the building ownership certificate. The landlord estimated that the building ownership certificate will be obtained by December 2013. Tai’an store commenced operation in June 2013.

• The landlord of part of Guzhen store which is a department store with a total GFA of approximately 6,590 sq.m. (out of 14,789 sq.m. retail space), obtained the land use right certificate, the construction work planning permit and the fire safety certificate. However, the landlord has not obtained the construction land use planning permit and completed the final acceptance process thus has not obtained the building ownership certificate. For the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013, the revenue from this part of Guzhen store was approximately RMB41.8 million, approximately RMB39.7 million, approximately RMB34.3 million and approximately RMB13.2 million respectively.

In relation to Yingde store, the relevant landlords have completed the final acceptance process for the whole construction project. The landlord for Yingde store is awaiting development of other parts of the larger construction project before application for the outstanding certificate. In view of the lease payment for part of Guzhen store is currently below market rate and the relevant landlord has confirmed its right to lease the property to us, our Directors believe that it is in our Company’s best interest to continue leasing the premises but intend not to continue leasing the premises upon its expiry in 2017.

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Taking into account our PRC Legal Advisers’ view that the landlords have the right to lease the property and the validity of the lease agreements, our Directors are of the view that leasing the aforesaid properties without building ownership certificates would not have any material adverse impact on our business and financial position.

Our Directors estimate that the time and aggregate cost required for relocation of the operations in the aforesaid properties are about two months and approximately RMB4.6 million respectively. Our Directors are of the view that considering (i) the percentage revenue contribution of the above properties without building ownership certificates to our total revenue during the Track Record Period; (ii) we are generally able to relocate our operations to other comparable properties; and (iii) the estimated costs and time for relocation, the properties above are not crucial to our operations.

Material property analysis

According to our Group’s combined statements of financial position set out in Appendix I to this prospectus, our Directors confirm that:

• our Group does not have any property interest that forms part of property activities as at 31 May 2013, so the aggregate carrying amount of the property interest that forms part of our Group’s property activities does not exceed 10% of the its total assets as at 31 May 2013; and

• the total and single property interest that forms part of non-property activities does not respectively have a carrying amount of 15% or more of our Group’s total assets as at 31 May 2013.

As such and pursuant to Rule 5.01A of the Listing Rules, no valuation report is included in this prospectus. According to section 6(2) of the Companies Ordinance (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice, this prospectus is exempted from compliance with the requirements of section 342(1)(b) of the Companies Ordinance in relation to paragraph 34(2) of the Third Schedule to the Companies Ordinance, which requires a valuation report with respect to all our Group’s interests in land or buildings.

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Following the Listing, the following transactions between the Group and the relevant Connected Persons will constitute (i) exempt continuing connected transactions under Rule 14A.33 of the Listing Rules; and (ii) non-exempt continuing connected transactions under Rule 14A.35 of the Listing Rules, for our Company.

CONNECTEDPERSONS

Upon the Listing, the following persons, with whom we have entered into certain transactions in our ordinary course of business, will become Connected Persons of our Company:

(1) Mr. Chen Daren

Mr. Chen Daren is a Director and Controlling Shareholder and is therefore a Connected Person of our Company by virtue of Rule 14A.11(1) of the Listing Rules;

(2) Mr. Lu

Mr. Lu is a Director and is therefore a Connected Person of our Company by virtue of Rule 14A.11(1) of the Listing Rules;

(3) Yihua Investment

Shunyi Industrial, Mr. Lu, Mr. Chen Zhengtao and Mr. Chen Daren hold approximately 49.6%, 28.22%, 11.09% and 11.09% of the equity interest in Yihua Investment. Yihua Investment is therefore a Connected Person of our Company by virtue of Rules 1.01 and 14A.11(4) of the Listing Rules;

(”၍ଣϞࠢʮ̡ (“Jinhui Centuryุيߏᄿఙ˰ිږ̹ژϪ (4)

Mr. Chen Daren holds 90% of the equity interest in Shunyi Industrial. Shunyi Industrial holds 90% equity interest in Jinhui Century. Jinhui Century is therefore a Connected Person of our Company by virtue of Rules 1.01 and 14A.11(4) of the Listing Rules;

(”ʕʆ̹ԯശ˰ߏৢֳϞࠢʮ̡ (“Jinghua Century Hotel (5)

Yihua Investment holds 80% of the equity interest in Jinghua Century Hotel. Jinghua Century Hotel is therefore a Connected Person of our Company by virtue of Rules 1.01 and 14A.11(4) of the Listing Rules;

– 209 – CONNECTEDTRANSACTIONS

(”ʕʆ̹̚ᕄ਷൱ɽৢֳϞࠢʮ̡ (“Guomao Hotel (6)

Yihua Investment holds 64% of the equity interest in Guomao Hotel. Guomao Hotel is therefore a Connected Person of our Company by virtue of Rules 1.01 and 14A.11(4) of the Listing Rules;

(”ʕʆ̹อேৢֳϞࠢʮ̡ (“Xindu Hotel (7)

Yihua Investment holds 90% of the equity interest in Xindu Hotel. Xindu Hotel is therefore a Connected Person of our Company by virtue of Rules 1.01 and 14A.11(4) of the Listing Rules;

(”අႴৢֳϞࠢʮ̡ (“Yihao Hotel̹ژϪ (8)

Yihua Investment holds 55% of the equity interest in Yihao Hotel. Yihao Hotel is therefore a Connected Person of our Company by virtue of Rules 1.01 and 14A.11(4) of the Listing Rules;

(9) Guangdong Yihua Management

Yihua Investment holds 60% of the equity interest in Guangdong Yihua Management. Guangdong Yihua Management is therefore a Connected Person of our Company by virtue of Rules 1.01 and 14A.11(4) of the Listing Rules;

(”Ӎ਷൱අႴৢֳϞࠢʮ̡ (“Yucca Hotelڙʕʆ̹ (10)

Yucca Hotel is owned as to 20% by Yihua Investment and as to 80% by Guangdong Yucca Hotel Management Co. Ltd. (ᄿ؇අႴৢֳ၍ଣϞࠢʮ̡), which is in turn owned as to 98.33% by Yihua Investment and as to 1.67% by Shunyi Industrial. Yucca Hotel is therefore a Connected Person of our Company by virtue of Rules 1.01 and 14A.11(4) of the Listing Rules; and

(11) इτूശໄุක೯Ϟࠢʮ̡ (“Tai’an Yihua Real Estate”)

Tai’an Yihua Real Estate is owned as to 100% by Yihua Investment, which is a Connected Person of our Company by virtue of Rules 1.01 and 14A.11(4) of the Listing Rules. Accordingly, Tai’an Yihua Real Estate is a Connected Person of our Company by virtue of Rules 1.01 and 14A.11(4) of the Listing Rules.

I.EXEMPTCONTINUINGCONNECTEDTRANSACTIONS

Cooperation Agreements in respect of VIP cards

The Group has issued to its VIP customers certain VIP cards whereby they are entitled to benefits as detailed in the section headed “Business – Marketing and promotion – Customer loyalty programs – VIP Cards” of this prospectus.

– 210 – CONNECTEDTRANSACTIONS

Guangdong Yihua Department Store entered into the following cooperation agreements with the following parties for the respective terms:

Name of the respective cooperation Name of the Date of agreement agreement other parties Term of the agreement

30 December 2012 JCH Agreement Jinghua Century For the period from Hotel 1 January 2013 to 31 December 2014

31 December 2012 GHAgreement Guomao Hotel For the period from 1 January 2013 to 31 December 2014

1January2013 XHAgreement XinduHotel Fortheperiodfrom 1 January 2013 to 31 December 2014

25 December 2012 YHAgreement Yihao Hotel For the period from 1 January 2013 to 31 December 2014

The JCH Agreement, GH Agreement, XH Agreement and YH Agreement, are collectively referred to as the “Cooperation Agreements”.

The general terms of the Cooperation Agreements are as follows:

(1) Guangdong Yihua Department Store is responsible for the issuance and promotion (including the production and advertising) of the ordinary VIP Cards, VIP gold cards and the VIP platinum cards (collectively the “Yihua Cards”);

(2) the other party of the relevant Cooperation Agreement shall provide holders of the Yihua Cards the relevant agreed discounts; and

(3) the other party of the relevant Cooperation Agreement is responsible for informing its respective relevant departments of the agreed discount.

Guangdong Yihua Department Store is not required to pay any fee to the other relevant parties to the Cooperation Agreements. Pursuant to the arrangements, Jinghua Century Hotel, Guomao Hotel, Xindu Hotel and Yihao Hotel, as cooperation partners will give special discounts on the price of their goods or services to our VIP cardholders. Accordingly, the terms are more favourable to Guangdong Yihua Department Store.

– 211 – CONNECTEDTRANSACTIONS

Jinghua Century Hotel, Guomao Hotel, Xindu Hotel and Yihao Hotel are not the sole cooperation partners of our Group for the VIP cards and we have signed similar cooperation agreements with Independent Third Parties. Our Group has also entered into two other cooperation agreements (the “Other Cooperation Agreements”) with different Independent Third Parties on the same terms and conditions as the Cooperation Agreements. There is no profit or cost sharing arrangement with the counterparties under the Cooperation Agreements as well as the Other Cooperation Agreements. Our Directors therefore consider that we do not place a significant reliance on Jinghua Century Hotel, Guomao Hotel, Xindu Hotel and Yihao Hotel in providing discounts to our VIP cardholders.

Master License Agreement

Prior to the Listing Date, our Group had licensed the use of additional area in the vicinity of our stores from Yihua Investment Group for short periods of less than one month. During the Track Record Period, this arrangement only comprised of one-off occasions licensing areas near our Guzhen Store without written agreements with Guomao Hotel and was for the Group’s own promotional activities purposes.

As the Group intends to enter into similar arrangements with other members of Yihua Investment Group, Guangdong Yihua Department Store and Yihua Investment have entered into a master license agreement dated 1 January 2013 (the “Master License Agreement”). Pursuant to the Master License Agreement, any member of Yihua Investment Group agrees at the request of any member of the Group to license the premises owned by any member of Yihua Investment Group from time to time in accordance with the terms and conditions of the relevant license agreement to be entered into between any member of the Group and any member of Yihua Investment Group. The Master License Agreement provides a term of three years, commencing from 1 January 2013 to 31 December 2015. Furthermore, the fees in respect of the license of the premises will be based on arm’s length negotiation between the parties involved with reference to the prevailing market rate and on terms no less favourable to the Group than the terms available from the Independent Third Parties.

During the years ended 31 December 2010, 2011 and 2012 and for the five months ended 31 May 2013 , our Group paid nil, approximately RMB131,000, approximately RMB271,000 and approximately RMB126,000 respectively to Guomao Hotel under this arrangement.

There is no monetary payment under the Cooperation Agreements and each of the percentage ratios (other than the profits ratio) for the Master License Agreement is expected on the annual basis to be less than 5% with the annual consideration is expected to be less than HK$1 million. Therefore, the continuing connected transaction contemplated thereunder will qualify as de minimis transactions under Rule 14A.33(3) of the Listing Rules, that are exempt from the reporting, annual review, announcement and independent shareholders’ approval requirements. In the event that the caps under each of the Master License Agreement exceeds the threshold of de minimis transaction in the future, the Company will comply with the relevant requirements pursuant to the Listing Rules in due course.

– 212 – CONNECTEDTRANSACTIONS

Our Directors (including the independent non-executive Directors) are of the view that the Cooperation Agreements and Master License Agreement have been entered into in the ordinary and usual course of business following arm’s length negotiations, are on normal commercial terms and such terms are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

II.CONTINUINGCONNECTEDTRANSACTIONSEXEMPTFROMINDEPENDENT SHAREHOLDERS’APPROVALREQUIREMENTS

The following are continuing connected transactions exempt from the independent shareholders’ approval requirements under Rule 14A.34 of the Listing Rules, and the highest applicable percentage ratio is expected to less than 5%:

Purchases of service from Yihua Investment Group

Pursuant to an agreement dated 1 January 2013 entered into by Guangdong Yihua Department Store and Yihua Investment, Yihua Investment and its subsidiaries agreed to make available their hotel rooms, restaurants and related services therefrom to Guangdong Yihua Department Store and its subsidiaries on discounted rates with the prices determined on case by case basis according to prevailing market rates and on an arm’s length basis (“Hotel and Restaurant Agreement”). The Hotel and Restaurant Agreement provides for a term of three years, commencing from 1 January 2013 to 31 December 2015. The annual caps for the Hotel and Restaurant Agreements are RMB1,500,000, RMB2,200,000 and RMB2,500,000 for the years ending 31 December 2013, 2014 and 2015 respectively.

The transactions occurred under the Hotel and Restaurant Agreement are mainly for the meals in the restaurants and the accommodation services in the hotels of the Yihua Investment Group by our staff during their business trips.

The annual caps for the years ending 31 December 2013, 2014 and 2015 have been determined on the basis of (i) the historical costs and expenses incurred on such meals and accommodation services; (ii) the additional costs and expenses expected to be incurred at the hotel and restaurants given more staff business trips due to starting up of new stores; (iii) anticipated hotel room rate fluctuation; and (iv) the anticipated inflation rate over the years.

– 213 – CONNECTEDTRANSACTIONS

The historical figures for each of the years ended 31 December 2010, 2011 and 2012 and for the five months ended 31 May 2013 and the annual caps for each of the years ending 31 December 2013, 2014 and 2015 are as follows:

Historical amounts Annual caps Five months ended Year ended 31 December 31May Yearending31December 2010 2011 2012 2013 2013 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Approx. Approx. Approx. Approx. Approx. Approx. Approx.

Hotel and Restaurant Agreement 1,132 1,109 1,341 417 1,5001 2,2002 2,5003

Notes:

1. For the year ending 31 December 2013:

The cap was calculated with reference to the aggregate amount of i) anticipated full-year amount of approximately RMB1,000,000 based on the audited figures for the existing stores; and ii) anticipated transaction amount of approximately RMB500,000 for the four new stores opened in 2013, namely Taiyangcheng store, Yangchun store, Tai’an store (Longtan) and Yangjiang store.

RMB1,000,000 + RMB500,000 = RMB1,500,000

2. For the year ending 31 December 2014:

The cap was calculated with reference to the aggregate amount of i) amount for the existing stores of approximately RMB1,000,000 for the year ending 31 December 2013 with 15% growth; and ii) RMB1,000,000 for the four new stores opened in 2013 and two new stores expected to be opened in 2014, namely Zhenjiang store and Tai’an store (Taishan). For the stores opened in 2013, the said amount will be fully counted during the year ending 2014. The growth of 15% was within the range of changes in historical amount of purchases of service from Yihua Investment Group during the Track Record Period.

RMB1,000,000 x 115% + RMB1,000,000 = RMB2,150,000

3. For the year ending 31 December 2015:

The cap was calculated with reference to the amount of RMB2,150,000 for the year ending 31 December 2014 with 15% growth. The growth of 15% was within the range of changes in historical amount of purchases of service from Yihua Investment Group during the Track Record Period.

RMB2,150,000 x 115% = RMB2,473,000

– 214 – CONNECTEDTRANSACTIONS

Our Director, having reviewed the relevant information on the basis of the annual caps (including, among other things, the historical amounts, the underlying agreements, the trends and growth in the industry and the future plans of our Group), are of the opinion that the Hotel and Restaurant Agreement was entered into under normal commercial terms or terms no less favourable to our Company than the terms available to or from (as appropriate) Independent Third Parties and the entering of the Hotel and Restaurant Agreement is fair and reasonable and in the interest of the Shareholders as a whole.

Sales of goods, provision of service and utility charges to Yihua Investment Group

Pursuant to an agreement dated 1 January 2013 entered into by Guangdong Yihua Department Store and Yihua Investment, Guangdong Yihua Department Store and its subsidiaries agreed to supply Yihua Investment and its subsidiaries with goods, service and utility with the prices determined on case by case basis according to prevailing market rates and on an arm’s length basis (“Master Supply Agreement”). The Master Supply Agreement provides for a term of three years, commencing from 1 January 2013 to 31 December 2015. The annual caps for the Master Supply Agreement are approximately RMB1,400,000, RMB2,600,000 and RMB3,000,000 for the years ending 31 December 2013, 2014, and 2015 respectively.

The transactions occurred under the Master Supply Agreement are mainly for the supply of electrical appliances and grocery items to hotels and restaurants of the Yihua Investment Group.

The annual caps for the years ending 31 December 2013, 2014 and 2015 have been determined on the basis of (i) the increase in demand due to the growth of business in the hotels and restaurants; and (ii) the anticipated inflation rate over the years for such goods.

The historical figures for each of the years ended 31 December 2010, 2011 and 2012 and for the five months ended 31 May 2013 and the annual caps for each of years ending 31 December 2013, 2014 and 2015 are as follows:

Master Supply Agreement 1,635 1,625 2,298 360 1,4001 2,6002 3,0003

– 215 – CONNECTEDTRANSACTIONS

Notes:

1. For the year ending 31 December 2013:

The cap was calculated with reference to the aggregate amount of i) anticipated full-year amount of approximately RMB1,000,000 based on the audited figures for the five months ended 31 May 2013 for existing stores; and ii) anticipated transaction amount of approximately RMB400,000 for the new business expansion in Yihua Investment Group near our stores. There were two new restaurants of Yihua Investment Group started operation near our two new stores, namely Taiyangcheng store and Tai’an store (Longtan) in 2013.

RMB1,000,000 + RMB400,000 = RMB1,400,000

2. For the year ending 31 December 2014:

The cap was calculated with reference to the aggregate amount of i) anticipated amount for the existing stores of approximately RMB1,000,000 for the year ending 31 December 2013 with 40% growth; and ii) anticipated transaction amount of approximately RMB1,200,000 for the new business expansion in Yihua Investment Group near our stores. The Directors expected that there will be three new restaurants of Yihua Investment Group started operation near our three stores, namely Jiangmen store, Yangjiang store and Zhenjiang store in 2014. The growth of 40% was within the range of changes in historical amount of sales of goods, provision of service and utility charges to Yihua Investment Group during the Track Record Period.

RMB1,000,000 x 140% + RMB1,200,000 = RMB2,600,000

3. For the year ending 31 December 2015:

The cap was calculated with reference to the amount for the year ending 31 December 2014 with 15% growth. The growth of 15% was within the range of changes in historical amount of sales of goods, provision of service and utility charges to Yihua Investment Group during the Track Record Period.

RMB2,600,000 x 115% = RMB2,990,000

Our Director, having reviewed the relevant information on the basis of the annual caps (including, among other things, the historical amounts, the underlying agreements, the trends and growth in the industry and the growth of demand in the Yihua Investment Group), are of the opinion that the Master Supply Agreement was entered into under normal commercial terms or terms no less favourable to our Company than the terms available to or from (as appropriate) Independent Third Parties and the entering of the Master Supply Agreement is fair and reasonable and in the interest of the Shareholders as a whole.

III.NON-EXEMPTCONTINUINGCONNECTEDTRANSACTIONS

The following transactions are continuing connected transactions subject to the reporting, announcement and independent shareholders’ approval requirements under Rule 14A.35 of the Listing Rules, as after aggregation, the highest applicable percentage ratio is expected to exceed 5% and the aggregate annual consideration is more than HK$10,000,000:

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Tenancy agreements with Guangdong Yihua Management

(a) First Tenancy Agreements

Pursuant to a long term framework tenancy agreement entered into on 12 March 2013 between Guangdong Yihua Department Store, Zhongshan Yihua Shijia and Guangdong Yihua Management (superseding an agreement dated 1 June 2007 between Guangdong Yihua Department Store and Guangdong Yihua Management), Guangdong Yihua Management agreed to lease the properties located at: (i) Levels 1 to 2 (with a total area of about 5,115 sq.m.) for a term from 12 March 2013 to 31 May 2017 to Guangdong Yihua Department Store; and (ii) Levels 3 to 4 (with a total area of about 5,056 sq.m.) for a term from 12 March 2013 to 31 May 2017 to Zhongshan Yihua Shijia both locations at West Wing of Yihua Commercial Center (“West Wing”) located at Zhongshan 3rd Road, East District, Zhongshan City, Guangdong Province, the PRC (the “First Tenancy Framework Agreement”).

We entered into the following agreements fixing the monthly rental amount (“First Tenancy Rental Agreements”),

• pursuant to an agreement dated 1 January 2013 between Guangdong Yihua Department Store and Guangdong Yihua Management, a monthly rental (inclusive of management fee) of RMB600,000 was agreed for the period from 1 January 2013 to 31 December 2013 in relation to the properties located at Levels 1 to 4 of West Wing, area at Level 5, Unit at Level 901 of Level 9 and additional area of 100 sq.m. at Level 1 of West Wing for commercial and office purposes. This agreement was subsequently superseded by the below agreements and the First Tenancy Additional Agreements (as defined below).

• pursuant to an agreement dated 12 March 2013 between Guangdong Yihua Department Store and Guangdong Yihua Management, a monthly rental (inclusive of management fee) of RMB224,182 was agreed for the period from 12 March 2013 to 31 December 2013 in relation to the properties located at Levels 1 to 2 of West Wing for commercial purposes.

• pursuant to an agreement dated 12 March 2013 between ZhongshanYihua Shijia and Guangdong Yihua Management, a monthly rental (inclusive of management fee) of RMB328,689 for the period from 12 March 2013 to 11 March 2014 was agreed for the properties located at Levels 3 to 4 of West Wing for commercial purposes.

– 217 – CONNECTEDTRANSACTIONS

• pursuant to an agreement dated 20 March 2013 between Guangdong Yihua Department Store and Guangdong Yihua Management, a monthly rental (inclusive of management fee) of RMB6,900 for the period from 20 March 2013 to 31 December 2013 was agreed for the property located at Level 1 of West Wing with an area of 100 sq.m. for commercial purpose.

• pursuant to two agreements both dated 19 November 2013 between Guangdong Yihua Department Store and Guangdong Yihua Management, the parties agreed that any increase in the monthly rental (inclusive of management fee) (i) for the year ending 31 December 2014, shall not exceeding 3% of the prevailing market rate as at 31 August 2013 in relation to the properties located at Levels 1 to 2 of West Wing and the area at Level 1 of West Wing with an area of 100 sq.m., being approximately RMB424,068; and (ii) for the year ending 31 December 2015, shall not exceeding 10% of the monthly rental as at 31 December 2014 in relation to the properties located at Levels 1 to 2 of West Wing and the area at Level 1 of West Wing with an area of 100 sq.m., being approximately RMB466,725.

• pursuant to an agreement dated 19 November 2013 between Zhongshan Yihua Shijia and Guangdong Yihua Management, the parties agreed that any increase in the monthly rental (inclusive of management fee) (i) for the year ending 31 December 2014, shall not exceeding 3% of the prevailing market rate as at 31 August 2013 in relation to the properties located at Levels 3 to 4 of West Wing; and (ii) for the year ending 31 December 2015, shall not exceeding 10% of the monthly rental as at 31 December 2014 in relation to the properties located at Levels 3 to 4 of West Wing.

We entered into the following short tenancy agreements leasing area in the vicinity (“First Tenancy Additional Agreements”),

• pursuant to an agreement dated 12 March 2013 (as supplemented by an agreement dated 19 November 2013) between Guangdong Yihua Department Store and Guangdong Yihua Management, Guangdong Yihua Management agreed to lease the properties located at Level 5 of West Wing for commercial purposes with aggregate area of about 2,497 sq.m. from 12 March 2013 to 31 December 2014 with the monthly rental (inclusive of management fees) of (i) RMB109,359 for the period from 12 March 2013 to 31 December 2013; and (ii) RMB108,135 for the period from 1 January 2014 to 31 December 2014;

• pursuant to an agreement dated 12 March 2013 (as supplemented by an agreement dated 19 November 2013) between Guangdong Yihua Department Store and Guangdong Yihua Management, Guangdong Yihua Management agreed to lease the properties located at Unit 901 of Level 9 of West Wing for office purposes with an area of about 1,888 sq.m. located at Zhongshan 3rd Road, East District, Zhongshan City, Guangdong Province, the PRC from 12 March 2013 to 31 December 2014 with the monthly rental (inclusive of management fees) of (i) RMB82,692 for the period from 12 March 2013 to 31 December 2013; and (ii) RMB105,183 for the period from 1 January 2014 to 31 December 2014.

– 218 – CONNECTEDTRANSACTIONS

Pursuant to an agreement dated 1 June 2013, Guangdong Yihua Department Store and Zhongshan Yihua Shijia have paid a rental deposit for the aforesaid properties of RMB2,255,064, equivalent to three months rental, to Guangdong Yihua Management (“First Tenancy Deposit Agreement”). The First Tenancy Framework Agreement, First Tenancy Rental Agreements, First Tenancy Additional Agreements and First Tenancy Deposit Agreement are collectively referred to as the “First Tenancy Agreements”.

First Tenancy Agreements Nil Nil Nil 3,397 8,6701 11,6902 10,0803

Notes:

1. For the year ending 31 December 2013:

(i) For the period from 1 January 2013 to 11 March 2013, the aggregate monthly rental for Levels 1 to 4, area at Level 5, Unit 901 and the additional area of 100 sq.m. at Level 1 of West Wing was RMB600,000: RMB600,000 x 2 months and 11/31 days = RMB1,412,903

(ii) (a) For the period from 12 March 2013 to 31 December 2013, the monthly rental for Levels 1 to 4, area at Level 5 and Unit 901 of West Wing: (RMB224,182 + RMB328,689 + RMB109,359 + RMB82,692) x 9 months and 20/31 days = RMB7,184,898

(b) For the period from 20 March 2013 to 31 December 2013, the monthly rental for the additional area of 100 sq.m. at Level 1 of West Wing: RMB6,900 x 9 months and 12/31 days = RMB64,771

Total: RMB8,662,572

The Valuer is of the view that the rent payable for (1) Levels 1 to 2, area at Level 5 and Unit 901 as a whole was lower than the prevailing market rates as at 31 December 2012; and (2) Levels 3 to 4 was at the prevailing market rent as at 31 December 2012. Our Directors consider that the terms of the First Tenancy Agreements were in the interest of our Company and the Shareholders as a whole.

– 219 – CONNECTEDTRANSACTIONS

2. For the year ending 31 December 2014:

(i) Rental for Levels 1 to 2 and the additional area of 100 sq.m. at Level 1 of West Wing (with reference to the prevailing market rent as at 31 August 2013 with maximum 3% of contractual rental growth from 1 January 2014): (RMB413,758 + RMB10,310) x 12 months = RMB5,088,818

(ii) Rental for area at Level 5 and Unit 901 of West Wing (with reference to the prevailing market rent as at 31 August 2013 with maximum 3% of contractual rental growth from 1 January 2014): (RMB108,135 + RMB105,183) x 12 months = RMB2,559,816

(iii) Rental for Levels 3 to 4 of West Wing (with reference to the prevailing market rent as at 31 August 2013 with maximum 3% of contractual rental growth from 12 March 2014): RMB328,689 x 3 months and 11/31 days + RMB338,803 x 8 months and 20/31 days = RMB4,031,706

Total: RMB11,680,340

3. For the year ending 31 December 2015,

Rental for Levels 1 to 4 and the additional area of 100 sq.m. at Level 1 of West Wing (with reference to the rental rate as at 31 December 2014 with maximum 10% of contractual rental growth): (RMB455,385 + RMB372,683 + RMB11,340) x 12 months = RMB10,072,895

Total: RMB10,072,895

During and prior to the Track Record Period, Guangdong Yihua Department Store agreed to lease the Levels 1 to 4 of the West Wing (the “West Wing Properties”) under the now superseded 2007 version of the First Tenancy Framework Agreement. However, no rental had been paid by Guangdong Yihua Department Store to Guangdong Yihua Management in respect of the West Wing Properties for each of the years ended 31 December 2010, 2011 and 2012. The reasons for the said rental free arrangement are as follows:

(a) In addition to the West Wing Properties, the Yihua Investment Group also held and leased other properties in West Wing.

(b) We understand from Yihua Investment Group that they believed that to retain a reputable supermarket section and electrical appliances section of a store will significantly increase the customer flow of West Wing, thereby enhance the value, occupancy and rental income of those other properties in West Wing.

(c) Thus, Guangdong Yihua Management entered into a rental free arrangement with Guangdong Yihua Department Store in respect of the properties under the now superseded 2007 First Tenancy Framework Agreement.

(d) In view of the current occupancy of those other properties in West Wing and the Listing, Guangdong Yihua Management entered into the First Tenancy Agreements with Guangdong Yihua Department Store for rent with reference to the prevailing market rent.

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(b) Second Tenancy Agreements

Pursuant to a long term framework tenancy agreement dated 1 September 2012 between Guangdong Yihua Department Store and Guangdong Yihua Management, Guangdong Yihua Management agreed to lease the property located at Levels 1 to 3 of East Wing of Yihua Commercial Center (“East Wing”) located at Zhongshan 3rd Road, East District, Zhongshan City, Guangdong Province, the PRC (the “Second Tenancy Framework Agreement”). The Second Tenancy Framework Agreement provides for a term of 10 years, commencing from 1 September 2012 and expiring on 31 August 2022. The monthly rent is fixed annually by mutual agreement between the parties and with reference to the market rent.

We entered into an agreement dated 1 January 2013 between Guangdong Yihua Department Store and Guangdong Yihua Management where a monthly rental (inclusive of management fee) of RMB235,552 was agreed for the period from 1 January 2013 to 31 December 2013 in relation to the properties located at Levels 1 to 3 of East Wing with a total area of about 4,444 sq.m. for commercial purposes (“Second Tenancy Rental Agreement”).

We also entered into a short tenancy agreement leasing area in the vicinity pursuant to an agreement dated 20 March 2013 (as supplemented by an agreement dated 19 November 2013) between Guangdong Yihua Department Store and Guangdong Yihua Management, Guangdong Yihua Management agreed to lease the properties located at Unit 501 of East Wing with aggregate area of about 1,063 sq.m. for commercial purposes from 20 March 2013 to 31 December 2014 with the monthly rental (inclusive of management fees) of (i) RMB43,583 for the period from 20 March 2013 to 31 December 2013; and (ii) RMB46,028 for the period from 1 January 2014 to 31 December 2014. (“Second Tenancy Additional Agreement”).

Pursuant to an agreement dated 19 November 2013 between Guangdong Yihua Department Store and Guangdong Yihua Management, the parties agreed that any increase in the monthly rental (inclusive management fee) for Levels 1 to 3 of East Wing not exceeding (i) for the year ending 31 December 2014, 3% of the prevailing market rate as at 31 August 2013 in relation to such properties, being approximately RMB307,107; and (ii) for the year ending 31 December 2015, 10% of the monthly rental as at 31 December 2014 in relation to such properties, being approximately RMB337,773.

Pursuant to an agreement dated 1 June 2013, Guangdong Yihua Department Store has paid a rental deposit of RMB837,405, equivalent to three months rental, to Guangdong Yihua Management. The aforesaid properties are used by the Group as premises for our Zhongshan main store (“Second Tenancy Deposit Agreement”). The Second Tenancy Framework Agreement, Second Tenancy Rental Agreement, Second Tenancy Additional Agreement and Second Tenancy Deposit Agreement are collectively referred to as the “Second Tenancy Agreements”.

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Second Tenancy Agreements Nil Nil Nil1 1,282 3,2402 4,2403 4,0604

Notes:

1. There is a rent free period from 1 September 2012 to 31 December 2012.

2. For the year ending 31 December 2013:

a) Rental for Levels 1 to 3 of East Wing: RMB235,552 x 12 months = RMB2,826,626

b) Rental for Unit 501 of East Wing: RMB43,583 x 9 months and 12/31 days = RMB409,118

Total: RMB3,235,744

The Valuer is of the view that the rent payable for (i) Levels 1 to 3 of East Wing was lower than the prevailing market rent; and (2) Unit 501 of East Wing was at the prevailing market rent as at 31 December 2012. Our Directors consider that the terms of the Second Tenancy Agreements were in the interest of our Company and the Shareholders as a whole.

3. For the year ending 31 December 2014:

Rental for Levels 1 to 3 and Unit 501 of East Wing, the monthly rental would be approximately RMB307,107 (with reference to the prevailing market rate as at 31 August 2013 with maximum 3% of contractual rental growth) and RMB46,028 (with reference to the prevailing market rate as at 31 August 2013 with maximum 3% of contractual rental growth) respectively: (RMB307,107 + RMB46,028) x 12 months = RMB4,237,615

4. For the year ending 31 December 2015:

Rental for Levels 1 to 3 of East Wing (with reference to the prevailing market rent at 31 August 2013 with maximum 10% of contractual rental growth): RMB337,773 x 12 months = RMB4,053,275

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Pursuant to a tenancy agreement dated 16 March 2012 between Guangdong Yihua Department Store and Guangdong Yihua Management, Guangdong Yihua Management agreed to lease the property located at Portion of Level 1 of Guomao Yihao Hotel located at the side of Weimin Road of Dongfu Road, Fusha Town, Zhongshan City, Guangdong Province, the PRC (the “Third Tenancy Agreement” and together with the First Tenancy Agreements and the Second Tenancy Agreements, the “GYM Tenancy Agreements”) with a total area of 870 sq.m. for commercial purposes. The Third Tenancy Agreement provides for a term of two years and eight months, commencing from 1 May 2012 and expiring on 31 December 2014. The rental, management fee and air conditioning fee under the Third Tenancy Agreement are as follows:

1 May 2014 – 1 May 2012 – 1 May 2013 – 31 December 30 April 2013 30 April 2014 2014 (per month (per month (per month per sq.m.) per sq.m.) per sq.m.)

Rental free RMB12to RMB12 to RMB30 RMB30 (subject to mutual (subject to mutual agreement) agreement) Management fee free RMB3 RMB6 Air conditioning fee RMB12 RMB12 RMB12 Maximum monthly total: (Note) RMB10,4401 RMB39,1502 RMB41,7603

Note:

The maximum monthly fee is calculated based on the total area of 870 sq.m. x (maximum rental amount + management fee + air conditioning fee).

1. Air conditioning fees of RMB12 x 870 sq.m. = RMB10,440

2. (Rental of RMB30 + Management fee of RMB3 + Air conditioning fee of RMB12) x 870 sq.m. = RMB39,150

3. (Rental of RMB30 + Management fee of RMB6 + Air conditioning fee of RMB12) x 870 sq.m. = RMB41,760

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Third Tenancy Agreement Nil Nil 841 52 3602 5003 Nil4

Notes:

1. Air conditioning fees of RMB10,440 x 8 months = RMB83,520

2. For the year ending 31 December 2013: Air conditioning fee of RMB10,440 x 4 months + total rental, management and air conditioning fees of RMB39,150 x 8 months = RMB354,960

3. For the year ending 31 December 2014: Total rental, management and air conditioning fees of RMB39,150 x 4 months + total rental, management and air conditioning fees of RMB41,760 x 8 months = RMB490,680

4. The Third Tenancy Agreement expires on 31 December 2014.

Tenancy Agreement with Jinhui Century

Pursuant to a long term framework tenancy agreement dated 10 August 2009 between Jiangmen Yihua Department Store and Jinhui Century (the “JC Tenancy Framework Agreement”), Jinhui Century agreed to lease the property located at Basement 1 and Levels 1 to 3 of Jinhui Century Square, No. 116 Yingbin Avenue Road, Pengjiang District, Jiangmen City, Guangdong Province, the PRC (“Jinhui Century Square”) for a term of ten years, commencing from 17 September 2009 to 16 September 2019. Under the JC Tenancy Framework Agreement, the parties will agree on the rent of each month with reference to the prevailing market rent of that year.

Pursuant to a subsequent agreements dated 1 January 2013 between Jiangmen Yihua Department Store and Jinhui Century (the “JC Tenancy Rental Agreement”), Jinhui Century agreed the monthly rental (inclusive of management fee and service fee) for the property located at Basement 1 and Levels 1 to 3 of Jinhui Century Square with a total area of about 40,178 sq.m. (a total area of about 32,520 sq.m. for commercial and about 66% of the 11,603 sq.m. (being approximately 7,658 sq.m.) for car parking spaces) is fixed at approximately RMB1,468,823 for the year 2013. Pursuant to an agreement dated 1 November 2013 between Jiangmen Yihua Department Store and Jinhui Century, the parties agreed that any increase in

– 224 – CONNECTEDTRANSACTIONS the monthly rental for the year ending (i) 31 December 2014, not exceeding 3% of the monthly rental as at 31 December 2013; and (ii) 31 December 2015, not exceeding 5% of the monthly rental as at 31 December 2014 in relation to the property located at Basement 1 and Levels 1 to 3 of Jinhui Century Square with a total area of about 40,178 sq.m..

Pursuant to an agreement dated 1 November 2013, Jiangmen Yihua Department Store paid a rental deposit of RMB3,707,884, equivalent to three months rental, to the landlord.

We also entered into a tenancy agreement leasing area in the vicinity pursuant to another agreement dated 1 June 2013 entered into between Jiangmen Yihua Department Store and Jinhui Century (“JC Tenancy Additional Agreement”), Jinhui Century agreed to lease (i) the remaining part of Basement 1 of Jinhui Century Square 34% of the 11,603 sq.m. (being approximately 3,945 sq.m.) for car parking spaces and (ii) an open area of No. 118 Yingbin Avenue Road Pengjiang District, Jiangmen City, Guangdong Province, the PRC (“118 Yingbin Avenue”) with an area of approximately 15,640 sq.m. for commercial purposes and car parking spaces from 1 June 2013 to 31 December 2015. The monthly rental (inclusive of management fee and service fee) for the period commenced from 1 June 2013 to 31 May 2014 is approximately RMB297,721. The monthly rental commencing from 1 June 2014 to 2015 will be revised with reference to prevailing market rent and in any event no more than 3% of the monthly rental agreed in the relevant previous year.

The JC Tenancy Framework Agreement, JC Tenancy Rental Agreement and JC Tenancy Additional Agreement are collectively referred to as the “JC Tenancy Agreements”.

JC Tenancy Agreement 7,026 17,113 17,113 7,334 19,7101 21,7902 22,8103

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Notes:

1. For the year ending 31 December 2013:

(i) For Basement 1 and Levels 1 to 3 of Jinhui Century Square: RMB1,468,823 x 12 months = RMB 17,625,881

(ii) For Basement 1 of Jinhui Century Square and an open area of 118 Yingbin Avenue: RMB297,721 x 7 months = RMB2,084,050

Total: RMB19,709,931

2. For the year ending 31 December 2014:

(i) For Basement 1 and Levels 1 to 3 of Jinhui Century Square (taking into account of 3% of contractual rental growth from 1 January 2014): RMB 17,625,881 x 103% = RMB18,154,657

(ii) For Basement 1 of Jinhui Century Square and an open area of 118 Yingbin Avenue (taking into account of maximum 3% of contractual rental growth from 1 June 2014): (RMB297,721 x 5 months) + (RMB297,721 x 103% x 7 months)= RMB3,635,179

Total: RMB21,789,836

3. For the year ending 31 December 2015:

(i) For Basement 1 and Levels 1 to 3 of Jinhui Century Square (taking into account of maximum 5% of contractual rental growth from 1 January 2015): RMB18,154,657 x 105% = RMB19,062,390

(ii) For Basement 1 of Jinhui Century Square and an open area of 118 Yingbin Avenue (taking into account of maximum 3% of contractual rental growth from 1 June 2015): (RMB297,721 x 103% x 5 months) + (RMB297,721 x 103% x 103% x 7 months) = RMB3,744,234

Total: RMB22,806,624

Tenancy Agreement with Guomao Hotel

Pursuant to a long term framework tenancy agreement dated 1 January 2010 between Guzhen Yihua Department Store and Guomao Hotel, Guomao Hotel agreed to lease the property located at portion of Level 3 of Section B of Zhongshan Guzhen International Hotel at Zhongxing Avenue, Guzhen Town, Zhongshan City, Guangdong Province, the PRC for a term of ten years, commencing from 1 January 2010 and expiring on 31 December 2019 for commercial purposes. The monthly rent is fixed annually by mutual agreement between the parties and with reference to the market rent (the “GH Tenancy Framework Agreement”). Pursuant to two agreements dated 30 December 2011 and 30 September 2013 between Guzhen Yihua Department Store and Guomao Hotel where a monthly rental (inclusive of management fee and service fee) of (i) RMB126,251 was agreed for the period from 1 January 2012 to 22 January 2014; and (ii) approximately RMB127,893 was agreed for the period from 23 January 2014 to 22 January 2016 in relation to the properties located at portion of Level 3 of Section B of Zhongshan Guzhen International Hotel at Zhongxing Avenue, Guzhen Town, Zhongshan City, Guangdong Province, the PRC with a total area of 4,070 sq.m. (the “GH Tenancy Rental

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Agreements”). We also entered into a short tenancy agreement leasing area in the vicinity pursuant to an agreement dated 16 July 2012 and 30 September 2013 between Guzhen Yihua Department Store and Guomao Hotel, Guomao Hotel agreed to lease the properties located at Area B of 3rd Floor with aggregate area of about 580 sq.m. for office purposes with the monthly rental (inclusive of management fees) of (i) approximately RMB17,412 for the period from 15 June 2012 to 22 January 2014 with a 90 day rent free period until 15 September 2012; and (ii) approximately RMB18,226 for the period from 23 January 2014 to 22 January 2016 (“GH Tenancy Additional Agreements” and together with the GH Tenancy Framework Agreement and the GH Tenancy Rental Agreements, the “GH Tenancy Agreements”). Pursuant to an agreement dated 1 November 2013, Guzhen Yihua Department Store paid a rental deposit of RMB389,139, equivalent to three months rental, to the landlord. The aforesaid property is used by the Group for commercial purposes.

GH Tenancy Agreements 787 1,321 1,2741 599 1,7302 1,7603 1,7604

Notes:

1. There is a rent free period from 15 June 2012 to 15 September 2012.

2. For the year ending 31 December 2013: (RMB126,251 + RMB17,412) x 12 months = RMB1,723,956

3. For the year ending 31 December 2014: (RMB126,251 + RMB17,412) x 22/31 days + (RMB127,893 + RMB18,226) x 11 months and 9/31 days = RMB1,751,680

4. For the year ending 31 December 2015: (RMB127,893 + RMB18,226) x 12 months = RMB1,753,423

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Tenancy Agreements with Yihua Investment and Yihao Hotel

Pursuant to a long term framework tenancy agreement dated 1 June 2006 between Jiangmen Yihua Department Store and Yihua Investment (“JP Tenancy Framework Agreement”), Yihua Investment agreed to lease the said properties at Basement 1, Levels 1 and 2 of podium building, Levels 2 to 4 of annex building, No. 118 Yingbin Avenue Road (“JP Area”), Pengjiang District, Jiangmen City, Guangdong Province, the PRC for commercial use for a term of 17 years, commencing from 16 June 2006 and expiring on 25 July 2023. Under the JP Tenancy Framework Agreement, the parties will agree on the monthly rent with reference to the prevailing market rent of that year.

Pursuant to a confirmation dated 16 February 2013 between Jiangmen Yihua Department Store and Yihua Investment (the “JP Rental Agreement”), (i) a monthly rental of RMB891,098 for a GFA of approximately 24,152 sq.m. for commercial use at the JPArea (“Main Building”); and (ii) a monthly rental of RMB31,173 for a GFA of approximately 3,511 sq.m. for office, staff quarter and storage uses at the JPArea (“Auxiliary Buildings”) were agreed for the period from 16 February 2013 to 15 February 2014. The monthly rental commencing from 16 February 2014 will be revised with reference to market rent. Pursuant to a supplemental agreement dated 15 February 2007, the annual increase in the rental was (i) 3% for the Main Building; and (ii) 1.5% for the Auxiliary Buildings commencing from 16 February 2007.

Furthermore, pursuant to an long term management services agreement dated 20 June 2009 between Jiangmen Yihua Department Store and Yihao Hotel, Yihao Hotel agreed to provide management service for the period from 1 July 2009 to 25 July 2023 for among others, the Main Building and Auxiliary Building for a monthly management fee of approximately RMB80,573, exclusive of water and electricity charges. The aforesaid agreement was superseded by two management services agreements both dated 1 January 2013 (“JP Management Agreements”) with similar terms above except that (i) effective from 1 January 2013, the term where the management services are provided is reduced to the period from 1 January 2013 to 31 December 2015; and (ii) the monthly management fees are RMB80,573, RMB82,990 and RMB85,480 for the year ending 31 December 2013, 2014 and 2015 respectively.

Furthermore, by a long term supplemental agreement dated 20 September 2008 entered into between Jiangmen Yihua Department Store and Yihao Hotel (“JP Tenancy Additional Agreement”), Yihao Hotel agreed to lease in the vicinity of the JP Area, an area of approximately 238 sq.m. for commercial purpose (“JP Additional Area”) from 22 September 2008 to 25 July 2023. Pursuant to a confirmation dated 31 August 2013, the monthly rental (inclusive of management fees) of RMB15,335, RMB15,795 and RMB16,268 was agreed for the period from 1 October 2013 to 30 September 2014 and the years ending 30 September 2015 and 2016 respectively in relation to the JP Additional Area. The JP Tenancy Framework Agreement, the JP Rental Agreement, the JP Management Agreements, the JP Tenancy Additional Agreement are collectively referred to as the “JP Tenancy Agreements”. Pursuant to an agreement dated 1 November 2013, Jiangmen Yihua Department Store paid a rental deposit of RMB2,809,397, equivalent to three months rental, to the landlord.

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JP Tenancy Agreements 7,383 11,549 11,853 5,050 12,1801 12,5402 12,9103

Notes:

1. For the year ending 31 December 2013:

(i) Rental for the Main Building (taking into account of 3% of contractual rental growth to RMB891,098 per month from 16 February 2013):

RMB865,144 x 1.5 months + RMB891,098 x 10.5 months = RMB10,654,248

(ii) Rental for the Auxiliary Buildings (taking into account of 1.5% of contractual rental growth to RMB31,173 per month from 16 February 2013):

RMB30,712 x 1.5 months + RMB31,173 x 10.5 months = RMB373,381

(iii) Management fees for the Main Building and the Auxiliary Buildings:

RMB80,573 x 12 months = RMB966,876

(iv) Rental and management fees for the JP Additional Area:

RMB14,909 x 9 months + RMB15,335 x 3 months = RMB180,181

Total: RMB12,174,686

2. For the year ending 31 December 2014:

(i) Rental for the Main Building (taking into account of 3% of contractual rental growth from 16 February 2014):

RMB891,098 x 1.5 months + RMB891,098 x 103% x 10.5 months = RMB10,973,876

(ii) Rental for the Auxiliary Buildings (taking into account of 1.5% of contractual rental growth from 16 February 2014):

RMB31,173 x 1.5 months + RMB31,173 x 101.5% x 10.5 months = RMB378,982

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(iii) Management fees for the Main Building and the Auxiliary Buildings (taking into account of maximum 3% of contractual increment from 1 January 2014):

RMB80,573 x 103% x 12 months = RMB995,882

(iv) Rental and management fees for the JP Additional Area:

RMB15,335 x 9 months + RMB15,795 x 3 months = RMB185,394

Total: RMB12,534,134

3. For the year ending 31 December 2015:

(i) Rental for the Main Building (taking into account of 3% of contractual rental growth from 16 February 2015):

RMB891,098 x 103%x 1.5 months + RMB891,098 x 103% x 103%x 10.5 months = RMB11,303,092

(ii) Rental for the Auxiliary Buildings (taking into account of 1.5% of contractual rental growth from 16 February 2015):

RMB31,173 x 101.5% x 1.5 months + RMB31,173 x 101.5% x 101.5% x 10.5 months = RMB384,667

(iii) Management fees for the Main Building and the Auxiliary Buildings (taking into account of maximum 3% of contractual increment from 1 January 2015):

RMB80,573 x 103% x 103% x 12 months = RMB1,025,759

(iv) Rental and management fees for the JP Additional Area:

RMB15,795 x 9 months + RMB16,268 x 3 months = RMB190,956

Total: RMB12,904,474

Property Management Agreement with Tai’an Yihua Real Estate

Pursuant to a property management agreement (the “Tai’an Management Agreement”) dated 14 June 2013 between Tai’an Yihua Real Estate and Tai’an Yihua Commercial, our wholly owned subsidiary, pursuant to which Tai’an Yihua Real Estate agreed to provide property management service to Tai’an Yihua Commercial for the total area of 15,467 sq.m. of Tai’an store (Longtan) located at No. 211-88 Longtan Road, Tai’an City, Shandong Province, the PRC for monthly service fee of RMB77,335 and monthly air conditioning fee of RMB149,670 from 15 June 2013 to 31 December 2015.

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Our Tai’an store (Longtan) commenced business in June 2013 and therefore there is no historical figures for each of the years ended 31 December 2010, 2011 and 2012 and for the five months ended 31 May 2013 . The annual caps for each of the years ending 31 December 2013, 2014 and 2015 are as follows:

Notes:

1. For the year ending 31 December 2013: (RMB77,335 + RMB149,670) x 6.5 months = RMB1,475,533

2. For the two years ending 31 December 2014 and 2015 respectively: (RMB77,335 + RMB149,670) x 12 months = RMB2,724,060

The Group entered into certain related party transactions with its related parties during the Track Record Period (“Related Party Transactions”). Details of the Related Party Transactions are set out in note 30 “Related parties and significant related party transactions” section of the Accountant’s Report of our Company as set out in Appendix I to this prospectus.

Save and except for the following transactions which are expected to recurring after the Listing, all other Related Party Transactions are either one off or non-recurring.

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Annual increment based on the rental and management fees per sq.m. for the above transactions

2012 to 2013 2013 to 2014 2014 to 2015

First Tenancy Agreements NA(Note 1) 3.1%(Note 2) 10.0% Second Tenancy Agreements NA(Note 1) 3.1%(Note 2) 10.0% Third Tenancy Agreements NA(Note 3) 0% NA Tenancy Agreements with Jinhui Century Basement 1 and Levels 1 to 3 of Jinhui Century Square 3.0% 3.0% 5.0% Basement 1 of Jinhui Century Square and an open area of 118 Yingbin Avenue NA(Note 4) 3.0% 3.0% Tenancy Agreement with Guomao Hotel Rental of area of 4,070 sq.m. (area B of 3rd Floor) 0.0% 1.7% 0.0% Rental of area of 580 sq.m. (area B of 3rd Floor) 0.0% 5.5% 0.0% Management fees of overall area 0.0% 0.0% 0.0% Tenancy Agreements with Yihua Investment and Yihao Hotel Rental of Main Building 3.0% 3.0% 3.0% Rental of Auxiliary Buildings 1.5% 1.5% 1.5% Management fees for the Main Building and the Auxiliary Buildings 0.0% 3.0% 3.0% Rental and management fees for the JP Additional Area 3.0% 3.0% 3.0% Property Management Agreement with Tai’an Yihua Real Estate 0.0% 0.0% 0.0%

Note 1: For the year ended 31 December 2012, the Company did not pay any rental payment for either the First Tenancy Agreements or Second Tenancy Agreements.

Note 2: The rental was with reference to the prevailing market rent as at 31 August 2013 with approximately 3.1% of rental growth from 1 January 2014.

Note 3: Rent free period ended on 30 April 2013.

Note 4: The rental period started in 2013.

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Historical figures and annual caps

The historical figures for each of the years ended 31 December 2010, 2011 and 2012 and for the five months ended 31 May 2013 and the annual cap for each of the years ending 31 December 2013, 2014 and 2015 are as follows:

Historical amounts Annual caps For the five months ended For the year ended 31 December 31 May For the year ending 31 December 2010 2011 2012 2013 2013 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Approx. Approx. Approx. Approx. Approx. Approx. Approx.

Hotel and Restaurant Agreement 1,132 1,109 1,341 417 1,500 2,200 2,500 Master Supply Agreement 1,635 1,625 2,298 306 1,400 2,600 3,000

Tenancy agreements with Guangdong Yihua Management First Tenancy Agreements Nil Nil Nil 3,397 8,670 11,690 10,080 Second Tenancy Agreements Nil Nil Nil 1,282 3,240 4,240 4,060 Third Tenancy Agreement Nil Nil 84 52 360 500 Nil Tenancy agreements with Jinhui Century JCTenancyAgreements 7,026 17,113 17,113 7,344 19,710 21,790 22,810 Tenancy agreements with Guomao Hotel GH Tenancy Agreements 787 1,321 1,274 599 1,730 1,760 1,760 Tenancy agreements with Yihua investment and Yihao Hotel JPTenancyAgreements 7,383 11,549 11,853 5,050 12,180 12,540 12,910 Tai’an Management Agreement Nil Nil Nil Nil 1,480 2,730 2,730 Aggregate annual caps for all tenancy and management agreements 47,370 55,250 54,350

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Listing Rules Implications

Pursuant to Rule 14A.25 of the Listing Rules, the continuing connected transactions represented by the GYM Tenancy Agreements, JC Tenancy Agreements, GH Tenancy Agreements, JP Tenancy Agreements and Tai’an Management Agreement (the “Tenancy and Management Agreements”) should be aggregated and treated as if they were one transaction. The aggregate annual caps of all the above said agreements for each of the years ended 31 December 2013, 2014 and 2015 are expected not to exceed approximately RMB47.4 million, approximately RMB55.3 million and approximately RMB54.4 million respectively.

The highest applicable percentage ratio under Chapter 14A of the Listing Rules for the transaction contemplated under the Tenancy and Management Agreements, is, on an annual basis, is expected to be more than 5% and the aggregate annual consideration is more than HK$10,000,000. Hence, the Tenancy and Management Agreements will be subject to the reporting, announcement, and independent shareholders’ approval requirement applicable to non-exempt continuing connected transactions under Rules 14A.45 to 14A.47 of the Listing Rules, and the prior independent shareholders’ approval requirements set out in Rules 14A.48 to 14A.54 of the Listing Rules.

Directors’ views on the continuing connected transactions

The durations of the following tenancy agreements (the “Long Tenancy and Management Agreements”) exceed a period of three years:

• The First Tenancy Framework Agreement and Second Tenancy Framework Agreement are for terms of more than four years and ten years respectively due to the nature of the business of our Group and to ensure sustainability of the business of the Group; and

• The durations of the JC Tenancy Framework Agreement (term of ten years), the GH Tenancy Framework Agreement (term of ten years), the GH Tenancy Additional Agreement (term of more than three years and seven months) the JP Tenancy Framework Agreement (term of 17 years and one month) and JP Tenancy Additional Agreement (term of more than 14 years and ten months) are due to the intended long term use of premises, the nature of the business of our Group, and the expected growth of the rentals throughout the relevant period(s).

Having considered our Group’s operations and based on observation of market practice in the PRC department stores industry, our Directors are of the view are within normal business practice for contracts of these types to be of such duration and to ensure sustainability of the business of our Group. Our Company confirms that it will comply with the applicable requirements under Chapter 14A of the Listing Rules.

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Our Directors (including our independent non-executive Directors) are of the view that (i) the Tenancy and Management Agreements and the Hotel and Restaurant Agreement and Master Supply Agreement are entered into in the ordinary and usual course of business of our Group, are on normal commercial terms, fair and reasonable and are in the interest of our Company and the Shareholders as a whole; (ii) the increment rate was within the historical changes in fair rent during the Track Record Period; and (iii) the proposed aggregate annual caps for such continuing connected transactions are fair and reasonable and in the interests of our Company and the Shareholders as a whole.

Furthermore, our Company is of the view that some of the above agreed rents may be lower than the prevailing market rate as determined by the Valuer as at 31 August 2013 due to the following:

(i) there is a timing difference between the date of rental determination of the relevant lease agreements and the valuation date of the Valuer. The dates of rental determination of the relevant lease agreements were at an earlier date than the date of valuation by the Valuer. Based on the investigation of the Valuer, the market rent of places where our Group are located, is generally in an increasing trend during the Track Record Period. Therefore, it is logical that the relevant rental were lower than the prevailing market rate;

(ii) instead of just leasing individual offices or units, our Group discusses with the relevant landlord to arrange for leasing of a large area (and sometimes for a long term) which generally allows our Group to negotiate better rates as there are less similar competing bidders for such size and length; and

(iii) better terms are offered by the landlord due to its view of the indirect benefits derived from leasing to us such as the early movers advantage as an anchor tenant or the landlord’s sincere belief that having an established department store in an area will raise the property value of its other properties in the same area.

Confirmation from the Valuer

The Valuer has reviewed the Tenancy and Management Agreements and confirmed that (i) the duration for the Tenancy and Management Agreements (including those agreements over three years in duration) are within normal business practice for contracts of such types and the terms of such Tenancy and Management Agreements are on normal commercial terms; (ii) as of 31 August 2013, the respective rents payable for the properties under the First Tenancy Additional Agreements (relating to Unit 501), Second Tenancy Additional Agreement, the First Tenancy Framework Agreement and First Tenancy Rental Agreements (relating to Levels 3 to 4), the Tenancy Agreements with Yihua Investment and Yihao Hotel (relating to Basement 1, Levels 1 and 2 of podium building), the JC Tenancy Agreements (relating to a commercial building with a lettable area of approximately 32,520 sq.m.), the JC Tenancy Additional Agreement, the Tenancy Agreement with Guomao Hotel and the car parking spaces under the JC Tenancy Agreements reflect the prevailing market rates and are fair and reasonable; (iii) as

– 235 – CONNECTEDTRANSACTIONS of 31 August 2013, the respective rents payable under the First Tenancy Framework Agreement and First Tenancy Rental Agreements (relating to Levels 1 to 2), the First Tenancy Rental Agreements, the First Tenancy Additional Agreements (relating to Unit 901), the Second Tenancy Rental Agreement, the JP Tenancy Framework Agreement (relating to Levels 2 to 4 of annex building) and the Third Tenancy Agreement were lower than the prevailing market rates; and (iv) as of 31 August 2013, the respective management fees payable under the Tai’an Management Agreement and JP Management Agreements were lower than prevailing market management fees.

Confirmation from the Sponsor

In regards to the Long Tenancy and Management Agreements and considering: (i) our Directors and the Valuer are of the view that the duration of leases of this nature are within normal business practice; (ii) based on the information provided by our Company as to the arrangements under each of the Long Tenancy and Management Agreements, the Sponsor, not being an expert on property leasing, is of the view that it is a normal business practice for the Long Tenancy and Management Agreements to have such a duration.

The Sponsor (not being experts on property leasing), is of the view that (i) the Tenancy and Management Agreements and the Hotel and Restaurant Agreement and Master Supply Agreement are entered into in the ordinary and usual course of business of our Company, are on normal commercial terms and are fair and reasonable to and are in the interest of the Company and the Shareholders as a whole; and (ii) the proposed aggregate annual caps for such continuing connected transactions are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

In providing the above view that the agreements are on normal commercial terms in the circumstances where the rental or management fees were lower than the prevailing market rate as determined by the Valuer as at 31 August 2013, the Sponsor gave due regard to the Valuer’s expert opinion above, the information provided by our Company and the logical reasons where the current rental may be lower than prevailing market rates.

Waiver from the Stock Exchange

Given that the transactions contemplated under the Tenancy and Management Agreements and the Hotel and Restaurant Agreement and Master Supply Agreement will be carried out following the Listing on a recurring basis, the Directors consider that strict compliance with the announcement and where applicable, the independent shareholders’ approval requirements would be impractical, burdensome and would add unnecessary administrative costs to the Company each time when such transaction arises.

– 236 – CONNECTEDTRANSACTIONS

Our Company has therefore applied to the Stock Exchange, and the Stock Exchange has granted to the Company a waiver from strict compliance with:

(i) the announcement requirement related to the transactions contemplated under each of the Hotel and Restaurant Agreement and the Master Supply Agreement pursuant to Rule 14A.42(3) of the Listing Rules on the condition that the aggregate value of the transactions contemplated thereunder for each of the three years ending 31 December 2013, 2014 and 2015 will not exceed its respective annual caps as stated above;

(ii) the announcement and the independent shareholders’ approval requirements related to the transactions contemplated under the Tenancy and Management Agreements pursuant to Rule 14A.42(3) of the Listing Rules on the condition that the aggregate value of the transactions contemplated thereunder for each of the three years ending 31 December 2013, 2014 and 2015 will not exceed their respective annual caps as stated above.

Our Company confirms that it will re-comply with the requirements under Chapter 14A of the Listing Rules and in the event of any future amendments to the Listing Rules imposing more stringent requirements than those current provisions under Chapter 14A of the Listing Rules, our Company will take immediate steps to ensure compliance with such requirements within a reasonable period.

– 237 – RELATIONSHIPWITHTHECONTROLLINGSHAREHOLDERS

RELATIONSHIPWITHCONTROLLINGSHAREHOLDERS

For the reasons sets out in the paragraph headed “Personal investments in businesses held by Mr. Chen Daren and his associates” of this section, we are of the view that none of the Controlling Shareholders or Directors holds or conducts any business which competes, or is likely to compete, either directly or indirectly, with our business.

Mr. Chen Daren is a non-executive Director and his brother, Mr. Chen, is an executive Director and chairman of the Company. Mr. Chen Zhengtao is the nephew of Mr. Chen Daren and son of Mr. Chen. Mr. Chen Daren and his associates are interested in (i) Yihua Investment Group; and (ii) other companies, details of which are set out below.

PERSONALINVESTMENTSINBUSINESSESHELDBYMR.CHENDARENANDHIS ASSOCIATES

Yihua Investment Group

Yihua Investment is an investment holding company with various subsidiaries. Yihua Investment is owned as to 11.09% by Mr. Chan Daren, 28.22% by Mr. Lu, 11.09% by Mr. Chen Zhengtao, and 49.6% by Shunyi Industrial. Shunyi Industrial is owned as to 90% by Mr. Chen Daren and 10% by Mr. Yu Huaxing.

Other investments owned by Mr. Chen Daren

As advised by the Controlling Shareholders, Mr. Chen Daren, apart from holding shares in our Group, has various other investments.

Mr. Chen Daren, among others, have undertaken to us that they will not be engaged in any competing business, and particulars of these undertakings are set forth in the paragraph headed “Deed of Non-competition” of this section.

– 238 – RELATIONSHIPWITHTHECONTROLLINGSHAREHOLDERS

As at the Latest Practicable Date, the use of the word “Yihua” and/or ”ूശ” is only used in two contexts:

(i) Yihua Investment (being the former majority shareholder of our Group) is the holding company of the Yihua Investment Group; and

(ii) in the names of a limited number of companies which the main business involves leasing and management of properties and in the names of a limited number of properties developed by the Yihua Investment Group.

Furthermore, based on the best knowledge of our Directors, the other main businesses of the Yihua Investment Group and the private companies owned by Mr. Chen Daren (such as operation of hotels, restaurants etc.) have their own respective brand names. Our Directors are therefore of the view that the use of the words “Yihua” and/or “ूശ” in the two contexts above would not affect our business or otherwise infringe our intellectual property. All of the private companies are either not active in business or are engaged in other business activities which do not include the operation of department stores. More importantly, we have registered or applied for registration of the trademarks used by us in our ordinary course of business as trademarks in the PRC and Hong Kong. Further information on our trademarks is set forth in the section headed “Statutory and general information − B. Further information about the business of the Group – 2. Intellectual property rights of the Group” in Appendix IV to this prospectus.

Delineation of business

Yihua Investment Group through various companies controlled by Mr. Chen Daren, one of our Controlling Shareholders, are interested in other different businesses, including but not limited to (i) hotels (i.e. operation of hotels); (ii) provision of food and beverage related services (mainly operation of restaurants); (iii) entertainment business (mainly operation of karaoke, spa and saunas); (iv) property related business (mainly property investment, development, management and rental); and (v) manufacture of electronics goods.

We are principally engaged in the operation of department stores. In such operations, our supermarket sections may sell products (such as groceries) to our customer which can be distinguished from sale of prepared food in the operation of restaurants operated by Yihua Investment Group and the various companies controlled by Mr. Chen Daren. Our Group does not operate any restaurants, which can be distinguished from the Yihua Investment Group which does operate restaurants. Furthermore, our Directors believe that our Group’s rental to fast food chains can be distinguished from the Yihua Investment Group’s rental to or operation of fine dining restaurants given the different dining experience and customer market. In addition, (i) given that we can rent our premises to other shop tenants that do not operate restaurants; and (ii) rental from shop tenants and collection of management fees contributed to a relatively minor portion of our revenue, our Directors believe the rental to restaurants can be distinguished from the significance of rental business as part of the property related businesses operated by Yihua Investment Group and the various companies controlled by Mr. Chen Daren or that there is limited competition in relation to the above.

– 239 – RELATIONSHIPWITHTHECONTROLLINGSHAREHOLDERS

For the aforesaid reasons, our Directors are of the view that the aforesaid business of Yihua Investment Group and various companies controlled by Mr. Chen Daren does not compete with our business.

DEEDOFNON-COMPETITION

For the purpose of the Listing, a Controlling Shareholder, Mr. Chen Daren as well as certain executive Directors and members of senior management interested in the Shares, being Mr. Chen, Mr. Lu, Mr. Fan, Mr. Su Weibing and Mr. Lin Guangzheng (collectively, the “Covenantors”) have entered into the Deed of Non-competition in favour of our Company, whereby each of the Covenantors jointly and severally, irrevocably and unconditionally, undertakes with our Company that with effect from the Listing Date and for as long as the Shares remain listed on the Stock Exchange and the Covenantors, individually or collectively with their associates (as defined in Chapter 1 of the Listing Rules), are, directly or indirectly, interested in not less than 30% of the Shares in issue, or are otherwise regarded as Controlling Shareholders, each of the Covenantors shall not, and shall procure that their respective associates shall not:

(a) directly or indirectly engage, participate or hold any right or interest in or render any services to or otherwise be involved in any business in competition with or likely to be in competition with the existing business activity of our Group or be in competition with our Group in any business activities which our Group may undertake in the future save for the holding (by him/her/it and/or his/her/its associates) of not more than 5% shareholding interests in any company listed on the Stock Exchange or any other stock exchange;

(b) take any direct or indirect action which constitutes an interference with or a disruption to the business activities of our Group including, but not limited to, solicitation of customers, suppliers and staff members of our Group; and

(c) keep our Directors informed of any matters of potential conflicts of interest between the Covenantors (including their associates) and our Group.

In addition, each of the Covenantors jointly and severally, irrevocably and unconditionally, undertakes with our Company that if any new business opportunity relating to any products and/or services of our Group (“New Business Opportunity”) is made available to any of the Covenantors or their respective associates (other than our Company), he/she/it will direct or procure the relevant associate to direct such New Business Opportunity to our Group with such required information to enable our Group to evaluate the merits of the New Business Opportunity. The relevant Covenantor shall provide or procure the relevant associate to provide all such reasonable assistance to enable our Group to secure the New Business Opportunity.

– 240 – RELATIONSHIPWITHTHECONTROLLINGSHAREHOLDERS

None of the Covenantors and their respective associates (other than our Company) will pursue the New Business Opportunity until our Group decides not to pursue the New Business Opportunity because of commercial reasons. Any decision of our Company will have to be approved by the independent non-executive Directors taking into consideration our Group’s prevailing business and financial resources, the financial resources required for the New Business Opportunity and any expert opinion on the commercial viability of the New Business Opportunity. Our Company will disclose any decisions on matters reviewed by the independent non-executive Directors relating to compliance and enforcement of the non-compete undertaking either through the annual report, interim report or by way of announcement including the independent non-executive Directors’ decision, and their basis, to pursue or decline any New Business Opportunity.

Each of the Covenantors jointly and severally, irrevocably and unconditionally, represents and warrants to our Company that neither he/she/it nor any of his/her/its associates is currently interested, involved or engaging, whether directly or indirectly, in any business competing with that of our Group under Rule 8.10 of the Listing Rules.

Each of the Covenantors further jointly and severally, irrevocably and unconditionally, undertakes that he/she/it will (i) provide to our Group all information necessary for the enforcement of the undertakings contained in the Deed of Non-competition; and (ii) confirm to our Company on an annual basis as to whether he/she/it has complied with such undertakings.

The Deed of Non-competition will cease to have any effect on the earliest of the date on which:

(a) our Company becomes wholly-owned by the Covenantors and/or their associates; or

(b) the Shares cease to be listed on the Stock Exchange.

INDEPENDENCEFROMCONTROLLINGSHAREHOLDERS

Having considered the following factors, we believe that we are capable of carrying on our business independently from the Controlling Shareholders after the Share Offer:

Management independence and operational independence

Our Board consists of nine Directors, comprising four executive Directors, two non-executive Directors and three independent non-executive Directors. As noted above, Mr. Chen Daren is a Controlling Shareholder and non-executive Director and Mr. Chen, who is the brother of Mr. Chen Daren, is an executive Director and chairman of our Company. Although our Controlling Shareholders will retain a controlling interest in our Company after the Listing, our Company has full rights to make all decisions on, and to carry out, its own business operations independently through its other Directors. Our Company (through its subsidiaries and/or authorised persons) has sufficient capital, suppliers networking, facilities and employees to operate our business independently from our Controlling Shareholders.

– 241 – RELATIONSHIPWITHTHECONTROLLINGSHAREHOLDERS

Independence of management

The following table sets forth details of the common director of our Company and members of the Yihua Investment Group immediately after the Listing:

Positions and responsibilities in the Positions and Yihua Investment responsibilities in our Reasons for Name of Director Group Group maintaining positions

Chen Jianren Chen Jianren, Chen Executive Director and • Chen Jianren is the Daren and Lu Hanxing chairman of our Group founder of our each hold directorship and responsible for the Group. positions in various formulation of the companies in the Yihua overall strategy and • Chen Jianren, Chen Investment Group. setting of business Daren and Lu direction of our Group Hanxing will not Chen Jianren is participate in the primarily responsible day to day for overall strategy and management of our the property related Group. businesses.

Chen Daren Chen Daren is primarily Non-executive Directors • The common responsible for responsible for assisting directors can businesses relating to in formulation of provide and develop the hotels, provision of overall strategy possible synergies food and beverage for the benefit of related services and both the Yihua entertainment Investment Group businesses. and our Group.

Lu Hanxing Lu Hanxing is primarily • The common responsible for directors have businesses relating to valuable business the manufacturing of experience in electronic goods. developing overall strategy and their continuing positions will provide continuity and stability of operations.

Each of our Directors is aware of his fiduciary duties as a Director of our Company which requires, among other things, that he acts for the benefit and in the best interests of our Company and does not allow any conflict between his duties as a Director and his personal interest. The Articles of Association generally provides that in the event that there is a material interest arising out of any transaction to be entered into between our Group and our Directors or their respective associates, the interested Director(s) shall abstain from voting at the relevant Board meetings of our Company in respect of such transactions and shall not be counted in the quorum. Further, the interested Director(s) shall not attend, or if already present, excuse himself from, any meeting or part of any meeting of the Board, and shall not participate in any discussions in respect of any resolution of the Board, in respect of such transactions, unless expressly requested to attend or participate in the discussions by a majority of our independent non-executive Directors. In addition, we have a senior management team to carry out our business decisions independently. A majority of our Board being our other three executive Directors and three independent non-executive Directors will also bring independent judgment to the decision-making process of our Board.

– 242 – RELATIONSHIPWITHTHECONTROLLINGSHAREHOLDERS

In addition, all members of our senior management are also independent from our Controlling Shareholders and the Yihua Investment Group and their respective associates.

Our executive Directors and senior management have served us for an extended period of time and have substantial experience in the industry in which our Company is engaged. Except as set out and for the reasons stated in this section, our operations are independent of and not connected with any of our Controlling Shareholders. Generally, our organisation structure consists of various departments and divisions, each with specific areas of responsibility.

Tenancy agreements with Connected Persons

All of the properties at which our department stores are situated, except for the properties which are leased from the Yihua Investment Group (details of which are set out in the section headed “Connected transactions” of this prospectus), are leased from Independent Third Parties. The rental for the leased premises was negotiated on an arm’s length basis.

In particular:

• Out of the ten department stores as at the Latest Practicable Date, only the Jiangmen store was on properties which was fully leased from our Group’s Connected Persons and the revenue from such store was approximately RMB169.0 million, RMB192.2 million, RMB179.6 million and RMB77.5 million for the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013 respectively.

• Out of the three community stores as at the Latest Practicable Date, only Fusha store which commenced business in 2012 was on a property fully leased from Connected Persons of our Company.

• Other than the aforesaid, part of the Zhongshan store (main store) (less than 40%) and part of the Guzhen store (less than 28%) was on properties which was leased from Connected Persons of our Company.

Our Directors are of the view that there is sufficient independence despite the aforesaid leases from Connected Persons of our Company due to the following reasons:

(1) The majority of the properties used by our Group are on properties leased from Independent Third Parties. As mentioned above, only one department store and one community store which commenced business in 2012 was on properties fully leased from Connected Persons of our Company. The lease agreements with Connected Persons covered less than 50% of two other department stores.

(2) The relevant lease agreements are non-exempt connected transactions and therefore subject to review by the independent non-executive Directors upon renewal.

– 243 – RELATIONSHIPWITHTHECONTROLLINGSHAREHOLDERS

(3) The tenancy agreements between our Group and Mr. Chen Daren and his associates, were entered into on normal commercial terms after arm’s length negotiations. The Valuer has reviewed the Tenancy and Management Agreements (as defined and set out in the section headed “Connected transactions” of this prospectus) and confirmed that (i) the duration for the Tenancy and Management Agreements (including those agreements over three years in duration) are within normal business practice for contracts of such types and the terms of such Tenancy and Management Agreements are on normal commercial terms; (ii) as of 31 August 2013, the respective rents payable for the properties under the First Tenancy Additional Agreements (relating to Unit 501), Second Tenancy Additional Agreement, the First Tenancy Framework Agreement and First Tenancy Rental Agreements (relating to Levels 3 to 4), the Tenancy Agreements with Yihua Investment and Yihao Hotel (relating to Basement 1, Levels 1 and 2 of podium building), the JC Tenancy Agreements (relating to a commercial building with a lettable area of approximately 32,520 sq.m.), the JC Tenancy Additional Agreement, the Tenancy Agreement with Guomao Hotel and the car parking spaces under the JC Tenancy Agreements reflect the prevailing market rates and are fair and reasonable; (iii) as of 31 August 2013, the respective rents payable under the First Tenancy Framework Agreement and First Tenancy Rental Agreements (relating to Levels 1 to 2), the First Tenancy Rental Agreements, the First Tenancy Additional Agreements (relating to Unit 901), the Second Tenancy Rental Agreement, the JP Tenancy Framework Agreement (relating to Levels 2 to 4 of annex building) and the Third Tenancy Agreement were lower than the prevailing market rates; and (iv) as of 31 August 2013, the respective management fees payable under the Tai’an Management Agreement and JP Management Agreements were lower than prevailing market management fees.

(4) Our Directors are of the view that even if some might consider those tenancy agreements are significant to the management and operation of our Group in terms of the spaces involved and the rentals payable, the management and operational independence of our Group nevertheless remains intact for our entering into the tenancy agreements, as they are in the mutual interest of our Group and the landlord. From the perspective of the landlord, it may be difficult to find a tenant to take up such amounts of space within a short period of time.

(5) If the relevant premises were no longer be available to us upon the expiry of the respective tenancy agreement and additional relocation costs may be incurred, we believe that our Group shall still be able to find suitable premises from third party landlord(s) in the same district as an alternative without undue delay or inconvenience. Further, the longer we stay in one premise for business, we may need to incur renovation and refurbishment cost which may be equivalent to the relocation cost.

– 244 – RELATIONSHIPWITHTHECONTROLLINGSHAREHOLDERS

Furthermore, it is a commercial decision not to inject the properties of its Connected Persons into our Group. Firstly, for purpose of clear delineation of business as the business of Yihua Investment Group includes property related businesses while the focus of our Group’s business is on operation of department stores. Secondly, operating our stores on leased premises allows our Group to focus its capital resources on its core business in operating its department store chain and not to tie up its funds for constructing self-owned premises.

VIP card program

Except as noted below, our VIP cards program (being the ordinary VIP card and the VIP gold card) is managed and operated by our Group independent from others including the acceptance or rejection of customers into the VIP program, the maintenance of VIP customer database and the issuing and replacing of ordinary VIP cards and VIP gold cards. Yihua Investment Group issues its own VIP platinum card which is managed and operated by it. Furthermore, as our Company and Yihua Investment Group do not share the profit and costs of cross-sale of merchandise or services offered in relation to the VIP customers, our Directors are of the view that there is sufficient operational independence.

Under four cooperation agreements entered into by Guangdong Yihua Department Store with certain Connected Persons, (i) ordinary VIP cardholders and VIP gold cardholders may gain certain benefits in specific businesses in the Yihua Investment Group; (ii) VIP platinum cardholders may gain certain benefits in our stores; and (iii) Guangdong Yihua Department Store is responsible for producing and advertising the VIP cards including the VIP platinum cards. Details of these cooperation agreements are set out in the section headed “Connected transactions – Exempt continuing connected transactions – (a) Cooperation agreements in respect of VIP cards” of this prospectus.

For further details of the above and other connected transactions including certain management agreements, a master license agreement and agreements relating to purchase of services and supply of goods, please refer to the section headed “Connected transactions” of this prospectus.

Synergy with Yihua Investment Group

Our Directors are of the view that the synergy between our Group and the Yihua Investment Group does not affect the independence between the two groups based on the reasons set out above and the administrative and financial independence set out below. We emphasise that since there is no profit sharing arrangement between our Group and the Yihua Investment Group, any beneficial effects is indirect and only serves to reinforce our business but cannot satisfy the demands of our customers.

– 245 – RELATIONSHIPWITHTHECONTROLLINGSHAREHOLDERS

Furthermore, we have found no specific correlation between Stores with complementary facilities and amenities owned and/or operated by the Yihua Investment Group in the vicinity as compared to those without as seen from the below table concerning our five main stores which commenced business prior to the Track Record Period:

Approximate revenue per GFA for the year ended 31 December 2012 (Note) With Without

Jiangmen store RMB2,960.1/sq.m. Shaoguan store RMB2,573.1/sq.m. Zhongshan store RMB3,760.9/sq.m. (main store) Guzhen store RMB7,376.3/sq.m. Qingyuan store RMB6,858.9/sq.m.

Note: The revenue per GFA is calculated by using the estimated revenue contribution of the relevant store for the year ended 31 December 2012 divided by the total GFA of the retail space of such store as at the Latest Practicable Date.

Therefore, we believe that complementary facilities draws in potential business and customers to both parties but core attraction for our customers comes from the strength of our own business.

Based on the above reasons, there is management and operational independence of our Company shall not be affected merely because of the overlapping directorship and ownership, the tenancy agreements with Connected Persons and the VIP card program.

Administrative independence

We have our own capabilities and personnel to perform all essential administrative functions including financial and accounting management, invoicing and billing, human resources and information technology.

Financial independence

We have an independent financial system and make financial decisions according to our own business needs. Our Directors confirm that as at the Latest Practicable Date, our Controlling Shareholders and their respective associates had not provided any outstanding guarantee or loan to us.

We believe we are capable of obtaining financing from Independent Third Parties, if necessary, without reliance on our Controlling Shareholders. Therefore, we are financially independent from our Controlling Shareholders.

Having considered the above reasons, our Directors are of the view that we are capable of carrying on our business independently of our Controlling Shareholders after Listing.

– 246 – RELATIONSHIPWITHTHECONTROLLINGSHAREHOLDERS

CORPORATEGOVERNANCEMEASURES

Our Directors believe that there are adequate corporate governance measures in place to manage the conflict of interests arising from any competing business and to safeguard the interests of the Shareholders, including:

• our independent non-executive Directors will review, on an annual basis, the compliance with the Deed of Non-competition by the Covenantors;

• the Covenantors have undertaken to provide to us all information necessary for the enforcement of the Deed of Non-competition, and confirm to us on an annual basis as to whether he or she or it has complied with the above non-competition undertakings;

• disclosure by us on decisions on matters reviewed by the independent non- executive Directors relating to the compliance and enforcement of the Deed of Non-competition in our annual report;

• the Covenantors making an annual statement on compliance with the Deed of Non-competition in our annual report, including the disclosure on how the Deed of Non-competition was complied with and enforced;

• in the event that potential conflicts of interest may materialise, i.e. where a Director has an interest in a company that will enter into an agreement with our Group, the Director(s) with an interest in the relevant transaction(s) will not be present at the relevant board meeting, and will be excluded from the board deliberation and abstain from voting and will not be counted towards quorum in respect of the relevant resolution(s) at such board meeting in accordance with the Articles; and

• in the event that potential conflicts of interest may materialise, the Shareholder(s) with an interest in the relevant transaction(s) will abstain from voting in the shareholders’ meeting of our Company with respect to the relevant resolution(s).

– 247 – DIRECTORS,SENIORMANAGEMENTANDSTAFF

DIRECTORS

The following information sets forth information regarding our Directors.

Position(s) in our Group and relevant Date of Name Age relationships Appointment Responsibilities

Chen Jianren 60 Chairmanand 20April2012 Formulationofthe (௓਄ʠ) executive Director overall strategy and chairman of and setting of the nomination business direction committee of the Group and duties as chairman Brother of Mr. Chen the nomination Daren committee Fan Xinpei 58 Chief executive 20April 2012 Overall development (ߪอ੃) officer, executive and strategic plans Director and and the member of formulation and remuneration implementation of committee our operational plans and duties as member of the remuneration committee Su Weibing 55 Executive Director 12 November 2013 Overall development (ᘽਃж) and strategic plans and the formulation and implementation of operational plans of the department store section and the electrical appliances section Lin Guangzheng 53 Executive Director 12 November 2013 Overall development Έ͍) and strategic plans؍) and the formulation and implementation of operation plans of the furniture section and the supermarket section Chen Daren 58 Non-executive 12 November 2013 Assisting in (௓༺ʠ) Director formulation of overall strategy Brother of Chen Jianren

– 248 – DIRECTORS,SENIORMANAGEMENTANDSTAFF

Position(s) in our Group and relevant Date of Name Age relationships Appointment Responsibilities

Lu Hanxing 63 Non-executive 12 November 2013 Assisting in (௔ဏጳ) Director formulation of overall strategy Sun Hong 64 Independent non- 12 November 2013 Duties as member of ,࢑ݳ) executive Director the audit) (formerly Sun and member of the nomination and Xiong (࢑ඪ)) audit, remuneration remuneration and nomination committees committees Xu Yinzhou 67 Independent non- 12 November 2013 Duties as member of (ࢱΙψ) executive Director the audit, and member of the nomination and audit, remuneration remuneration and nomination committees committees Leung Wai 49 Independent non- 12 November 2013 Duties as chairman Kwan executive Director, of the audit (૑ၪё) chairman of the committee and audit committee member of the and member of the nomination, remuneration and remuneration nomination committees and committees internal control committee

Chairman and Executive Directors

Chen Jianren (௓਄ʠ), aged 60, is our executive Director and chairman of our Group. Mr. Chen is the founder of our Group and was appointed as our Director on 20 April 2012. He is responsible for the formulation of the overall strategy and setting of business direction of our Group. He was also appointed as the director and manager of the Yihua Investment since 2005. Prior to joining the Yihua Investment, he was the director of Zhongshan Yihua Group Company Limited (ʕʆ̹׋ശණྠϞࠢʮ̡) from 1987 to 2002 and the director and general manager of Zhongshan King Hotel (ʕʆ̹ԯശৢֳ) in 1985. Mr. Chen has approximately 28 years of experience in corporate management. As the director of certain members of the Yihua Investment Group, Mr. Chen has extensive experience in the tertiary industry particularly in regards to property development.

He attained the certificate of professional corporate management (ʕʆΆุ၍ଣਖ਼ุ൛ ࣣ) from Sun Yat-Sen University (ʕʆɽኪ) in July 1998.

Mr. Chen is the brother of Mr. Chen Daren, a non-executive Director and a Controlling Shareholder.

– 249 – DIRECTORS,SENIORMANAGEMENTANDSTAFF

Fan Xinpei (ߪอ੃), aged 58, is our executive Director and chief executive officer of our Company. Mr. Fan was appointed as our Director on 20 April 2012. Mr. Fan is responsible for our overall development and strategic plans and the formulation and implementation of our operational plans. He is also responsible for our new development projects, the opening and location of our new stores and formulating our business and organisational structure. Mr. Fan joined our Group since the establishment of Guangdong Yihua Department Store and was appointed as president of Guangdong Yihua Department Store since May 1995. Prior to joining our Group, Mr. Fan worked in Yihua Group Company Limited (׋ശණྠϞࠢʮ̡) as vice president from 1987 to 1995. He was elected as the Standing Committee Member of the 10th session of the Zhongshan Municipal People’s Political Consultative Conference (݁՘ʕʆ̹ୋ ɤ֣։ࡰึ੬։), the Representative of the 14th session of the Zhongshan Municipal People’s Vice-Chairman of Council of China Chain-Store and Franchise ,(ڌ˾Congress (ʕʆ̹ɛɽ ,in March 2012 (ڗAssociation of Guangdong Province (ᄿ؇޲ஹᕁ຾ᐄ՘ึଣԫึਓึ Vice-Chairman of Zhongshan City Business Association (ʕʆ̹ਠุБุ՘ึଣԫึ੬ਕਓึ in March 2005, Chairman of Zhongshan Commerce Circulation Association (ʕʆ̹ਠ൱ (ڗ in August 2009. He was also awarded as National Working Model of (ڗݴஷ՘ึึ Commercial System (Ό਷ਠਕӻ୕௶ਗᅼᇍ) by Ministry of Commerce, PRC in January 2008. Mr. Fan is a substantial Shareholder.

Mr. Fan attained a graduation certificate of corporate governance (Άุ၍ଣ) (part-time) at University of Electronic Science and Technology of China, Zhongshan Institute (ཥɿ߅Ҧ ɽኪʕʆኪ৫), previously named Sun Wen Institute of Sun Yat-sen University (ʕʆɽኪ࢑˖ ኪ৫), in July 1992.

Su Weibing (ᘽਃж), aged 55, was appointed as our executive Director in 12 November 2013. Mr. Su is responsible for the overall operation and planning of the department stores section. He joined our Group in 1995 and was appointed as our vice president of Guangdong Yihua Department Store in 2001. He became the vice president of our Group in June 2012. Prior to joining us, Mr. Su has gained extensive experience while being a director and the ,general manager of First Department Store Limited (ϵ஬ɓਠֳٰ΅Ϟࠢʮ̡) in Tongliao Inner Mongolia, the PRC.

Mr. Su obtained a graduation certificate in business and corporate management (ਠุΆ ၍ଣ) from Tianjin College of Commerce (˂ݵਠኪ৫), and attained a diploma of economicุ management (຾᏶၍ଣ) from a correspondence program of Shanxi University of Finance and Economics (ʆГৌ຾ɽኪ), formerly known as Shanxi Finance and Economics Institute (ʆГ ৌ຾ኪ৫), in July 1989 and July 1993 respectively. He was accredited the title of Business Economist (ਠุ຾᏶ࢪ) by the Inner Mongolia Autonomous Region in 1993. Mr. Su was also appointed as the committee member of the 9th Chinese People’s Political Consultative .Conference of Tongliao (݁՘ஷ፱̹ୋɘ֣։ࡰึ) in 1994

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Έ͍), aged 53, was appointed as our executive Director in 12؍) Lin Guangzheng November 2013. Mr. Lin is responsible for the overall operation and planning of supermarket section, furniture section and logistic center, including setting up supermarket section and furniture section in new stores. He was also responsible for establishment of electrical appliances section in 1997, logistic center in 2003 and furniture section in 2013. He served in Guangdong Yihua Department Store as an office manager and assistant president from July 1995 to June 1997 and has worked as assistant president from July 1997 to November 2000. He was appointed as the vice president of Guangdong Yihua Department Store in December 2000. He became the vice president of our Group in June 2012. Before joining our Group, Mr. Lin was a teacher of Zhongshan Qifa Middle School (ʕʆ઼̹೯ʕኪ) for 19 years.

(He studied mathematics in Guangdong Radio and TV University (ᄿ؇ᄿᅧཥൖɽኪ from 1982 to 1984 and obtained the graduation certificate in November 1984. He completed a program on business administration in Sun Yat-Sen University (ʕʆɽኪ) in June 2000.

Non-executive Directors

Chen Daren (௓༺ʠ), aged 58, was appointed as our non-executive Director in 12 November 2013. Mr. Chen has been the director of the Yihua Investment and also the executive director of Guangdong Yucca Hotel Management Co. Ltd. (ᄿ؇අႴৢֳ၍ଣϞࠢʮ̡) since 2004. Mr. Chen has approximately nine years of experience in corporate management. As the deputy general manager of Yihua Investment, Mr. Chen has extensive experience in the tertiary industry and principally involved in the businesses relating to hotels, food and beverages and entertainment of Yihua Investment. He is responsible for the overall development and strategic plans of this area in the Yihua Investment Group.

Mr. Chen Daren is a Controlling Shareholder and brother of Mr. Chen, an executive Director and the chairman of our Group.

Lu Hanxing (௔ဏጳ), aged 63, was appointed as our non-executive Director in 12 November 2013. He has been the deputy general manager of Yihua Investment since 2003. Before joining the Yihua Investment Group, Mr. Lu has worked in Zhong Shan City Scenic Hotel Management Co. Ltd. (ʕʆ̹׋౻ৢֳ຾ᐄ၍ଣϞࠢʮ̡) from 1990 to 1997 as general manager. He has approximately 23 years of experience in corporate management.

Mr. Lu worked as deputy general manager in Yihua Group Company Limited between 1991 and 2002. He has taken up significant roles in the Yihua Investment Group since 2003 and principally involved in the businesses relating to the development of electronic goods manufacturing. He is responsible for the overall development and strategic plans of this area in the Yihua Investment Group.

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Independent non-executive Directors

Mr. Sun Hong (࢑ݳ) (formerly Sun Xiong (࢑ඪ)), aged 64, was appointed as our independent non-executive Director on 12 November 2013. He was appointed as the chairman from March 2012 to (ڗof Guangdong Chain Operations Association (ᄿ؇޲ஹᕁ຾ᐄ՘ึึ March 2015, and was appointed as council member of the China Chain Store and Franchise Association (ʕ਷ஹᕁ຾ᐄ՘ึ੬ਕଣԫ) in December 1998 and the honorary president of in 2011. He has (ڗGuangdong Chamber of Daily Used Chemicals (ᄿ؇޲˚ʷਠึ࿲ᚑึ been the committee member of the Advisory Committee in Economic decision-making and ආ)຾᏶Ӕഄፔ༔։ࡰึ) from October 2011 toڮPromotion of Shunde District (නᅃਜ(຾᏶ December 2013. He was elected as a member of the expert committee of Guangdong Consumer Council (ᄿ؇޲ऊ൬٫։ࡰึਖ਼࢕։ࡰึ։ࡰ) from March 2012 to March 2015. He was an independent director of a company listed on the Shenzhen Stock Exchange, Shenzhen (Agricultural Products Co., Ltd (ଉέ̹༵ପٰۜ΅Ϟࠢʮ̡) (Shenzhen Stock code: 000061 from October 2006 to October 2009.

He studied political economics in the Beijing College of Commerce (̏ԯਠุኪ৫) in 1978 and obtained a graduation certificate in December 1978. In 2011, Mr. Sun was appointed as an Adjunct Professor in the College of Business in the City University of Hong Kong from January 2011 to December 2012.

Mr. Xu Yinzhou (ࢱΙψ), aged 67, was appointed as our independent non-executive Director on 12 November 2013. He was the assistant dean in Guangdong University of between 2001 and 2005. Mr. Xu has been elected as the (ڗBusiness Studies (ᄿ؇ਠኪ৫ਓ৫ Policy Adviser in the second session of the policy advisory committee of the Guangzhou Municipal Government Office (ᄿψ̹ɛ͏ִ݁ୋɚ֣Ӕഄፔ༔ਖ਼࢕) from March 2010 to March 2013.

Mr. Xu graduated from Chemistry studies in Peking University (̏ԯɽኪ) in March 1970 and Trade Economics in Renmin University of China (ʕ਷ɛ͏ɽኪ) in July 1984, and is qualified as Professor in commerce and economics as accredited by Department of Personnel of Guangdong Province (ᄿ؇޲ɛԫᝂ) in December 1995 and tutor in business administration .as accredited by Guangdong University of Business Studies (ᄿ؇ਠኪ৫) in December 2003 He was also appointed as the ninth vice president of the Guangdong Economic Society (ᄿ؇ in June 2000. Mr. Xu was an independent director of a listed company on the (ڗ຾᏶ኪึਓึ Shenzhen Stock Exchange, Guangzhou KingTeller Technology Co., Ltd (ᄿψ੿ვ߅Ҧٰ΅Ϟ ࠢʮ̡) (Shenzhen stock code: 2177) from October 2004 to October 2010.

Mr. Leung Wai Kwan (૑ၪё), aged 49, was appointed as our independent non- executive Director on 12 November 2013. Prior to joining our Company, from April 2007 to May 2011, Mr Leung was a principal of a local audit firm, O.S.R. C.P.A Limited and the managing director of a consulting firm, O.S.R. Consultants & Secretaries Limited from February 1995 to October 1999 and from June 2006 to April 2011, which provides services of secretarial, taxation and corporate finance consultancy.

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He was also an executive director of two companies listed on the Stock Exchange, namely New Smart Energy Group Limited (Stock code: 91) from October 1999 to June 2005 and China Mining Resources Group Limited (Stock code: 340) from May 2000 to June 2004.

Mr. Leung is currently an executive director of a company listed on the Stock Exchange. He was appointed as an executive director of CVM Minerals Limited (Stock code: 705) since September 2010 and is the chief executive officer of this company. His duties for the aforesaid company listed on the Stock Exchange included implementation of internal control measures within the company, ensuring transactions complied with relevant accounting standards, analysing financial statements for a listed company and preparing and reviewing the annual report.

Information that needs to be disclosed pursuant to Rule 13.51(2) of the Listing Rules

Save as disclosed above, each of our Directors (i) had no other relationship with any Directors, senior management or substantial or controlling shareholders of our Company as at the Latest Practicable Date; and (ii) did not hold any other directorships in listed public companies in the three years prior to the Latest Practicable Date.

There is no information of each of our Directors which needs to be disclosed pursuant to the requirements under Rules 13.51(2)(h) to 13.51(2)(v) of the Listing Rules, and save as disclosed in this prospectus, there are no other matters that need to be brought to the attention of the Shareholders under Rule 13.51(2) of the Listing Rules in connection with his appointment as a Director.

SENIORMANAGEMENT

The following information sets forth information regarding our senior management.

Name Age Position in our Group Responsibilities

Wang Guping (ˮ̚ջ) 48 Assistantpresident Internalcontrolmanagement of our Group and assist in overall administration and operation of our Group including being a member of the internal control committee

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Name Age Position in our Group Responsibilities

Zhang Rong (ੵႂ) 41 Assistant president Overall administration management and operation and planning of the electronic appliance section and the department store section of our Group

Luo Chengwen (ᖯϓ˖) 55 Assistantpresident; Overall operation and General manager, strategic planning of Shaoguan Shaoguan Yihua Department Store

Pan Zhihong (ᆙқߎ) 46 Generalmanager, Overall operation and Qingyuan strategic planning of Qingyuan Yihua Department Store

Wu Bintao (ю੸ᏹ) 46 Generalmanager, Overall operation and Guzhen strategic planning of Guzhen Yihua Department Store

Hu Pingping (ߡ̻̻) 50 Deputygeneral Overall general management manager, Jiangmen of Jiangmen Yihua Department Store

Sun Shaobin (࢑ୗⅳ) 46 Deputygeneral Management of the manager, Yihua Lejia supermarket business and Supermarket future development plans of the supermarket business of our Group

Chen Jinquan (௓ආᛆ) 39 Deputygeneral Business management and manager, Yihua Shijia future development planning of Yihua Shijia of our Group

Zhou Zhijian (մ౽਺) 56 Generalmanager, Overall infrastructure infrastructure and planning and technical engineering support of the venues and expansion of new venues of our Group

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Name Age Position in our Group Responsibilities

Luan Xiaoxun (㐟ʃᆛ) 51 Financialmanager Assistthechieffinancial controller to handle finance matters of our Group

Tse Wing York (ᑽ͑ᝌ) 34 Chieffinancial Overall planning and controller and management of all company secretary accounting, finance and budget matters of our Group, company secretary of the Company

Ms. Wang Guping (ˮ̚ջ), aged 48, was appointed as our assistant president of Guangdong Yihua Department Store in February 2003. She is responsible for internal control management of our Group and assists in the overall administration and operation of our Group including being a member of the internal control committee. She acquired qualification for the local registered pharmacist in Guangdong Province, the PRC from December 2011 to December 2013 with our company being the chartered unit. Prior to joining our Group, Ms. (Wang worked as a supervisor in Zhongshan Yihua Group Limited (ʕʆ̹׋ശණྠϞࠢʮ̡ between December 1992 and April 1995. She graduated from Guangzhou Open University (ᄿ ψ̹ᄿᅧཥൖɽኪ) in chemical engineering (ଣʈᗳʷኪʈ೻) in July 1987. She also completed a program on business administration in Sun Yat-Sen University (ʕʆɽኪ) in 2002.

Ms. Zhang Rong (ੵႂ), aged 41, was appointed as our assistant president of Guangdong Yihua Department Store in February 2007. Ms. Zhang is responsible for the overall administration management and operation and planning of the department store section and the electronic appliance section of our Group. Prior to joining our Group in 1996, Ms. Zhang has worked in Zhong Shan City Scenic Hotel Management Co. Ltd. (ʕʆ̹׋౻ৢֳ຾ᐄ၍ଣʮ ຾ଣ) between March 1991 and March 1996. She obtained ąۃ) as a reception manager (̡ ᜕̮਷Ⴇኪ৫) in Julyྼیdiploma of English in Hainan Snow Foreign Language College (ऎ 1990 and also completed a program on business administration in Sun Yat-Sen University (ʕ ʆɽኪ) in September 2002. Ms. Zhang was appointed as the council member of the Home Appliances Industry Association of Zhongshan in 2008.

Mr. Luo Chengwen (ᖯϓ˖), aged 55, was appointed as the assistant president of Guangdong Yihua Department Store and the deputy general manager of Qingyuan Yihua Department Store from August 2005 to February 2008. Since March 2008, he is the assistant president of Guangdong Yihua Department Store and the general manager of Shaoguan Yihua Department Store. Mr. Luo is responsible for formulating and implementing plans for the opening of new stores of our Group. He is also responsible for the overall operation and strategic planning of Shaoguan Yihua Department Store.

Mr. Luo received his high school education at Shunde Guizhou Middle School (නᅃ࣭ݲ ʕኪ) in 1975.

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Ms. Pan Zhihong (ᆙқߎ), aged 46, was the supervisor of Guangdong Yihua Department Store from July 1997 to June 2000, and was promoted to vice section head from July 2000 to February 2003. From March 2003 to December 2003, she worked as the section head of Guzhen Yihua Department Store. From October 2004 to February 2008 she was the assistant manager of Qingyuan Yihua Department Store. From March 2008 to May 2012, she was appointed as the deputy general manager of Qingyuan Yihua Department Store. Since June 2012, Ms. Pan was appointed as the general manager of Qingyuan Yihua Department Store. She is responsible for the overall operation and strategic planning of Qingyuan Yihua Department Store. Prior to joining our Group, she has worked in the retail services and travel souvenirs trading companies of Zhongshan Yihua Group Limited between June 1989 to July 1997. Ms. Pan had completed a corporate management program (part-time) in Sun Yat-Sen University (ʕ ʆɽኪ) in February 1998. She was appointed as the vice president of Qingyuan Entrepreneurs Association (૶Ⴣ̹Άุ࢕՘ึ) in 2008.

Mr. Sun Shaobin (࢑ୗⅳ), aged 46, was appointed as the vice section head of Shaoguan Yihua Department Store from September 2008 to May 2010 and was promoted to the position of assistant manager from June 2010 to October 2011. Since November 2011, he has been working as the deputy general manager of Yihua Lejia Supermarket of Guangdong Yihua Department Store. He is responsible for the management and future development of the supermarket business. Mr. Sun completed a diploma on Commodities of Trading of Henan .ৌ຾ኪ৫) between September 1985 and July 1987یئ) University of Finance and Economics

Ms. Wu Bintao (ю੸ᏹ), aged 46, was appointed as the administration and human resources manager of Guzhen Yihua Department Store from August 2005 to February 2008 and has been promoted as its deputy general manager from March 2008 to May 2012 and its general manager since June 2012. She is responsible for the overall operation and strategic planning of Guzhen Yihua Department Store. Prior to joining our Group, she worked at the guest room service department of Zhong Shan City Scenic Hotel Management Co. Ltd. (ʕʆ̹׋౻ৢֳ ຾ᐄ၍ଣϞࠢʮ̡) from November 1984 to February 1996.

Ms. Wu was qualified as assistant human resources management trainer (пଣɛɢ༟๕၍ ଣࢪ) in July 2005 and enterprise trainer (Άุ੃৅ࢪ) as accredited by Occupational Skill ღ௅ᔖڭTesting Authority of Ministry of Human Resources and Social Security (௶ਗձٟึ Ҧঐᛡ֛ʕː) in January 2007. She also obtained her diploma in business administration inุ .Guangdong Ocean University (ᄿ؇ऎݱɽኪ) (a correspondence program) in 2011

Ms. Hu Pingping (ߡ̻̻), aged 50, has been appointed as the deputy general manager of Jiangmen Yihua Department Store since May 2012 and the deputy general manager of the Jiangmen branch of Zhongshan Yihua Shijia since December 2012. Ms. Hu is responsible for the overall general management of Jiangmen Yihua Department Store, including managing its daily operation and facilitating co-ordinations with internal departments and externally with government departments and customers. Ms. Hu joined our Group in February 1998 as an assistant team head of the service counter of the Zhongshan main store. She was redesignated to Jiangmen Yihua Department Store and promoted to be the vice section head and the assistant manager of the human resources and administration department in April 2006 and May 2007

– 256 – DIRECTORS,SENIORMANAGEMENTANDSTAFF respectively, and then as the deputy manager of the administration department in August 2009. In May 2010, Ms. Hu was awarded the title of Retail Profession – Manager (Shop Manager) .(by the China General Chamber of Commerce (ʕ਷ਠุᑌΥึ ((ڗֳ)ཧਯุᔖุ຾ଣɛ)

Prior to joining our Group, Ms. Hu has worked in Zhongshan China Sugar Group Company Limited (ʕʆ̹ʕጟණྠϞࠢʮ̡) from January 1980 to March 1997, with her last position as a technician of the company. Ms. Hu was awarded the qualification of assistant engineer by the Zhongshan Municipal Bureau of Personnel (ʕʆ̹ɛԫ҅) in December 1996.

Ms. Hu obtained a graduation certificate in sugar manufacturing from Zhongshan Tangzhi Gongye Vocational Secondary School (ʕʆ̹ጟॷʈุᔖʈʕഃਖ਼ุኪࣧ) in July 1988.

Mr. Chen Jinquan (௓ආᛆ), aged 39, was appointed as the deputy general manager of Yihua Shijia in December 2012. He is responsible for assisting the management in formulating the development strategies, establishment and implementation of the operational systems and human resources training and development of Yihua Shijia. Prior to joining our Group, Mr. Chen has worked in B&Q (China) Investments Co., Ltd (ϵτ֢(ʕ਷)ҳ༟Ϟࠢʮ̡), an interior decoration materials retailer and service provider, from March 2004 to September 2012, with the last position held as Operation Regional Manager.

Mr. Chen obtained a graduation certificate in professional studies of computerised accounting (part-time) from the School of Mathematics of South China Normal University (ശ .ࢪᇍɽኪ) in July 1996ی

Mr. Zhou Zhijian (մ౽਺), aged 56, was appointed as the section head of Qingyuan Yihua Department Store from January 2004 to April 2005. From May 2005 to March 2006, he worked as the deputy manager of Guzhen Yihua Department Store. He was then redesignated to work as the deputy manager of Jiangmen Yihua Department Store from April 2006 to October 2006. Between November 2006 and September 2009, he worked as the deputy manager of Guangdong Yihua Department Store. Since October 2012, he has been the general manager of the infrastructure and engineering department of Guangdong Yihua Department Store. He is responsible for the overall infrastructure planning and technical support of the venues and expansion on the new venues of our Group.

Mr. Zhou graduated from high school education at Guangzhou No.105 Secondary School (ᄿψ̹ୋ105ʕኪ) (already closed) in 1974.

Ms. Luan Xiaoxun (㐟ʃᆛ), aged 51, has been appointed as the financial manager of Guangdong Yihua Department Store since February 2003. Ms. Luan is responsible for assisting our chief financial controller to handle financial matters of our Group. Prior to joining our Group, Ms. Luan has worked in the audit department of Zhongshan Yihua Group Company Limited between 1993 and 1999. She obtained her diploma in business corporate administration (ਠุΆุ၍ଣ) in Jiangxi Radio and TV University (ϪГᄿᅧཥൖɽኪ) in October 1986, and was qualified for assistant accountant as accredited by Department of Human Resources of Jiangxi Province (ϪГ޲ɛԫᝂ) in October 1989.

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COMPANY SECRETARY

Mr. Tse Wing York (ᑽ͑ᝌ), aged 34, is our company secretary and chief financial controller. Mr. Tse joined our Group in March 2012. Mr. Tse has over seven years of experience in auditing and financial management. Prior to joining our Group, Mr. Tse worked in ShineWing (HK) CPA Limited (a certified public accounting firm) between July 2004 and September 2010 and left as an audit manager. From 3 October 2011 to 7 May 2013, Mr. Tse was the company secretary of Inno-Tech Holdings Limited, a company listed on the Stock Exchange (Stock code: 8202). Mr. Tse graduated from Lingnan University with a bachelor’s degree in business administration in 2004. Mr. Tse is a member of the Hong Kong Institute of Certified Public Accountants.

DIRECTORS’REMUNERATION

Our Directors’ remuneration is determined with reference to the prevailing market practice, our Company’s remuneration policy and his duties and responsibilities with our Group. For details of the directors’ remunerations, please refer to the section headed “Statutory and general information – C. Further information about directors, senior management and staff” in Appendix IV to this prospectus.

The remuneration of each Director is determined by reference to market terms, seniority, his/her experiences, duties and responsibilities within our Group. Our Directors are entitled to statutory benefits as required by law from time to time such as pension.

COMPLIANCEADVISER

Our Company will appoint Kingsway Capital Limited as our compliance adviser pursuant to Rule 3A.19 of the Listing Rules.

The term of the appointment shall commence on the Listing Date and end on the date on which we comply with Rule 13.46 of the Listing Rules in respect of our financial results for the first full financial year commencing after the Listing Date (i.e. the date of despatch of the annual reports of our Company in respect of our results for the financial year ending 31 December 2014), subject to early termination.

The compliance adviser shall provide us with services, including guidance and advice as to compliance with the requirements under the Listing Rules and applicable laws, rules, codes and guidelines, and to act as one of our principal channels of communication with the Stock Exchange.

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AUDITCOMMITTEE

Our Company established an audit committee on 12 November 2013 with written terms of reference in compliance with the Code on Corporate Governance Practices as set out in Appendix 14 to the Listing Rules. The primary duties of the audit committee are to review and supervise the financial reporting process and internal control procedures of our Group.

The audit committee comprises the three independent non-executive Directors, namely Mr. Sun Hong, Mr. Xu Yinzhou and Mr. Leung Wai Kwan. Mr. Leung Wai Kwan is the chairman of the audit committee.

REMUNERATION COMMITTEE

Our Company established a remuneration committee pursuant to a resolution of our Directors passed on 12 November 2013 in compliance with the Code on Corporate Governance Practices as set forth in Appendix 14 to the Listing Rules. The primary duties of the remuneration committee are to review and determine the terms of remuneration packages, bonuses and other compensation payable to our Directors and other senior management.

The remuneration committee comprises an executive Director and three independent non-executive Directors, namely Mr. Fan Xinpei, Mr. Sun Hong, Mr. Xu Yinzhou and Mr. Leung Wai Kwan respectively. Mr. Xu Yinzhou is the chairman of the remuneration committee.

NOMINATION COMMITTEE

Our Company established a nomination committee pursuant to a resolution of our Directors passed on 12 November 2013. The primary duties of the nomination committee are to make recommendations to the Board on the appointment of Directors and management of Board succession.

The nomination committee comprises an executive Director and three independent non-executive Directors, namely Mr. Chen Jianren, Mr. Sun Hong, Mr. Xu Yinzhou and Mr. Leung Wai Kwan respectively. Mr. Chen Jianren is the chairman of the nomination committee.

INTERNALCONTROLCOMMITTEE

Our Company established an internal control committee and its primary duties include, among others, reviewing and making recommendation to our Board in respect of our Group’s policies and practices on corporate governance, reviewing and monitoring our Group’s policies and practices on compliance with any requirement, direction and regulation that may be prescribed by our Board, contained in any constitutional documents of our Group, or imposed by the Listing Rules, other applicable laws, regulations, rules and codes, and ensuring that appropriate monitoring systems are in place to ensure compliance against the relevant internal control systems, processes and policies, and monitoring the implementation of our Group’s plan to maintain high compliance with own risk management standards.

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The internal control committee comprises an independent non-executive Director, Mr. Leung Wai Kwan, a member of senior management, Ms. Wang Guping and a part-time consultant with the PRC legal experience, Mr. Zhang Tianguo whose background is as follows:

Mr. Zhang Tianguo (ੵ˂਷), aged 48, was appointed as our a member of our internal control committee on 18 November 2013. He qualified as a lawyer in Guangdong Province, the PRC in 1989. Prior to joining our Group, Mr. Zhang worked as a qualified lawyer in different PRC laws firms from 1989 to 2010. He graduated in law from Sun Yat-Sen University in July ࢪ) in 1995 andܛ೐ږ) Mr. Zhang was awarded the honours of golden lawyer .1988 outstanding lawyer (ᎴӸܛࢪ) in 1997, 1999, 2000, 2001, 2002 and 2003 issued by Zhongshan from (ڗࢪ՘ึ). He was appointed as the vice president (ਓึܛLawyers Association (ʕʆ̹ in (ڗin 2008 and honourary president (࿲ᚑึ (ڗto 2007, executive president (ੂБึ 2004 2011 of the Zhongshan Lawyers Association.

Our Directors is of the view that despite Ms. Wang’s position in the senior management upon the occurrence of historical non-compliance, she was either not involved or did not adequate resources or powers to prevent such non-compliances. Ms. Wang’s proposed appointment as compliance officer and member of the internal control committee is reasonable given:

(1) her character;

(2) her familiarity with the structure of our Group and therefore her ability to effectively implement recommendations by the Internal Control Committee;

(3) her appointment will allow her to focus and dedicate her time on duties involving internal control versus her previous other duties over our Group’s overall administration and operation;

(4) her appointment will allow her greater authority to implement change that she previously might not have; and

(5) her understanding of general internal control requirements will be further enhanced by her appointment into the internal control committee.

CORPORATE GOVERNANCE

Our Directors recognise the importance of good corporate governance in management and internal control procedures so as to achieve accountability.

Our Company has adopted a code of corporate governance, containing the code provisions of the Code on Corporate Governance Practices contained in Appendix 14 to the Listing Rules (including those amendments which have come into effect on 1 January 2012). Our Directors will use their best endeavours to procure our Company to comply with such code of corporate governance and make disclosure of deviation from such code in accordance with the Listing Rules.

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STAFF

Staff

As at the 30 September 2013, the Group had employed a total of 2,085 staff. A breakdown of which by function is as follows:

Number of Function employees

Business operations and maintenance 1,134 Procurement, pricing and inspection 142 Human resources 35 Financial management and control 101 Office management and administration 262 Security 323 Information technology 32 Logistics and distribution 29 Others 27

Total 2,085

Staff benefits

Some of the employees of our Company’s subsidiaries in the PRC are members of a state-managed social insurance scheme operated by the local government of the PRC. Under the scheme, our Group provides pension, medical, unemployment, injury and maternity benefits to our employees in the PRC in accordance with the relevant PRC rules and regulations. Our Group is required to contribute a specified percentage of our payroll costs to the social insurance scheme to fund the benefits. The only obligation of our Group with respect to the social insurance scheme is to make the required contributions. Starting from April 2012, we have also begun contributing to housing provident funds for our employees for the period from 1 January 2012 to 31 March 2012 and have since been making contributions up to the Latest Practicable Date.

Except as set out in the section headed “Business – Legal compliance and litigation – Non-compliant incidents” of this prospectus, our Directors confirmed that our Group has made the relevant payment for the social insurance scheme and housing provident funds for our staff in accordance with the relevant rules and regulations of the PRC and has complied with the relevant requirements in relation to the contributions to the social insurance scheme and the housing fund scheme during the Track Record Period and up to the Latest Practicable Date.

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SHAREOPTIONSCHEME

Our Group has conditionally adopted the Share Option Scheme under which employees of our Group including executive Directors and other eligible participants may be granted options to subscribe for Shares. The principal terms of the Share Option Scheme are summarised in the section headed “Statutory and general information – D. Other information – 1. Share Option Scheme” in Appendix IV to this prospectus.

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SUBSTANTIALSHAREHOLDERS

So far as our Directors are aware, immediately following completion of the Share Offer and the Capitalisation Issue (taking no account of any Shares which may be allotted and issued under the Adjustment Option and any Shares which may fall to be issued pursuant to the exercise of options that may be granted under the Share Option Scheme), the following persons will have an interest or a short position in the Shares or underlying Shares which would fall to be disclosed to our Company under the provisions of Divisions 2 and 3 of Part XV of the SFO:

Approximate Number of percentage Shares of directly or Shareholding Capacity/Nature indirectly in our Name of interest held Position Company (%)

Jaguar Asian (Note 1) Beneficial owner 208,116,000 Long 57.81

Mr. Chen Daren Interest in 208,116,000 Long 57.81 (Note 1) controlled corporation

Eaglepass Beneficial owner 61,884,000 Long 17.19 Developments (Note 2)

Gain Profit (Note 2) Interest in 61,884,000 Long 17.19 controlled corporation

Yinglifeng Interest in 61,884,000 Long 17.19 Developments controlled (Note 2) corporation

Mr. Fan (Note 2) Interest in 61,884,000 Long 17.19 controlled corporation

Notes:

1. Jaguar Asian is wholly owned by Mr. Chen Daren, a non-executive Director. Mr. Chen Daren is deemed to be interested in the 208,116,000 Shares held by Jaguar Asian under the SFO.

2. Eaglepass Developments is owned as to 15.66% and 84.34% by Mr. Lu and Gain Profit respectively. Gain Profit is wholly owned by Yinglifeng Developments. Yinglifeng Developments is owned as to 66.33%, 9.62%, 9.62%, 4.81%, 4.81% and 4.81% by Mr. Fan, Mr. Lin Guangzheng, Mr. Su Weibing, Ms. Wang Guping, Ms. Zhang Rong and Mr. Luo Chengwen respectively. Mr. Fan is deemed to be interested in the 61,884,000 Shares held by Eaglepass Developments under the SFO.

– 263 – SUBSTANTIALSHAREHOLDERS

So far as our Directors are aware, immediately following completion of the Share Offer and Capitalisation Issue (taking no account of any Shares which may be allotted and issued under the Adjustment Option and which may fall to be issued pursuant to the exercise of and any options that may be granted under the Share Option Scheme), the following persons will directly and indirectly, be interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of our Group:

Approximately percentage of shareholding (assuming no exercise of the Adjustment Option and any options granted under the Share Name Name of members of our Group Option Scheme)

Ms. Zhu Muqiong (ϡᅉᖘ) Shaoguan Yihua Department Store 41%

Save as disclosed herein, our Directors are not aware of any person who will, immediately following completion of the Share Offer and the Capitalisation Issue (taking no account of any Shares which may be taken up under the Share Offer and Shares which may be allotted and issued under the Adjustment Option and any Shares which may fall to be issued pursuant to the exercise of any options that may be granted under the Share Option Scheme), have an interest or a short position in Shares or underlying Shares which would fall to be disclosed to our Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or who will, directly or indirectly, be interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of our Group.

– 264 – SHARE CAPITAL

AUTHORISEDANDISSUEDSHARECAPITAL

The following is a description of the authorised and issued share capital of our Company immediately following completion of the Capitalisation Issue and the Share Offer:

Authorised share capital: HK$

778,000,000 Shares 7,780,000

Shares issued and fully paid or credited as fully paid upon completion of the Share Offer (assuming that the Adjustment Option is not exercised):

10,000 Shares in issue as at the date of this prospectus 100

269,990,000 Shares to be issued under the Capitalisation Issue 2,699,900

90,000,000 Shares to be issued under the Share Offer 900,000

360,000,000 Shares in total 3,600,000

Assumptions

The above table assumes that the Share Offer and the Capitalisation Issue become unconditional and are completed in accordance with the relevant terms and conditions. The above table takes no account of (i) Shares which may be allotted and issued upon the exercise of any option which may be granted under the Share Option Scheme; and (ii) any Shares which may be allotted and issued or repurchased by our Company pursuant to the issuing mandate and the repurchase mandate, respectively, as described below.

Ranking

The Offer Shares will rank pari passu in all respects with all Shares in issue or to be issued as set out in the above table, and will qualify in full for all dividends and other distributions hereafter declared, made or paid on the Shares after the date of this prospectus other than participation in the Capitalisation Issue.

SHAREOPTIONSCHEME

Our Company has conditionally adopted the Share Option Scheme, the principal terms of which are summarised in the section headed “Statutory and general information – D. Other information – 1. Share Option Scheme” in Appendix IV to this prospectus.

– 265 – SHARE CAPITAL

ISSUING MANDATE

Our Directors have been granted a general unconditional mandate to allot, issue and deal with Shares with a total nominal value of not more than the aggregate of:

1. 20% of the total nominal amount of the Shares in issue immediately following completion of the Share Offer and the Capitalisation Issue (but excluding any Shares which may be issued pursuant to the exercise of the Adjustment Option or any options which may be granted under the Share Option Scheme); and

2. the total nominal amount of the Shares repurchased by the Company (if any) pursuant to a separate mandate to repurchase Shares and described more fully in the paragraph headed “Repurchase mandate” below.

This general mandate is in addition to the powers of our Directors to allot, issue or deal with Shares under a rights issue or an issue of Shares pursuant to the exercise of any options which may be granted under the Share Option Scheme or any other share scheme or similar arrangement for the time being adopted by our Company or any Shares allotted in lieu of the whole or part of a dividend on shares of our Company in accordance with its Articles or pursuant to a specific authority granted by the Shareholders in general meeting or pursuant to the Share Offer and the Capitalisation Issue.

This general mandate will expire:

(i) at the conclusion of our Company’s next annual general meeting; or

(ii) the expiration of the period within which our Company is required by the Articles or any applicable laws of the Cayman Islands to hold its next annual general meeting; or

(iii) when varied or revoked by an ordinary resolution of the Shareholders in general meeting, whichever occurs first.

For further details of the Issuing Mandate, please see the section headed “Statutory and general information – A. Further information about the Company and its subsidiaries – 3. Resolutions in writing of all Shareholders passed on 12 November 2013” in Appendix IV to this prospectus.

– 266 – SHARE CAPITAL

REPURCHASE MANDATE

Our Directors have been granted a general unconditional mandate to exercise all the powers of our Company to repurchase Shares with an aggregate nominal amount of not more than 10% of the total nominal amount of the Shares issued and to be issued immediately following the completion of the Share Offer and the Capitalisation Issue (but excluding any Shares which may be issued pursuant to the exercise of the Adjustment Option (or any options which may be granted under the Share Option Scheme).

This general mandate only relates to repurchases made on the Stock Exchange or on any other stock exchange on which the Shares are listed (and which is recognised by the SFC and the Stock Exchange for this purpose), and which are in accordance with the Listing Rules and all applicable laws. A summary of the relevant requirements in the Listing Rules is set out in the section headed “Statutory and general information – A. Further information about the Company and its subsidiaries – 6. Repurchase by the Company of its own securities” in Appendix IV to this prospectus.

This general mandate will expire:

(i) at the conclusion of our Company’s next annual general meeting; or

(ii) the expiration of the period within which our Company is required by the Articles or any applicable laws of the Cayman Islands to hold its next annual general meeting; or

(iii) when varied or revoked by an ordinary resolution of the Shareholders in general meeting, whichever occurs first.

For further details of the Repurchase Mandate, please see the section headed “Statutory and general information – A. Further information about the Company and its subsidiaries – 3. Resolutions in writing of all Shareholders passed on 12 November 2013” in Appendix IV to this prospectus.

RULE 10.08 OF THE LISTING RULES

Our Directors confirmed that, save for the Shares which may be issued pursuant to the exercise of the Adjustment Option and any options which may be granted under the Share Option Scheme, we will comply with the requirements of Rule 10.08 of the Listing Rules upon the Listing. Rule 10.08 of the Listing Rules provides that we may not issue any further Shares or securities convertible into equity securities or enter into any agreement to make such an issue within six months from the Listing Date.

– 267 – FINANCIAL INFORMATION

You should read this section in conjunction with our audited combined financial information, including notes thereto, as set forth in Appendix I “Accountant’s Report” to this prospectus. The financial information have been prepared in accordance with HKFRS. The following discussion and analysis contains certain forward-looking statements that reflect our current views with respect to future events and financial performance. These statements are based on assumptions and analysis made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. However, whether actual outcome and developments will meet our expectations and predictions depends on a number of risks and uncertainties over which we do not have control. Please see the section headed “Risk Factors” of this prospectus.

OVERVIEW

We are a long established department store chain based in Shiqi, Zhongshan city with over 18 years of history, principally operating in Guangdong Province and Shandong Province in the PRC and are expanding to Jiangsu Province, the PRC. We had maintained a profitable operation during the Track Record Period. For the year ended 31 December 2012 and the five months ended 31 May 2013, we had profit of approximately RMB43.6 million and approximately RMB13.6 million respectively. We positioned our stores in the market as a department store with contemporary ambience targeting the middle and upper income segments. As at the Latest Practicable Date, our retail network consists of 13 Stores, comprising ten department stores and three community stores covering a total of over 279,770 sq. m. of retail space.

In the past 18 years of our development, we have leveraged on the growth of the PRC retail industry and developed “ूശϵ஬” (Yihua Department Store) as a well-known retail brand in the Guangdong Province, the PRC.

– 268 – FINANCIAL INFORMATION

BASIS OF PRESENTATION

Our combined balance sheets, combined statements of comprehensive income, combined statements of changes in equity and combined cash flow statements for the Track Record Periods as included in the Accountant’s Report, the text of which is set out in Appendix I to this prospectus, include the results of operations of the companies comprising our Group following the consummation of the Reorganisation, as if our Group had been in existence in its current form throughout the Track Record Period.

We are principally engaged in the operation of department stores (“Listing Business”). Immediately prior to and after the Reorganisation, the Listing Business conducted through Guangdong Yihua Department Store and its subsidiaries, which are ultimately controlled by Mr. Chen Daren. Pursuant to the Reorganisation, the Listing Business is transferred to and held by our Company. The Reorganisation did not result in a change in management or the controlling shareholder of the Listing Business, Mr. Chen Daren. Accordingly, the combined financial information of the companies now comprising our Group is presented using the carrying values of the Listing Business under the controlling shareholder for all periods presented, or since the respective dates of incorporation/establishment of the combining entities, or since the date when the combining companies first came under the control of the controlling shareholder, whichever is earlier. For the purpose of the Accountant’s Report, our combined financial information has been prepared on a basis in accordance with the principles of the Auditing Guideline 3.340 “Prospectus and the Reporting Accountant” issued by the Hong Kong Institute of Certified Public Accountants. Please refer to the section headed “History and development” of this prospectus for details of the Reorganisation.

The combined financial information has been prepared in accordance with the HKFRSs issued by the Hong Kong Institute of Certified Public Accountants. The combined financial information has been prepared under the historical cost convention. Inter-company transactions, balances and unrealised gains/losses on transactions between group companies are eliminated on combination. We adopt the going concern basis in preparing the combined financial information. The principal accounting policies applied in the preparation of the combined financial information have been consistently applied during the Track Record Period, unless otherwise stated.

GENERAL FACTORS AFFECTING OUR RESULTS OF OPERATIONS AND FINANCIALPOSITION

Our Group’s business, results of operations and financial conditions are affected by a number of factors, many of which are beyond our control, including but not limited to the following factors.

– 269 – FINANCIAL INFORMATION

We derive substantially all of our revenue from Guangdong Province, the PRC and significant portion of our revenue from Zhongshan store and Jiangmen store

We are a long established Zhongshan-based department store chain based in Shiqi, Zhongshan city, Guangdong Province, the PRC. As at the Latest Practicable Date, our retail network consist of 13 Stores, of which 12 stores are located in Guangdong Province and one store in Shandong Province in the PRC. During the Track Record Period, all our revenue were generated from Guangdong Province, the PRC. Our profitability is dependent on the sustainability of the economic vigorousness and growth of Guangdong Province, particularly in Zhongshan and Jiangmen. We intend to expand our retail network beyond Guangdong Province to other regions of the PRC. Some indicators of economic growth, such as the per capita GDP, per capita consumption expenditure and retail consumption of Guangdong Province, have been increasing in the past years, which positively affected our operation and profitability in the region during the Track Record Period. Our major income source, which is the Guangdong Province operation, will highly depend on the social and economic conditions and whether the region can continue to sustain the historical growth rate. Our revenue and profitability might be adversely affected by any unfavourable change in the business environment of Guangdong Province, such as change in government policies, natural disasters, occurrence of epidemics, and imposition of new legal restrictions, which may lead to a decline in our sales or increase in the operating cost.

Sales to VIP customers constitute a substantial portion of our Gross Sale Proceeds

A significant portion of the total Gross Sale Proceeds were contributed from our VIP customers for the years ended 31 December 2010, 2011 and 2012 respectively. There is no assurance that VIP customers of our Group or VIP customers of the Yihua Investment Group will continue to visit and purchase merchandise at our stores. If they do not continue purchasing at our stores, our revenue and profitability may be materially and adversely affected.

Expansion plans of our network may need significant capital expenditure

The number of stores in our department store network and the area of floor space we operate will directly affect our turnover and profitability. Growth in our turnover during the Track Record Period has been driven by the maturity and expansion of our department store network. Our strategy is to continue to increase the number of stores in our network and further expand outside Guangdong Province, the PRC. We are in the process of opening three new stores one in each of Guangdong Province, Jiangsu Province and Shandong Province, the PRC, which are expected to commence business one after another in 2014 and 2015 respectively.

Expansion plans and establishment of new store may require significant capital expenditure and other expenses in the form of acquiring property, building and renovating, hiring and training sufficient staff, adapting our network, overseeing the construction and operations at the new location and marketing. After completion of expansion plans or establishment of our store, we have no assurance that it will be profitable or as profitable as we expect and/or a period may elapse between commencement and operations until it becomes profitable. Our revenue and liquidity may be adversely affected by those uncertainties.

– 270 – FINANCIAL INFORMATION

Our Gross Sale Proceeds and profitability may be adversely affected by the business environment surrounding our department stores

We prefer to choose suitable locations either with established features favourable to our business or with a great potential for future development. A suitable location is characterised by, among other factors, accessibility to potential customers, carparks, accommodating spaces for further expansions and our design plans.

Any changes in the business environment surrounding our department stores, such as regional development plans, redevelopment projects, road repair constructions negatively affecting the accessibility, delay in the completion of surrounding residential development or completion of new commercial projects owned by our competitors, may result in low pedestrian flow or decrease in number of customers visiting our stores. The low pedestrian flow and decrease in number of customers in return decrease the Gross Sale Proceeds and profitability of our stores. In return, we may have to incur extra promotion and advertisement cost to promote the affected stores, which may lead to increase of expenses.

Seasonality affects our turnover

Seasonal shopping patterns such as those long holidays and festivals such as New Year, Chinese New Year, Mid-autumn Festival, Labour Day, National Day, Christmas and other festival and holidays historically affected our turnover positively. We expected to incur more advertising and marketing expenses to attract customers before those long holidays and festivals. Also, we expected higher pedestrian flow and higher turnover in those periods.

Therefore, unexpected events or natural disasters, such as adverse weather conditions or infectious disease outbreaks during those peak periods, may greatly disrupt our operation and affect our financial results.

SIGNIFICANTACCOUNTINGPOLICIES

The preparation of financial statements in conformity with the HKFRSs requires the management of our Company to adopt accounting policies and make estimates and assumptions that affect amounts reported in its financial statements. Our Group significant accounting policies, which are important for an understanding of the results of operations and financial condition of our Group, are set forth in detail set forth in Appendix I “Accountant’s Report” to this prospectus. The policies have been consistently applied to all the years presented unless otherwise stated. In applying those accounting policies, our Company makes subjective and complex judgments that frequently require estimates about matters that are of an inherently uncertain nature and may change in subsequent periods. Our Group has adopted certain accounting policies that are significant to the preparation of our financial information:

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of our Group’s business. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within our Group.

– 271 – FINANCIAL INFORMATION

Our Group recognised revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of our Group’s activities, as described below.

Commission income from concessionaire sales is recognised upon sales of goods by the relevant stores.

Revenue from direct sales of goods is recognised when a group entity sells a product to the customer. Retail sales are usually settled in cash, debit cards, credit cards, Consumption Cards or under the method set out in the section headed “Business – Marketing and promotion – Customer loyalty programs – Promotional arrangements with a mobile telecommunications service provider” of this prospectus.

Operating lease rental income is recognised on a straight-line basis over the period of the lease. When our Group provides incentives to the tenants, the cost of incentives will be recognised over the lease term, on a straight-line basis, as a reduction of rental income. The difference between the gross receipt of rental and operating lease rental recognised over the lease term is recognised as deferred assets.

Management fee and service income from operations and management consulting service income are recognised when the service is rendered and right to receive payment is established.

Interest income is recognised using the effective interest method. When a loan and receivable is impaired, our Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loan and receivables are recognised using the original effective interest rate.

Payments received in advance that are related to sales of goods not yet delivered and sales of consumption cards are deferred in combined balance sheets and recorded as advances from customers. Advances from customers are recognised at fair value of consideration received. It is recognised as revenue when revenue recognition criteria is met.

Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to our Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the periods in which they are incurred.

– 272 – FINANCIAL INFORMATION

Depreciation of property, plant and equipment is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

– Leasehold improvements 10 years – Buildings 20 years – Office equipment 3 years – Vehicles 6 years – Other equipment 5 years

Residual values range from 0% to 5%.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within ‘Other gains/(losses) – net’ in the combined statements of comprehensive income.

Computer software

Acquired computer software is capitalised on the basis of the costs incurred to acquire and bring to use the specific software and is carried at cost less accumulated amortisation. These costs are amortised over their estimated useful lives of three years.

Inventories

Inventories comprise merchandise held for direct sales and low value consumables and are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

– 273 – FINANCIAL INFORMATION

Borrowings are classified as current liabilities unless our Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.

Borrowing costs are recognised as an expense in the period in which they are incurred.

Employee benefits

Pension obligations

Pursuant to the relevant regulations of the PRC Government, all the subsidiaries of our Group that were established in the PRC (the “PRC Subsidiaries”) have participated in a local municipal government retirement benefits scheme (the “Scheme”), whereby the PRC Subsidiaries are required to contribute a certain percentage of the salaries of their employees to the Scheme to fund their retirement benefits. The local municipal government undertakes to assume the retirement benefits of those employees of our Group. Contributions under the Scheme are charged to profit or loss as incurred.

Bonus plans

Provisions for bonus plan due wholly within twelve months after the end of the reporting period, provision is recognised where contractually obliged or where there is a past practice that has created a constructive obligation.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.

Trade and other receivables

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection of trade and other receivables is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

– 274 – FINANCIAL INFORMATION

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Bonus points liabilities

Our Group operates a VIP cards program, which allows customers to accumulate points when they purchase products in our Group’s department stores. The points can then be redeemed for gifts and Consumption Cards, subject to a minimum number of points being obtained. Consumption Cards are cash-equivalent when customers use them to purchase products in our Group’s department stores.

The bonus points are recognised as a separate identifiable component of the initial sale transaction, by allocating the fair value of consideration received between the award points and the other components of the sale such that the award points are recognised as a liability under “deferred revenue” at their fair value. Deferred revenue is recognised as revenue when the points are redeemed for gifts and is classified as advances from customers when the points are redeemed for Consumption Cards.

CRITICALACCOUNTINGESTIMATESANDJUDGEMENTS

Our Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. Estimates and judgments are continually 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 estimates and 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 addressed below.

Current income taxes and deferred tax

Our Group is subject to income taxes in the PRC. Significant judgement is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. Our Group recognised liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

Deferred tax assets relating to certain temporary differences and tax losses are recognised as management considers it is probable that future taxable profit will be available against which the temporary differences or tax losses can be recognised. Where the expectation is different from the original estimate, such differences will impact the recognition of deferred tax assets and taxation in the periods in which such estimate is changed.

– 275 – FINANCIAL INFORMATION

Useful lives of property, plant and equipment

We determine the estimated useful lives for its property, plant and equipment based on the historical experience of the actual useful lives of property, plant and equipment of similar nature and functions. Our Group will revise the depreciation charges where useful lives are different from previously estimated, or it will write off or write down technically obsolete or non-strategic assets that have been abandoned or sold.

Bonus points liabilities

The amount of revenue attributable to the credit award earned by the customers of our Group’s VIP cards program is estimated based on the fair value of the credits awarded and the expected redemption rate. The expected redemption rate is estimated considering the number of the credits that will be available for redemption in the future after allowing for credits which are not expected to be redeemed. Revenue from the award points is recognised when the points are redeemed.

RESULTS OF OPERATIONS

The table below sets out combined statements of comprehensive income for the periods indicated:

Five months Year ended 31 December ended 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Continuing operations Revenue 605,204 715,086 678,876 291,793 302,399 Other income 1,941 1,239 816 375 292 Other gains/(losses), net 429 241 589 (31) 108 Purchase of and changes in inventories (365,396) (404,313) (352,190) (150,906) (152,511) Employee benefit expenses (48,506) (58,003) (75,910) (29,630) (38,319) Depreciation and amortisation (13,696) (16,027) (17,300) (7,284) (8,473) Operating lease rental expense and property management fee (48,738) (66,213) (72,429) (29,709) (38,215) Other operating expenses (85,573) (103,710) (103,766) (42,208) (46,004)

Operating profit 45,665 68,300 58,686 32,400 19,277 Finance income 2,838 4,879 3,460 2,355 830 Finance costs (3,836) (4,747) (2,602) (1,600) (606)

Finance (costs)/income – net (998) 132 858 755 224

Profit before income tax 44,667 68,432 59,544 33,155 19,501 Income tax expense (12,189) (18,086) (17,025) (9,665) (6,780)

– 276 – FINANCIAL INFORMATION

Five months Year ended 31 December ended 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Profit for the year/period from continuing operations 32,478 50,346 42,519 23,490 12,721

Discontinued operations (Loss)/profit for the year/period from discontinuedoperations (1,948) (1,179) 1,124 293 841

Profit for the year/period 30,530 49,167 43,643 23,783 13,562

Profit/(loss) for the year/period attributable to: Equity holders of the Company 31,208 49,189 42,565 22,861 12,304 Non-controlling interests (678) (22) 1,078 922 1,258

30,530 49,167 43,643 23,783 13,562

Profit for the year/period 30,530 49,167 43,643 23,783 13,562

Other comprehensive income for the year/period – – − − −

Total comprehensive income for the year/period 30,530 49,167 43,643 23,783 13,562

Total comprehensive income/(loss) for the year/period attributable to: Equity holders of the Company 31,208 49,189 42,565 22,861 12,304 Non-controlling interests (678) (22) 1,078 922 1,258

30,530 49,167 43,643 23,783 13,562

Total comprehensive income/(loss) for the year/period attributable to equity holders of the Company: From continuing operations 32,159 49,767 42,014 22,718 11,893 From discontinued operations (951) (578) 551 143 411

31,208 49,189 42,565 22,861 12,304

– 277 – FINANCIAL INFORMATION

DESCRIPTIONOFSELECTEDCOMBINEDSTATEMENTSOFCOMPREHENSIVE INCOMEITEMS

Revenue. Our revenue consists of four operations, namely revenue from direct sales of goods, commissions from concessionaire sales, management fee and service income from operations and rental income.

The following table illustrates breakdown of our revenue and gross profit during the Track Record Period:

Year ended 31 December Five months ended 31 May

2010 2011 2012 2013

Revenue Grossprofit Revenue Grossprofit Revenue Grossprofit Revenue Grossprofit

RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %

Direct sales of goods 416,822 68.9% 51,426 21.4% 475,214 66.5% 70,901 22.8% 419,333 61.8% 67,143 20.6% 182,110 60.2% 29,599 19.7% Commission income from concessionaires 146,472 24.2% 146,472 61.1% 189,233 26.5% 189,233 60.9% 208,855 30.8% 208,855 63.9% 96,179 31.8% 96,179 64.2% Management fee and service income from operations 32,815 5.4% 32,815 13.7% 37,140 5.2% 37,140 12.0% 38,907 5.7% 38,907 11.9% 17,941 6.0% 17,941 12.0% Rental income 9,095 1.5% 9,095 3.8% 13,499 1.8% 13,499 4.3% 11,781 1.7% 11,781 3.6% 6,169 2.0% 6,169 4.1%

605,204 100.0% 239,808 100.0% 715,086 100.0% 310,773 100.0% 678,876 100.0% 326,686 100.0% 302,399 100.0% 149,888 100.0%

Under direct sales arrangements, we source merchandises directly from suppliers and then sell the merchandises to our customers at our stores. Most of our merchandises in the supermarket segment and electrical appliances segment of our stores are under direct sales arrangements. Revenue from direct sales of goods for each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013 amounted to approximately RMB416.8 million, approximately RMB475.2 million, approximately RMB419.3 million and approximately RMB182.1 million respectively.

Under concessionaire sales arrangements, we arrange specific concessionaires to occupy a certain allocated space in our stores for the establishment of sales counter for their own branded merchandises. We have concessionaire sales arrangements in three operating segments, namely department store segment, supermarket segment and electrical appliances segment. In return, we charge concessionaires a percentage of the Gross Sale Proceeds generated from their merchandise sales as a commission. Commission income from concessionaires for each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013 amounted to approximately RMB146.5 million, approximately RMB189.2 million, approximately RMB208.9 million and approximately RMB96.2 million respectively.

– 278 – FINANCIAL INFORMATION

Management fee and service income from operations include the following items: (i) commission income from concessionaires, where pursuant to the concessionaire agreement, we are entitled to a certain percentage of the Gross Sale Proceeds from such concessionaire sales where Consumption Cards or credit cards are used for payment; (ii) management fees for the provision of administration service to the concessionaires at our department stores; and (iii) income from provision of promotional services to concessionaires. Management fee and service income from operations for each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013 amounted to approximately RMB32.8 million, approximately RMB37.1 million, approximately RMB38.9 million and approximately RMB17.9 million respectively.

Under leasing arrangements, we allocate space in certain areas of our stores to lease to businesses that complement our retail business. Our Group received rental income from the leasing of certain allocated areas of our stores to restaurants (such as internationally renowned fast-food chains) and retailers. Fixed rental income for each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013 amounted to approximately RMB9.1 million, approximately RMB13.5 million, approximately RMB11.8 million and approximately RMB6.2 million respectively.

Our gross profit for each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013 amounted to approximately RMB239.8 million, approximately RMB310.8 million, approximately RMB326.7 million and approximately RMB150.0 million respectively. Commission income from concessionaires, management fee and service income from operations and rental income do not involve purchase of and changes in inventories, the gross profit earned from it therefore was equal to the revenue incurred in those operations for the Track Record Period.

Our Directors determine that our Group has four reportable operating segments, which are department store segment, supermarket segment, electrical appliances segment and furniture segment during the Track Record Period. The following table illustrates our revenue by business segments during the Track Record Period:

Year ended 31 December Five months ended 31 May

2010 2011 2012 2013

Segment Segment Segment Segment result Gross result Gross result Gross result Gross – gross profit – gross profit – gross profit – gross profit Segment revenue profit margin Segment revenue profit margin Segment revenue profit margin Segment revenue profit margin

RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %

Departmentstore 172,274 28.5% 168,318 97.7% 211,359 29.6% 208,899 98.8% 223,767 33.0% 218,958 97.9% 106,437 35.2% 102,668 96.5% Supermarket 243,211 40.2% 46,641 19.2% 293,824 41.1% 63,898 21.7% 290,350 42.8% 69,005 23.8% 124,830 41.3% 30,561 24.5% Electrical appliances 189,719 31.3% 24,849 13.1% 209,903 29.3% 37,976 18.1% 164,759 24.2% 38,723 23.5% 70,355 23.3% 15,882 22.6% Furniture − − − − − − − − − − − − 777 0.2% 777100.0%

605,204 100.0% 239,808 39.6% 715,086 100.0% 310,773 43.5% 678,876 100.0% 326,686 48.1% 302,399 100.0% 149,888 49.6%

– 279 – FINANCIAL INFORMATION

Except for (a) Taiyangcheng store and Yangchun store with only department store section; (b) Tai’an store (Longtan) and Yingde store with department store section and supermarket section; and (c) Yangjiang store with department store, supermarket and furniture sections, our department stores generally have three segments, which are (i) the department store segment; (ii) the supermarket segment, also known as “Yihua Lejia Supermarket”; and (iii) the electrical appliances segment, also known as “Yihua Sihai Electrical Appliance Centre”. The furniture segment, also known as “Yihua Shijia” (ूശ˰࢕) which was established in 2013 is currently only in Zhongshan store (main store), Yangjiang store and Jiangmen store.

The department store segment offers an extensive variety of merchandise, including watches, jewelries, cosmetics, handbags, leather goods, and children’s products, clothing, shoes, textiles, sports wear and beddings. All of our department stores have a department store segment currently in operation. Revenue from our department store segment for each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013 amounted to approximately RMB172.3 million, approximately RMB211.4 million, approximately RMB223.8 million and approximately RMB106.4 million respectively.

The supermarket segment offers mainly daily essential products such as food and beverages, perishables and other household products. Revenue from supermarket segment for each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013 amounted to approximately RMB243.2 million, approximately RMB293.8 million, approximately RMB290.4 million and approximately RMB124.8 million respectively.

The electrical appliances segment offers a variety of electrical appliances ranging from large household electrical appliances (such as refrigerators, washing machines, air conditioners, televisions, kitchen appliances etc.) to small household electrical appliances (such as rice cookers, hair dryers, toasters etc.). Revenue from electrical appliances segment for each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013 amounted to approximately RMB189.7 million, approximately RMB209.9 million, approximately RMB164.8 million and approximately RMB70.4 million respectively.

The furniture segment, also known as “Yihua Shijia” (ूശ˰࢕) which was established in 2013 is currently only in Zhongshan store (main store), Yangjiang store and Jiangmen store. Revenue from furniture segment for the five months ended 31 May 2013 amounted to approximately RMB777,000.

– 280 – FINANCIAL INFORMATION

The following table illustrates the Gross Sale Proceeds exclusive of value added tax and our revenue from concessionaire sales and rental income during the Track Record Period:

Five months Year ended 31 December ended 31 May

2010 2011 2012 2013

Gross Sale Proceeds exclusive of value added tax (RMB’000) (Note) 922,078 1,175,054 1,206,805 584,128 Revenue from concessionaire sales (RMB’000) 146,472 189,233 208,855 96,179 Commissions as a percentage of concessionaire sales 15.9% 16.1% 17.3% 16.5%

Note: The amount of Gross Sale Proceeds used for calculation was exclusive of value added tax, where our Directors considered tax rate of 17.0% for value added tax was appropriate for the calculation.

The commissions as a percentage of concessionaire sales, calculated as our revenue from concessionaire sales divided by the Gross Sale Proceeds exclusive for value added tax, were approximately 15.9%, approximately 16.1%, approximately 17.3% and approximately 16.5%, respectively for the year ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013.

Other income. Other income primarily consists of management consulting service income and government grants. The following table illustrates the other income during the Track Record Period:

Five months Year ended 31 December ended 31 May

2010 2011 2012 2013

RMB’000 RMB’000 RMB’000 RMB’000

Management consulting service income 1,125 500 375 − Government grants 816 739 441 292

1,941 1,239 816 292

– 281 – FINANCIAL INFORMATION

Management consulting service income represented the amount received from an arrangement with an Independent Third Party for the management of a store on premises owned by third parties. Our Group entered into management consultancy agreement on 1 July 2010 and this agreement was terminated in September 2012 upon the end of its term. Under the terms of such agreements, we offered consultancy services in relation to of this managed store including employment and training of staff, relations and management of concessionaires and direct suppliers, store design and layout, sale and promotional strategies. In return, we are entitled to management consultancy fees based on certain one-off fees, annual fees and other fees to be agreed by the parties. For each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013, the management consultancy fees amounted to approximately RMB1.1 million, approximately RMB0.5 million, approximately RMB0.4 million and nil respectively.

Government grants represented amounts received by our Group from local governments in relation to environmental protection (such as the ືঐਖ਼ධ໾൨ (Energy Saving Engagement Subsidies*)), awards (such as the ᄿ؇޲ഹΤਠᅺ (Well-known brand of Guangdong Province*)), for location of registered office (such as under theᗫ׵ོᎸ೯࢝ᐼ௅຾᏶ٙ߰ ʍจԈٙ໾̂จԈ(Supplemental Opinion on several opinions on encouragement of developing headquarters economy*)) (the “Zhongshan Headquarter Grant”) and other miscellaneous projects.

The Directors advised that government grants are recognised in profit or loss only if the requirements are met and right to receive such payment is established. For example, pursuant to the Zhongshan Headquarter Grant, Guangdong Yihua Department Store has agreed to continue having its registered office in Zhongshan and to fulfil its tax obligations to the Zhongshan government during the ten years period from the date of the grant in 2012. Guangdong Yihua Department Store longest lease agreement in Zhongshan expires on 30 April 2027 (i.e. being longer than 10 years from 2012) and the management has no plan to relocate the registered office of Guangdong Yihua Department Store in the foreseeable future. Therefore, management considered there was reasonable assurance that the Group would comply with the terms of the Zhongshan Headquarter Grant and it was recognised as “other income” during the five months ended 31 May 2013 in accordance with the HKFRS. For each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013, the government grants amounted to approximately RMB0.8 million, approximately RMB0.7 million, approximately RMB0.4 million and approximately RMB292,000 respectively. The government grants are neither arose from the ordinary and usual course of our business nor recurring in nature. Government grants may be available to other market participants if the relevant requirements are met.

Other income for each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013 amounted to approximately RMB1.9 million, approximately RMB1.2 million, approximately RMB0.8 million and approximately RMB292,000 respectively.

Purchases of and changes in inventories. Our purchases of and changes in inventories consist of costs incurred for purchases of products from suppliers and changes in inventories due to the changes of net realisable value. Purchases of and changes in inventories for each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013 amounted to approximately RMB365.4 million, approximately RMB404.3 million, approximately RMB352.2 million and approximately RMB152.5 million respectively.

– 282 – FINANCIAL INFORMATION

Employee benefit expenses. Employee benefit expenses primarily consist of wages and salaries to our staff, contribution to social security funds and welfare, medical and other benefits. Our concessionaires are responsible for their own staff costs relating to their employees who maintain and operate their counters in our department stores. For each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013, our employee benefit expenses were approximately RMB48.5 million, approximately RMB58.0 million, approximately RMB75.9 million and approximately RMB38.3 million respectively.

Depreciation and amortisation. Depreciation and amortisation primarily consist of the depreciation of property, plant and equipment, charged to write off the cost of property, plant and equipment, over their estimated useful lives, using the straight-line method. For each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013, our depreciation and amortisation amounted to approximately RMB13.7 million, approximately RMB16.0 million, approximately RMB17.3 million and approximately RMB8.5 million respectively.

Other operating expenses. Other operating expenses primarily consist of utilities, other taxes, advertising, promotion and related expenses, Consumption Cards related expenses and professional service expenses. The following table sets out a breakdown of other operating expenses during the Track Record Period.

Five months Year ended 31 December ended 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Utilities 37,688 36,617 38,172 13,985 13,530 Advertising, promotion and related expenses 7,515 9,064 12,884 7,060 6,553 Repairsandmaintenances 5,689 5,202 5,271 2,013 1,916 Insurance 315 434 399 216 203 Bank charges 4,108 5,439 4,259 1,827 1,836 Consumables 3,468 3,409 3,591 1,480 1,898 Travelling and transportationexpenses 2,692 2,805 3,310 1,343 1,871 Office expenses 2,675 3,131 3,403 1,414 1,742 Entertainment 2,051 2,390 2,734 1,212 1,402 Other taxes 12,413 16,216 17,123 6,903 7,963 Auditor’s remuneration 63 131 48 – 11 Professional service expenses – 2,738 996 872 3,389 Consumption Cards related expenses 1,050 4,716 3,364 1,159 900 Cash loss – 4,005 – –– Other expenses 5,846 7,413 8,212 2,724 2,790

85,573 103,710 103,766 42,208 46,004

– 283 – FINANCIAL INFORMATION

Our Group had a case of theft by an employee involving cash of an aggregate amount of approximately RMB4.0 million. The employee involved was a senior staff of the cashier’s office of our Jiangmen store from 2005 to 2012. By abusing her position and by keeping all the keys to access the safe box, she misappropriated approximately RMB4.0 million. The incident was discovered during our Company’s self-assessment for preparation of the Listing, upon her confession in 2012 and upon discovery, our Group had reported the case to the police department. The employee was charged and sentenced by court to an imprisonment of nine years and her employment was terminated.

The following table sets out a breakdown of other taxes during the Track Record Period.

Five months Year ended 31 December ended 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Main business taxes and surcharges 11,336 14,227 14,740 7,544 Stamp tax, embankment protection fees and real estate tax 1,077 1,989 2,383 419

12,413 16,216 17,123 7,963

Main business taxes and surcharges include business tax, sales tax, urban maintenance and construction tax, resource tax and educational surcharges and other relevant taxes associated with the business activities of the enterprise.

For each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013, the other taxes amounted to approximately RMB12.4 million, approximately RMB16.2 million, approximately RMB17.1 million and approximately RMB8.0 million respectively.

Our other expenses are mainly losses from inventory stock count, cleaning expenses, administration miscellanies expenses, traveling and convention expenses and printing expenses.

For each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013, our other operating expenses amounted to approximately RMB85.6 million, approximately RMB103.7 million, approximately RMB103.8 million and approximately RMB46.0 million respectively.

Finance costs – net. Finance costs – net consist of the net amount of interest expenses on the interest-bearing bank borrowings and borrowings from employees and interest income derived from the bank deposits. For the year ended 31 December 2010, our net finance costs amounted to approximately RMB1.0 million. Our net finance income for the year ended 31 December 2011 and 2012 and the five months ended 31 May 2013 amounted to approximately RMB0.1 million, approximately RMB0.9 million and approximately RMB0.2 million respectively.

– 284 – FINANCIAL INFORMATION

Income tax. The Company is incorporated in the Cayman Islands as an exempted company with limited liability under the Cayman Islands Companies Law and are currently exempt from payment of Cayman Islands income tax. No provision for Hong Kong profits tax has been made as the Group has no estimated assessable profit in Hong Kong for the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the combined balance sheet date in the countries where the Company’s subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

All of our operating subsidiaries are located in the PRC. The rates applicable for income tax in the PRC remained unchanged at 25% for the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013 respectively.

Our effective tax rate, calculated as our income tax expenses incurred in continuing operations divided by our profit before tax from continuing operations, was approximately 27.3%, approximately 26.4%, approximately 28.6% and approximately 34.8% for the year ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013, respectively. For the year ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013, we incurred expenses which are non-deductable nature for tax purposes of approximately RMB1.0 million, approximately RMB0.8 million, approximately RMB1.8 million and approximately RMB0.8 million respectively. Those expenses not deductible for tax purposes were mainly listing expenses incurred by oversea investment holding company, promotional expenses without tax-deductible invoices, entertainment expenses, staff welfare expenses and interest expenses on borrowing from employees in excess of the cap of deductable portion allowed by the tax regulations and non-deductible non-operating expenses.

Loss/profit from discontinued operations. Loss/profit from discontinued operations consist of the operating results from two subsidiaries, namely Guangdong Yihua Management and Shaoguan Central Management. We disposed of Guangdong Yihua Management on 12 October 2010. For each of the years ended 31 December 2010 and 2011, loss from discontinued operations amounted to approximately RMB1.9 million and approximately RMB1.2 million respectively. For the year ended 31 December 2012 and the five months ended 31 May 2013, we had profit from discontinued operations of approximately RMB1.1 million and approximately RMB0.8 million respectively.

– 285 – FINANCIAL INFORMATION

LISTINGEXPENSES

The total amount of listing expenses, commissions together with SFC transaction levy and the Stock Exchange trading fee that will be borne by us in connection with the Share Offer is estimated to be approximately HK$23.5 million (based on the mid-point of our indicative price range of the Share Offer), of which approximately HK$9.6 million is expected to be capitalised after the Listing. The remaining estimated listing expenses amounted to approximately HK$13.9 million, including (i) approximately HK$3.5 million, approximately HK$1.3 million and approximately HK$4.3 million respectively were recognised during the years ended 31 December 2011 and 2012 and the five months ended 31 May 2013; and (ii) approximately HK$9.1 million is expected to be charged to the combined statements of comprehensive income of our Group for the year ending 31 December 2013. The prepayment balance related to listing as at 31 May 2013 was approximately HK$3.0 million. The estimated listing expenses of our Group are subject to adjustments based on the actual amount of expenses incurred/to be incurred by our Company upon the completion of the Listing.

REVIEW OF HISTORICAL OPERATING RESULTS

Five months ended 31 May 2013 compared to five months ended 31 May 2012

Revenue. For the five months ended 31 May 2013, our revenue was approximately RMB302.4 million, an increase of approximately RMB10.6 million, or approximately 3.6%, from approximately RMB291.8 million for the five months ended 31 May 2012. Revenue from our department store segment to the total revenue increased from approximately 32.9% for the five months ended 31 May 2012 to approximately 35.2% for the five months ended 31 May 2013.

For the five months ended 31 May 2013, our sales of gold products from both direct sales and concessionaries in our department store segment increased significantly, mainly due to the decrease of the price of gold in April 2013.

We have established the furniture segment in 2013. Our revenue from the furniture segment was in the form of fixed rental together with some management fee and service income.

– 286 – FINANCIAL INFORMATION

The following table sets forth a breakdown of revenue for the periods indicated.

Five months ended 31 May 2012 Five months ended (Unaudited) 31 May 2013

Department Electrical Department Electrical store Supermarket appliance store Supermarket appliance Furniture segment segment segment Total segment segment segment segment Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Direct sales 1,856 117,186 63,456 182,498 4,590 114,814 62,706 – 182,110 Concessionaire sales 77,365 5,233 5,127 87,725 85,927 4,896 5,356 – 96,179 Management fee and service income from operations 14,451 1,655 1,250 17,356 13,007 3,290 1,393 251 17,941 Rental income 2,418 1,272 524 4,214 2,913 1,830 900 526 6,169

96,090 125,346 70,357 291,793 106,437 124,830 70,355 777 302,399

Revenue from direct sales. For the five months ended 31 May 2013, our revenue from direct sales was approximately RMB182.1 million, a slight decrease of approximately RMB388,000, or approximately 0.2%, from approximately RMB182.5 million for the five months ended 31 May 2012.

For the five months ended 31 May 2013, our revenue from direct sales in our supermarket segment and electrical appliances segment decreased by approximately 2.0% and approximately 1.2% respectively compared to those of the five months ended 31 May 2012.

The decrease in our revenue from direct sales of supermarket segment was mainly attributable to (i) the continuous decrease in group purchases in 2013 in view of the market environment in Guangdong Province, the PRC; and (ii) there were other supermarkets commenced business near our stores in 2012, including but not limited to Jiangmen store and Qingyuan store, which had intensified the market competition and affected our sales in supermarket segment.

The decrease in our revenue from direct sales of electrical appliances segment was mainly attributable to competition from online retailers with cheaper products, which in turn had taken over some of the market share from traditional retailers.

– 287 – FINANCIAL INFORMATION

The increase in our revenue from direct sales of department store segment was mainly attributable to (i) the increase in sales of gold products due to the decrease in the price of gold; and (ii) the increase in sales of cosmetics upon the launching of a cosmetic brand in our main store.

Commission income from concessionaire sales. For the five months ended 31 May 2013, our revenue from concessionaire sales was approximately RMB96.2 million, an increase of approximately RMB8.5 million, or approximately 9.6%, from approximately RMB87.7 million for the five months ended 31 May 2012. The increase was mainly due to (i) the sales in our new Taiyangcheng store and Yangchun store; (ii) the increase in sales of gold products due to the decrease in the price of gold; and (iii) the increase in commission as a percentage of concessionaire sales we charged our concessionaires, partly due to our increasing bargaining power with our concessionaires. Commission income from concessionaire sales as a percentage of total revenue increased from approximately 30.1% for the five months ended 31 May 2012 to approximately 31.8% for the five months ended 31 May 2013. For the five months ended 31 May 2013, commission as a percentage of concessionaire sales, calculated as our revenue from concessionaire sales divided by the gross sale proceeds received or receivable by us from concessionaire sales and proceeds collected from customers on behalf of leasees, was approximately 16.5%, increased from approximately 16.0% for the five months ended 31 May 2012. Our Directors considered that we have more bargaining power with our concessionaires during the Track Record Period mainly due to (i) the better achieving of economies of scale of our department store network; (ii) continuous promotional activities; and (iii) our successful merchandising strategy adjusted from time to time so as to keep abreast of the changing needs and tastes of our customers, as well as cater to the latest market conditions.

Management fee and service income from operations. For the five months ended 31 May 2013, our management fee and service income from operations were approximately RMB17.9 million, an increase of approximately RMB585,000, or approximately 3.4%, from approximately RMB17.4 million for the five months ended 31 May 2012. The slight increase was consistent with our growth in revenue.

Rental income. For the five months ended 31 May 2013, our revenue from rental income was approximately RMB6.2 million, an increase of approximately RMB2.0 million, or approximately 46.4%, from approximately RMB4.2 million for the five months ended 31 May 2012. The increase was mainly due to (i) the increase in area for fixed rental tenants in the supermarket segment in Jiangmen store; and (ii) some of our concessionaires and direct suppliers from electrical appliances segment turned to become fixed rental shop tenants. As a result, we collected fixed rental payment income and management fees from those tenants during the five months ended 31 May 2013. As it is expected that the growth of electrical appliances market will slow down in the near future, we strategically changed some of our concessionaires and direct suppliers to fixed rental tenant to stabilise our income. Our Directors considered that such change was more profitable to our Company in view of the current state of electrical appliances market saturation.

– 288 – FINANCIAL INFORMATION

Gross profit and gross profit margin. For the five months ended 31 May 2013, our total gross profit were approximately RMB149.9 million, an increase of approximately RMB9.0 million, or approximately 6.4%, from approximately RMB140.9 million for the five months ended 31 May 2012. The following table sets forth a breakdown of gross profit and gross profit margin by types of revenue for the periods indicated.

Five months ended Five months ended 31 May 2012 31 May 2013 Gross Gross Gross profit Gross profit profit margin profit margin RMB’000 % RMB’000 % (Unaudited)

Direct sales 31,592 17.3% 29,599 16.3% Concessionaire sales 87,725 100.0% 96,179 100.0% Management fee and service income from operations 17,356 100.0% 17,941 100.0% Rental income 4,214 100.0% 6,169 100.0%

140,887 48.3% 149,888 49.6%

For the five months ended 31 May 2013, our gross profit from direct sales was approximately RMB29.6 million, a decrease of approximately RMB2.0 million, or approximately 6.3%, from approximately RMB31.6 million for the five months ended 31 May 2012. The decrease in gross profit from direct sales was in line with the decrease in revenue from direct sales. As our commission income from concessionaires, management fee and service income from operations and rental income do not incur purchase of and changes in inventories, the gross profit earned from it therefore was equal to the revenue incurred in those operations for the Track Record Period.

For the five months ended 31 May 2013, our gross profit margin for direct sales was approximately 16.3%, decreased from approximately 17.3% for the five months ended 31 May 2012. Such decrease was mainly attributable to the significant increase in sales of our gold products, which has a lower gross profit margin generally compared to other products. Also, as the sales volume in electrical appliances segment decreased, the discount provided by the direct suppliers decreased accordingly. As a result, our gross profit margin decreased due to a comparatively higher cost of sale in electrical appliance segment.

– 289 – FINANCIAL INFORMATION

The following table sets forth a breakdown of gross profit and gross profit margin by different business segments for the periods indicated.

Five months ended Five months ended 31 May 2012 31 May 2013 Gross Gross Gross profit Gross profit profit margin profit margin RMB’000 % RMB’000 % (Unaudited)

Department store segment 94,878 98.7% 102,668 96.5% Supermarket segment 28,428 22.7% 30,561 24.5% Electricalappliancesegment 17,581 25.0% 15,882 22.6% Furniture segment – – 777 100.0%

140,887 48.3% 149,888 49.6%

For the five months ended 31 May 2013, our gross profit from department store segment was approximately RMB102.7 million, an increase of approximately RMB7.8 million, or approximately 8.2%, from approximately RMB94.9 million for the five months ended 31 May 2012. The increase was mainly attributable to the increase in our revenue from department store segment for the corresponding period. For the five months ended 31 May 2013, our gross profit margin for department store segment was approximately 96.5%, slightly decreased from approximately 98.7% for the five months ended 31 May 2012. This was mainly due to a higher proportion of our revenue was derived from direct sales of department store segment, which incurred purchase of and changes in inventories.

For the five months ended 31 May 2013, our gross profit from supermarket segment was approximately RMB30.6 million, an increase of approximately RMB2.1 million, or approximately 7.5%, from approximately RMB28.4 million for the five months ended 31 May 2012. Our gross profit margin for supermarket segment also increased from approximately 22.7% for the five months ended 31 May 2012 to approximately 24.5% for the five months ended 31 May 2013. The increase was mainly due to our increasing bargaining power with the direct suppliers for a lower cost of goods.

For the five months ended 31 May 2013, our gross profit from electrical appliances segment was approximately RMB15.9 million, a decrease of approximately RMB1.7 million, or approximately 9.7%, from approximately RMB17.6 million for the five months ended 31 May 2012. For the five months ended 31 May 2013, our gross profit margin for our electrical appliances segment was approximately 22.6%, decreased from approximately 25.0% for the five months ended 31 May 2012. As the electrical appliances market was relatively saturated in Guangdong Province, the PRC with competition from online retailers, the gross profit margin decreased accordingly.

– 290 – FINANCIAL INFORMATION

We established the furniture segment in 2013. For the five months ended 31 May 2013, our gross profit and gross profit margin of the furniture segment were approximately RMB777,000 and 100% respectively. We have 100% gross profit margin for our furniture segment because the revenue from this segment was derived from fixed rental income and management fee and service income from operations, which did not incur purchase of and changes in inventories.

The growth of our gross profit outpace the change of revenue in the corresponding period mainly due to (i) the increase of revenue in department store segment, which has a comparatively higher gross profit margin; and (ii) the increase of our gross profit margin for supermarket segment from approximately 22.7% for the five months ended 31 May 2012 to approximately 24.5% for the five months ended 31 May 2013.

Our gross profit margin increased to approximately 49.6% for the five months ended 31 May 2013 from approximately 48.3% for the five months ended 31 May 2012 mainly because of the increase of commission income from concessionaire sales. As our revenue from concessionaire sales did not involve purchase of and changes in inventories, the increase of commission income from concessionaire sales as a percentage of our total revenue had led to a higher gross profit margin.

Other income. For the five months ended 31 May 2013, our other income was approximately RMB292,000, which was some government grants. For the five months ended 31 May 2013, we did not have any management consulting service income after the termination of our management consultancy agreement in September 2012.

Purchases of and changes in inventories. For the five months ended 31 May 2013, our purchases of and changes in inventories was approximately RMB152.5 million, an increase of approximately RMB1.6 million, or approximately 1.1%, from approximately RMB150.9 million for the five months ended 31 May 2012. We have an increase in our purchases of and changes in inventories of 1.1%, but a decrease in our revenue from direct sales of goods of 0.2% for the five months ended 31 May 2013. This was primarily due to the increase in sales of our gold products, which generally had a lower profit margin compared to other products.

Employee benefit expenses. For the five months ended 31 May 2013, our employee benefit expenses were approximately RMB38.3 million, an increase of approximately RMB8.7 million, or approximately 29.3%, from approximately RMB29.6 million for the five months ended 31 May 2012. This increase was mainly due to (i) the increase in the number of employees in view of the business commencement of stores at, including but not limited to, Taiyangcheng, Yangchun and Yingde, Guangdong Province and Tai’an, Shandong Province, the PRC. Our number of employees had increased from 1,767 as at 31 May 2012 to 1,978 as at 31 May 2013; and (ii) the increase in wages because of the rise in overall wages in Guangdong Province, the PRC. In order to retain experienced staff and attract high-caliber candidates, we performed salary review in May 2012 for our existing staff. As advised by the Directors, the increment was approximately 24%. Employee benefit expenses as a percentage of revenue had increased from approximately 10.2% for the five months ended 31 May 2012 to approximately 12.7% for the five months ended 31 May 2013.

– 291 – FINANCIAL INFORMATION

Depreciation and amortisation. For the five months ended 31 May 2013, our depreciation and amortisation were approximately RMB8.5 million, an increase of approximately RMB1.2 million, or approximately 16.3%, from approximately RMB7.3 million for the five months ended 31 May 2012. This increase was primarily attributable to depreciation arising from new leasehold improvements incurred for the second half of year ended 31 December 2012 and the five months ended 31 May 2013.

Operating lease rental expenses and property management fee. For the five months ended 31 May 2013, our operating lease rental expenses and property management fee were approximately RMB38.2 million, an increase of approximately RMB8.5 million, or approximately 28.6%, from approximately RMB29.7 million for the five months ended 31 May 2012. This increase was primarily due to the business commencement of stores at Taiyangcheng and Yangchun, Guangdong Province, the PRC and the increase in rental expenses and property management fee paid in Zhongshan store (main store). We paid rental for Levels 1 to 4 of West Wing of Yihua Commercial Center and Levels 1 to 3 of East Wing of Yihua Commercial Center, Zhongshan City, Guangdong Province, the PRC since January 2013.

Other operating expenses. For the five months ended 31 May 2013, our other operating expenses were approximately RMB46.0 million, an increase of approximately RMB3.8 million, or approximately 9.0%, from approximately RMB42.2 million for the five months ended 31 May 2012. This increase was primarily attributable to (i) the increase in professional service expenses of approximately RMB2.5 million due to the Listing; and (ii) the increase in other taxes for approximately RMB1.1 million due to the expansion of our business.

Finance income – net. For the five months ended 31 May 2013, our net finance income was approximately RMB224,000, a decrease of approximately RMB531,000, or approximately 70.3%, from approximately RMB755,000 for the five months ended 31 May 2012. The decrease was mainly due to the decrease in the finance cost for the five months ended 31 May 2013.

Profit before income tax. As a result of the foregoing, our profit before income tax was approximately RMB19.5 million for the five months ended 31 May 2013, a decrease of approximately RMB13.7 million, or approximately 41.2%, from approximately RMB33.2 million for the five months ended 31 May 2012.

Income tax expense. Our income tax expense was approximately RMB6.8 million for the five months ended 31 May 2013, a decrease of approximately RMB2.9 million, or approximately 29.9%, from approximately RMB9.7 million for the five months ended 31 May 2012. Our effective income tax rates were approximately 29.2% for the five months ended 31 May 2012 and approximately 34.8% for the five months ended 31 May 2013. Our effective income tax rate was higher than that of previous period mainly due to the tax losses for which no deferred income tax asset was recognised for the periods, which primarily attributable to our new operations, namely (i) furniture segments; and (ii) Tai’an store and Yangjiang store. Please refer to note 11 “income tax expense” section of the Accountant’s Report in Appendix I to this prospectus for further details.

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Profit from discontinued operations. For the five months ended 31 May 2013, our profit from discontinued operation was approximately RMB841,000, an increase of approximately RMB548,000, or approximately 1.9 time, from approximately RMB293,000 for the five months ended 31 May 2012. The change was mainly due to the improved operating results of Shaoguan Central Management for the five months ended 31 May 2013.

Profit for the year. For the five months ended 31 May 2013, our profit for the year was approximately RMB13.6 million, a decrease of approximately RMB10.2 million, or approximately 43.0%, from approximately RMB23.8 million for the five months ended 31 May 2012. This decrease was primarily due to the increases in (i) employee benefit expenses of approximately RMB8.7 million; and (ii) operating lease rental expense and property management fee of approximately RMB8.5 million for the period. Also, there was listing expenses of approximately RMB3.4 million incurred during the period. Our Directors considered that the listing expenses was temporary and our new stores may start to contribute profit after their business commencement.

Net profit margin and other ratios. Our net profit margin before interest and tax and net profit margin decrease to approximately 6.4% and approximately 4.5% for the five months ended 31 May 2013 from approximately 11.1% and approximately 8.2% respectively for the five months ended 31 May 2012. The decrease was mainly attributable to the increases in employee benefit expenses as well as operating lease rental expense and property management fee. For the five months ended 31 May 2013, our employee benefit expenses were approximately RMB38.3 million, an increase of approximately RMB8.7 million, or approximately 29.3%, from approximately RMB29.6 million for the five months ended 31 May 2012. For the five months ended 31 May 2013, the operating lease rental expense and property management fee was approximately RMB38.2 million, an increase of approximately RMB8.5 million, or approximately 28.6%, from approximately RMB29.7 million for the five months ended 31 May 2012.

Year ended 31 December 2012 compared to year ended 31 December 2011

Revenue. For the year ended 31 December 2012, our revenue was approximately RMB678.9 million, a decrease of approximately RMB36.2 million, or approximately 5.1%, from approximately RMB715.1 million for the year ended 31 December 2011. Revenue from our department store segment to the total revenue increased from approximately 29.6% for the year ended 31 December 2011 to approximately 33.0% for the year ended 31 December 2012. Fusha community store, which had commenced business in April 2012, contributed revenue of approximately RMB2.5 million for the year ended 31 December 2012.

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The following table sets forth a breakdown of revenue for the periods indicated.

Year ended 31 December 2011 2012 Department Electrical Department Electrical store Supermarket appliances store Supermarket appliances segment segment segment Total segment segment segment Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Direct sales 3,500 277,349 194,365 475,214 6,204 266,186 146,943 419,333 Concessionaire sales 167,146 11,791 10,296 189,233 181,441 15,569 11,845 208,855 Management fee and service income from operations 30,938 2,179 4,023 37,140 28,397 6,031 4,479 38,907 Rental income 9,775 2,505 1,219 13,499 7,725 2,564 1,492 11,781

211,359 293,824 209,903 715,086 223,767 290,350 164,759 678,876

Revenue from direct sales. For the year ended 31 December 2012, our revenue from direct sales was approximately RMB419.3 million, a decrease of approximately RMB55.9 million, or approximately 11.8%, from approximately RMB475.2 million for the year ended 31 December 2011. The decrease was primarily due to decreases in direct sales of the supermarket segment and electrical appliances segment which partly offset by the increase in direct sales of the department store segment. For the year ended 31 December 2012, our revenue from direct sales in our supermarket segment and electrical appliances segment were approximately RMB266.2 million and approximately RMB146.9 million, representing decreases of approximately RMB11.2 million and approximately RMB47.4 million, or approximately 4.0% and approximately 24.4%, from approximately RMB277.3 million and approximately RMB194.4 million for the year ended 31 December 2011 respectively.

The decrease in our revenue from direct sales of supermarket segment was mainly attributable to (i) the decrease in group purchases in 2012 in view of the market environment in Guangdong Province, the PRC; and (ii) there were other supermarkets commenced business near our stores in late 2011 and 2012, including but not limited to Jiangmen store and Qingyuan store, which had intensified the market competition and affected our sales in supermarket segment.

The decrease in our revenue from direct sales of electrical appliances segment was mainly attributable to (i) lower demand of electrical products after the end of the Change of the Old for New Program by the end of 2011. For the year ended 31 December 2011, the revenue contributed by customers under the Change of the Old for New Program was approximately RMB173.5 million. Owing to the end of the program, we did not have any revenue contributed from it for the year ended 31 December 2012; and (ii) bearish properties markets in the PRC also reduced the demand of household appliance from new house owners. During the Track

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Record Period, we benefited from the Change of the Old for New Program as an authorised sales enterprise and this program expired at the end of 2011 (details of the program are set out in the section headed “Regulations – Change of the Old for New Program” of this prospectus). Our Directors were in the opinion that the Change of the Old for New Program benefited our revenue from direct sales of electrical appliances segment in 2010 and 2011.

Given the increasing bargaining power with the direct suppliers from the supermarket segment and electrical appliances segment, our cost of goods from these direct suppliers was in a decreasing trend during the Track Record Period. Our Directors considered that such increase in bargaining power with our direct suppliers was mainly due to (i) the better achieving of economies of scale of our store network; and (ii) our continuous promotional activities. Besides, direct suppliers of electrical appliances also reduced the cost of goods in 2012 so as to stimulate sales and increase our initiative to promote their products after the termination of the Change of the Old for New Program in 2011.

Commission income from concessionaire sales. For the year ended 31 December 2012, our revenue from concessionaire sales was approximately RMB208.9 million, an increase of approximately RMB19.6 million, or approximately 10.4%, from approximately RMB189.2 million for the year ended 31 December 2011. The increase was mainly due to (i) the increase in sales of our existing stores, namely our main store and Shaoguan store. Our main store commenced a new area in department store segment in 2012, focused on promoting discounted products. Also, we enhanced our promotion in our main store. Together with the commencement of business in Fusha store in 2012, for the year ended 31 December 2012, the advertising, promotion and related expenses in main store was approximately RMB4.3 million, an increase of approximately RMB1.3 million, or approximately 42.1%, from approximately RMB3.0 million for the year ended 31 December 2011. Our Shaoguan store also expanded a new area of approximately 1,500 sq.m. in department store segment in 2012 and the sales in department store segment increased accordingly; and (ii) the increase in commission as a percentage of concessionaire sales we charged our concessionaires, partly as a result of our increasing bargaining power with our concessionaires. Commission income from concessionaire sales as a percentage of total revenue increased from approximately 26.5% for the year ended 31 December 2011 to approximately 30.8% for the year ended 31 December 2012. For the year ended 31 December 2012, commission as a percentage of concessionaire sales, calculated as our revenue from concessionaire sales divided by the gross sale proceeds received or receivable by us from concessionaire sales and proceeds collected from customers on behalf of leasees, was approximately 17.3%, increased from approximately 16.1%, for the year ended 31 December 2011.

Management fee and service income from operations. For the year ended 31 December 2012, our management fee and service income from operations was approximately RMB38.9 million, an increase of approximately RMB1.8 million, or approximately 4.8%, from approximately RMB37.1 million for the year ended 31 December 2011. As the management fee and service income from operations were mainly charged from the concessionaires and fixed rental leasees, the increase was in line with the increase in our revenue from commission income from concessionaire sales. For the year ended 31 December 2012, our revenue from concessionaire sales was approximately RMB208.9 million, an increase of approximately RMB19.6 million, or approximately 10.4%, from approximately RMB189.2 million for the year ended 31 December 2011.

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Rental income. For the year ended 31 December 2012, our revenue from rental income was approximately RMB11.8 million, a decrease of approximately RMB1.7 million, or approximately 12.7%, from approximately RMB13.5 million for the year ended 31 December 2011. The decrease was primarily due to some fixed rental shop tenants turned to become our concessionaires during the year ended 31 December 2012. Our Directors considered it was more profitable to our Company for such change.

Gross profit and gross profit margin. For the year ended 31 December 2012, our total gross profit were approximately RMB326.7 million, an increase of approximately RMB15.9 million, or approximately 5.1%, from approximately RMB310.8 million for the year ended 31 December 2011. The following table sets forth a breakdown of gross profit and gross profit margin by types of revenue for the periods indicated.

Year ended 31 December 2011 2012 Gross profit Gross profit Gross profit margin Gross profit margin RMB’000 % RMB’000 %

Direct sales 70,901 14.9% 67,143 16.0% Concessionairesales 189,233 100.0% 208,855 100.0% Management fee and service income from operations 37,140 100.0% 38,907 100.0% Rental income 13,499 100.0% 11,781 100.0%

310,773 43.5% 326,686 48.1%

For the year ended 31 December 2012, our gross profit from direct sales was approximately RMB67.1 million, a decrease of approximately RMB3.8 million, or approximately 5.3%, from approximately RMB70.9 million for the year ended 31 December 2011. The decrease in our gross profit was mainly attributable to the decrease in our revenue of direct sales for the corresponding period.

For the year ended 31 December 2012, our gross profit margin for direct sales was approximately 16.0%, which increased from approximately 14.9% for the year ended 31 December 2011. The increase in the gross profit margin for our direct sales was mainly attributable to the increase in our gross profit margin for both supermarket segment and electrical appliances segment for the corresponding period.

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The following table sets forth a breakdown of gross profit and gross profit margin by different business segments for the periods indicated.

Year ended 31 December 2011 2012 Gross profit Gross profit Gross profit margin Gross profit margin RMB’000 % RMB’000 %

Department store segment 208,899 98.8% 218,958 97.9% Supermarket segment 63,898 21.7% 69,005 23.8% Electrical appliance segment 37,976 18.1% 38,723 23.5%

310,773 43.5% 326,686 48.1%

For the year ended 31 December 2012, our gross profit from department store segment was approximately RMB219.0 million, an increase of approximately RMB10.1 million, or approximately 4.8%, from approximately RMB208.9 million for the year ended 31 December 2011. For the year ended 31 December 2012, our gross profit margin for department store segment was approximately 97.9%, slightly decreased from approximately 98.8% for the year ended 31 December 2011. The increase in our gross profit from department store segment was mainly attributable to the increase in our revenue from department store segment for the corresponding period. The slight decrease of our gross profit margin for department store segment was mainly due to the increasing portion of our revenue from direct sales of department store segment, which incurred purchase of and changes in inventories.

For the year ended 31 December 2012, our gross profit from supermarket segment was approximately RMB69.0 million, an increase of approximately RMB5.1 million, or approximately 8.0%, from approximately RMB63.9 million for the year ended 31 December 2011. For the year ended 31 December 2012, our gross profit margin for supermarket segment was approximately 23.8%, slightly increased from approximately 21.7% for the year ended 31 December 2011. The slight increase of our gross profit margin for supermarket segment was mainly due to our increasing bargaining power with the direct suppliers for a lower cost of goods and the increasing portion of our revenue from concessionaire sales of supermarket segment.

For the year ended 31 December 2012, our gross profit from electrical appliances segment was approximately RMB38.7 million, an increase of approximately RMB0.7 million, or approximately 2.0%, from approximately RMB38.0 million for the year ended 31 December 2011. For the year ended 31 December 2012, our gross profit margin for electrical appliances segment was approximately 23.5%, increased from approximately 18.1% for the year ended 31 December 2011. We had recorded an increase in our gross profit from electrical appliances

– 297 – FINANCIAL INFORMATION segment but a decrease in our revenue from electrical appliances segment for the corresponding period. This was mainly due to our direct suppliers decreased the cost of goods supplied to us in order to stimulate sales and incentivise the stores to promote their products after the termination of the Change of the Old for New Program in 2011.As a result, our our gross profit margin from electrical appliances segment increased accordingly.

The growth of our gross profit outpace the change of revenue in the corresponding period mainly due to (i) the increase in revenue from our department store segment, which has the highest gross profit margin among our three segments; and (ii) our gross profit margin for both supermarket segment and electrical appliances segment increased from approximately 21.7% and approximately 18.1% for the year ended 31 December 2011 to approximately 23.8% and approximately 23.5% for the year ended 31 December 2012 respectively.

Our gross profit margin increased to approximately 48.1% for the year ended 31 December 2012 from approximately 43.5% respectively for the year ended 31 December 2011 due to the increase of commission income from concessionaire sales. As revenue from concessionaire sales did not involve purchase of and changes in inventories, the increase of commission income from concessionaire sales as a percentage of our total revenue lead to a higher gross profit margin.

Other income. For the year ended 31 December 2012, our other income was approximately RMB0.8 million, a decrease of approximately RMB0.4 million, or approximately 34.1%, from approximately RMB1.2 million for the year ended 31 December 2011. The decrease was due to the decrease in both management consulting service income and government grants. For the year ended 31 December 2012, our management consulting service income was approximately RMB0.4 million, a decrease of approximately RMB0.1 million, or approximately 25.0%, from approximately RMB0.5 million for the year ended 31 December 2011 due to the termination of the management consultancy agreement in September 2012. For the year ended 31 December 2012, our government grants was approximately RMB0.4 million, a decrease of approximately RMB0.3 million, or approximately 40.3%, from approximately RMB0.7 million for the year ended 31 December 2011.

Purchases of and changes in inventories. For the year ended 31 December 2012, our purchases of and changes in inventories was approximately RMB352.2 million, a decrease of approximately RMB52.1 million, or approximately 12.9%, from approximately RMB404.3 million for the year ended 31 December 2011. The decrease in our purchases of and changes in inventories was in line with the decrease in our revenue from direct sales of goods in the corresponding year. For the year ended 31 December 2012, our revenue from direct sales was approximately RMB419.3 million, a decrease of approximately RMB55.9 million, or approximately 11.8%, from approximately RMB475.2 million for the year ended 31 December 2011.

Employee benefit expenses. For the year ended 31 December 2012, our employee benefit expenses were approximately RMB75.9 million, an increase of approximately RMB17.9 million, or approximately 30.9%, from approximately RMB58.0 million for the year ended 31

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December 2011. This increase was mainly due to (i) the increase in wages because of the rise in overall wages in Guangdong Province, the PRC. According to the Statistics Bureau of Guangdong Province, the overall salary increment was approximately 19.9% on average for the employees working for the non-state owned enterprises in Guangdong Province for the year ended 31 December 2012; and (ii) the increase in the number of employees, including but not limited to Fusha store and Taiyangcheng store. As at 31 December 2012, our employees number was approximately 1,856, increased from approximately 1,699 as at 31 December 2011. Our Fusha store and Taiyangcheng store commenced business in April 2012 and January 2013 respectively. Although Taiyangcheng store commenced business in January 2013, we employed employees in 2012 for training and preparation work for Taiyangcheng store. Employee benefit expenses as a percentage of revenue was approximately 8.1% for the year ended 31 December 2011 and increased to approximately 11.2% for the year ended 31 December 2012.

Depreciation and amortisation. For the year ended 31 December 2012, our depreciation and amortisation were approximately RMB17.3 million, an increase of approximately RMB1.3 million, or approximately 7.9%, from approximately RMB16.0 million for the year ended 31 December 2011. This increase was primarily attributable to depreciation arising from new leasehold improvements in 2011 which had a partial impact for the year ended 31 December 2011 but a full impact for the year ended 31 December 2012.

Operating lease rental expenses and property management fee. For the year ended 31 December 2012, our operating lease rental expenses and property management fee was approximately RMB72.4 million, an increase of approximately RMB6.2 million, or approximately 9.4%, from approximately RMB66.2 million for the year ended 31 December 2011. This increase was primarily due to the increase of the rental expenses and property management fee mainly in Shaoguan store and Qingyuan store in 2012. For the year ended 31 December 2012, our operating lease rental expense and property management fee in Shaoguan store was approximately RMB8.0 million, an increase of approximately RMB1.8 million, or approximately 28.5%, from approximately RMB6.2 million for the year ended 31 December 2011, which was mainly due to the rental expenses and property management fee increment in 2012. In 2012, Qingyuan store newly rented some additional spaces for business expansion. For the year ended 31 December 2012, our operating lease rental expense and property management fee in Qingyuan store was approximately RMB7.7 million, an increase of approximately RMB1.3 million, or approximately 20.9%, from approximately RMB6.3 million for the year ended 31 December 2011.

Other operating expenses. For the year ended 31 December 2012, our other operating expenses were approximately RMB103.8 million, a slight increase of approximately RMB0.1 million, or approximately 0.1%, from approximately RMB103.7 million for the year ended 31 December 2011. Such change was attributable to the higher expenses incurred, mainly relating to (i) advertising and promotion; and (ii) utilities, and partially offset by the decrease in cash losses. We had recorded an increase in advertising, promotion and related expenses of approximately RMB3.8 million for the year ended 31 December 2012 due to the increase of advertising, promotion and related expenses incurred in our main store. For the year ended 31

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December 2012, the advertising, promotion and related expenses in our main store was approximately RMB7.0 million, an increase of approximately RMB4.0 million, or approximately 133.3%, from approximately RMB3.0 million for the year ended 31 December 2011, which was mainly due to the increase in frequency of promotional activities held in 2012 with the aim to increase our revenue. We had also recorded an increase in utilities of approximately RMB1.6 million, which was mainly due to the business expansion in the year. The decrease in cash losses of approximately RMB4.0 million was caused by a theft by an employee in Jiangmen store which was discovered in 2012 but was incurred for the year ended 31 December 2011. There were discrepancies identified during our Company’s self-assessment for preparation of Listing in cash book as compared to the accounting records existed in 2011.

Finance income – net. For the year ended 31 December 2012, our net finance income was approximately RMB0.9 million, an increase of approximately RMB0.7 million, or approximately 5.5 times, from approximately RMB0.1 million for the year ended 31 December 2011. The increase was mainly due to the decrease in the finance cost for the year ended 31 December 2012. For the year ended 31 December 2012, our finance income and finance costs were approximately RMB3.5 million and approximately RMB2.6 million, a decrease of approximately RMB1.4 million and approximately RMB2.1 million, or approximately 29.1% and approximately 45.2%, from approximately RMB4.9 million and approximately RMB4.7 million for the year ended 31 December 2011 respectively.

Profit before income tax. As a result of the foregoing, our profit before income tax was approximately RMB59.5 million for the year ended 31 December 2012, a decrease of approximately RMB8.9 million, or approximately 13.0%, from approximately RMB68.4 million for the year ended 31 December 2011.

Income tax expense. Our income tax expense was approximately RMB17.0 million for the year ended 31 December 2012, a decrease of approximately RMB1.1 million, or approximately 5.9%, from approximately RMB18.1 million for the year ended 31 December 2011. Our effective income tax rate was approximately 26.4% for the year ended 31 December 2011 and approximately 28.6% for the year ended 31 December 2012. Our effective income tax expenses were higher than the corporate income tax rate of the PRC at 25% mainly due to the non-deductable expenses incurred for the periods. The increase in effective income tax rate for the year ended 31 December 2012 was in line with the increase in non-deductible expenses. Please refer to note 11 “income tax expense” section of the Accountant’s Report in Appendix I to this prospectus for further details.

Profit/(loss) from discontinued operations. For the year ended 31 December 2012, our profit from discontinued operations was approximately RMB1.1 million, changed from the loss from discontinued operations of approximately RMB1.2 million for the year ended 31 December 2011. The change was mainly due to the change from loss to profit from Shaoguan Central Management for the year ended 31 December 2012.

Profit for the year. For the year ended 31 December 2012, our profit for the year was approximately RMB43.6 million, a decrease of approximately RMB5.5 million, or approximately 11.2%, from approximately RMB49.2 million for the year ended 31 December 2011. This decrease was primarily due to the decrease in revenue of approximately RMB36.2 million and the increase in employee benefit expenses of approximately RMB17.9 million for the period.

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Net profit margin and other ratios. Our net profit margin before interest and tax and net profit margin decrease to approximately 8.6% and approximately 6.4% for the year ended 31 December 2012 from approximately 9.6% and approximately 6.9% respectively for the year ended 31 December 2011. The decrease was mainly attributable to the increase in employee benefit expenses. For the year ended 31 December 2012, our employee benefit expenses were approximately RMB75.9 million, an increase of approximately RMB17.9 million, or approximately 30.9%, from approximately RMB58.0 million for the year ended 31 December 2011.

Year ended 31 December 2011 compared to year ended 31 December 2010

Revenue. For the year ended 31 December 2011, our revenue was approximately RMB715.1 million, an increase of approximately RMB109.9 million, or approximately 18.2%, from approximately RMB605.2 million for the year ended 31 December 2010. Revenue from our department store segment to the total revenue increased from approximately 28.5% for the year ended 31 December 2010 to approximately 29.6% for the year ended 31 December 2011.

The following table sets forth a breakdown of revenue for the periods indicated.

Year ended 31 December 2010 2011 Department Electrical Department Electrical store Supermarket appliances store Supermarket appliances segment segment segment Total segment segment segment Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Direct sales 5,941 231,852 179,029 416,822 3,500 277,349 194,365 475,214 Concessionaire sales 132,009 7,130 7,333 146,472 167,146 11,791 10,296 189,233 Management fee and service income from operations 27,972 2,044 2,799 32,815 30,938 2,179 4,023 37,140 Rental income 6,352 2,185 558 9,095 9,775 2,505 1,219 13,499

Total 172,274 243,211 189,719 605,204 211,359 293,824 209,903 715,086

Revenue from direct sales. For the year ended 31 December 2011, our revenue from direct sales was approximately RMB475.2 million, an increase of approximately RMB58.4 million, or approximately 14.0%, from approximately RMB416.8 million for the year ended 31 December 2010. The increase was primarily due to the increase in direct sales of the supermarket segment and electrical appliances segment. For the year ended 31 December 2011, our revenue from direct sales in our supermarket segment and electrical appliances segment were approximately RMB277.3 million and approximately RMB194.4 million, representing an increase of approximately RMB45.5 million and approximately RMB15.3 million, or approximately 19.6% and approximately 8.6%, from approximately RMB231.9 million and approximately RMB179.0 million for the year ended 31 December 2010 respectively.

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The increase in direct sales in our supermarket segment was mainly attributable to inflation in the PRC and our increased promotion activities for our supermarket segment. For the year ended 31 December 2011, the consumer price index was 105.4 according to National Bureau of Statistics of China. A higher consumer price index had increased the price level of our products in general, and thereby our sales increased. Besides, we also engaged in various brand-building activities such as food and culture festivals at our stores with the aim to promote our business in our supermarket segment.

In addition to the higher inflation rate in the PRC, the increase in revenue in electrical appliances segment was also attributable to the end of the Change of the Old for New Program in 2011.As the customers expected the PRC government’s termination of the Change of the Old for New Program in the second half year of 2011, the demand of electrical appliances surged and the sales of our electrical appliances segment increased.

For the year ended 31 December 2011, we allocated more resources in promotion activities for our supermarket segment and electrical appliances segment. Advertising and promotion expenses increased from approximately RMB7.5 million for the year ended 31 December 2010 to approximately RMB9.1 million for the year ended 31 December 2011. Revenue from direct sales as a percentage of total revenue slightly decreased from approximately 68.9% for the year ended 31 December 2010 to approximately 66.5% for the year ended 31 December 2011.

Commission income from concessionaire sales. For the year ended 31 December 2011, our revenue from concessionaire sales was approximately RMB189.2 million, an increase of approximately RMB42.8 million, or approximately 29.2%, from approximately RMB146.5 million for the year ended 31 December 2010. This increase was mainly due to (i) the increase in sales of our existing stores, namely Shaoguan store and Qingyuan store subsequent to their renovation, where Shaoguan store expanded its operation of kid’s wear section in the unused area for the year ended 31 December 2011 and Qingyuan store expanded its operation of department store segment in the second half of year 2010; (ii) the increase in the commission as a percentage of concessionaires sales we charge our concessionaire partners, partly as a result of our increasing bargaining power with concessionaires; and (iii) we successfully launched promotion and advertising campaigns to attract more customers. The renovation cost raised from renovation of Shaoguan store and Qingyuan store were capitalised to the property, plant and equipment and depreciated using straight-line method recognised in profit or loss in respective financial years. Commission income from concessionaire sales as a percentage of total revenue increased from approximately 24.2% for the year ended 31 December 2010 to approximately 26.5% for the year ended 31 December 2011. For the year ended 31 December 2011, our commission as a percentage of concessionaire sales, calculated as our revenue from concessionaire sales divided by the gross sale proceeds received or receivable by us from concessionaire sales and proceeds collected from customers on behalf of leasees, was approximately 16.1%, increased from approximately 15.9%, for the year ended 31 December 2010.

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Management fee and service income from operations. For the year ended 31 December 2011, our management fee and service income from operations were approximately RMB37.1 million, an increase of approximately RMB4.3 million, or approximately 13.2%, from approximately RMB32.8 million for the year ended 31 December 2010. As the management fee and service income from operations were mainly charged from the concessionaires, the increase was in line with the increase in our revenue from concessionaire. For the year ended 31 December 2011, our revenue from concessionaire sales was approximately RMB189.2 million, an increase of approximately RMB42.8 million, or approximately 29.2%, from approximately RMB146.5 million for the year ended 31 December 2010.

Rental income. For the year ended 31 December 2011, our revenue from rental income was approximately RMB13.5 million, an increase of approximately RMB4.4 million, or approximately 48.4%, from approximately RMB9.1 million for the year ended 31 December 2010. This increase was primarily due to the increase in rental revenue from department store segment in Jiangmen store in 2011. For the year ended 31 December 2011, our rental income from department store segment in Jiangmen store was approximately RMB6.6 million, an increase of approximately RMB3.1 million, or approximately 86.5%, from approximately RMB3.5 million for the year ended 31 December 2010. The increase was mainly due to some major leasees start rental terms in Jiangmen store during 2010 and the rental income from them charged fully in 2011.

Gross profit and gross profit margin. For the year ended 31 December 2011, our total gross profit were approximately RMB310.8 million, an increase of approximately RMB71.0 million, or approximately 29.6%, from approximately RMB239.8 million for the year ended 31 December 2010. The following table sets forth a breakdown of gross profit and gross profit margin by types of revenue for the periods indicated.

Year ended 31 December 2010 2011 Gross profit Gross profit Gross profit margin Gross profit margin RMB’000 % RMB’000 %

Direct sales 51,426 12.3% 70,901 14.9% Concessionairesales 146,472 100.0% 189,233 100.0% Management fee and service income from operations 32,815 100.0% 37,140 100.0% Rental income 9,095 100.0% 13,499 100.0%

239,808 39.6% 310,773 43.5%

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For the year ended 31 December 2011, our gross profit from direct sales was approximately RMB70.9 million, an increase of approximately RMB19.5 million, or approximately 37.9%, from approximately RMB51.4 million for the year ended 31 December 2010. The increase in our gross profit was mainly attributable to the increase in our revenue of direct sales for the corresponding period.

As commission income from concessionaires, management fee and service income from operations and rental income do not incur purchase of and changes in inventories, the gross profit of the respective operation were equal to the revenue incurred in those operations for the Track Record Period.

For the year ended 31 December 2011, our gross profit margin for direct sales was approximately 14.9%, increased from approximately 12.3% for the year ended 31 December 2010. The increase in the gross profit margin for our direct sales was mainly attributable to the increase in our gross profit margin for both supermarket segment and electrical appliances segment for the corresponding period.

The following table sets forth a breakdown of gross profit and gross profit margin by different business segments for the periods indicated.

Year ended 31 December 2010 2011 Gross profit Gross profit Gross profit margin Gross profit margin RMB’000 % RMB’000 %

Department store segment 168,318 97.7% 208,899 98.8% Supermarket segment 46,641 19.2% 63,898 21.7% Electrical appliance segment 24,849 13.1% 37,976 18.1%

239,808 39.6% 310,773 43.5%

For the year ended 31 December 2011, our gross profit from department store segment was approximately RMB208.9 million, an increase of approximately RMB40.6 million, or approximately 24.1%, from approximately RMB168.3 million for the year ended 31 December 2010. For the year ended 31 December 2011, our gross profit margin for department store segment was approximately 98.8%, slightly increased from approximately 97.7% for the year ended 31 December 2010. The increase in our gross profit from department store segment was mainly attributable to the increase in our revenue from department store segment for the corresponding period. The slight increase of our gross profit margin for department store segment was mainly due to the increasing portion of our revenue from concessionaire sales of department store segment.

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For the year ended 31 December 2011, our gross profit from supermarket segment was approximately RMB63.9 million, an increase of approximately RMB17.3 million, or approximately 37.0%, from approximately RMB46.6 million for the year ended 31 December 2010. For the year ended 31 December 2011, our gross profit margin for supermarket segment was approximately 21.7%, increased from approximately 19.2% for the year ended 31 December 2010. The increase in our gross profit from supermarket segment was in line with the increase in our revenue from supermarket segment for the corresponding period. The slight increase of our gross profit margin for supermarket segment was mainly due to our increasing bargaining power with the direct suppliers.

For the year ended 31 December 2011, our gross profit from electrical appliances segment was approximately RMB38.0 million, an increase of approximately RMB13.1 million, or approximately 52.8%, from approximately RMB24.8 million for the year ended 31 December 2010. For the year ended 31 December 2011, our gross profit margin for electrical appliances segment was approximately 18.1%, increased from approximately 13.1% for the year ended 31 December 2010. The increase in our gross profit from electrical appliances segment was mainly attributable to the increase in our revenue from electrical appliances segment for the corresponding period. The slight increase of our gross profit margin for electrical appliances segment was mainly due to our increasing bargaining power with the direct suppliers.

The growth of our gross profit outpace the growth of revenue in the corresponding period mainly due to the increase in revenue from our department store segment, which has the highest gross profit margin among our three operating segments.

Our gross profit margin increased to approximately 43.5% for the year ended 31 December 2011 from approximately 39.6% respectively for the year ended 31 December 2010 due to the increase of commission income from concessionaire sales. As revenue from concessionaire sales did not involve purchase of and changes in inventories, the increase of commission income from concessionaire sales as a percentage of total revenue had led to a higher gross profit margin.

Other income. For the year ended 31 December 2011, our other income was approximately RMB1.2 million, a decrease of approximately RMB0.7 million, or approximately 36.2%, from approximately RMB1.9 million for the year ended 31 December 2010. The decrease was due to the decrease in management consulting service income. For the year ended 31 December 2011, our management consulting service income was approximately RMB0.5 million, a decrease of approximately RMB625,000, or approximately 55.6%, from approximately RMB1.1 million for the year ended 31 December 2010, mainly due to the one-off income of approximately RMB1.0 million in 2010, according to the term of the management consultancy agreement.

Purchases of and changes in inventories. For the year ended 31 December 2011, our purchases of and changes in inventories was approximately RMB404.3 million, an increase of approximately RMB38.9 million, or approximately 10.7%, from approximately RMB365.4 million for the year ended 31 December 2010. The increase in our purchases of and changes

– 305 – FINANCIAL INFORMATION in inventories was in line with the increase in our revenue from direct sales of goods in the corresponding year. For the year ended 31 December 2011, our revenue from direct sales was approximately RMB475.2 million, an increase of approximately RMB58.4 million, or approximately 14.0%, from approximately RMB416.8 million for the year ended 31 December 2010. According to National Bureau of Statistics of China, the consumer price index was 105.4 for the year ended 31 December 2011. Such inflation also contributed to the increase of purchases of and changes in inventories.

Employee benefit expenses. For the year ended 31 December 2011, our employee benefit expenses were approximately RMB58.0 million, an increase of approximately RMB9.5 million, or approximately 19.6%, from approximately RMB48.5 million for the year ended 31 December 2010. This increase was mainly due to (i) the increase in average wages because of the increase in minimum wages under local regulatory requirements; and (ii) the increase in the number of employees relating to the opening of the Hetang community store. In September 2011, Hetang community store commenced its business in Jiangmen, Guangdong Province, the PRC and the average headcount increased in Jiangmen store accordingly. Employee benefit expenses as a percentage of revenue was approximately 8.0% for the year ended 31 December 2010 and slightly increased to approximately 8.1% for the year ended 31 December 2011.

Depreciation and amortisation. For the year ended 31 December 2011, our depreciation and amortisation were approximately RMB16.0 million, an increase of approximately RMB2.3 million, or approximately 17.0%, from approximately RMB13.7 million for the year ended 31 December 2010. This increase was primarily attributable to the depreciation arising from new leasehold improvements happen in 2010 which had a partial impact for the year ended 31 December 2010 but a full impact for the year ended 31 December 2011.

Operating lease rental expenses and property management fee. For the year ended 31 December 2011, our operating lease rental expenses and property management fee were approximately RMB66.2 million, an increase of approximately RMB17.5 million, or approximately 35.9%, from approximately RMB48.7 million for the year ended 31 December 2010. This increase was primarily due to the increase of the rental expenses and property management fee in Jiangmen store. As our Jiangmen store continued to develop its business and renewed the rental agreement of phase 2 of Jiangmen store, which became effective on 1 January 2011, the rental expenses for the year ended 31 December 2011 increased accordingly. For the year ended 31 December 2011, our operating lease rental expense and property management fee in Jiangmen store was approximately RMB28.7 million, an increase of approximately RMB14.3 million, or approximately 98.9%, from approximately RMB14.4 million for the year ended 31 December 2010.

Other operating expenses. For the year ended 31 December 2011, our other operating expenses were approximately RMB103.7 million, an increase of approximately RMB18.1 million, or approximately 21.2%, from approximately RMB85.6 million for the year ended 31 December 2010. This increase was primarily attributable to (i) cash losses of approximately RMB4.0 million caused by a theft by employee in Jiangmen store which was discovered in 2012 but such losses was incurred for the year ended 31 December 2011. There were

– 306 – FINANCIAL INFORMATION discrepancies identified during our Company’s self-assessment for preparation for Listing in cash book as compared to the accounting records existed in 2011; (ii) the increase in other taxes for approximately RMB3.8 million due to the expansion of our business. Other taxes represented mainly main business taxes and surcharges and stamp tax, embankment protection fees and real estate tax. As the main business taxes and surcharges were charged according to our revenue, the main business taxes and surcharges increased to approximately RMB14.2 million for the year ended 31 December 2011, from approximately RMB11.3 million for the year ended 31 December 2010 representing an increase of approximately RMB2.9 million or approximately 25.5%, such increase was in line with the increase of total revenue during the corresponding period; (iii) the increase in advertising, promotion and related expenses for approximately RMB1.5 million due to the increase of advertising, promotion and related expenses incurred in Qingyuan store. For the year ended 31 December 2011, the advertising, promotion and related expenses in Qingyuan store was approximately RMB2.4 million, an increase of approximately RMB1.1 million, or approximately 81.7%, from approximately RMB1.3 million for the year ended 31 December 2010, mainly due to our increased promotion effort subsequent to the renovation in Qingyuan store. It was partially offset by the decrease in utilities expenses for approximately RMB1.1 million due to effective cost control during the corresponding year. The overall increase in other operating expenses was consistent with the increase of our revenue and in line with our business expansion.

Finance (costs)/income – net. For the year ended 31 December 2011, our net finance income was approximately RMB0.1 million and our net finance costs was approximately RMB1.0 million for the year ended 31 December 2010. This change was due to the increase in the finance income had outpaced the increase in interest expenses on bank borrowings for the year ended 31 December 2011. For the year ended 31 December 2011, our finance income and finance costs were approximately RMB4.9 million and approximately RMB4.7 million, an increase of approximately RMB2.0 million and approximately RMB0.9 million, or approximately 71.9% and approximately 23.7%, from approximately RMB2.8 million and approximately RMB3.8 million for the year ended 31 December 2010 respectively.

Profit before income tax. As a result of the foregoing, our profit before income tax was approximately RMB68.4 million for the year ended 31 December 2011, an increase of approximately RMB23.8 million, or approximately 53.2%, from approximately RMB44.7 million for the year ended 31 December 2010.

Income tax expense. Our income tax expense was approximately RMB18.1 million for the year ended 31 December 2011, an increase of approximately RMB5.9 million, or approximately 48.4%, from approximately RMB12.2 million for the year ended 31 December 2010. Our effective income tax rate was approximately 27.3% for the year ended 31 December 2010 and approximately 26.4% for the year ended 31 December 2011. Our effective income tax expenses were slightly higher than the corporate income tax rate of the PRC of 25% mainly due to the non-deductable expenses incurred for the year. The decrease in effective income tax rate for the year ended 31 December 2011 was in line with the decrease in non-deductible expenses. Please refer to note 11 “Income tax expenses” section of the Accountant’s Report in Appendix I to this prospectus for further details.

– 307 – FINANCIAL INFORMATION

Loss from discontinued operations. For the year ended 31 December 2011, the loss from discontinued operations was approximately RMB1.2 million, a decrease of approximately RMB0.8 million, or approximately 39.5%, from approximately RMB1.9 million for the year ended 31 December 2010. The decrease in loss was mainly due to the disposal of Guangdong Yihua Management on 12 October 2010 and the decrease in loss from Shaoguan Central Management.

Profit for the year. For the year ended 31 December 2011, our profit for the year was approximately RMB49.2 million, an increase of approximately RMB18.6 million, or approximately 61.0%, from approximately RMB30.5 million for the year ended 31 December 2010. This increase was primarily due to the increases in revenue of approximately RMB110.0 million in the corresponding year was higher than the increase in our purchase of and changes in inventories of approximately RMB38.9 million and other operating expenses of approximately RMB18.1 million.

Net profit margin and other ratios. Our net profit margin before interest and tax and net profit margin increase to approximately 9.6% and approximately 6.9% for the year ended 31 December 2011 from approximately 7.5% and approximately 5.0% respectively for the year ended 31 December 2010. The increase was mainly attributable to the increase of commission income from concessionaire sales. For the year ended 31 December 2011, our revenue from concessionaire sales was approximately RMB189.2 million, an increase of approximately RMB42.8 million, or approximately 29.2%, from approximately RMB146.5 million for the year ended 31 December 2010. Also, commission income from concessionaire sales as a percentage of total revenue slightly increased from approximately 24.2% for the year ended 31 December 2010 to approximately 26.5% for the year ended 31 December 2011. As revenue from concessionaire sales did not involve purchase of inventory, the increase of commission income from concessionaire sales as a percentage of total revenue had led to a higher net profit margin.

– 308 – FINANCIAL INFORMATION

COMBINEDBALANCESHEETS

The following is the combined balance sheets of our Group as at 31 December 2010, 2011 and 2012 and 31 May 2013.

As at As at 31 December 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

ASSETS Non-current assets Property,plantandequipment 112,994 112,644 118,730 142,976 Computer software 124 101 79 80 Deferred income tax assets 2,772 2,027 1,676 1,772 Deferred assets 1,497 1,451 953 1,325 Long-term pre-paid rent and rental deposits 4,754 5,109 18,703 23,530

122,141 121,332 140,141 169,683

Current assets Inventories 79,688 100,115 93,778 79,430 Trade receivables, prepayments and other receivables 66,707 58,144 71,979 52,921 Amountsduefromrelatedparties 84,910 124,976 142,002 161,740 Restricted cash 4,002 14,160 15,097 15,470 Cash and cash equivalents 138,717 184,458 186,435 99,801

344,024 481,853 509,291 409,362 Assets of disposal group classified as held for sale – 6,068 5,375 5,218

344,024 487,921 514,666 414,580

Total assets 496,165 609,253 654,807 584,263

EQUITY Equity attributable to equity holders of the Company Combined capital 10,000 10,000 10,000 10,000 Other reserves 6,278 8,511 12,773 14,764 (Accumulated losses)/retained earnings (16,215) 30,741 69,044 79,357

63 49,252 91,817 104,121

Non-controlling interests (4,184) (4,206) (3,128) (1,870)

Total equity (4,121) 45,046 88,689 102,251

– 309 – FINANCIAL INFORMATION

As at As at 31 December 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

LIABILITIES Non-current liabilities Borrowings – 20,000 – 20,000 Deferred income tax liabilities 3,583 3,409 7,041 6,390 Other payables 1,188 1,799 2,502 4,467

4,771 25,208 9,543 30,857

Current liabilities Trade and other payables 243,320 298,947 287,119 226,759 Amountsduetorelatedparties 40,664 4,548 12,655 8,648 Deferred revenue 2,702 2,915 3,576 4,156 Advances from customers 178,855 164,239 231,238 208,433 Current income tax liabilities 9,974 15,590 4,356 2,526 Borrowings 20,000 50,000 15,000 –

495,515 536,239 553,944 450,522 Liabilities of disposal group classified as held for sale – 2,760 2,631 633

495,515 538,999 556,575 451,155

Total liabilities 500,286 564,207 566,118 482,012

Total equity and liabilities 496,165 609,253 654,807 584,263

Net current liabilities (121,491) (51,078) (41,909) (36,575)

Total assets less current liabilities 650 70,254 98,232 133,108

Description of certain items in the combined balance sheets

Our property, plant and equipment consisted of leasehold improvement, buildings, office equipment, vehicles and other equipments. As at 31 December 2010, 2011 and 2012 and 31 May 2013, the net book values of our Group’s property, plant and equipment were approximately RMB113.0 million, approximately RMB112.6 million, approximately RMB118.7 million and approximately RMB143.0 million respectively.

– 310 – FINANCIAL INFORMATION

The balance of computer software mainly represented the computer software purchased for normal operating uses. As at 31 December 2010, 2011 and 2012 and 31 May 2013, we had computer software of approximately RMB124,000, approximately RMB101,000, approximately RMB79,000 and approximately RMB80,000 respectively.

The assets and liabilities related to Guangdong Yihua Management, formerly a 50% owned subsidiary, have been presented as held for sale. On 12 October 2010, our Group transferred its entire interests in Guangdong Yihua Management to Yihua Investment, a company controlled by our Controlling Shareholder. As at 12 October 2010, net assets of Guangdong Yihua Management were approximately RMB4.1 million.

The assets and liabilities related to Shaoguan Central Management, formerly a 49% owned subsidiary, have been presented as held for sale as at 31 December 2011 following the approval of management and shareholders on our Group’s reorganisation plan in 2011. As at 31 May 2013, assets and liabilities of Shaoguan Central Management classified as held for sale were approximately RMB5.2 million and approximately RMB0.6 million respectively.

All restricted cash was denominated in Renminbi and pledged for the issuance of bank notes. As at 31 December 2010, 2011 and 2012 and 31 May 2013, we had restricted cash of approximately RMB4.0 million, approximately RMB14.2 million, approximately RMB15.1 million and approximately RMB15.5 million respectively.

As at 31 December 2010, 2011 and 2012 and 31 May 2013, the long-term pre-paid rent and rental deposit were approximately RMB4.8 million, approximately RMB5.1 million, approximately RMB18.7 million and approximately RMB23.5 million respectively. The fluctuation between 2012 and 2013 was mainly due to the long-term pre-paid rent paid for the new stores. As at 31 May 2013, we had long-term pre-paid rent and rental deposit at Tai’an store of approximately RMB12.0 million.

(Accumulated losses)/retained earnings

The accumulated losses/retained earnings attributable to equity holders of our Company during the Track Record Period are as follows:

As at 1 January 31 December 31 December 31 December 31 May 2010 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

(Accumulated losses)/retained earnings (46,538) (16,215) 30,741 69,044 79,357

– 311 – FINANCIAL INFORMATION

Our Group had accumulated losses of approximately RMB46.5 million as at 1 January 2010, which was mainly due to the historical accumulated losses of our Zhongshan store, our main store. Zhongshan store commenced operation in May 1995 and was operated by Guangdong Yihua Department Store (whose shareholders were collectively-owned enterprises at the time). At that time, the surrounding area of Zhongshan store was newly developed and therefore comparatively sparsely populated. Zhongshan store continued to expand, and electrical appliance retail business and supermarket business were commenced in September 1997 and in July 2000 respectively. During the expansion, capital expenditure had been incurred. Zhongshan store underwent series of reforms since 2000 which led to privatisation of the relevant assets and shareholding in 2004. Since then, Zhongshan store turned around from a loss making situation to a profit-making company in 2005.

As time goes by, our management team has established better ties with the local community, better merchandising sourcing, better suppliers and concessionaires management, better understanding on customers trends so as to expand the business according to spending behaviours of the local community. Coupled with the growing population in the surrounding area of Zhongshan store, increasing urbanisation and disposable income growth in Zhongshan city, Guangdong Province, the PRC, the financial result of Zhongshan store and the Guangdong Yihua Department Store continued to improve.

For Guzhen Yihua Department Store, Qingyuan Yihua Department Store, Jiangmen Yihua Department Store and Shaoguan Yihua Department Store, the turnaround time from loss making situation to profit earning ranges from approximately two to four years. When setting up new stores, start-up costs are incurred such as leasing of new properties, renovation, hiring and training new staff, purchase of new furniture and fittings, advertising and promotion etc. Furthermore, new stores will normally need to adjust its product mix and merchandise plan over time in order to suit the local customers demand. As per the Group’s unaudited combined management accounts, five new stores set up in 2013 had contributed an aggregated net loss of approximately RMB13.0 million, charged to the combined statement of comprehensive income for the eight months ended 31 August 2013.

During the Track Record Period, accumulated losses of our Group continued to decrease and turned around from accumulated losses of approximately RMB16.2 million as at 31 December 2010 to retained earnings of approximately RMB30.7 million, approximately RMB69.0 million and approximately RMB79.4 million respectively as at 31 December 2011 and 2012 and 31 May 2013. Accumulated losses of our Group had led to net liabilities position for our Group as at 31 December 2010.

– 312 – FINANCIAL INFORMATION

Net current liabilities and working capital sufficiency

The following table sets forth our current assets, current liabilities and net current liabilities as at the dates indicated.

As at As at 30 As at 31 December 31 May September 2010 2011 2012 2013 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)(1)

Current assets Inventories 79,688 100,115 93,778 79,430 100,446 Trade receivables, prepayments and other receivables 66,707 58,144 71,979 52,921 82,732 Amounts due from related parties 84,910 124,976 142,002 161,740 146,478 Restricted cash 4,002 14,160 15,097 15,470 25,012 Cash and cash equivalents 138,717 184,458 186,435 99,801 110,646 Assets of disposal group classified as held for sale – 6,068 5,375 5,218 2,051

Total current assets 374,024 487,921 514,666 414,580 467,365

Current liabilities Tradeandotherpayables 243,320 298,947 287,119 226,759 237,318 Amounts due to related parties 40,664 4,548 12,655 8,648 1,035 Deferred revenue 2,702 2,915 3,576 4,156 1,662 Advancesfromcustomers 178,855 164,239 231,238 208,433 221,835 Current income tax liabilities 9,974 15,590 4,356 2,526 684 Borrowings 20,000 50,000 15,000 – – Liabilities of disposal group classified as held for sale – 2,760 2,631 633 732

Total current liabilities 495,515 538,999 556,575 451,155 463,266

Net current (liabilities)/ assets (121,491) (51,078) (41,909) (36,575) 4,099

Note: (1) The amount was extracted from our Group’s unaudited combined management accounts as at 30 September 2013.

– 313 – FINANCIAL INFORMATION

We had net current liabilities of approximately RMB121.5 million, approximately RMB51.1 million, approximately RMB41.9 million and approximately RMB36.6 million as at 31 December 2010, 2011 and 2012 and 31 May 2013 respectively, due to current liabilities exceeding current assets as at the respective year ends.

Our net current liabilities position as at 31 December 2010, 2011 and 2012 and 31 May 2013 was primarily attributable to business nature of our department store operation. Our business nature is such that majority of our liabilities are short term, in particular our (1) trade and other payables; and (2) advances received from customers mainly in connection with Consumption Cards. Coupled with our (i) comparatively lower level of inventories, as we only carry inventories for our direct sales and not for our concessionaire sales; and (ii) trade receivables of our Group is relatively small compared to our sales, as we are primarily a cash-based business, the combination of which resulted in our net current liabilities position as at 31 December 2010, 2011 and 2012 and 31 May 2013.

In view of the business nature of department store operation, we collect gross proceeds from the sales of merchandises at our cashier desks of our stores and generally payments are made to direct suppliers and concessionaires later. Cash received will be utilised for expansion of current stores, establishment of new stores, building up brand name through advertising and promotion activities and other operating needs so as to create strategic value and improve profitability for the long run.

As shown in the table below, the aggregate of trade payables and payables to concessionaires and leasees amounted to approximately RMB160.3 million, approximately RMB207.9 million, approximately RMB192.6 million and approximately RMB154.9 million respectively as at 31 December 2010, 2011 and 2012 and 31 May 2013, which represented approximately 32.4%, approximately 38.6%, approximately 34.6% and approximately 34.3% of our current liabilities. Payments are generally made to our direct suppliers and concessionaires after the credit period or at the agreed intervals for payment.

– 314 – FINANCIAL INFORMATION

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 % RMB’000 % RMB’000 % RMB’000 %

Currentliabilities 495,515 100.0 538,999 100.0 556,575 100.0 451,155 100.0

(1)Tradepayables 69,163 14.0 93,213 17.3 69,812 12.5 59,401 13.2 (2) Payables to concessionaires and lessees 91,089 18.4 114,639 21.3 122,828 22.1 95,513 21.1

Subtotal: 160,252 32.4 207,852 38.6 192,640 34.6 154,914 34.3 (3) Advances from customers 178,855 36.1 164,239 30.5 231,238 41.5 208,433 46.2

Total: 339,107 68.5 372,091 69.1 423,878 76.1 363,347 80.5

Advances from customers are primarily relating to the unused value of our Consumption Cards. Advances from customers represent approximately 36.1%, approximately 30.5%, approximately 41.5% and approximately 46.2% of our current liabilities as at 31 December 2010, 2011 and 2012 and 31 May 2013 respectively.

Consumption Card is merely a payment method and not the determinant of our sales. Customers may use other payment methods such as cash or credit cards in the absence of Consumption Card. During the Track Record Period, Gross Sale Proceeds received by the method of Consumption Cards represented approximately 17.9%, approximately 21.6%, approximately 18.4% and approximately 20.3% respectively of the total Gross Sale Proceeds received. As mentioned in the section headed “Business- Store management- Collection” of this prospectus, most of the Gross Sale Proceeds were received by credit cards and debit cards, followed by cash and therefore, our Group did not rely on Consumption Cards for our sales.

The major cash inflow of the Group was Gross Sale Proceeds in the form of cash, credit cards and debit cards of approximately RMB1,261.2 million, approximately RMB1,472.1 million, approximately RMB1,534.6 million and approximately RMB707.8 million respectively for the years ended 31 December 2010, 2011 and 2012 and for the five months ended 31 May 2013. Meanwhile, our major cash outflow for daily operations was, among others, purchases of and changes in inventories of approximately RMB365.4 million, approximately RMB404.3 million, approximately RMB352.2 million and approximately RMB152.5 million for the years ended 31 December 2010, 2011 and 2012 and for the five months ended 31 May 2013. Comparing the said major cash inflow and the said cash outflow, the net operating cash flow movements due to the fluctuation of the balance of unused value of our Consumption Cards (the “net cash flow movement in Consumption Cards”) during the Track Record Period as set out in the table below was relatively small.

– 315 – FINANCIAL INFORMATION

Five months Year ended 31 December ended 31 May 2010 2011 2012 2013 RMB’ RMB’ RMB’ RMB’ million million million million

Net cash flow movement in Consumption Cards 43.6 (11.3) 63.3 (14.9)

Cash generated from operations excluding the net cash flow movement in Consumption Cards 43.6 104.1 62.9 5.3

During the Track Record Period, the net cash flow movement in Consumption Cards fluctuated, as it was dependent upon the amount of Consumption Cards issued and used during the year/period. For the year ended 31 December 2011 and the five months ended 31 May 2013, there was approximately RMB11.3 million and approximately RMB14.9 million respectively of net cash used in Consumption Cards, as there was greater amount of Consumption Cards used than Consumption Cards issued.

Given that (i) the Gross Sale Proceeds were mostly in the form of cash, credit cards and debit cards rather than Consumption Cards; (ii) the net cash flow movement in Consumption Cards fluctuated during the Track Record Period; and (iii) we had higher amount of cash and cash equivalents, inventory balances and amount due from related parties of non-trade nature of approximately RMB319.4 million than the Consumption Cards payable of RMB201.7 million as at 31 May 2013, and the additional undrawn banking facilities granted in 2013 further enhanced our working capital sufficiency, our Directors are of the view that (i) we did not and will not rely on cash flow from our Consumption Cards to finance the operation of our Group; and (ii) our business operation and our cash position will not have material adverse effect in the event that we do not issue anymore Consumption Cards.

Our net current liabilities decreased from approximately RMB121.5 million as at 31 December 2010 to approximately RMB51.1 million as at 31 December 2011. Such decrease was mainly due to (i) the increase in cash level of our Group, as there was no material capital expenditure during the year; and (ii) the increase of inventories due to preparation for festive sales for the Chinese New Year in late January 2012. Our net current liabilities further decreased to approximately RMB41.9 million as at 31 December 2012, which was primarily due to the increase in other receivables and cash level of our Group. Our net current liabilities continued to decrease slightly to approximately RMB36.6 million as at 31 May 2013. The working capital position of our Group had improved during the Track Record Period as our net current liabilities continued to decrease. Furthermore, the financial position of our Group had also improved from a net liabilities position in 2010 to a net assets position in 2011. Our net asset value continued to increase from approximately RMB45.0 million as at 31 December 2011 to approximately RMB88.7 million and approximately RMB102.3 million respectively as at 31 December 2012 and 31 May 2013.

– 316 – FINANCIAL INFORMATION

As at As at 31 December 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Current assets 374,024 487,921 514,666 414,580 Current liabilities (495,515) (538,999) (556,575) (451,155)

Net current liabilities (121,491) (51,078) (41,909) (36,575) Non-current assets 122,141 121,332 140,141 169,683 Non-current liabilities (4,771) (25,208) (9,543) (30,857)

Net (liabilities)/assets (4,121) 45,046 88,689 102,251

Our Directors are of the view that having net current liabilities position is not uncommon for department store business and we may continue to maintain a net current liabilities position after Listing.

Our Group had effectively managed its cash flow as evidenced by having net cash generated from operating activities, which was approximately RMB79.8 million, approximately RMB79.9 million, approximately RMB104.5 million respectively for the years ended 31 December 2010, 2011 and 2012. Our Group’s positive net cash generated from operating activities showed that our Group was able to generate sufficient working capital to sustain its daily operations. Our cash and cash equivalents increased from approximately RMB138.7 million as at 31 December 2010 to approximately RMB184.5 million as at 31 December 2011 and further increased to approximately RMB186.4 million as at 31 December 2012. The net increase in cash and cash equivalents of approximately RMB51.3 million, approximately RMB47.0 million, approximately RMB3.0 million for years ended 31 December 2010, 2011 and 2012 reflected that our Group improved its cash position and is ready to implement its expansion plans. For the five months ended 31 May 2013, we had recorded net cash used in continuing operations of approximately RMB7.9 million. This was mainly due to the following reasons:

(i) a lower profit before income tax of approximately RMB13.7 million, which was from approximately RMB19.5 million for the five months ended 31 May 2013 compared to approximately RMB33.2 million for the five months ended 31 May 2012;

(ii) decrease in trade and other payables of approximately RMB60.4 million coupled with a decrease in trade receivables, prepayments and other receivables of approximately RMB19.1 million between 31 December 2012 and 31 May 2013 had led to a combined effect of reducing our cash balance as at 31 May 2013. Our Directors considered such decrease was a normal trend for us given the seasonality effect where end of May 2013 was not a busy period for our Group as compared to year end where we typically record a high turnover due to long holidays and festivals;

– 317 – FINANCIAL INFORMATION

(iii) increase in long-term pre-paid rent and rental deposits of approximately RMB4.8 million between 31 December 2012 and 31 May 2013, which were mainly for the new leases of our new stores which commenced business in the first half year of 2013; and

(iv) decrease in advance from customers of approximately RMB22.8 million between 31 December 2012 and 31 May 2013.

Besides, our property, plant and equipment had increased by approximately RMB24.2 million between 31 December 2012 and 31 May 2013, which were mainly for the use of our new stores. As at 31 May 2013, our cash and cash equivalent had decreased to approximately RMB99.8 million.

Notwithstanding having net current liabilities position, our Directors believe that it is essential to manage our Group’s cash flow effectively so as to ensure fund sufficiency and adequate liquidity for our business operations. Our Group manages our overall cash flow by having:

It mainly consists of the revenue and – (ڌৌਕཫၑܓi) Annual financial budget (ϋ) expenditure budget of the financial year in conformity with corporate goals set by the top management. Annual operational budget is compiled by finance department of our Group and applies to each individual store;

It contains mainly a prediction of future cash – (ڌݴඎږii) Cash flow budget (ཫၑତ) receipts and expenditures during the financial year and is compiled by finance department of our Group. The cash flow budget assists the management of the main store as well as other individual stores to monitor our Group’s operations so as to ensure sufficient cash inflow is generated to cover expected expenses and future expansion; and

(iii) Liquidity position analysis – Comparison between actual financial position and the budget is performed in a monthly manner, among others, with details of the monthly amount of cash collection and payout of each store. This analysis is compiled by each store and submitted to the finance department of our Group and our executive Directors for review and decision on whether follow-up action needs to be taken at least on a monthly basis. Liquidity position therefore has been monitored in a timely manner. We placed extra cash in bank deposits and do not engage any derivative activities during the Track Record Period and up to the Latest Practicable Date.

We are able to obtain bank loans and facilities in view of our good credit history and our strong operating cash inflows during the Track Record Period. We did not encounter any difficulty in raising funds during the Track Record Period and up to the Latest Practicable Date.

– 318 – FINANCIAL INFORMATION

We strive to manage our cash flow to ensure that we have sufficient funds to meet our existing and future cash requirements. We expect to fund our working capital requirements in the future by (i) operating cash flow; and (ii) net proceeds from the Share Offer. We may consider, if necessary, to obtain borrowings to fund our working capital requirement, which are mainly for our business expansion and opening of new stores.

We also maintain a prudent capital expenditure policy under our internal control policies and procedures, which is implemented according to our business plan and cash flow situation.

Please see the paragraphs headed “Indebtedness, capital commitments and operating leases commitments/arrangements”, “Inventory analysis” and “Analysis of trade receivables, trade payables and other items in the combined balance sheets” in this section to this prospectus for more discussion on major items in the combined balance sheets.

Working capital sufficiency

Our Directors confirm that we have sufficient working capital for our requirements for at least the next 12 months from the date of this prospectus, taking into consideration our unutilised bank facilities, ability to manage our operating cash flow and net proceeds from the Share Offer. Further, we plan to use a portion of net proceeds from the Share Offer as working capital, which we expect, together with our operating cash flow, to be adequate to support our cash outflow, including planned capital expenditures.

LIQUIDITYANDCAPITALRESOURCES

Our principal uses of cash have been, and are expected to continue to be, operational costs, capital investments and developments of our department stores and community stores. Our Group’s cash and cash equivalent were denominated in Renminbi. The balances are deposited with banks in the PRC.

– 319 – FINANCIAL INFORMATION

Cash flow

Five months ended Year ended 31 December 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Net cash generated from/(used in) operating activities 79,829 79,940 104,298 (18,551) Net cash generated from/(used in) investing activities 8,040 (19,680) (49,049) (70,983) Net cash (used in)/generated fromfinancingactivities (36,524) (13,261) (52,220) 3,305 Net increase/(decrease) in cashandcashequivalents 51,345 46,999 3,029 (86,229) Cash and cash equivalents atendoftheyear/period 138,717 184,458 186,435 99,801

Net cash generated from/(used in) operating activities

For the five months ended 31 May 2013, we had net cash used in operating activities in the amount of approximately RMB18.6 million. This amount primarily reflected our profit before tax excluding discontinued operations of approximately RMB19.5 million, as adjusted by profit and loss items with non-operating cash effect of approximately RMB8.3 million and the following factors: (i) a decrease in trade and other receivables, amounts due from related parties, long-term pre-paid rent and rental deposit in the amount of approximately RMB34.9 million; (ii) a decrease in inventory in the amount of approximately RMB14.3 million; (iii) an increase in deferred assets in the amount of approximately RMB372,000; (iv) a decrease in trade and other payables, amounts due to related parties, deferred revenue and advances from customers in the amount of approximately RMB84.2 million; (v) an increase in restricted cash in the amount of approximately RMB373,000; and (vi) net interest and income tax paid in the amount of approximately RMB9.0 million. Also, for the five months ended 31 May 2013, we had net cash used in discontinued operations in the amount of approximately RMB1.6 million.

For the year ended 31 December 2012, we had net cash generated from operating activities in the amount of approximately RMB104.3 million. This amount primarily reflected our profit before tax excluding discontinued operations of approximately RMB59.5 million, as adjusted by profit and loss items with non-operating cash effect of approximately RMB16.4 million and the following factors: (i) an increase in trade and other receivables, amounts due from related parties, long-term pre-paid rent and rental deposit in the amount of approximately RMB19.1 million; (ii) a decrease in inventory in the amount of approximately RMB6.3 million;

– 320 – FINANCIAL INFORMATION

(iii) a decrease in deferred assets in the amount of approximately RMB498,000; (iv) an increase in trade and other payables, amounts due to related parties, deferred revenue and advances from customers in the amount of approximately RMB61.9 million; (v) an increase in restricted cash in the amount of approximately RMB937,000; and (vi) net interest and income tax paid in the amount of approximately RMB21.9 million. Also, for the year ended 31 December 2012, we had net cash generated from discontinued operations in the amount of approximately RMB1.5 million.

For the year ended 31 December 2011, we had net cash generated from operating activities in the amount of approximately RMB79.9 million. This amount primarily reflected our profit before tax excluding discontinued operations of approximately RMB68.4 million, as adjusted by profit and loss items with non-operating cash effect of approximately RMB15.9 million and the following factors: (i) an increase in trade and other receivables, amounts due from related parties, long-term pre-paid rent and rental deposit in the amount of approximately RMB32.8 million; (ii) an increase in inventory in the amount of approximately RMB20.4 million; (iii) a decrease in deferred assets in the amount of approximately RMB46,000; (iv) an increase in trade and other payables, amounts due to related parties, deferred revenue and advances from customers in the amount of approximately RMB71.2 million; (v) an increase in restricted cash in the amount of approximately RMB10.2 million; and (vi) net interest and income tax paid in the amount of approximately RMB12.8 million. Also, for the year ended 31 December 2011, we had net cash generated from discontinued operations in the amount of approximately RMB0.5 million.

For the year ended 31 December 2010, we had net cash generated from operating activities in the amount of approximately RMB79.8 million. This amount primarily reflected our profit before tax excluding discontinued operations of approximately RMB44.7 million, as adjusted by profit and loss items with non-operating cash effect of approximately RMB14.7 million and the following factors: (i) an increase in trade and other receivables, amounts due from related parties, long-term pre-paid rent and rental deposit in the amount of approximately RMB15.4 million; (ii) an increase in inventory in the amount of approximately RMB2.4 million; (iii) a decrease in deferred assets in the amount of approximately RMB0.6 million; (iv) an increase in trade and other payables, amounts due to related parties, deferred revenue and advances from customers in the amount of approximately RMB49.1 million; (v) an increase in restricted cash in the amount of approximately RMB2.5 million; and (vi) net interest and income tax paid in the amount of approximately RMB7.3 million. Also, for the year ended 31 December 2010, we had net cash used in discontinued operations in the amount of approximately RMB1.6 million.

Net cash generated from/(used in) investing activities

For the five months ended 31 May 2013, we had net cash outflow from investing activities in the amount of approximately RMB71.0 million, which was mainly the loans granted to a related company and purchase of property, plant and equipment and computer software of approximately RMB61.3 million and approximately RMB32.8 million respectively. The outflow partially offset by the loans repayments received from related companies and proceeds from sale of property, plant and equipment of approximately RMB23.0 million and approximately RMB26,000 respectively.

– 321 – FINANCIAL INFORMATION

For the year ended 31 December 2012, we had net cash outflow from investing activities in the amount of approximately RMB49.0 million, which mainly represents the loans granted to a related company and purchase of property, plant and equipment and computer software of approximately RMB110.0 million and approximately RMB20.0 million respectively. The outflow partially offset by the loans repayments received from related companies of approximately RMB81.0 million.

For the year ended 31 December 2011, we had net cash outflow from investing activities in the amount of approximately RMB19.7 million, which mainly represents the loans granted to a related company and purchase of property, plant and equipment and computer software of approximately RMB52.1 million and approximately RMB20.5 million respectively. The outflow partially offset by the loans repayments received from related companies, loans and advances repayments received from third parties and proceeds from sale of property, plant and equipment of approximately RMB33.0 million, approximately RMB19.5 million and approximately RMB469,000 respectively.

For the year ended 31 December 2010, we had net cash inflow from investing activities in the amount of approximately RMB8.0 million, which mainly represents the loans repayments received from related companies, loans repayments received from third parties, distribution of a subsidiary and proceeds from disposal of property, plant and equipment of approximately RMB81.4 million, approximately RMB1.0 million, approximately RMB1.2 million and approximately RMB33,000 respectively. The inflow partially offset by the loans granted to related companies and purchase of property, plant and equipment and computer software of approximately RMB48.9 million and approximately RMB26.7 million respectively.

Net cash (used in)/generated from financing activities

For the five months ended 31 May 2013, we had net cash inflow from financing activities in the amount of approximately RMB3.3 million, which was mainly proceeds from borrowings of approximately RMB20.0 million. The inflow partially offset by the repayments of borrowings, loans repayment to related companies and listing expenses of approximately RMB15.0 million, approximately RMB450,000 and approximately RMB1.2 million respectively.

For the year ended 31 December 2012, we had net cash outflow from financing activities in the amount of approximately RMB52.2 million, which mainly represents the repayments of borrowings, loans repayment to related companies, loans repayments to third parties and non-controlling interest and listing expenses of approximately RMB55.0 million, approximately RMB1.0 million, approximately RMB1.0 million and approximately RMB220,000 respectively. The outflow partially offset by loans received from third parties of approximately RMB5.0 million.

For the year ended 31 December 2011, we had net cash outflow from financing activities in the amount of approximately RMB13.3 million, which mainly represents the repayments of borrowings, loans repayments to related companies and loans and advances repayments to third parties and non-controlling interest of approximately RMB35.0 million, approximately RMB47.0 million and approximately RMB24.3 million respectively. The outflow partially offset by the proceeds from borrowings and loan received from related companies of approximately RMB85.0 million and approximately RMB8.1 million respectively.

– 322 – FINANCIAL INFORMATION

For the year ended 31 December 2010, we had net cash outflow from financing activities in the amount of approximately RMB36.5 million, which mainly represents the repayments of borrowings, loans repayments to related companies and loans repayments to third parties and non-controlling interest of approximately RMB130.0 million, approximately RMB20.8 million and approximately RMB5.5 million respectively. The outflow partially offset by the proceeds from borrowings, loan received from related companies, loans received from third parties and capital injection of approximately RMB55.0 million, approximately RMB58.3 million, approximately RMB5.5 million and approximately RMB1.0 million respectively.

INDEBTEDNESS,CAPITALCOMMITMENTSANDOPERATINGLEASES COMMITMENTS/ARRANGEMENTS

Indebtedness

Our borrowings consist of short-term secured borrowings and long-term unsecured borrowings from commercial banks in the PRC, employees and an Independent Third Party. The table below set forth our borrowings as at the dates indicated.

As at As at As at 31 December 31 May 30 September 2010 2011 2012 2013 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note)

Non-current Long-term bank borrowings, secured – – – 20,000 – Long-term bank borrowings, unsecured – 20,000 – – 20,000

Current Short-term bank borrowings,secured 20,000 50,000 – – − Borrowings from employees 1,450 – – – − Long-term bank borrowings, due within one year, unsecured – – 15,000 – − Borrowings from an Independent Third Party − − 5,000 – −

21,450 70,000 20,000 20,000 20,000

Note: Based on the Group’s unaudited combined management accounts as at 30 September 2013.

– 323 – FINANCIAL INFORMATION

During the Track Record Period, our total borrowings increased from approximately RMB21.5 million as at 31 December 2010 to approximately RMB70.0 million as at 31 December 2011, primarily due to (i) balancing short term fund and long term fund as at the year end; and (ii) an increase in short-term bank borrowings of RMB50 million in 2011, which had subsequently repaid in 2012. We repaid the outstanding loans from employees in full with internally generated funds in 2011. The total borrowings further decreased to approximately RMB20.0 million as at 31 December 2012 due to the repayment of loans and remained in a similar level as at 31 May 2013. All of the Group’s borrowings during the Track Record Period were denominated in RMB.

The effective interest rates of the Group’s total borrowings are as follows:

As at As at 30 September As at 31 December 31 May (Note) 2010 2011 2012 2013 2013

Long-term bank borrowings, secured – – – 7.07% – Long-term bank borrowings, unsecured – 6.44% – – 7.07% Short-term bank borrowings, secured 5.56% 6.69% – – – Long-term bank borrowings due within one year, unsecured – – 7.32% – – Borrowings from an Independent Third Party − − 11.0% – – Borrowings from employees 12.0% − − – –

Note: Based on the Company’s unaudited combined management accounts for this period.

Our gearing ratio, defined as total debts, including payables incurred not in the ordinary course of business, divided by total equity was approximately 202.1%, approximately 53.1% and approximately 49.5% as at 31 December 2011 and 2012 and 31 May 2013 respectively. Our gearing ratio was high as at 31 December 2011 primarily due to the extra borrowings obtained from bank for approximately RMB50.0 million in 2011. Our gearing ratio decreased to approximately 53.1% as at 31 December 2012 mainly due to the decrease in the loan balance and the increase of our total equity. As at 31 December 2012, our total equity amounted to approximately RMB88.7 million, an increase of approximately RMB43.6 million, or

– 324 – FINANCIAL INFORMATION approximately 96.9%, from approximately RMB45.0 million as at 31 December 2011. Our gearing ratio further decreased to approximately 49.5% as at 31 May 2013 due to the increase of our total equity to approximately RMB102.3 million as at 31 May 2013.

As at 30 September 2013, being the latest practicable date for determining indebtedness, other than the loan of approximately RMB20 million as disclosed above, we had no other borrowings.

Total unutilised banking facilities in the amount of approximately RMB40 million, details of which are as follows:

Bank A uncommitted bank facility Bank B committed bank facility

Term 8June2013to7June2014 1March2013to31March2014 (subject to extension by mutual agreement between the parties)

Details of A separate loan agreement will be A separate loan agreement will be loan entered into for amount drawn, entered into for amount drawn, interest and repayment period. interest and repayment period.

Credit RMB40 million RMB40 million (which includes limit amount previously loaned from Bank B and fully utilised as at the Latest Practicable Date)

Security Guarantee by Guzhen Yihua None Department Store and Jiangmen Yihua Department Store

Material Material terms generally found in Material terms generally found in terms bank facilities including but not bank facilities including but not limited to (i) undertaking to limited to (i) undertaking to promptly inform Bank A of certain promptly inform Bank B of certain events (e.g. reorganisation) which events (e.g. reorganisation) which may have a material impact and may affect its ability to perform seek bank consent prior to under the agreement; (ii) deemed effecting such transaction; and (ii) breach if the aforesaid events have, right to seek additional guarantee in the opinion of the bank, a or demand repayment in case of material adverse affect on the such events. financial conditions; and (iii) right to terminate the facility or reduce the credit limit in case of breach of the agreement.

Note: This banking facility superseded another banking facility provided by the same bank which required a guarantee from a related party.

– 325 – FINANCIAL INFORMATION

We did not experience withdrawal of any banking facilities, early payment of outstanding loans required by banks, requests by banks to increase the amount of collateral for secured borrowings subsequent to 31 May 2013 and up to the Latest Practicable Date. The Directors are also not aware of any breaches of the financial covenants in bank facilities or default on any loan repayments during the Track Record Period and up to the Latest Practicable Date.

As of the date of this prospectus, we do not intend to incur any material debt through external debt financing that is not in the ordinarily course of business in the foreseeable future after Listing.

General

Except as otherwise disclosed in the above tables, as at 30 September 2013, being the latest practicable date for determining our indebtedness, we did not have any material contingent liability or guarantees. Save as disclosed above, as at 30 September 2013, being the latest practicable date for determining indebtedness, we did not have any outstanding loan capital issued or agreed to be issued, bank overdrafts, loans, debt securities, borrowings or other similar indebtedness, liabilities under acceptance (other than normal trade bills) or acceptance credits, debentures, mortgages, charges, finance leases, hire purchase commitments, guarantees or other material contingent liabilities.

Capital commitments

The following table summarises our capital expenditure contracted as at the indicated dates:

As at As at 31 December 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Property,plantandequipment 507 137 10,669 33,340

Operating lease commitments/arrangements

During the Track Record Period, we leased certain of our stores, logistics centre, staff quarters and office premises under non-cancellable operating lease agreements. Our future aggregate minimum lease payments under non-cancellable operating leases as at the dates indicated are set out below.

– 326 – FINANCIAL INFORMATION

As at As at 31 December 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Not later than 1 year 549 754 1,205 15,845 Later than 1 year and not later than 5 years 3,431 3,280 8,630 23,754 Later than 5 years 7,023 6,420 56,772 48,250

11,003 10,454 66,607 87,849

CAPITAL EXPENDITURES

Our capital expenditure requirements mainly relate to expansion of our store network and addition in our property, plants and equipments, including improvements and constructions for our stores. For each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013, the addition in property, plant and equipments was approximately RMB26.6 million, approximately RMB20.6 million, approximately RMB23.3 million and approximately RMB32.7 million respectively.

As at the Latest Practicable Date, we expected to start our operation in two new stores, namely Zhenjiang store and Enping store in 2014 and further enhance the hardware in our existing stores. We expect to incur substantial capital expenditures of approximately RMB31.2 million and RMB70.0 million for the years ending 31 December 2013 and 2014 respectively in connection with this plan. We intend to apply the net proceeds after listing expenses, approximately HK$76.0 million (based on the mid-point of the indicative Offer Price range and assuming no exercise of the Adjustment Option) from the Share Offer to finance part of the capital expenditures of this plan. Please refer to section headed “Future plans and use of proceeds” of this prospectus for further details.

Other than as required by law and the Listing Rules, we do not undertake any obligation to publish updates of our capital expenditures plans.

We expect to finance our capital expenditures through a combination of operating cash flows and the proceeds from the Share Offer. Capital requirement relating to our expansion plan may vary significantly based on market conditions. Our ability to satisfy our capital expenditure requirements may be affected by our financial condition and results of operations and the liquidity of the international and domestic financial markets. We cannot assure you that we will be able to complete our expansion plan on terms acceptable to us or at all or that we will have sufficient financial resources to complete our expansions.

– 327 – FINANCIAL INFORMATION

INVENTORY ANALYSIS

Our inventories primarily consist of store merchandise, which we purchased from our suppliers and sold through the direct sales method in the supermarket segment and electrical appliances segment of our department stores. For most of the merchandise offered in our department store segment, such as watches, jewelries, cosmetics, handbags, leather goods, and children’s products, clothing, shoes, textiles, sports wear and beddings, are primarily sold through concessionaire arrangements. The concessionaires would take their own inventory risk and those merchandises owned by them will not count in our inventory. As at 31 December 2010, 2011 and 2012 and 31 May 2013, we had inventories of approximately RMB79.7 million, approximately RMB100.1 million, approximately RMB93.8 million and approximately RMB79.4 million respectively. The increase in the inventory balance from approximately RMB79.7 million as at 31 December 2010 to approximately RMB100.1 million as at 31 December 2011 primarily due to the increased merchandise purchased and held for the anticipation of festive sales for the Chinese New Year in late January 2012. The inventory balance decreased to approximately RMB93.8 million as at 31 December 2013 mainly due to the Chinese New Year in 2013 was in mid-February 2013. As there were no major festivals or long holiday near 31 May, the balance of inventories decreased to approximately RMB79.4 million as at 31 May 2013.

The following table sets out a summary of our average inventory turnover for the periods indicated.

Five months ended Year ended 31 December 31 May 2010 2011 2012 2013

Average inventory turnover (days) 78.4 81.2 100.5 85.7

1. Average inventory turnover is calculated as the average balance of inventory (year/period beginning plus year/period ending figures divided by two), divided by purchases of and changes in inventories for the year/period, and multiplied by the 365 days or 151 days for each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013 respectively.

Our inventory turnover days were increasing for the years ended 31 December 2010, 2011 and 2012 mainly due to the increase in inventory level during the year end of 2010, 2011 and 2012 respectively for the preparation of higher sales during Chinese New Years in early February 2011, late January 2012 and early February 2013 respectively.

Our inventory turnover days slightly increased from approximately 78.4 days for the year ended 31 December 2010 to approximately 81.2 days for the year ended 31 December 2011. This was primarily because of a slightly higher proportion of the increase in average inventory balance than the proportion of increase in purchase of and changes in inventories for the year.

– 328 – FINANCIAL INFORMATION

Our inventory turnover days further increased to approximately 100.5 days for the year ended 31 December 2012 mainly due to (i) the high inventory balance as at 31 December 2011 which inflated the average balance of inventory as at 31 December 2012 (as the nominator of the calculation in turnover of inventory was the average balance of inventory (year beginning plus year ending figures divided by two)); and (ii) the decrease of our purchases of and changes in inventories in 2012. For the year ended 31 December 2012, our purchases of and changes in inventories was approximately RMB352.2 million, a decrease of approximately RMB52.1 million, or approximately 12.9%, from approximately RMB404.3 million for the year ended 31 December 2011. A larger nominator coupled with a smaller denominator resulted a longer inventory turnover days for the year ended 31 December 2012. The average inventory turnover days decreased to approximately 85.7 days for the five months ended 31 May 2013 due to the decrease in our balance of inventories as at 31 May 2013.

ANALYSIS OF TRADE RECEIVABLES, TRADE PAYABLES AND OTHER ITEMS IN THECOMBINEDBALANCESHEETS

Trade receivables, prepayments and other receivables

Most of our customers pay by cash, credit card, debit card, Consumption Cards or under the method set out in the section headed “Business – Marketing and promotion – Customer loyalty programs – Promotional arrangements with a mobile telecommunications service provider” of this prospectus on the day of purchase. Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. Our trade receivables mainly consisted of management fee and service income receivables, receivables from bank for customers’ credit card payment and receivables from Change of the Old for New Program. The following table illustrates our trade receivables, prepayments and other receivables as at the dates indicated:

As at As at 31 December 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Trade receivables 17,760 16,349 14,294 14,273 Receivables from sales of Consumption Cards and arrangements with mobile telecommunications service provider 12,040 5,190 3,680 1,888 Other receivables 20,010 3,236 3,161 3,209 Prepayments 19,961 36,229 58,042 44,009 Rental and other deposits 1,690 2,249 11,505 13,072

71,461 63,253 90,682 76,451 Less: long-term pre-paid rent andrentaldeposits (4,754) (5,109) (18,703) (23,530)

66,707 58,144 71,979 52,921

– 329 – FINANCIAL INFORMATION

As at 31 December 2010, 2011 and 2012 and 31 May 2013, our trade receivables balance amounted to approximately RMB17.8 million, approximately RMB16.3 million, approximately RMB14.3 million and approximately RMB14.3 million respectively.

The aging analysis of trade receivables as at 31 December 2010, 2011 and 2012 and 31 May 2013 was as follows:

As at As at 31 December 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Trade receivables, gross – Within 2 months 14,695 16,111 13,632 13,999 – Over 2 months 3,065 238 662 274

17,760 16,349 14,294 14,273

The following table sets forth the turnover of our trade receivable for the periods indicated. Five months ended Year ended 31 December 31 May 2010 2011 2012 2013

Turnover of trade receivables 10.7 8.3 7.7 7.1

Note:

(1) Turnover of trade receivable days is calculated as the balance of trade receivables as at the end of the year/period, divided by the turnover for the year/period and multiplied by 365 days or 151 days for the year ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013 respectively.

Turnover of trade receivable days decreased from approximately 10.7 days for the year ended 31 December 2010 to approximately 8.3 days for the year ended 31 December 2011 and further decreased to approximately 7.7 days for the year ended 31 December 2012. The turnover of trade receivable days decreased during the Track Record Period mainly due to the decrease in the receivables from Change of the Old for New Program from approximately RMB2.6 million as at 31 December 2010 to approximately RMB1.9 million as at 31 December 2011 and further decreased to approximately RMB1,000 as at 31 December 2012. For the year ended 31 December 2011, our revenue was approximately RMB715.1 million, increased by approximately RMB109.9 million, or approximately 18.2%, from approximately RMB605.2 million for the year ended 31 December 2010. Our revenue decreased to approximately RMB678.9 million for the year ended 31 December 2012. Turnover of trade receivable days further decreased to approximately 7.1 days for the five months ended 31 May 2013 mainly due to the decrease in trade receivable balance with no long holiday or major festival around period end. The short turnover of trade receivable days is in line with the industry practice.

– 330 – FINANCIAL INFORMATION

Prepayments and other receivables

Prepayments and other receivables include amounts due from related parties, receivables from sales of stored value shopping cards, other receivables, prepayments and rental and other deposits.

Receivables from Consumption Cards and arrangements with mobile telecommunications service provider represented (i) receivables under the Consumption Cards bought in cash where Consumption Cards were bought on credit instead of immediately in cash, where corporates purchased Consumption Cards in bulk under an agreement. The counterparties settle the amount due from us usually within 60 days and the settlement method is usually by bank transfer or cheque; and (ii) receivables under the arrangements with the mobile telecommunications service provider as detailed out in the section headed “Business – Marketing and promotion – Customer loyalty programs – Promotional arrangements with a mobile telecommunications service provider” of this prospectus. The provider settles the sales amount after monthly reconciliation. As at 31 December 2010, 2011 and 2012 and 31 May 2013, the receivables from Consumption Cards and arrangements with mobile telecommunications service provider amounted to approximately RMB12.0 million, approximately RMB5.2 million, approximately RMB3.7 million and approximately RMB1.9 million respectively.

Our prepayments represent the prepayments to our direct sales suppliers and construction and other service providers. Before receiving the inventory from direct sales suppliers, especially the electrical appliance segment, the suppliers may require us to place certain percentage of inventory value as prepayments to them. Prepayments to construction and other service providers and rental prepayments mainly represented the prepayments paid for the construction, operating lease payments, and listing expenses. The breakdown of prepayment is as follows.

As at As at 31 December 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Prepayments to suppliers 14,388 28,615 43,020 26,621 Prepayments to construction and other service providers and rental prepayments 5,573 7,614 15,022 17,388

19,961 36,229 58,042 44,009

As at 31 December 2010, 2011 and 2012 and 31 May 2013, our prepayment balance amounted to approximately RMB20.0 million, approximately RMB36.2 million, approximately RMB58.0 million and approximately RMB44.0 million respectively.

– 331 – FINANCIAL INFORMATION

As at 31 December 2011, the balance of prepayment to suppliers amounted to approximately RMB28.6 million, increased from approximately RMB14.4 million as at 31 December 2010. This was mainly due to the increase in inventory level for the preparation of higher sales during the Chinese New Year in 2012. It further increased to approximately RMB43.0 million as at 31 December 2012, which was mainly due to the note payables arrangement with banks and our suppliers. For the year ended 31 December 2011, our prepayments were mainly paid by cash. For the year ended 31 December 2012, instead of prepayments by cash, we increased the amount of note payables to bank and placed the amount of note payables as prepayment to our suppliers. Such arrangement provided our Group with (i) greater liquidity by using note payables for prepayment as settlement could be made later, of which the usual settlement term of the note payables is six months; and (ii) a lower deposit amount required, as only approximately 30% of the total note payables was required to be deposited in banks, coupled with such restricted cash was interest-bearing. Our suppliers also prefer such arrangement as they can receive a lump sum amount and reduce the frequency of settlement. As a result, the balance of prepayment as at 31 December 2012 increased due to the higher outstanding amount of prepayments paid to the suppliers. As at 31 May 2013, the balance of prepayment decreased to approximately RMB44.0 million, mainly due to lower prepayments to suppliers as there is no seasonal anticipation of higher sales near the end of May 2013.

As at 31 December 2011 and 2012, note payables of our Group was approximately RMB47.2 million and approximately RMB50.3 million respectively. Normally, we settle the note payable issued six months after issuance of the bill. Our Company usually estimates the amount of purchases from the respective suppliers in the following six months with reference to the settlement term and issues the note payables according to such estimated amount. As discussed in the paragraph headed “Year ended 31 December 2012 compared to year ended 31 December 2011” of this section, the revenue from electrical appliances segment and supermarket segment decreased significantly during the year ended 31 December 2012, the note payables issued to the suppliers initially was therefore higher than the settlement amount for the six months period. After settlement with banks, the unused amount was carried forward for the use of purchasing inventories in the next period from the suppliers. As a result, the increment of balance outstanding of note payables between the two year ends was not in the same proportion as the increment in prepayment to suppliers.

The following table further illustrates other receivables breakdown as at the dates indicated:

As at As at 31 December 31 May 2010 2011 2012 2013

Advances to Independent Third Parties 19,450 – – – Others 560 3,236 3,161 3,209

20,010 3,236 3,161 3,209

– 332 – FINANCIAL INFORMATION

We have advances to Independent Third Parties amounted to approximately RMB19.5 million as at 31 December 2010 which was of non-trade nature, non-interest bearing and repayable within one year. The amount was fully settled during the year ended 31 December 2011. Our Directors considered that similar non-trade nature advances will not be made to Independent Third Parties in the future.

Others are mainly advances for business related projects and advances to employees for business trips and daily expenses.

As at 30 September 2013, approximately RMB13.2 million of the balance of trade receivables as at 31 May 2013, had been subsequently settled.

Amount due from related parties

As at 31 December 2010, 2011 and 2012 and 31 May 2013, our Group had amount due from related parties amounted to approximately RMB84.9 million, approximately RMB125.0 million, approximately RMB142.0 million and approximately RMB161.7 million respectively, of which approximately RMB54.9 million, approximately RMB74.9 million, approximately RMB102.2 million and approximately RMB140.2 million were loans provided to Yihua Investment, Zhongshan Yihua Property Company Limited and other related parties. The table below set forth the movement of loans during the Track Record period.

Five months ended Year ended 31 December 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Beginningoftheyear/period 85,405 54,862 74,897 102,211 Loans advanced 48,900 52,084 110,011 61,260 Loanrepaymentsreceived (81,359) (33,000) (81,000) (23,002) Interest income recognised 1,916 2,867 982 – Interest received – (1,916) (2,679) (269)

End of the year/period 54,862 74,897 102,211 140,200

As at 31 May 2013, the balances with Yihua Investment and other related parties totalling approximately RMB140.2 million were of non-trade nature, which will be repaid before the Listing. Other balances with related parties are arising from ordinary course of business, which will not be fully settled before Listing. Other than the loan to Yihua Investment, balances with related parties are unsecured, interest-free and repayable on demand. Certain amount due from related parties were not settled before Listing were of trade nature.

– 333 – FINANCIAL INFORMATION

Trade and other payables

The following table illustrates our trade and notes payables as at the dates indicated:

As at As at 31 December 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Trade payables 69,163 93,213 69,812 59,401 Notes payable 20,000 47,175 50,300 34,900

89,163 140,388 120,112 94,301

Our trade payables and notes payables represent the merchandises payable to our direct sales suppliers and bank acceptance bills that we use to settle for part of our purchases from suppliers. The aging analysis of the trade payables was as follows.

As at As at 31 December 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Below 3 months 53,780 76,073 57,309 39,099 Over 3 months 15,383 17,140 12,503 20,302

69,163 93,213 69,812 59,401

The following table sets forth the turnover of our trade payables for the periods indicated.

Five months ended Year ended 31 December 31 May 2010 2011 2012 2013

Turnover of trade payable days(1) 69.1 84.1 72.4 58.8

(1) Turnover of trade payables is calculated as the balance of trade payables as at the end of the year/period, divided by the purchases of and changes in inventories for the year/period and multiplied by 365 days or 151 days for the year ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013 respectively.

– 334 – FINANCIAL INFORMATION

Turnover of trade payable days measures the number of days a company takes to pay its suppliers from the date on which the inventory was received. Turnover of trade payable days increased from approximately 69.1 days for the year ended 31 December 2010 to approximately 84.1 days for the year ended 31 December 2011. This was mainly due to a higher level of trade payables to our direct sales suppliers as at 31 December 2011 than 31 December 2010 for the preparation of festive sales for the Chinese New Year in 2012, which was started earlier on or around 23 January 2012 than the Chinese New Year in 2011, which was started on or around 3 February 2011. We subsequently recorded a shorter trade payable days of approximately 72.4 days for the year ended 31 December 2012. This mainly because of a lower level trade payables to our direct sales suppliers were recorded as at 31 December 2012 than 31 December 2011. The preparation of festive sales for the Chinese New Year in 2013 took place at a later date than the Chinese New Year in 2012, as the Chinese New Year in 2013 started on or around 10 February 2013. Turnover of trade payable further decreased to approximately 58.8 days for the five months ended 31 May 2013 due to the decrease in trade payable balance.

Generally, our Company paid to the direct suppliers according to the credit terms on the contract, which is contractual credit period of up to 45 days from the day we sell the merchandise to the customers in our stores. The contractual credit period (i.e. up to 45 days) is shorter than our payable days because such contractual credit period begins upon the sale of merchandise, whereas the payables days begins from the receipt of inventory. Nevertheless, our Directors accept that, payment may be, in limited cases, delayed to suppliers and concessionaires due to administrative reasons (e.g. relevant senior management responsible for approving and signing such payment may be unavailable due to a business trip). Such delays however are with the consent of the relevant supplier and concessionaire. Our Company confirms that there is no material disputes between our Group and our concessionaires and suppliers concerning delayed payments during the Track Record Period and up to the Latest Practicable Date.

As at 30 September 2013, approximately RMB55.4 million of the balance of trade payables as at 31 May 2013, had been subsequently settled.

– 335 – FINANCIAL INFORMATION

Other payables

Other payables and accruals consists of staff salaries, bonuses and welfare payables, payables to concessionaires and leasees, other taxes and surcharge payable, borrowings from employees, rental and other deposits and others. The following table illustrates our other payables as at the dates indicated:

As at As at 31 December 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Staff salaries, bonuses and welfare payables 5,758 6,663 7,966 6,708 Payables to concessionaires and leasees 91,089 114,639 122,828 95,513 Other taxes and surcharges payable 9,432 13,461 8,875 1,871 Borrowingsfromemployees 1,450 – − – Rental and other deposits 9,233 9,117 10,431 10,823 Others 38,383 16,478 19,409 22,010

155,345 160,358 169,509 136,925

The following table further illustrates others in other payables breakdown as at the dates indicated:

As at As at 31 December 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Advances from Independent Third Parties 25,879 1,920 98 – Loan from an Independent Third Party – – 5,000 – Accrued utilities, rental and operating expenses 8,784 8,505 5,951 6,890 Construction related payables 1,079 75 616 6,395 Others 2,641 5,977 7,744 8,725

38,383 16,477 19,409 22,010

– 336 – FINANCIAL INFORMATION

All advances from Independent Third Parties were non-interest bearing and repayable within one year and settled by cash. We have advances from Independent Third Parties amounted to approximately RMB25.9 million and approximately RMB1.9 million respectively as at 31 December 2010 and 2011, mainly consist of (i) approximately RMB2.1 million and approximately RMB0.5 million respectively as at 31 December 2010 and 2011 were related to the amount advances from our business partners, including Guangdong Guang Zhi Lian, an associate of Guangdong Guang Zhi Lian and the landlord of our branches. Save for being the joint venture partner of our Group through its interest in Shaoguan Yihua Department Store and Shaoguan Central Management, Guangdong Guang Zhi Lian is an Independent Third Party; and (ii) approximately RMB14.4 million of advances from Zhongshan Taili Development Limited, (previously the 80% equity owner of Guangdong Yihua Department Store, please refer to the section headed “History and development- Our corporate structure- Guangdong Yihua Department Store” of this prospectus for its historical relationship with our Group and currently an Independent Third Party) which was non-trade in nature. For the details of loan from an Independent Third Party, please refer to the paragraph headed “Indebtedness” of this section.

The following table sets forth the turnover days of our payables to concessionaires and leasees for the periods indicated.

Five months ended Year ended 31 December 31 May 2010 2011 2012 2013

Turnover days of our payables to concessionaires and leasees(1) 36.1 35.6 37.1 24.7

(1) Turnover days of our payables to concessionaires and leasees is calculated as the balance of payables to concessionaires and leasees as at the end of the year/period, divided by the Gross Sale Proceeds received or receivable by us from concessionaire sales and proceeds collected from customers on behalf of leasees for the year/period and multiplied by 365 days or 151 days for the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013 respectively.

Turnover days of our payables to concessionaires and leasees were slightly over a month for the years ended 31 December 2010, 2011 and 2012. After collecting the payments from the sales of merchandises at our cashier, we subsequently remit the Gross Sale Proceeds after deducting all relevant fees and expenses owed to us (where applicable) to our concessionaires and shop tenants. In view of the agreed intervals for such payments are typically on a monthly basis, we have maintained a stable and reasonable settlement period. This also indicates that our Group’s finance is generally healthy and we had been able to maintain sufficient cash flow to meet our payment obligations in a timely manner. We note that there may be certain incidents of payment delay to concessionaires due to administrative reasons and in such delays, we obtain their consent for such delay. Given that the above calculation of the turnover days of our payables to concessionaires during the Track Record Period and the contractual credit terms offered to us by concessionaires is usually a week after our month-end reconciliation of

– 337 – FINANCIAL INFORMATION accounts, our Company is of the view that we generally pay our concessionaires on time despite the aforesaid incidents. We also believe such incidents are unlikely to lead to material disputes because (i) it is important for the concessionaires to have good relationship with us so as to enable them to continue to sell their merchandise at our stores for the mutual benefit of both parties; and (ii) concessionaire contracts are generally for one to two years and therefore dissatisfied concessionaires are able to resort to not renewing contracts with our Group. Our Directors confirm that our Group did not have material disputes with its concessionaires during the Track Record Period.

Turnover days of our payables to concessionaires and leasees decreased to approximately 24.7 days due to the lower payables to concessionaires and leasees as at 31 May 2013 compared to the previous year ends because of the seasonal factor. Comparing to New Year holidays during end of the year, there were no major festivals or long holiday near end of May 2013, payables to concessionaires and leasees therefore decreased significantly and led to the decrease of turnover days. As at 30 September 2013, approximately 92.4% of the payables to concessionaires and leasees was settled.

Other advances were considered as non-trade in nature. Our Directors considered that similar non-trade nature advances will not be obtained from Independent Third Parties.

Others are mainly construction fee payables, Housing Provident Fund payables, promotional expenses payables and management fee payables.

Amounts due to related parties

As at 31 December 2010, 2011 and 2012 and 31 May 2013, our Group had amounts due to related parties amounted to approximately RMB40.7 million, approximately RMB4.5 million, approximately RMB12.7 million and approximately RMB8.6 million respectively, of which approximately RMB40.4 million, approximately RMB4.2 million, approximately RMB4.5 million and approximately RMB7.3 million were loans obtained from Yihua Investment and other related parties. The table below set forth the movement of loans during the Track Record Period.

– 338 – FINANCIAL INFORMATION

Five months ended Year ended 31 December 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Beginningoftheyear/period 2,850 40,366 4,219 4,546 Loans received during year/period 58,266 8,100 – – Loan repayments (20,750) (47,016) (1,000) (450) Payment on behalf of the Company – 2,769 1,327 3,223

End of the year/period 40,366 4,219 4,546 7,319

As at 31 May 2013, amounts due to Yihua Investment totalling approximately RMB7.3 million are of non-trade nature, which will be repaid before the Listing. Amounts due to Yihua Investment was the listing expenses paid by Yihua Investment for the Listing and the amounts shall not be offset by amounts due from Yihua Investment. Amounts due to Zhongshan King Century Hotel Limited, Yihao Hotel and Guzhen International Hotel were from ordinary course of business which would not be fully settled before the Listing. Balances with related parties above are unsecured, interest free and repayable on demand.

Deferred revenue

We operate a VIP cards program, which allows customers to accumulate award points when they purchase products in our stores. The points can then be redeemed for gifts and Consumption Cards, subject to a minimum number of points being obtained. Our Consumption Cards are cash-equivalent when customers use them to purchase products in our Group’s department stores. (The award points are recognised as a separate identifiable component of the initial sale transaction, by allocating the fair value of consideration received between the award points and the other components of the sale such that the award points are recognised as a liability under “deferred revenue” at their fair value. Deferred revenue is recognised as revenue when the points are redeemed for gifts and is classified as advances from customers when the points are redeemed for Consumption Cards). In the initial sale transaction when the VIP customers buy products, the receipt was divided into two parts, namely the revenue related to that product and the award points gained in this transaction. The award points portion will be recognised as a liability under “deferred revenue” at their fair value. When our customers redeem the gift , the cost of the gift is charged to our profit or loss account and the relevant balance of inventory on our balance sheet is reduced.

– 339 – FINANCIAL INFORMATION

As at 31 December 2010, 2011 and 2012 and 31 May 2013, our deferred revenue balance amounted to approximately RMB2.7 million, approximately RMB2.9 million, approximately RMB3.6 million and approximately RMB4.2 million respectively. The increase in deferred revenue balance from approximately RMB2.7 million as at 31 December 2010 to approximately RMB2.9 million as at 31 December 2011 and further increased to approximately RMB3.6 million and approximately RMB4.2 million as at 31 December 2012 and 31 May 2013 primarily due to our business expansion during the Track Record Period.

Advances from customers

Advances from customers were primarily relating to unused value of our Consumption Cards and payment in advance from customers. Our Consumption Cards are issued under one of five methods: (i) bought by our customers; (ii) after a certain amount of Consumption Cards is bought, additional Consumption Cards are issued for free (e.g. after RMB10,000 of Consumption Cards are bought at a time, RMB200 Consumption Cards will be issued for free and such RMB10,200 of Consumption Cards will also be subject to regulatory requirements); (iii) issued after our customers have accumulated and converted a certain number of points on their VIP cards (currently at a conversion rate of RMB100 Consumption Card per 10,000 points with points collected generally at a rate of 0.5 point in the electrical appliances section and supermarket section or 1 point in the department store section for each RMB1 spent); (iv) issued for free for promotional purposes; or (v) bought by entities for their staff benefit or promotional arrangements. After the Consumption Card is bought by our customer, cash received from the issuance of such pre-paid Consumption Cards constitutes advances from customers. The amount will be recognised as revenue when revenue recognition criteria is met. As at 31 December 2010, 2011 and 2012 and 31 May 2013, the balance of our Group’s unused value of our Consumption Cards was approximately RMB164.6 million, approximately RMB153.3 million, approximately RMB216.6 million and approximately RMB201.7 million respectively. The remaining portion of advances from customers mainly represented the payment in advances from corporate customers for goods and Consumption Cards which were not yet settled as at each year end. The natures of goods purchased by corporate customers were mainly electrical appliances and daily necessity products such as towels and laundry detergent. The fluctuation of the unused value of our Consumption Cards was mainly due to the fluctuation in the value of our Consumption Cards used and issued during the Track Record Period. For further details, please see the section headed “Business – Marketing and promotion – Customer loyalty programs – Consumption Cards” of this prospectus.

Customers may use payment method such as cash or credit cards in the absence of Consumption Card. For illustration purpose only, our Directors estimated that net profit from using payment method of Consumption Cards were approximately RMB5.6 million, approximately RMB10.7 million, approximately RMB8.0 million and approximately RMB2.7 million respectively for the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013.

In accordance with the Administrative Measures for Pre-paid Cards, Guangdong Yihua Department Store had opened an escrow account with a bank in the PRC to serve as a reserve account as part of the registration procedure for our Consumption Cards. To meet the reserve requirement, we had deposited cash into the said escrow account and also obtained a guarantee by the same bank.

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π၍՘ᙄ (capital management agreement*) with the saidږWe have also entered into a ༟ bank. Pursuant to the capital management agreement, the bank supervises us for compliance with the capital reserve requirement in accordance with the Administrative Measures for Pre-paid Cards and reports to the relevant authority the condition of such escrow account. In the event that we are not able to meet the capital reserve requirement after the prescribed timeframe, we should report to the relevant authority. Certain information such as our registration as a prepaid card issuer under the Administrative Measures for Pre-paid Cards will ࢹӻ୕ (Single-purposeڦalso be accessible by the public online in ఊ͜௄ਠุཫ˹ุ̔ਕ Commercial Pre-paid Cards Information System*), which maintained by MOFCOM.

Our Directors considered that our Group is able to maintain sufficient cash flow for our daily operation needs and would not be material adverse impact on our main business operation in the event that our Company ceases the issuance of Consumption Cards or in the worse case scenario, required to redeem all the outstanding Consumption Card. This is supported by our cash and cash equivalents, restricted cash and inventory balances of approximately RMB194.7 million as well as the bank guarantee from same bank of our escrow account compared to the Consumption Cards payable of RMB201.7 million as at 31 May 2013. We also have the additional undrawn banking facilities granted in 2013 to further enhanced our working capital sufficiency. Coupled with the supervision of the bank to monitor us for compliance with the capital management requirement in accordance with the Administrative Measures for Pre-paid Cards, our Group is thereby required to comply with a formal regulatory liquidity standard in a timely manner.

Nevertheless, please take note that:

(1) under the terms of our Consumption Cards, our Consumption Cards cannot be redeemed for cash but instead, is used as payment for goods;

(2) our PRC Legal Advisers advise that the current PRC law and regulations governing the issuance of Consumption Card do not provide any measures to the relevant authority to order the issuer of such cards to redeem all the outstanding consumption cards or required us to refund the relevant income generated from the sale by such payment method; and

(3) we see no commercial reason to cease the issuance of Consumption Cards.

– 341 – FINANCIAL INFORMATION

KEY FINANCIAL RATIOS

Set out below is the summary of the key financial ratios of our Group during the Track Record Period:

Five months Year ended 31 December ended 31 May Notes 2010 2011 2012 2013

Turnover growth 1 NA 18.2% (5.1%) 3.6% Net profit growth 2 NA 61.0% (11.2%) (43.0%) Net profit margin before interest and tax 3 7.5% 9.6% 8.6% 6.4% Net profit margin 4 5.0% 6.9% 6.4% 4.5% Return on equity 5 NA 99.9% 46.4% 11.8% Return on total assets 6 6.3% 8.1% 6.5% 2.1% Average inventory turnover (days) 7 78.4 81.2 100.5 85.7 Turnover of trade receivable days 8 10.7 8.3 7.7 7.1 Turnover of trade payable days 9 69.1 84.1 72.4 58.8 Interest coverage 10 11.6 14.4 22.9 32.2 Gross profit growth 11 NA 29.6% 5.1% 6.4% Gross profit margin 12 39.6% 43.5% 48.1% 49.6%

Asat31December Asat31May 2010 2011 2012 2013

Current ratio 13 75.5% 90.5% 92.5% 91.9% Quick ratio 14 59.4% 71.9% 75.6% 74.3% Gearing ratio 15 NA 202.1% 53.1% 49.5% Debt to equity ratio 16 NANANA NA

Notes:

1. Turnover growth is calculated as the difference between the turnover of respective years/periods and the turnover of previous corresponding years/periods divided by the turnover of previous corresponding years/periods.

2. Net profit growth is calculated as the difference between the net profit of respective years/periods and the net profit of previous corresponding years/periods divided by the net profit of previous corresponding years/periods.

3. Net profit margin before interest and tax is calculated as the net profit before interest of the respective years/periods divided by the turnover of the respective years/periods.

4. Net profit margin is calculated as the profit for year/period attributable to the owners of our Company divided by the turnover of the respective years/periods.

5. Return on equity is calculated as the profit attributable to the owners of our Company divided by the equity attributable to the owners of our Company of the respective years/periods.

6. Return on total assets is calculated as the profit attributable to the shareholders of our Company divided by the total assets of our Group of the respective years/periods.

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7. Average inventory turnover (days) is calculated as the average balance of inventory (period beginning plus period ending figures divided by two), divided by purchases of and changes in inventories for the year/period, and multiplied by 365 days or 151 days.

8. Turnover of trade receivable days is calculated as the balance of trade receivables as at the end of the period, divided by the turnover for the period and multiplied by 365 days or 151 days.

9. Turnover of trade payables is calculated as the balance of trade payables as at the end of the period, divided by the purchases of and changes in inventories for the period and multiplied by 365 days or 151 days.

10. Interest coverage is calculated as profit before income tax divided by the interest expenses of the respective years/periods.

11. Gross profit growth is calculated as the difference between the gross profit of respective years/periods and the gross profit of previous corresponding years/periods divided by the gross profit of previous corresponding years/periods.

12. Gross profit margin is calculated as the gross profit of the respective years/periods divided by the turnover of the respective years/periods.

13. Current ratio is calculated as the total current assets divided by the total current liabilities as at the respective dates.

14. Quick ratio is calculated as the current assets minus inventories of our Group as at the respective dates divided by total current liabilities of our Group as at the respective dates.

15. Gearing ratio is calculated as total debts divided by total equity as at the respective dates.

16. Debt to equity ratio is calculated as all borrowings and other payables net of cash and cash equivalents divided by total equity of the Group of the respective years/periods. As our Group had the amount of cash and cash equivalents more than all borrowings as at 31 December 2010, 2011 and 2012 and 31 May 2013, this ratio was not applicable.

Please refer to the sections headed “Year ended 31 December 2011 compared to year ended 31 December 2010”, “Year ended 31 December 2012 compared to year ended 31 December 2011” and “Five months ended 31 May 2013 compared to five months ended 31 May 2012” above for discussion of the factors affecting revenue growth, net profit growth, gross profit growth and gross profit margin. Please refer to the section headed “Indebtedness, capital commitments and operating leases commitments/arrangements” above for discussion of the factors affecting gearing ratio.

Net profit margin before interest and tax and net profit margin

Net profit margin before interest and tax and net profit margin vary among the market participants due to certain factors, including segment allocation (allocation among department store segment, supermarket segment, electrical appliances segment and furniture segment) and the revenue nature (allocation among revenue from direct sales of goods, commissions from concessionaire sales, management fee and service income from operations and rental income). Generally, the revenue from department segment and commissions from concessionaire sales would have higher profit margin. Comparing our Group, which has a higher revenue from electrical appliances segment and supermarket segment than department store segment, with some of the market participants, which may have a higher revenue from department store, our Group may have comparatively lower net profit margin before interest and tax and net profit margin.

– 343 – FINANCIAL INFORMATION

Please refer to “Year ended 31 December 2011 compared to year ended 31 December 2010”, “Year ended 31 December 2012 compared to year ended 31 December 2011” and “Five months ended 31 May 2013 compared to five months ended 31 May 2012” above for discussion of the period-to-period fluctuation of net profit margin before interest and tax and net profit margin.

Return on equity and return on total assets

For the years ended 31 December 2011 and 2012 and the five months ended 31 May 2013, our return on equity amounted to approximately 99.9%, approximately 46.4% and approximately 11.8% respectively. For the three years ended 31 December 2012 and the five months ended 31 May 2013, our return on total assets amounted to approximately 6.3%, approximately 8.1%, approximately 6.5% and approximately 2.1%, respectively. Since our profit attributable to the owners of the Company for the year end 31 December 2011 increased for approximately 57.6% from that of the corresponding period, the fluctuation of return on equity was mainly due to the increase in reserve from accumulated retained profits during the Track Record Period. Our return on equity further decreased in 2012 and the five months ended 31 May 2013 due to the enlargement of our equity base. The fluctuation of return on total assets from 2010 to 2011 was mainly due to the increase in our net profit. Our return on total assets decreased to approximately 6.5% and further decreased to approximately 2.1% in 2012 and the five months ended 31 May 2013 mainly due to the decrease in our profit and increase in our asset base.

Current ratio and quick ratio

As at 31 December 2010, 2011 and 2012 and 31 May 2013, our current ratio amounted to approximately 75.5%, approximately 90.5%, approximately 92.5% and approximately 91.9% respectively, and quick ratio amounted to approximately 59.4%, approximately 71.9%, approximately 75.6% and approximately 74.3% respectively. We had net current liabilities position as at 31 December 2010, 2011 and 2012, primarily attributable to the trade and other payables and advances from customers as at the year end. Advances from customers decreased from approximately RMB178.9 million as at 31 December 2010 to approximately RMB164.2 million as at 31 December 2011. Trade and other receivables increased from approximately RMB151.6 million as at 31 December 2010 to approximately RMB183.1 million as at 31 December 2011. Both movements contributed to the improvements of both current ratio and quick ratio as at 31 December 2011. Our current ratio and quick ratio slightly increased to approximately 92.5% and approximately 75.6% mainly due to the increase in our current assets from 2011 to 2012. Both ratio remained stable as at 31 May 2013.

Interest coverage ratio

For the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013, our interest coverage ratio amounted to approximately 11.6 times, approximately 14.4 times, approximately 22.9 times and approximately 32.2 times respectively mainly due to decreases in finance cost during Track Record Period.

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FINANCIALINSTRUMENTS

Except as otherwise disclosed, we have not entered into any other financial instruments for hedging purposes.

OFFBALANCESHEETTRANSACTIONS

Except for the commitments and contingent liabilities set forth above, we have not entered into any material off-balance sheet transactions or arrangements.

FINANCIAL RISK FACTORS

Our Group’s activities expose it to a variety of financial risks, including interest rate risk, credit risk and liquidity risk.

Interest rate risk

Our interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose our Group to cash flow interest rate risk which is partially offset by cash held at variable rates. Borrowings issued at fixed rates expose our Group to fair value interest rate risk.

As at 31 December 2010, 2011 and 2012 and 31 May 2013, if interest rates on Renminbi-denominated borrowings had been 80 basis point higher/lower with all other variables held constant, post-tax profit for the year would have been nil and approximately RMB12,000 and nil and RMB5,000 lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings.

Credit risk

The credit risk of our Group mainly arises from cash and cash equivalents and restricted cash, trade receivables and other receivables, amounts due from related parties. The carrying amounts or the undiscounted nominal amounts, where applicable, of each class of these financial assets represent our Group’s maximum exposure to credit risk in relation to the corresponding class of financial assets.

Sales to retail customers are settled in cash, via major credit cards or Consumption Cards. At the reporting dates, our Directors consider our Group does not have a significant concentration of credit risk.

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As for trade receivables related to management fee and service income from operations from the ordinary course of business and receivables from sales of consumption cards, our Group carries out regular review on these balances and takes follow-up action on any overdue amounts to minimise exposures to credit risk.

Our Directors are of the view that there is no recoverability issue of amounts due from related parties, because our Group believes that the related parties have the repayment capabilities and our Group has agreed with the related parties about future plans of repayment.

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents, the availability of funding through an adequate amount of undrawn committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, our treasury function aims to maintain flexibility in funding by keeping committed credit lines available.

Except for our borrowings, all of our financial liabilities mature within one year from the end of the reporting period.

DIVIDENDANDDIVIDENDPOLICY

As part of the Reorganisation, Guangdong Yihua Department Store, our principal operating subsidiary, declared dividends to their then respective equity holders. After the Track Record Period but prior to the Listing, Guangdong Yihua Department Store declared a special dividend in the amount of approximately RMB64 million and had fully settled prior to the date of this prospectus. We financed the payment of all such dividends by internal financial resources. The special dividend to Yihua Investment and Shunyi Industrial did not have any significant impact on the cash outflow of our Group as Shunyi Industrial waived its own entitlement and the dividend payment to Yihua Investment was ultimately fully settled by netting off the amount due from Yihua Investment to our Group. The historical dividend payments of our subsidiaries should not be regarded as an indicator of our future dividend policy.

After completion of the Share Offer, our Shareholders will be entitled to receive dividends that we declare. The payment and the amount of any dividends will be at the discretion of our Directors and will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors which our Directors deem relevant. In addition, our Controlling Shareholders will be able to influence the approval by our Shareholders in a general meeting for any payment of dividends.

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Any declaration and payment as well as the amount of dividends will be subject to the Articles of Association and the Cayman Islands Companies Law. Our Shareholders in general meeting may approve and make any declaration of dividends in any currency, but no dividend shall exceed the amount recommended by our Board. Dividends may be paid out of our Company’s distributable profits as permitted under the relevant laws.

Dividends received from our subsidiaries in the PRC may be subject to PRC taxes. The PRC laws require that dividends be paid only out of net profit, calculated in accordance with the PRC accounting principles, which differ in many aspects from the generally accepted accounting principles in other jurisdictions, including the HKFRS. The PRC laws also require foreign-invested enterprises to set aside part of their net profits as statutory reserves, which are not available for distribution as cash dividends. For additional information, see “Risk Factors – Risks Relating to the PRC – Our Company relies principally on dividends paid by our subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to pay dividends to us could have a material adverse effect on our ability to conduct our business.”

Cash dividends on our Shares, if any, will be paid in Hong Kong dollars. Other distributions, if any, will be paid to our Shareholders by any means which our Directors consider legal, fair and practicable.

DISTRIBUTABLE RESERVES

Our Company’s distributable reserves consist of accumulated gains/losses. Under the Companies Law, the share premium account may be applied by our Company in paying distributions or dividends to the Shareholders, provided that immediately following the date on which the distribution or dividend is proposed to be paid, our Company shall be able to pay its debts as they fall due in the ordinary course of business.

As at 31 May 2013, our Company had no distributable reserves considering the accumulated losses as at the year end.

– 347 – FINANCIAL INFORMATION

UNAUDITEDPROFORMAADJUSTEDNETTANGIBLEASSETS

The following unaudited pro forma adjusted net tangible assets prepared in accordance with Rule 4.29 of the Listing Rules are set out below to illustrate the effect of the Share Offer on our net tangible assets as at 31 May 2013 as if the Share Offer had taken place on that date. The unaudited pro forma adjusted net tangible assets has been prepared for illustrative purpose only and, because of its hypothetical nature, it may not give a true picture of our net tangible assets had the Share Offer been completed as at 31 May 2013 or at any future date. The unaudited pro forma adjusted net tangible assets is based on our audited combined net tangible assets of our Group attributable to our equity holders of the Company as at 31 May 2013 as shown in the Accountant’s Report of our Company, the text of which is set out in Appendix I to this prospectus, and adjusted as described below.

Audited Unaudited combined pro forma net adjusted tangible net assets of tangible our Group assets attributable attributable to equity Estimated to equity holders of net holders of our proceeds our Company from the Company Unaudited pro forma as at 31 Share as at 31 adjusted net tangible May 2013(1) Offer(2) May 2013 assets per Share(3) RMB’000 RMB’000 RMB’000 RMB HK$ Based on an Offer Price of HK$1.40perShare 104,041 87,347 191,388 0.53 0.67 Based on an Offer Price of HK$1.00perShare 104,041 59,890 163,931 0.46 0.58

Notes:

(1) Our combined net tangible assets of our Group attributable to equity holders of the Company as at 31 May 2013 is extracted from the Accountant’s Report of our Company as set out in Appendix I to this prospectus, which is based on the audited combined net assets of our Group attributable to equity holders of the Company as at 31 May 2013 of RMB104,121,000 with an adjustment for the intangible asset as at 31 May 2013 of RMB80,000.

(2) The estimated net proceeds from the Share Offer are based on the Offer Price of HK$1.40 and HK$1.00 per Share, respectively, after deduction of estimated related fees and expenses (excluding approximately RMB7,207,000 listing expenses which have been incurred as of 31 May 2013) and takes no account of any Shares which may be issued upon the exercise of theAdjustment Option or of any Shares which may be issued upon the exercise of the options which may be granted under the Share Option Scheme. For illustrative purpose, the estimated net proceeds are converted into Renminbi at the exchange rate of RMB1.00 to HK$1.2717.

– 348 – FINANCIAL INFORMATION

(3) The unaudited pro forma adjusted net tangible assets per Share are determined after the adjustments as described in note 2 above and on the basis that 360,000,000 Shares were in issue immediately following the completion of the Reorganisation, the Capitalisation Issue and the Share Offer but takes no account of any Shares which may be issued upon exercise of the Adjustment Option or of any Shares which may be issued upon the exercise of the options which may be granted under the Share Option Scheme or any Shares which may be granted and issued or repurchased by our Company pursuant to the General Mandate and the Repurchase Mandate. For illustrative purpose, the unaudited pro forma adjusted net tangible assets per Share is converted into Hong Kong dollars at the exchange rate of RMB1.00 to HK$1.2717.

(4) Except as disclosed above, no adjustment has been made to reflect any trading result or other transactions of our Group entered into subsequent to 31 May 2013. In particular, the unaudited pro forma adjusted net tangible assets of our Group has not taken into account the payment of dividend of RMB64 million which was declared on 15 November 2013 and was fully settled prior to the Listing.

NOMATERIALADVERSECHANGE

Our Directors confirmed that, up to the Latest Practicable Date, there had been no material adverse change in the financial or trading position or prospects since 31 May 2013 and there had been no event since 31 May 2013 which would materially affect the information shown in the combined financial information included in the Accountant’s Report set forth in Appendix I to this prospectus.

DISCLOSUREREQUIREDUNDERTHELISTINGRULES

Our Directors confirm that, as at the Latest Practicable Date, there is no circumstance that would give rise to a disclosure requirement under Rules 13.13 to 13.19 of the Listing Rules.

– 349 – FUTUREPLANSANDUSEOFPROCEEDS

FUTUREPLANSANDPROSPECTS

Our long-term goals are to strengthen our current operational system in Guangdong Province, the PRC and to continue expanding our retail network to other provinces and cities outside Guangdong Province, the PRC. To achieve these goals, we intend to adopt the following business strategies:

Strengthen and enhance our market position in Guangdong Province, the PRC and continue expanding our presence to other areas of the PRC with long term growth potential

We intend to further maintain and enhance our market position in the retail business in Guangdong Province, the PRC by increasing our presence and expanding our retail network in the region. This includes opening a department store in Enping, Guangdong Province, the PRC.

We intend to expand to other areas in the PRC. Using Guangdong Province, the PRC as our foundation, we are in the position to grasp untapped opportunities in other areas of the PRC with long-term growth potential. We intend to expand our retail network to include two other stores in the following locations which we believe to have significant potential: one in Zhenjiang city of Jiangsu Province and one in Tai’an city of Shandong Province the PRC. For more details on our retail network including current and new stores, please refer to the section headed “Business – Our operations – retail network” of this prospectus.

Certain outstanding expenditures from the establishment of Yangjiang store which commenced business in October 2013 and the establishment of the new Zhenjiang store and Enping store will be financed from net proceeds from the Share Offer for any costs relating to the planning, establishing of store, renovating store and obtaining products from concessionaire and direct suppliers.

Finding suitable locations

We continue to seek suitable locations for the establishment of our Stores to sustain our growth. A suitable location is characterised by, among other factors, accessibility to potential customers, carpark, accommodating spaces for further expansions and our design plans, being a developing area with future growth potential. Subject to the compliance with relevant requirements under the Listing Rules (including connected transactions), we will take into account the existing or soon to be established businesses in the vicinity (including those of the Yihua Investment Group) to attract customer flow into new development areas where we are located. We will continue participate in various development stages with the aim to minimise our start-up costs and expedite the business commencement for such stores.

– 350 – FUTUREPLANSANDUSEOFPROCEEDS

Update our customer-oriented services and increase our VIP customer base

We intend to continue to expand our customer base by increasing our customer-oriented services and adopting new strategies to enroll new VIP customers.

At our core, we offer an extensive range of over 1,000 brands from a number of international and domestic brands in our stores. However, we also provide quality customer- orientated services such as our direct lines of communications to customers via our customer service centres, customer hotline and customer service email. Furthermore, customers enrolled in our customer loyalty program can receive discounts, gifts and other benefits. We intend to continually improve our customer-orientated services and adjust the terms of our customer loyalty programs to match our clients’ expectations and as enticement to continue shopping at our stores.

Upgrade our information and technology systems

We plan to further enhance our operating efficiency by upgrading our information and technology systems, in particular our POS, inventory management and financial management systems. We also intend to expand the bandwidth of our current system, thereby enhance its safety and operational efficiency. After receiving the net proceeds from the Share Offer, our Company will begin seeking quotations from vendors in regards to the upgrade and it expects that it will start using part of the net proceeds allocated for this purpose in January 2014.

REASONSFORTHESHAREOFFERANDUSEOFPROCEEDS

The net proceeds from the Share Offer will strengthen our capital base and will provide funding for achieving our business strategy and carrying out its future plans as set out in this section. The net proceeds from the Share Offer are mainly for capital expenditure, including certain outstanding expenditures including but not limited to renovation costs for establishment of Yangjiang store which commenced business in October 2013 and also renovation and purchases of furniture and fixings for two of our three new stores in (i) Zhenjiang of Jiangsu Province, the PRC; and (ii) Enping of Guangdong Province, the PRC as set out in this section and which will be incurred in 2014. These new stores will be established one after another in 2014 (instead of at the same time). Other expenses relating to the opening of these new stores such as staff travelling expenses, staff training will be from the working capital of our Group and/or bank borrowings, as the Board deems fit. Each of the new department stores in Yangjiang, Zhenjiang and Enping is expected to have approximately 266 staff, approximately 370 staff and approximately 116 staff respectively. As at the Latest Practicable Date, our Group has not identified any acquisition target to expand our network.

After a site is decided for a new store, starting up the new store generally involve several stages, including but not limited to (i) designing and planning of floor layout, division of different sections, merchandise/branding mix of the new store; (ii) renovating according to the design and plan with consistent interior design to distinguish our brand name of “ूശϵ஬” (Yihua Department Store) from our competitors; (iii) moving in of furniture and fittings, installation of facilities, including securities and fire monitoring system, POS check-out system, centralised air conditioning, escalators etc., which are in line with the general standard

– 351 – FUTUREPLANSANDUSEOFPROCEEDS for operating a unified department store chain; (iv) invitation, selection of, and negotiation, finalisation and execution of definitive agreements with the direct suppliers, concessionaires and shop tenants; and (v) adjusting and final touch up on the interior layout of the new store before business commencements so as to cater for the preferences and demands of local customers. Such whole process may take several months to over a year depending on the location and the size of the new store.

Assuming an Offer Price of HK$1.20 per Share (being the mid-point of the stated range of the Offer Price of between HK$1.00 per Share and HK$1.40 per Share), the net proceeds of the Share Offer, after deducting the underwriting fees and related expenses payable by us in connection with the Share Offer, are estimated to be approximately HK$84 million (assuming the Adjustment Option is not exercised) and HK$100 million (assuming the Adjustment Option is fully exercised). Our Directors presently intend to apply such net proceeds of the Share Offer as follows:

Expected starting Offer price of Offer price of time of the use HK$1.20 and the HK$1.20 and the of net proceeds Adjustment Adjustment for capital Option is not Option is fully expenditure exercised exercised

Estimated net proceeds

Estimated net proceeds of the approximately approximately Share Offer, after deducting HK$84 million HK$100 million related expenses payable by us

Use of proceeds

For newly opened department December 2013 approximately approximately store in Yangjiang (Note) HK$10 million HK$10 million For opening of new department January 2014 approximately approximately store in Zhenjiang HK$36 million HK$44 million For opening of new department October 2014 approximately approximately store in Enping HK$24 million HK$30 million For upgrading our existing January 2014 approximately approximately information and technology HK$6 million HK$6 million systems General working capital of our – approximately approximately Group HK$8 million HK$10 million

Note: Yangjiang store commenced business in October 2013. The aforementioned part of the proceeds will be used for settling outstanding expenditures including but not limited to renovation expenses.

– 352 – FUTUREPLANSANDUSEOFPROCEEDS

Assuming an Offer Price of HK$1.00 per Share and HK$1.40 per Share (being the low end and the high end of the stated range of the Offer Price), our Directors presently intend to apply such net proceeds of the Share Offer as follows:

Offer price of Offer price of Expected Offer price of HK$1.00 and Offer price of HK$1.40 and starting time HK$1.00 and the HK$1.40 and the of the use of the Adjustment the Adjustment net proceeds Adjustment Option is Adjustment Option is for capital Option is not fully Option is not fully expenditure exercised exercised exercised exercised

Estimated net proceeds

Estimated net proceeds approximately approximately approximately approximately of the Share Offer, HK$67 HK$80 HK$102 HK$120 after deducting million million million million related expenses payable by us

Use of proceeds

For newly opened December approximately approximately approximately approximately department store in 2013 HK$10 HK$10 HK$10 HK$10 Yangjiang (Note) million million million million For opening of new January 2014 approximately approximately approximately approximately department store in HK$26 HK$34 HK$46 HK$55 Zhenjiang million million million million For opening of new October 2014 approximately approximately approximately approximately department store in HK$18 HK$22 HK$30 HK$37 Enping million million million million For upgrading our January 2014 approximately approximately approximately approximately existing information HK$6 million HK$6 million HK$6 million HK$6 million and technology systems General working capital – approximately approximately approximately approximately of our Group HK$7 million HK$8 million HK$10 HK$12 million million

Note: Yangjiang store commenced business in October 2013. The aforementioned part of the proceeds will be used for settling outstanding expenditures including but not limited to renovation expenses.

To the extent that the net proceeds of the Share Offer and the issue of new Shares under the Adjustment Option are not immediately applied for the above purposes, it is the present intention of our Directors that such net proceeds will be placed on short-term deposits with licensed banks and authorised financial institutions.

– 353 – UNDERWRITING

PLACINGANDPUBLICOFFERUNDERWRITERS

Joint Bookrunners and Joint Lead Managers

Kingsway Financial Services Group Limited Upbest Securities Company Limited

Public Offer Underwriters and Placing Underwriters

Kingsway Financial Services Group Limited Upbest Securities Company Limited

UNDERWRITINGARRANGEMENTSANDEXPENSES

Public Offer Underwriting Agreement

Pursuant to the Public Offer Underwriting Agreement, the Company is offering the Public Offer Shares for subscription, subject to the terms and conditions of this prospectus and the Application Forms relating thereto, at the Offer Price.

Subject to, among other matters, the Listing Committee of the Stock Exchange granting listing of, and permission to deal in, the Shares in issue and to be issued as mentioned herein on or before Wednesday, 11 December 2013 (or such later date as the Joint Bookrunners may agree in writing with the Company) and the Offer Price having been determined by the Company and the Joint Bookrunners at or prior to 12:00 noon on Monday, 2 December 2013 or such other date or time as may be agreed between the Company and the Joint Bookrunners, and in any event no later than Wednesday, 4 December 2013, the Public Offer Underwriters have agreed to subscribe for or procure subscribers to subscribe for, on the terms and conditions of this prospectus and the Application Forms relating thereto, the Public Offer Shares now being offered for subscription under the Public Offer and which are not taken up under the Public Offer.

– 354 – UNDERWRITING

Grounds for termination

If, at any time prior to 8:00 a.m. on the Listing Date:

(i) there shall develop, occur, exist or come into effect:

(a) any event, or series of events, beyond the reasonable control of the Public Offer Underwriters (including, without limitation, acts of government, strikes, lock-outs, fire, explosion, flooding, civil commotion, acts of war, acts of God, acts of terrorism, riot, public disorder, economic sanctions, outbreak of diseases or epidemics including SARS and avian influenza and such related/mutated forms or interruption or delay in transportation) in or affecting Hong Kong, the Cayman Islands, the PRC or any other jurisdiction relevant to any member of the Group or the Share Offer (collectively, the “Relevant Jurisdictions”) which in the reasonable opinion of either (i) the Sponsor; or (ii) the Joint Bookrunners together, has or would have the effect of making any part of the Public Offer Underwriting Agreement (including underwriting) incapable of performance in accordance with its terms or which prevents the processing of applications and/or payments pursuant to the Share Offer or pursuant to the underwriting thereof; or

(b) any change or development involving a prospective change, or any event or series of events likely to result in any change or development involving a prospective change in local, national, international, financial, economic, political, military, industrial, fiscal, regulatory or market conditions and matters and/or disaster or any monetary or trading settlement systems (including any moratorium, suspension or material restriction on trading in securities generally on the Stock Exchange, or a material fluctuation in the exchange rate of Hong Kong dollars against any foreign currency, or any interruption in securities settlement or clearance service or procedures in the Relevant Jurisdictions); or

(c) any new law or change or development involving a prospective change in existing laws or any change or development involving a prospective change in the interpretation or application thereof by any court or other competent authority in any of the Relevant Jurisdictions; or

(d) the imposition of economic sanctions, in whatever form, directly or indirectly, by, or for any of the Relevant Jurisdictions; or

(e) a change or development occurs involving a prospective change in taxation or exchange control (or the implementation of any exchange control) in any of the Relevant Jurisdictions; or

(f) any material change or development involving a prospective change, or a materialisation of, any of the risks set forth in the section headed “Risk factors” of this prospectus; or

– 355 – UNDERWRITING

(g) any litigation or claim of material importance of any third party being threatened or instigated against any member of the Group; or

(h) a valid demand by any creditor for repayment or payment of any indebtedness of any member of the Group or in respect of which any member of the Group is liable prior to its stated maturity; or

(i) any loss or damage sustained by any member of the Group (howsoever caused and whether or not the subject of any insurance or claim against any person); or

(j) a petition is presented for the winding up or liquidation of any member of the Group or any member of the Group makes any composition or arrangement with its creditors or enters into a scheme of arrangement or any resolution is passed for the winding-up of any member of the Group or a provisional liquidator, receiver or manager is appointed to take over all or part of the assets or undertaking of any member of the Group or anything analogous thereto occurs in respect of any member of the Group; or

(k) any general moratorium on commercial banking activities in Hong Kong (imposed by the Financial Secretary of Hong Kong and/or the Hong Kong Monetary Authority or other competent authority) or any of the Relevant Jurisdictions,

which in the reasonable opinion of either (i) the Sponsor; or (ii) the Joint Bookrunners together):

(1) is/are or shall have or could be expected to have an material adverse effect on the business, financial or other condition or prospects of the Group as a whole or in the case of sub-paragraph (e) above, to any present or prospective shareholder of the Company in his, her or its capacity as such; or

(2) has/have or shall have or could reasonably be expected to have an adverse effect on the success, marketability or pricing of the Share Offer or the level of applications under the Public Offer or the level of interest under the Placing; or

(3) make(s) it inadvisable, inexpedient or impracticable for the Share Offer to proceed.

(ii) there has come to the notice of either (i) the Sponsor; or (ii) the Joint Bookrunners together:

(a) that any statement, reasonably considered by it/them to be material, contained in any of this prospectus, the Application Forms and any documents in connection with the Share Offer was when the same was issued, or has become, untrue, incorrect or misleading in any material respect; or

(b) that any matter has arisen or has been discovered which would, had it arisen or been discovered immediately before the date of this prospectus, constitute an omission therefrom reasonably considered by it/them to be material to the Share Offer; or

– 356 – UNDERWRITING

(c) any material breach of any of the obligations imposed upon any party to the Public Offer Underwriting Agreement or the Placing Underwriting Agreement (other than on any of the Underwriters); or

(d) any change or development that reasonably considered by it/them to have or could be expected to have a material adverse effect on business affairs, prospects or the financial or trading position of the Group as a whole; or

(e) any breach, reasonably considered by it/them to be material, of any of the warranties;

it/they shall be entitled by notice in writing to the Company to terminate the Public Offer Underwriting Agreement; and

(iii) (a) the Placing Underwriting Agreement shall not have been duly executed between the Company, the Controlling Shareholders, the Sponsor, the Joint Bookrunners and the Placing Underwriters; and (b) the Price Determination Agreement shall not have been duly executed between the Company and the Joint Bookrunners at or before 12:00 noon on Monday, 2 December 2013 (or such other date or time as may be agreed between the Company and the Joint Bookrunners and in any event no later than Wednesday, 4 December 2013) due to any reason whatsoever.

Undertaking pursuant to the Public Offer Underwriting Agreement

Undertakings by the Company

The Company undertakes to each of the Sponsor and the Joint Bookrunners that it shall, and each of the Controlling Shareholders undertakes to each of the Sponsor and the Joint Bookrunners to procure the Company to, ensure that no further Shares or securities convertible into equity securities of the Company (whether or not of a class already listed) may be issued by the or form the subject of any agreement to such an issue by the Company within six months from the Listing Date (whether or not such issue of Shares or securities of the Company will be completed within six months from the commencement of dealings), except in certain circumstances prescribed by Rule 10.08 of the Listing Rules.

– 357 – UNDERWRITING

Undertakings by the Controlling Shareholders

Each of the Controlling Shareholders jointly and severally agrees and undertakes to each of the Sponsor, the Company, the Joint Bookrunners and the Stock Exchange that unless with the prior written consent of the Joint Bookrunners and if necessary, the Stock Exchange:

(a) during the period commencing on the date by reference to which disclosure of the Controlling Shareholders’ shareholding in the Company is made in this prospectus and ending on the date falling six months after the Listing Date (the “First Six-month Period”), he/it shall not, and shall procure that the relevant registered holder(s) and our associates and companies controlled by him/it and any nominee or trustee holding in trust for him/it shall not, (i) offer, pledge, charge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant or agree to grant any option, right or warrant to purchase or subscribe for, lend or otherwise transfer or dispose of, either directly or indirectly, any of the Shares or any securities convertible into or exercisable or exchangeable for, or that represent the right to receive any of the Shares or securities of the Company disclosed in this prospectus to be beneficially owned by him/it or the relevant company, nominee or trustee (including any interest in any shares in any company controlled by him/it) which is directly or indirectly a beneficial owner of any of the Shares or securities of the Company as disclosed in this prospectus as aforesaid (the “Relevant Securities”); (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, directly or indirectly, any of the economic consequences of ownership of the Relevant Securities, whether any of the foregoing transactions is to be settled by delivery of the Relevant Securities, in cash or otherwise; (iii) agree (conditionally or unconditionally) to enter into or effect any transaction with the same economic effect as any of the transactions referred to in paragraphs (i) or (ii) above; (iv) announce any intention to enter into or effect any of the transactions referred to in paragraphs (i), (ii) or (iii) above;

(b) he/it shall not, and shall procure that the relevant registered holder(s) and his/its associates or companies controlled by him/it and any nominee or trustee holding in trust for him/it shall not, directly or indirectly in the period of six months immediately following the expiry of the First Six-month Period (the “Second Six-month Period”), dispose of, nor enter into any agreement to dispose of or otherwise create any options, rights, interests or encumbrances in respect of, any Relevant Securities if, immediately following such disposal or upon the exercise or enforcement of such options, rights, interests or encumbrances, he/it would cease to be a Controlling Shareholder of the Company or would together with the other Controlling Shareholders cease to be controlling shareholders (as defined in the Listing Rules) of the Company;

– 358 – UNDERWRITING

(c) in the event of a disposal of any Shares or securities of the Company or any interest therein within the Second Six-month Period, he/it shall take all reasonable steps to ensure that such a disposal shall not create a disorderly or false market for any Shares or other securities of the Company;

(d) he/it shall, and shall procure that his/its associates and companies controlled by he/it and nominees or trustees holding in trust for him/it shall, comply with all the restrictions and requirements under the Listing Rules on the sale, transfer or disposal by he/it or by the registered holder controlled by him/it of any Shares;

(e) he/it shall comply with all applicable restrictions under the Listing Rules on the disposal by him/it or by the registered holder(s) of any Shares or other securities of the Company in respect of which he/it is disclosed in this prospectus to be interested therein;

(f) neither he/it nor any of his/its associates nor any companies controlled by him/it nor any nominee or trustee holding in trust for him/it has any present intention of disposing of any Shares or other securities of the Company in respect of which he/it is disclosed in this prospectus to be interested therein;

(g) he/it shall not, and shall procure that none of his/its associates and the companies controlled by he/it or any nominee or trustee holding in trust for he/it shall/will sell, transfer or otherwise dispose of (including without limitation the creation of any option over) or create any rights in respect of any interest in any Shares or securities of the Company owned or held by him/it, his/its associates or the relevant company, nominee or trustee (including any interest in any shares in any company controlled by he/it which is directly or indirectly the beneficial owner of any of the Shares or securities of the Company) immediately following the completion of the Capitalisation Issue and the Share Offer (i) within the First Six-month Period; and (ii) within the Second Six-month Period;

(h) during the 12-month period from the Listing Date, when it pledges or charges any securities or interests in the Relevant Securities, it will immediately inform the Company and the Joint Bookrunners in writing of such pledges or charges together with the number of securities and nature of interest so pledged or charged; and

(i) during the 12-month period from the Listing Date, when it receives indications, either verbal or written, from any pledgee or chargee that any of the pledged or charged securities or interests in the securities of the Company will be sold, transferred or disposed of, immediately inform the Company and the Joint Bookrunners in writing of such indications.

– 359 – UNDERWRITING

Placing Underwriting Agreement

In connection with the Placing, it is expected that the Company and the Controlling Shareholders will, on or about 2 December 2013, enter into the Placing Underwriting Agreement with, among other parties, the Sponsor, the Joint Bookrunners and the Placing Underwriters. Under the Placing Underwriting Agreement, it is expected that the Placing Underwriters would, subject to certain conditions set out therein, agree to subscribe for or procure subscribers to subscribe for the Placing Shares.

Under the Placing Underwriting Agreement, the Company intends to grant to the Joint Bookrunners the Adjustment Option, which is exercisable by the Joint Bookrunners (for further details of the Adjustment Option, please refer to the section headed “Structure of the Share Offer” of this prospectus), to require the Company to issue up to an aggregate of 13,500,000 additional Shares, representing 15% of the number of Offer Shares initially available under the Share Offer, at the Offer Price, among other things, to cover over-allocations in the Placing, if any.

Commission and expenses

The Public Offer Underwriters will receive a commission of 3% of the aggregate Offer Price of all the Public Offer Shares and the Placing Underwriters will receive an underwriting commission of 3% of the aggregate of the Offer Price of all the Placing Shares, out of which they will pay any sub-underwriting commissions. The Sponsor will receive financial advisory and documentation fees. The underwriting commission, financial advisory and documentation fee, Stock Exchange listing fees and trading fee, SFC transaction levy, legal and other professional fees together with applicable printing and other expenses relating to the Share Offer are estimated to amount to approximately HK$23.2 million in total (based on an Offer Price of HK$1.20 per Share, being the mid-point of the indicative Offer Price range of between HK$1.00 and HK$1.40 per Share, and on the assumption that the Adjustment Option is not exercised), and will be payable by the Company.

Undertaking from a Substantial Shareholder

Mr. Fan, a Substantial Shareholder, will enter into a lock-up undertaking in favour of Kingsway Capital and the Joint Bookrunners, that unless with the prior consent of the Joint Bookrunners, at any time during the period commencing on the date of the undertaking and ending on a date which is six months after the Listing Date, he shall not,

(i) offer, pledge, charge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant or agree to grant any option, right or warrant to purchase or subscribe for, lend or otherwise transfer or dispose of, either directly or indirectly, any shares in Yinglifeng Developments or any securities convertible into or exercisable or exchangeable for, or that represent the right to receive any shares in Yinglifeng Developments or securities of Yinglifeng Developments (”Relevant Yinglifeng Securities”);

– 360 – UNDERWRITING

(ii) enter into any swap or other arrangement that transfers to another, in whole or in part, directly or indirectly, any of the economic consequences of ownership of the Relevant Yinglifeng Securities, whether any of the foregoing transactions is to be settled by delivery of Relevant Yinglifeng Securities, in cash or otherwise;

(iii) agree (conditionally or unconditionally) to enter into or effect any transaction with the same economic effect as any of the transactions referred to in paragraphs (i) or (ii) above; and

(iv) announce any intention to enter into or effect any of the transactions referred to in paragraphs (i), (ii) or (iii) above.

Underwriters’ interests in the Company

Save as disclosed under the paragraph headed “Sponsor’s interests in the Company” below and as contemplated under the Public Offer Underwriting Agreement and the Placing Underwriting Agreement, as at the Latest Practicable Date, none of the Underwriters was interested, directly or indirectly, in any shares or securities in any member of the Group or had any right or option (whether legally enforceable or not) to subscribe for, or to nominate persons to subscribe for, any shares or securities in any member of the Group.

Sponsor’s interests in the Company

Save as pursuant to the Underwriting Agreements and as disclosed herein, as at the Latest Practicable Date neither the Sponsor nor any of its associates was interested, directly or indirectly, in any shares or securities in any member of the Group or had any right or option (whether legally enforceable or not) to subscribe for, or to nominate persons to subscribe for, any shares or securities in any member of the Group. No director or employee of any of the Sponsor who is involved in providing advice to the Company has or may, as a result of the Share Offer, have any interest in any class of securities of the Company or any other member of the Group (including options or rights to subscribe for such securities but, for the avoidance of doubt, excluding interests in securities that may be subscribed for by any such director or employee of the Sponsor pursuant to the Public Offer).

None of the Sponsor or any of its associates has accrued any material benefit as a result of the successful outcome of the Share Offer, including by way of example, the repayment of material outstanding indebtedness or success fees, other than the following:

(i) by way of underwriting commission to be paid to Kingsway Financial for acting as one of the Public Offer Underwriters pursuant to the Public Offer Underwriting Agreement and one of the Placing Underwriters pursuant to the Placing Underwriting Agreement;

(ii) the financial advisory and documentation fees to be paid to the Sponsor; and

(iii) certain associates of the Sponsor, whose ordinary business involves the trading of and dealing in securities, may be involved in the trading of and dealing in the securities in the Company.

– 361 – UNDERWRITING

No director or employee of the Sponsor has a directorship in the Company or any other member of the Group.

COMPLIANCEADVISERAGREEMENT

Pursuant to the Compliance Adviser Agreement, the Company will appoint Kingsway Capital and Kingsway Capital will agree to act as the compliance adviser of the Company with effect from the Listing Date until the date on which the Company complies with Rule 13.46 of the Listing Rules in respect of its financial results for the first full financial year commencing after the Listing Date or until the Compliance Adviser Agreement is otherwise terminated pursuant to its terms and conditions. Details of the terms of the Compliance Adviser Agreement are set out under the section headed “Directors, senior management and staff – Compliance adviser” of this prospectus.

– 362 – STRUCTUREOFTHESHAREOFFER

PRICE PAYABLE ON APPLICATION

The Offer Price will not be more than HK$1.40 and is expected to be not less than HK$1.00 per Offer Share. Based on the maximum Offer Price of HK$1.40 per Offer Share, plus 1% brokerage fee, 0.003% SFC transaction levy and 0.005% Stock Exchange trading fee, the total cost payable for one board lot of 2,000 Offer Shares will amount to a total of HK$2,828.22. The Application Forms have tables showing the exact amount payable for multiples of the Offer Shares.

The Offer Price is expected to be fixed by an agreement between the Company and the Joint Bookrunners, at or prior to 12:00 noon on Monday, 2 December 2013 or such other date or time as may be agreed between the Company and the Joint Bookrunners and in any event no later than 4 December 2013.

If, based on the level of interests expressed by prospective professional, institutional and/or other investors during the book-building process, the Joint Bookrunners think it appropriate (for instance, if the level of interests is below the indicative Offer Price range), the indicative Offer Price range may be reduced below that as stated in this prospectus at any time prior to the morning of the last day for lodging applications. In such case, the Company will, as soon as practicable following the decision to make such reduction, and in any event not later than the morning of the last day for lodging applications under the Public Offer, cause notice of the reduction of the indicative Offer Price range to be published in The Standard (in English) and the Hong Kong Economic Times (in Chinese) and to be posted on the Company’s website at www.yihua.com.cn and the Stock Exchange’s website at www.hkexnews.hk. Such notice will also include any financial information which may change as a result of any such reduction.

If, for whatsoever reason, the Offer Price is not agreed between the Company and the Joint Bookrunners at or prior to 12:00 noon on Monday, 2 December 2013 or such other date or time as may be agreed between the Company and the Joint Bookrunners, and in any event no later than 4 December 2013, the Share Offer will not become unconditional and will lapse immediately. In such event, the Company will issue an announcement to be published in The Standard (in English) and the Hong Kong Economic Times (in Chinese) and to be posted on the Company’s website at www.yihua.com.cn and the Stock Exchange’s website at www.hkexnews.hk.

CONDITIONSOFTHESHAREOFFER

Acceptance of your application for the Offer Shares is conditional upon:

1. Listing

The Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Shares in issue and to be issued as mentioned in this prospectus;

2. Underwriting Agreements

The Company, the Controlling Shareholders, the Sponsor, the Joint Bookrunners and the relevant Underwriters entering into the Underwriting Agreements whereby the latter will underwrite the Offer Shares at the Offer Price;

– 363 – STRUCTUREOFTHESHAREOFFER

The obligations of the Underwriters under the Underwriting Agreements becoming unconditional and not being terminated before 8:00 a.m. on the Listing Date. Details of the Underwriting Agreements and their respective conditions and grounds for termination are set out in the section headed “Underwriting” of this prospectus. If any of these conditions is not fulfilled on or before the Listing Date (or such later date as either (i) the Sponsor; or (ii) the Joint Bookrunners together may agree in writing with the Company), the Share Offer will lapse and your application money will be returned to you, without interest, and by post at your own risk. The terms on which your money will be returned to you are set out in the section headed “How to apply for the Public Offer Shares – Despatch/Collection of share certificates and refund monies” of this prospectus. In the meantime, your money will be held in one or more separate bank accounts with the receiving banker or other banks in Hong Kong licensed under the Banking Ordinance (Chapter 155 of the Laws of Hong Kong);

3. Agreement between the Controlling Shareholders and their advisers

The terms of the Listing and the Share Offer being agreed between Controlling Shareholders and their advisers; and

4. Other agreements

The Listing and the Share Offer is not terminated as a result of any other terms and conditions as may be provided for in any agreement entered into by the Company and/or Controlling Shareholders in relation to the Listing and the Share Offer, including any force majeure or similar clause.

OFFERMECHANISM

This prospectus is published in connection with the Share Offer, which comprises the Placing and the Public Offer. Initially, 81,000,000 Shares (subject to reallocation and the Adjustment Option) are to be offered pursuant to the Placing to professional, institutional and private investors and 9,000,000 Shares (subject to reallocation) are to be offered to the public in Hong Kong under the Public Offer. References herein to applications, Application Forms, application monies or to the procedure for application relate solely to the Public Offer. The Offer Shares (subject to the Adjustment Option) will represent 25% of the Company’s enlarged issued share capital immediately after completion of the Share Offer and the Capitalisation Issue.

The Public Offer is fully underwritten by the Public Offer Underwriters subject to, amongst others, the Company and the Joint Bookrunners agreeing on the Offer Price. We expect to enter into the Placing Underwriting Agreement relating to the Placing on or about 2 December 2013 and that the Placing will be fully underwritten by the Placing Underwriters subject to, amongst others, the Company and the Joint Bookrunners agreeing on the Offer Price.

For a summary of the underwriting arrangements, the Public Offer Underwriting Agreement and the Placing Underwriting Agreement, please refer to the section headed “Underwriting” of this prospectus.

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Investors may apply for Public Offer Shares under the Public Offer or indicate an interest for Placing Shares under the Placing, but may not do both.

PLACING

The Company is initially offering, subject to the Adjustment Option and possible reallocation on the basis discussed below, 81,000,000 Shares, representing 90% of the total number of Shares being offered under the Share Offer, for subscription by way of the Placing. Under the Placing, the Placing Underwriters, on behalf of the Company, will conditionally place the Placing Shares with professional, institutional and private investors. Professional and institutional investors generally include brokers, dealers, companies (including fund managers) whose ordinary business involves dealing in shares and other securities and corporate entities which regularly invest in shares and other securities. We expect the Placing will be fully underwritten by the Placing Underwriters subject to, amongst others, the Company and the Joint Bookrunners agreeing on the Offer Price. Allocation of the Placing Shares pursuant to the Placing is based on a number of factors, including the level and timing of demand and whether or not it is expected that the relevant investor is likely to buy further Shares and/or hold or sell its Shares after the listing of the Shares on the Stock Exchange. Such allocation is intended to result in a distribution of the Placing Shares on a basis which would lead to the establishment of a solid shareholder base to the benefit of the Company and its shareholders as a whole. Investors allocated with the Placing Shares cannot apply for the Public Offer Shares under the Public Offer. The Placing is conditional on the fulfillment of all the conditions stated in the paragraph headed “Conditions of the Share Offer” above.

PUBLICOFFER

The Company is initially offering 9,000,000 Shares at the Offer Price under the Public Offer, representing 10% of the total number of Shares being offered under the Share Offer for subscription in Hong Kong, subject to reallocation as mentioned in this section. The Public Offer is managed by the Joint Bookrunners and is fully underwritten by the Public Offer Underwriters subject to, amongst others, the Company and the Joint Bookrunners agreeing on the Offer Price.

The Public Offer is open to all members of the public in Hong Kong as well as to institutional and professional investors. Applicants for the Public Offer Shares under the Public Offer may not apply for the Placing Shares under the Placing. Allocation of Shares to investors under the Public Offer will be based solely on the level of valid applications received under the Public Offer. The Public Offer will be subject to the conditions stated in the paragraph headed “Conditions of the Share Offer” above.

For allocation purposes only, the Public Offer Shares will be divided equally into two pools of 4,500,000 Shares each: Pool A and Pool B, both of which are available on an equitable basis to successful applicants. The Public Offer Shares in Pool A will be allocated on an equitable basis to applicants who have applied for the Public Offer Shares with a total subscription amount of HK$5 million or below (excluding the brokerage fee, SFC transaction

– 365 – STRUCTUREOFTHESHAREOFFER levy and Stock Exchange trading fee payable). The Public Offer Shares in Pool B will be allocated on an equitable basis to applicants who have applied for the Public Offer Shares with a total subscription amount of more than HK$5 million and up to the value of Pool B (excluding the brokerage fee, SFC transaction levy and the Stock Exchange trading fee payable). Applicants should be aware that applications in different pools may receive different allocation ratios. Where one but not both of the pools is undersubscribed, the surplus Public Offer Shares will be transferred to the other pool to satisfy the demand in that pool and be allocated accordingly.

Applicants can only receive an allocation of the Public Offer Shares from either Pool A or Pool B but not from both pools. Multiple or suspected multiple applications and any application for more than 50% of the Public Offer Shares initially being offered for subscription by the public (that is, more than 4,500,000 Shares) will be rejected. Only one application on a WHITE or YELLOW Application Form or by way of giving electronic application instructions to HKSCC via CCASS may be made for the benefit of any person. Multiple applications or suspected multiple applications within either pool and between pools will also be rejected.

BASISOFALLOCATIONOFTHEOFFERSHARES

The allocation of Shares between the Public Offer and the Placing is subject to the reallocation adjustment which in turn depends on the level of subscription of the Public Offer. The reallocation will be made on the following basis:

(i) if the number of Public Offer Shares validly applied for under the Public Offer equals or exceeds 135,000,000 Shares (being 15 times of the number of Public Offer Shares initially available for public subscription under the Public Offer) but is less than 450,000,000 Shares (being 50 times of the number of Public Offer Shares initially available for public subscription under the Public Offer), then the number of Shares available for public subscription under the Public Offer will be increased to 27,000,000 Shares, representing 30% of the 90,000,000 Shares available under the Share Offer (assuming the Adjustment Option will not be exercised);

(ii) if the number of Public Offer Shares validly applied for under the Public Offer equals or exceeds 450,000,000 Shares (being 50 times of the number of Public Offer Shares initially available for public subscription under the Public Offer) but is less than 900,000,000 Shares (being 100 times of the number of Public Offer Shares initially available for public subscription under the Public Offer), then the number of Public Offer Shares available for public subscription under the Public Offer will be increased to 36,000,000 Shares, representing 40% of the 90,000,000 Shares available under the Share Offer (assuming the Adjustment Option will not be exercised); and

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(iii) if the number of Public Offer Shares validly applied for under the Public Offer equals or exceeds 900,000,000 Shares (being 100 times of the number of Public Offer Shares initially available for public subscription under the Public Offer), then the number of Public Offer Shares available for public subscription under the Public Offer will be increased to 45,000,000 Shares, representing 50% of the 90,000,000 Shares available under the Share Offer (assuming the Adjustment Option will not be exercised). In all cases, the additional Shares reallocated to the Public Offer will be allocated equally between pool A and pool B and the number of Offer Shares allocated to the Placing will be correspondingly reduced.

If either the Public Offer or the Placing is not fully subscribed, the Joint Bookrunners will have the discretion to reallocate all or any unsubscribed Shares originally included in the Public Offer to the Placing (or vice versa, as appropriate) in such proportion and manner as it considers appropriate.

OVER-SUBSCRIPTION

Allocation of Public Offer Shares to applicants under the Public Offer will be based solely on the level of valid applications received. The basis of allocation may vary, depending on the number of Public Offer Shares validly applied for by each applicant. However, this may involve balloting, which would mean that some applicants may be allotted more Shares than others who have applied for the same number of Public Offer Shares and that applicants who are not successful in the ballot may not receive any Public Offer Shares.

ADJUSTMENTOPTION

In connection with the Share Offer and pursuant to the Placing Underwriting Agreement, we expect to grant either an Over-allotment Option or an Offer Size Adjustment Option to the Joint Bookrunners but not both.

If the final Offer Price as agreed between the Joint Bookrunners and the Company is equal to or more than HK$1.12 and as a result, the size of the Share Offer is equal to or more than HK$100 million, the Joint Bookrunners can only exercise the Over-allotment Option to cover over-allocations under the Share Offer.

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OFFERSIZEADJUSTMENTOPTION

Pursuant to the Offer Size Adjustment Option, the Joint Bookrunners will have the right, exercisable at any time during the period from the date of this prospectus to 10 December 2013, the last Business Day prior to the Listing Date, to require the Company to issue, at the Offer Price, up to an aggregate of 13,500,000 additional Shares, representing 15% of the initial Offer Shares to cover over-allocations in the Placing, subject to the terms of the Placing Underwriting Agreement. If the Offer Size Adjustment Option is exercised in full, the additional Shares will represent approximately 3.61% of the enlarged issued share capital of the Company immediately following the completion of the Share Offer, the Capitalisation Issue and the exercise of the Offer Size Adjustment Option.

For the avoidance of doubt, the purpose of the Offer Size Adjustment Option is to provide flexibility for the Joint Bookrunners to meet any excess demand in the Share Offer. The Offer Size Adjustment Option will not be associated with any price stabilisation activities of the Shares in the secondary market after the Listing and will not be subject to the Securities and Futures (Price Stabilizing) Rules of the SFO (Chapter 571W of the laws of Hong Kong). No purchase of the Shares in the secondary market will be effected to cover any excess demand in the Share Offer which will only be satisfied by the exercise of the Offer Size Adjustment Option in full or in part.

Our Company will disclose in its allotment results announcement whether and to what extent the Offer Size Adjustment Option has been exercised, and will confirm in the announcement that, if the Offer Size Adjustment Option is not exercised by then, the Offer Size Adjustment Option will lapse and cannot be exercised on any future date. The allotment results announcement will be published on the Stock Exchange website at www.hkexnews.hk and our Company’s website at www.yihua.com.cn.

OVER-ALLOTMENTOPTION

Pursuant to the Over-allotment Option, the Joint Bookrunners will have the right, exercisable at any time from the Listing Date until the date falling the 30th day after the last day for the lodging of applications under the Public Offer, to require the Company to issue the Over-allotment Shares at the Offer Price and on the same terms as those applicable to the Share Offer, representing 15% of the initial Offer Shares to, among other things, cover over- allocations in the Placing and/or the obligations of the Joint Bookrunners to return securities borrowed under the Stock Borrowing Agreement. If the Over-allotment Option is exercised in full, 13,500,000 additional Shares, representing approximately 15% of the initial offer Shares. In the event that the Over-allotment Option is exercised, a press announcement will be made.

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STABILISATION

Stabilisation is a practice used by underwriters in some markets to facilitate the distribution of securities. To stabilise, the underwriters may bid for, or purchase, the newly issued securities in the secondary market, during a specified period of time, to minimise and, if possible, prevent a decline in the market price of the securities below the initial offering price. In Hong Kong, the price at which stabilisation is effected is not permitted to exceed the initial offering price.

In connection with the Share Offer, the Joint Bookrunners (the “Joint Stabilising Managers”), their affiliates or any person acting for them, may over-allocate or effect transactions with a view to stabilising or maintaining the market price of the Shares at a level higher than that which might otherwise prevail for a limited period commencing from the Listing Date.

Such transactions may be effected in all jurisdictions where it is permissible to do so, in each case in compliance with all applicable laws and regulatory requirements. However, there is no obligation on the Joint Stabilising Managers, their affiliates or any person acting for them to do this. Such stabilisation, if commenced, will be conducted at the absolute discretion of the Joint Stabilising Managers, their affiliates or any person acting for them and may be discontinued at any time, and must be brought to an end after a limited period. The number of Shares that may be over-allocated will not be greater than the number of Shares which may be allotted and issued upon exercise of the Over-allotment Option, being 13,500,000 Shares, which is 15% of the Shares initially available under the Share Offer.

The Joint Stabilising Managers, their affiliates or any person acting for them may take all or any of the following stabilising actions in Hong Kong during the stabilisation period:

(i) purchase, or agree to purchase, any of the Shares or offer or attempt to do so for the sole purpose of preventing or minimising any reduction in the market price of the Shares; and/or

(ii) in connection with any action described in paragraph (i) above:

(A) (1) over-allocate the Shares; or

(2) sell or agree to sell the Shares so as to establish a short position in them, for the sole purpose of preventing or minimising any reduction in the market price of the Shares;

(B) exercise the Over-allotment Option and purchase or subscribe for or agree to purchase or subscribe for the Shares in order to close out any position established under paragraph (ii)(A) above;

(C) sell or agree to sell any of the Shares acquired by it in the course of the stabilising action referred to in paragraph (i) above in order to liquidate any position that has been established by such action; and/or

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(D) offer or attempt to do anything as described in paragraph (ii)(A)(2), (ii)(B) or (ii)(C) above.

The Joint Stabilising Managers, their affiliates or any person acting for them, may, in connection with the stabilising action, maintain a long position in the Shares, and there is no certainty as to the extent to which and the time period for which it will maintain such position. Investors should be warned of the possible impact of any liquidation of the long position by the Joint Stabilising Managers, their affiliates or any person acting for them, which may include a decline in the market price of the Shares.

Stabilisation cannot be used to support the price of the Shares for longer than the stabilisation period, which begins on the day on which dealings in the Shares commence on the Stock Exchange and ends on the 30th day after the last day for the lodging of applications under the Public Offer. The stabilisation period is expected to expire on Sunday, 29 December 2013. After this date, when no further stabilising action may be taken, demand for the Shares, and therefore their market price, could fall.

Any stabilising action taken by the Joint Stabilising Managers, their affiliates or any person acting for them, may not necessarily result in the market price of the Shares staying at or above the Offer Price either during or after the stabilisation period. Stabilisation bids or market purchases effected in the course of the stabilisation action may be made at any price at or below the Offer Price and can therefore be done at a price below the price investors have paid in acquiring the Shares.

All stabilising actions will be taken in accordance with the laws, rules and regulations in place in Hong Kong on stabilisation.

STOCKBORROWINGARRANGEMENT

In connection with the Share Offer, the Joint Bookrunners may over-allocate up to but not more than 13,500,000 additional Shares and cover such over-allocations by exercising the Over-allotment Option or by making purchases in the secondary market at prices that do not exceed the Offer Price or through stock borrowing arrangements or a combination of these means. In particular, for the purpose of covering such over-allocations, the Joint Bookrunners may borrow up to 13,500,000 Shares from Jaguar Asian, equivalent to the maximum number of Shares to be issued on a full exercise of the Over-allotment Option, under the Stock Borrowing Agreement. Such stock borrowing arrangement will be in compliance with Rule 10.07(3) of the Listing Rules such that it will not be subject to the restrictions as set out in Rule 10.07(1) of the Listing Rules.

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A summary of the stock borrowing arrangement, in compliance with Rule 10.07(3) of the Listing Rules, is set out as follows:

• the Stock Borrowing Agreement will only be effected by the Joint Bookrunners for settlement of over-allocation in connection with the Placing;

• the maximum number of Shares to be borrowed from Jaguar Asian by the Joint Bookrunners will be limited to the maximum number of Shares which may be issued upon full exercise of the Over-allotment Option which is 13,500,000 Shares;

• the same number of Shares so borrowed must be returned to Jaguar Asian or its nominee(s), as the case may be, on or before the third business day following the earlier of (i) the last day on which the Shares may be issued by the Company pursuant to the Over-allotment Option or (ii) the day on which the Over-allotment Option is exercised in full and the relevant shares are issued;

• the Stock Borrowing Agreement will be effected in compliance with all applicable laws, rules and regulatory requirements; and

• no payment or other benefit will be made to Jaguar Asian by the Joint Bookrunners under the stock borrowing arrangement.

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1. HOWTOAPPLY

If you apply for Public Offer Shares, then you may not apply for or indicate an interest for Placing Shares.

To apply for Public Offer Shares, you may:

• use a WHITE or YELLOW Application Form; or

• electronically cause HKSCC Nominees to apply on your behalf.

None of you or your joint applicant(s) may make more than one application, except where you are a nominee and provide the required information in your application.

Our Company or the Joint Bookrunners and their respective agents may reject or accept any application in full or in part for any reason at their discretion.

2. WHO CANAPPLY

You can apply for Public Offer Shares on a WHITE or YELLOW Application Form if you or the person(s) for whose benefit you are applying:

• are 18 years of age or older;

• have a Hong Kong address;

• are outside the United States, and are not a United States Person (as defined in Regulation S under the U.S. Securities Act); and

• are not a legal or natural person of the PRC (other than qualified domestic institutional investors).

If you are a firm, the application must be in the individual members’ names. If you are a body corporate, the application form must be signed by a duly authorised officer, who must state his representative capacity and stamped with your corporation’s chop.

If an application is made by a person under a power of attorney, the Joint Bookrunners (or their respective agents or nominees) may accept it at their discretion and on any conditions they think fit, including evidence of the attorney’s authority.

The number of joint applicants may not exceed four for the Public Offer Shares.

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Unless permitted by the Listing Rules, you cannot apply for any Public Offer Shares if you are:

• an existing beneficial owner of Shares and/or any its subsidiaries;

• a Director or chief executive officer of our Company and/or any of its subsidiaries;

• an associate (as defined in the Listing Rules) of any of the above;

• a connected person (as defined in the Listing Rules) of our Company or will become a connected person of our Company immediately upon completion of the Share Offer; or

• have been allocated or have applied for or indicated an interest in any Placing Shares under the Placing.

3. APPLYING FOR PUBLIC OFFER SHARES

Which application channel to use

For Public Offer Shares to be issued in your own name use a WHITE Application Form.

For Public Offer Shares to be issued in the name of HKSCC Nominees and deposited directly into CCASS to be credited to your or a designated CCASS Participant’s stock account, use a YELLOW Application Form or electronically instruct HKSCC via CCASS to cause HKSCC Nominees to apply for you.

Where to collect the Application Forms

You can collect a WHITE Application Form and a prospectus during normal business hours from 9:00 a.m. on Tuesday, 26 November 2013 to 12:00 noon on Friday, 29 November 2013 from:

(i) the following addresses of the Joint Bookrunners or the Public Offer Underwriter:

Kingsway Financial Services Group Limited 7th Floor, Tower 1, Lippo Centre 89 Queensway Hong Kong

Upbest Securities Company Limited 2nd Floor, Wah Kit Commercial Centre 302 Des Voeux Road Central Hong Kong

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(ii) any of the following branches of The Bank of EastAsia, Limited, the receiving bank for the Public Offer:

Branch Name Address

Hong Kong Island

Main Branch 10 Des Voeux Road Central, Hong Kong

Causeway Bay Branch 46 Yee Wo Street

399 Hennessy Road Ground Floor, Branch Eastern Commercial Centre, 399 Hennessy Road, Wanchai

Kowloon

Yaumatei Branch Ground Floor, 526 Nathan Road

Waterloo Road Branch Shop A, Ground Floor, Richland House, 77B & 77C Waterloo Road

Tsim Sha Tsui Branch Shop A & B, Milton Mansion, 96 Nathan Road

New Territories

Tai Po Branch 62-66 Po Heung Street, Tai Po Market

Ha Kwai Chung Branch 202 Hing Fong Road

You can collect a YELLOW Application Form and a prospectus during normal business hours from 9:00 a.m. on Tuesday, 26 November 2013 until 12:00 noon on Friday, 29 November 2013 from the depository counter of HKSCC at 2nd Floor, Infinitus Plaza, 199 Des Voeux Road Central, Hong Kong or from your stockbroker.

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Time for lodging Application Forms

Your completed WHITE or YELLOW Application Form, together with a cheque or a banker’s cashier order attached and marked payable to “The Bank of East Asia (Nominees) Limited – Yi Hua Department Store Public Offer” for the payment, should be deposited in the special collection boxes provided at any of the branches of the receiving bank listed above, at the following times:

Tuesday, 26 November 2013 — 9:00 a.m. to 5:00 p.m. Wednesday, 27 November 2013 — 9:00 a.m. to 5:00 p.m. Thursday, 28 November 2013 — 9:00 a.m. to 5:00 p.m. Friday, 29 November 2013 — 9:00 a.m. to 12:00 noon

The application lists will be open from 11:45 a.m. to 12:00 noon on Friday, 29 November 2013, the last application day or such later time as described in the paragraph headed “Effect of bad weather conditions on the opening of the applications lists” of this section.

4. TERMS AND CONDITIONS OF AN APPLICATION

Follow the detailed instructions in the Application Form carefully; otherwise, your application may be rejected.

By submitting an Application Form, among other things, you (and if you are joint applicants, each of you jointly and severally) for yourself or as an agent or a nominee on behalf of each person for whom you act:

(i) undertake to execute all relevant documents and instruct and authorise our Company and/or the Sponsor and/or the Joint Bookrunners (or their agents or nominees), as agents of our Company, to execute any documents for you and to do on your behalf all things necessary to register any Public Offer Shares allocated to you in your name or in the name of HKSCC Nominees as required by theArticles ofAssociation;

(ii) agree to comply with the Companies Ordinance and the Articles of Association;

(iii) confirm that you have read the terms and conditions and application procedures set out in this prospectus and in the Application Form and agree to be bound by them;

(iv) confirm that you have received and read this prospectus and have only relied on the information and representations contained in this prospectus in making your application and will not rely on any other information or representations except those in any supplement to this prospectus;

(v) confirm that you are aware of the restrictions on the Share Offer in this prospectus;

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(vi) agree that none of our Company, the Sponsor, the Joint Bookrunners their respective directors, officers, employees, partners, agents, advisers and any other parties involved in the Share Offer is or will be liable for any information and representations not in this prospectus (and any supplement to it);

(vii) undertake and confirm that you or the person(s) for whose benefit you have made the application have not applied for or taken up, or indicated an interest for, and will not apply for or take up, or indicate an interest for, any Placing Shares under the Placing nor participated in the Placing;

(viii) agree to disclose to our Company, the Hong Kong Branch Share Registrar, receiving bank, the Sponsor, the Joint Bookrunners and/or their respective advisers and agents any personal data which they may require about you and the person(s) for whose benefit you have made the application;

(ix) if the laws of any place outside Hong Kong apply to your application, agree and warrant that you have complied with all such laws and none of our Company, the Sponsor, the Joint Bookrunners nor any of their respective officers or advisers will breach any law outside Hong Kong as a result of the acceptance of your offer to purchase, or any action arising from your rights and obligations under the terms and conditions contained in this prospectus and the Application Form;

(x) agree that once your application has been accepted, you may not rescind it because of an innocent misrepresentation;

(xi) agree that your application will be governed by the laws of Hong Kong;

(xii) represent, warrant and undertake that (i) you understand that the Public Offer Shares have not been and will not be registered under the U.S. Securities Act; and (ii) you and any person for whose benefit you are applying for the Public Offer Shares are outside the United States (as defined in Regulation S) or are a person described in paragraph (h)(3) of Rule 902 of Regulation S;

(xiii) warrant that the information you have provided is true and accurate;

(xiv) agree to accept the Public Offer Shares applied for, or any lesser number allocated to you under the application;

(xv) authorise our Company to place your name(s) or the name of the HKSCC Nominees, on our Company’s register of members as the holder(s) of any Public Offer Shares allocated to you, and our Company and/or its agents to send any share certificate(s) and/or any refund cheque(s) to you or the first-named applicant for joint application by ordinary post at your own risk to the address stated on the application, unless you have chosen to collect the share certificate(s) and/or refund cheque(s) in person;

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(xvi) declare and represent that this is the only application made and the only application intended by you to be made to benefit you or the person for whose benefit you are applying;

(xvii) understand that our Company and the Joint Bookrunners will rely on your declarations and representations in deciding whether or not to make any allotment of any of the Public Offer Shares to you and that you may be prosecuted for making a false declaration;

(xviii) (if the application is made for your own benefit) warrant that no other application has been or will be made for your benefit on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC by you or by any one as your agent or by any other person; and

(xix) (if you are making the application as an agent for the benefit of another person) warrant that (i) no other application has been or will be made by you as agent for or for the benefit of that person or by that person or by any other person as agent for that person on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC; and (ii) you have due authority to sign the Application Form or give electronic application instructions on behalf of that other person as their agent.

Additional instructions for YELLOW Application Form

You may refer to the YELLOW Application Form for details.

5. APPLYING BY GIVING ELECTRONIC APPLICATION INSTRUCTIONS TO HKSCCVIACCASS

General

CCASS Participants may give electronic application instructions to apply for the Public Offer Shares and to arrange payment of the money due on application and payment of refunds under their participant agreements with HKSCC and the General Rules of CCASS and the CCASS Operational Procedures.

If you are a CCASS Investor Participant, you may give these electronic application instructions through the CCASS Phone System by calling 2979 7888 or through the CCASS Internet System (https://ip.ccass.com) (using the procedures in HKSCC’s “An Operating Guide for Investor Participants” in effect from time to time).

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HKSCC can also input electronic application instructions for you if you go to:

Hong Kong Securities Clearing Company Limited Customer Service Centre 2nd Floor, Infinitus Plaza 199 Des Voeux Road Central Hong Kong

and complete an input request form.

You can also collect a prospectus from the above address.

If you are not a CCASS Investor Participant, you may instruct your broker or custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give electronic application instructions via CCASS terminals to apply for the Public Offer Shares on your behalf.

You will be deemed to have authorised HKSCC and/or HKSCC Nominees to transfer the details of your application to our Company and our Hong Kong Branch Share Registrar.

Giving electronic application instructions to HKSCC via CCASS

Where you have given electronic application instructions to apply for the Public Offer Shares and a WHITE Application Form is signed by HKSCC Nominees on your behalf:

(i) HKSCC Nominees will only be acting as a nominee for you and is not liable for any breach of the terms and conditions of the WHITE Application Form or this prospectus;

(ii) HKSCC Nominees will do the following things on your behalf:

• agree that the Public Offer Shares to be allotted shall be issued in the name of HKSCC Nominees and deposited directly into CCASS for the credit of the CCASS Participant’s stock account on your behalf or your CCASS Investor Participant’s stock account;

• agree to accept the Public Offer Shares applied for or any lesser number allocated;

• undertake and confirm that you have not applied for or taken up, will not apply for or take up, or indicate an interest for, any Placing Shares under the Placing;

• declarethatonlyonesetof electronic application instructions has been given for your benefit;

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• (if you are an agent for another person) declare that you have only given one set of electronic application instructions for the other person’s benefit and are duly authorised to give those instructions as their agent;

• confirm that you understand that our Company, our Directors, the Sponsor and the Joint Bookrunners will rely on your declarations and representations in deciding whether or not to make any allotment of any of the Public Offer Shares to you and that you may be prosecuted if you make a false declaration;

• authorise our Company to place HKSCC Nominees’ name on our Company’s register of members as the holder of the Public Offer Shares allocated to you and to send share certificate(s) and/or refund monies under the arrangements separately agreed between us and HKSCC;

• confirm that you have read the terms and conditions and application procedures set out in this prospectus and agree to be bound by them;

• confirm that you have received and/or read a copy of this prospectus and have relied only on the information and representations in this prospectus in causing the application to be made, save as set out in any supplement to this prospectus;

• agree that none of our Company, the Sponsor, the Joint Bookrunners, their respective directors, officers, employees, partners, agents, advisers and any other parties involved in the Share Offer, is or will be liable for any information and representations not contained in this prospectus (and any supplement to it);

• agree to disclose your personal data to our Company, the Hong Kong Branch Share Registrar, receiving bank, the Sponsor and the Joint Bookrunners and/or its respective advisers and agents;

• agree (without prejudice to any other rights which you may have) that once HKSCC Nominees’ application has been accepted, it cannot be rescinded for innocent misrepresentation;

• agree that any application made by HKSCC Nominees on your behalf is irrevocable before the fifth day after the time of the opening of the application lists (excluding any day which is Saturday, Sunday or public holiday in Hong Kong), such agreement to take effect as a collateral contract with us and to become binding when you give the instructions and such collateral contract to be in consideration of our Company

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agreeing that it will not offer any Public Offer Shares to any person before the fifth day after the time of the opening of the application lists (excluding any day which is Saturday, Sunday or public holiday in Hong Kong), except by means of one of the procedures referred to in this prospectus. However, HKSCC Nominees may revoke the application before the fifth day after the time of the opening of the application lists (excluding for this purpose any day which is a Saturday, Sunday or public holiday in Hong Kong) if a person responsible for this prospectus under Section 40 of the Companies Ordinance gives a public notice under that section which excludes or limits that person’s responsibility for this prospectus;

• agree that once HKSCC Nominees’ application is accepted, neither that application nor your electronic application instructions can be revoked, and that acceptance of that application will be evidenced by our Company’s announcement of the Public Offer results;

• agree to the arrangements, undertakings and warranties under the participant agreement between you and HKSCC, read with the General Rules of CCASS and the CCASS Operational Procedures, for the giving electronic application instructions to apply for Public Offer Shares;

• agree with our Company, for itself and for the benefit of each Shareholder (and so that our Company will be deemed by its acceptance in whole or in part of the application by HKSCC Nominees to have agreed, for itself and on behalf of each of the Shareholders, with each CCASS Participant giving electronic application instructions) to observe and comply with the Companies Ordinance, the Articles; and

• agree that your application, any acceptance of it and the resulting contract will be governed by the laws of Hong Kong.

Effect of giving electronic application instructions to HKSCC via CCASS

By giving electronic application instructions to HKSCC or instructing your broker or custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give such instructions to HKSCC, you (and, if you are joint applicants, each of you jointly and severally) are deemed to have done the following things. Neither HKSCC nor HKSCC Nominees shall be liable to our Company or any other person in respect of the things mentioned below:

• instructed and authorised HKSCC to cause HKSCC Nominees (acting as nominee for the relevant CCASS Participants) to apply for the Public Offer Shares on your behalf;

– 380 – HOWTOAPPLYFORTHEPUBLICOFFERSHARES

• instructed and authorised HKSCC to arrange payment of the maximum Offer Price, brokerage, SFC transaction levy and the Stock Exchange trading fee by debiting your designated bank account and, in the case of a wholly or partially unsuccessful application and/or if the Offer Price is less than the maximum Offer Price per Offer Share initially paid on application, refund of the application monies (including brokerage, SFC transaction levy and the Stock Exchange trading fee) by crediting your designated bank account; and

• instructed and authorised HKSCC to cause HKSCC Nominees to do on your behalf all the things stated in the WHITE Application Form and in this prospectus.

Minimum purchase amount and permitted numbers

You may give or cause your broker or custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give electronic application instructions for a minimum of 2,000 Public Offer Shares. Instructions for more than 2,000 Public Offer Shares must be in one of the numbers set out in the table in the Application Forms. No application for any other number of Public Offer Shares will be considered and any such application is liable to be rejected.

Time for inputting electronic application instructions

CCASS Clearing/Custodian Participants can input electronic application instructions at the following times on the following dates:

Tuesday, 26 November 2013 — 9:00 a.m. to 8:30 p.m.(1) Wednesday, 27 November 2013 — 8:00 a.m. to 8:30 p.m.(1) Thursday, 28 November 2013 — 8:00 a.m. to 8:30 p.m.(1) Friday, 29 November 2013 — 8:00 a.m.(1) to 12:00 noon

Note (1): These times are subject to change as HKSCC may determine from time to time with prior notification to CCASS Clearing/Custodian Participants.

CCASS Investor Participants can input electronic application instructions from 9:00 a.m. on Tuesday, 26 November 2013 until 12:00 noon on Friday, 29 November 2013 (24 hours daily, except on the last application day).

The latest time for inputting your electronic application instructions will be 12:00 noon on Friday, 29 November 2013, the last application day or such later time as described in the paragraph headed “Effect of bad weather conditions on the opening of the application lists” of this section.

– 381 – HOWTOAPPLYFORTHEPUBLICOFFERSHARES

No multiple applications

If you are suspected of having made multiple applications or if more than one application is made for your benefit, the number of Public Offer Shares applied for by HKSCC Nominees will be automatically reduced by the number of Public Offer Shares for which you have given such instructions and/or for which such instructions have been given for your benefit. Any electronic application instructions to make an application for the Public Offer Shares given by you or for your benefit to HKSCC shall be deemed to be an actual application for the purposes of considering whether multiple applications have been made.

Section 40 of the Hong Kong Companies Ordinance

For the avoidance of doubt, our Company and all other parties involved in the preparation of this prospectus acknowledge that each CCASS Participant who gives or causes to give electronic application instructions is a person who may be entitled to compensation under Section 40 of the Companies Ordinance (as applied by Section 342E of the Companies Ordinance).

Personal data

The section of the Application Form headed “Personal Data” applies to any personal data held by us, the Hong Kong Branch Share Registrar, the receiving bank, the Sponsor, the Joint Bookrunners and any of their respective advisers and agents about you in the same way as it applies to personal data about applicants other than HKSCC Nominees.

6. WARNING FOR ELECTRONIC APPLICATIONS

The subscription of the Public Offer Shares by giving electronic application instructions to HKSCC is only a facility provided to CCASS Participants. Such facilities are subject to capacity limitations and potential service interruptions and you are advised not to wait until the last application day in making your electronic applications. Our Company, our Directors, the Sponsor and the Joint Bookrunners take no responsibility for such applications and provide no assurance that any CCASS Participant will be allotted any Public Offer Shares.

To ensure that CCASS Investor Participants can give their electronic application instructions, they are advised not to wait until the last minute to input their instructions to the systems. In the event that CCASS Investor Participants have problems in the connection to CCASS Phone System/CCASS Internet System for submission of electronic application instructions, they should either (i) submit a WHITE or YELLOW Application Form, or (ii) go to HKSCC’s Customer Service Centre to complete an input request form for electronic application instructions before 12:00 noon on Friday, 29 November 2013.

– 382 – HOWTOAPPLYFORTHEPUBLICOFFERSHARES

7. HOW MANY APPLICATIONS YOU CAN MAKE

Multiple applications for the Public Offer Shares are not allowed except by nominees. If you are a nominee, in the box on the Application Form marked “For nominees” you must include:

• an account number; or

• some other identification code, for each beneficial owner or, in the case of joint beneficial owners, for each joint beneficial owner. If you do not include this information, the application will be treated as being made for your benefit.

All of your applications will be rejected if more than one application on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC, is made for your benefit (including the part of the application made by HKSCC Nominees acting on electronic application instructions). If an application is made by an unlisted company and:

• the principal business of that company is dealing in securities; and

• you exercise statutory control over that company, then the application will be treated as being for your benefit.

“Unlisted company” means a company with no equity securities listed on the Stock Exchange.

“Statutory control” means you:

• control the composition of the board of directors of the company;

• control more than half of the voting power of the company; or

• hold more than half of the issued share capital of the company (not counting any part of it which carries no right to participate beyond a specified amount in a distribution of either profits or capital).

8. HOW MUCH ARE THE PUBLIC OFFER SHARES

The WHITE and YELLOW Application Forms have tables showing the exact amount payable for Shares.

You must pay the maximum Offer Price, brokerage, SFC transaction levy and the Stock Exchange trading fee in full upon application for Shares under the terms set out in the Application Forms.

– 383 – HOWTOAPPLYFORTHEPUBLICOFFERSHARES

You may submit an application using a WHITE or YELLOW Application Form in respect of a minimum of 2,000 Public Offer Shares. Each application or electronic application instruction in respect of more than 2,000 Public Offer Shares must be in one of the numbers set out in the table in the Application Form.

If your application is successful, brokerage will be paid to the Exchange Participants (as defined in the Listing Rules), and the SFC transaction levy and the Stock Exchange trading fee are paid to the Stock Exchange (in the case of the SFC transaction levy, collected by the Stock Exchange on behalf of the SFC).

For further details on the Offer Price, see the section headed “Structure of the Share Offer” of this prospectus.

9. EFFECT OF BAD WEATHER CONDITIONS ON THE OPENING OF THE APPLICATION LISTS

The application lists will not open if there is:

• a tropical cyclone warming signal number 8 or above; or

• a “black” rainstorm warning, in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Friday, 29 November 2013. Instead they will open between 11:45 a.m. and 12:00 noon on the next Business Day which does not have either of those warnings in Hong Kong in force at any time between 9:00 a.m. and 12:00 noon.

If the application lists do not open and close on Friday, 29 November 2013 or if there is a tropical cyclone warning signal number 8 or above or a “black” rainstorm warning signal in force in Hong Kong that may affect the dates mentioned in the section headed “Expected timetable” of this prospectus, an announcement will be made in such event.

10. PUBLICATION OF RESULTS

Our Company expects to announce the final Offer Price, the level of indication of interest in the Placing, the level of applications in the Public Offer and the basis of allocation of the Public Offer Shares on Tuesday, 10 December 2013 in The Standard (in English) and the Hong Kong Economic Times (in Chinese), on our Company’s website at www.yihua.com.cn and the website of the Stock Exchange at www.hkexnews.hk.

The results of allocations and the Hong Kong identity card/passport/Hong Kong business registration numbers of successful applicants under the Public Offer will be available at the times and date and in the manner specified below:

• in the announcement to be posted on our Company’s website at www.yihua.com.cn and the Stock Exchange’s website at www.hkexnews.hk by no later than 9:00 a.m. on Tuesday, 10 December 2013;

– 384 – HOWTOAPPLYFORTHEPUBLICOFFERSHARES

• from the designated results of allocations website at www.tricor.com.hk/ipo/result with a “search by ID” function on a 24-hour basis from 8:00 a.m. on Tuesday, 10 December 2013 to midnight on Monday, 16 December 2013;

• by telephone enquiry line by calling +852 3691 8488 between 9:00 and 6:00 p.m. from Tuesday, 10 December 2013 to Friday, 13 December 2013 on a business day;

• in the special allocation results booklets which will be available for inspection during opening hours from Tuesday, 10 December 2013 to Thursday, 12 December 2013 at all the receiving bank branches.

If our Company accepts your offer to purchase (in whole or in part), which it may do by announcing the basis of allocations and/or making available the results of allocations publicly, there will be a binding contract under which you will be required to purchase the Public Offer Shares if the conditions of the Share Offer are satisfied and the Share Offer is not otherwise terminated. Further details are contained in the section headed “Structure and conditions of the Share Offer” of this prospectus.

You will not be entitled to exercise any remedy of rescission for innocent misrepresentation at any time after acceptance of your application. This does not affect any other right you may have.

11. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOTTED OFFER SHARES

You should note the following situations in which the Public Offer Shares will not be allotted to you:

(i) If your application is revoked:

By completing and submitting an Application Form or giving electronic application instructions to HKSCC, you agree that your application or the application made by HKSCC Nominees on your behalf cannot be revoked on or before the fifth day after the time of the opening of the application lists (excluding for this purpose any day which is Saturday, Sunday or public holiday in Hong Kong). This agreement will take effect as a collateral contract with our Company.

Your application or the application made by HKSCC Nominees on your behalf may only be revoked on or before such fifth day if a person responsible for this prospectus under Section 40 of the Companies Ordinance (as applied by Section 342E of the Companies Ordinance) gives a public notice under that section which excludes or limits that person’s responsibility for this prospectus.

– 385 – HOWTOAPPLYFORTHEPUBLICOFFERSHARES

If any supplement to this prospectus is issued, applicants who have already submitted an application will be notified that they are required to confirm their applications. If applicants have been so notified but have not confirmed their applications in accordance with the procedure to be notified, all unconfirmed applications will be deemed revoked.

If your application or the application made by HKSCC Nominees on your behalf has been accepted, it cannot be revoked. For this purpose, acceptance of applications which are not rejected will be constituted by notification in the press of the results of allocation, and where such basis of allocation is subject to certain conditions or provides for allocation by ballot, such acceptance will be subject to the satisfaction of such conditions or results of the ballot respectively.

(ii) If the Company or its agents exercise their discretion to reject your application:

Our Company, the Sponsor and the Joint Bookrunners and their respective agents and nominees have full discretion to reject or accept any application, or to accept only part of any application, without giving any reasons.

(iii) If the allotment of Public Offer Shares is void:

The allotment of Public Offer Shares will be void if the Listing Committee does not grant permission to list the Shares either:

• within three weeks from the closing date of the application lists; or

• within a longer period of up to six weeks if the Listing Committee notifies our Company of that longer period within three weeks of the closing date of the application lists.

(iv) If:

• you make multiple applications or suspected multiple applications;

• you or the person for whose benefit you are applying have applied for or taken up, or indicated an interest for, or have been or will be placed or allocated (including conditionally and/or provisionally) Public Offer Shares and Placing Shares;

• your Application Form is not completed in accordance with the stated instructions;

• your payment is not made correctly or the cheque or banker’s cashier order paid by you is dishonoured upon its first presentation;

• the Underwriting Agreements do not become unconditional or are terminated;

– 386 – HOWTOAPPLYFORTHEPUBLICOFFERSHARES

• our Company or the Sponsor or the Joint Bookrunners believe(s) that by accepting your application, it or they would violate applicable securities or other laws, rules or regulations; or

• your application is for more than 50% of the Public Offer Shares initially offered under the Public Offer.

12. REFUND OF APPLICATION MONIES

If an application is rejected, not accepted or accepted in part only, or if the Offer Price as finally determined is less than the maximum offer price of HK$1.40 per Offer Share (excluding brokerage, SFC transaction levy and the Stock Exchange trading fee thereon), or if the conditions of the Public Offer are not fulfilled in accordance with the section headed “Structure of the Share Offer” of this prospectus or if any application is revoked, the application monies, or the appropriate portion thereof, together with the related brokerage, SFC transaction levy and the Stock Exchange trading fee, will be refunded, without interest or the cheque or banker’s cashier order will not be cleared.

Any refund of your application monies will be made on Tuesday, 10 December 2013.

13. DESPATCH/COLLECTION OF SHARE CERTIFICATES AND REFUND MONIES

You will receive one share certificate for all Public Offer Shares allotted to you under the Public Offer (except pursuant to applications made on YELLOW Application Forms or by electronic application instructions to HKSCC via CCASS where the share certificates will be deposited into CCASS as described below).

No temporary document of title will be issued in respect of the Shares. No receipt will be issued for sums paid on application. If you apply by WHITE or YELLOW Application Form, subject to personal collection as mentioned below, the following will be sent to you (or, in the case of joint applicants, to the first-named applicant) by ordinary post, at your own risk, to the address specified on the Application Form:

• share certificate(s) for all the Public Offer Shares allotted to you (for YELLOW Application Forms, share certificates will be deposited into CCASS as described below); and

• refund cheque(s) crossed “Account Payee Only” in favour of the applicant (or, in the case of joint applicants, the first-named applicant) for (i) all or the surplus application monies for the Public Offer Shares, wholly or partially unsuccessfully applied for; and/or (ii) the difference between the Offer Price and the maximum Offer Price per Offer Share paid on application in the event that the Offer Price is less than the maximum Offer Price (including brokerage, SFC transaction levy and the Stock Exchange trading fee but without interest).

– 387 – HOWTOAPPLYFORTHEPUBLICOFFERSHARES

Part of the Hong Kong identity card number/passport number, provided by you or the first-named applicant (if you are joint applicants), may be printed on your refund cheque, if any. Your banker may require verification of your Hong Kong identity card number/passport number before encashment of your refund cheque(s). Inaccurate completion of your Hong Kong identity card number/passport number may invalidate or delay encashment of your refund cheque(s).

Subject to arrangement on despatch/collection of share certificates and refund monies as mentioned below, any refund cheques and share certificates are expected to be posted on or around Tuesday, 10 December 2013. The right is reserved to retain any share certificate(s) and any surplus application monies pending clearance of cheque(s) or banker’s cashier’s order(s).

Share certificates will only become valid at 8:00 a.m. on Wednesday, 11 December 2013 provided that the Share Offer has become unconditional and the right of termination described in the section headed “Underwriting” of this prospectus has not been exercised. Investors who trade Shares prior to the receipt of share certificates or the share certificates becoming valid do so at their own risk.

Personal collection

(i) If you apply using a WHITE Application Form

If you apply for 1,000,000 or more Public Offer Shares and have provided all information required by your Application Form, you may collect your refund cheque(s) and/or share certificate(s) from our Company’s Hong Kong Branch Share Registrar, Tricor Investor Services Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, from 9:00 a.m. to 1:00 p.m. on Tuesday, 10 December 2013 or such other date as notified by us in the newspapers.

If you are an individual who is eligible for personal collection, you must not authorise any other person to collect for you. If you are a corporate applicant which is eligible for personal collection, your authorised representative must bear a letter of authorisation from your corporation stamped with your corporation’s chop. Both individuals and authorised representatives must produce, at the time of collection, evidence of identity acceptable to the Hong Kong Branch Share Registrar.

If you do not collect your refund cheque(s) and/or share certificate(s) personally within the time specified for collection, they will be despatched promptly to the address specified in your Application Form by ordinary post at your own risk.

If you apply for less than 1,000,000 Public Offer Shares, your refund cheque(s) and/or share certificate(s) will be sent to the address on the relevant Application Form on Tuesday, 10 December 2013, by ordinary post and at your own risk.

– 388 – HOWTOAPPLYFORTHEPUBLICOFFERSHARES

(ii) If you apply using a YELLOW Application Form

If you apply for 1,000,000 Public Offer Shares or more, please follow the same instructions as described above. If you have applied for less than 1,000,000 Public Offer Shares, your refund cheque(s) will be sent to the address on the relevant Application Form on Tuesday, 10 December 2013, by ordinary post and at your own risk.

If you apply by using a YELLOW Application Form and your application is wholly or partially successful, your share certificate(s) will be issued in the name of HKSCC Nominees and deposited into CCASS for credit to your or the designated CCASS Participant’s stock account as stated in your Application Form on Tuesday, 10 December 2013, or upon contingency, on any other date determined by HKSCC or HKSCC Nominees.

• If you apply through a designated CCASS Participant (other than a CCASS Investor Participant)

For Public Offer Shares credited to your designated CCASS Participant’s stock account (other than CCASS Investor Participant), you can check the number of Public Offer Shares allotted to you with that CCASS Participant.

• If you are applying as a CCASS Investor Participant

Our Company will publish the results of CCASS Investor Participants’ applications together with the results of the Public Offer in the manner described in “Publication of Results” above. You should check the announcement published by our Company and report any discrepancies to HKSCC before 5:00 p.m. on Tuesday, 10 December 2013 or any other date as determined by HKSCC or HKSCC Nominees. Immediately after the credit of the Public Offer Shares to your stock account, you can check your new account balance via the CCASS Phone System and CCASS Internet System.

(iii) If you apply via electronic application instructions to HKSCC

Allocation of Public Offer Shares

For the purposes of allocating Public Offer Shares, HKSCC Nominees will not be treated as an applicant. Instead, each CCASS Participant who gives electronic application instructions or each person for whose benefit instructions are given will be treated as an applicant.

– 389 – HOWTOAPPLYFORTHEPUBLICOFFERSHARES

Deposit of share certificates into CCASS and refund of application monies

• If your application is wholly or partially successful, your share certificate(s) will be issued in the name of HKSCC Nominees and deposited into CCASS for the credit of your designated CCASS Participant’s stock account or your CCASS Investor Participant stock account on Tuesday, 10 December 2013, or, on any other date determined by HKSCC or HKSCC Nominees.

• Our Company expects to publish the application results of CCASS Participants (and where the CCASS Participant is a broker or custodian, our Company will include information relating to the relevant beneficial owner), your Hong Kong identity card number/passport number or other identification code (Hong Kong business registration number for corporations) and the basis of allotment of the Public Offer in the manner specified in “Publication of Results” above on Tuesday, 10 December 2013. You should check the announcement published by our Company and report any discrepancies to HKSCC before 5:00 p.m. on Tuesday, 10 December 2013 or such other date as determined by HKSCC or HKSCC Nominees.

• If you have instructed your broker or custodian to give electronic application instructions on your behalf, you can also check the number of Public Offer Shares allotted to you and the amount of refund monies (if any) payable to you with that broker or custodian.

• If you have applied as a CCASS Investor Participant, you can also check the number of Public Offer Shares allotted to you and the amount of refund monies (if any) payable to you via the CCASS Phone System and the CCASS Internet System (under the procedures contained in HKSCC’s “An Operating Guide for Investor Participants” in effect from time to time) on Tuesday, 10 December 2013. Immediately following the credit of the Public Offer Shares to your stock account and the credit of refund monies to your bank account, HKSCC will also make available to you an activity statement showing the number of Public Offer Shares credited to your CCASS Investor Participant stock account and the amount of refund monies (if any) credited to your designated bank account.

• Refund of your application monies (if any) in respect of wholly and partially unsuccessful applications and/or difference between the Offer Price and the maximum Offer Price per Offer Share initially paid on application (including brokerage, SFC transaction levy and the Stock Exchange trading fee but without interest) will be credited to your designated bank account or the designated bank account of your broker or custodian on Tuesday, 10 December 2013.

– 390 – HOWTOAPPLYFORTHEPUBLICOFFERSHARES

14. ADMISSION OF THE SHARES INTO CCASS

If the Stock Exchange grants the listing of, and permission to deal in, the Shares and we comply with the stock admission requirements of HKSCC, the Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the date of commencement of dealings in the Shares or any other date HKSCC chooses. Settlement of transactions between Exchange Participants (as defined in the Listing Rules) is required to take place in CCASS on the second Business Day after any trading day.

All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Investors should seek the advice of their stockbroker or other professional adviser for details of the settlement arrangement as such arrangements may affect their rights and interests.

All necessary arrangements have been made enabling the Shares to be admitted into CCASS.

– 391 – APPENDIXI ACCOUNTANT’S REPORT

The following is the text of a report received from the Company’s reporting accountant, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this prospectus. It is prepared and addressed to the directors of the Company and to the Sponsor pursuant to the requirements of Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the Hong Kong Institute of Certified Public Accountants.

26 November 2013

The Directors Yi Hua Department Store Holdings Limited

Kingsway Capital Limited

Dear Sirs,

We report on the financial information of Yi Hua Department Store Holdings Limited (the “Company”) and its subsidiaries (together, the “Group”), which comprises the combined balance sheets as at 31 December 2010, 2011 and 2012 and 31 May 2013, the balance sheets of the Company as at 31 December 2012 and 31 May 2013 and the combined statements of comprehensive income, the combined statements of changes in equity and the combined cash flow statements for each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013 (the “Relevant Periods”), and a summary of significant accounting policies and other explanatory information. This financial information has been prepared by the directors of the Company and is set out in Sections I to III below for inclusion in Appendix I to the prospectus of the Company dated 26 November 2013 (the “Prospectus”) in connection with the initial listing of shares of the Company on the Main Board of The Stock Exchange of Hong Kong Limited.

The Company was incorporated in the Cayman Islands on 20 April 2012 as an exempted company with limited liability under the Companies Law (2012 Revision) of the Cayman Islands. Pursuant to a group reorganisation as described in Note 1.2 of Section II headed Reorganisation below, which was completed on 20 November 2013, the Company became the holding company of the subsidiaries now comprising the Group (the “Reorganisation”).

As at the date of this report, the Company has direct and indirect interests in the subsidiaries as set out in Note 1.2(a) of Section II below. All of these companies are private companies.

– I-1 – APPENDIXI ACCOUNTANT’S REPORT

No audited financial statements have been prepared by the Company as it has not involved in any significant business transactions since its date of incorporation other than the Reorganisation. The audited financial statements of the other companies now comprising the Group as at the date of this report for which there are statutory audit requirements have been prepared in accordance with the relevant accounting principles generally accepted in their place of incorporation. The details of the statutory auditors of these companies are set out in Note 1.2(b) of Section II below.

The directors of the Company have prepared the combined financial statements of the Company and its subsidiaries now comprising the Group for the Relevant Periods, in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) (the “Underlying Financial Statements”). The directors of the Company are responsible for the preparation of the Underlying Financial Statements that gives a true and fair view in accordance with HKFRSs. We have audited the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing (the “HKSA”) issued by the HKICPA pursuant to separate terms of engagement with the Company.

The financial information has been prepared based on the Underlying Financial Statements, with no adjustment made thereon, and on the basis set out in Note 2 of Section II below.

Directors’ Responsibility for the Financial Information

The directors of the Company are responsible for the preparation of the financial information that gives a true and fair view in accordance with the basis of presentation set out in Note 2 of Section II below and in accordance with HKFRSs, and for such internal control as the directors determine is necessary to enable the preparation of financial information that is free from material misstatement, whether due to fraud or error.

Reporting Accountant’s Responsibility

Our responsibility is to express an opinion on the financial information and to report our opinion to you. We carried out our procedures in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA.

Opinion

In our opinion, the financial information gives, for the purpose of this report and presented on the basis set out in Note 2 of Section II below, a true and fair view of the state of affairs of the Company as at 31 December 2012 and 31 May 2013, and of the combined state of affairs of the Group as at 31 December 2010, 2011 and 2012 and 31 May 2013 and of the Group’s combined results and cash flows for the Relevant Periods then ended.

– I-2 – APPENDIXI ACCOUNTANT’S REPORT

Review of Stub Period Comparative Financial Information

We have reviewed the stub period comparative financial information set out in Sections I to II below for inclusion in Appendix I to the prospectus which comprises the combined statement of comprehensive income, the combined statement of changes in equity and the combined cash flow statement for the five months ended 31 May 2012 and a summary of significant accounting policies and other explanatory information (the “Stub Period Comparative Financial Information”).

The directors of the Company are responsible for the preparation and presentation of the Stub Period Comparative Financial Information in accordance with the basis of presentation set out in Note 2 of Section II below and the accounting policies set out in Note 3 of Section II below.

Our responsibility is to express a conclusion on the Stub Period Comparative Financial Information based on our review. We conducted our review 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. A review of the Stub Period Comparative Financial Information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the HKSA 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.

Based on our review, nothing has come to our attention that causes us to believe that the Stub Period Comparative Financial Information, for the purpose of this report and presented on the basis set out in Note 2 of Section II below, is not prepared, in all material respects, in accordance with the accounting policies set out in Note 3 of Section II below.

– I-3 – APPENDIXI ACCOUNTANT’S REPORT

I.FINANCIALINFORMATION

The following is the financial information of the Group prepared by the directors of the Company as at 31 December 2010, 2011 and 2012 and 31 May 2013 and for each of the years ended 31 December 2010, 2011 and 2012 and each of the five months ended 31 May 2012 and 2013 (the “Financial Information”), presented on the basis set out in Note 2 of Section II below.

COMBINED STATEMENTS OF COMPREHENSIVE INCOME

Five months ended Year ended 31 December 31 May Notes 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Continuing operations

Revenue 6 605,204 715,086 678,876 291,793 302,399 Other income 7 1,941 1,239 816 375 292 Other gains/(losses), net 429 241 589 (31) 108 Purchases of and changes in inventories (365,396) (404,313) (352,190) (150,906) (152,511) Employee benefit expenses 8 (48,506) (58,003) (75,910) (29,630) (38,319) Depreciation and amortisation (13,696) (16,027) (17,300) (7,284) (8,473) Operating lease rental expense and property management fee (48,738) (66,213) (72,429) (29,709) (38,215) Other operating expenses 9 (85,573) (103,710) (103,766) (42,208) (46,004)

Operating profit 45,665 68,300 58,686 32,400 19,277

Finance income 2,838 4,879 3,460 2,355 830 Finance costs (3,836) (4,747) (2,602) (1,600) (606)

Finance (costs)/income – net 10 (998) 132 858 755 224

Profit before income tax 44,667 68,432 59,544 33,155 19,501 Income tax expense 11 (12,189) (18,086) (17,025) (9,665) (6,780)

Profit for the year/period from continuing operations 32,478 50,346 42,519 23,490 12,721 Discontinued operations (Loss)/profit for the year/period from discontinued operations 19 (1,948) (1,179) 1,124 293 841

Profit for the year/period 30,530 49,167 43,643 23,783 13,562

Profit/(loss) for the year/ period attributable to: Equity holders of the Company 31,208 49,189 42,565 22,861 12,304 Non-controlling interests (678) (22) 1,078 922 1,258

30,530 49,167 43,643 23,783 13,562

– I-4 – APPENDIXI ACCOUNTANT’S REPORT

Five months ended Year ended 31 December 31 May Notes 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Profit for the year/period

Other comprehensive income for the year/period –––––

Total comprehensive income for the year/period 30,530 49,167 43,643 23,783 13,562

Total comprehensive income/(loss) for the year/period attributable to: Equity holders of the Company 31,208 49,189 42,565 22,861 12,304 Non-controllinginterests (678) (22) 1,078 922 1,258

30,530 49,167 43,643 23,783 13,562

Total comprehensive income/(loss) for the year/ period attributable to equity holders of the Company: From continuing operations 32,159 49,767 42,014 22,718 11,893 From discontinued operations 19 (951) (578) 551 143 411

31,208 49,189 42,565 22,861 12,304

Earnings per share from continuing and discontinued operations attributable to equity holders of the Company for the year/period 13

Basic and diluted earnings per share From continuing operations N/AN/AN/AN/AN/A From discontinued operations N/AN/AN/AN/AN/A

N/AN/AN/AN/AN/A

Dividends 12 – – – – –

– I-5 – APPENDIXI ACCOUNTANT’S REPORT

COMBINEDBALANCESHEETS

As at As at 31 December 31 May Notes 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

ASSETS Non-current assets Property, plant and equipment 14 112,994 112,644 118,730 142,976 Computer software 124 101 79 80 Deferred income tax assets 15 2,772 2,027 1,676 1,772 Deferred assets 16 1,497 1,451 953 1,325 Long-term prepaid rent and rental deposits 18 4,754 5,109 18,703 23,530

122,141 121,332 140,141 169,683

Current assets Inventories 17 79,688 100,115 93,778 79,430 Trade receivables, prepayments and other receivables 18 66,707 58,144 71,979 52,921 Amounts due from related parties 30(b) 84,910 124,976 142,002 161,740 Restricted cash 20 4,002 14,160 15,097 15,470 Cash and cash equivalents 21 138,717 184,458 186,435 99,801

374,024 481,853 509,291 409,362 Assets of disposal group classified as held for sale 19 − 6,068 5,375 5,218

374,024 487,921 514,666 414,580

Total assets 496,165 609,253 654,807 584,263

EQUITY Equity attributable to equity holders of the Company Combined capital 22 10,000 10,000 10,000 10,000 Other reserves 23 6,278 8,511 12,773 14,764 (Accumulated losses)/retained earnings (16,215) 30,741 69,044 79,357

63 49,252 91,817 104,121 Non-controlling interests (4,184) (4,206) (3,128) (1,870)

Total equity (4,121) 45,046 88,689 102,251

– I-6 – APPENDIXI ACCOUNTANT’S REPORT

As at As at 31 December 31 May Notes 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

LIABILITIES Non-current liabilities Borrowings 25 − 20,000 − 20,000 Deferred income tax liabilities 15 3,583 3,409 7,041 6,390 Other payables 24 1,188 1,799 2,502 4,467

4,771 25,208 9,543 30,857

Current liabilities Trade and other payables 24 243,320 298,947 287,119 226,759 Amounts due to related parties 30(b) 40,664 4,548 12,655 8,648 Deferred revenue 2,702 2,915 3,576 4,156 Advancesfromcustomers 178,855 164,239 231,238 208,433 Current income tax liabilities 9,974 15,590 4,356 2,526 Borrowings 25 20,000 50,000 15,000 –

495,515 536,239 553,944 450,522 Liabilities of disposal group classified as held for sale 19 − 2,760 2,631 633

495,515 538,999 556,575 451,155

Total liabilities 500,286 564,207 566,118 482,012

Total equity and liabilities 496,165 609,253 654,807 584,263

Net current liabilities (121,491) (51,078) (41,909) (36,575)

Total assets less current liabilities 650 70,254 98,232 133,108

– I-7 – APPENDIXI ACCOUNTANT’S REPORT

BALANCESHEET

As at As at 31 December 31 May Notes 2012 2013 RMB’000 RMB’000

Current assets Prepayments 18 616 1,242

Equity attributable to equity holders of the Company Share capital 22 – – Accumulated losses 23(c) (1,845) (4,491)

Total equity (1,845) (4,491)

Current liabilities Amount due to a related party 30(b) 2,461 5,733

Total equity and liabilities 616 1,242

Net current liabilities (1,845) (4,491)

Total assets less current liabilities (1,845) (4,491)

– I-8 – APPENDIXI ACCOUNTANT’S REPORT

COMBINED STATEMENTS OF CHANGES IN EQUITY

Attributable to equity holders of the Company (Accumulated losses)/ Non- Combined Statutory Capital retained controlling Total capital reserve reserve earnings Total interests equity RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance as at 1 January 2010 10,000 488 3,478 (46,538) (32,572) (1,433) (34,005) Profit and total comprehensive income/(loss) for the year − − − 31,208 31,208 (678) 30,530 Appropriation to statutory reserve − 885 − (885) − − − Capital injection − − 1,000 − 1,000 − 1,000 Distribution of a subsidiary (Note 19(b)(iii)) − − 427 − 427 (2,073) (1,646)

Total transactions with owners − 885 1,427 (885) 1,427 (2,073) (646)

Balance as at 31 December 2010 10,000 1,373 4,905 (16,215) 63 (4,184) (4,121)

Balance as at 1 January 2011 10,000 1,373 4,905 (16,215) 63 (4,184) (4,121) Profit and total comprehensive income/(loss) for the year − − − 49,189 49,189 (22) 49,167 Appropriation to statutory reserve − 2,233 − (2,233) − − −

Total transactions with owners − 2,233 − (2,233) − − −

Balance as at 31 December 2011 10,000 3,606 4,905 30,741 49,252 (4,206) 45,046

Balance as at 1 January 2012 10,000 3,606 4,905 30,741 49,252 (4,206) 45,046 Profit and total comprehensive income for the year − − − 42,565 42,565 1,078 43,643 Appropriation to statutory reserve − 4,262 − (4,262) − − −

Total transactions with owners − 4,262 − (4,262) − − −

Balance as at 31 December 2012 10,000 7,868 4,905 69,044 91,817 (3,128) 88,689

– I-9 – APPENDIXI ACCOUNTANT’S REPORT

Balance as at 1 January 2012 10,000 3,606 4,905 30,741 49,252 (4,206) 45,046 Profit and total comprehensive income for the period − − − 22,861 22,861 922 23,783 Appropriation to statutory reserve − 2,283 − (2,283) − − −

Total transactions with owners − 2,283 − (2,283) − − −

Balance as at 31 May 2012 (Unaudited) 10,000 5,889 4,905 51,319 72,113 (3,284) 68,829

Balance as at 1 January 2013 10,000 7,868 4,905 69,044 91,817 (3,128) 88,689 Profit and total comprehensive income for the period − − − 12,304 12,304 1,258 13,562 Appropriation to statutory reserve − 1,991 − (1,991) − − −

Total transactions with owners − 1,991 − (1,991) − − −

Balance as at 31 May 2013 10,000 9,859 4,905 79,357 104,121 (1,870) 102,251

– I-10 – APPENDIXI ACCOUNTANT’S REPORT

COMBINED CASH FLOW STATEMENTS

Five months ended Year ended 31 December 31 May Notes 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Cash flow from operating activities Cash generated from/(used in) operations 26 87,156 92,770 126,150 9,961 (9,576) Interest received 827 3,817 5,026 2,223 988 Interest paid (5,369) (4,748) (2,602) (1,600) (606) Incometaxpaid (2,785) (11,899) (24,276) (18,102) (9,357)

Net cash generated from/(used in) operating activities 79,829 79,940 104,298 (7,518) (18,551)

Cash flow from investing activities Proceeds from disposal of property, plant and equipment 26 33 469 − – 26 Purchases of property, plant and equipment and computer software (26,676) (20,515) (20,038) (8,074) (32,751) Distribution of a subsidiary 19(b)(iii) 1,224 − − – – Loans granted to related companies 30(a)(vi) (48,900) (52,084) (110,011) (84,010) (61,260) Loans repayments received from related companies 30(a)(vi) 81,359 33,000 81,000 62,000 23,002 Loans and advances repayments received from third parties 1,000 19,450 – – –

Net cash generated from/(used in) investing activities 8,040 (19,680) (49,049) (30,084) (70,983)

– I-11 – APPENDIXI ACCOUNTANT’S REPORT

Five months ended Year ended 31 December 31 May Notes 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Cash flows from financing activities Capitalinjection 1,000 − − – – Proceeds from borrowings 55,000 85,000 − – 20,000 Repayments of borrowings (130,000) (35,000) (55,000) (50,000) (15,000)

Loans received from related companies 30(a)(vii) 58,266 8,100 − – – Loans repayments to related companies 30(a)(vii) (20,750) (47,016) (1,000) (1,000) (450) Loans and advances received from third parties 5,500 – 5,000 – – Loans and advances repayments to third parties and non- controlling interest (5,540) (24,345) (1,000) – – Professional expenses paid in connection with the Company’s listing – – (220) (220) (1,245)

Net cash (used in)/generated from financing activities (36,524) (13,261) (52,220) (51,220) 3,305

Net increase in cash and cash equivalents 51,345 46,999 3,029 (88,822) (86,229) Cash and cash equivalents at beginning of the year/period 87,372 138,717 184,458 184,458 186,435 Less: cash and cash equivalents included in assets of disposal group classified as held for sale − (1,258) (1,052) (859) (405)

Cash and cash equivalents at end of the year/period 138,717 184,458 186,435 94,777 99,801

– I-12 – APPENDIXI ACCOUNTANT’S REPORT

II.NOTESTOTHEFINANCIALINFORMATION

1.GENERALINFORMATIONANDREORGANISATION

1.1 General information of the Group

Yi Hua Department Store Holdings Limited (the “Company”) was incorporated in the Cayman Islands on 20 April 2012 as an exempted company with limited liability under the Cayman Islands Companies Law in preparation for a listing of the Company’s shares on the Main Board of the Stock Exchange of Hong Kong Limited (the “Listing”). The address of the Company’s registered office is at the Clifton House, 75 Fort Street, PO Box 1350, Grand Cayman, KY1-1108, Cayman Islands. The Company and its subsidiaries are collectively referred to as “the Group”.

The Company is an investing holding company. Prior to the incorporation of the Company and the completion of the reorganisation as described in Note 1.2 below (the “Reorganisation”), the operations of department stores (the “Department Stores Business”, or “Continuing operation”, or “Listing Business”) in the People’s Republic of China the “PRC”) was principally operated through Guangdong Yihua Department Store Limited (known as “ᄿ؇ूശϵ) ஬Ϟࠢʮ̡” or “Guangdong Yihua”) and its subsidiaries (collectively, the “Guangdong Yihua Group”). During the Relevant Periods, the Guangdong Yihua Group was also engaged in other businesses, including property leasing and management service and property rental management business in the PRC (collectively, the “Discontinued Operations”). Guangdong Yihua is ultimately controlled by Mr. Chen Daren.

As part of the Reorganisation, certain shell entities become the intermediate holding entities of Guangdong Yihua Group. During the Relevant Periods, some of these shell entities had operated other businesses, including mould and electronic products manufacturing business (collectively, the “Other Businesses”). The Other Businesses had been managed separately from the Listing Business and were disposed of prior to the Reorganisation. For the purpose of this report, the financial information of Other Businesses was excluded throughout the Relevant Periods.

1.2 The Reorganisation

The Group underwent the following Reorganisation steps in preparation for the Listing. The Company underwent a series of transactions to acquire all the equity interests of Guangdong Yihua and its subsidiaries (the major operating subsidiaries) through certain intermediate investment holding entities, from Guangdong Yihua Group Investment Company Limited (“Yihua Investment”), a company ultimately controlled by Mr. Chen Daren. Detailed procedures of the Reorganisation are as follows:

• On 7 March 2012, Intelligence Link Limited (“Intelligence Link”) acquired 30% and 9% of Zhongshan Lonwalk Mould Plastic Co., Ltd. (“Lonwalk Mould”), from its then shareholders at a consideration of RMB8,400,000 and RMB2,520,000, respectively. Since then, Lonwalk Mould became a wholly owned subsidiary of Intelligence Link and controlled by Mr. Chen Daren.

• On 10 April 2012, Intelligence Link Limited (“Intelligence Link”) allotted 9,998 shares to Mentor Asia Limited (“Mentor Asia”) at a consideration of HK$9,998. On 24 April 2012, Mentor Asia acquired one share of Intelligence Link from each of the then shareholders, Fortune Sky Development Limited (“Fortune Sky”) and Canton Sky Holdings Limited (“Canton Sky”), which were ultimately controlled by Mr. Chen Daren, at a consideration of approximately HK$861 respectively. Since then, Intelligence Link became a wholly owned subsidiary of Mentor Asia.

• On 20 April 2012, the Company issued and allotted 1 ordinary share and 2 ordinary shares of HK$0.01 each at par to Eaglepass Developments Limited (“Eaglepass”) and Jaguar Asian Limited (“Jaguar Asian”), respectively.

• On 16 May 2012, Intelligence Link disposed its 60% equity interests in Zhongshan Subor Electronics Industry Co., Ltd. (“Subor Electronics”) as part of the Other Businesses, to a third party at a consideration of RMB10,920,000.

• On 23 July 2012, Shaoguan Central Plaza Management Limited (“Shaoguan Central Management”) transferred its 100% equity interest of Shaoguan Wujiang Xinhui Property Management Service Limited (“Shaoguan Xinhui Property Management”) to a third party at a consideration of RMB500,000.

– I-13 – APPENDIXI ACCOUNTANT’S REPORT

• On 19 November 2013, Lonwalk Mould acquired 90% and 10% equity interests in Guangdong Yihua from Yihua Investment and Zhongshan Shunyi Industrial Development Limited (“Shunyi Industrial”) at consideration of RMB33,120,000 and RMB3,680,000, respectively. Since then, Guangdong Yihua became a wholly owned subsidiary of Lonwalk Mould.

• On 20 November 2013, the shareholders of Mentor Asia, Jaguar Asian and Eaglepass, transferred 7,708 and 2,292 shares of Mentor Asia to the Company in return for 7,706 and 2,291 new ordinary shares allotted by the Company. Since then, Mentor Asia became a wholly owned subsidiary of the Company and an intermediate holding company of the Group.

After the completion of the Reorganisation steps as described above, the Company became the holding company of the subsidiaries now comprising the Group.

(a) At the end of each reporting period and the date of this report, the Company has equity interests in the following subsidiaries:

Attributable equity interest held by the Company Country/date of As at As at the incorporation/ As at 31 December 31 May date of Principal activities Name of the establishment and Issued/registered this and place of company kind of legal entity and paid up capital 2010 2011 2012 2013 report operations

Subsidiaries – Incorporated in the British Virgin Islands (the “BVI”) and directly owned MentorAsia BVI, US$10,000 100% 100% 100% 100% 100% Investmentholding, 15 June 2000, BVI limited liability company

Subsidiaries – Incorporated in the Hong Kong and indirectly owned Intelligence Link Hong Kong, HK$10,000 100% 100% 100% 100% 100% Investmentholding, 3 May 1994, Hong Kong limited liability company

Subsidiaries – Established in the PRC and indirectly owned ʕʆ̹ࣦശᅼՈ෧ PRC, RMB40,000,000 – – – – 100% Investmentholding, ࣘϞࠢʮ̡ 16 October 2000, PRC Lonwalk limited liability Mould* company

ᄿ؇ूശϵ஬Ϟࠢ PRC, RMB10,000,000 100% 100% 100% 100% 100% Departmentstore ʮ̡ 24 October 1994, operations, PRC Guangdong limited liability Yihua* company

ʕʆ̹̚ᕄूശϵ PRC, RMB5,000,000 100% 100% 100% 100% 100% Departmentstore ஬Ϟࠢʮ̡ 29 March 2006, operations, PRC Zhongshan limited liability Guzhen Yihua company Department Store Limited* (“Guzhen Yihua”)

– I-14 – APPENDIXI ACCOUNTANT’S REPORT

ശϵ஬Ϟ PRC, RMB5,000,000 100% 100% 100% 100% 100% Departmentstoreू̹ژϪ ࠢʮ̡ 24 August 2004, operations, PRC Jiangmen Yihua limited liability Department company Store Limited*

૶Ⴣ̹۬ᄿఙूശ PRC, RMB5,000,000 100% 100% 100% 100% 100% Departmentstore ϵ஬Ϟࠢʮ̡ 16 October 2003, operations, PRC Qingyuan City limited liability Plaza Yihua company Department Store Limited*

ჭᗫ̹ूശϵ஬Ϟ PRC, RMB5,000,000 59% 59% 59% 59% 59% Departmentstore ࠢʮ̡ 3 August 2007, operations, PRC Shaoguan Yihua limited liability Department company Store Limited*

ჭᗫ̹ʕᐑᄿఙ၍ PRC, RMB500,000 49% 49% 49% 49% – Propertyrental ଣϞࠢʮ̡ 28 September 2006, management, Shaoguan limited liability PRC Central company Management*(1)

PRC, RMB500,000 N/A 49% – – –Property ිڦϪਜ؛ჭᗫ̹ ,ਕϞࠢʮ 9 March 2011, management؂ุي ̡ Shaoguan limited liability PRC Xinhui Property company Management*(1)

ʕʆ̹ूശᄿఙ၍ PRC, RMB5,000,000 100% 100% 100% 100% 100% Investmentholding, ଣϞࠢʮ̡ 1 April 2003, PRC Zhongshan limited liability company Yihua company Plaza Management Company Limited* (“Zhongshan Yihua Management”)(1)

ʕʆ̹̚ᕄूശਠ PRC, RMB500,000 60% 60% 60% 60% 60% Departmentstore ุ၍ଣϞࠢʮ̡ 26 March 2006, operations, PRC Zhongshan limited liability Guzhen Yihua company Trading Management Limited* (“Guzhen Yihua Trading”)(2)

– I-15 – APPENDIXI ACCOUNTANT’S REPORT

ʕʆ̹ूശ˰࢕ PRC, RMB5,000,000 N/A N/A 100% 100% 100% Furniturestore ࢕֢Ϟࠢʮ̡ 11 September 2012, operations, PRC Zhongshan limited liability Yihua Shijia company Jiaju Limited*

ජ݆̹ूശϵ஬ PRC, RMB1,000,000 N/A N/A 100% 100% 100% Departmentstore Ϟࠢʮ̡ 28 September 2012, operations, PRC Yangchun limited liability Yihua company Department Store Limited*

ʕʆ̹˄ජ۬ूശ PRC, RMB1,000,000 N/A N/A 100% 100% 100% Departmentstore Ϟࠢʮ̡ 9 November 2012, operations, PRC Zhongshan limited liability Taiyangcheng company Yihua Department Store Limited*

इτूശਠุϞࠢ PRC, RMB1,000,000 N/A N/A 100% 100% 100% Departmentstore ʮ̡ Tai’an 10 December 2012, operations, PRC Yihua limited liability Commercial company Limited*

ߵᅃ̹ूശϵ஬ PRC, RMB1,000,000 N/A N/A 100% 100% 100% Departmentstore Ϟࠢʮ̡ 11 December 2012, operations, PRC Yingde Yihua limited liability Department company Store Limited*

ජϪ̹ूശϵ஬ PRC, RMB5,000,000 N/A N/A N/A 100% 100% Departmentstore Ϟࠢʮ̡ 28 January 2013, operations, PRC Yangjiang limited liability Yihua company Department Store Limited*

ජϪ̹ूശ˰࢕ PRC, RMB5,000,000 N/A N/A N/A 100% 100% Furniturestore ࢕֢Ϟࠢʮ̡ 6 May 2013, operations, PRC Yangjiang limited liability Yihua Shijia company Jiaju Limited*

– I-16 – APPENDIXI ACCOUNTANT’S REPORT

(1) During the Relevant Periods, Guangdong Yihua holds 49% equity interests in Shaoguan Central Management through its wholly-owned subsidiary, Zhongshan Yihua Management. Pursuant to the letters of undertaking signed by the majority of remaining shareholders of Shaoguan Central Management dated 9 March 2009 and 20 May 2010 respectively (the “Letters of Undertaking”), they agree to vote under the instruction of Zhongshan Yihua Management. Accordingly, Zhongshan Yihua Management controls the board of directors of Shaoguan Central Management and controls the operating, investing and financing activities of Shaoguan Central Management. Thus, Shaoguan Central Management is deemed as a subsidiary of Zhongshan Yihua Management.

During the Relevant Periods, Shaoguan Xinhui Property Management is a wholly-owned subsidiary of Shaoguan Central Management and pursuant to the Letters of Undertaking, Zhongshan Yihua Management has effective control over this entity. Accordingly, Shaoguan Xinhui Property Management is also deemed as a subsidiary of Zhongshan Yihua Management.

(2) As part of the Reorganisation, in May 2012, Guzhen Yihua Trading assigned its rights and obligations of the tenancy agreements in respect of the Listing Business to Guzhen Yihua.

(b) The statutory financial statements of certain subsidiaries of the Company for the years ended 31 December 2010 and 2011 and 2012, where relevant, were audited by the respective certified public accountants as follows:

Name of company For the years ended Name of statutory auditors

Ϟࠢʮ̡הQingyuan City Plaza Yihua 31 December 2010, 2011 ૶Ⴣ̹૶͍ึࠇࢪԫਕ Department Store Limited and 2012 (Qingyuan Qing Zheng Certified Public Accountants Co., Ltd.*) Ϟࠢʮ̡הShaoguan Yihua Department Store 31 December 2010, 2011 ჭᗫʕɓึࠇࢪԫਕ Limited and 2012 (Shaoguan Zhong Yi Certified Public Accountants Co., Ltd.*) Ϟࠢʮ̡הShaoguan Central Management 31 December 2010, 2011 ჭᗫʕɓึࠇࢪԫਕ and 2012 (Shaoguan Zhong Yi Certified Public Accountants Co., Ltd.*) Ϟࠢʮ̡הShaoguan Xinhui Property From the date of ჭᗫʕɓึࠇࢪԫਕ Management incorporation to (Shaoguan Zhong Yi Certified Public 31 December 2011 Accountants Co., Ltd.*) Ϟࠢʮ̡הYingde Yihua Department Store From the date of ૶Ⴣ̹૶͍ึࠇࢪԫਕ Limited incorporation to 31 (Qingyuan Qing Zheng Certified December 2012 Public Accountants Co., Ltd.*)

All companies established in the PRC have adopted 31 December as their financial year end date for statutory reporting purpose.

Except for each of above mentioned companies, no audited statutory financial statements were prepared for the remaining subsidiaries now comprising the Group as shown in note 1.2(a) as it is not required to issue audited financial statements under the statutory requirement of their respective places of incorporation.

* The English names of certain subsidiaries and auditors referred to above represented the best efforts by management of the Company in translating their Chinese names as they do not have official English names.

2 PRESENTATION OF THE FINANCIAL INFORMATION

Immediately prior to and after the Reorganisation, the Listing Business is controlled by Mr. Chen Daren. The Listing Business is conducted through Guangdong Yihua Group, which are ultimately controlled by Mr. Chen Daren and are the only operating entities of the Group. Pursuant to the Reorganisation, the Listing Business is transferred to and held by the Company. The Company and intermediate holding entities do not have any other business at the time of the Reorganisation and the transactions as described in note 1.2 above is merely a Reorganisation of the Listing Business with no change in management and the controlling shareholder of the Listing Business, Mr. Chen Daren. Accordingly, the combined financial information of the companies now comprising the Group is presented using the carrying values of the Listing Business under the controlling shareholder for all periods presented, or since

– I-17 – APPENDIXI ACCOUNTANT’S REPORT the respective dates of incorporation/establishment of the combining entities, or since the date when the combining companies first came under the control of the controlling shareholder, whichever is earlier. For the purpose of this report, the Financial Information of the Group has been prepared on a basis in accordance with the principles of the Auditing Guideline 3.340 “Prospectus and the Reporting Accountant” issued by HKICPA.

Inter-company transactions, balances and recognised gains/losses on transactions between group companies are eliminated on combination.

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of the Financial Information are set out below. These policies have been consistently applied during the Relevant Periods, unless otherwise stated.

3.1 Basis of preparation

The Financial Information has been prepared in accordance with the HKFRS issued by HKICPA. The Financial Information has been prepared under the historical cost convention.

The preparation of Financial Information in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the Financial Information are disclosed in Note 5.

As at 31 December 2010, 2011 and 2012 and 31 May 2013, the current liabilities of the Group exceeded its current assets by approximately RMB121,491,000, RMB51,078,000, RMB41,909,000 and RMB36,575,000 respectively. Included in the current liabilities were advances from customers, primarily relating to consumption cards issued, amounting to approximately RMB178,855,000, RMB164,239,000, RMB231,238,000 and RMB208,433,000 respectively. The Group has monitored its liquidity position by maintaining good relationship with bankers for sufficient facilities available to finance its daily operations whenever necessary and generating continuous positive cash inflows from operations. Based on the directors’ review of the Group’s cash flow projection, taking into account the reasonably possible changes in the operational performance and the expected repayments of amounts due from the related parties, there are sufficient financial resources available to the Group at least in the coming twelve months to meet its liabilities as and when they fall due. Accordingly, the directors are of the opinion that it is appropriate to prepare the Financial Information on a going concern basis.

The following new standards, amendments and interpretations have been issued but are not effective for the annual accounting period beginning 1 January 2013 and have not been early adopted.

Effective for accounting periods beginning on Standards/Interpretation Subject of amendment or after

HKAS 32 (Amendment) Financial instruments: Presentation on assets 1 January 2014 and liabilities offsetting HKFRS 9 Financial Instruments 1 January 2015 HKFRS 7 and HKFRS 9 Mandatory effective date and transition 1 January 2015 (Amendments) disclosures

The Group anticipates that the adoption of the new and revised HKFRSs would not have a significant impact on the Group’s results of operation and financial position.

3.2 Consolidation and combination

(a) Subsidiaries

Subsidiaries are all entities (including special purpose entities) over which the group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

– I-18 – APPENDIXI ACCOUNTANT’S REPORT

(b) Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

3.3 Separate financial statements

Investments in subsidiaries are accounted for at cost less impairment. Cost also includes direct attributable costs of investment. The results of subsidiaries are accounted for by the company on the basis of dividend and receivable.

Impairment testing of the investments in subsidiaries is required upon receiving dividends from these investments if the dividend exceeds the total comprehensive income of the subsidiary in the period the dividend is declared or if the carrying amount of the investment in the separate financial statements exceeds the carrying amount in the consolidated financial statements of the investee’s net assets including goodwill.

3.4 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the directors and senior management of Guangdong Yihua that makes strategic decisions.

3.5 Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the ‘functional currency’). The Financial Information is presented in Renminbi (“RMB”), which is the Company’s functional and the Group’s presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

The results and financial position of all the companies now comprising the Group (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

(ii) income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

(iii) all resulting exchange differences are recognised in other comprehensive income.

– I-19 – APPENDIXI ACCOUNTANT’S REPORT

3.6 Property, plant and equipment

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the Relevant Periods in which they are incurred.

Depreciation of property, plant and equipment is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

– Leasehold improvements 10 years – Buildings 20 years – Office equipment 3 years – Vehicles 6 years – Other equipment 5 years

Residual values range from 0% to 5%.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within ‘Other gains/(losses), net’ in the combined statements of comprehensive income.

3.7 Computer software

3.8 Impairment of non-financial assets

Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

3.9 Non-current assets (or disposal groups) held for sale and discontinued operations

Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. The non-current assets (except for certain assets as explained below), (or disposal groups), are stated at the lower of carrying amount and fair value less costs to sell. Deferred tax assets, assets arising from employee benefits, financial assets (other than investments in subsidiaries and associates) and investment properties, even if held for sale, would continue to be measured in accordance with the policies set out elsewhere in note 3.

A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which represents a separate major line of business or geographic area of operations, or is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations, or is a subsidiary acquired exclusively with a view to resale.

When an operation is classified as discontinued, a single amount is presented in the income statement, which comprises the post-tax profit or loss of the discontinued operation and the post-tax gain or loss recognised on the measurement to fair value less costs to sell, or on the disposal, of the assets or disposal group(s) constituting the discontinued operation.

– I-20 – APPENDIXI ACCOUNTANT’S REPORT

3.10 Financial assets

3.10.1Classification

The Group classifies its financial assets as loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Group’s loans and receivables comprise ‘trade and other receivables’, ‘restricted cash’ and ‘cash and cash equivalents’ in the combined balance sheet.

3.10.2Recognition and measurement

Regular way purchases and sales of financial assets are recognised on the trade-date – the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

3.11 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the combined balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

3.12 Impairment of financial assets

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss.

3.13 Inventories

Inventories comprise merchandise held for direct sales and low value consumables and are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (‘FIFO’) method. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

– I-21 – APPENDIXI ACCOUNTANT’S REPORT

3.14 Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

3.15 Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.

3.16 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

3.17 Trade payables

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

3.18 Borrowings

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.

Borrowing costs are recognised as an expense in the period in which they are incurred.

3.19 Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive income or directly in equity, respectively.

(a) Current income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the combined balance sheet date in the countries where the Company’s subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

– I-22 – APPENDIXI ACCOUNTANT’S REPORT

(b) Deferred income tax

Inside basis differences

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the combined balance sheet. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the combined balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Outside basis differences

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

3.20 Employee benefits

(a) Pension obligations

Pursuant to the relevant regulations of the PRC Government, all the subsidiaries of the Group that were established in the PRC (the “PRC Subsidiaries”) have participated in a local municipal government retirement benefits scheme (the “Scheme”), whereby the PRC Subsidiaries are required to contribute a certain percentage of the salaries of their employees to the Scheme to fund their retirement benefits. The local municipal government undertakes to assume the retirement benefits of those employees of the Group. Contributions under the Scheme are charged to profit or loss as incurred.

(b) Bonus plans

Provisions for bonus plan due wholly within twelve months after the end of the reporting period. Provision is recognised where contractually obliged or where there is a past practice that has created a constructive obligation.

3.21 Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

– I-23 – APPENDIXI ACCOUNTANT’S REPORT

3.22 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group.

The Group recognised revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the group’s activities, as described below.

Commission income from concessionaire sales is recognised upon sales of goods by the relevant stores.

Revenue from direct sales of goods is recognised when a group entity sells a product to the customer. Retail sales are usually settled in cash, by credit cards or by using consumption cards.

Operating lease rental income is recognised on a straight-line basis over the period of the lease. When the Group provides incentives to its tenants, the cost of incentives will be recognised over the lease term, on a straight-line basis, as a reduction of rental income. The difference between the gross receipt of rental and operating lease rental recognised over the lease term is recognised as deferred assets.

Management fee and service income from operations and management consulting service income are recognised when the service is rendered and right to receive payment is established.

Interest income is recognised using the effective interest method. When a loan and receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loan and receivables are recognised using the original effective interest rate.

3.23 Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Receipts or payments made under operating leases (net of any incentives received from the lessor) are recognised as income or expenses in profit or loss on a straight-line basis over the period of the lease.

3.24 Dividend distribution

Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s combined balance sheet in the period in which the dividends are approved by the Company’s shareholders.

3.25 Bonus points liabilities

The Group operates a loyalty points program, which allows customers to accumulate points when they purchase products in the Group’s department stores. The points can then be redeemed for gifts and consumption cards, subject to a minimum number of points being obtained. The consumption cards are cash-equivalent when customers use them to purchase products in the Group’s department stores.

3.26 Government grants

Government grants are recognised at their fair values where there is a reasonable assurance that grant will be received and all attaching conditions will be complied with. Government grants relating to costs are recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate.

– I-24 – APPENDIXI ACCOUNTANT’S REPORT

4 FINANCIAL RISK MANAGEMENT

4.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks, including interest rate risk, credit risk and liquidity risk. The Group manages and monitors the exposures to ensure appropriate measures are implemented in a timely and effective manner.

(a) Interest rate risk

The Group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk which is partially offset by cash held at variable rates. Borrowings issued at fixed rates expose the Group to fair value interest rate risk.

As at 31 December 2010, 2011, 2012 and 31 May 2013, the Group’s long-term borrowings were held at variable rates denominated in RMB.

As at 31 December 2010, 2011 and 2012 and 31 May 2013, if interest rates on Renminbi-denominated borrowings had been 80 basis point higher/lower with all other variables held constant, post-tax profit for the year/period would have been nil, RMB12,000 and nil and RMB5,000 lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings.

(b) Credit risk

The credit risk of the Group mainly arises from cash and cash equivalents, restricted cash, trade and other receivables as well as amounts due from related parties. The carrying amounts or the undiscounted nominal amounts, where applicable, of each class of these financial assets represent our Group’s maximum exposure to credit risk in relation to the corresponding class of financial assets.

The Group’s measures to manage the credit risk are to control potential exposures to recoverability problem. To manage this risk, deposits are mainly placed with reputable financial institutions or with financial institutions which are controlled by the government. Sales to retail customers are settled in cash, or by using credit cards or consumption cards. As for trade receivables related to management fee and service income and receivables from sales of consumption cards, our Group carries out regular review on these balances and takes follow-up action on any overdue amounts to minimise exposures to credit risk.

Amounts due from related parties are continuously monitored by assessing the credit quality of the counterparties, taking into account their financial positions, past experience and other factors. The amounts due from related parties have no history of default. Management perceives that the credit risk of receivables from related parties is low after considering the creditworthiness and financial capability of these counterparties.

The table below shows the bank deposit balances of the major counterparties with or without external credit ratings as at 31 December 2010, 2011 and 2012 and 31 May 2013:

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Counterparties with external credit rating* Aa1 444 438 269 362 A1 96,090 89,241 98,856 51,245 A3 2,543 3,364 19,765 1,743 Baa2 142 540 8 369 Baa3 – – – 50 Ba1 − 68,176 52,020 40,547 Ba2 28,604 16,852 11,642 9,327

127,823 178,611 182,560 103,643

Counterparties without external credit rating* Commercial banks in rural areas 7,176 10,581 13,978 7,094

Restricted bank deposits and cash at banks 134,999 189,192 196,538 110,737

* The credit rating is from Moody’s.

– I-25 – APPENDIXI ACCOUNTANT’S REPORT

Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents and the availability of funding through an adequate amount of undrawn committed credit facilities. Due to the dynamic nature of the underlying businesses, the Group’s treasury function aims to maintain flexibility in funding by keeping committed credit lines available.

Except for the Group’s borrowings and certain trade and other payables, all of the Group’s financial liabilities mature within 1 year from the end of the reporting period. The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the combined balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Between Between Less than 1 and 2 2 and 5 Over 1 year years years 5years Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

As at 31 December 2010 Trade and other payables (excluding other taxes and surcharges payable) 233,888 − − 1,188 235,076 Amounts due to related parties 40,664 – – – 40,664 Borrowings 20,935 − − − 20,935

295,487 − − 1,188 296,675

As at 31 December 2011 Trade and other payables (excluding other taxes and surcharges payable) 285,486 − 14 1,785 287,285 Amounts due to related parties 4,548 – – – 4,548 Borrowings 52,962 20,036 − − 72,998

342,996 20,036 14 1,785 364,831

As at 31 December 2012 Trade and other payables (excluding other taxes and surcharges payable) 278,244 − 830 1,672 280,746 Amounts due to related parties 12,655 – – – 12,655 Borrowings 15,011 − − − 15,011

305,910 − 830 1,672 308,412

As at 31 May 2013 Trade and other payables (excluding other taxes and surcharges payable) 224,888 – 624 3,843 229,355 Amounts due to related parties 8,648 – – – 8,648 Borrowings 1,415 20,857 – – 22,272 234,951 20,857 624 3,843 260,275

As at 31 May 2013, the current liabilities of the Group exceeded its current assets by approximately RMB36,575,000 (Refer to Note 3.1 for details).

– I-26 – APPENDIXI ACCOUNTANT’S REPORT

4.2 Capital risk management

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

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The capital structure of the Group consists of borrowings and equity. Capital is managed so as to maximise the return to shareholders while maintaining a capital base to allow the Group to operate effectively in the marketplace and sustain future development of the business. The Group monitors capital on the basis of gearing ratio. This ratio is calculated as total debts (including borrowings, amounts due to related companies, borrowings from employees and other payables) divided by total equity as shown in the Financial Information.

The Group’s gearing ratio at 31 December 2010, 2011 and 2012 and 31 May 2013 were as follows:

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Total debts 100,497 91,026 47,064 50,658 Total equity (4,121) 45,046 88,689 102,251

Gearing ratio NA 202.1% 53.1% 49.54%

5 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually 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 Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and 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 addressed below.

(a) Current income taxes and deferred tax

The Group is subject to income taxes in the PRC. Significant judgement is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

Deferred tax assets relating to certain temporary differences and tax losses are recognised as management considers it is probable that future taxable profit will be available against which the temporary differences or tax losses can be utilised. Where the expectation is different from the original estimate, such differences will impact the recognition of deferred tax assets and taxation in the periods in which such estimate is changed.

(b) Useful lives of property, plant and equipment

The Group determines the estimated useful lives for its property, plant and equipment based on the historical experience of the actual useful lives of property, plant and equipment of similar nature and functions. The Group will revise the depreciation charges where useful lives are different from previously estimated, or it will write off or write down technically obsolete or non-strategic assets that have been abandoned or sold.

– I-27 – APPENDIXI ACCOUNTANT’S REPORT

The amount of revenue attributable to the credit award earned by the customers of the Group’s loyalty points program is estimated based on the fair value of the credits awarded and the expected redemption rate. The expected redemption rate is estimated considering the number of the credits that will be available for redemption in the future after allowing for credits which are not expected to be redeemed. Revenue from the loyalty points is recognised when the points are redeemed.

6 REVENUE AND SEGMENT INFORMATION

The chief operating decision-maker (“CODM”) has been identified as directors and senior management of Guangdong Yihua. Management determines the operating segments based on the Group’s internal reports, which are then submitted to directors and senior management for performance assessment and resources allocation.

The CODM considered the nature of the Group’s business and determined that the Group has four reportable operating segments as follows:

(i) Department store;

(ii) Supermarket;

(iii) Electrical appliances; and

(iv) Furniture.

The CODM assesses the performance of the operating segments based on a measure of revenue and gross profit (revenue less purchase of and changes in inventories, when appropriate). This measurement basis excludes Discontinued Operations. Assets and liabilities for the operating segments are not regularly reported to the CODM.

All revenue is generated in the PRC and all significant operating assets of the Group are in the PRC. No single external customer contributes 10 per cent or more of the Group’s revenues.

Revenue

The revenue reported to the CODM is measured in a manner consistent with that in the combined statement of comprehensive income.

The segment results for the year ended 31 December 2010:

Department Electrical store Supermarket appliances Total RMB’000 RMB’000 RMB’000 RMB’000

Segment revenue 172,274 243,211 189,719 605,204 Segment result – gross profit 168,318 46,641 24,849 239,808 Unallocated income – other income and other gains, net 2,370 Unallocated cost (196,513)

Operating profit 45,665 Finance income 2,838 Finance costs (3,836)

Profit before income tax 44,667 Income tax expense (12,189)

Profit for the year from continuing operations 32,478

Depreciation and amortisation (13,696)

– I-28 – APPENDIXI ACCOUNTANT’S REPORT

The segment results for the year ended 31 December 2011:

Department Electrical store Supermarket appliances Total RMB’000 RMB’000 RMB’000 RMB’000

Segment revenue 211,359 293,824 209,903 715,086 Segment result – gross profit 208,899 63,898 37,976 310,773 Unallocated income – other income and other gains, net 1,480 Unallocated cost (243,953)

Operating profit 68,300 Finance income 4,879 Finance costs (4,747)

Profit before income tax 68,432 Income tax expense (18,086)

Profit for the year from continuing operations 50,346

Depreciation and amortisation (16,027)

The segment results for the year ended 31 December 2012:

Department Electrical store Supermarket appliances Total RMB’000 RMB’000 RMB’000 RMB’000

Segment revenue 223,767 290,350 164,759 678,876 Segment result – gross profit 218,958 69,005 38,723 326,686 Unallocated income – other income and other gains, net 1,405 Unallocated cost (269,405)

Operating profit 58,686 Finance income 3,460 Finance costs (2,602)

Profit before income tax 59,544 Income tax expense (17,025)

Profit for the year from continuing operations 42,519

Depreciation and amortisation (17,300)

– I-29 – APPENDIXI ACCOUNTANT’S REPORT

The segment results for five months ended 31 May 2012 (unaudited):

Department Electrical store Supermarket appliances Total RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) (Unaudited)

Segment revenue 96,090 125,346 70,357 291,793 Segment result – gross profit 94,878 28,428 17,581 140,887 Unallocated income – other income and other gains, net 344 Unallocated cost (108,831)

Operating profit 32,400 Finance income 2,355 Finance costs (1,600)

Profit before income tax 33,155 Income tax expense (9,665)

Profit for the period from continuing operations 23,490

Depreciation and amortisation (7,284)

The segment results for five months ended 31 May 2013:

Department Electrical store Supermarket appliances Furniture Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Note (a)

Segment revenue 106,437 124,830 70,355 777 302,399 Segment result – gross profit 102,668 30,561 15,882 777 149,888 Unallocated income – other income and other gains, net 400 Unallocated cost (131,011)

Operating profit 19,277 Finance income 830 Finance costs (606)

Profit before income tax 19,501 Income tax expense (6,780)

Profit for the period from continuing operations 12,721

Depreciation and amortisation (8,473)

(a) “Furniture” is a new reportable segment operated by the Group starting from the five months period ended 31 May 2013.

– I-30 – APPENDIXI ACCOUNTANT’S REPORT

Entity-Wide information

The turnover of the Group for the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2012 and 2013 is set out as follows:

Five months Year ended 31 December ended 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Directsalesofgoods 416,822 475,214 419,333 182,498 182,110 Commission income from concessionairesales 146,472 189,233 208,855 87,725 96,179 Management fee and service income from operations 32,815 37,140 38,907 17,356 17,941 Rental income 9,095 13,499 11,781 4,214 6,169

605,204 715,086 678,876 291,793 302,399

7 OTHERINCOME

Five months ended Year ended 31 December 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Management consulting service income 1,125 500 375 375 – Government grants 816 739 441 – 292

1,941 1,239 816 375 292

8 EMPLOYEE BENEFIT EXPENSES (INCLUDING DIRECTORS’ EMOLUMENTS)

Five months ended Year ended 31 December 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Wages and salaries 40,751 48,259 63,729 23,833 31,924 Social security costs 5,291 6,673 8,094 3,107 3,559 Welfare and other benefits 2,464 3,071 4,087 2,690 2,836

48,506 58,003 75,910 29,630 38,319

– I-31 – APPENDIXI ACCOUNTANT’S REPORT

(a) Directors’ emoluments

Directors’ emoluments for the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2012 and 2013 are as follows:

Other benefits including Basic retirement salaries and Discretionary benefit Fees allowances bonuses contribution Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Year ended 31 December 2010 Executive directors Mr.FanXinpei*(“Mr.Fan”) – 481 30 13 524 Mr. Lin Guangzheng – 286 18 13 317 Mr. Su Weibing – 286 18 13 317 Mr. Chen Jianren* (“Mr. Chen”) – – – – –

Non-executive directors Mr. Chen Daren – – – – – Mr. Lu Hanxing – – – – –

– 1,053 66 39 1,158

Year ended 31 December 2011 Executive directors Mr. Fan Xinpei* – 487 30 14 531 Mr. Lin Guangzheng – 291 18 14 323 Mr. Su Weibing – 291 18 14 323 Mr. Chen Jianren* – – – – –

Non-executive directors Mr. Chen Daren – – – – – Mr. Lu Hanxing – – – – –

– 1,069 66 42 1,177

– I-32 – APPENDIXI ACCOUNTANT’S REPORT

Other benefits including Basic retirement salaries and Discretionary benefit Fees allowances bonuses contribution Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Year ended 31 December 2012 Executive directors Mr. Fan Xinpei* – 1,217 80 17 1,314 Mr. Lin Guangzheng – 714 50 17 781 Mr. Su Weibing – 714 50 17 781 Mr. Chen Jianren* – – – – –

Non-executive directors Mr. Chen Daren – – – – – Mr. Lu Hanxing – – – – –

– 2,645 180 51 2,876

Other benefits including Basic retirement salaries and Discretionary benefit Fees allowances bonuses contribution Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)

Five months ended 31 May 2012 (unaudited) Executive directors Mr. Fan Xinpei* – 302 80 8 390 Mr. Lin Guangzheng – 175 50 8 233 Mr. Su Weibing – 175 50 8 233 Mr. Chen Jianren* – – – – –

Non-executive directors Mr. Chen Daren – – – – – Mr. Lu Hanxing – – – – –

– 652 180 24 856

– I-33 – APPENDIXI ACCOUNTANT’S REPORT

Other benefits including Basic retirement salaries and Discretionary benefit Fees allowances bonuses contribution Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Five months ended 31 May 2013 Executive directors Mr. Fan Xinpei* – 705 80 8 793 Mr. Lin Guangzheng – 400 50 8 458 Mr. Su Weibing – 401 50 8 459 Mr. Chen Jianren* – – – – –

Non-executive directors Mr. Chen Daren – – – – – Mr. Lu Hanxing – – – – –

– 1,506 180 24 1,710

* Mr. Fan is the chief executive officer of the Group, and Mr. Chen is the chairman of the Group.

No directors have waived or agreed to waive any emoluments during the Relevant Periods.

(b) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group included 3, 3, 3, 3 and 3 directors for the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2012 and 2013. Their emolument is reflected in the analysis presented above. The emoluments payable to the remaining 2 individuals for the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2012 and 2013 are as follows:

Five months ended Year ended 31 December 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Basic salaries and allowances 447 457 901 241 481 Discretionary bonuses 28 28 60 60 60 Other benefits including retirement benefit contribution 26 28 35 3 16

501 513 996 304 557

– I-34 – APPENDIXI ACCOUNTANT’S REPORT

The emoluments of the above 2 individuals fell within the following bands:

Five months ended Year ended 31 December 31 May 2010 2011 2012 2012 2013

Emolument bands Nil − HK$1,000,000 2 2 2 2 2

During the Relevant Periods, no emoluments were paid by the Group to any of the directors or other members of the five highest paid individuals as an inducement to join, upon joining the Group, leave the Group or as compensation for loss of office.

9 OTHER OPERATING EXPENSES

Five months ended Year ended 31 December 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Utilities 37,688 36,617 38,172 13,985 13,530 Advertising, promotion and related expenses 7,515 9,064 12,884 7,060 6,553 Repairs and maintenances 5,689 5,202 5,271 2,013 1,916 Insurance 315 434 399 216 203 Bank charges 4,108 5,439 4,259 1,827 1,836 Consumables 3,468 3,409 3,591 1,480 1,898 Travelling and transportation expenses 2,692 2,805 3,310 1,343 1,871 Office expenses 2,675 3,131 3,403 1,414 1,742 Entertainment 2,051 2,390 2,734 1,212 1,402 Other taxes 12,413 16,216 17,123 6,903 7,963 Auditor’s remuneration 63 131 48 – 11 Professional service expenses – 2,738 996 872 3,389 Consumption cards related expenses 1,050 4,716 3,364 1,159 900 Cash losses (a) – 4,005 – – – Other expenses 5,846 7,413 8,212 2,724 2,790

85,573 103,710 103,766 42,208 46,004

(a) It represented cash losses identified by the Group during the course of operations of a department store.

– I-35 – APPENDIXI ACCOUNTANT’S REPORT

10 FINANCE COSTS AND INCOME

Five months ended Year ended 31 December 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Finance income – Interest income derived from bank and other deposits (922) (2,012) (2,478) (1,373) (830) – Interest income derived from loan to a related party (1,916) (2,867) (982) (982) –

Finance costs – Interest expense on bank borrowings 3,134 4,239 2,414 1,600 606 – Interest expense on borrowings from employees and a third party 702 508 188 – –

Finance costs/(income) – net 998 (132) (858) (755) (224)

11 INCOME TAX EXPENSE

Five months ended Year ended 31 December 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Current income tax – PRC corporate income tax 9,219 17,515 13,042 8,510 7,527 Deferred income tax 2,970 571 3,983 1,155 (747)

Income tax expense 12,189 18,086 17,025 9,665 6,780

Taxation has been provided at the appropriate tax rates prevailing in the territories in which the Group operates. No provision for Hong Kong profits tax has been made as the Group has no assessable profit in Hong Kong for each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2012 and 2013. Corporate Income Tax (“CIT”) is provided on the assessable income of entities within the Group established in the PRC.

Pursuant to the PRC Corporate Income Tax Law, the CIT is unified at 25% for all types of entities, effective from 1 January 2008.

– I-36 – APPENDIXI ACCOUNTANT’S REPORT

The taxation of the Group’s profit before income tax differs from the theoretical amount that would arise using the applicable tax rate as follows:

Five months ended Year ended 31 December 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Profit before income tax 44,667 68,432 59,544 33,155 19,501

Tax calculated at rates applicable to profits of the combined entities in the respective jurisdictions 11,167 17,108 14,886 8,289 4,875 Expenses not deductible for tax purposes 1,004 757 1,864 1,376 763 Tax losses for which no deferred income tax asset was recognised 18 221 275 – 1,142

Income tax expense 12,189 18,086 17,025 9,665 6,780

12 DIVIDENDS

No dividend has been paid or declared by the companies now comprising the Group for the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2012 and 2013.

13 EARNINGS PER SHARE

No earnings per share information is presented as its inclusion, for the purpose of this report, is not considered meaningful due to the Reorganisation and the preparation of the results for each of the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2012 and 2013 on a combined basis as disclosed in note 2 above.

– I-37 – APPENDIXI ACCOUNTANT’S REPORT

14 PROPERTY, PLANT AND EQUIPMENT

Leasehold Office Other Construction improvements Buildings equipment Vehicles equipment inprogress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

As at 1 January 2010 Cost 111,269 690 11,226 2,799 8,702 – 134,686 Accumulated depreciation (19,608) (101) (6,838) (1,630) (5,883) – (34,060)

Net book amount 91,661 589 4,388 1,169 2,819 – 100,626

Year ended 31 December 2010 Opening net book amount 91,661 589 4,388 1,169 2,819 – 100,626 Additions 23,842 – 531 981 1,295 – 26,649 Disposals – – (20) (14) (17) – (51) Depreciation (11,914) (33) (925) (429) (929) – (14,230)

Closing net book amount 103,589 556 3,974 1,707 3,168 – 112,994

As at 31 December 2010 Cost 135,111 690 11,715 3,049 9,656 – 160,221 Accumulated depreciation (31,522) (134) (7,741) (1,342) (6,488) – (47,227)

Net book amount 103,589 556 3,974 1,707 3,168 – 112,994

Year ended 31 December 2011 Opening net book amount 103,589 556 3,974 1,707 3,168 – 112,994 Additions 17,103 – 494 232 2,750 – 20,579 Disposals – (411) (2) (29) (46) – (488) Transfer to “assets of disposal group classified as held for sale” (Note 19(c)) (3,867) – – – (25) – (3,892) Depreciation (14,124) (21) (856) (449) (1,099) – (16,549)

Closing net book amount 102,701 124 3,610 1,461 4,748 – 112,644

As at 31 December 2011 Cost 146,460 210 12,158 2,875 12,267 – 173,970 Accumulated depreciation (43,759) (86) (8,548) (1,414) (7,519) – (61,326)

Net book amount 102,701 124 3,610 1,461 4,748 – 112,644

Year ended 31 December 2012 Opening net book amount 102,701 124 3,610 1,461 4,748 – 112,644 Additions 16,992 134 735 – 1,707 3,745 23,313 Disposals – – (4) – (1) – (5) Depreciation (14,358) (5) (384) (424) (2,051) – (17,222)

105,335 253 3,957 1,037 4,403 3,745 118,730

As at 31 December 2012 Cost 163,452 344 12,824 2,875 13,950 3,745 197,190 Accumulated depreciation (58,117) (91) (8,867) (1,838) (9,547) – (78,460)

Net book amount 105,335 253 3,957 1,037 4,403 3,745 118,730

– I-38 – APPENDIXI ACCOUNTANT’S REPORT

Leasehold Office Other Construction improvements Buildings equipment Vehicles equipment inprogress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Five months ended 31 May 2012 (unaudited) Opening net book amount 102,701 124 3,610 1,461 4,748 – 112,644 Additions 6,921 – 278 – 872 – 8,071 Disposals – – (3) – (1) – (4) Depreciation (6,051) (2) (204) (210) (797) – (7,264)

103,571 122 3,681 1,251 4,822 – 113,447

As at 31 May 2012 (unaudited) Cost 153,381 210 12,374 2,875 13,127 – 181,967 Accumulated depreciation (49,810) (88) (8,693) (1,624) (8,305) – (68,520)

Net book amount 103,571 122 3,681 1,251 4,822 – 113,447

Five months ended 31 May 2013 Opening net book amount 105,335 253 3,957 1,037 4,403 3,745 118,730 Additions 11,840 – 279 6 2,901 17,715 32,741 Disposals – – (25) – (4) – (29) Transfer 13,727 – – – – (13,727) – Depreciation (7,241) (5) (252) (169) (799) – (8,466)

123,661 248 3,959 874 6,501 7,733 142,976

As at 31 May 2013 Cost 189,019 344 13,078 2,881 16,770 7,733 229,825 Accumulated depreciation (65,358) (96) (9,119) (2,007) (10,269) – (86,849)

Net book amount 123,661 248 3,959 874 6,501 7,733 142,976

(a) No property, plant and equipment were pledged as collaterals for the Group’s borrowings as at 31 December 2010, 2011 and 2012, 31 May 2012 and 2013.

15 DEFERRED INCOME TAX

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset and when the deferred income taxes relate to the same tax authority. The analysis of deferred income tax assets and liabilities after offsetting is as follows:

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

(a) Deferred income tax assets: – to be recovered after 12 months 2,306 1,780 635 955 – to be recovered within 12 months 466 247 1,041 817

2,772 2,027 1,676 1,772

Deferred income tax liabilities: – to be settled after 12 months (3,245) (2,825) (6,323) (5,909) – to be settled within 12 months (338) (584) (718) (481)

(3,583) (3,409) (7,041) (6,390)

(811) (1,382) (5,365) (4,618)

– I-39 – APPENDIXI ACCOUNTANT’S REPORT

(b) The net movement of the deferred income tax account is as follows:

Five months ended Year ended 31 December 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

At beginning of the year/period 2,159 (811) (1,382) (5,365) Recognised in the combined statements of comprehensive income (Note 11) (2,970) (571) (3,983) 747

At ending of the year/period (811) (1,382) (5,365) (4,618)

(c) Movement in deferred income tax assets during the Relevant Periods, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:

Accrued expenses and deferred revenue Taxloss Others Total RMB’000 RMB’000 RMB’000 RMB’000

Deferred income tax assets As at 1 January 2010 2,624 4,633 – 7,257 Recognised in the combined statement of comprehensive income 677 (1,776) – (1,099)

As at 31 December 2010 3,301 2,857 – 6,158 Recognised in the combined statement of comprehensive income 951 (467) – 484

As at 31 December 2011 4,252 2,390 – 6,642 Recognised in the combined statement of comprehensive income (2,008) (967) 216 (2,759)

As at 31 December 2012 2,244 1,423 216 3,883 Recognised in the combined statement of comprehensive income 1,429 (607) 242 1,064

As at 31 May 2013 3,673 816 458 4,947

– I-40 – APPENDIXI ACCOUNTANT’S REPORT

(d) Movement in deferred income tax liabilities during the Relevant Periods, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:

Accelerated tax depreciation Deferred assets Total RMB’000 RMB’000 RMB’000

Deferred income tax liabilities

As at 1 January 2010 4,975 123 5,098 Recognised in the combined statement of comprehensive income 1,886 (15) 1,871

As at 31 December 2010 6,861 108 6,969 Recognised in the combined statement of comprehensive income 1,010 45 1,055 As at 31 December 2011 7,871 153 8,024 Recognised in the combined statement of comprehensive income 1,119 105 1,224

As at 31 December 2012 8,990 258 9,248 Recognised in the combined statement of comprehensive income 244 73 317

As at 31 May 2013 9,234 331 9,565

In accordance with the PRC tax law, tax losses may be carried forward to offset against future taxable income for a period of five years. As at 31 December 2010, 2011 and 2012 and 31 May 2013, the Group did not recognise deferred tax assets in respect of losses amounting to approximately RMB960,000, RMB1,844,000, RMB2,944,000 and RMB7,512,000, as it is uncertain that future taxable profit will be available against which the tax losses can be utilised. These tax losses will expire between 2015 and 2018.

16 DEFERRED ASSETS

Rental income is recognised on an accruals basis by averaging out the impact of rent-free periods, contracted rental escalations and such other terms affecting the cash received from rental income under each tenancy agreement. Thus, rental income is recognised on a straight-line basis for the entire lease term of each tenancy agreement, which effectively amortises the impact of rent-free periods, contracted rental escalations and other relevant terms on the rental income over the relevant lease periods. The difference between the rental income as set out in the lease agreements and accounting rental income is reflected as deferred assets.

17 INVENTORIES

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Merchandise held for direct sales 79,292 99,693 93,098 78,352 Low value consumables 396 422 680 1,078

79,688 100,115 93,778 79,430

– I-41 – APPENDIXI ACCOUNTANT’S REPORT

The cost of inventories recognised as purchase and changes in inventories amounted to approximately RMB365,396,000, RMB404,313,000 and RMB352,190,000 and RMB152,511,000 for the years ended 31 December 2010, 2011 and 2012 and the five months ended 31 May 2013.

18 TRADE RECEIVABLES, PREPAYMENTS AND OTHER RECEIVABLES

The Group

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Trade receivables 17,760 16,349 14,294 14,273 Receivables from sales of consumption cards and arrangements with mobile telecommunications service provider 12,040 5,190 3,680 1,888 Other receivables 20,010 3,236 3,161 3,209 Prepayments 19,961 36,229 58,042 44,009 Rental and other deposits 1,690 2,249 11,505 13,072

71,461 63,253 90,682 76,451

Less: long-term prepaid rent and rental deposits (4,754) (5,109) (18,703) (23,530)

66,707 58,144 71,979 52,921

(a) The carrying amounts of the Group’s trade and other receivables as at 31 December 2010, 2011 and 2012 and 31 May 2013 approximate their fair values.

(b) As at 31 December 2010, 2011 and 2012 and 31 May 2013, all of the Group’s trade and other receivables were denominated in RMB.

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Trade receivables, gross – Within 2 months 14,695 16,111 13,632 13,999 – Over 2 months 3,065 238 662 274

17,760 16,349 14,294 14,273

The balance of trade receivables related to management fee and service income from concessionaires and other leasees, the credit terms of which are generally within 30 to 60 days. No interest is charged on these receivables.

(d) As at 31 December 2010, 2011 and 2012 and 31 May 2013, trade receivables of approximately RMB3,065,000, RMB238,000 and RMB662,000 and RMB274,000 were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The credit quality of trade receivables neither past due nor impaired has been assessed by reference to historical records of the counterparty default rates.

– I-42 – APPENDIXI ACCOUNTANT’S REPORT

(e) The maximum exposure to credit risk at the respective combined balance sheet dates are the fair value of each class of receivable mentioned above. The Group does not hold any collateral as security.

None of these trade and other receivables was impaired as at 31 December 2010, 2011 and 2012 and 31 May 2013.

The Company

As at As at 31 December 2012 31 May 2013 RMB’000 RMB’000

Prepayments for professional fees in relation to the Company’s Listing 616 1,242

19 ASSETS/LIABILITIES OF DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE AND DISCONTINUEDOPERATIONS

(a) (Loss)/profit for the year/period from discontinued operations

Five months ended Year ended 31 December 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Guangdong Yihua Plaza Management Limited 418 – – – – Shaoguan Central Management (2,366) (1,179) 1,124 293 841

Total (1,948) (1,179) 1,124 293 841

(Loss)/profit for the year/period from discontinued operations attributable to: – Equity holders of the Company (951) (578) 551 143 411 – Non-controlling interests (997) (601) 573 150 430

(1,948) (1,179) 1,124 293 841

(b) Guangdong Yihua Plaza Management Limited

On 12 October 2010, the Group transferred its entire equity interests in Guangdong Yihua Plaza Management Limited, a 50% owned subsidiary, to Yihua Investment, a company controlled by the Controlling Shareholder of the Group at a consideration of RMB2,500,000.

– I-43 – APPENDIXI ACCOUNTANT’S REPORT

(i) The cash flows of Guangdong Yihua Plaza Management Limited for the period from 1 January 2010 to 12 October 2010 (date of disposal) are as follows:

For the period from 1 January 2010 to 12 October 2010 RMB’000

Cash and cash equivalents at 1 January 2010 790 Net cash generated from operating activities (2,236) Net cash used in investing activities 2,722 Disposal of discontinued operations (1,276)

Cash and cash equivalents at 12 October 2010 –

(ii) The operating results of Guangdong Yihua Plaza Management Limited for the period from 1 January 2010 to 12 October 2010 (date of disposal), which have been included in the combined statements of comprehensive income, are as follows:

For the period from 1 January 2010 to 12 October 2010 RMB’000

Revenue 13,472 Expenses (13,054)

Total profit before tax 418 Income tax expenses –

Net profit for the period 418

(iii) The details of assets and liabilities disposed of and the disposal consideration are as follows:

As at 12 October 2010 RMB’000

Property, plant and equipment 25,250 Inventories 99 Trade and other receivables 790 Cash and cash equivalents 1,276 Trade and other payables (23,269)

Net assets 4,146 Less: share of non-controlling shareholders (2,073)

Net assets attributable to equity holders of the Company 2,073 Less: total consideration (2,500)

Distribution of a subsidiary recorded in capital reserve (427)

Net cash inflow arising from distribution 1,224

– I-44 – APPENDIXI ACCOUNTANT’S REPORT

The assets and liabilities related to Shaoguan Central Management and its wholly-owned subsidiary, Shaoguan Xinhui Property Management (the “Shaoguan Management Group”) have been presented as held for sale since 31 December 2011 following the approval of management in 2011. On 23 July 2012, 100% equity interest of Shaoguan Xinhui Property Management was disposed to a third party at a consideration of RMB500,000. On 18 November 2013, the Group transferred its entire equity interests in Shaoguan Central Management to a third party at cash consideration of RMB245,000.

(i) The cash flows of Shaoguan Management Group for the Relevant Periods are as follows:

Five months ended Year ended 31 December 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Cash and cash equivalents at beginning of the year/period 126 717 1,258 1,258 1,052 Net cash generated from/(used in) operating activities 611 541 1,485 294 (1,647) Net cash used in investing activities (20) – (4) (4) – Net cash (used in)/generated from financing activities – – (1,687) (689) 1,000

Cash and cash equivalents at end of the year/period 717 1,258 1,052 859 405

(ii) Assets of Shaoguan Management Group as at 31 December 2011 and assets of Shaoguan Central Management as at 31 December 2012 and 31 May 2013 classified as held for sale:

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Property, plant and equipment – 3,892 3,896 3,896 Trade and other receivables – 918 427 917 Cash and cash equivalents – 1,258 1,052 405

Total – 6,068 5,375 5,218

– I-45 – APPENDIXI ACCOUNTANT’S REPORT

(iii) Liabilities of Shaoguan Management Group as at 31 December 2011 and liabilities of Shaoguan Central Management as at 31 December 2012 and 31 May 2013 classified as held for sale:

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Trade and other payables – 2,760 2,631 633

(iv) The operating results of Shaoguan Management Group, which have been included in the combined statements of comprehensive income, are as follows:

Year ended 31 December Five months ended 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Revenue 2,965 3,960 4,311 1,953 2,003 Expenses (5,331) (5,139) (3,187) (1,660) (1,162)

Total (loss)/profit before tax (2,366) (1,179) 1,124 293 841 Income tax expenses – – – – –

Net (loss)/profit for the year/period (2,366) (1,179) 1,124 293 841

20 RESTRICTED CASH

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Restricted cash 4,002 14,160 15,097 15,470

All restricted cash were denominated in RMB. As at 31 May 2013, RMB5,000,000 was deposited into a designated bank account for the formation of a new subsidiary of the Group. The rest of the restricted cash were pledged for notes payable ranged from three to six months.

21 CASH AND CASH EQUIVALENTS

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Cash at bank 107,189 159,727 147,781 83,899 Short-term bank deposits 23,808 15,305 33,660 11,368 Cash on hand 7,720 9,426 4,994 4,534

138,717 184,458 186,435 99,801

The Group’s cash and cash equivalent were denominated in RMB. The cash at bank balances are deposited with banks in the PRC.

– I-46 – APPENDIXI ACCOUNTANT’S REPORT

22 SHARE CAPITAL OF THE COMPANY AND COMBINED CAPITAL

Equivalent Number of Nominal value nominal value ordinary of ordinary of ordinary Share capital shares shares shares HK$ RMB Company

Authorised: Ordinary shares of HK$0.01 each as at 20 April 2012 (date of incorporation), 31 December 2012 and 31 May 2013 38,000,000 380,000 308,636

Issued and fully paid: Ordinary shares of HK$0.01 each at 20 April 2012 (date of incorporation), 31 December 2012 and 31 May 2013 3 0.03 0.03

The Company was incorporated in the Cayman Islands on 20 April 2012 with an authorised share capital of HK$380,000 divided into 38,000,000 shares of HK$0.01 each.

Combined capital

Combined capital during the Relevant Periods represents the aggregated paid-in capital of the Company, Guangdong Yihua and Mentor Asia at the respective dates.

23 OTHER RESERVES

Statutory reserve Capital reserve Total RMB’000 RMB’000 RMB’000 (Notea) (Noteb)

Balance as at 1 January 2010 488 3,478 3,966

Appropriation to reserve fund 885 – 885 Capital injection – 1,000 1,000 Distribution of a subsidiary (Note 19(b)(iii)) – 427 427

Balance as at 31 December 2010 1,373 4,905 6,278

Appropriation to reserve fund 2,233 – 2,233

Balance as at 31 December 2011 3,606 4,905 8,511

Appropriation to reserve fund 4,262 – 4,262

Balance as at 31 December 2012 7,868 4,905 12,773

Appropriation to reserve fund 1,991 – 1,991

Balance as at 31 May 2013 9,859 4,905 14,764

– I-47 – APPENDIXI ACCOUNTANT’S REPORT

(a) Appropriation to reserve fund

In accordance with relevant rules and regulations in the PRC, except for sino-foreign equity joint venture enterprises, all PRC companies are required to transfer 10% of their profit after taxation calculated under PRC accounting rules and regulations to the statutory reserve fund, until the accumulated total of the fund reaches 50% of their registered capital. The statutory reserve fund can only be used, upon approval by the relevant authority, to offset previous years’ losses or to increase the capital of respective companies.

(b) Capital reserve

This balance mainly represented accumulated capital contribution from shareholders of the Group.

Accumulated losses

As at 20 April 2012 (date of incorporation) – Loss for the period (1,845)

As at 31 December 2012 (1,845)

Loss for the period (2,646)

As at 31 May 2013 (4,491)

24 TRADE AND OTHER PAYABLES

The Group

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Trade payables 69,163 93,213 69,812 59,401 Notes payable 20,000 47,175 50,300 34,900 Staff salaries, bonuses and welfare payables 5,758 6,663 7,966 6,708 Payables to concessionaires and leasees 91,089 114,639 122,828 95,513 Other taxes and surcharges payable 9,432 13,461 8,875 1,871 Borrowings from employees 1,450 – – – Rental and other deposits 9,233 9,117 10,431 10,823 Others 38,383 16,478 19,409 22,010

244,508 300,746 289,621 231,226 Less: non-current portion of other payables (1,188) (1,799) (2,502) (4,467)

243,320 298,947 287,119 226,759

The borrowings from employees amounting to RMB1,450,000 as at 31 December 2010 and the borrowings from a third party amounting to RMB5,000,000 as at 31 December 2012 were interest bearing at 12% and 11% per annum respectively. Other trade and other payables balances of the Group were interest free, unsecured and their fair value approximated their carrying amounts due to their short maturities.

As at 31 December 2010, 2011 and 2012 and 31 May 2013, all of the Group’s trade and other payables were denominated in RMB.

– I-48 – APPENDIXI ACCOUNTANT’S REPORT

The aging analysis of the trade payables was as follows:

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Below 3 months 53,780 76,073 57,309 39,099 Over 3 months 15,383 17,140 12,503 20,302

69,163 93,213 69,812 59,401

25 BORROWINGS

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Non-current Long-term bank borrowings – Secured – – – 20,000 Long-term bank borrowings – Unsecured – 20,000 – –

Current Short-term bank borrowings – Secured 20,000 50,000 – – Long-term bank borrowings due within 1 year – Unsecured – – 15,000 –

Total borrowings 20,000 70,000 15,000 20,000

The Group’s secured bank borrowings as at 31 May 2013 are pledged by certain land and buildings owned by Lonwalk Mould (Note 30(a)(viii)). On 8 November 2013, these properties were transferred to Yihua Investment as part of the Reorganization and such loan was repaid on 15 October 2013.

The annual effective interest rates of the Group’s total borrowings are as follows:

Five months ended Year ended 31 December 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 (per annum)

Long-term bank borrowings, secured – – – 7.07% Long-term bank borrowings, unsecured – 6.44% – – Short-term bank borrowings, secured 5.56% 6.69% – – Long-term bank borrowings due within 1 year, unsecured – – 7.32% –

The exposure of the Group’s borrowings to interest rate changes and the contractual re-pricing dates at the end of each reporting period are as follows:

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

– 1 year or less 20,000 70,000 15,000 20,000

– I-49 – APPENDIXI ACCOUNTANT’S REPORT

The maturities of the Group’s total borrowings at respective combined balance sheet dates are set out as follows:

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

– Within 1 year 20,000 50,000 15,000 – – 1 to 2 years – 20,000 – 20,000

20,000 70,000 15,000 20,000

The carrying amounts and fair value of the non-current borrowings are as follows:

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Carrying amounts – 20,000 – 20,000

Fair values – 19,893 – 18,287

The fair values are based on cash flows discounted using a rate based on the borrowing rate of 6.65% per annum for the year ended 31 December 2011 and 7.07% per annum for the five months ended 31 May 2013.

The fair value of current borrowings approximates their carrying amount, as the impact of discounting is not significant.

The carrying amount of the Group’s borrowings was denominated in RMB.

– I-50 – APPENDIXI ACCOUNTANT’S REPORT

26 CASH GENERATED FROM/(USED IN) OPERATIONS

Five months Year ended 31 December ended 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Continuing operations Profit before income tax 44,667 68,432 59,544 33,155 19,501

Adjustments for: Depreciation of property, plant and equipment 13,648 15,975 17,222 7,264 8,466 Amortisation of computer software 48 52 78 20 7 Finance income (2,838) (4,879) (3,460) (2,355) (830) Financial costs 3,836 4,747 2,602 1,600 606 Loss from sale of property, plant and equipment 18 19 5 4 3

Changes in working capital: (Increase)/decrease in trade and other receivables, amounts due from related parties, long-term prepaidrentandrentaldeposits (15,389) (32,805) (19,088) 21,131 34,891 (Increase)/decreaseininventories (2,435) (20,427) 6,337 5,740 14,348 Decrease/(increase) in deferred assets 564 46 498 (112) (372) Increase/(decrease) in trade and other payables, amounts due to related parties, deferred revenue and advances from customers 49,131 71,227 61,864 (57,644) (84,176) (Increase)/decrease in restricted cash (2,469) (10,158) (937) 864 (373)

Cash generated from/(used in) continuing operations 88,781 92,229 124,665 9,667 (7,929)

Discontinued operations (Loss)/profit before income tax (1,948) (1,179) 1,124 293 841

Adjustments for: Depreciation of property, plant and equipment 582 574 – – – Finance income (10) (2) (2) (1) – Financial costs 1,533 1 1 – –

Changes in working capital: (Increase)/decrease in trade and other receivables (653) 636 491 350 (490) Increase in inventories (92) – – – – (Decrease)/increase in trade and other payables (1,037) 511 (129) (348) (1,998)

Cash (used in)/generated from discontinued operations (1,625) 541 1,485 294 (1,647)

Cash generated from/(used in) operations 87,156 92,770 126,150 9,961 (9,576)

– I-51 – APPENDIXI ACCOUNTANT’S REPORT

In the combined cash flow statements, proceeds from sale of property, plant and equipment comprise:

Five months Year ended 31 December ended 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Net book amount 51 488 5 4 29 Loss from sale of property, plant and equipment (18) (19) (5) (4) (3)

Proceeds from sale of property, plant and equipment received 33 469 – – 26

27 FINANCIAL INSTRUMENTS BY CATEGORY

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Deferred assets 1,497 1,451 953 1,325 Trade and other receivables excluding prepayments 51,500 27,024 32,640 32,442 Amounts due from related parties 84,910 124,976 142,002 161,740 Restricted cash 4,002 14,160 15,097 15,470 Cash and cash equivalents 138,717 184,458 186,435 99,801

280,626 352,069 377,127 310,778

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Trade and other payables excluding non-financial liabilities 235,076 287,285 280,746 229,355 Amounts due to related parties 40,664 4,548 12,655 8,648 Borrowings 20,000 70,000 15,000 20,000

295,740 361,833 308,401 258,003

28 CONTINGENCIES

As at 31 December 2010, 2011 and 2012 and 31 May 2013, the Group and the Company did not have any significant contingent liabilities.

– I-52 – APPENDIXI ACCOUNTANT’S REPORT

29 COMMITMENTS

The Group

(a) Capital commitments

Capital expenditure of the Group contracted for at each combined balance sheet date, but not yet incurred is as follows:

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Property, plant and equipment 507 137 10,669 33,340

(b) Operating lease commitments

The Group leases various buildings for operations under non-cancellable operating lease agreements.

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Not later than 1 year 549 754 1,205 15,845 Later than 1 year and not later than 5 years 3,431 3,280 8,630 23,754 Later than 5 years 7,023 6,420 56,772 48,250

11,003 10,454 66,607 87,849

The future minimum lease income under non-cancellable operating leases is as follows:

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Not later than 1 year 2,616 3,129 2,982 9,438 Later than 1 year and not later than 5 years 11,595 11,313 10,616 21,255 Later than 5 years 5,821 2,973 669 133

20,032 17,415 14,267 30,826

The above lease commitments only include commitments for basic rentals or fixed rentals, and do not include commitments for additional rental payable (contingent rents), if any, which are to be determined generally by applying predetermined percentages to future sales as it is not possible to determine in advance the amount of such additional rentals.

The Company

As at 31 December 2012 and 31 May 2013, the Company did not have any other capital commitments and operating lease commitments.

– I-53 – APPENDIXI ACCOUNTANT’S REPORT

30 RELATED PARTIES AND SIGNIFICANT RELATED PARTY TRANSACTIONS

The ultimate controlling individual of the companies now comprising the Group is Mr. Chen Daren throughout the Relevant Periods.

The directors of the Company are of the view that the following companies were related parties that had significant transactions or balances with the Group during the Relevant Periods.

Name Relationship with the Group

ᄿ؇ूശණྠҳ༟Ϟࠢʮ̡ A company controlled by Mr. Chen Daren Yihua Investment* ᄿ؇ूശᄿఙ၍ଣϞࠢʮ̡ A company controlled by Mr. Chen Daren Guangdong Yihua Plaza Management Limited* ʕʆ̹ԯശ˰ߏৢֳϞࠢʮ̡ A company controlled by Mr. Chen Daren Zhongshan King Century Hotel Limited* ʕʆ̹̚ᕄ਷൱ɽৢֳϞࠢʮ̡ A company controlled by Mr. Chen Daren Zhongshan Guzhen International Hotel Limited* ʕʆ̹อேৢֳϞࠢʮ̡ A company controlled by Mr. Chen Daren Zhongshan Xindu Hotel Limited* ၍ଣϞࠢʮ̡ Jiangmen Jinhui A company controlled by Mr. Chen Darenุيߏᄿఙ˰ිږ̹ژϪ Century Plaza Property Management Limited* අႴৢֳϞࠢʮ̡ A company controlled by Mr. Chen Daren̹ژϪ Jiangmen Yihao Hotel Limited* ໄุϞࠢʮ̡ A company controlled by Mr. Chen Darenڦ۾ʕʆ Zhongshan Weixin Investment Co., Limited* ήପϞࠢʮ̡ A company controlled by Mr. Chen Darenגʕʆ̹׋ശ Zhongshan Yihua Property Company Limited* ʕʆ̹׋ശණྠϞࠢʮ̡ A company controlled by Mr. Chen Daren Zhongshan Yihua Group Company Limited* ʕʆ̹ʃᚡˮཥɿʈุϞࠢʮ̡ A company controlled by Mr. Chen Daren Subor Electronics* ൱׸Ϟࠢʮ̡ A company controlled by Mr. Chen Darenڲʕʆ̹׋ Zhongshan Yijun Trade Co. Limited* ʕʆ̹ʗᘆௗନᆎՈϞࠢʮ̡ A company controlled by Mr. Chen Daren Zhongshan Dynasty Ceramic Sanitary Ware Co., Limited* Ӎ਷൱අႴৢֳϞࠢʮ̡ A company controlled by Mr. Chen Darenڙʕʆ̹ Zhongshan Fusha International Trade Yucca Hotel Company Limited ၍ଣϞࠢʮ̡ A company controlled by Mr. Chen Darenุيʕʆ̹ࣦശ Zhongshan Lonwalk Property Management Co., Limited ᄿ؇අႴৢֳ၍ଣϞࠢʮ̡ A company controlled by Mr. Chen Daren Guangdong Yucca Hotel Management Company Limited इτूശໄุක೯Ϟࠢʮ̡ A company controlled by Mr. Chen Daren Tai’an Yihua Property Development Company Limited ߪอ੃ Mr. Fan Xinpei* Director of the Group Έ͍ Mr. Lin Guangzheng* Director of the Group؍ ᘽਃж Mr. Su Weibing* Director of the Group ᖯϓ˖ Mr. Luo Chengwen* Key management of the Group ˮ̚ջ Ms. Wang Guping* Key management of the Group ੵႂ Ms. Zhang Rong* Key management of the Group

* The English names of certain companies and individuals referred to above represented the best efforts by management of the Company in translating their Chinese names as they do not have official English names.

– I-54 – APPENDIXI ACCOUNTANT’S REPORT

(a) Significant transactions with related parties

During the Relevant Periods, the Group had the following significant transactions with related parties:

Recurring transactions

(i) Rental expenses and property management fee:

Five months Year ended 31 December ended 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

ᄿ؇ूശණྠҳ༟Ϟࠢʮ̡ Yihua Investment 6,256 10,404 10,711 4,440 4,571 ၍ุيߏᄿఙ˰ිږ̹ژϪ ଣϞࠢʮ̡ Jiangmen Jinhui Century Plaza Property Management Limited 7,026 17,113 17,113 7,130 7,344 අႴৢֳϞࠢʮ̡̹ژϪ Jiangmen Yihao Hotel Limited 1,127 1,145 1,141 476 479 ʕʆ̹̚ᕄ਷൱ɽৢֳϞࠢ ʮ̡ Zhongshan Guzhen International Hotel Limited 787 1,452 1,545 727 725 ᄿ؇ूശᄿఙ၍ଣϞࠢʮ̡ Guangdong Yihua Plaza Management Limited (a) – – – – 4,679

15,196 30,114 30,510 12,773 17,798

(a) During the Relevant Periods, Guangdong Yihua entered into an agreement with Guangdong Yihua Plaza Management Limited whereby Guangdong Yihua Plaza Management Limited provided certain business premises to Guangdong Yihua for free up to 31 December 2012.

– I-55 – APPENDIXI ACCOUNTANT’S REPORT

Five months Year ended 31 December ended 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

(ii) Purchases of service:

ʕʆ̹ԯശ˰ߏৢֳ Ϟࠢʮ̡ Zhongshan King Century Hotel Limited 747 558 603 347 252 අႴৢֳϞࠢʮ̡̹ژϪ Jiangmen Yihao Hotel Limited 289 333 490 160 101 ʕʆ̹̚ᕄ਷൱ɽৢֳ Ϟࠢʮ̡ Zhongshan Guzhen International Hotel Limited 81 197 129 114 12 Ӎ਷൱අႴڙʕʆ̹ Ϟࠢʮֳ̡ৢ Zhongshan Fusha International Trade Yucca Hotel Company Limited – – 84 10 52 ʕʆ̹อேৢֳϞࠢ ʮ̡ Zhongshan Xindu Hotel Limited 15 21 35 23 –

1,132 1,109 1,341 654 417

– I-56 – APPENDIXI ACCOUNTANT’S REPORT

(iii) Sales of goods:

Five months Year ended 31 December ended 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Ӎ਷൱අႴڙʕʆ̹ Ϟࠢʮֳ̡ৢ Zhongshan Fusha International Trade Yucca Hotel Company Limited – – 947 100 – ʕʆ̹ԯശ˰ߏৢֳ Ϟࠢʮ̡ Zhongshan King Century Hotel Limited 292 451 339 199 82 අႴৢֳϞࠢʮ̡̹ژϪ Jiangmen Yihao Hotel Limited 1,185 929 950 389 200 ʕʆ̹̚ᕄ਷൱ɽৢֳ Ϟࠢʮ̡ Zhongshan Guzhen International Hotel Limited 97 169 – – 24

1,574 1,549 2,236 688 306

(iv) Provision of service and utility charges:

Five months Year ended 31 December ended 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

ʕʆ̹ԯശ˰ߏৢֳ Ϟࠢʮ̡ Zhongshan King Century Hotel Limited 61 76 62 21 –

Non-recurring transactions

(v) Interest income:

Five months Year ended 31 December ended 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

ᄿ؇ूശණྠҳ༟Ϟࠢ ʮ̡ Yihua Investment 1,916 2,867 982 982 –

– I-57 – APPENDIXI ACCOUNTANT’S REPORT

(vi) Loans to related parties:

During the Relevant Periods, the movement of loans provided to Yihua Investment, Zhongshan Yihua Group Company Limited, Guangdong Yucca Hotel Management Company Limited, Tai’an Yihua Property Development Company Limited and Zhongshan Yihua Property Company Limited is as follows:

Five months Year ended 31 December ended 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Beginning of the year/period 85,405 54,862 74,897 74,897 102,211 Loans advanced 48,900 52,084 110,011 84,010 61,260 Loan repayments received (81,359) (33,000) (81,000) (62,000) (23,002) Interest income recognised 1,916 2,867 982 982 – Interest received – (1,916) (2,679) – (269)

End of the year/period 54,862 74,897 102,211 97,889 140,200

(vii) Loans from related parties:

During the Relevant Periods, the movement of loans obtained from Yihua Investment and other related parties is as follows:

Five months Year ended 31 December ended 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Beginning of the year/period 2,850 40,366 4,219 4,219 4,546 Loans received 58,266 8,100 – – – Loan repayments (20,750) (47,016) (1,000) (1,000) (450) Payment on behalf of the Company – 2,769 1,327 1,327 3,223

End of the year/period 40,366 4,219 4,546 4,546 7,319

– I-58 – APPENDIXI ACCOUNTANT’S REPORT

(viii) Bank borrowing balances secured by pledges provided by related companies:

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Current borrowings Secured by land and buildings owned by the following related companies: ʕʆ̹ʗᘆௗନᆎՈϞࠢ ʮ̡ Zhongshan Dynasty Ceramic Sanitary Ware Co., Limited – 20,000 – –

Jointly secured by land and buildings owned by the following related companies: ήପϞࠢגʕʆ̹׋ശ ʮ̡ Zhongshan Yihua Property Company Limited, ʕʆ̹ʃᚡˮ ཥɿʈุϞࠢʮ̡ Subor Electronics, ʕʆ ̹ࣦശᅼՈ෧ࣘϞࠢ ʮ̡ Lonwalk Mould 20,000 – – –

ʕʆ̹ʗᘆௗନᆎՈϞࠢ ʮ̡ Zhongshan Dynasty Ceramic Sanitary Ware Co., Limited, ʕʆ̹ ʃᚡˮཥɿʈุϞࠢ ʮ̡ Subor Electronics – 30,000 – –

20,000 50,000 – –

Non-current borrowings Secured by land and buildings owned by the following related companies: ʕʆ̹ࣦശᅼՈ෧ࣘϞࠢ ʮ̡ Lonwalk Mould – – – 20,000

– I-59 – APPENDIXI ACCOUNTANT’S REPORT

(ix) Distribution of a subsidiary:

In 2010, the Group disposed of Guangdong Yihua Plaza Management Limited to Yihua Investment (Note 19(b)).

(x) Sales of consumption cards:

Year ended 31 December Five months ended 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

අႴৢֳϞ̹ࠢژϪ ʮ̡ Jiangmen Yihao Hotel Limited 2,000 – 154 4 25

(b) Balances with related parties

The Group

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Amounts due from related parties

Trade nature ၍ଣุيߏᄿఙ˰ිږ̹ژϪ Ϟࠢʮ̡ Jiangmen Jinhui Century Plaza Property Management Limited 21,334 37,940 27,844 13,008 ᄿ؇ूശᄿఙ၍ଣϞࠢʮ̡ Guangdong Yihua Plaza Management Limited 3,737 6,719 6,657 3,846 ໄุϞࠢʮ̡ڦ۾ʕʆ Zhongshan Weixin Investment Co., Limited 1,779 2,062 2,129 2,129 අႴৢֳϞࠢʮ̡̹ژϪ Jiangmen Yihao Hotel Limited 2,585 2,808 2,249 2,000 ʕʆ̹̚ᕄ਷൱ɽৢֳϞࠢʮ̡ Zhongshan Guzhen International Hotel Limited 563 500 500 500 ʕʆ̹ԯശ˰ߏৢֳϞࠢʮ̡ Zhongshan King Century Hotel Limited – – – 57 Ӎ਷൱අႴৢֳϞࠢʮ̡ڙʕʆ̹ Zhongshan Fusha International Trade Yucca Hotel Company Limited – – 412 – – – Έ͍ Mr. Lin Guangzheng (ii) 25 25؍ ᘽਃж Mr. Su Weibing (ii) 25 25 – –

Sub-total 30,048 50,079 39,791 21,540

– I-60 – APPENDIXI ACCOUNTANT’S REPORT

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Non-trade nature ᄿ؇ूശණྠҳ༟Ϟࠢʮ̡ Yihua Investment (i) 41,862 74,897 102,051 127,740 ᄿ؇අႴৢֳ၍ଣϞࠢʮ̡ Guangdong Yucca Hotel Management Company Limited – – – 12,000 ʕʆ̹׋ശණྠϞࠢʮ̡ Zhongshan Yihua Group Company Limited – – 160 160 ήପϞࠢʮ̡גʕʆ̹׋ശ Zhongshan Yihua Property Company Limited 13,000 – – – इτूശໄุක೯Ϟࠢʮ̡ Tai’an Yihua Property Development Company Limited – – – 300

Sub-total 54,862 74,897 102,211 140,200

Total 84,910 124,976 142,002 161,740

(i) The balances due from Yihua Investment of approximately RMB20,000,000 and RMB50,000,000 as at 31 December 2010 and 2011, the principal and interest of which were repayable on demand and borne interest at 6.03% and 4.85% per annum respectively. During 2012, such interest bearing balance from Yihua Investment was repaid. The remaining balances with Yihua Investment are unsecured, interest-free and repayable on demand.

(ii) Loans advanced to key management have the following terms and conditions:

Amounts of loan balances Maximum outstanding Name of key At end At beginning during the management of the year of the year year Terms RMB’000 RMB’000 RMB’000

Year ended 31 December 2010 Έ͍ Mr. Lin 25 25 25 Interestfreeand؍ Guangzheng repayable on demand ᘽਃж Mr. Su 25 25 25 Interestfreeand Weibing repayable on demand

Year ended 31 December 2011 Έ͍ Mr. Lin 25 25 25 Interestfreeand؍ Guangzheng repayable on demand ᘽਃж Mr. Su 25 25 25 Interestfreeand Weibing repayable on demand

– I-61 – APPENDIXI ACCOUNTANT’S REPORT

Amounts of loan balances Maximum outstanding Name of key At end At beginning during the management of the year of the year year Terms RMB’000 RMB’000 RMB’000

Year ended 31 December 2012 Έ͍ Mr. Lin – 25 25 Interestfreeand؍ Guangzheng repayable on demand ᘽਃж Mr. Su – 25 25 Interestfreeand Weibing repayable on demand

No provision was required for the receivables from key management personnel.

As at 31 May 2013, the balances with Yihua Investment, Guangdong Yucca Hotel Management Company Limited, Tai’an Yihua Property Development Company Limited and Zhongshan Yihua Group Company Limited totalling RMB140,200,000 were of non-trade nature, which will be repaid before the Listing. Other balances with related parties were arising from ordinary course of business, which will not be fully settled before the Listing. Other than those disclosed in note (i) above, balances with related parties are unsecured, interest-free and repayable on demand.

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Amounts due to related parties

Trade nature ၍ଣϞࠢʮุ̡يʕʆ̹ࣦശ Zhongshan Lonwalk Property Management Co., Limited – – 7,900 – ᄿ؇ूശᄿఙ၍ଣϞࠢʮ̡ Guangdong Yihua Plaza Management Limited – – – 868 අႴৢֳϞࠢʮ̡̹ژϪ Jiangmen Yihao Hotel Limited – – – 138 ʕʆ̹̚ᕄ਷൱ɽৢֳϞࠢʮ̡ Zhongshan Guzhen International Hotel Limited – – – 134 ʕʆ̹ԯശ˰ߏৢֳϞࠢʮ̡ Zhongshan King Century Hotel Limited 298 329 209 189

Sub-total 298 329 8,109 1,329

– I-62 – APPENDIXI ACCOUNTANT’S REPORT

As at 31 December As at 31 May 2010 2011 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000

Non-trade nature ᄿ؇ूശණྠҳ༟Ϟࠢʮ̡ Yihua Investment 34,316 2,769 4,096 7,319 ᄿ؇ूശᄿఙ၍ଣϞࠢʮ̡ Guangdong Yihua Plaza Management Limited 3,200 – – – අႴৢֳϞࠢʮ̡̹ژϪ Jiangmen Yihao Hotel Limited – 1,000 – – ߪอ੃ Mr. Fan Xinpei 950 450 450 – – – – Έ͍ Mr. Lin Guangzheng 1,400؍ ᖯϓ˖ Mr. Luo Chengwen 500 – – –

Sub-total 40,366 4,219 4,546 7,319

Total 40,664 4,548 12,655 8,648

As at 31 May 2013, amount due to Yihua Investment of RMB7,319,000 was of non-trade nature, which will be repaid before the Listing. Amounts due to Jiangmen Yihao Hotel Limited, Zhongshan Guzhen International Hotel Limited and Zhongshan King Century Hotel Limited were arising from ordinary course of business which will not be fully settled before the Listing. Balances with related parties above are unsecured, interest free and repayable on demand.

The Company

As at As at 31 December 2012 31 May 2013 RMB’000 RMB’000

Amount due to a related party

ᄿ؇ूശණྠҳ༟Ϟࠢʮ̡ Yihua Investment 2,461 5,733

As at 31 May 2013, the amount due to Yihua Investment totalling RMB5,733,000 was unsecured, interest free and will be settled before the Listing.

Year ended 31 December Five months ended 31 May 2010 2011 2012 2012 2013 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Unaudited)

Basic salaries and allowances 2,208 2,267 5,767 1,507 3,485 Discretionary bonuses 143 176 366 381 407 Other benefits including retirement benefit contribution 122 135 176 83 89

2,473 2,578 6,309 1,971 3,981

– I-63 – APPENDIXI ACCOUNTANT’S REPORT

31 SUBSEQUENT EVENTS

Save as disclosed in note 1.2 of Section II to this report, the following significant subsequent events took place after 31 May 2013:

– Pursuant to the written resolution passed by the Shareholders of the Company on 12 November 2013, the authorised share capital of the Company was increased from HK$380,000 divided into 38,000,000 shares of par value HK$0.01 each to HK$7,780,000 divided into 778,000,000 share of par value HK$0.01 each by the creation of an additional 740,000,000 shares.

– Pursuant to the written resolution passed by the Shareholders of the Company on 12 November 2013, conditional on the share premium account of the Company being credited as a result of the issue of the offer shares by the Company pursuant to the proposed share offer as described in the Prospectus, the Company will capitalise an amount of HK$2,699,900, standing to the credit of its share premium account of the Company by applying such sum to pay up in full at par a total of 269,990,000 shares for allotment and issue to the shareholders as at 30 November 2013 on a pro rata basis.

– According to a board resolution dated 15 November 2013, Guangdong Yihua distributed RMB64 million to its then shareholders and such amount was fully settled prior to the Listing.

III.SUBSEQUENTFINANCIALSTATEMENTS

No audited financial statements have been prepared by the Company or any of the companies now comprising the Group in respect of any period subsequent to 31 May 2013 and up to the date of this report. Save as disclosed in note 31 of Section II to this report, no dividend or distribution has been declared or made by the Company or any of the companies now comprising the Group in respect of any period subsequent to 31 May 2013.

Yours faithfully, PricewaterhouseCoopers Certified Public Accountants Hong Kong

– I-64 – APPENDIXIIUNAUDITEDPROFORMAFINANCIALINFORMATION

A.UNAUDITEDPROFORMAADJUSTEDNETTANGIBLEASSETS

Audited Unaudited combined net pro forma tangible assets adjusted net of our Group tangible assets attributable Estimated attributable to equity net to equity holders of our proceeds holders of our Company as from the Company as Unaudited pro forma at 31 May Share at 31 May adjusted net tangible 2013(1) Offer(2) 2013 assets per Share(3) RMB’000 RMB’000 RMB’000 RMB HK$

Based on an Offer Price of HK$1.40perShare 104,041 87,347 191,388 0.53 0.67 Based on an Offer Price of HK$1.00perShare 104,041 59,890 163,931 0.46 0.58

Notes:

(1) Our combined net tangible assets of our Group attributable to equity holders of the Company as at 31 May 2013 is extracted from the Accountant’s Report of our Company as set out in Appendix I to this prospectus, which is based on the audited combined net assets of the Group attributable to equity holders of the Company as at 31 May 2013 of RMB104,121,000 with an adjustment for the intangible asset as at 31 May 2013 of RMB80,000.

– II-1 – APPENDIXIIUNAUDITEDPROFORMAFINANCIALINFORMATION

(3) The unaudited pro forma adjusted net tangible assets per Share are determined after the adjustments as described in note 2 above and on the basis that 360,000,000 Shares were in issue immediately following the completion of the Reorganisation, the Capitalisation Issue and the Share Offer but takes no account of any Shares which may be issued upon exercise of the Adjustment Option or of any Shares which may be issued upon the exercise of the options which may be granted under the Share Option Scheme or any Shares which may be granted and issued or repurchased by the Company pursuant to the General Mandate and the Repurchase Mandate. For illustrative purpose, the unaudited pro forma adjusted net tangible assets per Share is converted into Hong Kong dollars at the exchange rate of RMB1.00 to HK$1.2717.

(4) Except as disclosed above, no adjustment has been made to reflect any trading result or other transactions of our Group entered into subsequent to 31 May 2013. In particular, the unaudited pro forma adjusted net tangible assets of our Group has not taken into amount the payment of dividend of RMB64 million which was declared on 15 November 2013 and was fully settled prior to the Listing.

– II-2 – APPENDIXIIUNAUDITEDPROFORMAFINANCIALINFORMATION

B.REPORTONUNAUDITEDPROFORMAFINANCIALINFORMATION

The following is the text of a report received from PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this prospectus.

INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE COMPILATIONOFUNAUDITEDPROFORMAFINANCIALINFORMATION INCLUDEDINAPROSPECTUS

TOTHEDIRECTORSOFYIHUADEPARTMENTSTOREHOLDINGSLIMITED

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of Yi Hua Department Store Holdings Limited (the “Company”) and its subsidiaries (collectively, the “Group”) by the directors for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma statement of adjusted net tangible assets of the Group as at 31 May 2013, and related notes (the “Unaudited Pro Forma Financial Information”) as set out on pages II-1 and II-2 in the Appendix II of the Company’s prospectus dated 26 November 2013 (“Prospectus”), in connection with the proposed initial public offering of the shares of the Company. The applicable criteria on the basis of which the directors have compiled the Unaudited Pro Forma Financial Information are described in the notes set out on pages II-1 and II-2 in the Appendix II of the Prospectus.

The Unaudited Pro Forma Financial Information has been compiled by the directors to illustrate the impact of the proposed initial public offering on the Group’s financial position as at 31 May 2013 as if the proposed initial public offering had taken place at 31 May 2013. As part of this process, information about the Group’s financial position has been extracted by the directors from the Group’s financial information for the period ended 31 May 2013, on which an accountant’s report has been published.

Directors’ Responsibility for the Unaudited Pro Forma Financial Information

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

– II-3 – APPENDIXIIUNAUDITEDPROFORMAFINANCIALINFORMATION

Reporting Accountant’s Responsibilities

Our responsibility is to express an opinion, as required by paragraph 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 paragraph 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 prospectus is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the entity 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 proposed initial public offering at 31 May 2013 would have been as presented.

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.

– II-4 – APPENDIXIIUNAUDITEDPROFORMAFINANCIALINFORMATION

The procedures selected depend on the reporting accountant’s judgment, having regard to the reporting accountant’s understanding of the nature of the company, 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 paragraph 4.29(1) of the Listing Rules.

PricewaterhouseCoopers Certified Public Accountants Hong Kong, 26 November 2013

– II-5 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

Set out below is a summary of certain provisions of the Memorandum and Articles of Association of the Company and of certain aspects of Cayman Islands company law.

The Company was incorporated in the Cayman Islands as an exempted company with limited liability on 20 April 2012 under the Cayman Companies Law. The Company’s constitutional documents consist of its Memorandum and the Articles.

1. MEMORANDUM OF ASSOCIATION

(a) The Memorandum provides, inter alia, that the liability of members of the Company is limited and that the objects for which the Company is established are unrestricted (and therefore include acting as an investment company), and that the Company shall have and be capable of exercising any and all of the powers at any time or from time to time exercisable by a natural person or body corporate whether as principal, agent, contractor or otherwise and since the Company is an exempted company that the Company will not trade in the Cayman Islands with any person, firm or corporation except in furtherance of the business of the Company carried on outside the Cayman Islands.

(b) By special resolution the Company may alter the Memorandum with respect to any objects, powers or other matters specified therein.

2. ARTICLES OF ASSOCIATION

The Articles were adopted on 12 November 2013. The following is a summary of certain provisions of the Articles:

(a) Shares

(i) Classes of shares

The share capital of the Company consists of ordinary shares.

(ii) Share certificates

Every person whose name is entered as a member in the register of members shall be entitled to receive a certificate for his shares. No shares shall be issued to bearer.

Every certificate for shares, warrants or debentures or representing any other form of securities of the Company shall be issued under the seal of the Company, and shall be signed autographically by one Director and the Secretary, or by 2 Directors, or by some other person(s) appointed by the Board for the purpose. As regards any certificates for shares or debentures or other securities of the Company,

– III-1 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

the Board may by resolution determine that such signatures or either of them shall be dispensed with or affixed by some method or system of mechanical signature other than autographic or may be printed thereon as specified in such resolution or that such certificates need not be signed by any person. Every share certificate issued shall specify the number and class of shares in respect of which it is issued and the amount paid thereon and may otherwise be in such form as the Board may from time to time prescribe. A share certificate shall relate to only one class of shares, and where the capital of the Company includes shares with different voting rights, the designation of each class of shares, other than those which carry the general right to vote at general meetings, must include the words “restricted voting” or “limited voting” or “non-voting” or some other appropriate designation which is commensurate with the rights attaching to the relevant class of shares. The Company shall not be bound to register more than 4 persons as joint holders of any share.

(b) Directors

(i) Power to allot and issue shares and warrants

Subject to the provisions of the Cayman Companies Law, the Memorandum and Articles and without prejudice to any special rights conferred on the holders of any shares or class of shares, any share may be issued with or have attached thereto such rights, or such restrictions, whether with regard to dividend, voting, return of capital, or otherwise, as the Company may by ordinary resolution determine (or, in the absence of any such determination or so far as the same may not make specific provision, as the Board may determine). Any share may be issued on terms that upon the happening of a specified event or upon a given date and either at the option of the Company or the holder thereof, they are liable to be redeemed.

The Board may issue warrants to subscribe for any class of shares or other securities of the Company on such terms as it may from time to time determine.

Where warrants are issued to bearer, no certificate thereof shall be issued to replace one that has been lost unless the Board is satisfied beyond reasonable doubt that the original certificate thereof has been destroyed and the Company has received an indemnity in such form as the Board shall think fit with regard to the issue of any such replacement certificate.

Subject to the provisions of the Cayman Companies Law, the Articles and, where applicable, the rules of any stock exchange of the Relevant Territory (as defined in the Articles) and without prejudice to any special rights or restrictions for the time being attached to any shares or any class of shares, all unissued shares in the Company shall be at the disposal of the Board, which may offer, allot, grant options over or otherwise dispose of them to such persons, at such times, for such consideration and on such terms and conditions as it in its absolute discretion thinks fit, but so that no shares shall be issued at a discount.

– III-2 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

Neither the Company nor the Board shall be obliged, when making or granting any allotment of, offer of, option over or disposal of shares, to make, or make available, any such allotment, offer, option or shares to members or others whose registered addresses are in any particular territory or territories where, in the absence of a registration statement or other special formalities, this is or may, in the opinion of the Board, be unlawful or impracticable. However, no member affected as a result of the foregoing shall be, or be deemed to be, a separate class of members for any purpose whatsoever.

(ii) Power to dispose of the assets of the Company or any subsidiary

While there are no specific provisions in the Articles relating to the disposal of the assets of the Company or any of its subsidiaries, the Board may exercise all powers and do all acts and things which may be exercised or done or approved by the Company and which are not required by the Articles or the Cayman Companies Law to be exercised or done by the Company in general meeting, but if such power or act is regulated by the Company in general meeting, such regulation shall not invalidate any prior act of the Board which would have been valid if such regulation had not been made.

(iii) Compensation or payments for loss of office

Payments to any present Director or past Director of any sum by way of compensation for loss of office or as consideration for or in connection with his retirement from office (not being a payment to which the Director is contractually or statutorily entitled) must be approved by the Company in general meeting.

(iv) Loans and provision of security for loans to Directors

There are provisions in the Articles prohibiting the making of loans to Directors and their associates which are equivalent to provisions of Hong Kong law prevailing at the time of adoption of the Articles.

The Company shall not directly or indirectly make a loan to a Director or a director of any holding company of the Company or any of their respective associates, enter into any guarantee or provide any security in connection with a loan made by any person to a Director or a director of any holding company of the Company or any of their respective associates, or if any one or more of the Directors hold (jointly or severally or directly or indirectly) a controlling interest in another company, make a loan to that other company or enter into any guarantee or provide any security in connection with a loan made by any person to that other company.

– III-3 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(v) Disclosure of interest in contracts with the Company or with any of its subsidiaries

With the exception of the office of auditor of the Company, a Director may hold any other office or place of profit with the Company in conjunction with his office of Director for such period and, upon such terms as the Board may determine, and may be paid such extra remuneration therefor (whether by way of salary, commission, participation in profits or otherwise) in addition to any remuneration provided for by or pursuant to any other Articles. A Director may be or become a director or other officer or member of any other company in which the Company may be interested, and shall not be liable to account to the Company or the members for any remuneration or other benefits received by him as a director, officer or member of such other company. The Board may also cause the voting power conferred by the shares in any other company held or owned by the Company to be exercised in such manner in all respects as it thinks fit, including the exercise thereof in favour of any resolution appointing the Directors or any of them to be directors or officers of such other company.

No Director or intended Director shall be disqualified by his office from contracting with the Company, either as vendor, purchaser or otherwise, nor shall any such contract or any other contract or arrangement in which any Director is in any way interested be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract or arrangement by reason only of such Director holding that office or the fiduciary relationship thereby established. A Director who is, in any way, materially interested in a contract or arrangement or proposed contract or arrangement with the Company shall declare the nature of his interest at the earliest meeting of the Board at which he may practically do so.

There is no power to freeze or otherwise impair any of the rights attaching to any Share by reason that the person or persons who are interested directly or indirectly therein have failed to disclose their interests to the Company.

A Director shall not vote (nor shall he be counted in the quorum) on any resolution of the Board in respect of any contract or arrangement or other proposal in which he or his associate(s) is/are materially interested, and if he shall do so his vote shall not be counted nor shall he be counted in the quorum for that resolution, but this prohibition shall not apply to any of the following matters namely:

(aa) the giving of any security or indemnity to the Director or his associate(s) in respect of money lent or obligations incurred or undertaken by him or any of them at the request of or for the benefit of the Company or any of its subsidiaries;

– III-4 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(bb) the giving of any security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiaries for which the Director or his associate(s) has/have himself/themselves assumed responsibility in whole or in part whether alone or jointly under a guarantee or indemnity or by the giving of security;

(cc) any proposal concerning an offer of shares or debentures or other securities of or by the Company or any other company which the Company may promote or be interested in for subscription or purchase, where the Director or his associate(s) is/are or is/are to be interested as a participant in the underwriting or sub-underwriting of the offer;

(dd) any proposal or arrangement concerning the adoption, modification or operation of a share option scheme, a pension fund or retirement, death or disability benefits scheme or other arrangement which relates both to Directors, his associate(s) and employees of the Company or of any of its subsidiaries and does not provide in respect of any Director, or his associate(s), as such any privilege or advantage not generally accorded to the employees to which such scheme or fund relates; or

(ee) any contract or arrangement in which the Director or his associate(s) is/are interested in the same manner as other holders of shares or debentures or other securities of the Company by virtue only of his/their interest in shares or debentures or other securities of the Company.

In addition, a Director shall not attend, or if already present, excuse himself from, any meeting or part of any meeting of the Board, and shall not participate in any discussions in respect of any resolution of the Board, relating to any contract or arrangement or other proposal in which he or any of his Associate(s) has/have a material interest, other than the following matters:

– III-5 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

unless expressly requested to attend or participate in the discussions by a majority of the independent non-executive Directors.

(vi) Remuneration

The Directors shall be entitled to receive, as ordinary remuneration for their services, such sums as shall from time to time be determined by the Board, or the Company in general meeting, as the case may be, such sum (unless otherwise directed by the resolution by which it is determined) to be divided amongst the Directors in such proportions and in such manner as they may agree or failing agreement, equally, except that in such event any Director holding office for only a portion of the period in respect of which the remuneration is payable shall only rank in such division in proportion to the time during such period for which he has held office. The Directors shall also be entitled to be repaid all travelling, hotel and other expenses reasonably incurred by them in attending any Board meetings, committee meetings or general meetings or otherwise in connection with the discharge of their duties as Directors. Such remuneration shall be in addition to any other remuneration to which a Director who holds any salaried employment or office in the Company may be entitled by reason of such employment or office.

Any Director who, at the request of the Company performs services which in the opinion of the Board go beyond the ordinary duties of a Director may be paid such special or extra remuneration (whether by way of salary, commission, participation in profits or otherwise) as the Board may determine and such extra remuneration shall be in addition to or in substitution for any ordinary remuneration

– III-6 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

as a Director. An executive Director appointed to be a managing director, joint managing director, deputy managing director or other executive officer shall receive such remuneration (whether by way of salary, commission or participation in profits or otherwise or by all or any of those modes) and such other benefits (including pension and/or gratuity and/or other benefits on retirement) and allowances as the Board may from time to time decide. Such remuneration shall be in addition to his ordinary remuneration as a Director.

The Board may establish, either on its own or jointly in concurrence or agreement with other companies (being subsidiaries of the Company or with which the Company is associated in business), or may make contributions out of the Company’s monies to, such schemes or funds for providing pensions, sickness or compassionate allowances, life assurance or other benefits for employees (which expression as used in this and the following paragraph shall include any Director or former Director who may hold or have held any executive office or any office of profit with the Company or any of its subsidiaries) and former employees of the Company and their dependents or any class or classes of such persons.

In addition, the Board may also pay, enter into agreements to pay or make grants of revocable or irrevocable, whether or not subject to any terms or conditions, pensions or other benefits to employees and former employees and their dependents, or to any of such persons, including pensions or benefits additional to those, if any, to which such employees or former employees or their dependents are or may become entitled under any such scheme or fund as mentioned above. Such pension or benefit may, if deemed desirable by the Board, be granted to an employee either before and in anticipation of, or upon or at any time after, his actual retirement.

(vii) Appointment, retirement and removal

At any time or from time to time, the Board shall have the power to appoint any person as a Director either to fill a casual vacancy on the Board or as an additional Director to the existing Board subject to any maximum number of Directors, if any, as may be determined by the members in general meeting. Any Director appointed by the Board to fill a casual vacancy shall hold office only until the first general meeting of the Company after his appointment and be subject to re-election at such meeting. Any Director appointed by the Board as an addition to the existing Board shall hold office only until the next following annual general meeting of the Company and shall then be eligible for re-election.

At each annual general meeting, one third of the Directors for the time being will retire from office by rotation. However, if the number of Directors is not a multiple of three, then the number nearest to but not less than one third shall be the number of retiring Directors. The Directors who shall retire in each year will be those who have been longest in the office since their last re-election or appointment but as between persons who become or were last re-elected Directors on the same day those to retire will (unless they otherwise agree among themselves) be determined by lot.

– III-7 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

No person, other than a retiring Director, shall, unless recommended by the Board for election, be eligible for election to the office of Director at any general meeting, unless notice in writing of the intention to propose that person for election as a Director and notice in writing by that person of his willingness to be elected shall have been lodged at the head office or at the registration office. The period for lodgment of such notices will commence no earlier than the day after the despatch of the notice of the meeting appointed for such election and end no later than 7 days prior to the date of such meeting and the minimum length of the period during which such notices to the Company may be given must be at least 7 days.

A Director is not required to hold any shares in the Company by way of qualification nor is there any specified upper or lower age limit for Directors either for accession to the Board or retirement therefrom.

A Director may be removed by an ordinary resolution of the Company before the expiration of his term of office (but without prejudice to any claim which such Director may have for damages for any breach of any contract between him and the Company) and the Company may by ordinary resolution appoint another in his place. The number of Directors shall not be less than two.

In addition to the foregoing, the office of a Director shall be vacated:

(aa) if he resigns his office by notice in writing delivered to the Company at the registered office or head office of the Company for the time being or tendered at a meeting of the Board;

(bb) if he dies or becomes of unsound mind as determined pursuant to an order made by any competent court or official on the grounds that he is or may be suffering from mental disorder or is otherwise incapable of managing his affairs and the Board resolves that his office be vacated;

(cc) if, without special leave, he is absent from meetings of the Board for six (6) consecutive months, and the Board resolves that his office is vacated;

(dd) if he becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors generally;

(ee) if he is prohibited from being a director by law;

(ff) if he ceases to be a director by virtue of any provision of law or is removed from office pursuant to the Articles;

– III-8 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(gg) if he has been validly required by the stock exchange of the Relevant Territory (as defined in the Articles) to cease to be a Director and the relevant time period for application for review of or appeal against such requirement has lapsed and no application for review or appeal has been filed or is underway against such requirement; or

(hh) if he is removed from office by notice in writing served upon him signed by not less than three-fourths in number (or, if that is not a round number, the nearest lower round number) of the Directors (including himself) then in office.

From time to time the Board may appoint one or more of its body to be managing director, joint managing director, or deputy managing director or to hold any other employment or executive office with the Company for such period and upon such terms as the Board may determine and the Board may revoke or terminate any of such appointments. The Board may also delegate any of its powers to committees consisting of such Director or Directors and other person(s) as the Board thinks fit, and from time to time it may also revoke such delegation or revoke the appointment of and discharge any such committees either wholly or in part, and either as to persons or purposes, but every committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that may from time to time be imposed upon it by the Board.

(viii)Borrowing powers

Pursuant to the Articles, the Board may exercise all the powers of the Company to raise or borrow money, to mortgage or charge all or any part of the undertaking, property and uncalled capital of the Company and, subject to the Cayman Companies Law, to issue debentures, debenture stock, bonds and other securities of the Company, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party. The provisions summarised above, in common with the Articles of Association in general, may be varied with the sanction of a special resolution of the Company.

(ix) Register of Directors and officers

Pursuant to the Cayman Companies Law, the Company is required to maintain at its registered office a register of directors, alternate director and officers which is not available for inspection by the public. A copy of such register must be filed with the Registrar of Companies in the Cayman Islands and any change must be notified to the Registrar within 30 days of any change in such directors or officers, including a change of name of such directors or officers.

– III-9 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(x) Proceedings of the Board

Subject to the Articles, the Board may meet anywhere in the world for the despatch of business and may adjourn and otherwise regulate its meetings as it thinks fit. Questions arising at any meeting shall be determined by a majority of votes. In the case of an equality of votes, the chairman of the meeting shall have a second or casting vote.

To the extent that the same is permissible under Cayman Islands law and subject to the Articles, the Memorandum and Articles of the Company may only be altered or amended, and the name of the Company may only be changed by the Company by special resolution.

(d) Variation of rights of existing shares or classes of shares

Subject to the Cayman Companies Law, if at any time the share capital of the Company is divided into different classes of shares, all or any of the special rights attached to any class of shares may (unless otherwise provided for by the terms of issue of the shares of that class) be varied, modified or abrogated either with the consent in writing of the holders of not less than three-fourths in nominal value of the issued shares of that class or with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class. To every such separate general meeting the provisions of the Articles relating to general meetings shall mutatis mutandis apply, but so that the necessary quorum (other than at an adjourned meeting) shall be not less than two persons together holding (or in the case of a shareholder being a corporation, by its duly authorised representative) or representing by proxy not less than one-third in nominal value of the issued shares of that class. Every holder of shares of the class shall be entitled on a poll to one vote for every such share held by him, and any holder of shares of the class present in person or by proxy may demand a poll.

Any special rights conferred upon the holders of any shares or class of shares shall not, unless otherwise expressly provided in the rights attaching to the terms of issue of such shares, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

(e) Alteration of capital

The Company may, by an ordinary resolution of its members, (a) increase its share capital by the creation of new shares of such amount as it thinks expedient; (b) consolidate or divide all or any of its share capital into shares of larger or smaller amount than its existing shares; (c) divide its unissued shares into several classes and attach thereto respectively any preferential, deferred, qualified or special rights, privileges or

– III-10 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

conditions; (d) subdivide its shares or any of them into shares of an amount smaller than that fixed by the Memorandum; (e) cancel shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of the shares so cancelled; (f) make provision for the allotment and issue of shares which do not carry any voting rights; (g) change the currency of denomination of its share capital; and (h) reduce its share premium account in any manner authorised and subject to any conditions prescribed by law.

Reduction of share capital – subject to the Cayman Companies Law and to confirmation by the court, a company limited by shares may, if so authorised by its Articles of Association, by special resolution, reduce its share capital in any way.

(f) Special resolution – majority required

In accordance with the Articles, a special resolution of the Company must be passed by a majority of not less than three-fourths of the votes cast by such members as, being entitled so to do, vote in person or by proxy or, in the case of members which are corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which not less than 21 clear days’ notice, specifying the intention to propose the resolution as a special resolution, has been duly given. However, except in the case of an annual general meeting, if it is so agreed by a majority in number of the members having a right to attend and vote at such meeting, being a majority together holding not less than 95% in nominal value of the shares giving that right and, in the case of an annual general meeting, if so agreed by all members entitled to attend and vote thereat, a resolution may be proposed and passed as a special resolution at a meeting of which less than 21 clear days’ notice has been given.

Under Cayman Companies Law, a copy of any special resolution must be forwarded to the Registrar of Companies in the Cayman Islands within 15 days of being passed.

An “ordinary resolution”, by contrast, is defined in the Articles to mean a resolution passed by a simple majority of the votes of such members of the Company as, being entitled to do so, vote in person or, in the case of members which are corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which not less than 14 clear days’ notice has been given and held in accordance with the Articles. A resolution in writing signed by or on behalf of all members shall be treated as an ordinary resolution duly passed at a general meeting of the Company duly convened and held, and where relevant as a special resolution so passed.

(g) Voting rights (generally and on a poll) and right to demand a poll

Subject to any special rights, restrictions or privileges as to voting for the time being attached to any class or classes of shares at any general meeting on a show of hands, every member who is present in person or by proxy or being a corporation, is present by its duly

– III-11 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

authorised representative shall have one vote, and 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 which is fully paid or credited as fully paid registered in his name in the register of members of the Company but so that no amount paid up or credited as paid up on a share in advance of calls or instalments is treated for the foregoing purpose as paid up on the share. Notwithstanding anything contained in the Articles, where more than one proxy is appointed by a member which is a Clearing House (as defined in the Articles) (or its nominee(s)), each such proxy shall have one vote on a show of hands. On a poll, a member entitled to more than one vote need not use all his votes or cast all the votes he does use in the same way.

At any general meeting a resolution put to the vote of the meeting is to be decided on a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded or otherwise required under the rules of the stock exchange of the Relevant Territory (as defined in the Articles). A poll may be demanded by:

(i) the chairman of the meeting; or

(ii) at least two members present in person or, in the case of a member being a corporation, by its duly authorised representative or by proxy for the time being entitled to vote at the meeting; or

(iii) any member or members present in person or, in the case of a member being a corporation, by its duly authorised representative or by proxy and representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or

(iv) a member or members present in person or, in the case of a member being a corporation, by its duly authorised representative or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.

Should a Clearing House or its nominee(s), be a member of the Company, such person or persons may be authorised as it thinks fit to act as its representative(s) at any meeting of the Company or at any meeting of any class of members of the Company provided that, if more than one person is so authorised, the authorisation shall specify the number and class of shares in respect of which each such person is so authorised.Aperson authorised in accordance with this provision shall be deemed to have been duly authorised without further evidence of the facts and be entitled to exercise the same rights and powers on behalf of the Clearing House or its nominee(s), as if such person were an individual member including the right to vote individually on a show of hands.

– III-12 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

Where the Company has knowledge that any member is, under the Listing Rules, required to abstain from voting on any particular resolution of the Company or restricted to voting only for or only against any particular resolution of the Company, any votes cast by or on behalf of such member in contravention of such requirement or restriction shall not be counted.

(h) Annual general meetings

The Company must hold an annual general meeting each year. Such meeting must be held not more than 15 months after the holding of the last preceding annual general meeting, or such longer period as may be authorised by the Stock Exchange at such time and place as may be determined by the Board.

(i) Accounts and audit

The Board shall cause proper books of account to be kept of the sums of money received and expended by the Company, and the matters in respect of which such receipt and expenditure take place, and of the assets and liabilities of the Company and of all other matters required by the Cayman Companies Law necessary to give a true and fair view of the state of the Company’s affairs and to show and explain its transactions.

The books of accounts of the Company shall be kept at the head office of the Company or at such other place or places as the Board decides and shall always be open to inspection by any Director. No member (other than a Director) shall have any right to inspect any account or book or document of the Company except as conferred by the Cayman Companies Law or ordered by a court of competent jurisdiction or authorised by the Board or the Company in general meeting.

The Board shall from time to time cause to be prepared and laid before the Company at its annual general meeting balance sheets and profit and loss accounts (including every document required by law to be annexed thereto), together with a copy of the Directors’ report and a copy of the auditors’report not less than 21 days before the date of the annual general meeting. Copies of these documents shall be sent to every person entitled to receive notices of general meetings of the Company under the provisions of the Articles together with the notice of annual general meeting, not less than 21 days before the date of the meeting.

Subject to the rules of the stock exchange of the Relevant Territory (as defined in the Articles), the Company may send summarised financial statements to shareholders who has, in accordance with the rules of the stock exchange of the Relevant Territory (as defined in the Articles), consented and elected to receive summarised financial statements instead of the full financial statements. The summarised financial statements must be accompanied by any other documents as may be required under the rules of the stock exchange of the Relevant Territory (as defined in the Articles), and must be sent to the shareholders not less than 21 days before the general meeting to those shareholders that have consented and elected to receive the summarised financial statements.

– III-13 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

The Company shall appoint auditor(s) to hold office until the conclusion of the next annual general meeting on such terms and with such duties as may be agreed with the Board. The auditors’ remuneration shall be fixed by the Company in general meeting or by the Board if authority is so delegated by the members.

The auditors shall audit the financial statements of the Company in accordance with generally accepted accounting principles of Hong Kong, the International Accounting Standards or such other standards as may be permitted by the Stock Exchange.

(j) Notices of meetings and business to be conducted thereat

An annual general meeting and any extraordinary general meeting at which it is proposed to pass a special resolution must be called by at least 21 days’notice in writing, and any other extraordinary general meeting shall be called by at least 14 days’ notice in writing. The notice shall be exclusive of the day on which it is served or deemed to be served and of the day for which it is given, and must specify the time, place and agenda of the meeting, and particulars of the resolution(s) to be considered at that meeting, and, in the case of special business, the general nature of that business.

Except where otherwise expressly stated, any notice or document (including a share certificate) to be given or issued under the Articles shall be in writing, and may be served by the Company on any member either personally or by sending it through the post in a prepaid envelope or wrapper addressed to such member at his registered address as appearing in the Company’s register of members or by leaving it at such registered address as aforesaid or (in the case of a notice) by advertisement in the newspapers. Any member whose registered address is outside Hong Kong may notify the Company in writing of an address in Hong Kong which for the purpose of service of notice shall be deemed to be his registered address. Where the registered address of the member is outside Hong Kong, notice, if given through the post, shall be sent by prepaid airmail letter where available. Subject to the Cayman Companies Law and the Listing Rules, a notice or document may be served or delivered by the Company to any member by electronic means to such address as may from time to time be authorised by the member concerned or by publishing it on a website and notifying the member concerned that it has been so published.

Although a meeting of the Company may be called by shorter notice than as specified above, such meeting may be deemed to have been duly called if it is so agreed:

(i) in the case of a meeting called as an annual general meeting, by all members of the Company entitled to attend and vote thereat; and

(ii) in the case of any other meeting, by a majority in number of the members having a right to attend and vote at the meeting, being a majority together holding not less than 95% in nominal value of the issued shares giving that right.

– III-14 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

All business transacted at an extraordinary general meeting shall be deemed special business and all business shall also be deemed special business where it is transacted at an annual general meeting with the exception of the following, which shall be deemed ordinary business:

(aa) the declaration and sanctioning of dividends;

(bb) the consideration and adoption of the accounts and balance sheet and the reports of the directors and the auditors;

(cc) the election of Directors in place of those retiring;

(dd) the appointment of auditors;

(ee) the fixing of the remuneration of the Directors and of the auditors;

(ff) the granting of any mandate or authority to the Board to offer, allot, grant options over, or otherwise dispose of the unissued shares of the Company representing not more than 20% in nominal value of its existing issued share capital (or such other percentage as may from time to time be specified in the rules of the Stock Exchange) and the number of any securities repurchased by the Company since the granting of such mandate; and

(gg) the granting of any mandate or authority to the Board to repurchase securities in the Company.

(k) Transfer of shares

Subject to the Cayman Companies Law, all transfers of shares shall be effected by an instrument of transfer in the usual or common form or in such other form as the Board may approve provided always that it shall be in such form prescribed by the Stock Exchange and may be under hand or, if the transferor or transferee is a Clearing House or its nominee(s), under hand or by machine imprinted signature or by such other manner of execution as the Board may approve from time to time.

Execution of the instrument of transfer shall be by or on behalf of the transferor and the transferee provided that the Board may dispense with the execution of the instrument of transfer by the transferor or transferee or accept mechanically executed transfers in any case in which it in its discretion thinks fit to do so, and the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the register of members of the Company in respect thereof.

The Board may, in its absolute discretion, at any time and from time to time remove any share on the principal register to any branch register or any share on any branch register to the principal register or any other branch register.

– III-15 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

Unless the Board otherwise agrees, no shares on the principal register shall be removed to any branch register nor shall shares on any branch register be removed to the principal register or any other branch register. All removals and other documents of title shall be lodged for registration and registered, in the case of shares on any branch register, at the relevant registration office and, in the case of shares on the principal register, at the place at which the principal register is located.

The Board may, in its absolute discretion, decline to register a transfer of any share (not being a fully paid up share) to a person of whom it does not approve or any share issued under any share option scheme upon which a restriction on transfer imposed thereby still subsists, and it may also refuse to register any transfer of any share to more than four joint holders or any transfer of any share (not being a fully paid up share) on which the Company has a lien.

The Board may decline to recognise any instrument of transfer unless a fee of such maximum sum as the Stock Exchange may determine to be payable or such lesser sum as the Board may from time to time require is paid to the Company in respect thereof, the instrument of transfer is properly stamped (if applicable), is in respect of only one class of share and is lodged at the relevant registration office or the place at which the principal register is located accompanied by the relevant share certificate(s) and such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer (and if the instrument of transfer is executed by some other person on his behalf, the authority of that person so to do).

The register of members may, subject to the Listing Rules (as defined in the Articles), be closed at such time or for such period not exceeding in the whole 30 days in each year as the Board may determine.

Fully paid shares shall be free from any restriction with respect to the right of the holder thereof to transfer such shares (except when permitted by the Stock Exchange) and shall also be free from all liens.

(l) Power of the Company to purchase its own shares

The Company is empowered by the Cayman Companies Law and the Articles to purchase its own shares subject to certain restrictions and the Board may only exercise this power on behalf of the Company subject to any applicable requirement imposed from time to time by the Articles, code, rules or regulations issued from time to time by the Stock Exchange and/or the Securities and Futures Commission of Hong Kong.

Where the Company purchases for redemption a redeemable Share, purchases not made through the market or by tender shall be limited to a maximum price, and if purchases are by tender, tenders shall be available to all members alike.

(m) Power of any subsidiary of the Company to own shares in the Company

There are no provisions in the Articles relating to the ownership of shares in the Company by a subsidiary.

– III-16 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(n) Dividends and other methods of distribution

The Company in general meeting may declare dividends in any currency to be paid to the members but no dividend shall be declared in excess of the amount recommended by the Board.

Except in so far as the rights attaching to, or the terms of issue of, any share may otherwise provide:

(i) all dividends shall be declared and paid according to the amounts paid up on the shares in respect whereof the dividend is paid, although no amount paid up on a share in advance of calls shall for this purpose be treated as paid up on the share; and

(ii) all dividends shall be apportioned and paid pro rata in accordance with the amount paid up on the shares during any portion or portions of the period in respect of which the dividend is paid. The Board may deduct from any dividend or other monies payable to any member all sums of money (if any) presently payable by him to the Company on account of calls, instalments or otherwise.

Where the Board or the Company in general meeting has resolved that a dividend should be paid or declared on the share capital of the Company, the Board may resolve:

(aa) that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up, provided that the members entitled thereto will be entitled to elect to receive such dividend (or part thereof) in cash in lieu of such allotment; or

(bb) that the members entitled to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such part of the dividend as the Board may think fit.

Upon the recommendation of the Board, the Company may by ordinary resolution in respect of any one particular dividend of the Company determine that it may be satisfied wholly in the form of an allotment of shares credited as fully paid up without offering any right to members to elect to receive such dividend in cash in lieu of such allotment.

Any dividend, bonus or other sum payable in cash to the holder of shares may be paid by cheque or warrant sent through the post addressed to the holder at his registered address, but in the case of joint holders, shall be addressed to the holder whose name stands first in the register of members of the Company in respect of the shares at his address as appearing in the register, or addressed to such person and at such address as

– III-17 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

the holder or joint holders may in writing so direct. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent and shall be sent at the holder’s or joint holders’risk and payment of the cheque or warrant by the bank on which it is drawn shall constitute a good discharge to the Company.Any one of two or more joint holders may give effectual receipts for any dividends or other monies payable or property distributable in respect of the shares held by such joint holders.

Whenever the Board or the Company in general meeting has resolved that a dividend be paid or declared, the Board may further resolve that such dividend be satisfied wholly or in part by the distribution of specific assets of any kind.

The Board may, if it thinks fit, receive from any member willing to advance the same, and either in money or money’s worth, all or any part of the money uncalled and unpaid or instalments payable upon any shares held by him, and in respect of all or any of the monies so advanced may pay interest at such rate (if any) not exceeding 20 % per annum, as the Board may decide, but a payment in advance of a call shall not entitle the member to receive any dividend or to exercise any other rights or privileges as a member in respect of the share or the due portion of the shares upon which payment has been advanced by such member before it is called up.

All dividends, bonuses or other distributions unclaimed for one year after having been declared may be invested or otherwise made use of by the Board for the benefit of the Company until claimed and the Company shall not be constituted a trustee in respect thereof. All dividends, bonuses or other distributions unclaimed for six years after having been declared may be forfeited by the Board and, upon such forfeiture, shall revert to the Company.

No dividend or other monies payable by the Company on or in respect of any share shall bear interest against the Company.

The Company may exercise the power to cease sending cheques for dividend entitlements or dividend warrants by post if such cheques or warrants remain uncashed on two consecutive occasions or after the first occasion on which such a cheque or warrant is returned undelivered.

(o) Proxies

Any member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint another person as his proxy to attend and vote instead of him.Amember who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at a general meeting of the Company or at a class meeting. A proxy need not be a member of the Company and shall be entitled to exercise the same powers on behalf of a member who is an individual and for whom he acts as proxy as such member could exercise. In addition, a proxy shall be entitled to exercise the

– III-18 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

same powers on behalf of a member which is a corporation and for which he acts as proxy as such member could exercise if it were an individual member. On a poll or on a show of hands, votes may be given either personally (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy.

The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing, or if the appointor is a corporation, either under seal or under the hand of an officer or attorney duly authorised. Every instrument of proxy, whether for a specified meeting or otherwise, shall be in such form as the Board may from time to time approve, provided that it shall not preclude the use of the two-way form. Any form issued to a member for use by him for appointing a proxy to attend and vote at an extraordinary general meeting or at an annual general meeting at which any business is to be transacted shall be such as to enable the member, according to his intentions, to instruct the proxy to vote in favour of or against (or, in default of instructions, to exercise his discretion in respect of) each resolution dealing with any such business.

(p) Calls on shares and forfeiture of shares

The Board may from time to time make such calls as it may think fit upon the members in respect of any monies unpaid on the shares held by them respectively (whether on account of the nominal value of the shares or by way of premium) and not by the conditions of allotment thereof made payable at fixed times. A call may be made payable either in one sum or by instalments. If the sum payable in respect of any call or instalment is not paid on or before the day appointed for payment thereof, the person or persons from whom the sum is due shall pay interest on the same at such rate not exceeding 20% per annum as the Board shall fix from the day appointed for the payment thereof to the time of actual payment, but the Board may waive payment of such interest wholly or in part. The Board may, if it thinks fit, receive from any member willing to advance the same, either in money or money’s worth, all or any part of the money uncalled and unpaid or instalments payable upon any shares held by him, and in respect of all or any of the monies so advanced the Company may pay interest at such rate (if any) not exceeding 20% per annum as the Board may decide.

If a member fails to pay any call or instalment of a call on the day appointed for payment thereof, the Board may, at any time thereafter during such time as any part of the call or instalment remains unpaid, serve not less than 14 days’notice on him requiring payment of so much of the call or instalment as is unpaid, together with any interest which may have accrued and which may still accrue up to the date of actual payment. The notice will name a further day (not earlier than the expiration of 14 days from the date of the notice) on or before which the payment required by the notice is to be made, and it shall also name the place where payment is to be made. The notice shall also state that, in the event of non-payment at or before the time appointed, the shares in respect of which the call was made will be liable to be forfeited.

– III-19 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

If the requirements of any such notice are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the Board to that effect. Such forfeiture will include all dividends and bonuses declared in respect of the forfeited share and not actually paid before the forfeiture.

A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares but shall, nevertheless, remain liable to pay to the Company all monies which, at the date of forfeiture, were payable by him to the Company in respect of the shares together with (if the Board shall in its discretion so require) interest thereon from the date of forfeiture until payment at such rate not exceeding 20% per annum as the Board may prescribe.

(q) Inspection of corporate records

Members of the Company have no general right under the Cayman Companies Law to inspect or obtain copies of the register of members or corporate records of the Company. However, the members of the Company will have such rights as may be set forth in the Articles. The Articles provide that for so long as any part of the share capital of the Company is listed on the Stock Exchange, any member may inspect any register of members of the Company maintained in Hong Kong (except when the register of member is closed) without charge and require the provision to him of copies or extracts thereof in all respects as if the Company were incorporated under and were subject to the Hong Kong Companies Ordinance.

An exempted company may, subject to the provisions of its articles of association, maintain its principal register of members and any branch registers at such locations, whether within or outside the Cayman Islands, as its directors may, from time to time, think fit.

(r) Quorum for meetings and separate class meetings

No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business, and continues to be present until the conclusion of the meeting.

The quorum for a general meeting shall be two members present in person (or in the case of a member being a corporation, by its duly authorised representative) or by proxy and entitled to vote. In respect of a separate class meeting (other than an adjourned meeting) convened to sanction the modification of class rights the necessary quorum shall be two persons holding or representing by proxy not less than one-third in nominal value of the issued shares of that class.

(s) Rights of minorities in relation to fraud or oppression

There are no provisions in the Articles concerning the rights of minority members in relation to fraud or oppression. However, certain remedies may be available to members of the Company under Cayman Islands law, as summarised in paragraph 3(f) of this Appendix.

– III-20 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(t) Procedures on liquidation

A resolution that the Company be wound up by the court or be wound up voluntarily shall be a special resolution.

Subject to any special rights, privileges or restrictions as to the distribution of available surplus assets on liquidation for the time being attached to any class or classes of shares:

(i) if the Company shall be wound up and the assets available for distribution amongst the members of the Company shall be more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, then the excess shall be distributed pari passu amongst such members in proportion to the amount paid up on the shares held by them respectively; and

(ii) if the Company shall be wound up and the assets available for distribution amongst the members as such shall be insufficient to repay the whole of the paid-up capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the members in proportion to the capital paid up, on the shares held by them respectively.

In the event that the Company is wound up (whether the liquidation is voluntary or compelled by the court) the liquidator may, with the sanction of a special resolution and any other sanction required by the Cayman Companies Law divide among the members in specie or kind the whole or any part of the assets of the Company whether the assets shall consist of property of one kind or shall consist of properties of different kinds and the liquidator may, for such purpose, set such value as he deems fair upon any one or more class or classes of property to be divided as aforesaid and may determine how such division shall be carried out as between the members or different classes of members and the members within each class. The liquidator may, with the like sanction, vest any part of the assets in trustees upon such trusts for the benefit of members as the liquidator shall think fit, but so that no member shall be compelled to accept any shares or other property upon which there is a liability.

(u) Untraceable members

In accordance with the Articles, the Company is entitled to sell any of the shares of a member who is untraceable if:

(i) all cheques or warrants, being not less than three in total number, for any sum payable in cash to the holder of such shares have remained uncashed for a period of 12 years;

– III-21 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(ii) upon the expiry of the 12 years and 3 months period (being the 3 months notice period referred to in sub-paragraph (iii)), the Company has not during that time received any indication of the existence of the member; and

(iii) the Company has caused an advertisement to be published in accordance with the rules of the stock exchange of the Relevant Territory (as defined in the Articles) giving notice of its intention to sell such shares and a period of three months has elapsed since such advertisement and the stock exchange of the Relevant Territory (as defined in the Articles) has been notified of such intention. The net proceeds of any such sale shall belong to the Company and upon receipt by the Company of such net proceeds, it shall become indebted to the former member of the Company for an amount equal to such net proceeds.

(v) Subscription rights reserve

Pursuant to the Articles, provided that it is not prohibited by and is otherwise in compliance with the Cayman Companies Law, if warrants to subscribe for shares have been issued by the Company and the Company does any act or engages in any transaction which would result in the subscription price of such warrants being reduced below the par value of the shares to be issued on the exercise of such warrants, a subscription rights reserve shall be established and applied in paying up the difference between the subscription price and the par value of such shares.

3. CAYMAN ISLANDS COMPANY LAW

The Company was incorporated in the Cayman Islands as an exempted company on 20 April 2012 subject to the Cayman Companies Law. Certain provisions of Cayman Islands company law are set out below but this section does not purport to contain all applicable qualifications and exceptions or to be a complete review of all matters of the Cayman Companies Law and taxation, which may differ from equivalent provisions in jurisdictions with which interested parties may be more familiar.

(a) Company operations

As an exempted company, the Company must conduct its operations mainly outside the Cayman Islands. Moreover, the Company is required to file an annual return each year with the Registrar of Companies of the Cayman Islands and pay a fee which is based on the amount of its authorised share capital.

(b) Share capital

In accordance with the Cayman Companies Law, a Cayman Islands company may issue ordinary, preference or redeemable shares or any combination thereof. The Cayman Companies Law provides that where a company issues shares at a premium, whether for

– III-22 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account, to be called the “share premium account”. At the option of a company, these provisions may not apply to premiums on shares of that company allotted pursuant to any arrangements in consideration of the acquisition or cancellation of shares in any other company and issued at a premium. The Cayman Companies Law provides that the share premium account may be applied by the company subject to the provisions, if any, of its memorandum and articles of association, in such manner as the company may from time to time determine including, but without limitation, the following:

(i) paying distributions or dividends to members;

(ii) paying up unissued shares of the company to be issued to members as fully paid bonus shares;

(iii) any manner provided in section 37 of the Cayman Companies Law;

(iv) writing-off the preliminary expenses of the company; and

(v) writing-off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company.

Notwithstanding the foregoing, the Cayman Companies Law provides that no distribution or dividend may be paid to members out of the share premium account unless, immediately following the date on which the distribution or dividend is proposed to be paid, the company will be able to pay its debts as they fall due in the ordinary course of business.

It is further provided by the Cayman Companies Law that, subject to confirmation by the court, a company limited by shares or a company limited by guarantee and having a share capital may, if authorised to do so by its articles of association, by special resolution reduce its share capital in any way.

The Articles include certain protections for holders of special classes of shares, requiring their consent to be obtained before their rights may be varied. The consent of the specified proportions of the holders of the issued shares of that class or the sanction of a resolution passed at a separate meeting of the holders of those shares is required.

There are no statutory prohibitions in the Cayman Islands on the granting of financial assistance by a company to another person for the purchase of, or subscription for, its own, its holding company’s or a subsidiary’s shares. Therefore, a company may provide financial assistance provided the directors of the company when proposing to grant such financial assistance discharge their duties of care and acting in good faith, for a proper purpose and in the interests of the company. Such assistance should be on an arm’s-length basis.

– III-23 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(d) Purchase of shares and warrants by a company and its subsidiaries

A company limited by shares or a company limited by guarantee and having a share capital may, if so authorised by its articles of association, issue shares which are to be redeemed or are liable to be redeemed at the option of the company or a member and, for the avoidance of doubt, it shall be lawful for the rights attaching to any shares to be varied, subject to the provisions of the company’s articles of association, so as to provide that such shares are to be or are liable to be so redeemed. In addition, such a company may, if authorised to do so by its articles of association, purchase its own shares, including any redeemable shares. Nonetheless, if the articles of association do not authorise the manner and terms of purchase, a company cannot purchase any of its own shares without the manner and terms of purchase first being authorised by an ordinary resolution of the company. A company may not redeem or purchase its shares unless they are fully paid. Furthermore, a company may not redeem or purchase any of its shares if, as a result of the redemption or purchase, there would no longer be any issued shares of the company other than shares held as treasury shares. In addition, a payment out of capital by a company for the redemption or purchase of its own shares is not lawful unless immediately following the date on which the payment is proposed to be made, the company shall be able to pay its debts as they fall due in the ordinary course of business.

Under Section 37A(1) the Cayman Companies Law, shares that have been purchased or redeemed by a company or surrendered to the company shall not be treated as cancelled but shall be classified as treasury shares if (a) the memorandum and articles of association of the company do not prohibit it from holding treasury shares; (b) the relevant provisions of the memorandum and articles of association (if any) are complied with; and (c) the company is authorised in accordance with the company’s articles of association or by a resolution of the directors to hold such shares in the name of the company as treasury shares prior to the purchase, redemption or surrender of such shares. Shares held by a company pursuant to section 37A(1) of the Cayman Companies Law shall continue to be classified as treasury shares until such shares are either cancelled or transferred pursuant to the Cayman Companies Law.

A Cayman Islands company may be able to purchase its own warrants subject to and in accordance with the terms and conditions of the relevant warrant instrument or certificate. Thus there is no requirement under Cayman Islands law that a company’s memorandum or articles of association contain a specific provision enabling such purchases. The directors of a company may under the general power contained in its memorandum of association be able to buy and sell and deal in personal property of all kinds.

Under Cayman Islands law, a subsidiary may hold shares in its holding company and, in certain circumstances, may acquire such shares.

– III-24 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(e) Dividends and distributions

With the exception of sections 34 and 37A(7) of the Cayman Companies Law, there are no statutory provisions relating to the payment of dividends. Based upon English case law which is likely to be persuasive in the Cayman Islands, dividends may be paid only out of profits. In addition, section 34 of the Cayman Companies Law permits, subject to a solvency test and the provisions, if any, of the company’s memorandum and articles of association, the payment of dividends and distributions out of the share premium account (see sub-paragraph 2(n) of this Appendix for further details). Section 37A(7)(c) of the Cayman Companies Law provides that for so long as a company holds treasury shares, no dividend may be declared or paid, and no other distribution (whether in cash or otherwise) of the company’s assets (including any distribution of assets to members on a winding up) may be made to the company, in respect of a treasury share.

(f) Protection of minorities and shareholders’ suits

It can be expected that the Cayman Islands courts will ordinarily follow English case law precedents (particularly the rule in the case of Foss v. Harbottle and the exceptions thereto) which permit a minority member to commence a representative action against or derivative actions in the name of the company to challenge:

(i) an act which is ultra vires the company or illegal;

(ii) an act which constitutes a fraud against the minority and the wrongdoers are themselves in control of the company; and

(iii) an irregularity in the passing of a resolution the passage of which requires a qualified (or special) majority which has not been obtained.

Where a company (not being a bank) is one which has a share capital divided into shares, the court may, on the application of members thereof holding not less than one-fifth of the shares of the company in issue, appoint an inspector to examine the affairs of the company and, at the direction of the court, to report thereon.

Moreover, any member of a company may petition the court which may make a winding up order if the court is of the opinion that it is just and equitable that the company should be wound up.

In general, claims against a company by its members must be based on the general laws of contract or tort applicable in the Cayman Islands or be based on potential violation of their individual rights as members as established by a company’s memorandum and articles of association.

– III-25 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(g) Disposal of assets

There are no specific restrictions in the Cayman Companies Law on the power of directors to dispose of assets of a company, although it specifically requires that every officer of a company, which includes a director, managing director and secretary, in exercising his powers and discharging his duties must do so honestly and in good faith with a view to the best interest of the company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

(h) Accounting and auditing requirements

Section 59 of the Cayman Companies Law provides that a company shall cause proper records of accounts to be kept and retained with respect to (i) all sums of money received and expended by the company and the matters with respect to which the receipt and expenditure takes place; (ii) all sales and purchases of goods by the company and (iii) the assets and liabilities of the company for a minimum period of five years from the date on which they are prepared.

Section 59 of the Cayman Companies Law further states that proper books of account shall not be deemed to be kept if there are not kept such books as are necessary to give a true and fair view of the state of the company’s affairs and to explain its transactions.

If the Company keeps its books of account at any place other than at its registered office or at any other place within the Cayman Islands, it shall, upon service of an order or notice by the Tax Information Authority pursuant to the Tax Information Authority Law (2009 Revision) of the Cayman Islands, make available, in electronic form or any other medium, at its registered office copies of its books of account, or any part or parts thereof, as are specified in such order or notice.

(i) Exchange control

There are no exchange control regulations or currency restrictions in effect in the Cayman Islands.

– III-26 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(j) Taxation

Pursuant to section 6 of the Tax Concessions Law (2011 Revision) of the Cayman Islands, the Company has obtained an undertaking from the Governor in Cabinet:

(i) that no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations shall apply to the Company or its operations; and

(ii) in addition, that no tax be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable by the Company:

(aa) on or in respect of the shares, debentures or other obligations of the Company; or

(bb) by way of withholding in whole or in part of any relevant payment as defined in section 6(3) of the Tax Concessions Law (2011 Revision).

The undertaking for the Company is for a period of twenty years from 15 May 2012.

The Cayman Islands currently levy no taxes on individuals or corporations based upon profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to the Company levied by the Government of the Cayman Islands save certain stamp duties which may be applicable, from time to time, on certain instruments.

(k) Stamp duty on transfers

There is no stamp duty payable in the Cayman Islands on transfers of shares of Cayman Islands companies save for those which hold interests in land in the Cayman Islands.

(l) Loans to directors

The Cayman Companies Law contains no express provision prohibiting the making of loans by a company to any of its directors. However, the Articles provide for the prohibition of such loans under specific circumstances.

(m) Inspection of corporate records

The members of the company have no general right under the Cayman Companies Law to inspect or obtain copies of the register of members or corporate records of the company. They will, however, have such rights as may be set out in the company’s articles of association.

– III-27 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(n) Register of members

A Cayman Islands exempted company may maintain its principal register of members and any branch registers in any country or territory, whether within or outside the Cayman Islands, as the company may determine from time to time. The Cayman Companies Law contains no requirement for an exempted company to make any returns of members to the Registrar of Companies in the Cayman Islands. The names and addresses of the members are, accordingly, not a matter of public record and are not available for public inspection. However, an exempted company shall make available at its registered office, in electronic form or any other medium, such register of members, including any branch register, as may be required of it upon service of an order or notice by the Tax Information Authority pursuant to the Tax Information Authority Law (2009 Revision) of the Cayman Islands.

(o) Winding up

A Cayman Islands company may be wound up either by (i) an order of the court; (ii) voluntarily by its members; or (iii) under the supervision of the court.

The court has authority to order winding up in a number of specified circumstances including where, in the opinion of the court, it is just and equitable that such company be so wound up.

A voluntary winding up of a company occurs where the Company so resolves by special resolution that it be wound up voluntarily, or, where the company in general meeting resolves that it be wound up voluntarily because it is unable to pay its debt as they fall due; or, in the case of a limited duration company, when the period fixed for the duration of the company by its memorandum or articles expires, or where the event occurs on the occurrence of which the memorandum or articles provides that the company is to be wound up. In the case of a voluntary winding up, such company is obliged to cease to carry on its business from the commencement of its winding up except so far as it may be beneficial for its winding up. Upon appointment of a voluntary liquidator, all the powers of the directors cease, except so far as the company in general meeting or the liquidator sanctions their continuance.

In the case of a members’ voluntary winding up of a company, one or more liquidators shall be appointed for the purpose of winding up the affairs of the company and distributing its assets.

As soon as the affairs of a company are fully wound up, the liquidator must make a report and an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of, and thereupon call a general meeting of the company for the purposes of laying before it the account and giving an explanation thereof.

– III-28 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

When a resolution has been passed by a company to wind up voluntarily, the liquidator or any contributory or creditor may apply to the court for an order for the continuation of the winding up under the supervision of the court, on the grounds that (i) the company is or is likely to become insolvent; or (ii) the supervision of the court will facilitate a more effective, economic or expeditious liquidation of the company in the interests of the contributories and creditors. A supervision order shall take effect for all purposes as if it was an order that the company be wound up by the court except that a commenced voluntary winding up and the prior actions of the voluntary liquidator shall be valid and binding upon the company and its official liquidator.

For the purpose of conducting the proceedings in winding up a company and assisting the court, there may be appointed one or more persons to be called an official liquidator or official liquidators; and the court may appoint to such office such person or persons, either provisionally or otherwise, as it thinks fit, and if more than one persons are appointed to such office, the court shall declare whether any act required or authorised to be done by the official liquidator is to be done by all or any one or more of such persons. The court may also determine whether any and what security is to be given by an official liquidator on his appointment; if no official liquidator is appointed, or during any vacancy in such office, all the property of the company shall be in the custody of the court.

(p) Reconstructions

Reconstructions and amalgamations are governed by specific statutory provisions under the Cayman Companies Law whereby such arrangements may be approved by a majority in number representing 75% in value of members or creditors, depending on the circumstances, as are present at a meeting called for such purpose and thereafter sanctioned by the courts. Whilst a dissenting member would have the right to express to the court his view that the transaction for which approval is being sought would not provide the members with a fair value for their shares, nonetheless the courts are unlikely to disapprove the transaction on that ground alone in the absence of evidence of fraud or bad faith on behalf of management and if the transaction were approved and consummated the dissenting member would have no rights comparable to the appraisal rights (i.e. the right to receive payment in cash for the judicially determined value of their shares) ordinarily available, for example, to dissenting members of a United States corporation.

– III-29 – APPENDIXIII SUMMARYOFTHECONSTITUTIONOFTHE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(q) Take-overs

Where an offer is made by a company for the shares of another company and, within four months of the offer, the holders of not less than 90% of the shares which are the subject of the offer accept, the offeror may at any time within two months after the expiration of the said four months, by notice require the dissenting members to transfer their shares on the terms of the offer. A dissenting member may apply to the court of the Cayman Islands within one month of the notice objecting to the transfer. The burden is on the dissenting member to show that the court should exercise its discretion, which it will be unlikely to do unless there is evidence of fraud or bad faith or collusion as between the offeror and the holders of the shares who have accepted the offer as a means of unfairly forcing out minority members.

(r) Indemnification

Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, save to the extent any such provision may be held by the court to be contrary to public policy, for example, where a provision purports to provide indemnification against the consequences of committing a crime.

4. GENERAL

Appleby, the Company’s legal adviser on Cayman Islands law, has sent to the Company a letter of advice which summarises certain aspects of the Cayman Islands company law. This letter, together with a copy of the Cayman Companies Law, is available for inspection as referred to in the paragraph headed “Documents Available for Inspection” in Appendix V to this prospectus. Any person wishing to have a detailed summary of Cayman Islands company law or advice on the differences between it and the laws of any jurisdiction with which he is more familiar is recommended to seek independent legal advice.

– III-30 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

A. FURTHER INFORMATION ABOUT THE COMPANY AND ITS SUBSIDIARIES

1. Incorporation of our Company

Our Company was incorporated in the Cayman Islands under the Companies Law as an exempted company with limited liability on 20 April 2012 with an authorised share capital of HK$380,000.00 divided into 38,000,000 Shares of par value HK$0.01 each. Reid Services Limited subscribed for 1 Share. On the same day, the said 1 Share was transferred to Eaglepass Developments, and two Shares were allotted and issued fully paid, to Jaguar Asian.

Eaglepass Developments is owned as to 15.66% and 84.34% by Mr. Lu and Gain Profit respectively. Gain Profit is wholly owned by Yinglifeng Developments. Yinglifeng Developments is owned as to 66.33%, 9.62%, 9.62%, 4.81%, 4.81% and 4.81% by Mr. Fan, Mr. Lin Guangzheng, Mr. Su Weibing, Ms. Wang Guping, Ms. Zhang Rong and Mr. Luo Chengwen respectively. Mr. Fan is therefore deemed or taken to be interested in the shares held by Eaglepass Developments for the purpose of the SFO.

Jaguar Asian is wholly owned by Mr. Chen Daren. Mr. Chen Daren is therefore deemed or taken to be interested in the shares held by Jaguar Asian for the purpose of the SFO.

Our Company was subject to the Cayman Islands law and to its constitution which comprises the Memorandum of Association and the Articles of Association. A summary of various parts of the constitution and relevant aspects of the Companies Law is set out in Appendix III to this prospectus.

2. Changes in share capital of our Company

(a) Increase in the authorised share capital

Pursuant to the resolutions in writing of all Shareholders passed on 12 November 2013, the authorised share capital of the Company was increased from HK$380,000.00 divided into 38,000,000 Shares of par value HK$0.01 each to HK$7,780,000 divided into 778,000,000 Shares of par value HK$0.01 each by the creation of an additional 740,000,000 Shares. On the 20 November 2013, 7,706 Shares were allotted and issued, credited as fully paid, to Jaguar Asian, and 2,291 Shares was allotted and issued, credited as fully paid, to Eaglepass Developments.

Immediately upon completion of the Share Offer and the Capitalisation Issue (but without taking into account any Shares which may be issued pursuant to the exercise of the Adjustment Option or any options which may be granted under the Share Option Scheme), the authorised share capital of our Company will be HK$7,780,000 divided into 778,000,000 Shares of which 360,000,000 Shares will be allotted and issued fully paid or credited as fully paid and 418,000,000 Shares

– IV-1 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

will remain unissued. Other than pursuant to the exercise of the Adjustment Option or any options which may be granted under the Share Option Scheme, and save as otherwise disclosed herein, the Directors have no present intention to issue any part of the authorised but unissued share capital of the Company and, without the prior approval of the Shareholders in general meeting, no issue of Shares will be made which would effectively alter the control of the Company.

(b) Founder shares

The Company has no founder shares, management shares or deferred shares.

Save as disclosed herein and in paragraphs 1 to 3 of this appendix, there has been no alteration in the share capital of the Company since its incorporation.

3. Resolutions in writing of all Shareholders passed on 12 November 2013

On 12 November 2013, pursuant to the resolutions in writing passed by all Shareholders, among other matters:

(a) the Company approved and adopted the Memorandum and the Articles;

(b) conditional upon all conditions set out in the section headed “Structure of the Share Offer” of this prospectus:

(i) the Listing, Share Offer, the issue of the Offer Shares and the Adjustment Option were approved and the Directors were authorised to approve the allotment and issue of the Offer Shares pursuant to the Share Offer and any Shares which may be required to be issued if the Adjustment Option is exercised;

(ii) conditional on the Listing Committee of the Stock Exchange granting approval of the Share Option Scheme, the grant of options thereunder and the listing of and permission to deal in the Shares to be issued pursuant to the exercise of any options granted thereunder, the rules of the Share Option Scheme were approved and adopted and the Directors were authorised to make such further amendments thereon or to take all such actions as they may consider necessary, expedient or desirable to implement the Share Option Scheme and to grant options and to allot and issue Shares pursuant to the exercise of any options granted under the Share Option Scheme;

(c) the Issuing Mandate was given to the Directors to allot, issue and deal with, otherwise than by way of rights issue, scrip dividend schemes or similar arrangements in accordance with the Articles, or pursuant to the exercise of options which may be granted under the Share Option Scheme or under the

– IV-2 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

Share Offer or Capitalisation Issue, Shares with an aggregate nominal value of not exceeding the sum of 20% of the aggregate nominal value of the share capital of the Company in issue immediately following the completion of the Share Offer and Capitalisation Issue (without taking into account any Shares falling to be issued pursuant to the exercise of the Adjustment Option or any options which may be granted under the Share Option Scheme) until the conclusion of the next annual general meeting of the Company, or the date by which the next annual general meeting of the Company is required by the Articles or the Companies Law or any applicable law to be held, or the passing of an ordinary resolution by Shareholders revoking or varying the authority given to the Directors, whichever occurs first;

(d) the Repurchase Mandate was given to the Directors to exercise all powers for and on behalf of the Company to repurchase Shares with an aggregate nominal amount of not exceeding 10% of the aggregate nominal amount of the share capital of the Company in issue immediately following completion of the Share Offer and the Capitalisation Issue (but without taking into account any Shares falling to be issued pursuant to the exercise of the Adjustment Option or any options which may be granted under the Share Option Scheme) until the conclusion of the next annual general meeting of the Company, or the date by which the next annual general meeting of the Company is required by the Articles or the Companies Law or any applicable law to be held, or the passing of an ordinary resolution by Shareholders revoking or varying the authority given to the Directors, whichever occurs first; and

(e) the Issuing Mandate be extended by the addition to the aggregate nominal amount of the share capital of the Company which may be allotted or agreed to be allotted by the Directors pursuant to such unconditional general mandate of an amount representing the aggregate nominal amount of the Shares purchased by the Company pursuant to the Repurchase Mandate provided that such extended amount shall not exceed 10% of the aggregate nominal value of the issued share capital of the Company immediately following completion of the Share Offer and the Capitalisation Issue.

4. Group reorganisation

The companies comprising the Group underwent the Reorganisation in preparation for the listing of the Shares on the Stock Exchange. Immediately after completion of the Reorganisation, our Company then became the holding company of our Group. For information relating to the Reorganisation, please refer to the section headed “History and development” of this prospectus for further details.

– IV-3 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

5. Changes in the share capital of subsidiaries

The subsidiaries of the Company are set out in the Accountant’s Report set out in Appendix I to this prospectus.

In addition to the Reorganisation as set out in the section headed “History and development – Corporate Reorganisation” of this prospectus, the following alterations in the share capital of the subsidiaries of the Company took place within the two years immediately preceding the date of this prospectus:

(a) On 16 May 2012, Intelligence Link transferred its 60% shareholdings of Subor Electronics to an Independent Third Party at the consideration of RMB10,920,000.

Save as disclosed above in this section, there has been no alteration in the share capital of any of the subsidiaries of the Company within the two years immediately preceding the date of this prospectus.

6. Repurchase by the Company of its own securities

This section includes information relating to the repurchase by us of our own Shares, including information required by the Stock Exchange to be included in this prospectus concerning such repurchase.

The Listing Rules permit companies with a primary listing on the Stock Exchange to repurchase their shares on the Stock Exchange subject to certain restrictions, the most important of which are summarised below:

(a) Shareholders’ approval

All proposed repurchases of securities (which must be fully paid up in the case of shares) on the Stock Exchange by a company with a primary listing on the Stock Exchange must be approved in advance by an ordinary resolution, either by way of general mandate or by specific approval of a particular transaction. The Company’s sole listing will be on the Stock Exchange.

Note: Pursuant to the resolutions in writing passed by our Shareholders on 12 November 2013, the Repurchase Mandate was given to our Directors to exercise all powers of our Company to repurchase on the Stock Exchange, or on any other stock exchange on which the Shares may be listed and which is recognised by the SFC and the Stock Exchange for this purpose, up to 10% of the aggregate nominal value of the share capital of our Company in issue and to be issued as mentioned in this prospectus but without taking into account any Shares which may be issued upon exercise of the Adjustment Option and the options which may be granted under the Share Option Scheme. The Repurchase Mandate will expire at the earliest of (i) the conclusion of the next annual general meeting of our Company, (ii) the expiration of the period within which the next annual general meeting of our Company is required by the Articles, the Companies Law or any applicable laws to be held, or (iii) it being revoked or varied by an ordinary resolution of our Shareholders in a general meeting of our Company (the “Relevant Periods”).

– IV-4 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

(b) Trading restrictions

The Company is authorised to repurchase on the Stock Exchange or on any other stock exchange recognised by the SFC and the Stock Exchange the total number of Shares which represent up to a maximum of 10% of the aggregate nominal value of the existing issued share capital of the Company or warrants to subscribe for Shares representing up to 10% of the amount of warrants then outstanding at the date of the passing of the relevant resolution granting the Repurchase Mandate. The Company may not issue or announce an issue of new securities of the type that have been repurchased for a period of 30 days immediately following a repurchase of securities (except pursuant to the exercise of warrants, share options or similar instruments requiring the Company to issue securities which were outstanding prior to the repurchase) without the prior approval of the Stock Exchange. In addition, the Company shall not repurchase its shares on the Stock Exchange if the purchase price is higher than 5% or more than the average closing market price for the 5 preceding trading days on which the Shares were traded on the Stock Exchange. The Company is also prohibited from making securities repurchases on the Stock Exchange if the result of the repurchases would be that the number of the listed securities in public hands would fall below the relevant prescribed minimum percentage as required by the Stock Exchange, which is currently 25% in the case of the Company.

The Listing Rules provide that the listing of all repurchased securities is automatically cancelled and that the relevant certificates must be cancelled and destroyed as soon as reasonably practicable. Under the Cayman Islands law, the Company’s repurchased shares shall be treated as cancelled on repurchase and the amount of the Company’s issued share capital shall be diminished by the aggregate nominal value of the repurchased Shares (although the authorised share capital of the Company will not be reduced as a result of the repurchase).

(d) Suspension of repurchase

The Listing Rules prohibit any repurchase of securities after a price-sensitive development has occurred or has been the subject of a decision until such time as the price-sensitive information has been made publicly available. In particular, during the period of one month immediately preceding the earlier of (a) the date of the board meeting (as such date is first notified to the Stock Exchange in accordance with the Listing Rules) for the approval of the results for any year, half-year, quarterly or any other interim period (whether or not required under the Listing Rules); and (b) the deadline for the Company to publish an announcement of its results for any year or half-year under the Listing Rules, or quarterly or any other interim period (whether or not required under the Listing Rules), and ending on the date of the results announcement, the Company may not repurchase its securities on

– IV-5 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

the Stock Exchange, unless the circumstances are exceptional. In addition, the Stock Exchange may prohibit repurchases of securities on the Stock Exchange if a company has breached any of the Listing Rules.

(e) Procedural and reporting requirements

Repurchases of securities on the Stock Exchange or otherwise must be reported to the Stock Exchange not later than 9:30 a.m. (Hong Kong time) on the following business day. In addition, the Company’s annual report and accounts are required to include a monthly breakdown of Share repurchases made during the financial year under review, showing the number of Shares repurchased each month (whether on the Stock Exchange or otherwise), the purchase price per Share or the highest and lowest prices paid for all such repurchases and the total prices paid by the Company. The directors’ report is also required to contain reference to the repurchases made during the year and the directors’ reasons for making such repurchases. The Company shall make arrangements with its broker who effects the repurchase to provide the Company in a timely fashion with the necessary information in relation to the repurchase made on behalf of the Company to enable the Company to report to the Stock Exchange.

(f) Reasons for repurchases

The Directors believe that it is in the best interest of the Company and the Shareholders for the Directors to have a general authority from the Shareholders to enable the Company to repurchase Shares in the market. Repurchases of Shares will only be made when the Directors believe that such a repurchase will benefit the Company and the Shareholders. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net asset value of the Company or its earnings per Share or both.

(g) Funding of repurchases

Any repurchases by the Company will only be funded out of funds of the Company legally available for the purpose in accordance with the Memorandum, the Articles, the Listing Rules and the applicable laws of the Cayman Islands. Under Cayman Islands law, repurchases by the Company may be made out of profits of the Company or out of the Company’s share premium account, or out of the proceeds of a fresh issue of shares made for the purpose of repurchase, or, if so authorised by its Articles and subject to the provisions of the Companies Law, out of capital. Any premium payable on a repurchase over the par value of the Shares to be purchased must be provided for out of either or both of the profits of the Company or the Company’s share premium account, or, if so authorised by the Articles and subject to the provisions of the Companies Law, out of capital.

– IV-6 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

Based on the financial position of the Group as disclosed in the section headed “Financial Information” and Appendices I and II of this prospectus, the Directors consider that there would not be a material adverse impact on the working capital and on the gearing position in the event that the Repurchase Mandate is exercised in full in the proposed repurchase period. However, the Directors do not propose to exercise the Repurchase Mandate to such extent as would, in the circumstances, have a material adverse effect on the working capital requirements of the Group or the gearing levels which in the opinion of the Directors are from time to time appropriate for the Group. The exercise in full of the Repurchase Mandate, assuming that the Adjustment Option is not exercised at all and on the basis of 360,000,000 Shares in issue immediately after completion of the Share Offer and the Capitalisation Issue, would result in up to 36,000,000 Shares being repurchased by the Company during the period in which the Repurchase Mandate remains in force.

(h) General

As at the Latest Practicable Date, none of the Directors and, to the best of their knowledge, having made all reasonable enquiries, none of their respective associates have any present intention in selling any Share to the Company or its subsidiaries if the Repurchase Mandate is approved by the Shareholders and exercised by the Directors. As at the Latest Practicable Date, no connected persons (as defined in the Listing Rules) of the Company have notified the Company that they have any present intention to sell Shares to the Company or have undertaken not to do so, if the Repurchase Mandate is approved by the Shareholders and exercised by the Directors.

(i) Directors’ Undertaking

The Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the Repurchase Mandate in accordance with the Listing Rules, the Articles and the applicable laws of the Cayman Islands.

(j) Takeovers Code Consequences

If, as a result of a repurchase of Shares, a Shareholder’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition for the purposes of the Hong Kong Code on Takeovers and Mergers (“Takeovers Code”). As a result, a shareholder, or a group of shareholders acting in concert (as defined in the Takeovers Code), depending on the level of increase in the shareholder’s interests, could obtain or consolidate control of the Company and become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code as a result of any such increase. Save as aforesaid, the Directors are not aware of any consequences which would arise under the Takeovers Code as a consequence of any repurchases pursuant to the Repurchase Mandate.

– IV-7 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

7. Registration under Part XI of the Companies Ordinance

On 8 July 2013, the Company was registered as a non-Hong Kong company under Part XI of the Companies Ordinance. It has established its head office and a principal place of business in Hong Kong for the purpose of registration under Part XI of the Companies Ordinance. The principal place of business in Hong Kong is at Unit 2205A, 22nd Floor, Nine Queen’s Road Central, Hong Kong. The address for service of process and notices of the Company is the same as its principal place of business in Hong Kong. Tse Wing York has been appointed as the authorised representative(s) of the Company for the acceptance of service of process and notices in Hong Kong.

B.FURTHERINFORMATIONABOUTTHEBUSINESSOFTHEGROUP

1. Summary of material contracts

The following contracts (not being contracts in the ordinary course of business) have been entered into by members of the Group within the two years preceding the date of this prospectus and are or may be material:

(a) Instrument of transfer and bought and sold notes all dated 24 April 2012 in respect the transfer of one share of Intelligence Link from Canton Sky and Fortune Sky each to Mentor Asia;

(b) a deed of indemnity dated 19 November 2013 executed by Mr. Chen Daren in favour of the Group, containing the indemnities more particularly referred to in the sub-section headed “D. Other information – 2. Estate duty and indemnity” in this appendix;

(d) an agreement relating to the sale and purchase of shares in Mentor Asia dated 20 November 2013 made among, inter alia, (i) all the then shareholders of Mentor Asia as the vendors and (ii) the Company as purchaser for the acquisition by the Company of the entire issued share capital of Mentor Asia in consideration and in exchange for which the Company allotted and issued an aggregate of 9,997 Shares, credited as fully paid at par, to the following parties in the proportion as set out below:

No. of Shares allotted and Allottees issued

Eaglepass Developments 2,291 Jaguar Asian 7,706

(e) the Public Offer Underwriting Agreement.

– IV-8 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

2. Intellectual property rights of the Group

Trademarks in Hong Kong

As at the Latest Practicable Date, Guangdong Yihua Department Store has registered the following trademarks which we believe are material to our business:

Registration Expiry Registration Trademarks Class date date number

ूശϵ஬ 11, 16, 20/04/2011 19/04/2021 301894122 18, 24, 35

YHBH 11, 16, 20/04/2011 19/04/2021 301894131 18, 24, 35

11, 16, 09/01/2012 08/01/2022 302133233 18, 24, 35

ू䕅ϵ஬ 11, 16, 09/01/2012 08/01/2022 302133288 18, 24, 35

As at the Latest Practicable Date, Guangdong Yihua Department Store had applied for the registration of the following trademarks which we believe may be material to our business, the registration of which has not yet been granted:

Application Application Trademarks Class date number

YHYIHUASHIJIA 3, 5, 6, 7, 9, 11, 27/09/2012 302391877 ूശ˰࢕ 14, 18, 19, 20, 21, 24, 25, 35, 36, 37

– IV-9 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

Trademarks in the PRC

As at the Latest Practicable Date, Guangdong Yihua Department Store has been granted with the following trademarks which we believe are material to our business in the PRC:

Registration Registration Trademarks Class date Expirydate number

35 14/11/2007 13/11/2017 1127897

35 14/01/2008 13/01/2018 1143888

16 28/12/2007 27/12/2017 4295259

16 28/01/2009 27/01/2019 4905365

11 21/06/2011 20/06/2021 8031882

11 14/04/2011 13/04/2021 8031896

16 07/03/2011 06/03/2021 8031938

18 14/02/2011 13/02/2021 8031951

24 14/02/2011 13/02/2021 8032005

– IV-10 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

Registration Registration Trademarks Class date Expirydate number

35 14/03/2011 13/03/2021 8032052

Ꮄ۶ϵ஬ 35 28/01/2013 27/01/2023 10017148 35 14/03/2013 13/03/2023 10388896

35 14/10/2013 13/10/2023 11030113

35 14/10/2013 13/10/2023 11030079

35 14/10/2013 13/10/2023 11030244

35 14/10/2013 13/10/2023 11030372

As at the Latest Practicable Date, Guangdong Yihua Department Store has applied for registration of the following trademarks which we believe may be material to our business in the PRC, the registration of which has not yet been granted:

Application Trademarks Class date Application number

35 06/06/2012 11030353

35 06/06/2012 11030304

35 06/06/2012 11030174

35 06/06/2012 11030157

3, 5, 6, 7, 9, 17/09/2012 11500107, 11500112, 11500118, 11500134, 11500146, 11, 14, 18, 19, 20, 18/09/2012 11507387, 11507395, 11507401, 11507455, 11507480, 21, 24, 25, 35, 36, 19/09/2012 11513541, 11513553, 11513570, 11513581, 11513595, 37 20/09/2012 11519343

Domain name

As at the Latest Practicable Date, the Group was the registered holder of the following domain name:

Domain name Registration date Expiry date

http://www.yihua.com.cn 26/07/2001 26/07/2015

– IV-11 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

The content in the website of the Group does not form part of this prospectus.

Save as aforesaid, there are no other trade or service marks or other intellectual property register which are material in relation to our business.

3. Further information about the Group’s subsidiaries

(a) The Group has one subsidiary each in BVI and Hong Kong, the basic information of which are set out as follows:

Mentor Asia, incorporated under the laws of BVI

Date of incorporation: 15 June 2000

Authorised share capital: US$50,000 divided into 50,000 ordinary shares with a par value of US$1.00 each

Issued share capital: US$10,000 divided into 10,000 ordinary shares with a par value of US$1.00 each

Address of registered office: Commence Chambers, Road Town, Tortola, British Virgin Islands

General nature of business: Investment holding

Existing Shareholder(s): the Company

Intelligence Link, incorporated under the laws of Hong Kong

Dateofincorporation: 3May1994

Authorised share capital: HK$10,000 divided into 10,000 ordinary shares with a par value of HK$1.00 each

Issued share capital: HK$10,000 divided into 10,000 ordinary shares with a par value of HK$1.00 each

Address of registered office: 16th Floor, Yue On Commercial Building, 385-387 Lockhart Road, Wanchai, Hong Kong

General nature of business: Investment holding

Existing Shareholder(s): Mentor Asia

– IV-12 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

(b) The Group has established 14 subsidiaries (excluding those in the process of deregistration) in the PRC, the basic information of which is set out as follows:

Lonwalk Mould

Date of establishment: 16 October 2000

Type of company: Wholly foreign owned enterprise with limited liability

Total registered capital: RMB40,000,000

Registered owner: Intelligence Link

Term of operation: From 16 October 2000 to 15 October 2020

Scope of business: Whole-sale and retail (without retail stores) for textile, arts and crafts (not including historical item), metal electronics, office equipment, construction material (no including steel, valuable metals), fashion, shoes and hats, watches, glasses, cosmetics and hygienic goods, accessories, vegetables and fruits; trading, commission business (excluding auction) (not involving goods under national trade management, goods involving quota, permit shall be applied through relevant national regulations). Manufacturing of plastics products, mould, electronic products (including computer, cord phone etc.), construction plastics, plastic alloy, metal wear (excluding plating process). Products are for export and local sales.

Guangdong Yihua Department Store

Date of establishment: 24 October 1994

Type of company: Wholly foreign owned enterprise with limited liability

Total registered capital: RMB10,000,000

Registered owner: Lonwalk Mould

– IV-13 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

Term of operation: From 24 October 1994 to 23 October 2044

Scope of business: Sales: department stores, textile, arts and crafts (except for gold and silver), metalware, modern office equipments, construction materials, household goods; retail gold accessories; watch and clock repair, electrical appliance repair, shoe repair; retail sales of audio-visual products, domestic books, newspapers and magazines; optometrist services (excluding consultation), optical services retail: three categories: 6822 Medical optical instruments, instruments and endoscopic equipment (limited to soft corneal contact lens and contact lens care solution) (except for consultation and advisory service); retail: fruit and vegetables, meat, fishery product; wholesale and retail: health foods (the above items operated by branches); retail: pre-packaged food and bulk food bulk food (nuts, cooked meat food, rice and noodles products, glace fruit, cooking condiment), dairy product (including infant formula), cigarettes, salt (the above items operated by branches).

Guzhen Yihua Department Store

Date of establishment: 29 March 2006

Type of company: Domestic enterprise

Total registered capital: RMB5,000,000

Registered owner: Guangdong Yihua Department Store

Term of operation: from 29 March 2006 to long term

– IV-14 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

Scope of business: Sales: department stores, textile, arts and crafts, gold and silver accessories, metalware, office equipments, construction materials, clothing, household goods, glasses, food, cereals and oil, cigarettes, wine, vegetable and fruit, decoration materials, contraceptive devices, computing facilities, optometrist services (excluding consultation), optician services; maintenance: watch and clock, shoe repair, electrical appliances, computing facilities; business management information consultation, commercial space for lease.

Qingyuan Yihua Department Store

Date of establishment: 16 October 2003

Type of company: Domestic enterprise

Total registered capital: RMB5,000,000

Registered owner: Guangdong Yihua Department Store

Term of operation: From 16 October 2003 to 14 April 2016

Scope of business: Sales: general merchandise, textiles, arts and crafts, hardware, office equipments and supplies, decoration materials, electronic products, jewelry, shoe repair, electrical appliance maintenance repair; secondary agricultural products purchasing; food wholesale and retail (limited to the branches with valid license within the business premise of the Company); liquor retail; retail of cigarettes, cigars, and non-punishable retail foreign tobacco products (limited to the business premises); audio-visual products retail; domestic edition books, newspapers, books and magazines retail; health food business; category B non-prescription medicine retail; category 2 physical therapy and rehabilitation equipments; lease management, electrical appliance recycling; optometric services (not include contact lenses); sales: flowers, pot culture; design, produce, issue, act for domestic advertising.

– IV-15 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

Jiangmen Yihua Department Store

Date of establishment: 24August 2004

Type of company: Domestic enterprise

Total registered capital: RMB5,000,000

Registered owner: Guangdong Yihua Department Store

Term of operation: from 24 August 2004 to long term

Scope of business: Supermarket business operation (including purchasing and selling agricultural secondary products), cigarettes, cigars, tobacco retail; sales of general merchandise, clothing, leather goods, shoes, watches and clocks, glasses, optometrist services, optician services, daily products, gold accessories, arts and crafts, mobile phones, household electrical appliances, metalware; audio-visual products retail; domestic books, newspapers and magazines rental and retail; electrical appliance repair, watch and clock repair, property leasing; Chinese fast food and Dim Sum making and selling; pre-packaged food and bulk food retail; dairy product (including infant formula) retail; wholesale and retail: furniture, light fittings, household goods, construction materials (For those business scopes which require permit for operation, valid licenses are required for operation of business premise within permitted scope).

– IV-16 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

Shaoguan Yihua Department Store

Date of establishment: 3August 2007

Type of company: Domestic enterprise

Total registered capital: RMB5,000,000

Registered owner: 59% of the registered capital held by Guangdong Yihua Department Store and 41% of the registered capital held by Zhu Muqiong (ϡᅉᖘ)

Term of operation: From 3 August 2007 to 27 July 2022

Scope of business: Domestic commerce and trade; corporate image design service; lease management of Podium Building of 1st-4th floor, west of 5th floor and west side of north of 5th floor of Central Plaza, Hui Min South Road, Shaoguan City authorized by ჭᗫ̹˰ߏਠᑌໄุϞࠢʮ̡ (Shaoguan Shiji Shang Lian Property Limited*) (expect approval from relevant department is needed before the registration according to the laws, regulations or State Council decision regulations and there is no such approval) (except for business that are prohibited by the PRC laws and regulation. Business restricted by the PRC laws and regulation can be operated only after obtaining the relevant approval).

– IV-17 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

Yangchun Yihua Department Store

Date of establishment: 28 September 2012

Type of company: Domestic enterprise

Total registered capital: RMB1,000,000

Registered owner: Guangdong Yihua Department Store

Term of operation: From 28 September 2012 to long term

Scope of business: Domestic commerce and trade (except for items that are prohibited by laws and regulation, items restricted by Administrative regulations only commence after obtaining approval); lease management; corporate image design service.

Taiyangcheng Yihua Department Store Limited

Date of establishment: 9 November 2012

Type of company: Domestic enterprise

Total registered capital: RMB1,000,000

Registered owner: Guangdong Yihua Department Store

Term of operation: From 9 November 2012 to long term

Scope of business: Sales of general merchandise, clothing, leather goods, shoes, watches and clocks, cosmetics, glasses (except for contact lenses and contact lens care solution), golden accessories and jewelry; arts and crafts; household decoration; household electrical appliances; metalware; clothing, shoe and leather goods repair; electrical appliance repair; watch and clock repair; property management; corporate image design service.

– IV-18 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

Yingde Yihua Department Store

Date of establishment: 11 December 2012

Type of company: Domestic enterprise

Total registered capital: RMB1,000,000

Registered owner: Guangdong Yihua Department Store

Term of operation: From 11 December 2012 to 11 December 2016

Scope of business: Domestic commerce and trade (except for items that are prohibited by laws and regulation, restricted items only commence after obtaining approval); lease management; corporate image design service.

Tai’an Yihua Commercial

Date of establishment: 10 December 2012

Type of company: Domestic enterprise

Total registered capital: RMB1,000,000

Registered owner: Guangdong Yihua Department Store

Term of operation: From 10 December 2012 to long term

Scope of business: Prior approval operating items: pre-packaged food and bulk food retail (valid to 8 May 2016); cigarettes, cigars, tobacco retail (valid to 31 December 2015); General operation items: domestic trading; space leasing; property management; corporate image design service; design, produce, issue, act for domestic advertising (excluding printing advertisement); recycling gold, silver and other noble metal. (except for business that are prohibited by laws and regulations, business restricted by laws and regulations can only be operated after obtaining the relevant approval).

– IV-19 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

Yangjiang Yihua Department Store

Date of establishment: 28 January 2013

Type of company: Domestic enterprise

Total registered capital: RMB5,000,000

Registered owner: Guangdong Yihua Department Store

Term of operation: From 28 January 2013 to long term

Scope of business: Domestic trading (except for items that are prohibited by laws and regulations, restricted items only commence after obtaining approval); property leasing; corporate image design service; recycling gold, silver and other noble metal; audio-visual products retail (valid to 28 March 2018); domestic books, newspapers and magazines rental and retail (valid to 28 March 2018).

Zhenjiang Yihua Department Store

Date of establishment: 5 June 2013

Type of company: Domestic enterprise

Total registered capital: RMB5,000,000

Registered owner: Guangdong Yihua Department Store

Term of operation: From 5 June 2013 to long term

Scope of business: Retail: clothing, daily commodities, shoes and hats, leather goods, office stationery, sporting goods, watches and clocks, glasses, cosmetics, golden accessories and jewelry, labour protection appliance, arts and crafts, household decoration, household electrical appliances, electrical toys, electrical appliances, computers, digital product, digital accessories, electronic accessories, printers, hardware; cloth repair; shoes, leather goods, watch, clock and household electrical appliances repair; property and counters leasing; property management; corporate image design service.

– IV-20 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

Zhongshan Yihua Shijia

Date of establishment: 11 September 2012

Type of company: Domestic enterprise

Total registered capital: RMB1,000,000

Registered owner: Guangdong Yihua Department Store

Term of operation: From 11 September 2012 to long term

Scope of business: Sales of general merchandise, clothing, leather goods, shoes, watches and clocks, glasses (except for contact lenses), spectacle frames; daily commodities; golden accessories; arts and crafts (except for items that are prohibited by laws and regulation); mobile phones; household electrical appliances; hardware; furniture; light fittings; textile; construction materials; electrical appliances; watch and clock repair; own property leasing; optometric services (except for consultation opticals services).

Yangjiang Yihua Shijia

Date of establishment: 6 May 2013

Type of company: Domestic enterprise

Total registered capital: RMB5,000,000

Registered owner: Zhongshan Yihua Shijia

Termofoperation: From6May2013tolongterm

Scope of business: DomesticTrading(exceptprohibitedorrequired permit by laws or administrative regulations), property leasing and management, corporate image planning

– IV-21 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

C.FURTHERINFORMATIONABOUTDIRECTORS,SENIORMANAGEMENT AND STAFF

1. Disclosure of interests of Directors

(i) Save as disclosed in section 6 of this section, sections headed “Business”, “History and development” and Appendix I in this prospectus, none of the Directors or their associates (as defined in the Listing Rules) were engaged in any dealings with the Group during the two years preceding the date of this prospectus; and

(ii) Each of Mr. Fan, Mr. Lu Hanxing, Mr. Lin Guangzheng, Mr. Su Weibing and Mr. Chen Daren are interested in the Reorganisation referred to in paragraph 4 of this appendix.

2. Particulars of service contracts

(a) Executive Directors

Each of the executive Directors has entered into a service contract with the Company. Particulars of these contracts, except as indicated, are in all material respects identical and are set out below:

Each of the service contracts is for an initial term of three years commencing on the Listing Date unless terminated by not less than three months’ notice in writing served by either the Director or the Company. In certain other circumstances, each agreement can also be terminated by the Company, including but not limited to serious breaches of the Directors’ obligations under the agreement or serious misconduct. The executive Directors are officially stationed in the PRC, but may be required to work in Hong Kong or in other places, as may be determined by the board of Directors from time to time.

(b) Non-executive Directors and independent non-executive Directors

Each of the non-executive Directors and independent non-executive Directors has signed an appointment letter with the Company for a term of three years commencing from the Listing Date. The appointments are subject to the provisions of retirement and rotation of Directors under the Articles. Save for directors’ fees of the amount as stated below per annum for each respective non-executive Director and independent non-executive Director, none of the non-executive Director and independent non-executive Director is expected to receive any other remuneration for holding their office as an non-executive Director or independent non-executive Director.

– IV-22 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

The current basic annual salaries of the executive Directors and the annual fees payable to the non-executive Directors and independent non-executive Directors are as follows:

Executive Directors Amount Amount (RMB) (approximate amount in HK$)

Mr. Fan Xinpei RMB1,080,000 1,328,400 (after tax) Mr. Chen Jianren RMB1,200,000 1,476,000 (after tax) Mr. Lin Guangzheng RMB696,000 856,080 (after tax) Mr. Su Weibing RMB696,000 856,080 (after tax)

Non-executive Directors Amount Amount (approximate amount in HK$)

Mr. Lu Hanxing RMB60,000 73,800 (after tax) Mr. Chen Daren RMB60,000 73,800 (after tax)

Independent non-executive Directors Amount Amount (approximate amount in HK$)

Mr. Sun Hong RMB80,000 98,400 (before tax) Mr. Leung Wai Kwan HK$120,000 – (before tax) Mr. Xu Yinzhou RMB80,000 98,400 (before tax)

– IV-23 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

In addition, for the financial year ending 31 December 2013 and each of the financial years thereafter, the executive Directors are also entitled to a discretionary bonus.

Save as disclosed above, none of the Directors has entered into any service agreements with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation other than statutory compensation).

3. Directors’ remuneration

(a) The Company’s policies concerning remuneration of executive Directors are as follows:

(i) the amount of remuneration payable to the executive Directors will be determined on a case by case basis depending on the experience, responsibility, workload and the time devoted to the Group;

(ii) non-cash benefits may be provided at the discretion of the Board to the Directors under their remuneration package; and

(iii) the executive Directors may be granted, at the discretion of the board of Directors, share options under the Share Option Scheme as part of their remuneration package.

(b) During each of the years ended 31 December 2010, 2011 and 2012, the aggregate emoluments of the Directors were approximately RMB1.16 million, RMB1.18 million and RMB2.9 million, respectively. Details of the Directors’ remuneration are set out in note 8(a) to section II of the Accountant’s Report set out in Appendix I to this prospectus.

(c) Under the arrangements currently in force, the aggregate emoluments payable to the Directors for the year ending 31 December 2013 are estimated to be approximately HK$282,300.

(d) None of the Directors or any past directors of any member of the Group has been paid any sum of money for each of the years ended 31 December 2010, 2011 and 2012 (i) as an inducement to join or upon joining the Company or (ii) for loss of office as a director of any member of the Group or of any other office in connection with the management of the affairs of any member of the Group.

(e) There has been no arrangement under which a Director has waived or agreed to waive any emoluments for each of the years ended 31 December 2010, 2011 and 2012.

– IV-24 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

4. Interests and short position of Directors in the share capital of the Company and its associated corporations

Immediately following the completion of the Share Offer and the Capitalisation Issue (without taking into account any Shares falling to be issued pursuant to the exercise of the Adjustment Option or any options which may be granted under the Share Option Scheme), the interests and short position of the Directors and chief executives in the Shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which will have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under the SFO) once the Shares are listed, or which will be required, pursuant to Section 352 of the SFO, to be entered in the register required to be kept therein once the Shares are listed, or will be required pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers of the Listing Rules, to be notified to the Company and the Stock Exchange, once the Shares are listed, will be as follows:

Company/ name of Number of Approximate Name of associated Shares percentage Directors corporation Capacity (Note 1) of interest

Mr. Chen Daren The Company Interest of a 208,116,000 57.81% controlled (L) corporation 13,500,000 3.75% (Notes 2 (S) and 3)

Mr. Fan Xinpei The Company Interest of a 61,884,000 17.19% controlled (L) corporation (Note 4)

Mr. Chen Daren Jaguar Asian Beneficial 1 100% Owner (L)

– IV-25 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

Percentage Company/ of holding name of of associated registered Percentage Name of Directors corporation Capacity capital of interest

Mr.LinGuangzheng Guzhen Beneficial 20% (L) 20% Yihua Owner Trading

Mr. Su Weibing Guzhen Beneficial 20% (L) 20% Yihua Owner Trading

Notes:

1. The letters “L” and “S” denote long position and short position respectively in the Shares and/or the shares of the relevant associated corporation.

2. These shares will be registered in the name of Jaguar Asian, which is wholly owned by Chen Daren who is deemed to be interested in all the Shares in which Jaguar Asian is interested by virtue of the SFO.

3. The short position of 13,500,000 Shares arises as a result of the entering of the Stock Borrowing Agreement by Jaguar Asian.

4. These Shares will be registered in the name of Eaglepass Developments, which is owned as to 15.66% and 84.34% by Mr. Lu and Gain Profit respectively. Gain Profit is wholly owned by Yinglifeng Developments. Yinglifeng Developments is owned as to 66.33%, 9.62%, 9.62%, 4.81%, 4.81% and 4.81% by Mr. Fan, Lin Guangzheng, Su Weibing, Wang Guping, Zhang Rong and Luo Chengwen respectively. Mr. Fan is deemed to be interested in all the Shares referred to in note 3 above by virtue of the SFO.

– IV-26 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

5. Substantial Shareholders

So far as the Directors are aware, the following entities (not being Directors or chief executive of the Company) will, immediately following the completion of the Share Offer and the Capitalisation Issue (without taking into account any Shares falling to be issued pursuant to the exercise of the Adjustment Option or any options which may be granted under the Share Option Scheme), have an interest or short position in the Shares or underlying Shares which will have to be disclosed to the Company and the Stock Exchange pursuant to Divisions 2 and 3 of Part XV of the SFO, or are directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group, once the Shares are listed will be as follows:

Company/ Number of Approximate Name of name of Shares percentage of Shareholder subsidiary Capacity (Note 1) shareholding

Eaglepass TheCompany BeneficialOwner 61,884,000 17.19% Developments Gain Profit The Company Interest in 61,884,000 17.19% controlled corporation (Note 2) Yinglifeng The Company Interest in 61,884,000 17.19% Developments controlled corporation (Note 2) Jaguar Asian The Company Beneficial Owner 208,116,000 57.81% (Note 3) 13,500,000 3.75% (S)

Notes:

1. The letters “L” and “S” denote long position and short position respectively in the Shares and/or the shares of the subsidiary of the Company.

2. These Shares will be registered in the name of Eaglepass Developments, which is owned as to 15.66% and 84.34% by Mr. Lu and Gain Profit respectively. Gain Profit is wholly owned by Yinglifeng Developments. Yinglifeng Developments is owned as to 66.33%, 9.62%, 9.62%, 4.81%, 4.81% and 4.81% by Mr. Fan, Lin Guangzheng, Su Weibing, Wang Guping, Zhang Rong and Luo Chengwen respectively.

3. The short position of 13,500,000 Shares arises as a result of the entering of the Stock Borrowing Agreement by Jaguar Asian.

– IV-27 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

6. Related party transactions

Related party transactions entered into within the two years immediately preceding the date of this prospectus are set out in note 30 to section II of the Accountant’s Report in Appendix I to this prospectus.

7. Agency fees or commissions received

None of the Directors, the promoters of the Company or the persons named under “Consents of experts” in this appendix had received any discounts, brokerage and other special terms, agency fee or commission from the Group in connection with the issue or sale of any capital of any member of the Group within the two years immediately preceding the date of this prospectus.

The Underwriters will receive a commission and the Sponsor will receive a financial advisory fee and documentation fee as mentioned in the section headed “Underwriting – Commission and expenses” of this prospectus.

8. Disclaimers

Save as disclosed in this appendix and the sections headed “Business”, “History and development” and “Connected transaction” of this prospectus:

(a) once the Shares are listed, none of the Directors or chief executives of the Company has any interest or short position in the Shares, underlying Shares or debenture of the Company or any of its associate corporations which will have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he will be taken or deemed to have under the SFO), or which will be required, pursuant to section 352 of the SFO, to be entered in the register referred to therein or which will be required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers of the Listing Rules relating to securities transactions by Directors to be notified to the Company and the Stock Exchange;

(b) taking no account of any Shares which may be taken up under the Share Offer, the Directors are not aware of any person (not being a Director or chief executives of the Company) who will, immediately following the completion of the Share Offer and the Capitalisation Issue, be interested, directly or indirectly, in 10% or more of the nominal amount of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group or any options in respect of such capital;

– IV-28 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

(c) none of the Directors or any of the persons whose names are listed in the paragraph headed “Consents of experts” of this appendix are directly or indirectly interested in the promotion of the Company or in any assets which have been, within the two years immediately preceding the date of this prospectus, acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group;

(d) none of the Directors nor any of the persons whose names are listed in the paragraph headed “Consents of experts” of this appendix are materially interested in any contract or arrangement subsisting at the date of this prospectus which is significant in relation to the business of the Group;

(e) none of the Directors have entered or have proposed to enter into any service contracts with any other member of the Group (other than contracts expiring or determinable by the employer within one year without payment of compensation other than statutory compensation);

(f) none of the persons whose names are listed in the paragraph headed “Consents of experts” of this appendix have any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for shares in any member of the Group or is an officer or servant or a partner of or in the employment of an officer or servant of the Group;

(g) no cash, share or other benefit has been paid, allotted or given within the two years preceding the date of this prospectus to any promoter of the Company nor is any cash, share or benefit intended to be paid, allotted or given on the basis of the Share Offer or related transactions as mentioned in this prospectus; and

(h) so far as is known to the Directors, none of the Directors, their respective associates or Shareholders who are interested in 5% or more of the issued share capital of the Company has any interests in the five largest customers or five largest suppliers of the Group.

– IV-29 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

D. OTHER INFORMATION

1. Share Option Scheme

The following is a summary of the principal terms of the Share Option Scheme conditionally approved by the resolutions of the Shareholders dated 12 November 2013. For the purpose of this section, unless the context otherwise requires:

“Adoption Date” 12 November 2013; “Board” means the board of Directors or a committee thereof duly appointed for the purpose of administering the Share Option Scheme; “Business Day” means a day on which the Stock Exchange is open for the business of trading in securities; “Commencement Date” means in respect of any particular Option, the date on which the Option is granted in accordance with the terms of the Share Option Scheme; “Employee” means any employee (whether or not full time and including directors and executives), of any member of the Group; “Grantee” means any Participant who has been offered and has accepted an Offer in accordance with the terms of the Share Option Scheme, or (where the context so permits) any person who is entitled to any such Option in consequence of the death of the original Grantee; “Listing Date” means the date on which dealings in the Shares first commence on the Stock Exchange; “Offer” means the offer of the grant of an Option made in accordance with the Share Option Scheme; “Offer Date” means the date on which an Offer is made to a Participant; “Option” means a right granted to subscribe for Shares pursuant to the terms of the Share Option Scheme; “Option Period” means a period to be determined and notified by the Board to each Grantee and in any event such period of time shall not be more than ten years from the Commencement Date;

– IV-30 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

“Participant” means all full-time employee, Directors (including independent non-executive Directors) and part-time employees with weekly working hours of 10 hours and above, of the Group, substantial shareholders of each member of the Group, associates of the directors and substantial shareholders of any member of the Group, trustee of any trust pre-approved by the Board; and any adviser (professional or otherwise) or consultant, distributor, supplier, agent, customer, joint venture partner, service provider to the Group whom the Board considers, in its sole discretion, have contributed or contribute to the Group; and “Subscription Price” means the price per share at which a Grantee may subscribe for share on the exercise of an Option.

The purpose of the Share Option Scheme is to enable the Company to grant Options to selected persons as incentives or rewards for their contribution to the Group.

(a) Administration

The Share Option Scheme is subject to the administration by the Board, and the decision of the Board shall be final and binding on all parties. The Board, subject to the Listing Rules, shall have the right (i) to interpret and construe the provisions of the Share Option Scheme, (ii) to determine the eligibility of the persons who will be awarded Options under the Share Option Scheme, and the number and subscription price of Options awarded thereto, (iii) to make such appropriate and equitable adjustments to the terms of Options granted under the Share Option Scheme as it deems necessary, and (iv) to make such other decisions or determinations as it shall deem appropriate in the administration of the Share Option Scheme.

(b) Who may join

The Board may, at its discretion, offer any Participants options to subscribe for such number of new Shares as the Board may determine at the Subscription Price to be determined in accordance with paragraph (c) below. Upon acceptance of the option, the Grantee shall pay HK$1.00 to the Company as consideration for the grant.

– IV-31 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

The subscription price for Shares under the Share Option Scheme will be determined by the Board in its absolute discretion and notified to each Participant and will be no less than the highest of:

(i) the closing price of the Shares as stated in the daily quotations sheet issued by the Stock Exchange on the Offer Date which must be a Business Day;

(ii) the average closing price of the Shares as stated in the daily quotation sheets issued by the Stock Exchange for the five Business Days immediately preceding the Offer Date; and

(iii) the nominal value of a Share at the time of exercise of an Option.

For the purpose of calculating the Subscription Price where the Company has been listed for less than five Business Days, the issue price shall be used as the closing price for any Business Day falling within the period before the Listing Date.

(d) Maximum number of Shares

(i) the overall limit on the number of Shares which may be issued upon the exercise of all outstanding Options granted and yet to be exercised under the Share Option Scheme and any other share option schemes of the Company must not, in aggregate, exceed 30% of the Shares in issue from time to time.

(ii) subject to paragraph (i) above, the Shares which are the subject to options to be granted under the Share Option Scheme and any other share option schemes of the Company immediately after the Listing Date must not, in aggregate, exceed 10% of the Shares in issue on the Listing Date (excluding any shares which may be issued pursuant to the exercise of the Adjustment Options) (“Scheme Limit”) unless approval of the Shareholders has been obtained pursuant to sub-paragraphs (iii) and (iv) below. Options lapsed in accordance with the terms of the Share Option Scheme will not be counted for the purpose of calculating the Scheme Limit.

(iii) subject to paragraph (i) above, the Company may refresh the Scheme Limit at any time subject to prior Shareholders’ approval in general meeting, provided that the limit as “refreshed” must not exceed 10% of the Shares in issue as at the date of approval of the limit. Options previously granted under the Share Option Scheme and other share option schemes (including those outstanding, cancelled, lapsed in accordance

– IV-32 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

with the Share Option Scheme or other share option scheme or exercised Options) will not be counted for the purpose for calculating the limit as “refreshed”. A circular containing information required under the Rule 17.02(2) of the Listing Rules and the disclaimer required under Rule 17.02(4) of the Listing Rules must be sent to Shareholders in connection with the meeting at which their approval will be sought.

(iv) subject to paragraph (i) above, the Company may also seek separate Shareholders’ approval in general meeting for granting Options beyond the Scheme Limit provided the Option in excess of the Scheme Limit are granted only to Participants specifically identified by the Company before such approval is sought. A circular must be sent to Shareholders containing a generic description of the specified Participants who may be granted such Option, the number and terms of the Options to be granted, the purpose of granting Options to the specified Participants with an explanation as to how the terms of such Options serve such purpose, the information required under Rule 17.02(2) of the Listing Rules and the disclaimer required under Rule 17.02(4) of the Listing Rules.

(v) the total number of Shares issued and to be issued upon exercise of the Options granted to each Participant (including both exercised and outstanding Options) in any 12-month period must not exceed 1% of the Shares in issue from time to time. Any further grant of Options to such Participant which would result in the Shares issued and to be issued upon exercise of all options granted and to be granted to such Participant (including exercised, cancelled and outstanding Options) in the 12-month period up to and including the date of such further grant representing in aggregate over 1% of the relevant class of Shares in issue, such further grant must be separately approved by Shareholders in general meeting with such Participant and his or her associates (as defined in the Listing Rules) abstaining from voting. A circular must be sent to the Shareholders disclosing the identity of the Participant, the number and terms of the Options to be granted (and Options previously granted to such Participant). The number and terms (including the Subscription Price) of Options to be granted to such Participant must be fixed before the Shareholders’ approval is sought and the date of board meeting for proposing such further grant should be taken as the date of grant for the purpose of calculating the Subscription Price.

– IV-33 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

(e) Grant of Options

Any grant of Options must not be made after inside information has come to the Company’s knowledge, until it has been announced in accordance with Rule 2.07C of the Listing Rules. In particular, no Option may be granted during the period commencing one month immediately before the earlier of:

(i) the date of the board meeting (as such date is first notified to the Stock Exchange under the Listing Rules) for approving of the Company’s results for any year, half-year or quarterly or any other interim period (whether or not required under the Listing Rules); and

(ii) the deadline for the Company to publish an announcement of its results for any year or half-year under the Listing Rules, or quarterly or any interim period (whether or not required under the Listing Rules);

and ending on the date of the results announcement.

(f) Terms and conditions of Options

An Option may be exercised in accordance with the terms of the Share Option Scheme at any time during the Option Period but may not be exercised after the expiry of ten years from the Commencement Date. There is no general requirement that an Option must be held for any minimum period before it can be exercised and there is no specific performance targets which must be achieved before Options can be exercised stipulated under the terms of the Share Option Scheme. The Board is currently unable to determine such restrictions on the exercise of the Option, but the Board may impose restrictions on the exercise of an Option during the Option Period including (but not limited to), if appropriate:

(i) the minimum period for which all or part of an Option may be exercised; and

(ii) performance targets (if any) which must be achieved before the Options can be exercised.

– IV-34 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

(g) Grant of Options to connected person

The grant of Options to a Director, chief executive or substantial Shareholder or any of their respective associates requires the approval of the independent non-executive Directors (excluding an independent non-executive Director who is the Grantee of the Options). Where any grant of Options to a substantial shareholder (as defined in the Listing Rules) or an independent non-executive Director or any of their respective associates will result in the Shares issued and to be issued upon exercise of all Options already granted and to be granted (including Options exercised, cancelled and outstanding) to such person in the 12-month period up to and including the date of the grant:

(i) representing in aggregate over 0.1% of the Shares in issue; and

(ii) having an aggregate value, based on the closing price of the Shares at the date of each grant, in excess of HK$5 million,

such grant of Options must be subject to approval by the Shareholders taken on a poll and a circular must be sent to the Shareholders. All connected persons (as defined in the Listing Rules) of the Company must abstain from voting in favour at such general meeting except that any connected person may vote against the resolution provided that his intention to do so has been stated in the circular to Shareholders seeking the approval.

The abovenamed circular must contain the following:

(i) details of the number and terms of the Options (including the Subscription Price) to be granted to each Participant which must be fixed before the shareholders’ meeting and the date of board meeting for proposing such further grant should be taken as the date of grant for the purpose of calculating the Subscription Price;

(ii) a recommendation from the independent non-executive Directors (excluding any independent non-executive Director who is the Grantee of the Options in question) to the independent Shareholders as to voting;

(iii) information in relation to any Directors who are trustees of the Scheme or have a direct or indirect interest in the trustees; and

(iv) all other information and/or disclaimer (where applicable) required under the Listing Rules.

The requirements for the granting of Options to a Director or chief executive of the Company set out above do not apply where the Participant is only a proposed Director or chief executive of the Company.

– IV-35 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

(h) Rights are personal to grantee

An Option is personal to the Grantee and shall not be assignable or transferable and no Grantee shall in any way sell, transfer, charge, mortgage, encumber or create any interest, whether legal or beneficial in favour of any other person over or in relation to any Option, or enter into agreement for doing so.

(i) Rights on ceasing employment for other reasons

If the Grantee who is an Employee ceases to be an Employee for any reason other than his or her death or the termination of his or her employment on one or more of the grounds specified in paragraph (o)(iv) below, the Grantee may exercise the Option within three months following the date of cessation up to the Grantee’s entitlement at the date of cessation (to the extent not already exercised). The date of cessation of employment shall be the last actual working day with the relevant company in the Group whether salary is paid in lieu of notice or not.

(j) Rights on death

In the event the Grantee dies before exercising the Option in full (and none of certain events which would be a ground for termination of his or her employment under paragraph (o)(iv) below arises), the personal representative(s) of the Grantee shall be entitled within a period of 12 months from the date of death to exercise the Option up to the entitlement of the Grantee as at the date of death (to the extent not already exercised).

(k) Effects of alterations to capital

In the event of any alteration in the capital structure of the Company whilst any option may become or remains exercisable, whether by way of capitalisation issue, rights issue, consolidation, subdivision or reduction of share capital of the Company, or otherwise howsoever, such corresponding alterations (if any) shall be made in the number or nominal amount of Shares subject to any options so far as unexercised and/or the exercise price per Share of each outstanding option and/or the method of exercise of the option as the auditors of the Company or an independent financial adviser shall certify in writing to the Board to be in their/his opinion fair and reasonable in compliance with Rule 17.03(13) of the Listing Rules and the notes thereto.

– IV-36 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

Any such alterations will be made on the basis that a Grantee shall have the same proportion of the issued share capital of the Company (as interpreted in accordance with the Supplementary Guidance attached to the letter from the Stock Exchange dated 5 September 2005 to all issuers relating to Share Option Schemes). No such alteration will be made the effect of which would be to enable a Share to be issued at less than its nominal value. The issue of securities as consideration in a transaction is not to be regarded as a circumstance requiring any such alterations.

(l) Rights on general offer

In the event of a general offer (otherwise than by a scheme of arrangement) being made to all Shareholders (or all such holders other than the offeror and/or any person controlled by the offeror and/or any person acting in association or concert with the offeror) to acquire all or part of the issued shares and such offer becomes or is declared unconditional prior to the expiry date of the relevant option, the Grantee (or his legal personal representatives) shall be entitled to exercise the option in full (to the extent not already exercised even though the Option Period has not come into effect during the occurrence of the general offer) at any time within one month after the date on which the offer becomes or is declared unconditional.

In the event of a general offer, by way of scheme of arrangement, being made to all the Shareholders and has been approved by the necessary number of Shareholders at the requisite meetings, the Grantee (or his or her personal representatives) may thereafter (but before such time as shall be notified by the Company) exercise the Option (to the extent not already exercised) to its full extent or to the extent specified in such notice.

(m) Rights on a compromise or arrangement

Other than a scheme of arrangement contemplated in sub-paragraph (l) above, in the event of a compromise or arrangement between the Company and its members or creditors being proposed in connection with the scheme for the reconstruction or amalgamation of the Company, the Company shall give notice thereof to all Grantees on the same day as it gives notice of the meeting to its members or creditors to consider such a scheme or arrangement and the Grantee (or his or her legal personal representatives) may by notice in writing to the Company accompanied by the remittance for the Subscription Price in respect of the relevant Option (such notice to be received by the Company not later than four Business Days prior to the proposed meeting) exercise the Option (to the extent not already exercised) either to its full extent or to the extent specified in such notice, and the Company shall as soon as possible and in any event no later than the Business Day immediately prior to the date of the proposed meeting, allot and issue such number of Shares to the Grantee which falls to be issued on such exercise credited as fully paid and register the Grantee as holder thereof.

– IV-37 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

(n) Rights on winding up

In the event a notice is given by the Company to its Shareholders to convene a Shareholders’ meeting for the purpose of considering and, if thought fit, approving a resolution to voluntarily wind up the Company, the Company shall forthwith give notice thereof to the Grantee and the Grantee (or his or her legal personal representatives) may by notice in writing to the Company (such notice to be received by the Company not later than four Business Days prior to the proposed Shareholders’ meeting) exercise the option (to the extent not already exercised) either to its full extent or to the extent specified in such notice and the Company shall as soon as possible and in any event no later than the Business Day immediately prior to the date of the proposed Shareholders’ meeting, allot and issue such number of Shares to the Grantee which falls to be issued on such exercise.

(o) Lapse of Option

An Option shall lapse automatically and not be exercisable (to the extent not already exercised) on the earliest of:

(i) the expiry of the Option Period;

(ii) the expiry of the periods referred to in paragraphs (i), (j), (n) respectively;

(iii) subject to the compromise or arrangement becoming effective, the expiry of the period referred to in paragraph (m) above;

(iv) subject to the scheme of arrangement becoming effective, the expiry of the period referred to in paragraph (l) above;

(v) the date on which the Grantee who is an Employee ceases to be an Employee by reason of the termination of his or her employment on the grounds that he or she has been guilty of serious misconduct, or has been in breach of a material term of the relevant employment contracts, or appears either to be unable to pay or to have no reasonable prospect of being able to pay his or her debts or has become bankrupt or has made any arrangement or composition with his or her creditors generally, or has been convicted of any criminal offence involving his or her integrity or honesty or on any other ground on which an employer would be entitled to terminate his or her employment summarily;

(vi) the date of the commencement of the winding-up of the Company;

(vii) the date on which the Grantee sells, transfers, charges, mortgages, encumbers or creates any interest, whether legal or beneficial, in favour of any other person over or in relation to any Option or enter into any agreement for doing so;

– IV-38 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

(viii)the expiry of the period referred to in paragraph (l) provided that if any court of competent jurisdiction makes an order the effect of which is to prevent the offeror from acquiring Shares in the offer, the relevant period within which Options may be exercised shall not begin to run until the discharge of the order in question or unless the offer lapses or is withdrawn before that date; and

(ix) the occurrence of such event or expiry of such period as may have been specifically provided for in the Offer (if any), unless otherwise resolved to the contrary by the Board.

(p) Ranking of Shares

The Shares to be allotted and issued upon the exercise of an Option will be subject to the provisions of the memorandum and articles of association of the Company as amended from time to time and will rank pari passu with the fully paid Shares in issue on the date of exercise of the Option and in particular will rank in full for all dividends or other distributions declared, paid or made on or after the date of exercise of the Option other than any dividend or other distribution previously declared or recommended or resolved to be paid or made if the record date therefor is before the date of exercise of the Option.

Unless the context otherwise requires, references to “Shares” in the Share Option Scheme include references to Shares in the Company of any such nominal amount as shall result from a sub-division, consolidation, reclassification or reconstruction of the share capital of the Company from time to time.

(q) Cancellation of Options granted

Any Options granted but not exercised may be cancelled if the Grantee so agrees and new Options may be granted to the Grantee provided such new Options fall within the limits prescribed by paragraph (d) above and otherwise comply with the terms of the Share Option Scheme. If such cancellation has been approved by Shareholders in general meeting, such Options which were cancelled may be re-issued after such cancellation, provided that re-issued Options (to the extent not yet granted and excluding the cancelled Options) shall only be granted in compliance with the terms of the Share Option Scheme and within the Scheme Limited (as refreshed from time to time).

(r) Period of Share Option Scheme

The Share Option Scheme will remain valid for a period of 10 years commencing on the Adoption Date (save that the Company, by ordinary resolution in general meeting or the Board may at any time terminate the operation of the Share Option Scheme). After termination, no further Options will be granted but the

– IV-39 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

provisions of the Share Option Scheme shall in all other respects remain in full force and effect and Options which are granted during the life of the Share Option Scheme may continue to be exercisable in accordance with their terms of issue.

(s) Alteration to Share Option Scheme

The provisions of the Share Option Scheme may be altered in any respect by resolution of the Board except that provisions relating to the class of persons eligible for the grant of Options, the Option Period and all such other matters set out in Rule 17.03 of the Listing Rules cannot be altered to the advantage of the Participants without the prior approval of the Shareholders in general meeting.

Any alterations to the terms and conditions of the Share Option Scheme which are of a material nature, or any change to the terms of the Options granted must be approved by the Shareholders in general meeting, except where the alterations take effect automatically under the existing terms of the Share Option Scheme. The amended terms of the Share Option Scheme or the Options must still comply with the relevant requirements of Chapter 17 of the Listing Rules. Any change to the authority of the Directors or scheme administrators in relation to any alteration to the terms of the Share Option Scheme must be approved by the Shareholders in general meeting.

(t) Conditions of the Share Option Scheme

The Share Option Scheme is conditional on:

(i) the Listing Committee granting approval of the listing of and permission to deal in any Shares which may be issued pursuant to the exercise of options granted under the Share Option Scheme (subject to an initial limit of 10% of the Shares in issue on the Listing Date without taking into account the number of Shares to be issued pursuant to the exercises of the Adjustment Option), and

(ii) the commencement of dealings in the Shares on the Stock Exchange.

(u) Termination of the Share Option Scheme

The Company by ordinary resolution in general meeting or the Board may at any time terminate the operation of the Share Option Scheme and in such event no further Options will be offered or granted but in all other respects the provisions of the Share Option Scheme shall remain in full force and effect. Options complying with the provisions of Chapter 17 of the Listing Rules which are granted during the life of the Share Option Scheme and remain unexpired immediately prior to the termination of the operation of the Share Option Scheme shall continue to be exercisable in accordance with their terms of issue after the termination of the Share Option Scheme.

– IV-40 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

(v) General

As at the date of this prospectus, no option has been granted or agreed to be granted under the Share Option Scheme. The Share Option Scheme complies with the Listing Rules, and any adjustment to be made to the exercise price of, and/or the number of shares subject to, any options to be granted under the scheme will comply with the Listing Rules, the supplemental guidance of 5 September 2005 and any future guidance or the Listing Rules’ interpretation from time to time.

2. Estate duty and indemnity

Mr. Chen Daren (the “Indemnifier”), one of our Controlling Shareholders, has pursuant to a deed of indemnity referred to in the paragraph headed “Summary of material contracts” of this appendix, given indemnity in respect of among other things (a) any liability for Hong Kong estate duty which might be incurred by any member of the Group by virtue of any transfer of property (within the meaning of section 35 of the Estate Duty Ordinance (Chapter 111 of the Laws of Hong Kong, as amended)) to any member of the Group on or before the date on which the Share Offer becomes unconditional; (b) any actions, claims, demands, proceedings, costs and expenses, losses and liabilities of whatever nature which may be made, suffered or incurred by any member of the Group in respect of or arising directly or indirectly from or on the basis of or in connection with the non-compliance or alleged non-compliance by any member of the Group with any applicable laws, rules and regulations in Hong Kong, the PRC, or any jurisdictions including but not limited to those matters specified in the section headed “Business – Legal compliance and litigation – Indemnification by a Controlling Shareholder of our Group’s non-compliance” of this prospectus; and (c) any tax liabilities which might be payable by any member of the Group in respect of any income, profits or gains earned, accrued or received or deemed to have been earned, accrued or received on or before the date on which the Share Offer becomes unconditional, save in amongst other situations set in the Deed of Indemnity:

(i) to the extent that full provision has been made for such taxation in the audited consolidated accounts of the Company and its subsidiaries or the audited accounts of the relevant group companies for the three years ended 31 December 2012 and five months ended 31 May 2013;

(ii) to the extent that the liability for such taxation would not have arisen but for some act or omission of, or transaction voluntarily effected by, any member of the Group (whether alone or in conjunction with some other act, omission or transaction, whenever occurring) other than any such act, omission or transaction:

(aa) carried out or effected in the ordinary course of business or in the ordinary course of acquiring and disposing of capital assets after 31 December 2012; or

– IV-41 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

(bb) carried out, made or entered into pursuant to a legally binding commitment created on or before 31 December 2012 or pursuant to any statement of intention made in this prospectus; or

(cc) consisting of any member of the Group ceasing, or being deemed to cease, to be a member of any group of companies or being associated with any other company for the purposes of any matter of taxation; or

(iii) to the extent of any provisions or reserve made for taxation in the audited accounts of any member of the Group up to 31 December 2012 which is finally established to be an over-provision or an excessive reserve provided that the amount of any such provision or reserve applied to reduce the Indemnifier’s liability in respect of taxation shall not be available in respect of any such liability arising thereafter; or

(iv) the taxation claim arises or is incurred as a result of the imposition of taxation as a consequence of any retrospective change in the law or practice coming into force after the date of the Deed of Indemnity or to the extent that such taxation claim arises or is increased by an increase in rates of taxation after such date with retrospective effect.

The Directors have been advised that no material liability for estate duty is likely to fall on any member of the Group in the Cayman Islands, BVI, Hong Kong and the PRC, being jurisdictions in which the companies comprising the Group are incorporated.

3. Litigation

Neither the Company or any of its subsidiaries is engaged in any litigation or arbitration of material importance and no litigation, arbitration or claim of material importance is known by the Directors to be pending or threatened by or against any member of the Group.

4. Application for listing of Shares

The Sponsor has made an application for and on behalf of the Company to the Listing Committee for the listing of, and permission to deal in, all the Shares in issue, the Shares to be issued as mentioned in this prospectus and any Shares which may fall to be issued pursuant to the exercise of the Adjustment Option and any options granted under the Share Option Scheme.

5. Preliminary expenses

The preliminary expenses of the Company are estimated to be approximately HK$38,258 and are payable by the Company.

6. Promoter

There is no promoter of the Company.

– IV-42 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

7. Qualifications of experts

The followings are the qualifications of the experts who have given opinion or advice which are contained in this prospectus:

Name Qualification

KingswayCapitalLimited Licensed corporation for types 1 and 6 regulated activities under the SFO

Appleby Legal advisers to the Company on the Cayman Islands laws

PricewaterhouseCoopers Certified public accountants

JunZeJun Law Offices PRC legal advisers

Jones Lang LaSalle Corporate Property valuer Appraisal and Advisory Limited

Baker Tilly Hong Kong Business Internal control advisers Services Limited

8. Consents of experts

Each of Kingsway Capital Limited, Appleby, PricewaterhouseCoopers, JunZeJun Law Offices, Jones Lang LaSalle Corporate Appraisal and Advisory Limited and Baker Tilly Hong Kong Business Services Limited has given and has not withdrawn its written consent to the issue of this prospectus with the inclusion of its report and/or letter and/or valuation certificate and/or the references to its name included herein in the form and context in which they are respectively included.

9. Binding effect

This prospectus shall have the effect, if an application is made in pursuance hereof, of rendering all persons concerned bound by all of the provisions (other than the penal provisions) of sections 44A and 44B of the Companies Ordinance insofar as applicable.

10. Taxation of holders of Shares

(a) Cayman Islands

Under the current Cayman Islands laws, there is no stamp duty payable in the Cayman Islands on transfers of Shares save for those which hold interests in land in the Cayman Islands.

– IV-43 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

(b) Hong Kong

Dealings in Shares registered on the Hong Kong Branch Share Register of members will be subject to Hong Kong stamp duty. Intending holders of Shares are recommended to consult their professional advisers if they are in any doubt as to the taxation implications of subscribing for, purchasing, holding or disposing of or dealing in Shares. It is emphasised that none of the Company, the Directors or the other parties involved in the Share Offer can accept responsibility for any tax effect on, or liabilities of, holders of Shares resulting from their subscription for, purchase, holding or disposal of or dealing in Shares.

Profits from dealings in the Shares arising in or derived from Hong Kong may also be subject to Hong Kong profits tax.

The sale, purchase and transfer of Shares are subject to Hong Kong stamp duty the current rate charged on each of the purchaser and seller is 0.1% of the consideration or, if higher, the fair value of the Shares being sold or transferred.

11. Miscellaneous

(a) Save as disclosed in appendix, sections headed “Business”, “History and development” and “Underwriting” in this prospectus, within the two years preceding the date of this prospectus:

(i) no share or loan capital of the Company or any of its subsidiaries has been issued or agreed to be issued fully or partly paid either for cash or for a consideration other than cash;

(ii) no share or loan capital of the Company or any of its subsidiaries is under option or is agreed conditionally or unconditionally to be put under option;

(iii) no founders or management or deferred shares of the Company or any of its subsidiaries have been issued or agreed to be issued;

(iv) no commissions, discounts, brokerages or other special terms have been granted in connection with the issue or sale of any capital of the Company or any of its subsidiaries; and

(v) no commission has been paid or payable, except for the commission payable to the Joint Bookrunners for subscription of, agreeing to subscribe or procuring subscription of any shares in the Company or any of its subsidiaries.

– IV-44 – APPENDIX IV STATUTORYAND GENERAL INFORMATION

(b) The Directors confirm that:

(i) there has been no material adverse change in the financial or trading position or prospects of the Group since 31 May 2013 (being the date to which the latest audited financial statements of the Group were made); and

(ii) there has not been any interruption in the business of the Group which may have or have had a material adverse effect on the financial position of the Group in the 12 months preceding the date of this prospectus.

(i) is interested beneficially or non-beneficially in any shares in any member of the Group; or

(ii) has any right or option (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for any shares in any member of the Group.

(d) the register of members of the Company will be maintained in the Cayman Islands by Appleby Trust (Cayman) Ltd. and a branch register of members of the Company will be maintained in Hong Kong by Tricor Investor Services Limited. Unless the Directors otherwise agree, all transfers and other documents of title of Shares must be lodged for registration with and registered by the Company’s branch share registrar in Hong Kong and may not be lodged in the Cayman Islands.

(e) No company within the Group is presently listed on any stock exchange or traded on any trading system.

(f) All necessary arrangements have been made to enable the Shares to be admitted into CCASS for clearing and settlement.

12. Bilingual prospectus

The English language and Chinese language versions of this prospectus are being published separately, in reliance upon the exemption provided under section 4 of the Companies Ordinance (Exemption of Companies and Prospectuses for Compliance with Provisions) Notice (Chapter 32L of the Laws of Hong Kong).

13. Exemption from the requirement of a property valuation report

This prospectus is exempted from compliance with the requirement of section 342(1)(b) of the Companies Ordinance in relation to paragraph 34(2) of the Third Schedule to the Companies Ordinance in reliance to the exemption under section 6(2) of the Companies Ordinance (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice (Chapter 32L of the Laws of Hong Kong). Please refer to the section headed “Business − Property – Owned Property” of the prospectus.

– IV-45 – APPENDIXVDOCUMENTSDELIVEREDTOTHEREGISTRAROFCOMPANIESIN HONG KONG AND AVAILABLE FOR INSPECTION

DOCUMENTSDELIVEREDTOTHEREGISTRAROFCOMPANIES

The documents attached to a copy of this prospectus delivered to the Registrar of Companies in Hong Kong for registration were copies of the WHITE application forms, YELLOW application forms, the written consents referred to in the section headed “Statutory and general information – Consents of experts” in Appendix IV to this prospectus and copies of the material contracts referred to in the section headed “Statutory and general information – B. Further information about the business of the Group – 1. Summary of material contracts” in Appendix IV to this prospectus.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the offices of Anthony Siu & Co at 2205A, 22nd Floor, Nine Queen’s Road Central, Hong Kong during normal business hours up to and including the date which is 14 days from the date of this prospectus:

(a) the Memorandum and the Articles;

(b) the Accountant’s Report from PricewaterhouseCoopers, the text of which is set out in Appendix I to this prospectus;

(c) the report from PricewaterhouseCoopers relating to the unaudited pro forma financial information, the text of which is set out in Appendix II to this prospectus;

(d) the letter, relating to the review from the Internal Control Adviser on our Group’s prevention of theft, bribery, anti-money laundering procedures and systems and controls concerning the non-compliance incidents during the Track Record Period;

(e) the material contracts referred to in the paragraph headed “B. Further information about the business of the Group – 1. Summary of material contracts” in Appendix IV to this prospectus;

(f) the service agreements referred to in the paragraph headed “C. Further information about directors, senior management and staff – 2. Particulars of service contracts” in Appendix IV to this prospectus;

(g) the rules of the Share Option Scheme;

(h) the written consents referred to in the paragraph headed under “D. Other information – Consents of experts” in Appendix IV to this prospectus;

(i) the Companies Law;

(j) the letter prepared by Appleby summarising certain aspects of the Cayman Islands company law referred to in Appendix III to this prospectus; and

(k) the PRC legal opinions prepared by JunZeJun Law Offices, the legal advisers of our Company as to PRC law.

– V-1 – 益華百貨控股有限公司 Yi Hua Department Store Holdings Limited