Circular Is Important and Requires Your Immediate Attention

Home , Chet Lam, Ivana Wong, Jolin Tsai, Leon Lai, Show Lo, Zhang Guoli

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

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

If you have sold or transferred all your shares in eSun Holdings Limited (the “Company”), you should at once hand this circular and the accompanying form of proxy to the purchaser(s), or the transferee(s) or to the licensed securities dealer or other registered institution in securities, bank or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or the transferee(s).

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

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

eSun Holdings Limited (Incorporated in Bermuda with limited liability) (Stock Code: 571)

POSSIBLE VERY SUBSTANTIAL ACQUISITION AND NOTICE OF SPECIAL GENERAL MEETING

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

A letter from the Board is set out on pages 7 to 23 of this circular.

A notice convening the SGM to be held at Harbour View Room I, 3rd Floor, The Excelsior, Hong Kong, 281 Gloucester Road, Causeway Bay, Hong Kong on Friday, 11 May 2012 at 11:00 a.m. is set out on pages 160 and 161 of this circular. A form of proxy for use by the Shareholders at the SGM is enclosed with this circular. If you do not intend to be present at the SGM or any adjournment thereof in person but wish to exercise your rights as a Shareholder, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar of the Company in Hong Kong, Tricor Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for holding the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof should you so wish.

24 April 2012 TABLE OF CONTENTS

Page

Definitions ...... 1

Letter from the Board ...... 7

Appendix I — Financial information of the Group...... 24

Appendix II — Financial information of the Lai Fung Group ...... 67

Appendix III — Unaudited pro forma financial information of the Enlarged Group ...... 119

Appendix IV — General information...... 148

Notice of the SGM...... 160

Accompanying Document: Form of Proxy

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

Unless the context otherwise requires, terms used in this circular shall have the following respective meanings:

“acting in concert” has the meaning ascribed to it under the Takeovers Code

“Announcement” the announcement dated 27 February 2012 jointly issued by the Company and Lai Fung in relation to, among other things, the Open Offer, the absence of excess application arrangement for the Offer Shares, the Whitewash Waiver and the Underwriting Agreement

“Application Form” the form of application for the Offer Shares to be sent to the Qualifying Shareholders in respect of their assured entitlements in connection with the Open Offer

“associate(s)” has the meaning ascribed to it under the Listing Rules or the Hong Kong Financial Reporting Standards (as the case may be)

“Board” the board of Directors

“Business Day” means any day (other than a Saturday or Sunday, or a day on which a tropical cyclone warning signal numbered 8 or above or a “black” rainstorm warning signal is hoisted in Hong Kong at any time between 9:00 a.m. and 4:00 p.m.) on which licensed banks in Hong Kong are open for business and the Stock Exchange is open for the business of dealing in securities

“Capital Increase” the proposed increase of the authorised share capital of Lai Fung from HK$1,200,000,000 comprising 12,000,000,000 Lai Fung Shares, to HK$2,000,000,000 comprising 20,000,000,000 Lai Fung Shares by the creation of an additional 8,000,000,000 Lai Fung Shares

“CIMB” CIMB Securities (HK) Limited, a licensed corporation to carry out type 1 (dealing in securities), type 4 (advising on securities) and type 6 (advising on corporate finance) regulated activities under the SFO, being the independent financial adviser appointed by Lai Fung for the purpose of advising the Lai Fung Independent Board Committee and the Lai Fung Independent Shareholders on the terms of the Open Offer, the absence of excess application arrangement for the Offer Shares and the Whitewash Waiver

– 1 – DEFINITIONS

“CL” CapitaLand LF (Cayman) Holdings Co., Ltd., a company incorporated in the Cayman Islands, a substantial shareholder of Lai Fung which is beneficially interested in 1,610,000,000 Lai Fung Shares, representing about 20% of the existing issued share capital of Lai Fung, as at the Latest Practicable Date

“CL Undertaken Shares” the 1,610,000,000 Offer Shares representing the assured entitlements of CL (or its nominees) that CL has agreed to subscribe or procure to be subscribed pursuant to the CL Undertaking, on account of the 1,610,000,000 Lai Fung Shares beneficially owned by CL as at the date of the Underwriting Agreement

“CL Undertaking” a written undertaking from CL in favour of Lai Fung and the Company dated 27 February 2012 under which CL has undertaken to, inter alia, take up (or procure to be taken up) all the CL Undertaken Shares under the Open Offer

“Companies Ordinance” the Companies Ordinance, Chapter 32 of the laws of Hong Kong

“Company”/“eSun” eSun Holdings Limited, an exempted company incorporated in Bermuda with limited liability and registered in Hong Kong under Part XI of the Companies Ordinance, the issued shares of which are listed and traded on the Main Board of the Stock Exchange (Stock Code: 571)

“Concert Group” the Company and the parties acting in concert with it

“controlling shareholder” has the meaning ascribed to it under the Listing Rules

“Directors” the directors of the Company

“Enlarged Group” the Group and the Lai Fung Group

“Excluded Shareholders” the Overseas Shareholder(s) whom the Lai Fung Board, based on legal opinion(s) or advice provided or to be provided by legal advisers to Lai Fung, after making reasonable enquiries, on account either of the legal restrictions under the laws of the relevant jurisdiction or requirements of the relevant regulatory body or stock exchange in that jurisdiction, considers it necessary or expedient not to offer the Offer Shares

“Executive” the executive director of the corporate finance division of the SFC or any delegate of the executive director

– 2 – DEFINITIONS

“Final Acceptance Date” 5 June 2012 (or such other time or date as the Company and Lai Fung may agree in writing) and described as the latest time and date for acceptance of and payment for the Offer Shares in the Prospectus Documents

“GEM” the Growth Enterprise Market of the Stock Exchange

“Group”/“eSun Group” the Company and its subsidiaries from time to time

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

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

“Lai Fung” Lai Fung Holdings Limited, an exempted company incorporated in the Cayman Islands with limited liability and registered in Hong Kong under Part XI of the Companies Ordinance, the issued shares of which are listed and traded on the Main Board of the Stock Exchange (Stock Code: 1125)

“Lai Fung Board” the board of Lai Fung Directors

“Lai Fung Directors” the directors of Lai Fung

“Lai Fung EGM” an extraordinary general meeting of Lai Fung to be convened and held to consider and, if thought fit, approve the Capital Increase, the Open Offer (including the absence of excess application arrangement for the Offer Shares) and the Whitewash Waiver as described in the Announcement

“Lai Fung EGM Circular” a circular containing details of the Capital Increase, the Open Offer (including the absence of excess application arrangements for the Offer Shares), the Whitewash Waiver (which shall include the letter from the Lai Fung Independent Board Committee and the letter from the Lai Fung IFA) and a notice convening the Lai Fung EGM to be despatched to the Lai Fung Shareholders

“Lai Fung Group” Lai Fung and its subsidiaries from time to time

“Lai Fung IFA” CIMB, the independent financial adviser appointed by Lai Fung for the purpose of advising the Lai Fung Independent Board Committee and the Lai Fung Independent Shareholders on the terms of the Open Offer, the absence of excess application arrangement for the Offer Shares and the Whitewash Waiver

– 3 – DEFINITIONS

“Lai Fung Independent an independent board committee of Lai Fung, comprising Board Committee” Messrs. Lam Bing Kwan, Ku Moon Lun and Law Kin Ho, being all the three independent non-executive Lai Fung Directors, which has been established to advise the Lai Fung Independent Shareholders on the terms of the Open Offer, the absence of excess application arrangement for the Offer Shares and the Whitewash Waiver

“Lai Fung Independent Lai Fung Shareholders excluding (i) the Company and its Shareholders” associates and the parties acting in concert with it regarding the Open Offer and the absence of excess application arrangement for the Offer Shares, and (ii) the Company and the parties acting in concert with it and any Lai Fung Shareholders who are involved or interested in the transactions regarding the Open Offer and the Whitewash Waiver

“Lai Fung Share(s)” the share(s) of HK$0.10 each in the share capital of Lai Fung

“Lai Fung Shareholders” the holders of Lai Fung Share(s)

“Latest Practicable Date” 20 April 2012, being the latest practicable date prior to the despatch of this circular for ascertaining certain information for inclusion in this circular

“Listing Committee” the listing sub-committee of the board of the Stock Exchange

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

“LSD” Lai Sun Development Company Limited, a company incorporated in Hong Kong with limited liability, whose issued shares are listed and traded on the Main Board of the Stock Exchange (Stock Code: 488)

“MAGHL” Media Asia Group Holdings Limited, a company incorporated in the Cayman Islands and continued in Bermuda as an exempted company with limited liability, the issued shares of which are listed and traded on GEM (Stock Code: 8075)

“Long Stop Date” 30 June 2012 or such later time and date as may be agreed in writing between the Company and Lai Fung

“Offer Share(s)” the new Lai Fung Share(s) proposed to be issued under the Open Offer

– 4 – DEFINITIONS

“Open Offer” the proposed issue by Lai Fung of the Offer Shares by way of an open offer to the Qualifying Shareholders on the basis of an assured allotment of 1 Offer Share for every 1 existing Lai Fung Share held on the Record Date at the Subscription Price

“Option Holder” the holder of share options granted under the share option scheme adopted by the Company on 23 December 2005 and became effective on 5 January 2006 entitling him to subscribe for certain Shares

“Overseas Shareholder(s)” the Lai Fung Shareholder(s) whose name(s) appear(s) on the register of members or the Hong Kong branch register of members of Lai Fung on the Record Date and whose address(es) as shown in such register(s) on that date is/are outside Hong Kong

“Percentage Ratio(s)” the percentage ratio(s) set out in Rule 14.07 of the Listing Rules to be applied for determining the classification of a transaction

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

“Prospectus” the prospectus to be issued by Lai Fung in relation to the Open Offer

“Prospectus Documents” the Prospectus and the Application Form

“Prospectus Posting Date” 22 May 2012 or such other date as the Company may agree in writing with Lai Fung as the date of despatch of the Prospectus Documents

“Qualifying Shareholder(s)” the Lai Fung Shareholder(s) whose name(s) appear(s) on the register of members or the Hong Kong branch register of members of Lai Fung on the Record Date, other than the Excluded Shareholder(s)

“Record Date” 18 May 2012 or such other date as may be agreed in writing between Lai Fung and the Company for determining entitlements to participate in the Open Offer

“Settlement Date” 8 June 2012 or such other date as the Company and Lai Fung may agree in writing

“SFC” the Securities and Futures Commission of Hong Kong

– 5 – DEFINITIONS

“SFO” the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong)

“SGM” the special general meeting of the Company to be convened and held to consider and, if thought fit, approve, confirm and ratify the Underwriting Agreement and the transactions contemplated thereunder as described in this circular

“Share(s)” the share(s) of HK$0.50 each in the share capital of the Company

“Shareholders” the holders of the Share(s)

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“Subscription Price” the subscription price of HK$0.125 per Offer Share

“subsidiary” has the meaning ascribed to it under the Listing Rules

“substantial shareholder” has the meaning ascribed to it under the Listing Rules

“Takeovers Code” the Hong Kong Code on Takeovers and Mergers

“Underwriting Agreement” the underwriting agreement dated 27 February 2012 and entered into between Lai Fung and the Company in relation to the Open Offer

“Underwritten Shares” all Offer Shares (including the CL Undertaken Shares which CL has irrevocably undertaken to Lai Fung and the Company that it will take up or procure to be taken up) other than those undertaken to be procured for taking up by the Company

“Whitewash Waiver” a waiver of the obligation of the Company and the parties acting in concert with it to make a mandatory general offer arising from the underwriting of the Open Offer for all Lai Fung Shares not already owned, controlled or agreed to be acquired by them pursuant to Note 1 on dispensation from Rule 26 of the Takeovers Code by the Executive as referred to in this circular

“%” per cent. or percentage

– 6 – LETTER FROM THE BOARD

eSun Holdings Limited (Incorporated in Bermuda with limited liability) (Stock Code: 571)

Executive Directors: Registered office: Dr. Lam Kin Ngok, Peter Clarendon House Mr. Lui Siu Tsuen, Richard (Chief Executive Officer) 2 Church Street Mr. Cheung Sum, Sam Hamilton HM 11 Bermuda Non-executive Directors: Madam U Po Chu Head office and principal Mr. Albert Thomas da Rosa, Junior place of business: Mr. Andrew Y. Yan 11th Floor Lai Sun Commercial Centre Independent Non-executive Directors: 680 Cheung Sha Wan Road Mr. Low Chee Keong (Chairman) Kowloon Mr. Alfred Donald Yap Hong Kong Dr. Ng Lai Man, Carmen Mr. Lo Kwok Kwei, David

24 April 2012

To the Shareholders and for information only, the Option Holder

Dear Sir or Madam,

POSSIBLE VERY SUBSTANTIAL ACQUISITION AND NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

On 27 February 2012, the Board announced in a joint announcement with Lai Fung that on 27 February 2012 after trading hours, Lai Fung and the Company entered into the Underwriting Agreement in relation to the Open Offer. As stated in the Announcement, Lai Fung proposed to raise approximately HK$1,006 million, before expenses, by issuing 8,047,956,478 Offer Shares by way of an Open Offer at the Subscription Price of HK$0.125 per Offer Share on the basis of 1 Offer Share for every 1 existing Lai Fung Share held by the Qualifying Shareholders on the Record Date. The Open Offer is not available to the Excluded Shareholders.

– 7 – LETTER FROM THE BOARD

The Company, the controlling shareholder of Lai Fung, indirectly beneficially owned 3,265,688,037 Lai Fung Shares, representing approximately 40.6% of the total issued Lai Fung Shares as at the Latest Practicable Date. Pursuant to the Underwriting Agreement, the Company has irrevocably undertaken to Lai Fung to, among other things, procure its wholly-owned subsidiaries to take up their assured entitlements under the Open Offer in full. Pursuant to the CL Undertaking, CL has irrevocably undertaken to each of Lai Fung and the Company to, among other things, take up (or procure to be taken up) the CL Undertaken Shares, being its assured entitlement of 1,610,000,000 Offer Shares under the Open Offer. Save for those Offer Shares for which the Company has irrevocably undertaken to procure to be taken up, the Open Offer (including the CL Undertaken Shares) is fully underwritten by the Company.

The Underwriting Agreement may potentially increase the Company’s shareholding interests in Lai Fung to more than 50% whereupon Lai Fung will become a subsidiary of the Company. In that case, as the relevant Percentage Ratios under Chapter 14 of the Listing Rules will exceed 100%, the Underwriting Agreement will constitute a possible very substantial acquisition for the Company under the Listing Rules. The purpose of this circular is to provide the Shareholders with the notice of the SGM and more information on the Underwriting Agreement and other information as required under the Listing Rules.

INFORMATION RELATING TO THE OPEN OFFER OF LAI FUNG

The following sets out certain information relating to the Open Offer. Further details of the Open Offer are set out in the Announcement.

Issue statistics

Basis of the Open Offer : 1 Offer Share for every 1 existing Lai Fung Share held on the Record Date

Number of existing : 8,047,956,478 Lai Fung Shares as at the Latest Lai Fung Shares in issue Practicable Date

Number of Offer Shares : 8,047,956,478 Offer Shares

Subscription Price : HK$0.125 per Offer Share

Amount to be raised : Approximately HK$1,006 million from the Offer Shares, before expenses

Underwriter : The Company, the controlling shareholder of Lai Fung

– 8 – LETTER FROM THE BOARD

Number of Offer Shares undertaken : 3,265,688,037 Offer Shares to be procured for taking up by the Company

Number of Offer Shares underwritten : 4,782,268,441 Offer Shares (including the CL by the Company Undertaken Shares which CL has irrevocably undertaken to Lai Fung and the Company that it will take up or procure to be taken up). Details of such arrangement are disclosed under the section headed “Underwriting Arrangements” in this circular

Pursuant to the Underwriting Agreement, the Company has irrevocably undertaken to Lai Fung to, among other things, procure its wholly-owned subsidiaries to take up their assured entitlements under the Open Offer in full. Pursuant to the CL Undertaking, CL has irrevocably undertaken to each of Lai Fung and the Company to, among other things, take up (or procure to be taken up) the CL Undertaken Shares. Save for those Offer Shares for which the Company has irrevocably undertaken to procure to be taken up, the Open Offer (including the CL Undertaken Shares) is fully underwritten by the Company.

As at the Latest Practicable Date, there was no outstanding options granted under the share option scheme of Lai Fung and Lai Fung has no outstanding options, convertible securities or warrants which confer the right to subscribe for the Lai Fung Shares.

Subscription Price

The Subscription Price for the Offer Share is HK$0.125 per Offer Share payable in cash and in full upon acceptance of the assured allotment of the Offer Shares under the Open Offer. The Subscription Price represents:

(i) a discount of approximately 40.2% to the last traded price of HK$0.209 per Lai Fung Share as quoted on the Stock Exchange immediately prior to the commencement of the suspension of trading in respect of the Lai Fung Shares on 22 February 2012 pending the release of the Announcement;

(ii) a discount of approximately 38.1% to the closing price of HK$0.202 per Lai Fung Share as quoted on the Stock Exchange on 21 February 2012;

(iii) a discount of approximately 38.1% to the average of the closing prices per Lai Fung Share as quoted on the Stock Exchange for the last five previous consecutive full trading days up to and including 21 February 2012 of approximately HK$0.202;

(iv) a discount of approximately 37.8% to the average of the closing prices per Lai Fung Share as quoted on the Stock Exchange for the last ten previous consecutive full trading days up to and including 21 February 2012 of approximately HK$0.201;

– 9 – LETTER FROM THE BOARD

(v) a discount of approximately 23.8% to the theoretical ex-entitlements price of HK$0.164 per Lai Fung Share based on the closing price of HK$0.202 per Lai Fung Share as quoted on the Stock Exchange on 21 February 2012;

(vi) a discount of approximately 10.1% to the closing price of HK$0.139 per Lai Fung Share as quoted on the Stock Exchange on the Latest Practicable Date; and

(vii) a discount of approximately 88.9% to the unaudited consolidated net asset value attributable to the Lai Fung Shareholders as at 31 January 2012 of HK$1.13 per Lai Fung Share.

The Subscription Price was determined by the Lai Fung Directors with reference to the market price of the Lai Fung Shares prior to and including 21 February 2012 and the last traded price of the Lai Fung Shares on the Stock Exchange prior to the suspension of trading of the Lai Fung Shares on 22 February 2012.

Basis of assured allotments

1 Offer Share for every 1 existing Lai Fung Share held by the Qualifying Shareholder on the Record Date.

Status of the Offer Shares

The Offer Shares, when allotted, issued and fully paid, will rank pari passu in all respects with the then existing Lai Fung Shares in issue on the date of allotment of the Offer Shares. Holders of such Offer Shares will be entitled to receive all future dividends and distributions which may be declared, made or paid on or after the date of allotment and issue of the Offer Shares.

No Excess Application Arrangement for the Offer Shares

There is no arrangement for application for the Offer Shares by the Qualifying Shareholders in excess of their entitlements. Any Offer Shares not taken up by the Qualifying Shareholders will be taken up by the Company subject to and in accordance with the terms of the Underwriting Agreement.

Since no application for excess Offer Shares is available and the Open Offer is underwritten by the Company, in accordance with Rule 7.26A(2) of the Listing Rules, the absence of excess application arrangement for the Offer Shares is conditional on approval by the Lai Fung Independent Shareholders at the Lai Fung EGM to be convened.

– 10 – LETTER FROM THE BOARD

Irrevocable Undertakings

The Company, the controlling shareholder of Lai Fung, indirectly (through its two wholly-owned subsidiaries) beneficially owned 3,265,688,037 Lai Fung Shares, representing approximately 40.6% of the total issued Lai Fung Shares as at the Latest Practicable Date. Pursuant to the Underwriting Agreement, the Company has irrevocably undertaken to Lai Fung, among other things, that (i) it controls, and will from the date of the Underwriting Agreement up to the Record Date control in aggregate 3,265,688,037 Lai Fung Shares through its two wholly-owned subsidiaries; (ii) it will procure its aforesaid wholly-owned subsidiaries not to, within the period commencing on the date of the Underwriting Agreement and ending on the Settlement Date, transfer or otherwise dispose of, or create any right in respect of, any Lai Fung Shares held by them or in which they are beneficially interested, nor shall it transfer or otherwise dispose of any interests in any shares in its aforesaid wholly-owned subsidiaries which shall remain wholly-owned by it until the Settlement Date; and (iii) subject to fulfilment (or waiver) of the conditions of the Open Offer and the Underwriting Agreement and the Company not having terminated the Underwriting Agreement in accordance with the terms thereof, it will procure its wholly-owned subsidiaries to take up, in aggregate, 3,265,688,037 Offer Shares which will be allotted and issued to its wholly-owned subsidiaries or nominee(s) as their assured entitlements under the Open Offer.

CL, a substantial shareholder of Lai Fung, beneficially owned 1,610,000,000 Lai Fung Shares, representing approximately 20% of the total issued Lai Fung Shares as at the Latest Practicable Date. CL is wholly-owned by CapitaLand Limited, the issued shares of which are listed and traded on Singapore Exchange Securities Trading Limited. Pursuant to the CL Undertaking, CL has irrevocably undertaken to Lai Fung and the Company that, among other things, (i) it shall procure that all the 1,610,000,000 Lai Fung Shares shall remain beneficially and directly owned by it from the date of the CL Undertaking up to the Record Date; (ii) it will subscribe and procure that its nominee (as the case may be) shall subscribe for its full entitlement of 1,610,000,000 Offer Shares which will be allotted to it or its nominee (as the case may be); and (iii) it shall procure that acceptances in respect of the 1,610,000,000 Offer Shares will be lodged with the Hong Kong branch registrar of Lai Fung, with payment in full therefor in cash (whether by cheque, banker’s cashier order or such other form as Lai Fung may approve), by no later than 4:00 p.m. on the Final Acceptance Date.

Conditions of the Open Offer and the Underwriting Agreement

The Open Offer and the obligations of the Company under the Underwriting Agreement are conditional upon the following conditions being fulfilled:

(a) the despatch of the Lai Fung EGM Circular to all the Lai Fung Shareholders;

(b) the approval by the Shareholders (other than those Shareholders, if any, required to abstain from voting) by way of poll at the SGM for the Underwriting Agreement and the transactions contemplated thereunder in accordance with the Listing Rules and the constitutional documents of the Company by no later than the Prospectus Posting Date;

– 11 – LETTER FROM THE BOARD

(c) the approval by the Lai Fung Shareholders of the Capital Increase, and the approval by the Lai Fung Independent Shareholders of the Open Offer, the absence of excess application arrangement for the Offer Shares and the Whitewash Waiver, in each case by way of poll at the Lai Fung EGM in accordance with the Listing Rules and the Takeovers Code by no later than the Prospectus Posting Date;

(d) the grant by the Executive, and not having withdrawn or revoked such grant, of the Whitewash Waiver, and the fulfilment of all conditions (if any) attached to it;

(e) the delivery to the Stock Exchange for authorisation and the registration with the Registrar of Companies in Hong Kong, respectively, not later than the Prospectus Posting Date, of one copy of each of the Prospectus Documents for use by the Qualifying Shareholders to apply for the Offer Shares under their entitlements, duly signed by two Lai Fung Directors (or their agents duly authorised in writing) as having been approved by resolution of the Lai Fung Directors (and all other documents required to be attached to it) and otherwise in compliance with the Listing Rules and the Companies Ordinance;

(f) the despatch of the Prospectus Documents to the Qualifying Shareholders and the despatch of the Prospectus stamped “For Information Only” to the Excluded Shareholders (if and to the extent legally and practically permissible) on the Prospectus Posting Date;

(g) the grant (subject to allotment) by the Listing Committee, and not having withdrawn or revoked such grant, of the listing and the permission to deal in the Offer Shares, either unconditionally or subject to such conditions as are accepted by Lai Fung (and the satisfaction of such conditions (if any and where relevant) on or prior to 4:00 p.m. on the day next following the day being the latest time for acceptance of and the payment for the Offer Shares as stated in the Prospectus (or such other day as may be agreed in writing between Lai Fung and the Company);

(h) the delivery by CL to Lai Fung and the Company of the CL Undertaking duly executed by CL on the same date as the Underwriting Agreement; and

(i) the Underwriting Agreement not being validly terminated by the Company in accordance with the terms thereof.

As at the Latest Practicable Date, the condition set out in paragraph (h) above has been fulfilled. The other conditions in (a) to (g) and (i) above cannot be waived.

If any of the above conditions is not fulfilled or waived on or before the Long Stop Date, or shall become incapable of being fulfilled on or before such time or date without being so waived, the Underwriting Agreement may be terminated by the Company by written notice to Lai Fung and the Open Offer will not proceed. In that event, all obligations and liabilities of Lai Fung and the Company under the Underwriting Agreement shall cease, and neither Lai Fung nor the Company shall have any claim against the other of them, save that all costs, fees and out-of-pocket expenses reasonably incurred by the Company in the performance of its obligations under the Underwriting Agreement shall be borne by Lai Fung.

– 12 – LETTER FROM THE BOARD

Application for listing

Lai Fung will apply to the Listing Committee for the listing of, and permission to deal in, the Offer Shares.

UNDERWRITING ARRANGEMENT

Underwriting Agreement

Save for those Offer Shares for which the Company has irrevocably undertaken to take up (or procure to be taken up) under the Underwriting Agreement, the Open Offer (including the CL Undertaken Shares) will be fully underwritten by the Company pursuant to the Underwriting Agreement.

Date: 27 February 2012

Issuer: Lai Fung

Underwriter: The Company, the controlling shareholder of Lai Fung

Number of Offer Shares underwritten: All Offer Shares (including the CL Undertaken Shares) other than those undertaken to be procured for taking up by the Company (being 3,265,688,037 Offer Shares)

Underwriter’s Commission: 2% of the aggregate Subscription Price for the Offer Shares other than those undertaken to be procured for taking up by the Company and the CL Undertaken Shares

The amount of underwriting commission will be approximately HK$7.9 million. The underwriting commission was determined after arm’s length negotiations between Lai Fung and the Company and between the Lai Fung Board (excluding those Lai Fung Directors who are members of the Lai Fung Independent Board Committee) and the Board (including, in the case of the Company, its non-executive Directors and independent non-executive Directors) consider that the underwriting commission is fair and reasonable and is on normal commercial terms. All sums payable by Lai Fung in this connection shall be satisfied by deduction from the amount payable by the Company to Lai Fung in relation to taking up its assured entitlements of the Offer Shares.

– 13 – LETTER FROM THE BOARD

Termination of the Underwriting Agreement

The Company may, at its sole and absolute discretion, by notice in writing to Lai Fung at any time before 4:00 p.m. on the Business Day immediately following the Final Acceptance Date, terminate the Underwriting Agreement, if at any time before 4:00 p.m. on the Business Day immediately following the Final Acceptance Date:

(a) there has developed, occurred, existed or come into effect:

(i) the introduction of any new law or regulation or any change in existing laws or regulations, or the judicial interpretation of such laws or regulations, or any other similar matter or event which has a material adverse effect on the business or financial condition of the Lai Fung Group as a whole; or

(ii) any change in local, national or international economic, financial or political conditions or any matter or event beyond the control of Lai Fung and/or the Company (including acts of government, economic sanctions, strikes, riot, fire, explosion, flooding, earthquake, civil commotion, act or declaration of war, outbreak or escalation of hostilities, act of terrorism, acts of God, pandemic, outbreak of infectious disease, declaration of a state of emergency or calamity or crisis or accident) which is materially adverse in the context of the Open Offer or makes it inadvisable or inexpedient to proceed with the Open Offer; or

(iii) any change in local, national or international stock market conditions (including any moratorium, suspension of or material restriction on trading in securities generally) which materially and adversely affects the Open Offer or makes it inadvisable or inexpedient to proceed with the Open Offer; or

(iv) any change, or any development involving a prospective change, in taxation in Hong Kong, the PRC or any other jurisdiction to which any member of the Lai Fung Group is subject, or the implementation of any exchange control, which materially and adversely affects any member of the Lai Fung Group or the Lai Fung Shareholders in their capacity as such; or

(b) there comes to the notice of the Company any matter or event showing any of the warranties given by Lai Fung to be untrue or inaccurate in a material respect which is materially adverse in the context of the Open Offer; or

(d) Lai Fung is in breach of any of its obligations under the Underwriting Agreement which is material in the context of the Open Offer.

If the Company terminates the Underwriting Agreement, the Open Offer will not proceed.

– 14 – LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF LAI FUNG

Assuming that (a) the Open Offer proceeds and is completed; (b) the Company’s assured allotments under the Open Offer are taken up in full subject to and in accordance with the Underwriting Agreement; and (c) there is no change in the shareholding structure of Lai Fung from the Latest Practicable Date to immediately before completion of the Open Offer, set out below is the simplified shareholding structure of Lai Fung as at the Latest Practicable Date and immediately after completion of the Open Offer:

Immediately after completion of the Open Offer (Note 1) Assuming the Assuming only assured Assuming only assured Name of Offer Shares allotments of allotments of Lai Fung As at the are taken up by all the Company and the Company Shareholders Latest Practicable Date Qualifying Shareholders CL are taken up are taken up (Notes 2 & 4) (Note 4) No. of No. of No. of No. of Lai Fung approx. Lai Fung approx. Lai Fung approx. Lai Fung approx. Shares % Shares % Shares % Shares %

The Company 3,265,688,037 40.58 6,531,376,074 40.58 9,703,644,515 60.29 11,313,644,515 70.29 (Note 4)

CL 1,610,000,000 20 3,220,000,000 20 3,220,000,000 20 1,610,000,000 10

A director 6,458,829 0.08 12,917,658 0.08 6,458,829 0.04 6,458,829 0.04 (Note 3)

Public 3,165,809,612 39.34 6,331,619,224 39.34 3,165,809,612 19.67 3,165,809,612 19.67

Total 8,047,956,478 100 16,095,912,956 100 16,095,912,956 100 16,095,912,956 100

Notes:

1. The numbers and percentages are based on the stated assumptions and are hence included for illustrative purposes only.

2. It is further assumed that the number of Lai Fung Shares held by CL will remain at its current level of 1,610,000,000 Lai Fung Shares.

3. Such Lai Fung Shares are held by Mr. Lau Shu Yan, Julius, an executive director of Lai Fung.

4. As at the Latest Practicable Date, the Company’s shareholding interests in Lai Fung are held through its wholly- owned subsidiaries, namely (1) Merit Worth Limited (as to 1,869,206,362 Lai Fung Shares representing 23.2% of the issued Lai Fung Shares) and (2) Silver Glory Securities Limited (as to 1,396,481,675 Lai Fung Shares representing 17.4% of the issued Lai Fung Shares).

– 15 – LETTER FROM THE BOARD

Pursuant to the Underwriting Agreement, the Company has undertaken to Lai Fung that, if subscription of the Offer Shares by the Company pursuant to its underwriting obligations under the Underwriting Agreement will result in the public float of Lai Fung falling below the minimum percentage level as prescribed by the Listing Rules, the Company shall take all necessary steps to place down such number of Lai Fung Shares to independent placees with a view to enabling Lai Fung to comply with the public float requirement under the Listing Rules by close of business on the first day of dealing in the Offer Shares. Lai Fung will closely monitor its shareholdings and take such appropriate steps as may be necessary or required to maintain the minimum public float in compliance with the requirements of the Listing Rules.

REASONS FOR AND BENEFITS OF ENTERING INTO THE UNDERWRITING AGREEMENT AND INTENDED USE OF PROCEEDS OF THE OPEN OFFER

The principal business activities of the Company, through its subsidiaries and associates, are: (i) films production and distribution; (ii) development and operation of and investment in media and entertainment businesses; and (iii) investment in and development of real estate projects with a cultural and entertainment-led theme such as the Creative Culture City in Hengqin, the PRC. The Company also has an approximately 40.6% shareholding investment in Lai Fung.

The Directors are confident in the long-term prospects of the Lai Fung Group and the entering into of the Underwriting Agreement will enable the Company to maintain and enhance the long-term value of the Company’s investment in Lai Fung. In addition, if as a result of the level of subscription of the Open Offer and the underwriting obligations of the Company, the Company’s shareholding interests in Lai Fung increase to more than 50% of Lai Fung’s issued share capital as enlarged by the Open Offer, Lai Fung will become a subsidiary of the Company.

The terms of the Underwriting Agreement were arrived at after arm’s length negotiations between the Company and Lai Fung. The Board (including its non-executive Directors and independent non- executive Directors) considers that the terms of the Underwriting Agreement are on normal commercial terms which are fair and reasonable as far as the Company and the Shareholders are concerned.

The amount of subscription proceeds payable by the Company (through its wholly-owned subsidiaries for taking up their respective assured entitlements of the Offer Shares) is approximately HK$408.2 million. The maximum amount of subscription proceeds payable by the Company as the underwriter for taking up all underwritten Offer Shares (including the CL Undertaken Shares) and without taking into account the underwriting commission to be received by the Company is approximately HK$597.8 million. All sums payable by the Company in this connection will be financed by the internal resources of the Group.

The Directors believe that the entering into of the Underwriting Agreement is in the interests of the Company and the Shareholders as a whole.

The principal business activities of the Lai Fung Group include property development for sale and property investment in the PRC.

– 16 – LETTER FROM THE BOARD

Set out below are the abridged audited consolidated results of Lai Fung for the two years ended 31 July 2011 as extracted from the annual report of Lai Fung for the year ended 31 July 2011:

For the year ended 31 July 2011 2010 HK$’000 HK$’000

Turnover 647,183 1,514,214 Profit before taxation 771,963 817,560 Profit after taxation 578,300 363,263 Profit attributable to the Lai Fung Shareholders 530,112 322,106

The audited consolidated net asset value attributable to the Lai Fung Shareholders as at 31 July 2011 and 31 July 2010 as disclosed in the annual report of Lai Fung for the year ended 31 July 2011 were approximately HK$8,514 million and HK$7,525 million respectively.

The estimated net proceeds of the Open Offer are approximately HK$990 million, and are intended to be used as working capital which may be applied (i) towards financing the existing continuing property development projects of Lai Fung where the amount will depend upon various factors such as market conditions and the cash flow generated from sales of the completed development properties; and (ii) the balance will be utilised for investment in new property projects that may emerge in the future. Lai Fung will apply the net proceeds from the Open Offer as working capital per the Announcement and as at the Latest Practicable Date, Lai Fung had not decided on any plan to earmark any part of the working capital for (i) and/or (ii). Such allocation can only be determined if and when there is a need to increase working capital for existing property projects; and/or should any new property investment opportunities arise and materialise. As at the Latest Practicable Date, Lai Fung has not identified any such investment opportunities.

In the event that the Company is required to take up the Underwritten Shares pursuant to the underwriting obligations of the Company under the Underwriting Agreement such that the Company becomes interested in more than 50% of the total voting rights of Lai Fung upon completion of the Open Offer, Lai Fung will become an indirect subsidiary of the Company and the results of the Lai Fung Group will be consolidated into the Group’s consolidated financial statements.

FINANCIAL EFFECTS OF THE UNDERWRITING IN RELATION TO THE OPEN OFFER

Possible financial effects to the Company in relation to the Open Offer

As at 31 July 2011 and 31 January 2012, the Company held a 40.58% equity interest in Lai Fung which was accounted for as an associate of the Company. The carrying value of the Company’s 40.58% equity interest in Lai Fung was approximately HK$4,466.7 million and was included as interests in associates in the audited consolidated financial statements of the Company as at 31 July 2011 and the share of exchange reserve retained by the Company was approximately HK$193.0 million. The carrying value of the Company’s 40.58% equity interest in Lai Fung was approximately HK$4,633.8 million and was included as interests in associates in the unaudited consolidated financial statements of the Company as at 31 January 2012 and the share of exchange reserve retained by the Company was approximately HK$269.5 million.

– 17 – LETTER FROM THE BOARD

Possible financial effects to the Company in relation to the Open Offer: Lai Fung becomes a subsidiary of the Company

Scenario 1: Assuming only assured allotments pertaining to the Company and CL are taken up, the Company would hold a 60.29% shareholding interest in Lai Fung immediately upon completion of the Open Offer. It is further assumed that the Company would place down approximately 5.34% equity interest in Lai Fung immediately upon completion of the Open Offer to enable Lai Fung to maintain its public float at the required minimum level of 25%. As a result, the Company would end up holding a 54.95% equity interest in Lai Fung upon completion of the Open Offer and after the placing down of 5.34% of the enlarged share capital of Lai Fung.

Pursuant to the Underwriting Agreement, the Company is required to take up any Offer Shares not subscribed for by any Qualifying Shareholder. Assuming no Qualifying Shareholders, other than the Company and CL (who will respectively take up their pro-rata entitlements in accordance with their existing shareholding interests in Lai Fung of 40.58% and 20% respectively), will subscribe for the Offer Shares, the Company shall then be obliged to take up all of the remaining Offer Shares which have not been subscribed for under the Open Offer and in aggregate ends up subscribing for up to a maximum of 80% of the Offer Shares. In this situation, the Company would end up holding up to a maximum of 60.29% equity interest in Lai Fung immediately upon completion of the Open Offer. Pursuant to the Underwriting Agreement, the Company would need to place down 5.34% of its shareholding interest in Lai Fung immediately after completion of the Open Offer to restore the minimum public float. As the terms and conditions for the subsequent placing down is yet to be determined, such subsequent placing down of shares will be treated as a separate transaction in accordance with the Hong Kong Financial Reporting Standards and will not be linked with the business combination in respect of the acquisition of additional shareholding interests in Lai Fung pursuant to the Open Offer. Hong Kong Accounting Standard 27 (Revised)-Consolidated and Separate Financial Statement (“HKAS 27 (Revised)”) requires that a change in the parent’s ownership interests in a subsidiary without a loss of control to be accounted for as an equity transaction. The difference between the fair value of the consideration to be received and the carrying amount in respect of the 5.34% of the enlarged equity interest in Lai Fung in the subsequent placing down will be accounted for as an equity transaction.

On completion of the Open Offer, Lai Fung’s consolidated net assets will be increased by approximately HK$1,006 million (being the estimated gross proceeds before expenses of the Open Offer). After taking into account the subscription by the Company of up to 80% of the Offer Shares, the Company will end up holding up to a maximum of 60.29% equity interest in Lai Fung immediately upon completion of the Open Offer. In accordance with Hong Kong Financial Reporting Standards, the fair value of the Company’s existing 40.58% equity interest in Lai Fung as at the date of completion of the Open Offer (which is considered as the acquisition date) will be calculated with reference to the quoted share price of Lai Fung as at the date of completion of the Open Offer. Such fair value would be included in the calculations of goodwill or gain on a bargain purchase relating to a business combination achieved in stages, whereby the fair value of the original 40.58% equity interest in Lai Fung would become part of the acquisition cost of the 60.29% equity interest in Lai Fung in stages as a subsidiary. Any difference between the fair value of the original 40.58% equity interest in Lai Fung as at the date of completion of the Open Offer and the carrying value of such interest that was equity accounted for in the consolidated financial statements of the Company as at the date of completion of the Open Offer will be recognised in the consolidated income statement of the Company as a gain or loss. In addition, any related exchange reserves retained by the Company under its 40.58% equity interest in Lai Fung will be recycled and released to the consolidated income statement of the Company as a gain or loss.

– 18 – LETTER FROM THE BOARD

The fair value of the Company’s 40.58% equity interest in Lai Fung was estimated to be approximately HK$463.7 million based on its current holding of 3,265,688,037 shares in Lai Fung and the theoretical ex-entitlements price of each Lai Fung Share of HK$0.142 per share calculated with reference to the closing price of HK$0.159 per Lai Fung Share on 14 March 2012, being the latest practicable date for this accounting calculation and the price of the Offer Shares of HK$0.125 per share. Assuming that the theoretical ex-entitlements price calculated based on the closing share price of Lai Fung on 14 March 2012 would be the same as the closing share price of Lai Fung as at the date of completion of the Open Offer, a fair value loss of approximately HK$4,170.1 million will arise as a result of the remeasurement of the previously held equity interest in Lai Fung and be recognised in the consolidated income statement of the Company upon completion of the Open Offer. In addition, an exchange reserve of HK$269.5 million would be recycled and released to the consolidated income statement as a gain on bargain purchase upon completion of the Open Offer. Such recycling and release of exchange reserves would have no overall net impact on the consolidated net assets of the Company.

After taking into account of the following assumptions:

(a) the Company would hold a 60.29% equity interest in Lai Fung immediately upon completion of the Open Offer;

(b) the estimated consideration of approximately HK$804.7 million to be paid by the Company for the subscription of 80% of the Offer Shares;

(c) the pro rata share of the estimated fair value of the net identifiable assets and liabilities of Lai Fung of approximately HK$5,248.5 million pertaining to the 39.71% non-controlling shareholding interests in Lai Fung;

(d) the fair value of the previously held 40.58% equity interests in Lai Fung of approximately HK$463.7 million; and

(e) the estimated fair value of the net identifiable assets and liabilities of Lai Fung as at 31 January 2012 after taking into account the subscription proceeds under the Open Offer of HK$1,006 million of approximately HK$13,215.8 million.

The Company would, upon completion of the Open Offer, recognise in the consolidated income statement an estimated gain on bargain purchase attributable to the Shareholders of approximately HK$6,698.9 million. The overall net gain from the transactions before expenses attributable to the Shareholders expected to be recognised in the consolidated income statement of the Company is estimated to be approximately HK$2,798.3 million. Immediately upon completion of the Open Offer, the overall increase in the consolidated net assets attributable to Shareholders would be HK$2,528.8 million.

Upon completion of the Open Offer and the subsequent placing down of 5.34% of the enlarged equity interest in Lai Fung, Lai Fung will become a 54.95%-owned subsidiary of the Company and the results and net assets of Lai Fung will be consolidated in the consolidated financial statements of the Company.

– 19 – LETTER FROM THE BOARD

The financial effects and the related accounting treatments have been reviewed by the auditors of the Company. For accounting purposes, the Group will continue to share the results of the Lai Fung Group under the equity method of accounting up to the date of the completion of the Open Offer. The results of the Lai Fung Group will include, inter alia, the operating results of the Lai Fung Group and the gain or loss (net of the related tax impact) arising from the change in fair values of the investment properties interests held by the Lai Fung Group. This will affect the actual carrying amount of the Group’s 40.58% share of net assets of the Lai Fung Group as at the date of completion of the Open Offer. Upon completion of the Open Offer, the actual financial effects, for accounting purposes, will need to be recalculated based on the actual number of Offer Shares acquired and the actual consideration paid by the Company for the Offer Shares , the carrying amount of the Company’s 40.58% share of net assets of the Lai Fung Group as at the date of completion of the Open Offer, the fair value of the Company’s previously held 40.58% equity interest in Lai Fung and the actual amount of the non- controlling interests in Lai Fung as at the date of completion of the Open Offer, the fair value of the net identifiable assets and liabilities of the Lai Fung Group as at the date of completion of the Open Offer, and the actual number of the Lai Fung Shares to be placed down and the actual consideration to be received from the share placement. The actual financial effects are expected to be different from the amounts disclosed above.

Possible financial effects to the Company in relation to the Open Offer: Lai Fung remains as an associate of the Company

Scenario 2: Assuming the Company would hold 50.00% equity interest in Lai Fung upon completion of the Open Offer

In the event that the Company’s equity interest in Lai Fung upon completion of the Open Offer is equal to or less than 50.00%, any difference between the consideration paid by the Company for the acquisition of the Offer Shares and the Company’s share of the net fair value of Lai Fung’s identifiable assets and liabilities in respect of the acquisition of the Offer Shares in excess of its pro rata entitlement will be treated as goodwill and will be included in the carrying amount of equity interest in Lai Fung or as a discount on acquisition in the Company’s consolidated financial statements in accordance with its accounting policy. The carrying value of the Company’s equity interest in Lai Fung will be increased by the amount paid by the Company for such number of Offer Shares under the Open Offer and the discount on such acquisition upon completion of the Open Offer. The consolidated net assets of the Company will be increased by the amount of the discount on acquisition of the Offer Shares in excess of its pro rata entitlement.

Assuming the Company holds up to a maximum of 50.00% equity interest in Lai Fung upon completion of the Open Offer and taking into account the estimated consideration of approximately HK$597.8 million to be paid by the Company for the subscription of 59.42% of the Offer Shares, i.e. 40.58% attributable to its existing shareholding interest in Lai Fung and 18.84% attributable to those Offer Shares not subscribed for by existing shareholders and acquired by the Company pursuant to the Underwriting Agreement, the Company’s shareholding interest in Lai Fung will be increased from 40.58% to 50.00% upon completion of the Open Offer. The carrying value of the Company’s original 40.58% equity interest in Lai Fung would be increased by HK$408.2 million to HK$5,042.0 million as a result of its taking up of its pro rata entitlement under the Open Offer. The carrying value for the Company’s equity interest in Lai Fung will be further increased by HK$1,245.2 million as a result of its acquisition of an additional 9.42% equity interest in Lai Fung; this HK$1,245.2 million represents

– 20 – LETTER FROM THE BOARD the estimated share of the net fair value of Lai Fung’s identifiable assets and liabilities in respect of the additional 9.42% equity interest acquired. The total estimated carrying value of the Company’s 50.00% equity interest in Lai Fung upon completion of the Open Offer would be HK$6,287.2 million. The difference between the consideration paid by the Company for the acquisition of an additional 9.42% equity interest in Lai Fung of HK$189.6 million and the share of the net fair value of Lai Fung’s identifiable assets and liabilities before expenses of HK$1,245.2 million in respect of the additional 9.42% equity interest acquired amounted to HK$1,055.6 million and will be treated as a discount on acquisition and credited to the Company’s consolidated income statement in accordance with its accounting policy. The consolidated net assets of the Company attributable to shareholders of the Company would be increased by HK$1,055.6 million upon completion of the Open Offer.

Upon completion of the Open Offer, Lai Fung will continue to be accounted for as an associate of the Company and the results and net assets of the Lai Fung Group will be equity accounted for with the new percentage of shareholding interests in Lai Fung in the consolidated financial statements of the Group.

The financial effects and the related accounting treatments have been reviewed by the auditors of the Company. For accounting purposes, the Group will continue to share the results of the Lai Fung Group under the equity method of accounting up to the date of completion of the Open Offer. The results of the Lai Fung Group will include, inter alia, the operating results of the Lai Fung Group and the gain or loss (net of the related tax impact) arising from the change in fair values of the investment properties interests held by the Lai Fung Group. This will affect the actual carrying amount of the Group’s 40.58% share of net assets of the Lai Fung Group as at the date of completion of the Open Offer. Upon completion of the Open Offer, the actual financial effects, for accounting purposes, will need to be recalculated based on the actual number of Offer Shares acquired and accordingly the actual consideration paid by the Company for acquiring such number of Offer Shares, the carrying amount of the Company’s 40.58% share of net assets of the Lai Fung Group as at the date of completion of the Open Offer, and the actual share of the net fair value of Lai Fung’s identifiable assets and liabilities in respect of the additional equity interests acquired at the date of completion of the Open Offer. The actual financial effects are expected to be different from the amounts disclosed above.

GENERAL

Possible very substantial acquisition

If as a result of taking up its full entitlements under the Open Offer and further Lai Fung Shares pursuant to the terms of the Underwriting Agreement, the Company increases its shareholding interests in Lai Fung to more than 50% of the issued Lai Fung Shares (as enlarged by the Open Offer), Lai Fung will become a subsidiary of the Company. In that case, as the relevant Percentage Ratios under Chapter 14 of the Listing Rules will exceed 100%, the Underwriting Agreement will constitute a very substantial acquisition for the Company under Rule 14.06(5) of the Listing Rules.

– 21 – LETTER FROM THE BOARD

A SGM will be convened to approve, confirm and ratify the Underwriting Agreement and the transactions contemplated thereunder which constitute a very substantial acquisition for the Company in accordance with the Listing Rules.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, none of the Shareholders have any material interest in the Underwriting Agreement. Hence, none of the Shareholders are required to abstain from voting at the SGM for approving, confirming and ratifying the entering into of the Underwriting Agreement and the transactions contemplated thereunder.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, Lai Fung is not a connected person of the Company under Rule 14A.11 of the Listing Rules.

Whitewash Waiver

As at the Latest Practicable Date, the Concert Group was beneficially interested in an aggregate of 3,265,688,037 Lai Fung Shares, representing approximately 40.6% of the total voting rights of Lai Fung. In the event that the Company is required to take up the Underwritten Shares pursuant to the underwriting obligations of the Company under the Underwriting Agreement, the shareholding of the Concert Group in Lai Fung would increase from approximately 40.6% of the existing total issued share capital of Lai Fung to approximately 60.3% of the enlarged total issued share capital of Lai Fung immediately upon completion of the Open Offer.

Hence, the Underwriting Agreement may potentially increase the shareholdings of the Company in Lai Fung by more than 2% in the relevant 12 month-period within the meaning of the creeper provisions of Rule 26.1 of the Takeovers Code, in which case a mandatory offer obligation will arise on the part of the Company and the parties acting in concert with it to make an offer to acquire all the Lai Fung Shares not otherwise owned, controlled or agreed to be acquired by them, unless, among others, the Whitewash Waiver is obtained from the Executive and approved by the Lai Fung Independent Shareholders at the Lai Fung EGM by way of poll.

An application has been made by the Company to the Executive for the Whitewash Waiver, pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code, to waive the obligations of the Company and the parties acting in concert with it to make such a mandatory general offer. The Whitewash Waiver, if granted, will be subject to, among other things, the approval of the Lai Fung Independent Shareholders at the Lai Fung EGM by way of poll. The Company, the Concert Group and any Lai Fung Shareholders who are involved or interested in the Whitewash Waiver will abstain from voting on the proposed resolutions approving the Whitewash Waiver at the Lai Fung EGM. If the Whitewash Waiver is not granted by the Executive or not approved by the Lai Fung Independent Shareholders, the Open Offer will not become unconditional and will not proceed.

– 22 – LETTER FROM THE BOARD

RECOMMENDATION

The Directors believe that the entering into of the Underwriting Agreement is in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of the ordinary resolution approving, confirming and ratifying the entering into of the Underwriting Agreement and the transactions contemplated thereby at the SGM.

ADDITIONAL INFORMATION

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

Yours faithfully, For and on behalf of the Board of eSun Holdings Limited Low Chee Keong Chairman

– 23 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

1. CONSOLIDATED FINANCIAL INFORMATION

The audited consolidated financial statements and the independent auditors’ report of the Group (i) for the seven months ended 31 July 2011 are disclosed in the annual report 2011 of the Company dated 28 October 2011, from pages 46 to 156; (ii) for the year ended 31 December 2010 are disclosed in the annual report 2010 of the Company dated 29 March 2011, from pages 50 to 163; and (iii) for the year ended 31 December 2009 are disclosed in the annual report 2009 of the Company dated 16 April 2010, from pages 46 to 145. The unaudited condensed consolidated financial statements of the Group for the six months ended 31 January 2012 are disclosed in the interim report of the Company for the six months ended 31 January 2012, from pages 5 to 24. All of these financial statements have been published on the respective websites of the Stock Exchange (http://www.hkexnews.hk) and the Company (http://www.esun.com).

2. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 July 2011, being the date to which the latest published audited consolidated financial statements of the Group were made up.

3. MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Set out below are the management discussion and analysis of the Group as extracted from the annual reports of the Company for the seven months ended 31 July 2011, year ended 31 December 2010, year ended 31 December 2009, and the interim report for the six months ended 31 January 2012 (the “Management Discussion and Analysis”), unless stated otherwise. Terms used below shall have the same meanings as those defined in the Management Discussion and Analysis.

(1) For the six months ended 31 January 2012

Overview of Interim Results

For the six months ended 31 January 2012, the Company and its subsidiaries (together the “Group”) recorded a turnover of HK$236.1 million (six months ended 31 January 2011: HK$306.3 million), representing a decrease of 22.9% over the corresponding period last year. The Group recorded a loss attributable to shareholders of HK$58.8 million (six months ended 31 January 2011: profit of HK$683.9 million). The results compared to the same period last year was primarily due to the following non-cash/non-recurring items:

—a negative fair value effect from the change in fair value of the forward contract associated with the contractual commitment for issuance of unsecured and unguaranteed 3-year zero coupon convertible notes by Media Asia Group Holdings Limited (“MAGHL”), which is a 51.09%-owned subsidiary of the Company, on the first anniversary of 9 June 2011 as part of the acquisition of MAGHL by certain subscribers;

– 24 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

— the absence of one-off gain from the shares swap transactions completed on 30 September 2010 (as explained in Note 8 of Notes to Financial Statements, the “Reorganisation”); and

—a decrease in the Group’s share of profits and losses of associates which was mainly attributable to contributions from Lai Fung Holdings Limited (“Lai Fung”).

Interim Dividend

The board of directors of the Company (the “Board”) does not recommend the payment of an interim dividend for the six months ended 31 January 2012 (six months ended 31 January 2011: Nil).

Business Review and Outlook

The Group delivered an encouraging performance during the six months ended 31 January 2012 compared to the same period last year. The reduction in turnover contribution was mainly due to fewer blockbuster titles and major events. However, the number of live show events which the Group organised or participated in increased to 65 in the period under review compared to 55 in the same period last year. Music production and distribution also demonstrated good momentum with the number of albums released almost doubled to 50 from 26. The Group expects this momentum to continue given an underlying schedule of new releases in movies, events and music albums in the second half of 2012.

MAGHL

Acquisition of MAGHL (in which the Company has a 51.09% shareholding interest) strengthened our media and entertainment businesses and provided a dedicated platform for the Group to better leverage our resources to deliver our China strategy in this segment, including film production, music production, distribution and publishing, artiste management, new media (such as internet content licensing), live entertainment and television program production and distribution, and investment in movie theatres. With the approval by MAGHL’s independent shareholders of various continuing connected transactions recently proposed for better alignment of resources between the Group and MAGHL, the Company envisages MAGHL’s financial contribution to the Group to improve going forward and deliver the synergy expected.

Lai Fung

Since completion of the Reorganisation, the Group now owns a 40.58% shareholding interest in Lai Fung and no longer has any shareholding interest in Lai Sun Development Company Limited (“LSD”). Despite the challenging operating environment in the Mainland of China, Lai Fung was able to deliver a good performance for the six months ended 31 January 2012. Net asset value increased steadily and net profit attributable to shareholders was broadly maintained.

– 25 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

In line with Lai Fung’s prudent financial management strategy and given the current challenging operating environment in the property sector of the Mainland of China, Lai Fung has been reviewing different options to shore up working capital. Having considered the credit markets and the interest burden associated with any loan or debt issuance, the directors (excluding those directors who are members of the Independent Board Committee and will form their view after discussion with the independent financial adviser) of Lai Fung believe it would be in the best interests of Lai Fung and its shareholders as a whole to raise long-term equity capital through an Open Offer (as defined in an announcement dated 27 February 2012 and jointly issued by the Company and Lai Fung) which provides all shareholders with an equitable means to participate without suffering from shareholding dilution.

The Open Offer is fully underwritten by the Company with irrevocable undertakings from the Company and CapitaLand LF (Cayman) Holdings Co., Ltd., a substantial shareholder of Lai Fung, to subscribe for their assured entitlements. The Company is confident in the long-term prospects of Lai Fung and the Company’s underwriting of the Open Offer will enable the Company to maintain and enhance the long-term value of its investment in Lai Fung. In addition, depending on the level of subscription of the Open Offer and the underwriting obligations of the Company, the Company’s shareholding interests in Lai Fung may potentially increase to more than 50% of Lai Fung’s issued share capital as enlarged by the Open Offer, in which case Lai Fung will become a subsidiary of the Company.

The Open Offer is expected to complete in June 2012. The Open Offer, subject to approvals from the respective shareholders of the Company and Lai Fung, is expected to raise approximately HK$990 million (net of expenses), which is intended to be used as working capital for applying (i) towards financing the existing property development projects of Lai Fung; and (ii) for identifying and proceeding with property projects that may emerge in the future.

Creative Culture City Project in Hengqin (the “Project”)

Further to the joint announcement on 16 September 2011 whereby the Company and Lai Fung announced the entering into of a Cooperation Agreement with the Hengqin New District Management Committee to jointly invest in and develop the Project in Hengqin New District (in Zhuhai City, Guangdong Province, China), the Group has made steady progress towards finalising the master plan for the Project.

The Project is still in its preliminary stage. The parties will further negotiate the detailed terms of the cooperation and further updates will be made from time to time.

Further expansion through mergers and acquisitions

The Group will continue to look for suitable investment opportunities that have synergies with its existing core businesses in Hong Kong and overseas. In particular, the Group will look for investment opportunities that have good cash yield and potential for long- term capital appreciation.

– 26 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Summary of results for the six months ended

For the six months ended 31 January 2012, the Group recorded a turnover of HK$236.1 million (six months ended 31 January 2011: HK$306.3 million), representing a decrease of 22.9% over the corresponding period last year. Gross profit increased to HK$72.1 million (six months ended 31 January 2011: HK$57.1 million), representing an increase of 26.3%. Reduction in turnover was essentially due to the release of a smaller number of blockbuster titles and the organisation of fewer major events compared to the same period last year. However, the cost of sales associated with the new releases and events were also lower, which led to an improvement in the gross profit of the Group.

Loss from operating activities was HK$228.6 million (six months ended 31 January 2011: HK$178.9 million), representing an increase of 27.8%. This is primarily due to the change in fair value of the forward contract associated with the contractual commitment for the issuance of unsecured and unguaranteed 3-year zero coupon convertible notes (the “Second Completion Convertible Notes”) by Media Asia Group Holdings Limited (“MAGHL”, formerly known as “Rojam Entertainment Holdings Limited”) on the first anniversary of 9 June 2011 to certain subscribers (including the Group) as part of the acquisition of MAGHL by the said subscribers. Excluding the fair value loss from the forward contract, loss from operating activities was HK$116.1 million, representing a loss reduction of 35.1% over the same period last year.

The Group recorded a share of profits of associates of HK$104.0 million (six months ended 31 January 2011: HK$269.7 million). Following the completion of the shares swap transactions on 30 September 2010 (as explained in Note 8 of Notes to Financial Statements, the “Reorganisation”), the Group ceased to hold any shareholding interests in Lai Sun Development Company Limited (“LSD”) and Lai Fung Holdings Limited (“Lai Fung”) has since become an associate of the Company. The Group has been holding approximately 40.58% shareholding interests in Lai Fung since 30 September 2010. Accordingly, the share of profits of associates for the current reporting period was mainly attributable from Lai Fung. The share of profits of associates for the six months ended 31 January 2011 included mainly contributions from LSD of HK$130.5 million for the period from 1 August 2010 to 30 September 2010 (including the cross-holding effects) and contribution from Lai Fung of HK$139.7 million for the period from 1 October 2010 to 31 January 2011.

The Group’s share of profits from jointly-controlled entities was HK$8.4 million, as compared to losses of HK$17.9 million for the six months ended 31 January 2011. As a result of the completion of the disposal of the Macao Studio City (the “MSC”) project in July 2011, there had been no share of losses from the MSC project for the period under review.

For the six months ended 31 January 2011, the Group booked a one-off gain of HK$610.0 million as a result of the completion of the Reorganisation whereby the Company transferred its entire shareholding interests in LSD and acquired 40.58% shareholding interests in Lai Fung.

– 27 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Finance costs during the six months ended 31 January 2012 amounted to HK$11.4 million (six months ended 31 January 2011: HK$3.6 million). The increase was due to the finance cost associated with the unsecured and unguaranteed 3-year zero coupon convertible notes issued by MAGHL in June 2011 (the “First Completion Convertible Notes”).

As a result, the Group recorded a loss attributable to shareholders of HK$58.8 million (six months ended 31 January 2011: profit of HK$683.9 million).

Film production and distribution

Turnover was HK$58.7 million (six months ended 31 January 2011: HK$96.5 million). The reduction in turnover was due to the fact that the contribution from the new releases was lower than the contribution from the blockbuster titles in the prior period. During the period under review, the Group principally completed the photography of two films, with two other films in the production pipeline or under development.

The Group has released 2 films during the six months ended 31 January 2012, namely 1911 Revolution and Life Without Principle as compared to 4 films released in the corresponding period in 2011, namely Frozen, Legend of the Fist: The Return of Chen Zhen, Reign of Assassins and Bruce Lee, My Brother. The Group’s current production pipeline includes 14 films which are expected to be released during the course of 2012 and 2013.

Media and entertainment

Turnover was HK$140.9 million (six months ended 31 January 2011: HK$181.4 million). The reduction in turnover was primarily due to the production of fewer anchor live entertainment events even though there were a higher number of events organised.

Live entertainment

The Group’s live entertainment division produced and participated in 65 (six months ended 31 January 2011: 55) concerts and entertainment events by popular local, Asian and internationally renowned artistes, including Andy Lau, Sammi Cheng, Han Hong (韓紅), Leon Lai, Miriam Yeung, Andy Hui, Denise Ho, Ivana Wong, William So and Ekin Cheng, in Hong Kong, the Mainland of China (“China”), Macau, Malaysia, Canada and the United States of America.

Since 31 January 2012 and up to the end of February 2012, the Group has organised and participated in 19 shows. The Group has scheduled a further 45 shows to take place in the financial year ending 31 July 2012.

– 28 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Music production, distribution and publishing

The Group’s music production and distribution division demonstrated robust momentum and released 50 albums (six months ended 31 January 2011: 26), including titles by Andy Lau, Sammi Cheng, Miriam Yeung, Denise Ho, Andy Hui, Ivana Wong, Ekin Cheng, William So and Eason Chan.

Since 31 January 2012, the Group has scheduled to release another 27 albums in the financial year ending 31 July 2012. The Group is expected to continue to increase its music licensing revenue from the exploitation of the music library through new media distribution.

Television drama, content production and distribution

The Group has made investments, via content directors, producers and artistes from China, to produce renowned television dramas and content. 60 episodes of television dramas were produced for the six months ended 31 January 2012 (six months ended 31 January 2011: 100 episodes). The Group will continue its production and distribution expansion strategy through mergers and acquisitions.

New media

Goyeah.com is a video community launched by the Company in 2009 that provides not only FREE movies, the most popular Japanese animation, but also high quality content for the young generation.

Cinema operation

The Group through its subsidiary, MAGHL, has entered into an agreement with an independent party from China to establish a joint venture in a cinema project for a total investment of approximately RMB40 million. The cinema project will be located in a property currently under development in Sanlitun, Beijing, China. The cinema is expected to commence operations in 2014.

Cosmetic products

The Group has been engaging in the manufacture and sale of cosmetic products including shampoo, shower gel and lotion, etc under the licensed brandname “Crocobaby” for a number of years with sales focused in Southern China. During the period, sales of this segment has increased by 48.2% to HK$29.8 million as a result of continuing efforts put in by the operation team in expanding the key clientele and other distribution networks. Gross profit for the period has improved due to various cost reduction measures implemented during the period. Albeit the improved results achieved in the interim period, the general market environment for this business segment remains competitive. Performance of this segment for the second half year is expected to be lower than the first half due to its seasonality nature and the overall inflationary pressure on various cost factors.

– 29 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Change of financial year end date

The financial year end date of the Company has been changed from 31 December to 31 July with effect from 31 July 2011 in order to align the financial year end date of the Company with its other listed affiliates.

By a letter dated 19 April 2011, The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) granted to the Company: (i) a waiver from its strict compliance with Rule 13.49(6) of the Rules Governing the Listing of Securities on the Stock Exchange (the “Listing Rules”) to publish a preliminary interim results announcement for the six months ended 30 June 2011 and (ii) a waiver from its strict compliance with Rule 13.48(1) of the Listing Rules to publish an interim report in respect of the same period.

Accordingly, the Company published the announcement of its final results for the seven months ended 31 July 2011. As there were no preliminary interim results announcement of the Company for the six months ended 30 June 2011, on 24 February 2012, the Stock Exchange agreed that the Company could calculate and present figures covering the six- month period from 1 August 2010 to 31 January 2011 (unaudited) as comparative figures in this Interim Report and its interim results announcement dated 29 March 2012, in order to present more meaningful information to the Company’s shareholders for comparison by way of using a set of more recent comparative figures.

Liquidity, Financial Resources, Charge on Assets, Gearing and Capital Commitments

As at 31 January 2012, cash and cash equivalents held by the Group amounted to HK$2,197,303,000, of which over 95% was denominated in Hong Kong dollar and United States dollar currencies and 5% was denominated in Renminbi (“RMB”). As Hong Kong dollars are pegged to United States dollars, the Group considers that the corresponding exposure to exchange rate risk is nominal. The conversion of RMB denominated cash and bank balances into foreign currencies and the remittance of such foreign currencies denominated balances out of China are subject to the relevant rules and regulations of foreign exchanges control promulgated by the government authorities concerned.

As at 31 January 2012, there existed unsecured other borrowings due to the late Mr. Lim Por Yen in the principal amount of HK$112,938,000 which is interest-bearing at the HSBC prime rate per annum. The Group’s recorded interest accruals was HK$54,508,000 for the said unsecured other borrowings as at 31 January 2012. On 31 January 2012, at the request of the Group, the executor of Mr. Lim Por Yen’s estate confirmed that no demand for the repayment of the outstanding other borrowings or the related interest would be made within one year from 31 January 2012.

– 30 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

As at 31 July 2011, a subsidiary company MAGHL had First Completion Convertible Notes with an aggregate principal amount of approximately HK$371,387,000, comprising approximately HK$163,120,000 and approximately HK$208,267,000 issued to the Group and other subscribers respectively. On 8 September 2011, the Group converted part of the First Completion Convertible Notes in an aggregate principal amount of HK$25,000,000 at a conversion price of HK$0.016 per share and accordingly, MAGHL has issued a total of 1,562,500,000 new shares to the Group. As at 31 January 2012, MAGHL had unsecured and unguaranteed First Completion Convertible Notes with an aggregate principal amount of approximately HK$346,387,000, comprising approximately HK$138,120,000 and HK$208,267,000 issued to the Group and other subscribers respectively. For accounting purposes, after deducting the equity portion of the convertible notes from the principal amount, the resultant carrying amount of the convertible notes after adjusting for (i) accrued interest and (ii) intra-group elimination was HK$163,770,000 as at 31 January 2012. MAGHL has conditionally agreed to issue to each of the subscribers (including the Group), and each of the subscribers (including the Group) has conditionally agreed to subscribe for, unsecured and unguaranteed 3-year zero coupon convertible notes with an aggregate principal amount of approximately HK$224,874,000, comprising approximately HK$153,175,000 and approximately HK$71,699,000 to be issued to the Group and other subscribers respectively on the first anniversary of 9 June 2011.

As at 31 January 2012, a revolving term loan facility in the amount of HK$60 million was granted by a bank to the Group. The said loan facility is subject to an annual review by the bank for renewal and is secured by a pledge of the Group’s land and buildings with a carrying amount of HK$54.5 million as at 31 January 2012. Such bank loan facility had not been utilised by the Group as at 31 January 2012. As at 31 January 2012, an unsecured revolving loan facility in the amount of HK$20 million was granted by another bank to the Group. The said unsecured loan facility is subject to an annual review by the bank for renewal and such bank loan facility had not been utilised by the Group as at 31 January 2012. During the six months ended 31 January 2012, MAGHL has been granted by a bank with a secured letter of credit facility in the amount of US$5 million (equivalent to approximately HK$39 million) for a film production project. As at 31 January 2012, the available unutilised letter of credit facility to MAGHL was US$1.25 million (equivalent to approximately HK$9,750,000), which was secured by a pledged deposit of US$2.5 million (equivalent to approximately HK$19,500,000) of the MAGHL Group.

The Group’s debt to equity ratio, expressed as a percentage of total borrowings to consolidated net assets attributable to owners of the Company, remained low at approximately 5% as at 31 January 2012. All of the Group’s borrowings are denominated in Hong Kong dollars and the majority of which are floating rate debts. No financial instruments for hedging purposes were employed by the Group during the period under review.

– 31 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

On 27 February 2012, the Company entered into an underwriting agreement with Lai Fung pursuant to which the Company has irrevocably undertaken to Lai Fung to take up (or procure to be taken up ) all the Offer Shares (including the CL Undertaken Shares (as defined in Note 19 of Notes to Financial Statements)) other than those undertaken to be procured for taking up by the Company. The maximum underwriting obligations to the Company is therefore approximately HK$1,006 million. All sums payable by the Company and its wholly-owned subsidiaries in this connection are intended to be funded by the internal resources of the Group.

Contingent Liabilities

Save as disclosed in the “Litigation” section on page 59 in this Appendix I, the Group has no other contingent liabilities as at 31 January 2012.

Employees and Remuneration Policies

As at 31 January 2012, the Group employed a total of around 323 employees. The Group recognises the importance of maintaining a stable staff force for its continued success. Under the Group’s existing policies, employee pay rates are maintained at competitive levels whilst promotion and salary increments are assessed on a performance-related basis. Discretionary bonuses are granted to employees based on their merit and in accordance with industry practice. Other benefits including share option schemes, mandatory provident fund scheme, free hospitalisation insurance plan, subsidised medical care and sponsorship for external education and training programmes are also offered to eligible employees.

(2) For the seven months ended 31 July 2011

Overview of Final Results

In May 2011, the Board of the Company resolved to change the financial year end date of the Company from 31 December to 31 July with effect from 31 July 2011 in order to align the financial year end date of the Company with its other listed affiliates. The change will have an effect of substantially simplifying the reporting procedures, accounts preparation and audit work. As a result of the change of the financial year end date, the current financial report only covers a seven-month period beginning on 1 January 2011 and ending on 31 July 2011.

Following completion of the Group’s acquisition of a controlling equity stake of approximately 51.30% in Media Asia Group Holdings Limited (寰亞傳媒集團有限公司) (“MAGHL”, formerly known as Rojam Entertainment Holdings Limited) on 9 June 2011, the Group has since consolidated the results of the MAGHL.

For the seven months ended 31 July 2011, the Group recorded a turnover of HK$316,285,000 (twelve months ended 31 December 2010: HK$459,020,000). For the current reporting period, there were, on an annualised basis, increases in turnover contributed by film production and distribution and artiste management, and decreases in turnover in entertainment event income, music production and distribution and film library licensing income. The increase in turnover from film production and distribution

– 32 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

was mainly due to the release of 3 films during the current reporting period and the continued contribution from the 8 films released in year 2010. Also, there was a corresponding increase in marketing expenses incurred for the related film production and distribution business.

For the seven months ended 31 July 2011, the Group recorded a loss from operating activities of HK$154,482,000 (twelve months ended 31 December 2010: a loss of HK$269,069,000).

During the period, the Group recognised a fair value gain on a forward contract of HK$6,585,000 which represented the change in fair value of the forward contract associated with the contractual commitment for issuance of unsecured and unguaranteed 3-year zero coupon convertible notes by MAGHL to certain subscribers (including the Group) with an aggregate principal amount of approximately HK$224,874,000, comprising approximately HK$153,175,000 and approximately HK$71,699,000 to be issued to the Group and other subscribers respectively on the first anniversary of 9 June 2011.

For the seven months ended 31 July 2011, the Group recorded a share of profits of associates of HK$35,940,000 (twelve months ended 31 December 2010: HK$541,685,000). Following the completion of the Group Reorganisation (as explained in the Chairman’s Statement of the Company’s Annual Report 2010) on 30 September 2010, the Group ceased to hold any shareholding interests in Lai Sun Development Company Limited (“LSD”) and Lai Fung Holdings Limited (“Lai Fung”) has since become an associate of the Company. The Group holds approximately 40.58% shareholding interests in Lai Fung since 30 September 2010. Accordingly, the share of profits of associates for the current reporting period was mainly attributable to Lai Fung. The share of profits of associates for the twelve months ended 31 December 2010 included mainly contributions from LSD of HK$402,681,000 for the period up to 30 September 2010 (including the cross-shareholding effects) and contribution from Lai Fung of HK$139,660,000 for the period from 1 October 2010 to 31 December 2010.

For the seven months ended 31 July 2011, the Group’s share of losses from jointly- controlled entities was HK$9,487,000, as compared to a reported loss of HK$31,353,000 for the twelve months ended 31 December 2010. The decrease in share of losses from jointly-controlled entities was mainly attributable to the decrease in losses of the project of Macao Studio City (the “MSC”).

Finance costs during the period ended 31 July 2011 was HK$6,052,000 (twelve months ended 31 December 2010: HK$7,226,000).

As a result of the completion of the disposal of the MSC project in July 2011, the Group recorded a one-off net gain of HK$652,408,000 for the current reporting period. For the twelve months ended 31 December 2010, the Group booked a one-off gain of HK$610,007,000 as a result of the completion of the Group Reorganisation where the Company transferred its entire shareholding interests in LSD and acquired the 40.58% shareholding interests in Lai Fung.

– 33 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Due to the reasons stated above, the Group recorded a consolidated profit for the seven months ended 31 July 2011 (before non-controlling interests) of HK$518,215,000 (twelve months ended 31 December 2010: HK$842,777,000) and a consolidated profit attributable to owners of the Company for the period of HK$524,538,000 (twelve months ended 31 December 2010: HK$853,278,000).

Shareholders’ equity as at 31 July 2011 amounted to HK$6,837,486,000, as compared to HK$6,198,759,000 as at 31 December 2010. Net asset value per share as at 31 July 2011 was HK$5.5, as compared to HK$5.0 as at 31 December 2010.

Dividend

The Board does not recommend the payment of a final dividend for the financial period from 1 January 2011 to 31 July 2011 (Year ended 31 December 2010: Nil).

Business Review

Resolution of MSC disputes and disposal of the Group’s interests in the MSC project

The MSC project had been intended as an integrated leisure resort project combining theatre/concert venues, live entertainment facilities, a destination retail complex, Las Vegas-style gaming facilities and world-class hotels. It had been developed by a joint venture, in which the Company had, but now no longer has, an interest as set out below.

Cyber One Agents Limited (“Cyber One”) had been the jointly-controlled entity of the Group responsible for the development of the MSC project. East Asia Satellite Television (Holdings) Limited (“EAST (Holdings)”) — an indirect majority-owned subsidiary of the Company — had a 60% shareholding interest in Cyber One. New Cotai, LLC (“New Cotai”) had been the US joint venture partner holding a 40% shareholding interest in Cyber One.

Since 2009, there had been disputes and ongoing litigation between EAST (Holdings) and New Cotai in respect of the development and construction of the MSC project, which effectively deadlocked the development and construction.

In order to resolve this deadlock, amongst other reasons, on 15 June 2011, EAST (Holdings), the Company and Melco Crown Entertainment Limited (“MCE”) agreed amongst other things, that EAST (Holdings) would sell its 60% shareholding in Cyber One to MCE. During the period ended 31 July 2011, EAST (Holdings) had completed the disposal of its shares in Cyber One to MCE, such that the Company has ceased to hold any interest in Cyber One and the MSC project.

In order to achieve this, the Group acquired the 33.33% shareholding interests of CapitaLand Integrated Resorts Pte. Ltd. (“CIR”) in EAST (Holdings) at a consideration of HK$658,756,800 in accordance with a Waiver and Termination Agreement dated 15 June 2011, which also provided for the termination of the Put Option (as defined in Note 36 to the financial statements of this Annual Report) to CIR. The relevant transactions described above were completed on 27 July 2011.

– 34 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The disputes and litigation between EAST (Holdings) and New Cotai have also been fully and finally settled on a no-admission of liability basis. Details of the litigation and settlement are set out in Note 49 to the financial statements of this Annual Report.

Joint investment in and development of the Creative Culture City Project in Hengqin (“the Project”)

On 16 September 2011, the Company and Lai Fung entered into a Cooperation Agreement with the Hengqin New District Management Committee (the “Cooperation Agreement”), pursuant to which the Company and Lai Fung shall jointly invest in and develop the Project in the Hengqin Cultural and Creative Zone, Zhuhai City, Guangdong Province, China. In addition, the Company and Lai Fung entered into a strategic banking cooperation framework agreement with the China Construction Bank Corporation Guangdong Branch (“CCB”) on 15 September 2011 and a banking cooperation agreement with Industrial Bank Co., Ltd. Guangzhou Branch (“Industrial Bank”) on 25 July 2011 (collectively the “Banking Agreements”) whereby both CCB and Industrial Bank have agreed to provide indicative credit facilities to support the development of the Project.

The cooperation under the Cooperation Agreement and the Banking Agreements is at a preliminary stage. The parties will further negotiate on the detailed terms of the cooperation and further updates will be made from time to time.

Acquisition of MAGHL

On 9 June 2011, the Company, Yunfeng Fund, L.P. and the SINA Corporation acquired control of MAGHL for the consideration of HK$490 million. The company name of MAGHL has been changed from Rojam Entertainment Holdings Limited with effect from 23 August 2011 and on its re-launch the re-branded group will expand into the Mainland of China’s media and entertainment markets aiming to bring to the Mainland audience with ever-wider, more exuberant choice in entertainment experiences.

Leveraging on the Company’s core resources in performance, media and entertainment business as well as programme management, and the strong business network and established strategic partnership of Yunfeng Fund. L.P., as well as the resource advantages of other leading local internet companies in new media, MAGHL will actively expand its presence and business in the media and entertainment markets of the Mainland of China. Its business scope includes film production, concert and music performance, artiste management, television dramas production and distribution, investment in movie theatres, and new media business.

– 35 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Media and entertainment

Film production and distribution

For the period ended 31 July 2011, the Group through its film production and distribution units, completed the principal photography on 3 films, with 6 other films in the production pipeline or under development and also committed equity investment in a film with a leading production company in Europe.

Due to the change in the financial year end date of the Group from 31 December to 31 July, the Group has released 3 films during the 7-month period, namely Don’t Go Breaking My Heart, Punished and A Beautiful Life as compared to 8 films released in 2010, namely Love In A Puff, Fire Of Conscience, Once A Gangster, Aftershock, Frozen, Legend of the Fist: The Return of Chen Zhen, Reign of Assassins and Bruce Lee, My Brother.

Live entertainment

During the period, the Group’s live entertainment division produced and participated in 58 (year ended 31 December 2010: 141) concerts and entertainment events by popular local, Asian and internationally renowned artistes, including Andy Lau, Sammi Cheng, Vivian Chow, Miriam Yeung, Andy Hui, Jim Chim, Jolin Tsai, Richie Jen, Emil Chau, Ekin Cheng, Eric Moo and Samuel Tai, Fish Leong, Lo Ta Yu, Elva Hsiao and Mayday, in Hong Kong, the Mainland of China, Macau, Malaysia and the United States of America.

Music production, distribution and publishing

During the period, the Group’s music production and distribution division released 32 albums (year ended 31 December 2010: 45), including titles by Andy Lau, Sammi Cheng, Miriam Yeung, Denise Ho, Andy Hui, Ivana Wong, Ekin Cheng, William So, Eason Chan, Edison Chen and Ellen Lo.

The Group would increase its music licensing revenue from the exploitation of the music library through new media distribution. The performance of the music publishing business depends on, among other things, the capability of the new media distributor(s), the available channels for new media/digital distribution and the receptiveness of the public (in general) to use such distribution method for music.

Television drama, content production and distribution

During the period, the Group has made investments, via content directors, producers and artistes from the Mainland of China, to produce renowned television dramas and content. 30 episodes of television dramas were produced for the period ended 31 July 2011. In addition, the Group is gradually expanding its production and distribution network for such operation through merger and acquisitions.

– 36 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

New media

Goyeah.com is a video community launched by the Company in 2009 and it provides not only FREE movies, the most popular Japanese animation, but also high quality content for the young generation.

Cinema operation

The Group through its subsidiary, MAGHL, has entered into an agreement with an independent party of the Mainland of China to establish a joint venture for a total investment of approximately RMB40 million in a cinema project which will be located in a property currently under development in Sanlitun, Beijing, China. The cinema is expected to commence operation in 2014.

Outlook

Growing the Group’s media and entertainment businesses

By its acquisition of MAGHL, the Company has signaled its intention to further strengthen its media and entertainment businesses. Such a platform allows the Company to exploit the synergies between the Company’s media and entertainment businesses with that of MAGHL to enable the Group to grow and expand in various key areas (as described above), including music production, distribution and publishing, artiste management, new media (such as internet content licensing), live entertainment and television program production and distribution.

Joint investment in and development of the Creative Culture City Project in Hengqin

The Creative Culture City project will be the main focus of the Group in the coming years. The investment horizon will include further negotiations with the Hengqin New District Management Committee in relation to the further details of the co-operation and the commencement of agreed works. It should also be noted that Lai Fung, which is an associate of the Group, will be participating in the Project as well. The Group is committed to the success of this Project.

Further expansion through mergers and acquisitions

– 37 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Liquidity, Financial Resources, Charge on Assets, Gearing and Capital Commitments

As at 31 July 2011, cash and cash equivalents held by the Group amounted to HK$2,311,490,000, of which over 97% was denominated in Hong Kong dollar and United States dollar currencies. As Hong Kong dollars are pegged to United States dollars, the Group considers that the corresponding exposure to exchange rate risk is nominal.

As at 31 July 2011, there existed unsecured other borrowings due to the late Mr. Lim Por Yen in the principal amount of HK$112,938,000 which is interest-bearing at the HSBC prime rate per annum. The Group recorded interest accruals of HK$51,663,000 for the said unsecured other borrowings as at 31 July 2011. On 31 July 2011, at the request of the Group, the executor of Mr. Lim Por Yen’s estate confirmed that no demand for the repayment of the outstanding other borrowings or the related interest would be made within one year from 31 July 2011. As at 31 July 2011, the Group had secured bank borrowings in the Mainland of China of RMB10,000,000 (or HK$12,092,000) falling due within one year, which was secured by pledged deposits of HK$12,960,000. The secured bank borrowings bear interest with reference to the People’s Bank of China Base Interest Rate. The Group recorded interest accruals of HK$137,000 for the secured bank borrowings as at 31 July 2011. Also, the Group had finance lease payables of HK$125,000 falling due within one year, HK$119,000 falling due within the second year and HK$128,000 falling due within the third to fifth years, as at 31 July 2011.

As at 31 July 2011, a subsidiary company MAGHL had unsecured and unguaranteed 3-year zero coupon convertible notes with an aggregate principal amount of approximately HK$371,387,000, comprising approximately HK$163,120,000 and HK$208,267,000 issued to the Group and other subscribers, respectively on 9 June 2011. For accounting purposes after deducting the equity portion of the convertible notes from the principal amount, the resultant carrying amount of the convertible notes after adjusting for (i) accrued interest and (ii) intra-group elimination was HK$155,422,000 as at 31 July 2011. MAGHL has conditionally agreed to issue to each of the subscribers (including the Group) and each of the subscribers (including the Group) has conditionally agreed to subscribe for unsecured and unguaranteed 3-year zero coupon convertible notes with an aggregate principal amount of approximately HK$224,874,000, comprising approximately HK$153,175,000 and approximately HK$71,699,000 to be issued to the Group and other subscribers respectively on the first anniversary of 9 June 2011.

As at 31 July 2011, a revolving term loan facility in the amount of HK$60 million was granted by a bank to the Group. The said loan facility is subject to an annual review and is secured by a pledge of the Group’s land and buildings with a carrying amount of HK$55,486,000 as at 31 July 2011. Such bank loan facility had not been utilised by the Group as at 31 July 2011. As at 31 July 2011, an unsecured revolving loan facility in the amount of HK$20 million was granted by another bank to the Group. The said unsecured loan facility is subject to an annual review and such bank loan facility had not been utilised by the Group as at 31 July 2011.

– 38 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The Group’s debt to equity ratio, expressed as a percentage of total borrowings to consolidated net assets attributable to owners of the Company, remained low at approximately 5% as at 31 July 2011. All of the Group’s borrowings, except for the secured bank borrowings of HK$12,229,000 which are denominated in Renminbi, are denominated in Hong Kong dollars and the majority of which are floating rate debts. No financial instruments for hedging purposes were employed by the Group during the period under review.

Contingent Liabilities

Save as disclosed in the “Litigation” section on pages 59 to 61 in this Appendix I, the Group has no other contingent liabilities as at 31 July 2011.

Employees and Remuneration Policies

As at 31 July 2011, the Group employed a total of around 325 employees. The Group recognises the importance of maintaining a stable staff force in its continued success. Under the Group’s existing policies, employee pay rates are maintained at competitive levels, whilst promotion and salary increments are assessed on a performance-related basis. Discretionary bonuses are granted to employees based on their merit and in accordance with industry practice. Other benefits including share option schemes, mandatory provident fund scheme, free hospitalisation insurance plan, subsidised medical care and sponsorship for external education and training programmes are also offered to eligible employees.

(3) For the year ended 31 December 2010

Reorganisation

On 30 September 2010, the Company and Lai Sun Garment (International) Limited (“LSG”) completed a reorganisation (“Reorganisation”). Pursuant to the Reorganisation, the Company transferred its entire shareholding interest in Lai Sun Development Company Limited (“LSD”) (approximately 36.72% of the issued share capital of LSD) to LSG in exchange for LSG’s entire shareholding interest in Lai Fung Holdings Limited (“Lai Fung”) (approximately 40.58% of the issued share capital of Lai Fung). In order to account for the difference between the agreed value of the LSD shares and the Lai Fung shares being swapped, the Company further agreed to pay to LSG an additional cash of approximately HK$178.4 million, out of which HK$100 million was paid upon completion of the Reorganisation and the remaining approximately HK$78.4 million to be paid, without interest, six months after the completion of the Reorganisation.

– 39 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Immediately following the completion of the Reorganisation, the group structure involving LSG, LSD, the Company and Lai Fung has become as follows:

LSG

47.97%

LSD

36.08%

Company

40.58%

Lai Fung

As a result of the Reorganisation, the cross-shareholding structure between the Company and LSD that existed since 2004 was dismantled. The Reorganisation simplified the ownership structure of the Company and LSD, and eliminated the circular effect of the accounting treatment of the cross-holding. By dismantling this structure, the magnifying effect of the cross-held shareholding interests has been eliminated upon completion of the Reorganisation. More importantly, the directors of the Company (“Directors”) believe that the simplified shareholding structure provides greater clarity to shareholders and the market with regard to the core business of each of the companies.

The Company has become the controlling shareholder of Lai Fung, which has a well- established portfolio of property interests in the Mainland of China. The Company thus shares the results of Lai Fung as an associate (as that expression is used in the context of the Hong Kong Financial Reporting Standards) of the Company.

– 40 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Overview of Annual Results

For the year ended 31 December 2010, the Group recorded a turnover of HK$459,020,000 (2009: HK$359,455,000), representing an increase of approximately 27.7% from the previous year. For the year 2010, except for film production and distribution, there were increases in revenue across most of our media and entertainment business operations, namely entertainment event income, music production and distribution and film library licensing income. The increase in entertainment event income over the previous year was mainly due to the Group organising larger scale concerts in the year as compared to the smaller events in the previous year. The increase in revenue for music production and distribution was due to higher album sales in 2010. The decrease in revenue for film production and distribution was largely due to the comparatively lower revenue from the films released in 2010.

For the year ended 31 December 2010, the Group recorded a loss from operating activities of HK$269,069,000 (2009: a loss of HK$422,013,000). During the year, the increase in revenue of certain business operations was accompanied by corresponding increases in related cost/expenditure. The Group recognised a fair value loss on a put option of HK$25,356,000 (2009: HK$118,328,000) in 2010. Further details of the put option are set out in below Business Review under the heading of “EAST (Holdings)’s put option”.

For the year ended 31 December 2010, the Group recorded a share of profits of associates of HK$541,685,000 (2009: HK$521,276,000). Prior to the Reorganisation, the Group held approximately 36.72% shareholding interest in LSD, which in turn held approximately 36.08% shareholding interest in the Group. Following the Reorganisation, the Group holds approximately 40.58% shareholding interest in Lai Fung while the Group ceased to hold any shareholding interest in LSD. Following the completion of the Reorganisation on 30 September 2010, LSD ceased to be an associate of the Company and Lai Fung has become an associate of the Company. Accordingly, the share of profits of associates during the year was mainly attributable to (i) LSD for the period up to 30 September 2010; and (ii) Lai Fung for the period since 1 October 2010. For the year under review, LSD and Lai Fung contributed HK$402,681,000 (including cross- shareholding effects) and HK$139,660,000 to the Group’s share of profits of associates, respectively.

For the year, the Group’s share of the losses of jointly-controlled entities was HK$31,353,000, as compared to a reported loss of HK$43,313,000 for the previous year. The decrease in share of losses of jointly-controlled entities was attributable to the decrease in losses of the MSC project.

Finance costs during the year increased to HK$7,226,000 (2009: HK$6,758,000). Further, as a result of the completion of the Reorganisation, the Group booked a one-off gain of HK$610,007,000. The Group recorded a profit for the year (before non-controlling interests) of HK$842,777,000 (2009: HK$49,038,000). Due to the reasons stated above, the Group recorded a consolidated profit attributable to owners of the parent for the year of HK$853,278,000 (2009: HK$68,553,000).

– 41 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Shareholders’ equity as at 31 December 2010 amounted to HK$6,198,759,000, as compared to HK$5,490,662,000 as at 31 December 2009. Net asset value per share as at 31 December 2010 was HK$5.00, as compared to HK$4.43 as at 31 December 2009.

Business Review

Macao Studio City

MSC is an integrated leisure resort project combining theatre/concert venues, live entertainment facilities, a destination retail complex, Las Vegas-style gaming facilities and world-class hotels. The site of the project is strategically located next to the Lotus Bridge immigration checkpoint, linking the complex directly to Zhuhai’s Hengqin Island.

Project progress

There is no progress on the MSC project over the year, essentially because of the continuing litigations between joint venture partners.

Cyber One Agents Limited (“Cyber One”) is the jointly-controlled joint venture company responsible for the MSC project. East Asia Satellite Television (Holdings) Limited (“EAST (Holdings)”) is the holding company of a 60% shareholding interest in Cyber One, of which 66.7% is held indirectly by the Company and 33.3% is held by CapitaLand Integrated Resorts Pte. Ltd. (“CapitaLand”), a wholly-owned subsidiary of CapitaLand Limited. New Cotai, LLC (“New Cotai”) is the US joint venture partner holding a 40% shareholding interest in Cyber One.

Company CapitaLand

66.7% 33.3%

EAST (Holdings) New Cotai

60% 40%

Cyber One

100%

MSC project

– 42 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Cyber One has yet to receive approval from the Macau government in relation to its application for a land grant modification on land use and the increase of the developable gross floor area of the site from the original gazetted area to approximately 6,000,000 square feet. Since 2009, there have been disputes and ongoing litigations between EAST (Holdings) and New Cotai on the land grant modification and development of the project. Details of the litigations are set out in Note 46 to the consolidated financial statements of the Group for the year ended 31 December 2010.

The outcome of all these legal proceedings remains inherently uncertain. However, the Directors believe that the litigation is necessary in order to protect the interest of all shareholders and, ultimately, to preserve the potential of the MSC project. Further, in the event of prolonged delays to the recommencement of the project, it is uncertain as to whether and how the Macau government would exercise its rights, including but not limited to its rights to re-possess the plot of land.

Cyber One has not appointed a general contractor and has not, to date, progressed the building works beyond foundations for the superstructure. Cyber One presently has only a minimal staff base so as to contain overheads and expenses.

Financing

To date, the parties have contributed a total of US$200 million to serve as working capital on the project (the Company’s attributable share being US$80 million). However, Cyber One has yet to secure the necessary project finance for the development. The Directors believe that this will be more readily achievable once consensus is reached between the joint venture partners or the current differences are resolved.

EAST (Holdings)’s put option

Although the Company and CapitaLand have been in consistent agreement on the development of the MSC, it should be noted that in the event that the land grant modification for the first phase of the project has not been published by the Macau government and the occupation permit for the MSC (in effect, signifying completion of the first phase of the project) is not issued solely due to the failure of the Macau government to publish in its gazette the land grant modification for the first phase of the project, in each case, within 54 months of completion of CapitaLand’s investment (i.e. by mid-September 2011), then CapitaLand would, subject to the terms and conditions of the sale and purchase agreement, have an option to put back its holding of shares in EAST (Holdings) to the Company. The consideration payable for such shares would be equal to the purchase price paid by CapitaLand for the shares (being approximately HK$659 million to date) and any further sums invested by it (being US$40 million to date, as its project funding contribution) net of any returns or dividends received by CapitaLand. Were the put option to become exercisable and be exercised and completed, the Company’s attributable interest in the MSC project would increase to 60%.

– 43 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Media and entertainment

Film production and distribution — Media Asia Entertainment Group Limited (“MAEG”)

During the year, the Group through its film production and distribution unit, MAEG, completed the principal photography on 6 films, with 6 films still in the production pipeline or under development. There were 8 films released in 2010, namely Love In A Puff in March, Fire Of Conscience in April, Once A Gangster in May, Aftershock in July, Frozen and Legend of the Fist: The Return of Chen Zhen in September, Reign of Assassins in October and Bruce Lee, My Brother in November as compared to 6 films released in 2009, namely Look For A Star, The Sniper, City Of Life And Death, Vengeance, Accident and The Founding of a Republic.

Other than that, MAEG got 24 nominations in the 30th Hong Kong Film Awards, including the nominations for Best Picture, Best Director, Best Screenplay, Best Actor and Best Actress. The film Reign of Assassins has 11 nominations while Legend of the Fist: The Return of Chen Zhen and Bruce Lee, My Brother has 4 nominations respectively.

Live entertainment

During the year, the Group’s live entertainment division produced and participated in 90 (2009: 97) concerts and entertainment events by popular local, Asian and internationally renowned artistes, including Andy Lau, Sammi Cheng, Miriam Yeung, Ivana Wong, Chet Lam, Eman Lam, Janice M. Vidal, Jan Lamb, Captain Lu, Yoga Lin, Show Lo, Big Four, Fama and Super Band, in Hong Kong, the Mainland of China, Macau, Taiwan, Malaysia, Singapore, Australia and the United States of America.

Music production, distribution and publishing

During the year, the Group’s music production and distribution unit released 45 albums (2009: 52), including titles by Andy Lau, Sammi Cheng, Leon Lai, Miriam Yeung, Denise Ho, Ivana Wong, Edison Chen, Janice M. Vidal, Chet Lam, At 17, Bosco Wong, Big Four and Fama.

The Group has expanded its music library through acquisitions in 2007 and 2008 and has since achieved a positive contribution from the exploitation of the music library through new media distribution. However, the pace of development and performance of the music publishing business has lagged behind the budgeted plan for 2010. The performance of the music publishing business depends on, among other things, the capability of the new media distributor(s), the available channels for new media/digital distribution and the receptiveness of the public (in general) to use such distribution method for music.

– 44 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Television drama, content production and distribution

In 2010, the Group has made investments, via content directors, producers and artistes from the Mainland of China, to produce renowned television dramas and content. 160 episodes of television dramas were produced in 2010. In addition, the Group is gradually expanding its distribution network for such operation. However, during the year, the hours of production being made and released were limited due to various constraints, namely the highly competitive market for prime time spots on television channels and other mediums, and the mis-match of capital to be recouped and re-invested which has resulted in dampening the growth rate of this business.

New media

Goyeah.com is a new media platform of the Group launched in 2009 and it is the first video sharing community and social networking website in Hong Kong.

In 2010, the Group launched its own online games. Featuring celebrities including Huang Xiao Ming, Shuqi, Angelababy, Fama, Master Szeto, South China Football Team and Jessica C, the website has successfully drawn greater support among netizens as well as publicity attention. Furthermore, by licensing in movies and Japanese animations from different local and overseas sources, content of the website has been enriched, thus enabling it to better cater to the interests and preferences of internet users from a wider spectrum. In 2010, the number of registered members of the website is around 85,000.

LSD

Prior to the Reorganisation, the Group held approximately 36.72% shareholding interest in LSD, which in turn held approximately 36.08% shareholding interest in the Group. Following the completion of the Reorganisation on 30 September 2010, the Group ceased to hold any shareholding interest in LSD. For the year under review, LSD contributed HK$402,681,000 to the Group’s share of profits of associates, including cross- shareholding effects. For the full year of 2009, LSD contributed HK$522,104,000 to the Group’s share of profits of associates, including cross-shareholding effects.

Lai Fung

Following the completion of the Reorganisation on 30 September 2010, the Group held approximately 40.58% shareholding interest in Lai Fung, which has become an associate of the Group. Upon Lai Fung becoming an associate of the Group, Lai Fung’s revenue sources mainly comprised (i) rental income from investment properties; (ii) revenue and profits from the sale of its property units at Guangzhou West Point; and (iii) a fair value gain on its investment properties portfolio.

– 45 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Outlook

MSC

Management expects that MSC will eventually become one of the region’s major entertainment complexes and will serve as an important platform for the Group to expand and monetise its entertainment and media expertise. The Group remains confident about the future of the project, with or without the participation of its US project partners.

Media and entertainment

Film production and distribution

MAEG will continue to invest or produce more quality Chinese-language films that appeal to local and international markets.

The Group controls a library of around 180 Chinese films. MAEG will continue the distribution of the films to major international territories, including Australia, France, Germany, Indonesia, Japan, Korea, Malaysia, Russia, Spain, South America, Singapore, Taiwan, Thailand, United Kingdom and Vietnam.

Live entertainment

For 2011, the Group anticipates the production of around 12 title concerts and entertainment events, all of which will involve popular local and Asian artistes. The Group will also participate in the production of world concert tours involving around 66 shows in total. The Group remains keen on expanding its presence in both promotion and organisation of live entertainment events in Hong Kong and worldwide.

Music production, distribution and publishing

Owing to the continuing challenge of dwindling physical music sales, as well as with the change of consumer’s pattern from physical to digital music sales, the Group will continue to explore new media channels that enable the Group to achieve a more efficient distribution of music products. The Group anticipates that the new media distribution channels will increase in popularity over time and serve to increase music sales amid the population of netizens who now opts to consume music products digitally.

Television drama, content production and distribution

Profit from television drama production and distribution has suffered a downturn due to unstable performance of certain drama titles. However, the Group continues to look for business opportunities in new titles with strong ratings and good profit. The Group also considers increasing the investment ratio in certain television dramas so as to enhance the distribution income in 2011.

– 46 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

New media

Goyeah.com is a new media platform of the Group aimed at widening the dissemination of information regarding the Group’s media and entertainment businesses. The platform was successfully granted an ICP license by the Beijing Ministry of Industry and Information in September 2010. This is a good starting point for the Group to expand its new media business to the Mainland of China. In addition to the Group’s strong support from various media and entertainment industries, the lately introduced e-commerce service is expected to draw greater popularity and support among netizens of the GoYeah online community as well as business opportunities.

Furthermore, the Group started to produce and run its own programs in September 2010 which received very good feedback from young netizens. One of the programs, entitled “50 bucks with change,” was covered and highlighted by CNN. The Group will increase the number of its own production in 2011.

Artiste management

The Group has been able to attract and retain popular celebrities and potential talents in Hong Kong under its artiste management group. The artiste management group will continuously provide a fresh supply of talent as well as new entertainment projects in different parts of the region.

Lai Fung

China’s property market will continue to be subject to policy risks. To consolidate and enhance their positive impacts of the austerity measures and effectively manage inflation, the central and local government in China is expected to fine-tune existing austerity measures or introduce new policies. Accordingly, the unfavourable impact of the austerity policies will lead to short-term volatility in China’s property market.

The Group believes that the consumption power and housing demand in the Mainland of China will remain robust in the medium and long term. Overall, Lai Fung believes that the government policies aimed at the property market has been consistent, which is to stabilise property prices and curb speculative demand in order to achieve steady development of the market.

Lai Fung’s net gearing level was low by industry standards. Lai Fung will be able to implement its business plan and respond to the challenges of the ever-changing policies. It will continue the construction schedules of its existing development projects to fuel growth in turnover and profits for future financial years. Lai Fung is now awaiting an improvement in market sentiment prior to launching further pre-sale of properties in the pipeline. Furthermore, as encouraged by its success in revitalising the Shanghai Hong Kong Plaza property, Lai Fung will continue to grow its recurrent income base through

– 47 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

an upgrade programs aimed at improving existing rental properties and the addition of new venues through completion of commercial property portions of new development projects. While Lai Fung expects that its rental income will increase steadily in the next few years, it will closely monitor the market and cautiously evaluate new investment opportunities.

Liquidity, Financial Resources, Charge on Assets, Gearing and Capital Commitments

As at 31 December 2010, cash and cash equivalents held by the Group amounted to HK$1,089,144,000, of which over 89% and 5% were denominated in Hong Kong dollar and United States dollar currencies respectively. The Group also invested in bond investments with investment grade rating and short-term securities investments. As at 31 December 2010, the carrying amount of such bond investments and securities investments held by the Group amounted to HK$51,561,000 and HK$2,083,000, respectively. The bond investments of the Group as at 31 December 2010 were denominated in United States dollars. As Hong Kong dollars are pegged to United States dollars, the Group considers that the corresponding exposure to exchange rate risk is nominal.

As at 31 December 2010, there existed unsecured other borrowings due to the late Mr. Lim Por Yen in the principal amount of HK$112,938,000 which is interest-bearing at the HSBC prime rate per annum. The Group recorded interest accruals of HK$48,383,000 for the said unsecured other borrowings as at 31 December 2010. On 31 December 2010, at the request of the Group, the executor of Mr. Lim Por Yen’s estate confirmed that no demand for the repayment of the outstanding other borrowings or the related interest would be made within one year from 31 December 2010. As at 31 December 2010, the Group had secured bank borrowings in the Mainland of China of RMB10,000,000 (or HK$11,752,000) falling due within one year, which was secured by pledged deposits of HK$12,960,000. The secured bank borrowings bear interest with reference to the People’s Bank of China Base Interest Rate. The Group recorded interest accruals of HK$68,000 for the secured bank borrowings as at 31 December 2010. Also, the Group had finance lease payables of HK$130,000 falling due within one year, HK$120,000 falling due within the second year and HK$194,000 falling due within the third to fifth years, as at 31 December 2010. As at 31 December 2010, a revolving term loan facility in the amount of HK$60 million was granted by a bank to the Group. The said loan facility is subject to an annual review and is secured by a pledge of the Group’s land and buildings with a carrying amount of HK$56,615,000 as at 31 December 2010. Such bank loan facility had not been utilised by the Group as at 31 December 2010.

As detailed in Note 36 to the financial statements, the Group has an outstanding put option granted to CapitaLand in connection with the disposal of its partial interests in the MSC project in 2007. The Put Option is only exercisable under certain discrete circumstances by 11 September 2011. Were the Put Option to become exercisable and be exercised, the total amount payable by the Group based on the conditions prevailing as at 31 December 2010 would be approximately HK$971 million. In preparation for meeting the funding requirement arising from such, the Group has obtained an unsecured term loan facility of HK$500 million from a finance company for the stated purpose of part financing any possible payment obligations of the Group under the Put Option.

– 48 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The Group’s debt to equity ratio, expressed as a percentage of total borrowings to consolidated net assets attributable to owners of the parent, remained low at approximately 3% as at 31 December 2010. All of the Group’s borrowings, except for the secured bank borrowings of HK$11,820,000 which are denominated in Renminbi, are denominated in Hong Kong dollars and the majority of which are floating rate debts. No financial instruments for hedging purposes were employed by the Group during the year under review.

Contingent Liabilities

Save as disclosed in the “Litigation” section on pages 61 to 65 in this Appendix I, the Group has no other contingent liabilities as at 31 December 2010.

Employees and Remuneration Policies

The Group employed a total of approximately 270 employees as at 31 December 2010. Pay rates for employees are maintained at competitive levels and salary and bonuses are rewarded on a performance-related basis. Other staff benefits include free hospitalisation insurance plan, subsidised medical care and subsidies for external educational and training programmes. The Company also adopted a share option scheme for its Directors and employees on 23 December 2005.

(4) For the year ended 31 December 2009

Overview of Results

For the year ended 31 December 2009, the Group recorded a turnover of HK$359,455,000 (2008: HK$270,131,000), representing an increase of approximately 33% from the previous year. For the year 2009, there were increases in revenue with respect to certain business operations (namely film production and distribution, music production and distribution and live entertainment), but off-set by a reduction in revenue from other business operations (namely sale of products, artiste management, film library licensing and advertising). The year-on-year increase in revenue for film production and distribution was largely due to the successful release of several films in 2009 as compared to a backlog created by, and as a result of the limited time slot suitable and/or available for any film promotional campaigns prior to, the Beijing 2008 Olympic Games in August 2008. The year-on-year increase in revenue for music production and distribution was largely due to the expansion into new media distribution and karaoke income. The year-on-year increase in revenue for live entertainment was mainly due to the re-opening after renovation of the Hong Kong Coliseum, a major local pop concert venue in Hong Kong, in early 2009 after its renovation since late 2008 which allowed the Group to produce larger scale live entertainment events as compared to those produced in other venues in 2008 when the Hong Kong Coliseum was under renovation.

– 49 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

For the year ended 31 December 2009, the Group recorded a loss from operating activities of HK$422,013,000 (2008: HK$233,574,000). The increase in loss from operating activities was mainly due to the increase in other operating expenses by approximately 63% to HK$140,453,000. Such increase related principally to the impairment of goodwill arising out of the acquisition of Media Asia Entertainment Group Limited, which was completed in 2007, and the increase in the impairment of film rights of the Group’s film library. In addition, marketing expenses increased to HK$92,274,000 in conjunction with the increase in revenue from certain business operations, in particular, the film production and distribution operations. In addition, the Group recognised a fair value loss on a put option of HK$118,328,000 in 2009 (further details of the put option are set out in the below Business Review under the heading of “EAST (Holdings)’s option”).

The Group recorded a share of profits of associates of HK$521,276,000 as compared to a share of losses of associates of HK$71,256,000 for the previous year. The share of profits of associates was mainly attributable to Lai Sun Development Company Limited (“LSD”), an associate of the Company. The Group currently holds a 36.72% interest in LSD, which in turn holds a 36.08% interest in the Group. The Group’s share of the losses of jointly-controlled entities, at HK$43,313,000, was significantly lower than the loss of HK$92,308,000 for the previous year. The principal explanation for this is that (i) no provision was made in 2009 for the film production and distribution business undertaken by a jointly-controlled entity (as contrasted with 2008) and (ii) there was a substantial increase in profit arising out of the investment in television drama and content production business of a jointly-controlled entity.

For the year ended 31 December 2009, the Group recorded a consolidated profit attributable to owners of the parent of HK$68,553,000 (2008: loss of HK$385,476,000). The changes in the results in 2009 were largely due to the reasons explained above.

Shareholders’ equity as at 31 December 2009 amounted to HK$5,490,662,000, as compared to HK$5,321,231,000 as at 31 December 2008. Net asset value per share as at 31 December 2009 was HK$4.43, as compared to HK$4.29 as at 31 December 2008.

Business Review

Macao Studio City

The Company’s ambition remains to build Macao Studio City into one of Asia’s leading integrated leisure resorts combining theatre/concert venues, live entertainment facilities, Studio RetailTM (a destination retail complex), Las Vegas-style gaming facilities and world- class hotels. The site of the project is strategically located “Where Cotai BeginsTM”, next to the Lotus Bridge immigration checkpoint, linking the complex directly to Zhuhai’s Hengqin Island.

– 50 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Project progress

The Macao Studio City project has not progressed over the year under review, essentially because of the continuing dispute between East Asia Satellite Television (Holdings) Limited (“EAST (Holdings)”) and New Cotai, LLC (“New Cotai”).

EAST (Holdings) is the holding company of a 60% interest in Cyber One Agents Limited (“Cyber One”), of which 66.7% is held indirectly by the Company and 33.3% is held by CapitaLand Integrated Resorts Pte. Ltd. (“CapitaLand”), a wholly-owned subsidiary of CapitaLand Limited (one of the largest listed real estate companies in Asia). New Cotai is the US joint venture partner holding a 40% interest in Cyber One.

Cyber One, the jointly-controlled joint venture company responsible for the project, has yet to receive approval from the Macau government in relation to its application for a land grant modification on land use and to increase the developable gross floor area of the site from the original gazetted area to approximately 6,000,000 square feet. In connection with that application, the Macau government requested, and has repeated its request for, further particulars from the joint venture concerning plans for the project, in respect of which EAST (Holdings) and New Cotai have yet to formulate an agreed response.

Notwithstanding that Macau has suffered from significant economic volatility since the original project plan was developed in 2006/2007, the Group is confident that the Macao Studio City project is still an attractive business proposition with considerable potential for long-term returns. The Group firmly believes that Cyber One is ready and able to present updated proposals on prospective financing and construction to the Macau government, despite the Group’s view that New Cotai has, for its own reasons, refused to approve or allow Cyber One to make any substantive response to the Macau government’s request for further particulars required to date.

On 29 October 2009, EAST (Holdings) commenced legal proceedings in the Hong Kong SAR against New Cotai and parties interested in that company, including David Friedman, Silver Point Capital L.P. and Oaktree Capital Management L.P., and others. Amongst other things, EAST (Holdings) is claiming damages of approximately HK$689 million for breach or inducing breaches of contract and, by way of derivative action on behalf of members of the Cyber One group, damages of approximately US$2.385 billion (approximately HK$18.6 billion) for, amongst other things, breaches of fiduciary duties and dishonestly assisting breaches of fiduciary duties owed to such members of the Cyber One group. On 3 February 2010, EAST (Holdings) filed its Statement of Claim with the High Court in Hong Kong SAR setting out the particulars of its claims. The proceedings are being pursued in the context of a desire on the part of the Company to protect EAST (Holdings)’s interests in the development and progress the Macao Studio City project. However, the timing and outcome of all litigation is inherently uncertain and, in this case, is being contested and/or may prompt claims or counterclaims on the part of New Cotai or others. Further, in the event of prolonged delays to the recommencement of the project, it is uncertain as to whether and how the Macau government would exercise its rights, including but not limited to its rights to re-possess the plot of land.

– 51 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Cyber One will need to revisit its plans for the retail and entertainment component of the project. As announced by the Company on 21 August 2009, the various arrangements with Taubman Centres, Inc and its subsidiaries (“Taubman”), which would have seen Taubman take an equity stake in the retail component and take the lead in managing it, have now lapsed. The Company is aware that the retail element of the Macao Studio City will be one of the key components of the project and it is keen to explore, together with the other stakeholders and Taubman, whether it might be possible to revive or reconfigure the arrangements with Taubman in due course. In addition, as announced by the Company on 19 November 2009, the various arrangements with Playboy Enterprises International, Inc. and its subsidiaries in relation to the development of a multi-use entertainment venue on site have also terminated.

Financing

To date, the parties have contributed a total of US$200 million capital to the project (the Company’s attributable share being US$80 million). However, Cyber One has yet to secure the necessary project finance for the development. The Directors believe that this will be more readily achievable once consensus is reached between the joint venture partners or the current differences are resolved. The Company continues to hold net proceeds of approximately HK$1,015 million from its rights issue of 2008, substantially all of which was, and is, intended for investment in the project. Indeed, it is ultimately anticipated that, when the project does resume, there will be a requirement for further equity investment in excess of these proceeds.

EAST (Holdings)’s option

Although the Company and CapitaLand have been in consistent agreement on the development of Macao Studio City, it should be noted that, in the event the land grant modification for the first phase of the project has not been published by the Macau government and the occupation permit for Macao Studio City (in effect, signifying completion of the first phase of the project) is not issued solely due to the failure of the Macau government to publish in its gazette the land grant modification for the first phase of the project, in each case, within 54 months of completion of CapitaLand’s investment (i.e. by mid September 2011), then CapitaLand would, subject to the terms and conditions in the sale and purchase agreement, have an option to put back its holding of shares in EAST (Holdings) to the Company. The consideration payable for the shares would be equal to the purchase price paid by CapitaLand for the shares (being approximately HK$659 million to date) and any further sums invested by it (being US$40 million to date, as its project funding contribution) net of any returns or dividends received by CapitaLand. Were the put to become exercisable and be exercised and completed, the Company’s attributable interest in Macao Studio City would increase to 60%.

– 52 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Media and entertainment

Film production and distribution — Media Asia Entertainment Group Limited (“MAEG”)

During the year ended 31 December 2009, MAEG has completed the principal photography of 7 films with 10 films still in the pipeline of production or under development. There were 6 films released in 2009, namely “Look For A Star” in January, “The Sniper” in April, “City Of Life And Death” in May, “Vengeance” in August, “Accident” in September and “The Founding of a Republic” in October as compared to 4 films released in 2008, namely “If You Are The One”, “Lady Cop & Papa Crook”, “Marriage Trap” and “Set-Off”. Such difference was largely due to a backlog created by, and as a result of the limited time slot suitable and/or available for any film promotional campaigns prior to the Beijing 2008 Olympic Games in August 2008.

In 2009, various MAEG’s films have achieved remarkable results. The “Founding of a Republic” is a film made to mark the 60th anniversary of the establishment of the People’s Republic of China (the “PRC”) with a cast of over 100 stars in the PRC, Hong Kong and Taiwan, and has recorded box-office receipts of over RMB410 million. “If You Are The One” is a romantic comedy directed by Feng Xiaogang and featured by Ge You and Shu Qi, and the film has broken the box-office record of Chinese language movie with the box-office receipts reached RMB325 million in the PRC. In 2009, MAEG films have recorded a total box-office receipts of over HK$1.26 billion in Asia.

MAEG’s films also continue to receive industry recognitions in local and international film festivals in 2009. “City Of Life And Death” was awarded the Best Picture at the San Sebastian Film Festival, the Best Director at the Asia Pacific Screen Awards, and the Best Cinematography at the 46th Golden Horse Awards. In addition, Mr. Lam Kin Ngok, Peter, Chairman of MAEG, was awarded “Producer of the Year” at the CineAsia 2009.

Live entertainment

For the year ended 31 December 2009, the Group’s live entertainment division produced and participated in 97 (2008: 146) concerts and entertainment events by popular local, Asian and internationally renowned artistes including Andy Lau, Leon Lai, Sammi Cheng, Denise Ho, Alan Tam, Hacken Lee, Super Band, Kay Tse, Ekin Cheng, Liu Chia Chang, At 17 and George Lam, in Hong Kong, the Mainland of China and Macau. The re-opening after renovation of the Hong Kong Coliseum, a major local pop concert venue in Hong Kong, in early 2009 has allowed the Group to produce larger scale live entertainment events as compared to those produced in other venues in 2008 when the Hong Kong Coliseum was under renovation and hence, revenue generated from live entertainment division in 2009 increased (despite a lower overall number of events produced in 2009 as compared with 2008).

With the addition of new venues including the Venetian and the City of Dreams, the Group’s live entertainment division has expanded its coverage in Macau. In 2009, the Group has produced 1 pop concert in Macau performed by popular artiste Andy Lau. In addition, the Group has continued to participate and organise concert tours in the PRC and the rest of the world.

– 53 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Music production, distribution and publishing

For the year ended 31 December 2009, the Group’s music production, distribution and publishing division released 52 albums (2008: 56), including titles by Andy Lau, Sammi Cheng, Miriam Yeung, Andy Hui, Denise Ho, Richie Jen, Ivana Wong, Janice M. Vidal, Bosco Wong, Chet Lam, At 17 and Pong Nan. In 2009, the Group gradually expanded into Mandarin albums with various artistes commenceing and/or increasing publication of Mandarin songs during the year. Following the acquisition of music libraries containing over 3,000 songs and 400 music videos in 2007 and 2008, the Group has, by expanding its content offering, enhanced its position to expand into the new media distribution business. During the year under review, the Group steadily grew its position in the market for music publishing and generated a stable and recurring cash flow.

Television drama and content production

The Group has expanded its entertainment offerings to include TV drama business. During the year under review, the Group has made investments, via renowned television dramas and content directors, producers and artistes from the Mainland of China, to produce television dramas and content. For the year ended 31 December 2009, the Group has invested in the production of approximately 150 hours of television dramas and content. Through co-operations with well-known artistes in the PRC, the television dramas which the Group invested in had effectively secured prime broadcasting time via distribution deals with major television networks in the PRC and worldwide. This mode of operation was proven to be successful by the elevated distribution income. During the year under review, the Group also reactivated its distribution network with the intention to expand this part of the operation.

New media

In view of the rising popularity of the new media, the Group has decided to tap into this business segment to enhance our entertainment platform and to extend the consumer reach of our entertainment products. In the second half of 2009, the Group has launched an artiste driven entertainment community — www.goyeah.com (“Goyeah”) in Hong Kong. The Goyeah community is an entertainment platform offering free and legal contents including video, online artiste community and artiste-driven online games. As of 31 December 2009, Goyeah has secured the exclusive online and mobile rights of over 20 leading artistes and models. By the end of 2009, Goyeah has achieved web traffic of over 2 million page views per month.

Lai Sun Development Company Limited (“LSD”)

For the year ended 31 December 2009, LSD’s results as attributable to the Group were significantly improved by, amongst other things, a gain on fair value change in LSD’s investment properties as compared to a loss on fair value change in LSD’s investment properties in the previous year.

– 54 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

For the year under review, the Group reported an operating loss (before taking into account the Group’s share of LSD’s profit) of approximately HK$453,551,000 (2008: HK$314,227,000). Since LSD holds a 36.08% equity interest in the Company, LSD is required to equity account for the operating loss of the Group. As the Group also holds a 36.72% equity interest in LSD, the Group is required to further take up LSD’s share of the Group’s operating results. The effect of such recurring process leads to the Group taking up a further loss of HK$69,265,000 (2008: HK$46,702,000) and such amount is included in the Group’s share of profits and losses of associates. Taking into account the cross-holdings between the Group and LSD, the Group’s share of LSD’s profits included within the Group’s share of profits and losses of associates for the year ended 31 December 2009 was HK$522,104,000 (2008: loss of HK$71,249,000).

Outlook

Macao Studio City

The Company continues to believe that the Macao Studio City will eventually become one of the region’s major entertainment destinations and will be an important platform for the Group to expand and monetise its entertainment and media expertise. The Group remains firmly committed, with or without the participation of its US project partners, to the project.

Media and entertainment

Film production and distribution

The success in our various film projects in 2009 reaffirms our beliefs in Chinese language films, MAEG scheduled to release no less than 6 films in 2010 including “Love in A Puff”, “Fire of Conscience”, “Frozen”, “Legend of the Fist: The Return of Chen Zhen” and “Once A Gangster”.

In light of the enormous yet continuously growing PRC market, MAEG will continue to co-produce films with the leading/renowned PRC companies, producers, directors as well as artistes to enhance our film revenue and expand our market share in the PRC. In addition, the Group has established a film production joint venture with Shanghai Film and “Beijing Guoli Chang Shing Film and TV Cultural Promotion Company Limited” (北京國立常升影視文化傳播有限公司) , a company managed by Mr. Zhang Guoli, a well-known artiste in the PRC. Leveraging on the market expertise and recognitions of our joint venture partners, the Group would through this joint venture increase its participation in film projects in the PRC with an aim to strengthen our market position in the PRC.

– 55 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Live entertainment

For 2010, the live entertainment division of the Group has already scheduled its own production of 6 titled concerts and entertainment events by popular local artistes and participation in the production of no less than 6 other titled events by other promoters, including overseas concert tours already involving some 80 shows in total.

With the increasing venues for performance in Macau, the Group will continue to expand the coverage of its live entertainment business in Macau. In addition, the Group will continue to expand into live entertainment promotions in the Mainland of China and Taiwan.

Music production, distribution and publishing

The traditional physical music record market has been dwindling over the last few years. Confronted with the changing consumers’ pattern from physical to digital music sales, the Group will continue to explore new sales channel for our music products.

With the successful debut of East Asia Music’s expansion into Mandarin albums and the positive contribution from the exploitation of the music library through new media distribution, the Group will continue its efforts to expand its presence in the Mainland of China.

Television drama and content production, and distribution

In view of the steady returns generated from investments in television drama and other television content, the Group will continue to look for business opportunities in this area in order to boost the quantity of television drama as well as to broaden the television contents to be produced. Given the success of our operation mode, the Group will continue to work with well-known artistes in the PRC to secure broadcasting time via distribution deals with major television networks in the PRC and worldwide so as to enhance the distribution income.

New media

The Group has successfully secured new investors’ funds in March 2010 for further development of Goyeah. The Group will continue to enrich the contents of Goyeah with the goal of attracting more netizen and escalating page views. Leveraging on the Group’s strong support from various aspects of media and entertainment businesses, and supplemented by the comprehensive entertainment contents, the Group will expand this business to the PRC. We expect that the Goyeah community will be a new revenue stream for the Group.

– 56 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The PRC artiste management

The PRC entertainment market is enormous with a wealth source of new talents and rising stars. In addition, various well-known PRC artistes have been gaining increasing fame and popularity in Asia and the rest of the world. Riding on the fast growing PRC entertainment industry, the Group intends to expand its business to the PRC artiste management. This new division could provide us with a fresh supply of artistes for entertainment projects to be organised and/or promoted and/or produced by the Group and hence, we expect that this new area of business will complement our other media and entertainment businesses.

LSD

According to LSD, it will target to maintain high occupancy rates and rental cashflows from its investment properties. It is further understood that LSD will monitor the local property market closely and will adopt a balanced approach towards its property development business.

Liquidity, Financial Resources, Charge on Assets, Gearing and Capital Commitments

As at 31 December 2009, cash and cash equivalents held by the Group amounted to HK$1,341,437,000 of which over 96% were denominated in Hong Kong dollar currency.

In order to optimise the Group’s liquidity and to enhance the yield of the Group’s available cash, the Group also invested in short-term bond investments with investment grade rating and short-term securities investments. As at 31 December 2009, the carrying amount of such bond investments and securities investment held by the Group amounted to HK$120,724,000 and HK$2,809,000, respectively.

As at 31 December 2009, the Group has unsecured promissory notes payable of HK$30,000,000 falling due within one year. The promissory notes payable bears interest at 3.5% per annum, and the Group recorded interest accruals of HK$2,319,000. As at 31 December 2009, there existed unsecured other borrowings from a former shareholder of the Company in the principal amount of HK$112,938,000 which is interest-bearing at the HSBC prime rate per annum and is repayable on demand. The Group recorded interest accruals of HK$42,735,000 for the other borrowings as at 31 December 2009. As at 31 December 2009, the Group has secured bank borrowings in China of RMB10,000,000 (or HK$11,361,000) falling due within one year which was secured by pledged deposit of HK$12,600,000. The secured bank borrowings bear interest with reference to the People’s Bank of China Base Interest Rate. The Group recorded interest accruals of HK$57,000 for the secured bank borrowings as at 31 December 2009. In addition, certain land and buildings of the Group with a carrying amount of HK$58,551,000 were pledged to a bank to secure general banking facilities granted to the Group which were not utilised by the Group as at 31 December 2009. Also, the Group had finance lease payables of HK$92,000 falling due within one year, HK$73,000 falling due within the second year and HK$123,000 falling due within the third to fifth years, as at 31 December 2009.

– 57 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The Group’s debt to equity ratio, expressed as a percentage of total borrowings to total net assets, remained low at approximately 3% as at 31 December 2009. All of the Group’s borrowings, except for the secured bank borrowings of HK$11,418,000 which are denominated in Renminbi, are denominated in Hong Kong dollars and the majority of which are floating rate debts. No financial instruments for hedging purposes were employed by the Group during the year under review. The Group considers that the exposure to fluctuations in exchange rates are nominal.

Contingent Liabilities

Contingent liabilities not provided for in the financial statements at the end of the reporting periods were as follows:

Company 2009 2008 HK$’000 HK$’000

Guarantee given to a bank in respect of bank facilities granted to a subsidiary (Note) 150,000 150,000

Guarantee given to a supplier in connection with credit facilities given to a subsidiary 2,000 2,000

152,000 152,000

At the end of the reporting periods, the Group did not have any significant contingent liabilities.

Note: At 31 December 2009 and 2008, the banking facilities granted to a subsidiary were not utilised.

Save as disclosed above and in the “Litigation” section on pages 65 and 66 in this Appendix I, the Group has no other contingent liabilities as at 31 December 2009.

Employees and Remuneration Policies

The Group employed a total of approximately 230 employees as at 31 December 2009. Pay rates for employees are maintained at competitive levels, salary and bonuses are rewarded on a performance-related basis. Other staff benefits include free hospitalisation insurance plan, subsidised medical care and subsidies for external educational and training programmes. The Company also adopted a share option scheme for its directors and employees on 23 December 2005.

– 58 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

4. LITIGATION

(1) For the six months ended 31 January 2012

Litigation with Passport Special Opportunities Master Fund, LP and Passport Global Master Fund SPC Limited (“Passport”)

In December 2008, the Company had sought to raise approximately HK$60 million through a share placement exercise (with the prospect of raising an additional HK$60 million if the placees exercised the accompanying warrants in full). The placing, which was primarily intended to finance the Group’s media and entertainment businesses and otherwise for general working capital purposes, did not ultimately proceed because Passport, at that time a substantial shareholder of the Company, obtained an ex-parte injunction temporarily restraining the Company from proceeding. In essence, Passport alleged that the Company and the directors acted improperly and that there was no good commercial reason for the placement.

On 8 June 2011, the Judge dismissed Passport’s claims against the Company and the directors. Passport then served a notice to appeal the decision. On 19 January 2012, the Judge further ordered Passport to pay the Company’s entire costs of the legal proceedings.

The Company is defending the appeal and challenging a part of the original decision; the hearing of the appeal will take place between 18 and 22 June 2012. On 29 March 2012, the Court of Appeal further ordered Passport to make an additional payment of HK$2.6 million into the Court by 12 April 2012 as security for the Company’s costs of the appeal.

Passport and its affiliates disposed of their entire shareholdings in the Company on 30 April 2010.

(2) For the seven months ended 31 July 2011

Litigation with Passport

In December 2008, the Company had sought to raise approximately HK$60 million through a share placement exercise (with the prospect of raising an additional HK$60 million if the placees exercised the accompanying warrants in full). The placing shares would have represented approximately 8.82% of the enlarged issued share capital of the Company (and the shares issued on the full exercise of the warrants would have represented approximately 8.10% of the further enlarged issued share capital of the Company). The placing, which was primarily intended to finance the Group’s media and entertainment businesses and otherwise for general working capital purposes, did not ultimately proceed because Passport, which was then a substantial shareholder of the Company, obtained an ex-parte injunction temporarily restraining the Company from proceeding with the placing (Passport and its affiliates disposed of their entire shareholdings in the Company on 30 April 2010.). Although the long-stop date for the placing was extended once, with the injunction order remaining in place and the conditions to the placing remaining unfulfilled, the placing agreement lapsed on 9 January 2009.

– 59 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

In essence, Passport alleged that the Company had no good commercial reason for the placement and that its sole or primary purpose was to dilute Passport’s shareholding.

On 8 June 2011, judgment was handed down. The Judge held that Passport’s claims to relief against the Company and the directors be dismissed. Passport has appealed against the decision and the hearing of the appeal will take place between 18 and 22 June 2012. In the meantime, a hearing has been fixed on 19 January 2012 before the Trial Judge to determine the question of costs and for directions to be given for the further conduct of the matter, namely on the question of enforcement of Passport’s undertaking as to damages. Passport has put up a bank guarantee in the sum of HK$120 million to fortify its undertaking as to damages. Passport also put up security for the Company’s costs.

Litigation with New Cotai, LLC (“New Cotai”)

Cyber One had been the jointly-controlled entity of the Group responsible for the MSC project. EAST (Holdings) — of which 66.7% was held indirectly by the Company and 33.3% was held by CIR — had a 60% shareholding interest in Cyber One. New Cotai had been the US joint venture partner holding a 40% shareholding interest in Cyber One.

Since 2009, there had been disputes and ongoing litigation between EAST (Holdings) and New Cotai in respect of the development and construction of the MSC project, which had effectively deadlocked the project’s development and construction. The litigation between the parties was, in short, as follows:

(i) On 29 October 2009, EAST (Holdings) commenced legal proceedings (HCA 2189/ 2009) in the Hong Kong SAR against New Cotai and parties interested in that company. Amongst other things, EAST (Holdings) claimed damages of approximately HK$689 million for breach or inducing breaches of contract.

(ii) On 29 October 2009, EAST (Holdings) also sought an order by way of a petition (under HCMP 2218/2009) requiring New Cotai to transfer its interests in the Cyber One Group to EAST (Holdings).

(iii) On 14 October 2010, New Cotai Entertainment, LLC commenced an action (HCA 1545 of 2010) in the Hong Kong High Court against EAST (Macau), the Company, EAST (Holdings), CIR and CapitaLand Limited seeking specific performance of the execution of a casino lease, and damages for breach of contract and inducing or procuring breach of contract for failure to execute the casino lease.

(iv) Also on 14 October 2010, the directors of Cyber One nominated by New Cotai commenced an action (HCA 1546 of 2010) against Cyber One and EAST (Holdings) seeking an indemnity of all costs and expenses incurred by them in defending the legal proceedings commenced against them by EAST (Holdings).

– 60 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

(v) On 29 October 2010, New Cotai also presented to the Hong Kong High Court a counter petition (HCMP 2185 of 2010) seeking an order requiring EAST (Holdings) to transfer its interests in the Cyber One group to New Cotai. Essentially, New Cotai’s petition was the mirror-image of EAST (Holdings)’s petition.

In order to resolve the deadlock between the parties, amongst other reasons, EAST (Holdings), the Company and MCE agreed amongst other things that EAST (Holdings) would sell its 60% shareholding in Cyber One to MCE. As at 31 July 2011, EAST (Holdings) had completed the disposal of its shares in Cyber One to MCE, such that the Company has ceased to hold any interest in Cyber One and the MSC project.

On the event of the above completion, and pursuant to the terms of a Deed of Settlement dated 15 June 2011, the Company, EAST (Holdings), CIR, CapitaLand Limited, New Cotai and New Cotai Entertainment, LLC on a no admission of liability basis, fully and finally settled:

(i) the above claims and petitions; and

(ii) all disputes between them arising out of, or in connection with, the MSC project and the related joint venture between EAST (Holdings) and New Cotai.

The settlement includes a release from liability between the parties to the Deed of Settlement and no settlement sum has been paid by any party pursuant to the terms of that Deed.

(3) For the year ended 31 December 2010

Litigation with Passport

In December 2008, the Company had sought to raise approximately HK$60 million through a share placement exercise (with the prospect of raising an additional HK$60 million if the placees exercised the accompanying warrants in full). The placing shares would have represented approximately 8.82% of the enlarged issued share capital of the Company (and the shares issued on the full exercise of the warrants would have represented approximately 8.10% of the further enlarged issued share capital of the Company). The placing, which was primarily intended to finance the Group’s media and entertainment businesses and otherwise for general working capital purposes, did not ultimately proceed in light of the fact that Passport, who was then a substantial shareholder of the Company, obtained an ex-parte injunction temporarily restraining the Company from proceeding with the placing. Although the long-stop date for the placing was extended once, with the injunction order remaining in place and the conditions to the placing remaining unfulfilled, the placing agreement lapsed on 9 January 2009. However, Passport and its affiliates disposed of their entire shareholdings in the Company on 30 April 2010.

– 61 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

In essence, Passport alleges that the Company had no good commercial reason for the placement and that its sole or primary purpose was to dilute Passport’s shareholding. Whether or not the injunction was validly obtained by Passport remains the subject of on-going legal proceedings in respect of which the Company and its Directors are vigorously defending Passport’s claims, and are pursuing their own remedies against Passport. The Court granted leave to the placing agent and certain of the placees to join the legal proceedings as parties who were adversely affected by Passport’s injunction. The Court required Passport to put up a bank guarantee in the sum of HK$120 million to fortify its undertaking as to damages. Passport has also put up security for the Company’s costs. The trial commenced in November 2009 and concluded in January 2010. The judge reserved his decision after the conclusion of the trial. Judgement has not yet been handed down and it is not known when judgement will be handed down.

Litigation with New Cotai

EAST (Holdings) is the holding company of a 60% interest in Cyber One, of which 66.7% is held indirectly by the Company and 33.3% is held by CapitaLand, a wholly- owned subsidiary of CapitaLand Limited. New Cotai is the US joint venture partner holding a 40% interest in Cyber One.

Cyber One, the jointly-controlled joint venture company responsible for the MSC project, has yet to receive approval from the Macau government in relation to its application for a land grant modification on land use and to increase the developable gross floor area of the site from the original gazetted area to approximately 6,000,000 square feet. In connection with that application, the Macau government requested, and has repeated its request for, further particulars from the joint venture concerning plans for the project, in respect of which EAST (Holdings) and New Cotai have yet to formulate an agreed response, although EAST (Holdings) and New Cotai made separate submissions in May 2010 in response to the Macau government. In the event of prolonged delays to the recommencement of the project, it is uncertain as to whether and how the Macau government would exercise its rights, including but not limited to its rights to re-possess the plot of land.

On 29 October 2009, EAST (Holdings) commenced legal proceedings (HCA 2189/2009) in the Hong Kong SAR against New Cotai and parties interested in that company (the “New Cotai Parties”). Amongst other things, EAST (Holdings) is claiming damages of approximately HK$689 million for breach or inducing breaches of contract and, by way of derivative action on behalf of members of the Cyber One group, damages of approximately US$2.385 billion (approximately HK$18.6 billion) for, amongst other things, breaches of fiduciary duties and dishonestly assisting breaches of fiduciary duties owed to such members of the Cyber One group. EAST (Holdings) is also seeking an order by way of a petition (under HCMP 2218/2009) requiring New Cotai to transfer its interests in the Cyber One group to EAST (Holdings). The proceedings are being pursued in the context of a desire on the part of the Company to protect EAST (Holdings)’s interests in the development and progress the MSC project.

– 62 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The New Cotai Parties made several interlocutory applications to the Court to challenge certain of these claims. By judgement dated 16 July 2010, the Court struck out certain claims, including the derivative claims by the Company made on behalf of members of the Cyber One group. The aforesaid judgement, if not overturned on appeal, will have the effect of preventing EAST (Holdings) from proceeding with the derivative claims in Hong Kong. However, EAST (Holdings) may consider proceeding with the derivative claims in the jurisdictions where relevant members of the Cyber One group are incorporated. EAST (Holdings) might also procure the relevant members of the Cyber One group to proceed with the claims in Hong Kong directly in the event EAST (Holdings) is successful in securing control of the Cyber One group through the litigation. On 30 July 2010, EAST (Holdings) obtained leave to appeal the aforesaid judgement. The appeal has been fixed for 12 and 13 May 2011. EAST (Holdings) intends to pursue that appeal vigorously. It is noted that no challenge was made in these applications with regard to the claim for damages of approximately HK$689 million for breach of contract by the New Cotai Parties.

The New Cotai Parties filed their defence on 27 September 2010. EAST (Holdings) filed its reply on 5 November 2010. The New Cotai Parties further filed a rejoinder on 20 December 2010.

In October 2010, New Cotai and related parties issued three sets of proceedings against EAST (Holdings), the Company and related parties:

On 14 October 2010, New Cotai Entertainment LLC commenced an action (HCA 1545 of 2010) in the Hong Kong High Court against EAST (Macau), the Company, EAST (Holdings), CapitaLand and CapitaLand Limited seeking specific performance of the execution of a casino lease, and damages for breach of contract and inducing or procuring breach of contract for failure to execute the casino lease. The Company and EAST (Holdings) filed their defence on 9 December 2010. New Cotai Entertainment LLC filed its reply on 20 December 2010. EAST (Macau) is not represented. The CapitaLand entities are represented by Freshfields, and are applying to set aside service of the proceedings on them.

A summary of EAST (Holdings) and the Company’s defence is as follows:

(i) in circumstances where EAST (Macau) has not been able to obtain the gazetted land grant modification and substantive development of the MSC project has not yet commenced, doubts exist as to whether EAST (Macau) would be immediately exposed to liability if it signed and executed the casino lease;

(ii) by email dated 5 December 2008, the joint venture’s legal counsel advised that the validity of the casino lease was in doubt as the subject premises were not available, and that EAST (Macau) should seek external legal advice on this issue;

– 63 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

(iii) the directors of Cyber One nominated by EAST (Holdings) have tried to procure EAST (Macau) to seek appropriate legal advice on EAST (Macau)’s obligation to enter into the casino lease and its obligations under that lease, and have acted reasonably by doing so;

(iv) nevertheless, both New Cotai and New Cotai Entertainment LLC have impeded and frustrated EAST (Holdings)’s efforts in this regard; and

(v) as a result, EAST (Macau) has not been able to seek independent advice and, therefore, has not executed the casino lease.

EAST (Holdings) and the Company consider that their defence has merit, particularly in light of the current status of the MSC project.

Also on 14 October 2010, the directors of Cyber One nominated by New Cotai commenced an action (HCA 1546 of 2010) against Cyber One and EAST (Holdings) seeking an indemnity of all costs and expenses incurred by them in defending the legal proceedings commenced against them by EAST (Holdings). EAST (Holdings) has been advised by its legal advisers that EAST (Holdings) should not be side tracked by satellite litigation and should instead focus on the core proceedings. EAST (Holdings) agrees, therefore, in principle, that Cyber One can pay the New Cotai nominated directors’ claim for an indemnity, subject to certain conditions. For example, the New Cotai nominated directors must show that their legal expenses have been reasonably and properly incurred and provide sufficient evidence to the Cyber One board of what those expenses are. Further any payment by Cyber One must be premised on an undertaking given by the New Cotai nominated directors that if it is ultimately judicially determined that the directors were not entitled to the indemnity, they will repay the legal expenses to Cyber One.

The New Cotai nominated directors have refused to agree to some of the conditions requested by EAST (Holdings). For example, they will not agree that their legal expenses must have been reasonably incurred. They have also failed to date to produce any details of those expenses to either Cyber One or EAST (Holdings). As a result, it has been impossible for EAST (Holdings) to resolve this matter with the New Cotai nominated directors. Accordingly, EAST (Holdings) filed a protective defence on 12 January 2011.

On 29 October 2010, New Cotai also presented to the Hong Kong High Court a counter petition (HCMP 2185 of 2010) seeking an order requiring EAST (Holdings) to transfer its interests in the Cyber One group to New Cotai. Essentially, New Cotai’s petition is the mirror-image of EAST (Holdings)’s petition. The Court has directed that the two petitions be heard at the same time, and that the evidence filed in each petition will stand as evidence in the other petition also. Thus, the evidence which New Cotai filed in support of its own petition also stands in opposition to EAST (Holdings)’s petition. EAST (Holdings) filed its own evidence in opposition to New Cotai’s petition on 14 February 2011. New Cotai is to file its evidence in reply on or before 3 May 2011.

– 64 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The New Cotai Parties also accepted EAST (Holdings)’s and the Company’s proposal that all the litigation proceedings discussed above (i.e. HCA 2189/2009, HCA 1545/ 2010, HCA 1546/2010, HCMP 2218/2009 and HCMP 2185/2010) be heard at the same time, and that the evidence filed in the petition proceedings will also stand as evidence in the three High Court actions HCA 2189/2009, HCA 1545/2010 and HCA 1546/2010.

Discovery in the three High Court actions took place on 21 March 2011. The parties have agreed to attend before the Court at a date to be filed soon after 3 May 2011 to discuss the directions for setting down the petitions and the three High Court actions for trial. This will include directions for expert evidence. No trial date has been set yet. It is expected that the trial of these proceedings will not take place before the fourth quarter of 2011.

The outcome of all these proceedings remains inherently uncertain. However, the directors continue to believe that EAST (Holdings)’s core claims are well-founded and that the litigation is necessary in order to protect the interest of all of the Company’s shareholders and, ultimately, to preserve the potential of the MSC project. Further, in the event of prolonged delays to the recommencement of the project, it is uncertain as to whether and how the Macau government would exercise its rights, including but not limited to its rights to re-possess the plot of land.

(4) For the year ended 31 December 2009

Litigation with Passport

In December 2008, the Company had sought to raise approximately HK$60 million through a share placement exercise (with the prospect of raising an additional HK$60 million if the placees exercised the accompanying warrants in full). The placing shares would have represented approximately 8.82% of the enlarged issued share capital of the Company (and the shares issued on the full exercise of the warrants would have represented approximately 8.10% of the further enlarged issued share capital of the Company). The placing, which was primarily intended to finance the Group’s media and entertainment businesses and otherwise for general working capital purposes, did not ultimately proceed in light of the fact that Passport, a substantial shareholder of the Company, obtained an ex-parte injunction temporarily restraining the Company from proceeding with the placing. Although the long-stop date for the placing was extended once, with the injunction order remaining in place and the conditions to the placing remaining unfulfilled, the placing agreement lapsed on 9 January 2009.

– 65 – APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The Court required Passport to put up a bank guarantee in the sum of HK$120 million to fortify its undertaking as to damages. Passport also put up security for the Company’s costs. The trial commenced in November 2009 and concluded in January 2010. The judge reserved his decision after the conclusion of the trial and judgement will be handed down in due course.

Litigation with New Cotai

The Group held an effective 40% economic interest in Cyber One as at 31 December 2009. Cyber One, owned as to 60% by EAST (Holdings) and 40% by New Cotai, is the jointly-controlled entity responsible for the proposed development of the Macao Studio City project, which has, in effect, stalled in recent times, including as regards the submission to the Macau government of further particulars in relation to Cyber One’s application to increase the development gross floor area of the site to approximately 6,000,000 square feet. In connection with that application, the Macau government requested, and has repeated its request for, further particulars from the joint venture concerning plans for the project, in respect of which EAST (Holdings) and New Cotai have yet to formulate an agreed response.

Notwithstanding that Macau has suffered from significant economic volatility since the original project plan was developed in 2006/2007, the Group is confident that the Macao Studio City project is still an attractive business proposition with considerable potential for long-term returns. The Group firmly believes that Cyber One is ready and able to present undated proposals on prospective financing and construction to the Macau government, despite the Group’s view that New Cotai has, for its own reasons, refused to approve or allow Cyber One to make any substantive response to the Macau government’s request for further particulars required to date.

On 29 October 2009, EAST (Holdings) commenced legal proceedings in the Hong Kong SAR against New Cotai and parties interested in that company, including David Friedman, Silver Point Capital L.P. and Oaktree Capital Management L.P., and others. Amongst other things, EAST (Holdings) is claiming damages of approximately HK$689 million for breach or inducing breaches of contract and, by way of derivative action on behalf of members of the Cyber One group, damages of approximately US$2.385 billion (approximately HK$18.6 billion) for, amongst other things, breaches of fiduciary duties and dishonestly assisting breaches of fiduciary duties owed to such members of the Cyber One group. On 3 February 2010, EAST (Holdings) filed its Statement of Claim with the High Court in Hong Kong SAR setting out the particulars of its claims. The proceedings are being pursued in the context of a desire on the part of the Company to protect EAST (Holding)’s interests in the development and to progress the Macao Studio City project. However, the timing and outsome of all litigation is inherently uncertain and, in this case, is being contested and/or may prompt claims or counterclaims on the part of New Cotai or others. Further, in the event of prolonged delays to the recommencement of the project, it is uncertain as to whether and how the Macau government would exercise its rights, including but not limited to its rights to re-possess the plot of land.

– 66 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

1. CONSOLIDATED FINANCIAL INFORMATION

The audited consolidated financial statements and the independent auditors’ report of the Lai Fung Group (i) for the year ended 31 July 2011 are disclosed in the annual report 2010-2011 of Lai Fung dated 28 October 2011, from pages 46 to 112; (ii) for the year ended 31 July 2010 are disclosed in the annual report 2009-2010 of Lai Fung dated on 5 November 2010, from pages 48 to 123; and (iii) for the year ended 31 July 2009 are disclosed in the annual report 2008- 2009 of Lai Fung dated 6 November 2009, from pages 45 to 128. The unaudited condensed consolidated financial statements of the Lai Fung Group for the six months ended 31 January 2012 are disclosed in the interim report of Lai Fung for the six months ended 31 January 2012, from pages 5 to 19. All of these financial statements have been published on the website of the Stock Exchange (http://www.hkexnews.hk) and the website of Lai Fung (http://www.laisun.com/ laifung).

2. MANAGEMENT DISCUSSION AND ANALYSIS OF THE LAI FUNG GROUP

Set out below are the management discussion and analysis of the Lai Fung Group as extracted from the annual reports of Lai Fung for each of the three years ended 31 July 2011 and the interim report for the six months ended 31 January 2012 (the “Lai Fung Management Discussion and Analysis”), unless stated otherwise. Terms used below shall have the same meanings as those defined in the Lai Fung Management Discussion and Analysis.

(1) For the six months ended 31 January 2012

Overview of interim results

For the six months ended 31 January 2012, the Group recorded a turnover of HK$831.3 million (2011: HK$383.4 million) and a gross profit of HK$454.1 million (2011: HK$190.4 million), representing an increase of approximately 117% and 138% respectively from the previous corresponding period. Net profit attributable to shareholders was approximately HK$399.1 million (2011: HK$389.8 million), representing an increase of approximately 2%.

Basic earnings per share correspondingly increased to HK4.96 cents (2011: HK4.84 cents).

Shareholders’ equity as at 31 January 2012 amounted to HK$9,060.9 million, up from HK$8,514.5 million as at 31 July 2011. Net asset value per share attributable to owners of the Company correspondingly increased to HK$1.13 per share from HK$1.06 per share for the same period.

Interim Dividend

The board of directors (the “Board”) of the Company has resolved not to pay an interim dividend for the six months ended 31 January 2012 (six months ended 31 January 2011: Nil).

– 67 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Market and business overview

In 2011, the property market in China was characterised by waves of escalated austerity measures with the intention to rein back a surging property market in order to harmonise overall economic growth. Factors such as the fear of global economic recession, the spread of Europe’s financial crisis, the presidential election in the United States and the change of leadership in China added uncertainties to China’s export economy, which led to concerns on China’s overall economic growth. As a result, the China property market changed from robust to challenging. Against such testing market conditions, the Group adopted a prudent yet flexible strategy and responded to market changes actively with the objective of preserving profitability and long-term value for shareholders, which led to an encouraging set of results characterised by the strong performances from the Group’s investment properties and satisfactory sales momentum of its development properties.

Stable financial position

The Group maintains a prudent financial strategy adopted for optimising its financial structure and strengthening working capital. In light of the challenging operating environment in the China property sector currently and the expected construction costs for completed and on-going projects, the Company has been reviewing different options to shore up working capital. Having considered the credit markets and the interest burden associated with any loan or debt issuance, the directors (excluding those directors who are members of the Independent Board Committee (as defined in the announcement stated below) and will form their view after discussion with the independent financial adviser) of the Company believe that it would be in the best interests of the Company and its shareholders as a whole to raise long-term equity capital through an open offer of its shares which provides all shareholders with an equitable means to participate without suffering from shareholding dilution.

On 27 February 2012, the Company announced a proposed open offer on the basis of one offer share for every one share of HK$0.10 each in the share capital of the Company (the “Offer Shares”) at a subscription price of HK$0.125 per Offer Share (the “Open Offer”). The Open Offer is fully underwritten by eSun Holdings Limited (“eSun”) with irrevocable undertakings from eSun and CapitaLand LF (Cayman) Holdings Co., Ltd., to subscribe for their assured entitlements which demonstrates the Company’s major shareholders’ confidence and commitment in the long-term prospect of the Group. Depending on the level of subscription of the Open Offer and the underwriting obligations of eSun, eSun’s interests in the Company may potentially increase to more than 50% of the Company’s issued share capital as enlarged by the Open Offer, in which case the Company will become a subsidiary of eSun.

– 68 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

The Open Offer, subject to approvals from the respective shareholders of the Company and eSun, is expected to raise approximately HK$990 million (net of expenses), which is intended to be used as working capital for (i) applying towards financing the existing property development projects of the Company; and (ii) identifying and proceeding with property projects that may emerge in the future. The Open Offer is expected to complete in June 2012.

Further details of the Open Offer are disclosed in the joint announcement of the Company and eSun dated 27 February 2012.

Strategy and prospects

The international financial and economic conditions are expected to remain challenging in 2012 with no clear long-term solution to the credit crisis in Europe and recession risk in the United States has not completely subsided. The presidential election in the United States and the change of leadership in China add short-term uncertainties. These uncertainties will affect the macro-economic situation in China. The tightening policies introduced by the Central Government over the property market are showing signs of impact and expected to continue. However, the Group is optimistic in the long-term prospects of the property market in China which is underpinned by robust long-term economic growth, continuous urbanisation trend, strong underlying demand, high inflation and high savings ratio.

The Group will adopt a strategy of prudent expansion. While continuing to strengthen its business in and around Shanghai and Guangzhou, the Group will continue to investigate the conditions of different cities to identify new opportunities. It will adapt its development plans according to market conditions in different cities with a view of delivering long- term value to shareholders.

Successful revitalisation of Shanghai Hong Kong Plaza is a testament of our expertise in enhancing the value of our investment properties. The Group will continue to improve its recurrent income base through upgrading existing rental properties and adding new commercial properties from development projects. The Group expects its investment properties to provide a strong base of recurrent income in the years to come.

The Group will continue to focus on development projects in and around Shanghai and Guangzhou. It will also continue to replenish its land bank should the right opportunities arise. With its quality products, excellent after-sales service and customer-focused property management, the Group is confident that it is well positioned to take advantage of the challenges ahead.

At the same time, the Group will adhere to and implement a prudent financial strategy to maintain a sound financial position and cash flow, with a view to improving its competitiveness in the challenging market environment and capturing market opportunities that arise in a timely manner.

– 69 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Business Review

Property Investment

Rental income

During the six months ended 31 January 2012, the Group’s rental operations recorded a turnover of HK$227.0 million (2011: HK$182.0 million), representing 27% of the Group’s total turnover and a 25% increase as compared with that of the same period in 2011. Breakdown of rental turnover by investment properties is as follows:

Six months ended 31 January 2012 2011 Change HK$ million HK$ million %

Shanghai Hong Kong Plaza 168.2 129.1 30

Shanghai Regents Park (commercial podium and car-parking spaces) 5.2 4.0 30

Shanghai Northgate Plaza I 2.8 9.0 -69

Guangzhou May Flower Plaza 43.0 35.5 21

Guangzhou West Point (commercial podium and car-parking spaces) 7.8 4.4 77

Total 227.0 182.0 25

During the period, we had five major investment properties located in the heart of Shanghai and Guangzhou with a total gross floor area (“GFA”) of 200,255 square meters (“sq.m.”). The commercial podium and basement of the recently completed Shanghai May Flower Plaza has been added to the portfolio and pre-lease is in progress.

Rental income achieved robust increase as a whole. Strong performance from Shanghai Hong Kong Plaza was underpinned by full contribution from existing leases and increase in revenue from the serviced apartments due to a substantial increase in average available rooms to over 300 rooms (2011: 162) after renovation. As the Group is considering a comprehensive redevelopment of Shanghai Northgate Plaza I and II, rental income for this property recorded a negative growth as we did not renew leases expired during the period.

– 70 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Rental income from Guangzhou May Flower Plaza recorded a healthy growth driven by robust rent increase. Guangzhou West Point demonstrated strong growth as a result of improved occupancy and rent on lease renewal.

Property Development

Recognised sales

During the six months ended 31 January 2012, the Group’s property development operations recorded a turnover of HK$604.3 million (2011: HK$201.4 million) and total recognised GFA sold was approximately 14,211 sq.m. (2011: 9,054 sq.m.) from sale of properties, representing a 200% increase in turnover and 57% increase in GFA.

The increase in recognised sales was due to increase in volume as well as change in geographical mix, which led to a higher average selling price. Total recognised sales was driven by sales performance of Shanghai May Flower Plaza in 2011 of which 13,953 sq.m. of GFA was sold. During the period under review, the average selling price recognised for all the projects increased by 115% to approximately HK$45,000 per sq.m. (2011: HK$20,900 per sq.m.).

Breakdown of turnover for the period from property sales is as follows:

Six months ended 31 January 2012 Approximate Total average recognised Recognised recognised sales sales area selling price# amount* sq.m. HK$/sq.m. HK$’000

Shanghai May Flower Plaza Residential Units 13,953 45,200 595,671

Guangzhou West Point Residential Units 258 29,400 7,154

Sub-total 14,211 602,825

Guangzhou Eastern Place Car-parking Spaces 1,503

Total 604,328

# Before business tax * After business tax

– 71 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Contracted sales

During the same period, contracted sales (excluding those conducted through associates) decreased to HK$196.3 million (2011: HK$528.5 million) and contracted GFA sold to 9,817 sq.m. (2011: 16,511 sq.m.), representing a 63% and 41% decrease respectively. Average selling price decreased by 35% to approximately HK$19,900 per sq.m. (2011: HK$30,600 per sq.m.).

The decrease in contracted sales was due to lower volume and change in geographical mix, which led to the decrease in average selling price. During the period under review, contracted sales was dominated by transaction volume from Palm Spring in Zhongshan, whereas the performance in the same period last year was driven by transaction volume from Shanghai May Flower Plaza.

Breakdown of contracted sales for the period is as follows:

Six months ended 31 January 2012 Approximate average Total Contracted contracted contracted sales area selling price# sales amount# sq.m. HK$/sq.m. HK$’000

Shanghai May Flower Plaza Residential Units 2,639 46,300 122,147

Shanghai Regents Park Phase II, Residential Units 371 48,700 18,080

Guangzhou West Point Residential Units 514 28,300 14,522 Office Units 100 27,100 2,714

Zhongshan Palm Spring Residential Units 6,193 6,200 38,139

Sub-total 9,817 195,602

Guangzhou Eastern Place Car-parking Spaces 674

Total 196,276

Guangzhou Dolce Vita Residential Units* 21,453 19,400 416,859

– 72 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

# Before business tax

* Guangzhou Dolce Vita is a joint venture project with CapitaLand China Holdings Pte. Ltd., in which the Group has an effective 47.5% interest. Please note that the reported contracted sales of HK$417 million is attributable to the full project. The Group’s attributable share of profit from the sale of these residential units is expected to be recognised upon completion of the project after 2012.

In light of the challenging operating environment and stringent government policies particularly for residential properties, the Group has adopted a prudent yet flexible approach with the objective of preserving margin and optimising long-term value for shareholders. The Group has achieved satisfactory sales momentum for the six months ended 31 January 2012 with such strategy. The Group expects the operating environment to remain challenging in 2012. However, the Group believes that it is well-positioned to take advantage of the pent-up demand with our project pipeline.

Project pipeline

As at 31 January 2012, the Group has a number of projects in various stages of development in Shanghai, Guangzhou and Zhongshan, which are expected to complete in the next two to three years. The Group continues to adopt its prudent land replenishment plan, including making acquisitions in accordance with the development needs and market conditions.

Gross profit

Gross profit of the Group (before land appreciation tax provision) increased substantially by 138% to approximately HK$454.1 million for the six months ended 31 January 2012 over the same period in 2011. Gross profit margin increased to approximately 55% for the six months ended 31 January 2012 from approximately 50% for the same period in 2011, primarily due to the sale of Shanghai May Flower Plaza’s residential units having higher gross profit margin than projects sold in the same period in 2011 and strong performance from key investment property projects, namely Shanghai Hong Kong Plaza and Guangzhou May Flower Plaza.

Fair value gains on investment properties

During the period, the fair value gains on all investment properties amounted to approximately HK$480.8 million and the related deferred tax charged for the period was approximately HK$120.2 million.

Profit attributable to shareholders

For the reasons elaborated above, the net profit attributable to shareholders was approximately HK$399.1 million (2011: HK$389.8 million), representing an increase of approximately 2%.

– 73 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Review of major property projects

Shanghai

Shanghai Hong Kong Plaza

Shanghai Hong Kong Plaza is a twin-tower prime property located on both the north and south sides of the street at Huaihaizhong Road, Huangpu District, Shanghai; the twin- towers are connected by a footbridge. The property comprises an office tower, shopping arcades and a serviced apartments tower. The property is directly above the Huangpi South Road Metro Station and is within walking distance of Xintiandi, a well-known landmark in Shanghai. Rental income for the six months ended 31 January 2012 amounted to HK$168.2 million, up by 30% from HK$129.1 million in the previous corresponding period. The increase in rental income continues to reflect its improved leasing profile of the shopping arcades and serviced apartments after renovation.

Shopping arcades were re-opened in October 2010 and since their re-opening, Shanghai Hong Kong Plaza’s shopping arcades have become one of the most visible high-end retail venues for global luxury brands in the Huaihaizhong Road area. Anchor tenants include The Apple Store, Cartier, Coach, GAP and Tiffany and international renowned luxury brands and high-end restaurants. As at 31 January 2012, 97% of the arcades’ leasable areas were leased.

Serviced apartments are managed by the Ascott Group and the Group has successfully leveraged Ascott Group’s extensive experience and expertise in operating serviced apartments to position the serviced apartments as a high-end product. Since the completion of the renovation work at the shopping arcades and serviced apartments, occupancy of the office tower of Shanghai Hong Kong Plaza has also improved. As at 31 January 2012, occupancy rate for the office tower was approximately 96%.

Shanghai May Flower Plaza

Shanghai May Flower Plaza is a mixed-use project located at the junction of Da Tong Road and Zhi Jiang Xi Road in Su Jia Xiang in the Zhabei District of Shanghai. This project is situated near the Zhongshan Road North Metro Station. The Group has an effective 95% interest in the project.

The project has a total GFA of approximately 111,000 sq.m. (GFA attributable to the Group of approximately 105,000 sq.m.), comprising residential units, office apartment units and commercial spaces. The total saleable area of residential and office apartment units is approximately 80,000 sq.m. The completion certificate for the project was obtained in December 2011.

– 74 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

The residential portion of Shanghai May Flower Plaza is branded “The Mid-town” which comprises 628 residential units. Up to 31 January 2012, the Group had obtained contracted sales for 164 units with a total saleable GFA of 17,267 sq.m. at an average price of approximately RMB37,000 per sq.m.

We commenced pre-sale of the office apartments portion of the project with a total GFA of approximately 18,800 sq.m. comprising 335 units in late February this year. Sales momentum to date has been in line with expectation.

Shanghai Regents Park Phase II

Regents Park is a major residential project located in the Zhongshan Park Commercial Area of the prestigious Changning District, Shanghai with a total saleable GFA of approximately 154,000 sq.m. (GFA attributable to the Group is approximately 146,000 sq.m.). The Group has an effective 95% interest in the project. Phase II of the project comprises 6 residential towers with 455 units (total saleable GFA of approximately 62,845 sq.m. and GFA attributable to the Group of approximately 59,700 sq.m.).

Residential units have almost been completely sold with only a handful of units remaining. We retain the commercial podium which is fully let out.

Shanghai Northgate Plaza

Shanghai Northgate Plaza I comprises office units, a retail podium (now closed) and car- parking spaces. Located on Tian Mu Road West in the Zhabei District of Shanghai near the Shanghai Railway Terminal, this property is 97% owned by the Group and has a total GFA of approximately 36,500 sq.m. including car-parking spaces. Shanghai Northgate Plaza II is a vacant site adjacent to Plaza I. The site area of Plaza II is approximately 4,115 sq.m. and its buildable above ground GFA is approximately 25,000 sq.m. The Group has an effective 99% interest of Northgate Plaza II.

The Group plans to redevelop Shanghai Northgate Plaza I and II together under a comprehensive redevelopment plan. The redeveloped project will include an office tower, a shopping arcade and underground car-parking spaces. The Group is currently discussing the feasibility of the redevelopment proposal with professional consultants.

Guangzhou and Zhongshan

Guangzhou May Flower Plaza

Guangzhou May Flower Plaza is a prime property situated at Zhongshanwu Road, Yuexiu District directly above the Gongyuanqian Metro Station in Guangzhou, the interchange station of Guangzhou Subway Lines No. 1 and 2. The Group has an effective 77.5% interest in this property.

– 75 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

This 13-storey complex has a total GFA of approximately 51,000 sq.m. (GFA attributable to the Group of approximately 39,000 sq.m.), comprising retail spaces, restaurants and fast food outlets, and office units. The property is fully leased to tenants that are well- known corporations, consumer brands and restaurants. The property also houses a multiplex cinema. Rental income from Guangzhou May Flower Plaza was HK$43.0 million for the six months ended 31 January 2012, representing an increase of approximately 21% from the previous corresponding period. The increase in rental income reflects its improved tenant mix after partial transformation of the shopping arcades.

Guangzhou Eastern Place

Guangzhou Eastern Place is a multi-phase project located on Dongfeng East Road, Yuexiu District, Guangzhou. The current Phase V development will have a total GFA attributable to the Group of approximately 101,000 sq.m., comprising two residential blocks, an office block and ancillary retail spaces. Construction work has commenced and is expected to be completed between 2012 and 2013. Pre-sale of the residential units is expected to start in the fourth quarter of 2012.

Guangzhou West Point

Guangzhou West Point is located on Zhongshan Qi Road and is within walking distance from the Ximenkou Subway Station. The project has a total GFA of approximately 63,000 sq.m., comprising 243 residential units, 244 office units and commercial spaces. In addition, there are approximately 10,000 sq.m. for carparks and ancillary facilities.

Residential blocks were completed in February 2010 and the office and commercial blocks were completed in June 2010 and sales of residential and office units have virtually been completed.

As at 31 January 2012, the retail spaces available were fully leased. Tenants in Guangzhou West Point include renowned restaurants and retail brands. During the period under review, the rental income from the commercial podium and car-parking spaces of Guangzhou West Point was approximately HK$7.8 million.

Guangzhou Dolce Vita

The Guangzhou Dolce Vita is a joint venture project with CapitaLand China Holdings Pte. Ltd in which the Group has a 47.5% interest. The development in Jinshazhou, Hengsha, Baiyuan District, Guangzhou will have a total GFA of approximately 369,000 sq.m. (GFA attributable to the Group of approximately 175,200 sq.m.), comprising approximately 3,400 low-rise and high-rise residential units with ancillary facilities including car-parking spaces and shopping amenities. It is conveniently located near the business centre of Jinshazhou as well as several shopping and entertainment areas, and is easily accessible via Guangzhou Subway Line 6 and other transport modes. Praised as the metropolis of Guangzhou and Foshan, Jinshazhou is located in north-west Guangzhou.

– 76 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

The project is divided into four phases of similar sizes for development. Construction of Phase I commenced in the second quarter of 2010 and completion is expected to take place around the end of 2012. Pre-sale of Phase I of this project commenced in the second quarter of 2011. Up to 31 January 2012, the project had obtained contracted sales for 352 residential units with a total saleable GFA of 36,762 sq.m. at an average price of approximately RMB15,600 per sq.m.

Guangzhou Haizhu Plaza

Guangzhou Haizhu Plaza is located on Chang Di Main Road in Yuexiu District, Guangzhou along the Pearl River. The Group owns the entire project.

The proposed development has a GFA of approximately 103,000 sq.m. and is intended to be developed into an office and commercial complex. The Group has completed substantially most of the resettlement work of the original occupants. However, due to recent changes in government planning of the site, the Group is now in the process of negotiating a land exchange with the city government.

Guangzhou King’s Park

The site is located on Donghua Dong Road in Yuexiu District. The permitted GFA is approximately 10,000 sq.m. The project is intended to be developed into a residential block with car-parking spaces and ancillary facilities. Construction work commenced in December 2010 and is expected to be completed in 2012.

Guangzhou Paramount Centre

The site is located at the junction of Da Sha Tou Road and Yan Jiang Dong Road in Yuexiu District. The permitted GFA is approximately 8,000 sq.m. This project is intended to be developed into an office block with car-parking spaces and ancillary facilities. Construction work commenced in December 2010 and is expected to be completed in 2012.

Guangzhou Guan Lu Road Project

The site is located on Guan Lu Road in Yuexiu District. The permitted GFA is approximately 14,000 sq.m. The project is intended to be developed into a residential block with car-parking spaces and ancillary facilities. Construction work is expected to commence later this year and will be completed in 2014.

Zhongshan Palm Spring

The project is located in Caihong Planning Area, West District of Zhongshan. The overall development has a total planned GFA of approximately 510,000 sq.m.

– 77 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Phase I of the project will comprise high-rise residential towers with a total saleable GFA of approximately 47,000 sq.m., commercial areas with a total GFA of approximately 16,000 sq.m. and low-rise townhouses and semi-detached villas with a total saleable GFA of approximately 27,000 sq.m. Construction of Phase I development is expected to be completed around mid-2012. Pre-sale of the residential units commenced in September 2011.

Up to 31 January 2012, the project had obtained contracted sales for 66 units with a total saleable GFA of 6,193 sq.m. at an average price of approximately RMB5,000 per sq.m.

Capital structure, liquidity and debt maturity profile

As at 31 January 2012, the Group had total borrowings in the amount of HK$3,039 million (as at 31 July 2011: HK$3,074 million), representing a decrease of HK$35 million. The consolidated net assets attributable to the owners of the Company amounted to HK$9,061 million (as at 31 July 2011: HK$8,514 million). The total debt to equity ratio (total borrowings to consolidated net assets) was 34% (as at 31 July 2011: 36%). The total debt to total capitalisation (long-term debt + equity) ratio was 27% (as at 31 July 2011: 27%). The net debt (total borrowings less cash and bank balances) to total equity plus net debt was 17% (as at 31 July 2011: 15%). The maturity profile of the Group’s borrowings of HK$3,039 million was spread with HK$668 million repayable within 1 year, HK$930 million repayable in the second year and HK$1,441 million repayable in the third to fifth years.

Approximately 47% and 51% of the Group’s borrowings were on a fixed rate basis and floating rate basis respectively, and the remaining 2% of the Group’s borrowings were interest free.

Apart from the fixed rate senior notes which were denominated in United States dollars (“USD”), the Group’s other borrowings of HK$1,615 million were 63% denominated in Renminbi (“RMB”), 36% in USD and 1% in Hong Kong dollars (“HKD”). The Group’s cash and bank balances of HK$1,246 million were 87% denominated in RMB, 8% in HKD and 5% in USD.

The Group’s presentation currency is denominated in HKD. The Group’s monetary assets, liabilities and transactions are principally denominated in RMB, USD and HKD. The Group, with HKD as its presentation currency, is exposed to foreign currency risk arising from the exposure of HKD against USD and RMB, respectively. Considering that HKD is pegged against USD, the Group believes that the corresponding exposure to USD exchange rate fluctuation is nominal. However, the Group has a net exchange exposure to RMB as the Group’s assets are principally located in China and the revenues are predominantly in RMB.

– 78 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Certain assets of the Group have been pledged to secure borrowings of the Group, including investment properties with a total carrying value of approximately HK$7,009 million, properties under development with a total carrying value of approximately HK$219 million, serviced apartments and related properties with a total carrying value of approximately HK$749 million, a property with carrying value of approximately HK$41 million, completed properties for sale with a total carrying value of approximately HK$1,287 million and bank balances of approximately HK$161 million.

Under a litigation being processed in a district court in China, the Group, as the claimant, is claiming for a sum of RMB17 million from one of the Group’s contractors. As a measure to preserve the payment ability of the defendant, the Group applied to the local court to freeze certain assets of the defendant. In return, the Group was required to pledge a leasehold property with a carrying value of approximately HK$45 million to the court as collateral.

On 27 February 2012, the Company announced a proposed issue by way of an open offer (the “Open Offer”) of 8,047,956,478 offer shares at the subscription price of HK$0.125 per offer share on the basis of 1 offer share for every 1 share of the Company. The estimated gross proceeds before expenses from the Open Offer are approximately HK$1,006 million. The estimated proceeds after expenses of HK$990 million are intended to be used as working capital.

Taking into account the amount of cash being held as at the end of the reporting period, available banking facilities, expected renewal of certain bank loans, recurring cash flows from the Group’s operating activities and the estimated net proceeds from the proposed Open Offer, the Group believes that it would have sufficient liquidity to finance its existing property development and investment projects.

Contingent liabilities

As at 31 January 2012, there has been no material change in contingent liabilities of the Group since 31 July 2011.

As at 31 July 2011, the contingent liabilities of the Group are as set out on page 91 of this circular. As at 29 February 2012, the contingent liabilities of the Group is estimated to be amounted to HK$92 million. The Group had provided guarantees to certain banks in respect of mortgage loan facilities granted by such banks to certain end-buyers of property units developed by the Group. Pursuant to the terms of the guarantees, upon default in mortgage payments by these end-buyers, the Group will be responsible to repay the outstanding mortgage loan principals together with accrued interest owed by the defaulted end-buyers. The Group’s obligation in relation to such guarantees has been gradually relinquished along with the settlement of the mortgage loans granted by the banks to the end-buyers. Such obligation will also be relinquished then the Property Ownership Certificates for the relevant properties are issued or the end-buyers have fully repaid the mortgage loans, whichever is the earlier.

– 79 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Employees and remuneration policies

As at 31 January 2012, the Group employed a total of around 1,400 employees. The Group recognises the importance of maintaining a stable staff force in its continued success. Under the Group’s existing policies, employee pay rates are maintained at competitive levels whilst promotion and salary increments are assessed on a performance- related basis. Discretionary bonuses are granted to employees based on their merit and in accordance with industry practice. Other benefits including share option scheme, mandatory provident fund scheme, free hospitalisation insurance plan, subsidised medical care and sponsorship for external education and training programmes are offered to eligible employees.

(2) For the year ended 31 July 2011

Overview of Final Results

For the year ended 31 July 2011, the Company and its subsidiaries (the “Group”) recorded a turnover of HK$647,183,000 (2010: HK$1,514,214,000) and a gross profit of HK$382,274,000 (2010: HK$775,445,000), representing a decrease of approximately 57.3% and 50.7% respectively from the previous year.

Out of the total turnover, rental income increased by 101.1% to HK$388,796,000 (2010: HK$193,306,000), which was mainly due to the re-opening of the shopping arcades and gradual re-launching of the renovated serviced apartments of Shanghai Hong Kong Plaza during the year. However, turnover from sale of properties decreased by 80.4% to HK$258,387,000 (2010: HK$1,320,908,000). The business review section will set out more information on the composition of the property sales during the year. Rental income accounted for 60.1% of the total turnover for the year ended 31 July 2011 compared to 12.8% for the previous year. Rental operations on average achieved a higher gross profit margin when compared to the sales of property units. As a result, overall gross profit margin was 59.1%, compared to 51.2% in the previous year.

During the year, the Group recorded the following major other operating income/expenses items:

— provision for impairment loss on certain properties under development of HK$22,037,000 (2010: a provision of HK$56,281,000); and

—fair value gain on its investment properties of HK$605,006,000 (2010: gain of HK$284,835,000).

Finance costs expensed during the year reduced to HK$76,143,000 (2010: HK$84,806,000), after capitalising finance costs of HK$111,155,000 (2010: HK$96,884,000) for properties under development, investment properties and property, plant and equipment during the year.

– 80 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

For the year ended 31 July 2011, profit from operating activities was HK$850,868,000 (2010: HK$902,376,000), representing a decrease of approximately 5.7% from the previous year. Tax charge reduced to HK$193,663,000 (2010: HK$454,297,000) mainly due to a decrease in property development profit as compared to the previous year. For the year ended 31 July 2011, profit attributable to owners of the Company was HK$530,112,000 (2010: HK$322,106,000), representing an increase of 64.6% from the previous year.

Basic earnings per share was HK6.59 cents for the year ended 31 July 2011 compared to HK4.00 cents for the previous year.

Shareholders’ equity as at 31 July 2011 amounted to HK$8,514,458,000, up from HK$7,525,127,000 as at 31 July 2010. Net asset value per share attributable to owners of the Company was HK$1.06 as at 31 July 2011, as compared to HK$0.94 as at 31 July 2010.

Final Dividend

The board of directors of the Company (the “Board”) has recommended a final dividend of HK0.5 cent per share for the year ended 31 July 2011 (2010: HK0.5 cent per share) payable to shareholders whose names appear on the Hong Kong Branch Register of Members of the Company at the close of business on Wednesday, 4 January 2012. Subject to the approval of shareholders at the forthcoming annual general meeting of the Company, the proposed final dividend, amounting to a total of about HK$40,240,000 (2010: HK$40,240,000), will be payable on Friday, 13 January 2012.

– 81 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Business Review

Investment Properties

Property Rental Results

During the year ended 31 July 2011, the Group recorded a turnover of HK$388,796,000 from rental income. Breakdown of turnover from rental income is as follows:

Year ended 31 July 2011 2010 Change HK$ HK$ %

Shanghai Hong Kong Plaza 279,087,000 100,969,000 176.4

Shanghai Regents Park (commercial podium and car-parking spaces) 8,350,000 7,116,000 17.3

Shanghai Northgate Plaza I 17,448,000 19,470,000 -10.4

Guangzhou May Flower Plaza 72,362,000 64,687,000 11.9

Guangzhou West Point (commercial podium and car-parking spaces) 11,489,000 — n/a

Others 60,000 1,064,000 -94.4

Total 388,796,000 193,306,000 101.1

During the year, rental income from Shanghai Hong Kong Plaza increased substantially due to completion of the renovation of its retail podiums and serviced apartments. As the Group is now considering a comprehensive redevelopment of Shanghai Northgate Plaza I and II, rental income for this property recorded negative growth as some of the previous tenants chose to move out of the property.

During the year, rental income from Guangzhou May Flower Plaza recorded a healthy growth and Guangzhou West Point commercial podium started to generate rental income.

– 82 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Development Properties

Contracted Sales of Development Properties

During the year ended 31 July 2011 Approximate Total average contracted Contracted contracted sales sales area selling price# amount# sq.m. HK$/sq.m. HK$’000

Shanghai May Flower Plaza Residential Units 14,628 43,400 634,940,000

Shanghai Regents Park Phase II, Residential Units 1,091 51,000 55,674,000

Guangzhou West Point Residential Units 173 29,900 5,167,000 Office Units 9,801 18,900 185,718,000

Guangzhou Eastern Place Phase II, Residential Unit 91 27,200 2,472,000

Sub-total 25,784 883,971,000

Guangzhou Eastern Place Car-parking Spaces 24,306,000

Total 908,277,000

Guangzhou Dolce Vita Residential Units* 15,309 17,900 274,590,000

# Before business tax

*Guangzhou Dolce Vita was a 50:50 joint venture project with CapitaLand China Holdings Pte. Ltd.. Please note that the reported contracted sales of HK$274,590,000 is attributable to the full project. The Group’s attributable share of profit from the sale of these residential units is expected to be recognised upon completion of the project after mid-2012.

The contracted sales at Shanghai Regents Park, Guangzhou West Point and Guangzhou Eastern Place shown above were recorded as turnover for the year under review. The contracted sales at Shanghai May Flower Plaza are expected to be recognised as turnover in the fourth quarter of 2011.

– 83 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Sales of Development Properties Recorded

During the year ended 31 July 2011 Approximate average Total Recorded recorded recorded sales area selling price# sales amount* sq.m. HK$/sq.m. HK$

Shanghai Regents Park Phase II, Residential Units 1,091 51,000 52,541,000

Guangzhou Eastern Place Phase II, Residential Unit 91 27,200 2,331,000

Guangzhou West Point Residential Units 173 29,900 4,873,000 Office Units 9,801 18,900 175,719,000

Sub-total 11,156 235,464,000

Guangzhou Eastern Place Car-parking Spaces 22,923,000

Total 258,387,000

# Before business tax

* After business tax

Joint Investment in and Development of the Creative Culture City Project in Hengqin

On 16 September 2011, the Company and eSun Holdings Limited (“eSun”) entered into a co-operation agreement with the Hengqin New District Management Committee (the “Co-operation Agreement”), pursuant to which the Company and eSun shall jointly invest in and develop the project in Hengqin Cultural and Creative Zone, Zhuhai, Guangdong Province (the “Project”). In addition, the Company and eSun entered into a strategic banking co-operation framework agreement with China Construction Bank Corporation Guangdong Branch (“CCB”) on 15 September 2011 and a banking co-operation agreement with Industrial Bank Co., Limited Guangzhou Branch (“Industrial Bank”) on 25 July 2011 (collectively the “Banking Agreements”) whereby both CCB and Industrial Bank have agreed to provide indicative credit facilities to support development of the Project.

The co-operation under the Co-operation Agreement and the Banking Agreements is at a preliminary stage. The parties will further negotiate on the detailed terms of the cooperation and further updates will be made from time to time.

– 84 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Market Overview and Operating Environment

The Group is principally engaged in property development for sale and property investment for rental purposes in the Mainland of China (“China”). The Group currently has property projects in Shanghai, Guangzhou and Zhongshan.

During the year under review, the operating environment for the property market in China went from robust to challenging. Since April 2010, the soaring property prices and transaction volumes have led the central and local city governments in China to introduce several rounds of austerity measures aimed at suppressing the non-end-user demand and preventing a bubble developing in the property market. Since September 2010, the control measures have turned more drastic, and included raising lending rates and bank’s required reserve ratios, increasing down-payment requirement on mortgage loans, imposing more limits to developers for domestic bank financing and restrictions on new purchases by local and non-local residents. Recently, the policy driven market has turned to increased construction and availability of affordable housing, which has the effect of increasing supply and at the same time suppressing property price increases. As a result, there had been an obvious drop in transaction volume, a softening of property prices and a gradual increase in inventory. It is apparent that the Central Government aims to maintain a stable property market by controlling speculative buying. To this end, the Group has turned more cautious towards the China property market and will continue to implement and adjust its business plan according to market developments.

Review of Major Property Projects

Shanghai

Shanghai Hong Kong Plaza

Shanghai Hong Kong Plaza is a twin-tower prime property located on both the North and South sides of the street at Huaihaizhong Road, Luwan District, Shanghai; the twin- towers are connected by a footbridge. The property comprises an office tower, shopping arcades and a serviced apartments tower. The property is directly above the Huangpi South Road Metro Station and is within walking distance of Xintiandi, a well-known landmark in Shanghai. Rental income for the year ended 31 July 2011 amounted to HK$279,087,000, up substantially by 176% from HK$100,969,000 in the previous year. Such increase in rental income was primarily due to the gradual re-opening of its shopping arcades and serviced apartments after renovation.

Shanghai Hong Kong Plaza’s shopping arcades were re-opened in October 2010. Since its re-opening, Shanghai Hong Kong Plaza’s shopping arcades have been one of the most visible high-end retail venues for global luxury brands in the Huaihaizhong Road area. As at 31 July 2011, 99% of the arcades’ leasable areas have been leased. The arcades have successfully secured The Apple Store, Cartier, Coach, GAP and Tiffany as anchor tenants and their flagship stores were opened since the second half of 2010. Other tenants include international renowned luxury brands and high-end restaurants.

– 85 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Shanghai Hong Kong Plaza’s serviced apartments are now managed by the Ascott Group. The Group can now leverage on the Ascott Group’s extensive experience and expertise in operating serviced apartments to help position the serviced apartments as a high-end product.

Due to completion of the renovation work at the shopping arcades and serviced apartments during the year under review, occupancy at the office tower of Shanghai Hong Kong Plaza has also improved. As at 31 July 2011, the office tower was about 98% leased.

Shanghai May Flower Plaza

Shanghai May Flower Plaza is a mixed-use project located at the junction of Da Tong Road and Zhi Jiang Xi Road in Su Jia Xiang in the Zhabei District in Shanghai. This project is situated near the Zhongshan Road North Metro Station. The Group has an effective 95% interest in the project.

The project has a total gross floor area (“GFA”) of approximately 111,000 square metres (“sq.m.”) (GFA attributable to the Group of approximately 105,000 sq.m.), comprising residential, office apartments and commercial spaces. The total saleable area of residential and office apartment units is approximately 80,000 sq.m. The Group expects to obtain the completion certificate of this project in the fourth quarter of 2011.

The residential portion of Shanghai May Flower Plaza is now branded “The Mid-town” which comprises 628 residential units. The Group started the pre-sale of this project in November 2010. Up to 31 July 2011, the Group had obtained contracted sales for 136 units with a total saleable GFA of 14,628 sq.m. at an average price of RMB36,900 per sq.m.

Shanghai Regents Park Phase II

Phase II of the project comprises 6 residential towers with 455 units (total saleable GFA of approximately 62,845 sq.m. and GFA attributable to the Group of approximately 59,700 sq.m.). Phase II was completed in December 2008.

Up to 31 July 2011, the Group sold a total of 450 units with a total saleable GFA of 61,131 sq.m. at an average price of RMB34,300 per sq.m. As at 31 July 2011, the Group had 5 units remaining with a total saleable GFA of 1,714 sq.m. The commercial podium was about 98% leased.

– 86 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Shanghai Northgate Plaza

Shanghai Northgate Plaza I currently comprises office units, a retail podium and car- parking spaces. Located on Tian Mu Road West in the Zhabei District of Shanghai near the Shanghai Railway Terminal, this property has a total GFA of approximately 36,500 sq.m. including car-parking spaces.

Shanghai Northgate Plaza II is a vacant site adjacent to Plaza I. The site area of Plaza II is approximately 4,115 sq.m. and its buildable above ground GFA is approximately 25,000 sq.m. The Group has an effective 99% interest of Northgate Plaza II.

The Group is currently discussing the feasibility of the redevelopment proposal with professional consultants.

Guangzhou and Zhongshan

Guangzhou May Flower Plaza

This 13-storey complex has a total GFA of approximately 51,000 sq.m. (GFA attributable to the Group of approximately 39,000 sq.m.), comprising retail spaces, restaurants and fast food outlets, and office units. The property is fully leased to tenants that are well- known corporations, consumer brands and restaurants. The property also houses a multiplex cinema. Rental income from Guangzhou May Flower Plaza was HK$72,362,000 for the year ended 31 July 2011, representing an increase of approximately 11.9% from the previous year.

Guangzhou Eastern Place

Guangzhou Eastern Place is a multi-phase project located on Dongfeng East Road, Yuexiu District, Guangzhou.

The current Phase V development will have a total GFA attributable to the Group of approximately 101,000 sq.m., comprising residential blocks, an office block and ancillary retail spaces. Construction work has commenced and is expected to be completed between 2012 and 2013. Pre-sale of the residential units is expected to start in the second quarter of 2012.

– 87 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

During the year under review, the Group sold 36 car-parking spaces at an average price of RMB573,600 per space.

Guangzhou West Point

Guangzhou West Point is located on Zhongshan Qi Road and is within walking distance from the Ximenkou Subway Station. The project has a total GFA of approximately 64,000 sq.m., comprising 243 residential units, 244 office units and commercial spaces. In addition, there are approximately 10,000 sq.m. for carparks and ancillary facilities.

Residential blocks were completed in February 2010 and the office and commercial blocks were completed in June 2010. Up to 31 July 2011, the Group sold a total of 219 residential units with a total saleable GFA of 22,160 sq.m. at an average price of RMB13,300 per sq.m., and the Group also sold a total of 235 office units with a total saleable GFA of 20,276 sq.m. at an average price of RMB14,700 per sq.m.

The commercial portion of Guangzhou West Point held a grand-opening ceremony in December 2010. Up to 31 July 2011, 98% of the retail spaces available were leased. Tenants in Guangzhou West Point include renowned restaurants and retail brands. During the year, the rental income from the commercial podium and car-parking spaces of Guangzhou West Point was approximately HK$11.5 million.

Guangzhou Dolce Vita

The Guangzhou Dolce Vita was a 50:50 joint venture project with CapitaLand China Holdings Pte. Ltd. This proposed development in Jinshazhou, Hengsha, Baiyuan District, Guangzhou will have a total GFA of approximately 369,000 sq.m. (GFA attributable to the Group of approximately 184,500 sq.m.), comprising approximately 3,400 low-rise and high-rise residential units with ancillary facilities including car-parking spaces and shopping amenities. It is conveniently located near the business centre of Jinshazhou as well as several shopping and entertainment areas, and is easily accessible via Guangzhou Subway line 6 and other transport modes. Touted as the metropolis of Guangzhou and Foshan, Jinshazhou is located in north-west Guangzhou.

The project will be divided into four phases of similar sizes for development. Construction of Phase I commenced in the second quarter of 2010 and completion is expected to take place around the end of 2012. The Group started to pre-sale Phase I of this project in the second quarter of 2011. Up to 31 July 2011, the project had obtained contracted sales for 149 units with a total saleable GFA of 15,309 sq.m. at an average price of RMB15,200 per sq.m.

– 88 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Guangzhou Haizhu Plaza

Guangzhou Haizhu Plaza is located on Chang Di Main Road in Yuexiu District, Guangzhou along the Pearl River. The Group owns the entire project.

The proposed development has a GFA of approximately 103,000 sq.m., and is intended to be developed into an office and commercial complex. The Group has completed substantially most of the resettlement work of the original occupants. However, due to recent changes in government planning of the site, the Group is now in the process of negotiating a land exchange with the city government.

Guangzhou King’s Park

Guangzhou Paramount Centre

Guangzhou Guan Lu Road Project

Zhongshan Palm Spring

The project is located in Caihong Planning Area, West District of Zhongshan. The overall development has a total planned GFA of approximately 504,000 sq.m.

Phase I of the project will comprise high-rise residential towers with a total saleable GFA of approximately 47,000 sq.m., commercial areas with a total GFA of approximately 16,000 sq.m. and low-rise townhouses and semi-detached villas with a total saleable GFA of approximately 27,000 sq.m. Construction of Phase I development has commenced and is now expected to be completed around mid-2012. Pre-sale of residential units commenced in September 2011.

– 89 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Capital Structure, Liquidity and Debt Maturity Profile

As at 31 July 2011, the Group had total borrowings in the amount of HK$3,074 million (2010: HK$2,556 million), representing an increase of HK$518 million. The consolidated net assets attributable to the owners of the Company amounted to HK$8,514 million (2010: HK$7,525 million). The total debt to equity ratio (total borrowings to consolidated net assets) was 36% (2010: 34%). The total debt to total capitalisation (long-term debt + equity) ratio was 27% (2010: 26%). The net debt (total borrowings less cash and bank balances) to total equity plus net debt was 15% (2010: 10%). The maturity profile of the Group’s borrowings of HK$3,074 million was spread with HK$118 million repayable within 1 year, HK$1,521 million repayable in the second year and HK$1,435 million repayable in the third to fifth years.

Approximately 46% and 52% of the Group’s borrowings were on a fixed rate basis and floating rate basis respectively, and the remaining 2% of the Group’s borrowings were interest free.

Apart from the fixed rate senior notes which were denominated in United States Dollars (“USD”), the Group’s other borrowings of HK$1,646 million were 63% denominated in Renminbi (“RMB”), 36% in USD and 1% in Hong Kong dollars (“HKD”). The Group’s cash and bank balances of HK$1,600 million were 88% denominated in RMB, 7% in HKD and 5% in USD.

Certain assets of the Group have been pledged to secure borrowings of the Group, including investment properties with a total carrying value of approximately HK$6,248 million, properties under development with a total carrying value of approximately HK$1,197 million, serviced apartments and related properties with a total carrying value of approximately HK$819 million, a property with carrying value of approximately HK$41 million and bank balances of approximately HK$127 million.

– 90 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Taking into account the amount of cash being held as at the end of the reporting period, the available banking facilities and the recurring cashflows from the Group’s operating activities, the Group believes that it would have sufficient liquidity to finance its existing property development and investment projects.

Contingent Liabilities

(a) As at the end of the reporting period, contingent liabilities not provided for in the financial statements are as follows:

Company 2011 2010 HK$’000 HK$’000

Guarantees given to banks in connection with facilities granted to subsidiaries 1,140,161 985,596

As at 31 July 2011, the banking facilities granted to the subsidiaries subject to guarantees given to the banks by the Company were utilised to the extent of HK$1,096,631,000 (2010: HK$950,061,000).

(b) The Group had provided guarantees to certain banks in respect of mortgage loan facilities granted by such banks to certain end-buyers of West Point and Eastern Place Phase IV. Pursuant to the terms of the guarantees, upon default in mortgage payments by these end-buyers, the Group will be responsible to repay the outstanding mortgage loan principals together with accrued interest owed by the defaulted end-buyers. The Group’s obligation in relation to such guarantees has been gradually relinquished along with the settlement of the mortgage loans granted by the banks to the end-buyers. Such obligation will also be relinquished when the Property Ownership Certificates for the relevant properties are issued or the end-buyers have fully repaid the mortgage loans, whichever is the earlier. It is not practical to determine the outstanding amount of the contingent liabilities of the Group and the Company in respect of the above guarantees as at the end of the reporting period.

– 91 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Employees and Remuneration Policies

As at 31 July 2011, the Group employed a total of around 1,300 employees. The Group recognises the importance of maintaining a stable staff force in its continued success. Under the Group’s existing policies, employee pay rates are maintained at competitive levels, whilst promotion and salary increments are assessed on a performance-related basis. Discretionary bonuses are granted to employees based on their merit and in accordance with industry practice. Other benefits including share option scheme, mandatory provident fund scheme, free hospitalisation insurance plan, subsidised medical care and sponsorship for external education and training programmes are offered to eligible employees.

Prospects

The current macro-economic situation in China is subject to complicated domestic and external influence. Europe is finding it very difficult to control its own unwieldy situation, especially with regard to maintaining confidence in the Euro. The threat of recession in the United States is the other substantial risk to the global economy. In the near term, we expect that the China property market will continue to be influenced by government macro-economic policies as well as fiscal policies of the West.

From a domestic perspective, ongoing urbanization and demand for living improvement should pave the way for growth in the real estate market in China. Overall, the Group is still cautiously optimistic about the China property market and believes that we are well positioned to take advantage of the situation in the coming years. The Group’s net gearing level is low by industry standard and will continue with its development plans to fuel growth in turnover and profits for the coming year. It will also continue to replenish its land bank should the right opportunities surface. Furthermore, as encouraged by the Group’s success in revitalizing the Shanghai Hong Kong Plaza property, the Group will continue to improve upon its recurrent income base through upgrading existing rental properties and adding new venues from the commercial property portions of new development projects. The Group expects its investment properties to generate a healthy record income in the next few years.

(3) For the year ended 31 July 2010

Overview of Final Results

For the year ended 31 July 2010, the Group recorded a turnover of HK$1,514,214,000 (2009: HK$937,380,000) and a gross profit of HK$775,445,000 (2009: HK$632,436,000), representing an increase of approximately 61.5% and 22.6% respectively from the previous year.

– 92 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Out of the total turnover, rental income decreased by 11.5% to HK$193,306,000 (2009: HK$218,525,000), which was mainly due to closure and renovation of the shopping arcades and serviced apartments portions of Shanghai Hong Kong Plaza during most of the year. Owing to further contribution from the sales of residential units of Shanghai Regents Park Phase II during the year ended 31 July 2010 and recognition of income from sales of residential and office units of Guangzhou West Point, turnover from sales of properties increased by 83.8% to HK$1,320,908,000 (2009: HK$718,855,000).

Sales of units at Shanghai Regents Park Phase II achieved higher gross profit margin compared to sales of units at Guangzhou West Point. Property development turnover recognised in the year was made up of sales of units at both Shanghai Regents Park Phase II and Guangzhou West Point, while property development turnover in the previous year was entirely made up of sales of units at Shanghai Regents Park Phase II. As a result, overall gross profit margin was 51.2%, compared to 67.5% in the previous year.

During the year, the Group recorded the following major non-recurrent other operating income/expenses items:

—a provision for impairment loss on certain properties under development of HK$56,281,000 (2009: a provision of HK$60,680,000);

—a fair value gain on its completed investment properties of HK$198,098,000 (2009: a gain of HK$143,127,000); and

—a fair value gain on its investment properties under construction of HK$86,737,000 (2009: Nil) due to the Group’s adoption of HKAS 40 Amendments. Prior to the adoption of Amendments to HKAS 40, the Group’s investment properties under construction was carried at cost until the construction is completed, at which time it will be fair valued. As a result of the HKAS 40 Amendments, such investment properties under construction will be carried at fair value when the fair value first becomes reliably measurable. Any gain or loss will be recognised in profit or loss, consistent with the policy adopted for all other investment properties carried at fair value.

During the previous year ended 31 July 2009, the Group recorded a gain of HK$256,311,000 on the termination of all cross currency swaps. As these cross currency swaps were fully terminated during the previous year, no such gain was recorded again during the year ended 31 July 2010.

Finance costs expensed during the year reduced to HK$84,806,000 (2009: HK$118,588,000), after finance costs of HK$96,884,000 (2009: HK$77,337,000) had been capitalised in properties under development, investment properties and property, plant and equipment during the year.

– 93 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

For the year ended 31 July 2010, profit from operating activities was HK$902,376,000 (2009: HK$886,631,000), representing an increase of approximately 1.8% from the previous year. For the year ended 31 July 2010, profit attributable to owners of the Company was HK$322,106,000 (2009: HK$406,888,000), representing a decrease of 20.8% from the previous year.

Basic earnings per share was HK4.00 cents for the year ended 31 July 2010 compared to HK5.06 cents for the previous year.

Shareholders’ equity as at 31 July 2010 amounted to HK$7,525,127,000, up from HK$7,210,784,000 as at 31 July 2009. Net asset value per share attributable to owners of the Company was HK$0.94 as at 31 July 2010, as compared to HK$0.90 as at 31 July 2009.

Final Dividend

The Board of Directors has recommended a final dividend of HK0.5 cent per share for the year ended 31 July 2010 (2009: HK0.5 cent per share) payable to shareholders whose names appear on the register of members of the Company as at the close of business on 21 December 2010. Subject to the approval of shareholders at the forthcoming annual general meeting of the Company, the dividend will be payable on 6 January 2011.

– 94 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Business Review

Investment properties

Property rental results

During the year ended 31 July 2010, the Group recorded a turnover of HK$193,306,000 from rental income. Breakdown of turnover from rental income is as follows:

Year ended 31 July 2010 2009 Change HK$ HK$ %

Shanghai Hong Kong Plaza 100,969,000 128,520,000 (21.4)

Shanghai Regents Park (commercial podium and carparking spaces) 7,116,000 7,332,000 (2.9)

Shanghai Northgate Plaza I 19,470,000 20,811,000 (6.4)

Guangzhou May Flower Plaza 64,687,000 61,214,000 5.7

Others 1,064,000 648,000 64.2

Total 193,306,000 218,525,000 (11.5)

During the year, the decrease in rental income from Shanghai Hong Kong Plaza was mainly due to closure in most of the year of certain portions of its shopping arcades and serviced apartments for renovation work. As the Group is now considering renovation plan and new trade-mix for Shanghai Northgate Plaza I, rental income for this property also recorded negative growth as some of the previous tenants opted to move out of the property.

On the other hand, rental income from Guangzhou May Flower Plaza recorded a healthy growth during the year.

– 95 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Development properties

Contracted sales of development properties

During the year ended 31 July 2010 Approximate average Total Contracted contracted contracted sales area selling price sales amount# sq.m. HK$/sq.m. HK$

Shanghai Regents Park Phase II, Residential Units 20,494 44,000 901,455,000

Guangzhou West Point Residential Units 574 17,500 10,024,000 Office Units 10,474 15,200 158,988,000

Total 31,542 1,070,467,000

# Before business tax

All of the above contracted sales were recorded as turnover in the year ended 31 July 2010.

Sales of development properties recorded

During the year ended 31 July 2010 Approximate average Total Recorded recorded recorded sales area selling price sales amount* sq.m. HK$/sq.m. HK$

Shanghai Regents Park Phase II, Residential Units 20,494 44,000 855,932,000

Guangzhou West Point Residential Units 21,986 15,000 313,938,000 Office Units 10,474 15,200 151,038,000

Total 52,954 1,320,908,000

* After business tax – 96 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Market Overview and Operating Environment

During the year under review, the property market in China had entered a turning point in the first half of 2010. Before April 2010, China property market has experienced rapid surges in transaction volume and total investment in residential units, due to strong flow of investment demand and public expectation on insufficient supply and price hike. Since April 2010, the Central Government launched a series of administrative control measures to curb the soaring property prices and suppress speculative demand. The Central Government’s actions were substantially echoed by the implementation measures adopted by various local city governments. These control measures include bank credit control on purchasers, temporary limit on number of new purchase by each individual, possible implementation of new property-related tax, speeding up of policy housing and strengthening property market regulatory forces. As a result, there have been gradual drop in transaction volume and softening of property prices since the second quarter of 2010.

Overall, the Group believes the intention of the government policies on the property is consistent, which is to stabilize the property price and curb speculative demand in order to achieve steady development of the property market. To this end, the Group is cautiously optimistic about the China property market and will continue to implement its business plan according to market developments.

Review of Major Property Projects

Shanghai

Shanghai Hong Kong Plaza

Shanghai Hong Kong Plaza is a twin-tower prime property located at Huaihaizhong Road, Luwan District, Shanghai comprising office, shopping arcades and serviced apartments. The property is directly above Huangpi South Road Metro Station and is within walking distance of Xintiandi. Rental income for the year ended 31 July 2010 amounted to HK$100,969,000, down by 21.4% from HK$128,520,000 in the previous year. Such decrease in rental income was mainly due to closure in most of the year of certain portions of its shopping arcades and serviced apartments for renovation work.

– 97 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Renovation work on the shopping arcades under both towers was completed in the first quarter of 2010 and leased units were handed over to the tenants for their renovation since then. At present, about 96% of the leasable areas of the shopping arcades portion have been leased. The premises has successfully secured The Apple Store, Cartier, Coach, GAP and Tiffany as anchor tenants and their flagship stores were opened since the middle of 2010. Other tenants include international renowned luxury brands and high-end restaurants. Shanghai Hong Kong Plaza’s shopping arcades were grand-opened in October 2010. After its re-opening, Shanghai Hong Kong Plaza’s shopping arcades are one of the most visible high-end retail venues for global luxury brands in Huaihaizhong Road area.

The serviced apartments portion of Shanghai Hong Kong Plaza under the Group was vacated for full renovation since August 2009 to upgrade the quality of the rooms and the services. The Group has engaged the Ascott Group to manage the serviced apartments portion, and hopes this will enable the Group to leverage on the Ascott Group’s extensive experience and expertise in operating serviced apartments and to establish a high-end brand image. Certain floors of renovated and re-branded serviced apartments of Shanghai Hong Kong Plaza were soft-opened for business in May 2010. Rest of the serviced apartment floors will be re-opened by the end of 2010.

Renovation of common areas and lift lobbies of the office tower was completed at the end of 2009. As at 31 July 2010, the office tower was about 84% leased.

The rental income of Hong Kong Plaza is expected to be substantially improved from its current level upon its re-opening after the renovation.

Shanghai Regents Park Phase II

Regents Park is a major residential project located in the Zhongshan Park Commercial Area of the prestigious Changning District, Shanghai with a total saleable gross floor area (“GFA”) of approximately 154,000 square metres (“sq.m.”) (GFA attributable to the Group of approximately 146,000 sq.m.). The Group has an effective 95% interest in the project.

Up to 31 July 2010, the Group sold a total of 447 units with a total saleable GFA of 60,040 sq.m. at an average price of RMB34,100 per sq.m. As at 31 July 2010, the Group only had 8 units with a total saleable GFA of 2,805 sq.m. remaining in this project.

– 98 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Shanghai May Flower Plaza

The project has a total GFA of approximately 114,500 sq.m. (GFA attributable to the Group of approximately 109,000 sq.m.), comprising residential and office apartments, and commercial spaces. In addition, there will be approximately 33,000 sq.m. for carparks and ancillary facilities. Total saleable area of residential and serviced apartment units is approximately 77,450 sq.m. Construction work is scheduled for completion in mid-2011.

The residential portion of Shanghai May Flower Plaza is now branded “The Mid-town” which offers 628 residential units. The Group is now in the process of applying for pre- sale permit for the residential units and will commence pre-sale after obtaining the approval.

Shanghai Northgate Plaza

Shanghai Northgate Plaza I is a block of office units with retail podium located on Tian Mu Road West in the Zhabei District of Shanghai near the Shanghai Railway Terminal. Shanghai Northgate Plaza I has a total GFA of approximately 36,500 sq.m. including carparks. The Group is now considering renovation plan and new trade-mix for Shanghai Northgate Plaza I.

The Group plans to develop Shanghai Northgate Plaza II on the vacant site located adjacent to Phase I. The Group has 99% interest in Phase II. Phase II development will have a total GFA of approximately 28,800 sq.m. comprising serviced apartments with retail podium and carparking spaces. Foundation work was completed in August 2009.

The Group has re-submitted the design of Shanghai Northgate Plaza II for government approval and is now awaiting relevant approval.

Guangzhou and Zhongshan

Guangzhou May Flower Plaza

– 99 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

This 13-storey complex has a total GFA of approximately 51,000 sq.m. (GFA attributable to the Group of approximately 39,000 sq.m.) comprising retail spaces, restaurants and fast food outlets, cinema and office units. The property is fully leased to various tenants that are well-known corporations, consumer brands, cinemas and restaurants. Rental income from Guangzhou May Flower Plaza was HK$64,687,000 for the year ended 31 July 2010, representing a growth of approximately 5.7% from the previous year.

Guangzhou Eastern Place

Guangzhou Eastern Place is a multi-phase project located in Dongfeng East Road, Yuexiu District, Guangzhou.

The current Phase V development will have a total GFA attributable to the Group of approximately 101,000 sq.m. comprising residential blocks, a block of office or serviced apartments, and ancillary retail spaces. Construction work has commenced and is expected to be completed in 2012. Pre-sale of the residential units is now expected to start in 2011.

Guangzhou West Point

Guangzhou West Point is located on Zhongshan Qi Road and is within walking distance from the Ximenkou Subway Station. The project has a total GFA of approximately 64,000 sq.m., comprising 243 residential units, 244 office units and commercial spaces. In addition, there will be approximately 10,000 sq.m. for carparks and ancillary facilities.

Residential blocks were completed in February 2010 and the office and commercial blocks were completed in June 2010. Up to 31 July 2010, the Group sold a total of 218 residential units with a total saleable GFA of 21,986 sq.m. at an average price of RMB13,200 per sq.m., and the Group sold a total of 129 office units with a total saleable GFA of 10,474 sq.m. at an average price of RMB13,300 per sq.m.

The retail portion of Guangzhou West Point was soft-opened in August 2010. Up to 31 October 2010, around 76% of the retail spaces available were leased. Tenants in Guangzhou West Point include renowned restaurants and retail brands.

Guangzhou Jinshazhou Project

Guangzhou Jinshazhou project is a 50:50 joint venture with CapitaLand China Holdings Pte. Ltd. This proposed development in Jinshazhou, Hengsha, Baiyuan District, Guangzhou has a total GFA of approximately 369,000 sq.m. (GFA attributable to the Group of approximately 184,500 sq.m.), comprising a total of around 3,400 low-rise and high-rise residential units with ancillary facilities including carparks and shopping amenities. It is conveniently located near the business center of Jinshazhou as well as several shopping and entertainment areas, and easily accessible via Guangzhou Subway line 6 and other transport modes. Touted as the metropolis of Guangzhou and Foshan, Jinshazhou is located in north-west of Guangzhou.

– 100 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Guangzhou Haizhu Plaza

Guangzhou Haizhu Plaza is located on Chang Di Main Road in Yuexiu District, Guangzhou along the Pearl River. The Group owns the entire interest in this project.

The proposed development has a GFA of approximately 103,000 sq.m., and is intended to be developed into an office and commercial complex. The Group has completed substantially most of the resettlement work of original occupants. However, due to recent change in government planning of the site, the Group is now in the process of negotiating the development plan with the city government.

Guangzhou Donghua Dong Road Project

The site is located on Donghua Dong Road in Yuexiu District. The permitted GFA is approximately 10,000 sq.m. The project is intended to be developed into a residential tower, carparks and ancillary facilities. Construction is expected to start this year.

Guangzhou Da Sha Tou Road/Yuan Jiang Dong Road Project

The site is located at the junction of Da Sha Tou Road and Yuan Jiang Dong Road in Yuexiu District. The permitted GFA is approximately 8,000 sq.m. The project is intended to be developed into a serviced apartment tower, carparks and ancillary facilities. Construction is expected to start this year.

Guangzhou Guan Lu Road Project

The site is located on Guan Lu Road in Yuexiu District. The permitted GFA is approximately 14,000 sq.m. The project is intended to be developed into a residential tower, carparks and ancillary facilities. Construction is expected to start in 2011.

Zhongshan Palm Springs

The project is located in Caihong Planning Area, West District of Zhongshan. The overall development has a total planned GFA of approximately 406,000 sq.m.

Phase I of the project will comprise high-rise residential towers with a total saleable GFA of approximately 44,000 sq.m., commercial areas with a total GFA of approximately 16,000 sq.m. and low-rise townhouses and semi-detached villas with a total saleable GFA of approximately 27,000 sq.m. Construction of Phase I development has commenced and is now expected to complete in the first half of 2012. Pre-sale of residential units will start in the first half of 2011.

– 101 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Subsequent Event — Group Reorganisation

On 30 September 2010, Lai Sun Garment (International) Limited (“LSG”) and eSun Holdings Limited (“eSun”) completed a group reorganisation (“Group Reorganisation”). Pursuant to the Group Reorganisation, LSG transferred its entire interest in the Company (approximately 40.58% of the issued share capital of the Company) to eSun; whereby eSun transferred its entire interest in Lai Sun Development Company Limited (“LSD”) (approximately 36.72% of the issued share capital of LSD) to LSG.

Immediately following the completion of the Group Reorganisation, the ownership structure involving the Company became:

LSG

47.97%

LSD

36.08%

eSun

40.58%

The Company

Capital Structure, Liquidity and Debt Maturity Profile

As at 31 July 2010, the Group had total borrowings in the amount of HK$2,556 million (2009: HK$2,674 million), representing a decrease of HK$118 million. The consolidated net assets attributable to the owners of the Company amounted to HK$7,525 million (2009: HK$7,211 million). The total debt to equity ratio was 34% (2009: 37%) and the total debt to total capitalisation (long-term debt + equity) ratio was 26% (2009: 29%). The maturity profile of the Group’s borrowings of HK$2,556 million was spread with HK$132 million repayable within 1 year, HK$184 million repayable in the second year, HK$2,239 million repayable in the third to fifth years and HK$1 million repayable beyond 5 years.

– 102 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Approximately 56% and 42% of the Group’s borrowings were on a fixed rate basis and floating rate basis respectively, and the remaining 2% of the Group’s borrowings were interest free.

Apart from the fixed rate senior notes which is denominated in United States Dollars (“USD”), the Group’s other borrowings of HK$1,135 million were 46% denominated in Renminbi (“RMB”), 1% in Hong Kong Dollars (“HKD”) and 53% in USD. The Group’s cash and bank balances of HK$1,713 million were 73% denominated in RMB, 13% in HKD and 14% in USD.

The Group’s reporting currency is denominated in HKD. The Group’s monetary assets, liabilities and transactions are principally denominated in RMB, USD and HKD. The Group is exposed to foreign currency risk arising from the exposure of HKD against USD and RMB, respectively. Considering that HKD is pegged against USD, the Group believes that the corresponding exposure to USD exchange rate fluctuation is nominal. However, the Group has a net exchange exposure to RMB as the Group’s assets are principally located in China and the revenues are in RMB.

Certain assets of the Group have been pledged to secure financing, including investment properties with carrying value of approximately HK$5,434 million, properties under development with carrying value of approximately HK$920 million, serviced apartments with carrying value of approximately HK$614 million, a property with carrying value of approximately HK$42 million and bank balances of approximately HK$171 million.

Under a litigation in a district court in China, the Group, as the claimant, claimed for a total of RMB17 million from one of the Group’s contractors. As a measure to preserve the payment ability of the defendant, the Group applied to the local court to freeze certain assets of the defendant. In return, the Group pledged a leasehold building with a carrying value of approximately HK$45 million to the court as collateral.

Taking into account cash held as at the end of the reporting period, available banking facilities and the recurring cashflows from the Group’s operating activities, the Group believes it has sufficient liquidity to finance its existing property development and investment projects.

– 103 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Contingent Liabilities

(a) As at the end of the reporting period, contingent liabilities not provided for in the financial statements are as follows:

Company 2010 2009 HK$’000 HK$’000

Guarantee given to banks in connection with facilities granted subsidiaries 985,596 1,221,040

As at 31 July 2010, the banking facilities granted to the subsidiaries subject to guarantee given to the banks by the Company were utilised to the extent of HK$950,061,000 (2009: HK$917,075,000).

(b) (i) The Group had provided guarantees to certain banks in respect of mortgage loan facilities granted by such banks to certain end-buyers of Regents Park Phase I and Eastern Place Phase IV. Pursuant to the terms of the guarantees, upon default in mortgage payments by these end-buyers, the Group will be responsible to repay the outstanding mortgage loan ‘principles together with accrued interest owed by the defaulted end-buyers. The Group’s obligation in relation to such guarantees has been gradually relinquished along with the settlement of the mortgage loans granted by the banks to the end-buyers. Such obligation will also be relinquished when the Property Ownership Certificates for the relevant properties are issued or the end-buyers have fully repaid the mortgages loans, whichever is earlier.

(ii) The Group had provided guarantees to certain banks in respect of mortgage loan facilities granted by such banks to certain end-buyers of West Point. Pursuant to the terms of the guarantees, upon default in mortgage payments by these end-buyer, the Group will be responsible to repay the outstanding mortgage loan principals together with the accrued interest owed by the defaulted end-buyers. Such obligation will be relinquished when the Property Ownership Certificates for the relevant properties are issued or the end- buyers have fully repaid the mortgage loans, whichever is earlier.

It is not practical to determine the outstanding amount of the contingent liabilities of the Group and the Company in respect of the above guarantees as at the end of the reporting period.

– 104 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Employees and Remuneration Policies

As at 31 July 2010, the Group employed a total of around 1,200 staff. The Group recognises the importance of maintaining a stable staff force in its continued success. Under the Group’s existing policies, employee pay rates are maintained at competitive levels, whilst promotion and salary increments are assessed on a performance-related basis. Discretionary bonuses are granted to certain employees on a merit basis and in accordance with industry practice. Other staff benefits include share option scheme, mandatory provident fund scheme for all eligible employees, free hospitalisation insurance plan, subsidised medical care and subsidies for external education and training programmes.

Prospects

China has now become the second largest economy in the world. In the meantime, the current macro-economic development of China is still subject to complicated domestic and external environments. The global economic outlook is still uncertain. Within China’s domestic economy, there are still many conflicts and challenges ahead to overcome. In the short term, the development of China property market will continue to be influenced by government control measures and macro-economic policies.

In the medium and long term, ongoing urbanisation and demand for living improvement will foster healthy growth of the real estate market in China. Overall, the Group is still cautiously optimistic about the China property market and believes that we are well positioned for growth in the coming years. The Group’s net gearing level was low by industry standard. In addition, the Group will continue its construction schedules of its existing development projects to fuel growth in turnover and profits for future financial years. Furthermore, as encouraged by the Group’s success in revitalizing the Shanghai Hong Kong Plaza property, the Group will continue to grow its recurrent income base through upgrade of existing rental properties and addition of new venues through completion of commercial property portions of the new development projects. The Group expects its rental income will increase substantially in the next few years. With the macro- economic condition as mentioned above, the Group will monitor the market closely and evaluate new investment opportunities.

(4) For the year ended 31 July 2009

Results

For the year ended 31 July 2009, the Group recorded a turnover of HK$937,380,000 (2008: HK$868,001,000) and a gross profit of HK$632,436,000 (2008: HK$622,837,000), representing an increase of approximately 8.0% and 1.5% respectively from the previous year.

– 105 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Out of the total turnover, rental income decreased by 14.0% from HK$254,160,000 to HK$218,525,000, which was mainly due to the adverse impact of renovation work on Shanghai Hong Kong Plaza. Owing to the contribution from sales of residential units of Shanghai Regents Park Phase II during the year ended 31 July 2009, turnover from sales of properties increased by 17.1% from HK$613,841,000 to HK$718,855,000. Mainly as a result of lower proportion of rental income compared to sales of development properties, gross profit margin decreased slightly to 67.5%, from 71.8% in the previous year.

During the year, the Group recorded the following major other operating income/expenses items:

—a gain of HK$256,311,000 on the termination of all cross currency swaps in October 2008. These cross currency swaps with an aggregate notional amount of US$200,000,000 (same amount as the 7-year maturity 9.125% fixed rate senior notes issued by the Company in April 2007 (the “Senior Notes”)) were intended to enable the Group to make interest and principal repayments of the Senior Notes at a fixed interest rate and at a contracted exchange rate of Renminbi (“RMB”) against United States dollars (“USD”);

— an exchange loss of HK$2,540,000 on a USD denominated bank loan (2008: a net exchange loss of HK$114,081,000 on a USD denominated bank loan and the cross currency swaps);

—a gain of HK$29,579,000 on repurchase of certain Senior Notes. During the year, the Group repurchased Senior Notes amounting to an aggregate principal value of US$14,253,000;

—a fair value gain on its investment properties of HK$143,127,000 (2008: HK$398,515,000); and

— an impairment loss on certain proper ties under development of HK$60,680,000 (2008: HK$99,561,000).

Finance costs expensed during the year reduced to HK$118,588,000 (2008: HK$151,911,000), after an amount of HK$77,030,000 (2008: HK$54,130,000) had been capitalised in properties under development during the year.

For the year ended 31 July 2009, profit from operating activities was HK$886,631,000 (2008: HK$761,532,000) and profit attributable to equity holders of the Company was HK$406,888,000 (2008: HK$206,005,000), representing an increase of approximately 16.4% and 97.5% respectively from the previous year. The increase in profit from operating activities was mainly due to lower other operating expenses, net (as detailed above). Other than the increase in profit from operating activities, profit attributable to equity holders of the Company increased, partly due to lower finance costs expensed.

– 106 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Basic earnings per share was HK5.06 cents for the year ended 31 July 2009 compared to HK2.56 cents for the previous year.

Shareholders’ equity as at 31 July 2009 amounted to HK$7,210,784,000, up from HK$6,909,222,000 as at 31 July 2008. Net asset value per share attributable to equity holders of the Company was HK$0.90 as at 31 July 2009, as compared to HK$0.86 as at 31 July 2008.

Final Dividend

The Board of Directors has recommended a final dividend of HK0.5 cent per share for the year ended 31 July 2009 (2008: HK0.4 cent per share), payable to shareholders whose names appear on the register of members of the Company as at the close of business on 23 December 2009. Subject to the approval of shareholders at the forthcoming annual general meeting of the Company, the dividend will be payable on 6 January 2010.

Business Review

Investment properties

Property rental results

During the year ended 31 July 2009, the Group recorded a turnover of HK$218,525,000 from rental income. Breakdown of turnover from rental income is as follows:

Year ended 31 July 2009 2008 Change HK$ HK$ %

Shanghai Hong Kong Plaza 128,520,000 181,437,000 (29.2)

Shanghai Regents Park (commercial podium and carparking spaces) 7,332,000 6,028,000 21.6

Shanghai Northgate Plaza I 20,811,000 9,797,000 112.4

Guangzhou May Flower Plaza 61,214,000 56,898,000 7.6

Others 648,000 — n/a

Total 218,525,000 254,160,000 (14.0)

– 107 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

During the year, rental income from Shanghai Hong Kong Plaza recorded a decrease of 29.2% to HK$128,520,000, which was mainly due to closure of its shopping arcades for renovation work and a decrease in occupancy rate of the serviced apartments.

The Group’s share of rental income for Shanghai Northgate Plaza I for the previous year had been recorded under “Share of profits of associates” before the Group acquired the remaining interests in January 2008.

Rental income from Guangzhou May Flower Plaza recorded an increase of 7.6% to HK$61,214,000 for the year under review.

Development properties

Contracted sales of development properties

Approximate average Total Contracted contracted contracted sales area selling price sales amount sq.m. HK$/sq.m. HK$

Shanghai Regents Park, Phase II 21,592 35,100 757,088,000

Guangzhou West Point, Residential Units 15,242 15,100 230,527,000

Total 36,834 987,615,000

Sales of development properties recorded

Approximate Total average recorded Recorded recorded sales sales area selling price amount* sq.m. HK$/sq.m. HK$

Shanghai Regents Park, Phase II 21,592 35,100 718,855,000

* After business tax

– 108 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

During the year, the Group concluded total contracted sales area of approximately 36,834 sq.m., which are residential units of Shanghai Regents Park Phase II and Guangzhou West Point.

The Group recorded the contracted sales of residential units at Shanghai Regents Park Phase II concluded during the year ended 31 July 2009 for the year under review. Contracted pre-sales of residential units at Guangzhou West Point during the years ended 31 July 2008 and 2009 will be recorded in the next financial year ending 31 July 2010 upon substantial completion of construction of the project.

Market Overview and Operating Environment

During the year under review, China’s property market experienced great volatility. The austerity measures previously implemented by the Central Government in 2008 and the global financial turmoil in the fourth quarter of 2008 adversely affected market sentiment and volume of transactions of China’s real estate market and of the Group’s development properties available for sale in the whole of 2008. In response to the unfavourable market sentiment during this period, the Group rescheduled the construction program of some of its new development projects, and adjusted its sales programme in the first half of the year ended 31 July 2009.

Since the beginning of 2009, with the implementation of massive economic stimulating packages and relaxation of credit control by the Central Government and its central bank, China’s real estate market started to show strong recovery. Up to July 2009, primary transactions of residential sales at core city areas in Shanghai and Guangzhou have almost recovered to pre-financial crisis level in early 2008 in terms of both transaction volume and average selling prices. Such recovery was generally stronger than most of the market expectations. Utilising such prime opportunity, the Group, since the first quarter of 2009, geared up its marketing effort for its development properties available for sale and quickly achieved impressive sales results for Shanghai Regents Park Phase II and Guangzhou West Point. Despite the slow-down in the first half of the year under review, the Group concluded the financial year ended 31 July 2009 with sales targets and turnover well exceeding expectations.

– 109 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Review of Major Property Projects

Shanghai

Shanghai Hong Kong Plaza

Hong Kong Plaza is a twin-tower prime property located at Huaihaizhong Road, Luwan District, Shanghai comprising office, shopping arcades and serviced apartments. The property is directly above Huangpi South Road Metro Station and is within walking distance of Xintiandi. Rental income for the year ended 31 July 2009 amounted to HK$128,520,000, down by 29.2% from HK$181,437,000 in the previous year. Such decrease in rental income was mainly due to closure of shopping arcades at Hong Kong Plaza for renovation work.

Renovation work on the shopping arcades under the serviced apartment tower commenced in July 2008. The renovation of the shopping arcades under the office tower also commenced in March 2009. The Group is now negotiating with various potential tenants for the renovated shopping arcades, and expects to re-open both shopping arcades in mid-2010. Upon completion, Hong Kong Plaza’s shopping arcades will be one of the most visible high-end retail venues for global luxury brands in the Huaihaizhong Road area.

Common areas and lift lobbies of the office tower were being renovated during the year and such renovation will be completed by the end of 2009. In addition, the serviced apartment portion of Hong Kong Plaza under the Group was vacated for full renovation at the end of July 2009 to upgrade the quality of the rooms and the services. The Group has engaged the Ascott Group to manage the serviced apartment portion, and hopes this will enable the Group to leverage on the Ascott Group’s extensive experience and expertise in operating serviced apartments and to establish a high-end brand image. Soft-opening of the re-branded serviced apartments of Hong Kong Plaza is expected to take place in mid-2010.

The rental income of Hong Kong Plaza is expected to be substantially improved from its current level upon completion of renovation. However, before its completion, rental income will be further affected by the renovation for the next financial year ending 31 July 2010.

Shanghai Regents Park Phase II

Regents Park is a major residential project located in the Zhongshan Park Commercial Area at the prestigious Changning District, Shanghai with a total saleable gross floor area (“GFA”) of approximately 154,000 square metres (“sq.m.”) (GFA attributable to the Group of approximately 146,000 sq.m.). The Group has an effective 95% interest in the project.

– 110 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Pre-sale of the Phase II residential units was launched in April 2008. Up to 31 July 2009, the Group sold a total of 299 units with a total saleable GFA of 39,547 sq.m. at an average price of RMB31,700 per sq.m.. As such, the Group recorded the relevant consideration (after business tax) of approximately HK$718,855,000 (2008: HK$602,699,000) as turnover for the year ended 31 July 2009.

Since July 2009 and up to 31 October 2009, the Group sold a further 129 units with a total saleable GFA of 17,013 sq.m. at an average price of RMB38,000 per sq.m. Such consideration (after business tax) of approximately HK$696,991,000 will be recognised as turnover in the next financial year ending 31 July 2010.

As at 31 October 2009, the Group only has 27 units with a total saleable GFA of 6,285 sq.m. remaining in this project. The Group targets to maximise the sales proceeds for the remaining units.

Shanghai May Flower Plaza

The project has a total GFA of approximately 114,500 sq.m. (GFA attributable to the Group of approximately 109,000 sq.m.), comprising residential and office apartments, and commercial spaces. In addition, there will be approximately 33,000 sq.m. for carparks and ancillary facilities. Construction work commenced in October 2007 and is scheduled for completion in mid-2011. Pre-sale of the residential units is expected to start by the third quarter of 2010.

Shanghai Northgate Plaza

Northgate Plaza I is a block of office units with retail podium located on Tian Mu Road West in the Zhabei District of Shanghai near the Shanghai Railway Terminal. Northgate Plaza I has a total GFA of approximately 36,500 sq.m. including carparks.

The Group plans to develop Northgate Plaza II on the vacant site adjacent to Phase I. The Group has a 99.0% interest in Phase II. Phase II development will have a total GFA of approximately 28,800 sq.m. comprising serviced apartments with retail podium and carparking spaces. Foundation work was substantially completed in August 2009.

– 111 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

The Group is adjusting the design of Northgate Plaza II and will re-submit the new development plan for government approval. Superstructure work is expected to commence in 2010.

Guangzhou and Zhongshan

Guangzhou May Flower Plaza

This 13-storey complex has a total GFA of approximately 51,000 sq.m. (GFA attributable to the Group of approximately 39,000 sq.m.) comprising retail spaces, restaurants and fast food outlets, cinema and office units. The property is fully let to various tenants that are well-known corporations, consumer brands, cinemas and restaurants. Rental income from Guangzhou May Flower Plaza was HK$61,214,000 for the year ended 31 July 2009, representing an increase of approximately 7.6% from the previous year.

Guangzhou Eastern Place

Eastern Place is a multi-phase project located in Dongfeng East Road, Yuexiu District, Guangzhou.

The current Phase V development will have a total GFA attributable to the Group of approximately 101,000 sq.m. comprising residential blocks, a block of office or serviced apartments, and ancillary retail spaces. Construction work has commenced. Residential blocks are scheduled to be completed by the end of 2011 and the office/serviced apartment block is scheduled to be completed by the middle of 2012. Pre-sale of the residential units is now expected to start at the end of 2010 or in early 2011.

Guangzhou West Point

West Point is located on Zhongshan Qi Road and is within walking distance from the Ximenkou Subway Station. The project has a total GFA of approximately 64,000 sq.m., comprising 243 residential units, 244 office units and commercial spaces. In addition, there will be approximately 10,000 sq.m. for carparks and ancillary facilities. The project is scheduled for completion by the end of 2009.

– 112 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Pre-sale of residential units was started in July 2008. Up to 31 July 2009, the Group sold a total of 214 units with a total saleable GFA of 21,413 sq.m. at an average price of RMB13,200 per sq.m. As such, the Group will record the relevant consideration (after business tax) of approximately HK$303,196,000 as turnover in the next financial year ending 31 July 2010. As at 31 October 2009, the Group only has 25 residential units with a total saleable GFA of 2,278 sq.m. remaining in this project. The Group targets to sell the remaining units after completion of the project.

Pre-sale of office units was started in September 2009. Since the launch of the pre-sale and up to 31 October 2009, the Group sold 35 office units with a total saleable GFA of 2,524 sq.m. at an average price of RMB12,700 per sq.m. Such consideration (after business tax) of approximately HK$34,490,000 will be recognised as turnover in the next financial year ending 31 July 2010.

Pre-leasing of the commercial spaces in this project progressed well during the year and a number of anchor tenants including retail brands and restaurants have committed to establish outlets in West Point.

Guangzhou Jinshazhou Project

The Jinshazhou project is a 50:50 joint venture with CapitaLand China Holdings Pte. Ltd. This proposed development in Hengsha, Baiyuan District, Guangzhou has a total GFA of approximately 369,000 sq.m. (GFA attributable to the Group of approximately 184,500 sq.m.), comprising low-rise and high-rise residential units with ancillary facilities including carparks and shopping amenities.

The development plan of the project has been finalised. The project will be divided into four phases of similar scale for development. It is now expected that construction of Phase I will commence in the second quarter of 2010 and pre-sale of Phase I residential units will commence by mid-2011. Completion of Phase I is expected to take place around or at the end of 2012.

Guangzhou Haizhu Plaza

Haizhu Plaza is located on Chang Di Main Road in Yuexiu District, Guangzhou along the Pearl River. The Group owns the entire interest in this project.

The proposed development has a GFA of approximately 103,000 sq.m., and is intended to be developed into a grade-A office tower, a serviced apartment tower, retail podium, carparks and ancillary facilities.

The project is currently in the process of resettlement, which is expected to be completed next year.

– 113 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Guangzhou Donghua Dong Road Project

The site is located in Donghua Dong Road in Yuexiu District. The permitted GFA is approximately 10,000 sq.m. The project is currently at the planning stage and is intended to be developed into a residential tower, carparks and ancillary facilities. The project is now expected to be completed in 2012.

Guangzhou Da Sha Tou Road/Yuan Jiang Dong Road Project

The site is located at the junction of Da Sha Tou Road and Yuan Jiang Dong Road in Yuexiu District. The permitted GFA is approximately 8,000 sq.m. The project is currently at the planning stage and is intended to be developed into a serviced apartment tower, carparks and ancillary facilities. The project is now expected to be completed in 2012.

Guangzhou Guan Lu Road Project

The site is located in Guan Lu Road in Yuexiu District. The permitted GFA is approximately 14,000 sq.m. The project is currently at the planning stage and is intended to be developed into a residential tower, carparks and ancillary facilities. The project is now expected to be completed in 2012.

Zhongshan Palm Springs

The project is located in Caihong Planning Area, West District of Zhongshan. Having taken into account the prevailing market condition after late 2008 and the expected supply from other developers in this area, the Group has revised the development plan and reduced the total GFA of Palm Springs project to approximately 406,000 sq.m. The Group believes that the lower density of the revised development plan will enhance the competitiveness of the products in Zhongshan’s current property market.

It is now planned that Phase I of the project will comprise high-rise residential towers with a total saleable GFA of approximately 44,000 sq.m., commercial areas with a total GFA of approximately 16,000 sq.m. and low-rise townhouses and semi-detached villas with a total saleable GFA of approximately 27,000 sq.m. Construction of Phase I development is expected to commence in the first quarter of 2010 and is expected to complete by the first half of 2012. Pre-sale of residential units will start in early 2011.

– 114 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Capital Structure, Liquidity and Debt Maturity Profile

As at 31 July 2009, the Group had total borrowings in the amount of HK$2,674 million (2008: HK$2,872 million), representing a decrease of HK$198 million. The consolidated net assets attributable to the equity holders of the Company amounted to HK$7,211 million (2008: HK$6,909 million). The total debt to equity ratio was 37% (2008: 42%) and the total debt to total capitalisation (long-term debt + equity) ratio was 29% (2008: 31%). The maturity profile of the Group’s borrowings of HK$2,674 million was spread with HK$582 million repayable within 1 year, HK$70 million repayable in the second year, HK$2,018 million repayable in the third to fifth years and HK$4 million repayable beyond 5 years.

Approximately 53% and 45% of the Group’s borrowings were on a fixed rate basis and floating rate basis respectively, and the remaining 2% of the Group’s borrowings were interest free.

Apart from the Senior Notes, the Group’s other borrowings of HK$1,259 million were 37% denominated in RMB, 15% in Hong Kong dollars (“HKD”) and 48% in USD. The Group’s cash and bank balances of HK$2,023 million were 44% denominated in RMB, 21% in HKD and 35% in USD.

In October 2008, the Group terminated the cross currency swap agreements and recorded a gain of HK$256,311,000. After the termination of the cross currency swap agreements, the Group does not have any derivative financial instruments or hedging instruments outstanding. The Group will constantly review the economic situation and its foreign currency risk profile, and will consider appropriate hedging measures in future as may be necessary.

Certain assets of the Group have been pledged to secure financing, including investment properties with carrying value of approximately HK$4,515 million, serviced apartments with carrying value of approximately HK$540 million, properties under development with carrying value of approximately HK$153 million, a property with carrying value of approximately HK$43 million and bank balances of approximately HK$190 million.

– 115 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

Under a litigation in a district court in China, the Group, as the claimant, claimed for a total of RMB17 million from one of the Group’s contractors. As a measure to preserve the payment ability of the defendant, the Group applied to the local court to freeze certain assets of the defendant. In return, the Group pledged certain leasehold building with a carrying value of approximately HK$46 million to the court as collateral.

Taking into account cash held as at the balance sheet date, available banking facilities and the recurring cashflows from the Group’s operating activities, the Group believes it has sufficient liquidity to finance its existing property development and investment projects.

Contingent Liabilities

(a) As at the balance sheet date, contingent liabilities not provided for in the financial statements are as follows:

Company 2009 2008 HK$’000 HK$’000

Guarantees given to banks in connection with facilities granted to subsidiaries 1,221,040 1,125,871

As at 31 July 2009, the banking facilities granted to the subsidiaries subject to guarantees given to the banks by the Company were utilised to the extent of HK$917,075,000 (2008: HK$795,663,000).

(b) (i) Under a mortgage loan facility provided by a bank to the end-buyers of the office and apartment units of Hong Kong Plaza, the Company agreed to guarantee up to 95% of the liabilities of a subsidiary for the due performance of its undertaking to buy back the relevant properties in case the end-buyers default in repayment of the mortgage loans. The Group’s obligation has been gradually relinquished along with the settlement of the mortgage loans granted by the banks to the end-buyers.

(ii) The Group had provided guarantees to certain banks in respect of mortgage loan facilities granted by such banks to certain end-buyers of Regents Park Phase I. Pursuant to the terms of the guarantees, upon default in mortgage payments by these end-buyers, the Group will be responsible to repay the outstanding mortgage loan principals together with accrued interest owed by the defaulted end-buyers. The Group’s obligation in relation to such guarantees has been gradually relinquished along with the settlement of the mortgage loans granted by the banks to the endbuyers. Such obligation will also be relinquished when the Property Ownership Certificates for the relevant properties are issued or the end-buyers have fully repaid the mortgage loans, whichever is the earlier.

– 116 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

(iii) The Group had provided guarantees to certain banks in respect of mortgage loan facilities granted by such banks to certain end-buyers of Eastern Place Phase I, II and III. Pursuant to the terms of the guarantees, upon default in mortgage payments by these end-buyers, the Group will be responsible to repay the outstanding mortgage loan principals together with the accrued interest owed by the defaulted end-buyers. Such obligation will be relinquished when the end-buyers have fully repaid the mortgage loans.

(iv) The Group had provided guarantees to certain banks in respect of mortgage loan facilities granted by such banks to certain end-buyers of Eastern Place Phase IV. Pursuant to the terms of the guarantees, upon default in mortgage payments by these end-buyers, the Group will be responsible to repay the outstanding mortgage loan principals together with the accrued interest owed by the defaulted end-buyers. Such obligation will also be relinquished when the Property Ownership Certificates for the relevant properties are issued or the end-buyers have fully repaid the mortgage loans, whichever is the earlier.

It is not practical to determine the outstanding amount of the contingent liabilities of the Group and the Company in respect of the above guarantees as at the balance sheet date.

Employees and Remuneration Policies

As at 31 July 2009, the Group employed a total of around 1,200 staff. The Group recognises the importance of maintaining a stable staff force in its continued success. Under the Group’s existing policies, employee pay rates are maintained at competitive levels, whilst promotion and salary increments are assessed on a performance-related basis. Discretionary bonuses are granted to certain employees on a merit basis and in accordance with industry practice. Other staff benefits include a share option scheme, mandatory provident fund scheme for all eligible employees, free hospitalisation insurance plan, subsidised medical care and subsidies for external education and training programmes.

Prospects

In the past years, the real estate industry in China has been characterised by strong growth in housing demand and fluctuating government policies. In 2007, China’s property market experienced rapid development nationwide. In late 2007 and 2008, austerity measures by the Central Government triggered corrections of the overall property markets in China. In late 2008, the global financial turmoil further deteriorated the sentiment of China’s property market. In early 2009, abundant funds at a reasonable bank lending rate, plus the relaxation of control measures, encouraged the resurfacing of housing demand. Starting in the second quarter of 2009, there has been a broad-based market rebound with significant increase in property transaction volume and selling prices across China.

– 117 – APPENDIX II FINANCIAL INFORMATION OF THE LAI FUNG GROUP

The faster-than-expected market recovery in the second quarter of 2009 induced supply shortage in certain cities, especially the first-tier cities in China. As the new supply could not keep pace with the fast growing demand, in the short term, it is widely expected that there will be a contraction in property transaction volume but steady price increase.

In the medium and long term, ongoing urbanisation and demand for living improvement will foster healthy growth of the real estate market in China. Since the outbreak of the global financial turmoil in 2008, the Central Government has placed significant emphasis on domestic consumption to fuel economic growth. Real estate as an important segment of domestic consumption will be a key beneficiary. It is widely expected that the Central Government would not easily make a drastic shift from its current favourable policies towards real estate. However, there would be adjustment policies to pace the property market and economic rhythm. By then, this could cause short-term fluctuation in the property market in China.

Overall, the Group is cautiously optimistic about China’s property market and believes that we are well positioned for growth in the coming years. The Group’s net gearing level was low by industry standard. Owing to its strong sales performance for Shanghai Regents Park Phase II and Guangzhou West Point, the Group has locked in substantial sales revenue for the next financial year. In addition, the Group has re-accelerated the construction schedules of other development projects to fuel growth in turnover and profits for the financial years beyond next year.

With the macro-economic condition as mentioned above, the Group will monitor the market closely and expand its landbank at the appropriate time. Furthermore, the Group will continue to grow its recurrent income base through upgrading of existing rental properties and addition of new ones upon completion of commercial property portions of the new development projects.

– 118 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

1. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Introduction of the Unaudited Pro Forma Financial Information of the Enlarged Group

The accompanying unaudited pro forma financial information of the Enlarged Group has been prepared to illustrate the financial effects of the Transaction (as defined on page 141) based on the following assumptions:

We have presented two scenarios in the accompanying unaudited pro forma financial information. Scenario 1 has assumed that only the assured allotments pertaining to the Company and CL are taken up by the Company and CL respectively resulting in the Company holding a 60.29% shareholding interest in Lai Fung immediately upon completion of the Open Offer. This scenario is presented for illustrative purposes as the management has no reason to consider CL not to take up its entitlement pursuant to the CL Undertaking. Scenario 2 is presented to illustrate the scenario that Lai Fung would remain as an associate of the Company.

Pursuant to the Underwriting Agreement, the Company is required to take up any Offer Shares not subscribed for by any Qualifying Shareholders. Assuming no Qualifying Shareholders, other than the Company and CL (who will respectively take up their pro-rata entitlements in accordance with their existing shareholding interests in Lai Fung of 40.58% and 20% respectively), will subscribe for the Offer Shares, the Company shall then be obliged to take up all of the remaining Offer Shares which have not been subscribed for under the Open Offer and in aggregate ends up subscribing for up to a maximum of 80% of the Offer Shares. In this situation, the Company would end up holding up to a maximum of 60.29% equity interest in Lai Fung immediately upon completion of the Open Offer. Pursuant to the Underwriting Agreement, the Company would need to place down 5.34% of its shareholding interest in Lai Fung immediately after completion of the Open Offer to restore the minimum public float. As the terms and conditions for the subsequent placing down is yet to be determined, such subsequent placing down of shares will be treated as a separate transaction in accordance with the Hong Kong Financial Reporting Standards and will not be linked with the business combination in respect of the acquisition of additional shareholding interests in Lai Fung pursuant to the Open Offer. HKAS 27 (Revised) requires that a change in the parent’s ownership interests in a subsidiary without a loss of control to be accounted for as an equity transaction. The difference between the fair value of the consideration to be received and the carrying amount in respect of the 5.34% of the enlarged equity interest in Lai Fung in the subsequent placing down will be accounted for as an equity transaction. The accompanying unaudited pro forma financial information has not illustrated the financial effects in connection with the subsequent placing down. – 119 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The accompanying unaudited pro forma consolidated statement of financial position of the Enlarged Group as at 31 January 2012 assumes that completion of the Open Offer had taken place on 31 January 2012. The accompanying unaudited pro forma consolidated income statement and pro forma consolidated statement of cash flows for the period from 1 August 2011 to 31 January 2012 of the Enlarged Group assumes that completion of the Open Offer had taken place at the beginning of the six months ended 31 January 2012.

The accompanying unaudited pro forma consolidated income statement and pro forma consolidated statement of cash flows of the Enlarged Group as set out on pages 124 and 125 in this Appendix III are based upon (i) the unaudited consolidated income statement and the unaudited consolidated statement of cash flows of the Group for the period from 1 August 2011 to 31 January 2012 and (ii) the unaudited consolidated income statement and the unaudited consolidated statement of cash flows of the Lai Fung Group for the period from 1 August 2011 to 31 January 2012, as adjusted for the change in results of the Lai Fung Group due to the adjustments to reflect the fair value of landed properties and related interests (after taking into account the estimated corresponding effects on the deferred tax liabilities and non-controlling interests) of the Lai Fung Group as at 31 January 2012. The accompanying unaudited pro forma consolidated income statement of the Enlarged Group has not been prepared to illustrate the possible financial effects that would be caused by the fair value adjustments being made to

– 120 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

the carrying value of the completed properties for sale of the Lai Fung Group on 31 January 2012. As such, the pro forma consolidated income statement of the Enlarged Group for the six months ended 31 January 2012 should not be used as a basis to predict the future financial and cash flow performance of the Enlarged Group because from the Company’s perspective, the carrying value of its shareholding interest in Lai Fung will reflect the fair value of the net identifiable assets and liabilities of Lai Fung at the date of completion of the Open Offer (which is different from the basis used by Lai Fung to record such assets and liabilities) hence adjustments will need to be made to the consolidated income statement of the Enlarged Group in future to account for these differences.

The unaudited pro forma consolidated statement of financial position of the Enlarged Group as set out on pages 122 and 123 in this Appendix III is based upon (i) the unaudited consolidated statement of financial position of the Group as at 31 January 2012 and (ii) the unaudited consolidated statement of financial position of the Lai Fung Group as at 31 January 2012, as adjusted to reflect the fair value of net identifiable assets, liabilities and contingent liabilities (after taking into account the estimated corresponding effects on the deferred tax liabilities) of the Lai Fung Group as at 31 January 2012. Narrative descriptions of the pro forma adjustments to illustrate the effects of completion of the Open Offer that are (i) directly attributable to the transactions; (ii) expected to have a continuing impact on the Enlarged Group; and (iii) factually supportable, are summarised in the below notes to the unaudited pro forma financial information.

The accompanying unaudited pro forma financial information of the Enlarged Group, which is based on currently available information and on the assumptions that (i) completion of the Open Offer had taken place on 31 January 2012 (in respect of the pro forma consolidated statement of financial position of the Enlarged Group as at 31 January 2012) and at the beginning of the six months ended 31 January 2012 (in respect of the pro forma consolidated income statement and pro forma consolidated statement of cash flows of the Enlarged Group for the period from 1 August 2011 to 31 January 2012; and (ii) that the Company had paid cash of HK$804.7 million for the subscription of 80% of the Offer Shares upon completion of the Open Offer and Lai Fung had received HK$1,006 million as gross proceeds from the Offer Shares, is provided for illustrative purposes. As a result of these assumptions, the accompanying unaudited pro forma financial information of the Enlarged Group does not purport to describe the actual financial position or results of the Enlarged Group’s operations that would have been attained had completion of the Open Offer and subsequent placing down taken place at the dates indicated herein. Further, the accompanying unaudited pro forma financial information of the Enlarged Group does not purport to predict the Enlarged Group’s future financial position, results of operations or cash flows.

The unaudited pro forma financial information of the Enlarged Group should be read in conjunction with the financial information on the Lai Fung Group as set out in Appendix II, the financial information on the Group as set out in Appendix I and other financial information included elsewhere in this circular.

– 121 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Scenario 1

Unaudited Pro Forma Consolidated Statement of Financial Position of the Enlarged Group

NON-CURRENT ASSETS Property, plant and equipment 78,487 865,449 943,936 1,053,935 (a) 1,053,935 1,997,871 Properties under development — 717,210 717,210 34,101 (a) 34,101 751,311 Investment properties — 10,195,922 10,195,922 1,025,878 (a) 1,025,878 11,221,800 Prepaid land lease payments — 5,716 5,716 (5,716) (a) (5,716) — Film rights 49,770 — 49,770 49,770 Film products 78,968 — 78,968 78,968 Music catalogs 44,746 — 44,746 44,746 Goodwill — 3,737 3,737 (3,737) (a) (3,737) — Investments in jointly-controlled entities 83,289 — 83,289 83,289 Investments in associates 4,634,245 325,062 4,959,307 674,572 (a) (4,633,783) (e) (3,959,211) 1,000,096 Available-for-sale investments 197,249 — 197,249 197,249 Held-to-maturity debt investments 6,672 — 6,672 6,672 Deposits, prepayments and other receivables 86,214 — 86,214 86,214

Total non-current assets 5,259,640 12,113,096 17,372,736 15,517,986

CURRENT ASSETS Properties under development — 615,613 615,613 (8,924) (a) (8,924) 606,689 Completed properties for sale — 1,553,757 1,553,757 1,428,243 (a) 1,428,243 2,982,000 Loan receivable 11,000 — 11,000 11,000 Inventories 6,919 — 6,919 6,919 Equity investments at fair value through profit or loss 1,066 — 1,066 1,066 Films under production 182,419 — 182,419 182,419 Debtors, deposits, prepayments and other receivables 229,375 129,885 359,260 359,260 Forward contract — — — — Tax recoverable — 28,640 28,640 28,640 Pledged and restricted deposits 19,500 487,945 507,445 507,445 Cash and cash equivalents 2,197,303 758,477 2,955,780 1,005,995 (a) (804,745) (h) 201,250 3,157,030

Total current assets 2,647,582 3,574,317 6,221,899 7,842,468

– 122 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Scenario 1

Lai Fung eSun Group Group As at As at Note (1) Note (2) Note (3) Pro Forma Pro Forma 31 January 31 January Pro Forma Pro Forma Pro Forma Adjustments Enlarged 2012 2012 Sub-total Adjustment Adjustment Adjustment Total Group (Unaudited*) (Unaudited**) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 CURRENT LIABILITIES Creditors and accruals (247,924) (856,448) (1,104,372) (1,104,372) Deposits received and deferred income — (234,478) (234,478) (234,478) Tax payable (4,424) (347,899) (352,323) (352,323) Finance lease payables (119) — (119) (119) Interest-bearing bank loans, secured — (667,748) (667,748) (667,748) Forward contract (104,244) — (104,244) (104,244) Total current liabilities (356,711) (2,106,573) (2,463,284) (2,463,284) NET CURRENT ASSETS 2,290,871 1,467,744 3,758,615 5,379,184 TOTAL ASSETS LESS CURRENT LIABILITIES 7,550,511 13,580,840 21,131,351 20,897,170 NON-CURRENT LIABILITIES Long term deposits received — (88,795) (88,795) (88,795) Finance lease payables (188) — (188) (188) Interest-bearing bank loans, secured — (890,636) (890,636) (890,636) Interest-bearing other borrowings (167,446) — (167,446) (167,446) Advances from a former substantial shareholder — (57,404) (57,404) (57,404) Fixed rate senior notes — (1,423,624) (1,423,624) (1,423,624) Convertible notes (163,770) — (163,770) (163,770) Deferred tax liabilities (61) (1,444,246) (1,444,307) (1,003,341) (b) (1,003,341) (2,447,648) Total non-current liabilities (331,465) (3,904,705) (4,236,170) (5,239,511)

Net assets 7,219,046 9,676,135 16,895,181 15,657,659

EQUITY Equity attributable to owners of the parent Issued capital 621,606 804,796 1,426,402 804,796 (b) (1,609,592) (j) (804,796) 621,606 Reserves 6,371,129 8,256,153 14,627,282 201,199 (c) 3,148,903 (9,077,426) (k) (5,727,324) 8,899,958 6,992,735 9,060,949 16,053,684 9,521,564 Non-controlling interests 226,311 615,186 841,497 46,108 (c) 5,248,490 (g) 5,294,598 6,136,095 Total equity 7,219,046 9,676,135 16,895,181 15,657,659

*Financial information extracted from the unaudited consolidated financial statements of the eSun Group for the period from 1 August 2011 to 31 January 2012 ** Financial information extracted from the unaudited consolidated financial statements of the Lai Fung Group for the period from 1 August 2011 to 31 January 2012

– 123 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Scenario 1

Unaudited Pro Forma Consolidated Income Statement of the Enlarged Group Lai Fung eSun Group Group for the for the period period from from 1 August 1 August 2011 to 2011 to Note (4) Note (5) Note (6) Pro Forma Pro Forma 31 January 31 January Pro Forma Pro Forma Pro Forma Adjustments Enlarged 2012 2012 Sub-total Adjustment Adjustment Adjustment Total Group (Unaudited*) (Unaudited**) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 TURNOVER 236,147 831,332 1,067,479 1,067,479 Cost of sales (164,017) (377,185) (541,202) (541,202) Gross profit 72,130 454,147 526,277 526,277 Other revenue 13,456 57,055 70,511 70,511 Marketing expenses (24,196) (39,921) (64,117) (64,117) Administrative expenses (163,583) (120,918) (284,501) (16,789) (16,789) (301,290) Other operating gains 8,675 — 8,675 8,675 Other operating expenses (22,540) (61,122) (83,662) (83,662) Fair value gain on investment properties — 480,759 480,759 480,759 Fair value loss on a forward contract (112,580) — (112,580) (112,580) LOSS FROM OPERATING ACTIVITIES (228,638) 770,000 541,362 524,573 Finance costs (11,407) (45,123) (56,530) (56,530) Share of profits and losses of jointly-controlled entities 8,398 — 8,398 8,398 Share of profits and losses of associates 103,974 (7,889) 96,085 (104,247) (104,247) (8,162) PROFIT/(LOSS) BEFORE TAX (127,673) 716,988 589,315 468,279 Income tax (861) (270,110) (270,971) 4,147 4,147 (266,824) PROFIT/(LOSS) FOR THE PERIOD (128,534) 446,878 318,344 201,455

Attributable to: Owners of the parent (58,844) 399,129 340,285 (104,247) (12,468) (153,557) (270,272) 70,013 Non-controlling interests (69,690) 47,749 (21,941) (174) 153,557 153,383 131,442 (128,534) 446,878 318,344 201,455

*Financial information extracted from the unaudited consolidated financial statements of the eSun Group for the period from 1 August 2011 to 31 January 2012

** Financial information extracted from the unaudited consolidated financial statements of the Lai Fung Group for the period from 1 August 2011 to 31 January 2012

– 124 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Scenario 1 Unaudited Pro Forma Consolidated Statement of Cash Flows of the Enlarged Group Lai Fung eSun Group Group for the for the period from period ended 1 August 1 August 2011 to 2011 to Note (1)/(3h) Note (4) Note (5) Note (7) Note (8) Pro Forma Pro Forma 31 January 31 January Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma Adjustments Enlarged 2012 2012 Sub-total Adjustment Adjustment Adjustment Adjustment Adjustment Total Group (Unaudited*) (Unaudited**) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 NET CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES (279,617) (9,852) (289,469) (104,247) (16,789) — (289,469) 104,247 16,789 NET CASH FLOWS GENERATED FROM/ (USED IN) INVESTING ACTIVITIES (116,873) 61,305 (55,568) 7,931 (24,259) (16,328) (71,896) NET CASH FLOWS GENERATED FROM/(USED IN) FINANCING ACTIVITIES 278,128 (199,262) 78,866 24,259 24,259 103,125 NET DECREASE IN CASH AND CASH EQUIVALENTS (118,362) (147,809) (266,171) (258,240) Cash and cash equivalents at the beginning of period 2,311,490 883,058 3,194,548 1,005,995 201,250 3,395,798 (804,745) Effect of foreign exchange rate changes, net 4,175 23,228 27,403 27,403 CASH AND CASH EQUIVALENTS AT THE END OF PERIOD 2,197,303 758,477 2,955,780 3,164,961 ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and cash equivalents as stated in the statement of financial position 344,808 456,817 801,625 201,250 — — 7,931 — 209,181 1,010,806 Non-pledged and non-restricted time deposits with original maturity of more than three months when acquired 1,852,495 301,660 2,154,155 2,154,155 Cash and cash equivalents as stated in the statement of cash flows 2,197,303 758,477 2,955,780 3,164,961

*Financial information extracted from the unaudited consolidated financial statements of the eSun Group for the period from 1 August 2011 to 31 January 2012

** Financial information extracted from the unaudited consolidated financial statements of the Lai Fung Group for the period from 1 August 2011 to 31 January 2012

– 125 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Scenario 1

Notes:

(1) The adjustment represents the receipt of cash of HK$1,005,995,000 before expenses by Lai Fung from the issuance of 8,047,956,478 Offer Shares at HK$0.125 per Offer Share.

(a) Receipt of cash of HK$1,005,995,000 from the issuance of 8,047,956,478 Offer Shares at HK$0.125 per Offer Share.

(b) Share capital of 8,047,956,478 Offer Shares at par value of HK$0.1 per Offer Share.

Adjustments (2) and (3) reflect the acquisition of Lai Fung in stages as a subsidiary through subscription of 6,437,956,478 Offer Shares. In accordance with Hong Kong Financial Reporting Standards, the fair value of the Company’s existing 40.58% equity interest in Lai Fung as at the date of completion of the Open Offer (which is considered as the acquisition date) will be calculated with reference to the quoted share price of Lai Fung as at the date of completion of the Open Offer. Such fair value would be included in the calculations of goodwill or gain from a bargain purchase relating to a business combination achieved in stages, whereby the fair value of the original 40.58% equity interest in Lai Fung would become part of the acquisition cost of the 60.29% equity interest in Lai Fung in stages as a subsidiary. Any difference between the fair value of the original 40.58% equity interest in Lai Fung as at the date of completion of the Open Offer and the carrying value of such interest that was equity accounted for in the consolidated financial statements of the Company as at the date of completion of the Open Offer will be recognised in the consolidated income statement of the Company as a gain or loss. In addition, any related exchange reserves retained by the Company under its 40.58% equity interest in Lai Fung will be recycled and released to the consolidated income statement of the Company as a gain or loss. The identifiable assets and liabilities of the Lai Fung Group will be accounted for in the consolidated financial statements of the Enlarged Group at fair value under the purchase method of accounting upon completion of the Open Offer.

(2) This adjustment reflects the fair value adjustments related to landed properties attributable to Lai Fung Shareholders by approximately HK$3,148,903,000, which is the net effect of:

(a) The adjustments of HK$4,198,352,000 represent the fair value adjustments on landed properties of Lai Fung comprise the following items:

(i) A sum of HK$3,523,780,000 being the fair value adjustments on landed properties held by subsidiaries of the Lai Fung Group. The total market value of the landed properties held by subsidiaries of the Lai Fung Group as shown in the valuation certificates prepared by the valuers, Knight Frank Petty Ltd as at 31 January 2012 is approximately HK$17,451,800,000 and the carrying value of those landed properties as included in the unaudited consolidated management accounts of the Lai Fung Group as at 31 January 2012 is approximately HK$13,928,020,000.

– 126 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Scenario 1

(ii) An amount of HK$674,572,000 being the net fair value adjustment on landed property held by an associate of which Lai Fung Group has a 47.5% equity interest. The market value of the landed property held by the associate of the Lai Fung Group as shown in the valuation certificates prepared by the valuers, Knight Frank Petty Ltd as at 31 January 2012 is HK$3,447,000,000 and the carrying value of the landed property as included in the unaudited management accounts of the associate of the Lai Fung Group as at 31 January 2012 is HK$1,163,251,000. The fair value adjustment of HK$674,572,000 represents the 47.5% sharing by Lai Fung Group of the fair value adjustment on the landed property less the estimated corresponding deferred tax liability effects of HK$863,598,000. The basis of calculation of the deferred tax liability is set out in Note (b) below.

(b) The estimated corresponding deferred tax liability (“DTL”) effects arising from the adjustments to the landed properties calculated in accordance with the Hong Kong Financial Reporting Standards, the prevailing tax rates and legislations governing the Hong Kong profits tax, PRC corporate income tax (“CIT”) and PRC land appreciation tax (“LAT”) as appropriate, amounted to HK$1,003,341,000. The relevant tax rates used in the calculations for the estimated corresponding DTL effects are: (i) Hong Kong profits tax rate at 16.5%; (ii) PRC CIT rate at 25% and (iii) PRC LAT rate which is subject to a regime of progressive rates on the appreciation of land value from 30% to 60%; and

(c) Non-controlling interests of approximately HK$46,108,000 arising from the effective sharing of the increase in net assets value for landed properties net of the related deferred tax effects for those landed properties with attributable interests to the non-controlling interests of Lai Fung. Certain landed properties of Lai Fung Group have non-controlling interests. The amount of approximately HK$46,108,000 is calculated at such non-controlling interests’ proportionate share of the net effect of the fair value adjustment arising from landed properties as mentioned in (a) above and the relating DTL effects as mentioned in (b) above.

(3) The amounts represent the acquisition of Lai Fung, cash consideration paid and the estimated gain on bargain purchase from the Transaction to be recognised by the Enlarged Group upon completion of the Open Offer, and the elimination of share capital and pre-acquisition reserves of Lai Fung upon completion of the Open Offer.

– 127 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Scenario 1

HK$’000

Fair value of net identifiable assets and liabilities of Lai Fung at completion of the Open Offer:

(a) Net asset value attributable to Lai Fung Shareholders at 31 January 2012 9,060,949 (i)

(b) Add: Fair value adjustments related to landed properties of Lai Fung 3,148,903 (ii)

Fair value of net identifiable assets and liabilities of Lai Fung at completion of the Open Offer 13,215,847 (vii)

Disposal of the Company’s previously held 40.58% equity interest in Lai Fung:

(d) Fair value of the Company’s 40.58% equity interest in Lai Fung at date of completion of the Open Offer 463,728 (iv)

(e) Less: Carrying value of the Company’s 40.58% equity interest in Lai Fung (4,633,783) (v)

Loss on disposal of previously held equity interest (I) (4,170,055) (iv)

Acquisition of 60.29% equity interest in Lai Fung:

(f) Fair value of net identifiable assets and liabilities of Lai Fung at completion of the Open Offer 13,215,847

Less:

(g) Non-controlling interest of 39.71% in Lai Fung (5,248,490) (vii)

(h) Cash consideration paid for acquiring 19.71% interest in Lai Fung (804,745) (vi)

(i) Fair value of previously held equity interest of 40.58% in Lai Fung (463,728) (viii)

Sub-total=(g)+(h)+(i) (6,516,963)

Gain on bargain purchase (II)=(f)-(g)-(h)-(i) 6,698,884 (x)

Overall net gain to be recognised by the Enlarged Group before release of reserves (I)+(II) 2,528,829

Add: release of Lai Fung Group’s exchange reserves shared by the Enlarged Group 269,452 (ix)

Gain from the Transaction to be recognised by the Enlarged Group 2,798,281

– 128 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Scenario 1

(j) The adjustment represents elimination of issued share capital of Lai Fung: HK$’000

Issued capital of Lai Fung as at 31 January 2012 804,796

Add: Issued capital of Lai Fung for Offer Shares 804,796

Total issued capital of Lai Fung subject to elimination 1,609,592

(k) The adjustment represents elimination of pre-acquisition reserve of Lai Fung: HK$’000

Reserves of Lai Fung as at 31 January 2012 8,256,153

Add: Reserves from issuance of Offer Shares 201,199

Add: Reserves from fair value adjustments related to landed properties of Lai Fung 3,148,903

11,606,255

Less: Increase in net assets value attributable to the Enlarged Group upon completion of the Open Offer (2,528,829)

Amount of pre-acquisition reserves subject to elimination 9,077,426

Notes:

(i) The amount represents the net asset value attributable to the owners of Lai Fung as extracted from the unaudited consolidated financial statements of Lai Fung as at 31 January 2012.

(ii) The amount represents the fair value adjustments related to landed properties of Lai Fung based on the valuation as shown in the valuation certificates prepared by the valuers, Knight Frank Petty Ltd as at 31 January 2012, the estimated corresponding effects on the deferred tax liabilities, and the applicable effects as attributable to non-controlling interests of Lai Fung for certain properties in respect thereof, as if completion of the Open Offer had taken place on 31 January 2012.

(iii) Being the gross proceeds of the Open Offer from the issuance of 8,047,956,478 Offer Shares at HK$0.125 per Offer Share.

(iv), (viii) The fair value of the Company’s 40.58% equity interest in Lai Fung was estimated to be HK$463,728,000 based on its current holding of 3,265,688,037 shares in Lai Fung and the theoretical ex-entitlements price of each Lai Fung share of HK$0.142 per share calculated with reference to the closing price of HK$0.159 per Lai Fung Share on 14 March 2012, being the latest practicable date for this accounting calculation and the price of the Offer Shares of HK$0.125 per share. This calculation assumes that the theoretical ex-entitlements price calculated based on the closing share price of Lai Fung on 14 March 2012 would be the same as the closing share price of Lai Fung as at the date of completion of the Open Offer.

A fair value loss arising from the remeasurement of the previously held 40.58% equity interest in Lai Fung of HK$4,170,055,000 would be recognised in the consolidated income statement of the Company upon completion of the Open Offer.

– 129 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Scenario 1

(v) Amount represents the carrying value of the Company’s 40.58% equity interest in Lai Fung as included in the investments in associates in the unaudited consolidated financial statements of the Company as at 31 January 2012.

(vi) The amount represents the cash consideration of HK$804,745,000 paid by the Company for the subscription of 6,437,956,478 Offer Shares at HK$0.125 per Offer Share.

(vii) For the purposes of preparing the unaudited pro forma statement of financial position of the Enlarged Group, the Group has chosen to account for the non-controlling interests in Lai Fung Group at their proportionate share of the Lai Fung Group’s net identifiable assets and liabilities. The amount HK$5,248,490,000 represents the 39.71% non-controlling interests’ pro-rata share of the estimated fair value of the net identifiable assets and liabilities of Lai Fung upon completion of the Open Offer of approximately HK$13,215,847,000.

(ix) In addition, an exchange reserve of HK$269,452,000 as extracted from the unaudited consolidated management accounts of eSun as at 31 January 2012 would be recycled and released to the consolidated income statement as a gain on bargain purchase upon completion of the Open Offer. Such recycling and release of exchange reserves would have no overall net impact on the consolidated net assets of the Company.

(x) The amount of gain on bargain purchase of HK$6,698,884,000 is calculated from the difference between the fair value of net identifiable assets and liabilities of Lai Fung at completion of the Open Offer less the sum of (i) non-controlling interest of 39.71% in Lai Fung; (ii) cash consideration paid for acquiring 19.71% interest in Lai Fung and (iii) fair value of previously held equity interest of 40.58% in Lai Fung. The basis of calculations is in accordance with the Hong Kong Financial Reporting Standard 3 (Revised) — “Business Combinations”.

Upon completion of the Open Offer, the actual financial effects, for accounting purposes, will need to be recalculated based on the actual number of Offer Shares acquired and the actual consideration paid by the Company for the Offer Shares, the carrying amount of the Company’s 40.58% share of net assets of the Lai Fung Group as at the date of completion of the Open Offer, the fair value of the Company’s previously held 40.58% equity interest in Lai Fung and the actual amount of the non-controlling interests in Lai Fung as at the date of completion of the Open Offer, the fair value of the net identifiable assets and liabilities of the Lai Fung Group at the date of completion of the Open Offer, and the actual number of Lai Fung Shares to be placed down together with the actual consideration to be received therefrom. The actual financial effects are expected to be different from the amounts shown in this Appendix.

(4) The adjustment represents the reversal of the 40.58% share of profits of Lai Fung under the equity method of accounting as included in the consolidated income statement of the Company for the period from 1 August 2011 to 31 January 2012.

– 130 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Scenario 1

(5) The adjustment represents the additional depreciation charges as a result of the fair value adjustments made for property, plant and equipment of Lai Fung as at 31 January 2012, the estimated corresponding credit effects on the deferred tax expenses and the applicable effects as attributable to non-controlling interests of Lai Fung for certain properties in respect thereof, as if the completion of the Open Offer had taken place at the beginning of the financial period.

(6) The adjustment represents the sharing of results of Lai Fung as attributable to the non-controlling interests in the Lai Fung Group, as if completion of the Open Offer had taken place at the beginning of the financial period:

HK$’000

(a) Net profit attributable to shareholders of Lai Fung for the six months ended 31 January 2012 399,129

(b) Less: Additional depreciation charges on property, plant and equipment due to fair value adjustment net of the estimated corresponding effects on deferred tax liabilities and the applicable sharing to non-controlling interests of Lai Fung Group for certain properties in respect thereof (12,468)

Adjusted net profit attributable to Lai Fung Shareholders 386,661

X Percentage attributable to non-controlling interests of Lai Fung 39.71%

Net profit attributable to non-controlling interest of Lai Fung 153,557

(7) The adjustment represents the additional dividend that would have been received by the Group from the acquisition of its additional 19.71% equity interest in Lai Fung during the period from 1 August 2011 to 31 January 2012, assuming that completion of the Open Offer had taken place at the beginning of the financial period, i.e. 1 August 2011. The actual dividend received for its 40.58% interests in Lai Fung during the six months ended 31 January 2012 was approximately HK$16,328,000. Assuming that the total amount of dividends paid by Lai Fung is unchanged, the Company would have received an additional cash dividend of approximately HK$7,931,000 from its additional 19.71% equity interest in Lai Fung during the six months ended 31 January 2012.

(8) The adjustment represents the intra-group elimination of the pro forma dividend paid by the Lai Fung Group and received by the Group of HK$24,259,000, based on the Company’s holding of a 60.29% equity interest in Lai Fung upon completion of the Open Offer. Dividend paid by Lai Fung was included in “cash flow generated from financing activities” while the dividend received by the Group was included in “cash flows from investing activities”. After intra-group elimination for the dividend paid by Lai Fung Group and received by the Group, the net amount of dividend paid out by the Enlarged Group will decrease and the cash as retained by the Enlarged Group will correspondingly increase.

(9) Pro forma adjustments as described in Notes (5) and (6) above are expected to have a continuing effect on the consolidated income statement of the Enlarged Group while the pro forma adjustments as described in Note (4) above are not expected to have continuing effect on the consolidated income statement of the Enlarged Group.

(10) Pro forma adjustments as described in Notes (5), (7) and (8) above are expected to have a continuing effect on the consolidated statement of cash flows of the Enlarged Group while the pro forma adjustments as described in Notes (1)/(3h) and (4) above are not expected to have a continuing effect on the consolidated statement of cash flows of the Enlarged Group.

– 131 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Scenario 2: Assuming the Company would hold 50.00% equity interest in Lai Fung upon completion of the Open Offer

Scenario 2 assumes the Company would hold 50.00% equity interest in Lai Fung upon completion of the Open Offer. Taking into account the estimated consideration of approximately HK$ 597.8 million to be paid by the Company for the subscription of 59.42% of the Offer Shares, i.e. 40.58% attributable to its existing shareholding interest in Lai Fung and 18.84% attributable to those Offer Shares not subscribed for by existing shareholders and acquired by the Company pursuant to the Underwriting Agreement, the Company’s shareholding interest in Lai Fung will be increased from 40.58% to 50.00% upon completion of the Open Offer. The carrying value of the Company’s original 40.58% equity interest in Lai Fung would be increased by HK$408.2 million to HK$5,042.0 million as a result of its take up of its pro rata entitlement under the Open Offer. The carrying value for the Company’s equity interest in Lai Fung will be further increased by HK$1,245.2 million as a result of its acquisition of an additional 9.42% equity interest in Lai Fung; this HK$1,245.2 million represents the estimated share of the net fair value of Lai Fung’s identifiable assets and liabilities in respect of the additional 9.42% equity interest acquired. The total estimated carrying value of the Company’s 50.00% equity interest in Lai Fung upon completion of the Open Offer would be HK$6,287.2 million. The difference between the consideration paid by the Company for the acquisition of an additional 9.42% equity interest in Lai Fung of HK$189.6 million and the share of the net fair value of Lai Fung’s identifiable assets and liabilities before expenses of HK$1,245.2 million in respect of the additional 9.42% equity interest acquired amounted to HK$1,055.6 million and will be treated as a discount on acquisition and credited to the Company’s consolidated income statement in accordance with its accounting policy. The consolidated net assets of the Company attributable to shareholders of the Company would increase by HK$1,055.6 million upon completion of the Open Offer.

The accompanying unaudited pro forma consolidated income statement and pro forma consolidated statement of cash flows of the Enlarged Group as set out on pages 137 to 138 in this Appendix III are based upon (i) the unaudited consolidated income statement and the unaudited consolidated statement of cash flows of the Group for the period from 1 August 2011 to 31 January 2012 and (ii) the unaudited consolidated income statement and the unaudited consolidated statement of cash flows of the Lai Fung Group for the period from 1 August 2011 to 31 January 2012.

– 132 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The unaudited pro forma consolidated statement of financial position of the Enlarged Group as set out on pages 134 to 136 in this Appendix III is based upon (i) the unaudited consolidated statement of financial position of the Group as at 31 January 2012 and (ii) the unaudited consolidated statement of financial position of the Lai Fung Group as at 31 January 2012, as adjusted to reflect the fair value of net identifiable assets, liabilities and contingent liabilities (after taking into account the estimated corresponding effects on the deferred tax liabilities) of the Lai Fung Group as at 31 January 2012. Narrative descriptions of the pro forma adjustments to illustrate the effects of the completion of the Open Offer that are (i) directly attributable to the transactions; (ii) expected to have a continuing impact on the Enlarged Group; and (iii) factually supportable, are summarised in the notes to the unaudited pro forma financial information.

The accompanying unaudited pro forma financial information of the Enlarged Group, which is based on currently available information and on the assumptions that (i) completion of the Open Offer had taken place on 31 January 2012 (in respect of the pro forma consolidated statement of financial position of the Enlarged Group as at 31 January 2012) and 1 August 2011 (in respect of the pro forma consolidated income statement and pro forma consolidated statement of cash flows of the Enlarged Group for the period from 1 August 2011 to 31 January 2012; and (ii) that the Company had paid cash of HK$597.8 million for the subscription of 59.42% of the Offer Shares upon completion of the Open Offer, is provided for illustrative purposes. As a result of these assumptions, the accompanying unaudited pro forma financial information of the Enlarged Group does not purport to describe the actual financial position or results of the Enlarged Group’s operations that would have been attained had completion of the Open Offer taken place at the dates indicated herein. Further, the accompanying unaudited pro forma financial information of the Enlarged Group does not purport to predict the Enlarged Group’s future financial position, results of operations or cash flows.

– 133 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Scenario 2

Unaudited Pro Forma Consolidated Statement of Financial Position of the Enlarged Group

eSun Group As at Note (1) Note (2) Pro Forma Pro Forma 31 January Pro Forma Pro Forma Adjustments Enlarged 2012 Adjustment Adjustment Total Group (Unaudited*) (Unaudited) (Unaudited) (Unaudited) (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

NON-CURRENT ASSETS Property, plant and equipment 78,487 78,487 Properties under development — — Investment properties — — Prepaid land lease payments — — Film rights 49,770 49,770 Film products 78,968 78,968 Music catalogs 44,746 44,746 Goodwill — — Investments in jointly-controlled entities 83,289 83,289 Investments in associates 4,634,245 408,211 1,245,217 (d) 1,653,428 6,287,673 Available-for-sale investments 197,249 197,249 Held-to-maturity debt investments 6,672 6,672 Deposits, prepayments and other receivables 86,214 86,214

Total non-current assets 5,259,640 6,913,068

CURRENT ASSETS Properties under development — — Completed properties for sale — — Loan receivable 11,000 11,000 Inventories 6,919 6,919 Equity investments at fair value through profit or loss 1,066 1,066 Films under production 182,419 182,419 Debtors, deposits, prepayments and other receivables 229,375 229,375 Forward contract — — Tax recoverable — — Pledged and restricted deposits 19,500 19,500 Cash and cash equivalents 2,197,303 (408,211) (189,573) (e) (597,784) 1,599,519

Total current assets 2,647,582 2,049,798

– 134 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Scenario 2

CURRENT LIABILITIES Creditors and accruals (247,924) (247,924) Deposits received and deferred income — — Tax payable (4,424) (4,424) Finance lease payables (119) (119) Interest-bearing bank loans, secured — — Forward contract (104,244) (104,244)

Total current liabilities (356,711) (356,711)

NET CURRENT ASSETS 2,290,871 1,693,087

TOTAL ASSETS LESS CURRENT LIABILITIES 7,550,511 8,606,155

NON-CURRENT LIABILITIES Long term deposits received — — Finance lease payables (188) (188) Interest-bearing bank loans, secured — — Interest-bearing other borrowings (167,446) (167,446) Advances from a former substantial shareholder — — Fixed rate senior notes — — Convertible notes (163,770) (163,770) Deferred tax liabilities (61) (61)

Total non-current liabilities (331,465) (331,465)

7,219,046 8,274,690

– 135 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Scenario 2

EQUITY Equity attributable to owners of the parent Issued capital 621,606 621,606 Reserves 6,371,129 1,055,644 (f) 1,055,644 7,426,773

6,992,735 8,048,379 Non-controlling interests 226,311 226,311

Total equity 7,219,046 8,274,690

*Financial information extracted from the unaudited consolidated financial statements of the eSun Group for the period from 1 August 2011 to 31 January 2012

– 136 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Scenario 2 Unaudited Pro Forma Consolidated Income Statement of the Enlarged Group eSun Group for the period from 1 August 2011 to Note (3) Pro Forma Pro Forma 31 January Pro Forma Adjustments Enlarged 2012 Adjustment Total Group (Unaudited*) (Unaudited) (Unaudited) (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 TURNOVER 236,147 236,147 Cost of sales (164,017) (164,017) Gross profit 72,130 72,130 Other revenue 13,456 13,456 Marketing expenses (24,196) (24,196) Administrative expenses (163,583) (163,583) Other operating gains 8,675 8,675 Other operating expenses (22,540) (22,540) Fair value gain on investment properties — — Fair value loss on a forward contract (112,580) (112,580) LOSS FROM OPERATING ACTIVITIES (228,638) (228,638) Finance costs (11,407) (11,407) Share of profits and losses of jointly-controlled entities 8,398 8,398 Share of profits and losses of associates 103,974 24,199 24,199 128,173 PROFIT/(LOSS) BEFORE TAX (127,673) (103,474) Income tax expense (861) (861) PROFIT/(LOSS) FOR THE PERIOD (128,534) (104,335)

Attributable to: Owners of the parent (58,844) 24,199 24,199 (34,645) Non-controlling interests (69,690) (69,690) (128,534) (104,335)

*Financial information extracted from the unaudited consolidated financial statements of the eSun Group for the period from 1 August 2011 to 31 January 2012

– 137 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Scenario 2

Unaudited Pro Forma Consolidated Statement of Cash Flows of the Enlarged Group

eSun Group for the period from 1 August 2011 to Note (1) Note (2) Note (3) Note (4) Pro Forma Pro Forma 31 January Pro Forma Pro Forma Pro Forma Pro Forma Adjustments Enlarged 2012 Adjustment Adjustment Adjustment Adjustment Total Group (Unaudited*) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

NET CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES (279,617) 24,199 — (279,617) (24,199) NET CASH FLOWS GENERATED FROM/ (USED IN) INVESTING ACTIVITIES (116,873) 3,790 3,790 (113,083) NET CASH FLOWS GENERATED FROM FINANCING ACTIVITIES 278,128 278,128

NET DECREASE IN CASH AND CASH EQUIVALENTS (118,362) (114,572) Cash and cash equivalents at the beginning of period 2,311,490 (408,211) (189,573) (597,784) 1,713,706 Effect of foreign exchange rate changes, net 4,175 4,175

CASH AND CASH EQUIVALENTS AT THE END OF PERIOD 2,197,303 1,603,309

ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS

Cash and cash equivalents as stated in the statement of financial position 344,808 (408,211) (189,573) 3,790 (593,994) (249,186) Non-pledged and non-restricted time deposits with original maturity of more than three months when acquired 1,852,495 1,852,495

Cash and cash equivalents as stated in the statement of cash flows 2,197,303 1,603,309

*Financial information extracted from the unaudited consolidated financial statements of the eSun Group for the period from 1 August 2011 to 31 January 2012

– 138 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Scenario 2

Notes:

(1) The adjustment represents the Company’s take up of its pro rata entitlement to its existing 40.58% equity interest in Lai Fung by paying cash of HK$408,211,000 for the subscription of 3,265,688,037 Offer Shares at HK$0.125 per Offer Share. The carrying value of interest in associate would be increased by HK$408,211,000.

(2) The adjustment represents the Company’s acquisition of an additional 9.42% equity interest in Lai Fung Group, cash consideration paid for the subscription of 1,516,580,404 Offer Shares, and the discount on acquisition for the additional 9.42% equity interest in Lai Fung to be recognised by the Group upon completion of the Open Offer.

HK$’000

Fair value of net identifiable assets and liabilities of Lai Fung at completion of the Open Offer:

(a) Net asset value attributable to Lai Fung Shareholders at 31 January 2012 9,060,949 (i)

(b) Add: Fair value adjustments related to landed properties of Lai Fung 3,148,903 (ii)

Fair value of net identifiable assets and liabilities of Lai Fung at completion of the Open Offer 13,215,847

Additional equity interest of Lai Fung to be acquired 9.42%

(d) 9.42% of the fair value of net identifiable assets and liabilities of Lai Fung 1,245,217

(e) Less: fair value of consideration given for acquisition of additional 9.42% equity interest in Lai Fung (189,573) (iv)

(f) Discount on acquisition of additional 9.42% equity interest in associate 1,055,644

Notes:

(i) The amount represents the net asset value attributable to the owners of Lai Fung as extracted from the unaudited consolidated financial statements of Lai Fung as at 31 January 2012.

(ii) The amount represents the fair value adjustments related to landed properties of Lai Fung based on the valuation as shown in the valuation certificates prepared by the valuers, Knight Frank Petty Ltd as at 31 January 2012, and the estimated corresponding effects on the deferred tax liabilities, the applicable effects as attributable to non-controlling interests of Lai Fung for certain properties in respect thereof, as if completion of the Open Offer had taken place on 31 January 2012.

(iii) Being the gross proceeds of the Open Offer from the issuance of 8,047,956,478 Offer Shares at HK$0.125 per Offer Share.

(iv) Being cash paid for the subscription of 1,516,580,404 Offer Shares at HK$0.125 per Offer Share.

– 139 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Scenario 2

(3) The adjustment represents the share of profits of Lai Fung for the acquisition of an additional equity interest of 9.42% under the equity method of accounting as included in the consolidated income statement of the Company for the period from 1 August 2011 to 31 January 2012, as if completion of the Open Offer had taken place at the beginning of the financial period.

(4) The adjustment represents the additional dividend that would have been received by the Group from its additional 9.42% equity interest in Lai Fung during the period from 1 August 2011 to 31 January 2012, assuming that completion of the Open Offer had taken place at the beginning of the financial period, i.e. 1 August 2011. The actual dividend received by the Company for its 40.58% interests in Lai Fung during the six months ended 31 January 2012 was approximately HK$16,328,000. Assuming that the total amount of dividends paid by Lai Fung is unchanged, the Company would have received an additional cash dividend of HK$3,790,000 from its additional 9.42% equity interest in Lai Fung during the six months ended 31 January 2012.

(5) Pro forma adjustment as described in Note (3) above is expected to have a continuing effect on the consolidated income statement of the Enlarged Group.

(6) Pro forma adjustments as described in Notes (3) and (4) above are expected to have a continuing effect on the consolidated statement of cash flows of the Enlarged Group while the pro forma adjustments as described in Notes (1) and (2) above are not expected to have a continuing effect on the consolidated statement of cash flows of the Enlarged Group.

– 140 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

2. LETTER FROM THE REPORTING ACCOUNTANTS ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is the text of the report dated 24 April 2012, prepared for the sole purpose of inclusion in this circular, received from the independent reporting accountants, Ernst & Young, in respect of the unaudited pro forma financial information of the Enlarged Group.

22/F CITIC Tower 1 Tim Mei Avenue Central, Hong Kong

24 April 2012

The Board of Directors eSun Holdings Limited 11th Floor Lai Sun Commercial Centre 680 Cheung Sha Wan Road Kowloon Hong Kong

Dear Sirs,

eSun Holdings Limited (the “Company”) and its subsidiaries (collectively, the “Group”)

Report on the review of the unaudited pro forma financial information regarding the possible very substantial acquisition of Lai Fung Holdings Limited (the “Transaction”)

We report on the unaudited pro forma financial information of the Group, Lai Fung Holdings Limited and its subsidiaries (collectively, the “Enlarged Group”) upon the completion of the Transaction (the “Unaudited Pro Forma Financial Information”), which has been prepared by the directors of the Company for illustrative purposes only, to provide information about how the Transaction might have affected the historical financial information in respect of the Group as at 31 January 2012, for inclusion in Appendix III to the circular dated 24 April 2012 (the “Circular”) issued by the Company. The basis of preparation of the Unaudited Pro Forma Financial Information is set out on pages 119 to 140 to the Circular.

– 141 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Respective Responsibilities of Directors of the Company and the Reporting Accountants

It is the responsibility solely of the directors of the Company to prepare the Unaudited Pro Forma Financial Information in accordance with Rule 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

It is our responsibility to form an opinion, as required by Rule 4.29(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

Basis of opinion

We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the HKICPA. Our work consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Unaudited Pro Forma Financial Information with the directors of the Company. This engagement did not involve independent examination of any of the underlying financial information.

Our work did not constitute an audit or review made in accordance with Hong Kong Standards on Auditing, Hong Kong Standards on Review Engagements or Hong Kong Standards on Assurance Engagements issued by the HKICPA, and accordingly, we do not express any such audit or review assurance on the Unaudited Pro Forma Financial Information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purpose of the Unaudited Pro Forma Financial Information as disclosed pursuant to Rule 4.29(1) of the Listing Rules.

– 142 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The Unaudited Pro Forma Financial Information is for illustrative purposes only, based on the judgements and assumptions of the directors of the Company, and, because of its hypothetical nature, it does not provide any assurance or indication that any event will take place in the future and may not be indicative of the financial position or results of

— the Enlarged Group had the transactions actually occurred as at the dates indicated therein; or

— the Enlarged Group at any future dates or for any future periods.

Opinion

In our opinion:

(a) the accompanying Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated;

(b) such basis is consistent with the accounting policies of the Group; and

(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to Rule 4.29(1) of the Listing Rules.

Yours faithfully, Ernst & Young Certified Public Accountants Hong Kong

– 143 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

3. WORKING CAPITAL

The Directors are of the opinion that, in the absence of any unforeseen circumstances and after taking into account (i) in the case assuming Lai Fung remains an associate of eSun upon completion of the Open Offer, the internal resources of the Group or, (ii) in the case assuming Lai Fung would become a subsidiary of eSun upon completion of the Open Offer, (a) the internal resources of the Enlarged Group; (b) the Enlarged Group’s presently available banking facilities, the expected renewal of certain bank loans of Lai Fung of outstanding principals of approximately HK$900 million in aggregate upon maturity with final maturity dates of bank loan principals of approximately HK$576 million and approximately HK$324 million scheduled on 31 December 2012 and 29 March 2013, respectively, and that the Directors of Lai Fung are optimistic that the renewal of such bank loans would be able to be carried out; and (c) the estimated net proceeds from the Open Offer, the Group or the Enlarged Group (as the case may be) has sufficient working capital for its present requirements and for at least 12 months from the date of this circular.

4. STATEMENT OF INDEBTEDNESS

As at the close of business on 29 February 2012, being the latest practicable date for ascertaining certain information relating to this indebtedness statement and assuming Lai Fung would become a subsidiary of eSun upon completion of the Open Offer, the Enlarged Group had outstanding consolidated total borrowings (after intra-group elimination) of approximately HK$3,368 million.

The indebtedness information for the Enlarged Group, which comprises the eSun Group and the Lai Fung Group, is as follows:

The eSun Group

As at 29 February 2012, the eSun Group had outstanding total borrowings, including accrued interest, of approximately HK$333 million, comprising an unsecured and unguaranteed other borrowings from a former shareholder of the Company of approximately HK$168 million, unsecured and unguaranteed 3-year zero coupon convertible notes with an aggregate carrying amount of approximately HK$165 million.

In addition, as at 29 February 2012, a revolving term loan facility in the amount of HK$60 million was granted by a bank to the eSun Group. The said loan facility is subject to an annual review by the bank for renewal and is secured by a pledge of the eSun Group’s land and buildings with a carrying amount of approximately HK$54 million as at 29 February 2012. As at 29 February 2012, an unsecured revolving loan facility in the amount of HK$20 million was granted by another bank to the eSun Group. The said unsecured loan facility is subject to an annual review by the bank for renewal. The revolving term loan facility and the unsecured revolving loan facility as mentioned above had not been utilised by the eSun Group as at 29 February 2012.

– 144 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

As at 29 February 2012, MAGHL, a 51.09%-owned subsidiary company of the eSun Group which is listed on the GEM of the Stock Exchange had unsecured and unguaranteed 3-year zero coupon convertible notes with an aggregate principal amount of approximately HK$346 million, comprising approximately HK$138 million and approximately HK$208 million issued to the eSun Group and other subscribers, respectively. For accounting purposes, after deducting the equity portion from the principal amount and adding the accrued interest of the convertible notes up to 29 February 2012, the resultant carrying amount of the convertible notes as at 29 February 2012 was approximately HK$275 million, comprising approximately HK$110 million and approximately HK$165 million issued to the eSun Group and other subscribers, respectively. MAGHL has conditionally agreed to issue to each of the subscribers (including the eSun Group) and each of the subscribers (including the eSun Group) has conditionally agreed to subscribe for unsecured and unguaranteed 3-year zero coupon convertible notes with an aggregate principal amount of approximately HK$225 million, comprising approximately HK$153 million and approximately HK$72 million to be issued to the eSun Group and other subscribers respectively on the first anniversary of 9 June 2011.

As at 29 February 2012, MAGHL and its subsidiaries had an outstanding unutilised letter of credit facility of HK$10 million which was secured by a pledged bank deposits of MAGHL and its subsidiaries amounted to approximately HK$19 million.

The Lai Fung Group

As at 29 February 2012, the Lai Fung Group had outstanding borrowings of approximately HK$3,043 million comprising bank loans of approximately HK$1,561 million, fixed rate senior notes of approximately HK$1,424 million and an advance from a former substantial shareholder of approximately HK$58 million. Included in the fixed rate senior notes liability of Lai Fung, a carrying amount of approximately HK$8 million is held by a subsidiary of eSun.

All of the Lai Fung Group’s bank loans are secured. As at 29 February 2012, certain investment properties with total carrying amounts of approximately HK$7,009 million (being their carrying amounts as at 31 January 2012 as disclosed in the published interim report of the Lai Fung Group for the six months ended 31 January 2012), certain properties under development with total carrying amounts of approximately HK$225 million, certain serviced apartments and related properties with total carrying amounts of approximately HK$747 million, a property with a carrying amount of approximately HK$41 million, certain completed properties for sale with total carrying amounts of approximately HK$1,291 million and certain bank balances of approximately HK$144 million were pledged to banks to secure bank loan facilities granted to the Lai Fung Group. Shares in certain subsidiaries of Lai Fung were pledged to banks to secure certain bank loan facilities granted to the Lai Fung Group. In addition, Lai Fung and certain of its subsidiaries have also provided corporate guarantees in favor of the banks in respect of certain bank loan facilities granted to the Lai Fung Group. The fixed rate senior notes are unsecured and guaranteed by certain subsidiaries of Lai Fung on a senior basis, subject to certain limitations. The advance from a former substantial shareholder is unsecured and unguaranteed.

– 145 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Under a litigation being processed in a district court in China, the Lai Fung Group, as the claimant, is claiming for a sum of RMB17 million from one of the Lai Fung Group’s contractors. As a measure to preserve the payment ability of the defendant, the Lai Fung Group applied to the local court to freeze certain assets of the defendant. In return, the Lai Fung Group was required to pledge a leasehold property with a carrying amount of approximately HK$45 million to the court as collateral.

The Lai Fung Group had provided guarantees to certain banks in respect of mortgage loan facilities granted by such banks to certain end-buyers of property units developed by the Lai Fung Group. Pursuant to the terms of the guarantees, upon default in mortgage payments by these end-buyers, the Lai Fung Group will be responsible to repay the outstanding mortgage loan principals together with accrued interest owed by the defaulted end-buyers. The Lai Fung Group’s obligation in relation to such guarantees has been gradually relinquished along with the settlement of the mortgage loans granted by the banks to the end-buyers. Such obligation will also be relinquished when the Property Ownership Certificates for the relevant properties are issued or the end-buyers have fully repaid the mortgage loans, whichever is the earlier. As at 29 February 2012, in respect of these guarantees, the contingent liabilities of the Lai Fung Group is estimated to be amounted to HK$92 million.

In December 2008, the Company sought to raise approximately HK$60 million through a share placement exercise. The placing did not ultimately proceed because Passport, a substantial shareholder of the Company at that time, obtained an ex-parte injunction temporarily restraining the Company from proceeding. For further details, please refer to the “Litigation” section in Appendix IV of this circular.

Save as aforesaid, and apart from intra-group liabilities, the Enlarged Group did not, as at 29 February 2012, have any material outstanding (i) debt securities, whether issued and outstanding, authorised or otherwise created but unissued, or term loans, whether guaranteed, unguaranteed, secured (whether the security is provided by the Group or by third parties) or unsecured; (ii) other borrowings or indebtedness in the nature of borrowings including bank overdrafts and liabilities under acceptances (other than normal trade bills) or acceptance credits or hire purchase commitments, whether guaranteed, unguaranteed, secured or unsecured; (iii) mortgage or charges; or (iv) guarantees or other contingent liabilities.

5. FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

eSun

The principal business activities of the Group, through its subsidiaries and associates, are: (i) production and distribution of films; (ii) development and operation of and investment in media and entertainment businesses; and (iii) investment in and development of real estate projects with a cultural and entertainment-led theme such as the Creative Culture City in Hengqin, the PRC.

– 146 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The Group is confident with the future prospects of its principal businesses which are underpinned by sound financial position. The Group will continue to focus on these businesses and build upon the momentum achieved which is expected to carry over to the remainder of the financial year in 2012. Film production and distribution and media and entertainment businesses are expected to remain as the predominant revenue contributors for the remainder of the financial year ending 31 July 2012 based on the schedule of new releases in movies, events and music albums in the second half of 2012.

Lai Fung

The Group also has 40.6% shareholding investment in Lai Fung currently which is accounted as an associated company of the Group. Following the completion of the Open Offer, depending on the level of the subscription of the entitlements under the Open Offer by the Lai Fung Independent Shareholders, Lai Fung may become a subsidiary of the Group. Lai Fung Group’s principal business activities are property investment and property development in the PRC.

Lai Fung Group is confident in the long term prospects of the property sector in the PRC. The Group will adopt a strategy of prudent expansion and financial management to maintain a strong financial position and cash flow, with a view to improving its competitiveness in the challenging market environment and capturing market opportunities that arise in a timely manner. It will continue to focus on development projects in and around Shanghai and Guangzhou and continue to look for opportunities to replenish its land bank should those right opportunities arise. Lai Fung Group will continue to improve its recurrent income base through upgrading existing rental properties and adding new commercial properties from development projects. The Lai Fung Group expects its investment properties to provide a strong base of recurrent income in years to come.

The Enlarged Group

Irrespective of the outcome of the Open Offer, the Group and the Lai Fung Group will continue to be independently managed and will focus on their respective principal business activities as stated above.

Shareholders should note that the financial position of eSun after the Open Offer will depend on whether the Lai Fung Group will be consolidated or remain as an associate after the Open Offer. The unaudited pro forma financial information of the Enlarged Group are set out from pages 119 to 131 of this circular if Lai Fung Group is consolidated and from pages 132 to 140 of this circular if Lai Fung Group remains as an associate of the Group. Shareholders are reminded to review the relevant information including the notes accompanying the section in its entirety and not in parts.

– 147 – APPENDIX IV GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

(a) Directors’ interests

As at the Latest Practicable Date, the following Directors and the chief executive of the Company and their respective associates (as defined in the Listing Rules) were interested, or were deemed to be interested, in the following long positions in the Shares, underlying Shares and debentures of the Company or any of its associated corporations (within the meaning of the SFO) on that date (i) as required to be notified to the Company and the Stock Exchange pursuant to the provisions of Divisions 7 and 8 of Part XV of the SFO (including interests and short positions, if any, which they were taken or deemed to have under such provisions of the SFO); or (ii) as recorded in the register required to be kept by the Company pursuant to section 352 of the SFO (the “Register”); or (iii) as notified to the Company and the Stock Exchange pursuant to the Code of Practice for Securities Transactions by Directors and Designated Employees adopted by the Company (the “Securities Code”) or (iv) as otherwise known by the Directors:

(1) The Company

Long position in the Shares Approximate Number of Shares percentage Name of Personal Corporate of issued Directors Capacity interests interests Total Shares

Lam Kin Ngok, Beneficial owner/ 2,794,443 471,604,186 474,398,629 38.16% Peter Owner of controlled (Note 1) corporations

Andrew Y. Yan Owner of controlled Nil 125,000,000 125,000,000 10.05% corporations (Note 2)

– 148 – APPENDIX IV GENERAL INFORMATION

Notes:

1. As at the Latest Practicable Date, Dr. Lam Kin Ngok, Peter (“Dr. Lam”) was deemed to be interested in 471,604,186 Shares (approximately 37.93% of the issued shares of the Company) indirectly owned by LSD by virtue of his personal and deemed controlling shareholding interests of approximately 38.06% in Lai Sun Garment (International) Limited (“LSG”). LSD was approximately 47.97% directly and indirectly owned by LSG. LSG was approximately 8.07% owned by Dr. Lam and approximately 29.99% owned by Wisdoman Limited which was in turn 50% beneficially owned by Dr. Lam.

2. Mr. Andrew Y. Yan (“Mr. Yan”) was deemed to be interested in 125,000,000 Shares owned by SAIF Partners IV LP as the said limited partnership was indirectly controlled by Mr. Yan as a director and the sole shareholder of SAIF IV GP Capital Limited which was the sole general partner of SAIF IV GP LP which in turn is the sole general partner of SAIF Partners IV LP.

(2) Associated corporations

(i) Lai Fung — an associate of the Company

(a) By virtue of his deemed controlling shareholding interests in the Company as described in Note 1 of item (1) under paragraph 2. (a) “Directors’ Interests” above, as at the Last Practical Date, Dr. Lam was deemed to be interested in:

— 3,265,688,037 shares of HK$0.10 each, representing approximately 40.58% of the issued share capital of Lai Fung, which shares were held by certain wholly-owned subsidiaries of the Company; and

—a principal amount of US$1,025,000 in the 9.125% Senior Notes due 2014 issued by Lai Fung (the “Senior Notes”), which was beneficially owned by a wholly-owned subsidiary of the Company.

(b) Mr. Cheung Sum, Sam, an executive Director, was beneficially interested in a principal amount of US$200,000 in the Senior Notes.

– 149 – APPENDIX IV GENERAL INFORMATION

(ii) MAGHL — a subsidiary of the Company

By virtue of his deemed controlling shareholding interests in the Company as described in Note 1 of item (1) under paragraph 2. (a) “Directors’ Interests” above, Dr. Lam was deemed to be interested in the following shares and underlying shares of MAGHL which were held by Perfect Sky Holdings Limited (“Perfect Sky”), a wholly-owned subsidiary of the Company: Approximate Number of percentage of Capacity/Nature Number of underlying MAGHL’s of interest MAGHL shares MAGHL shares issued shares (Note 1) (i) Owner of controlled corporations 6,712,925,500 51.09% (ii) Deemed interest under S. 317 1,732,343,209 13.18% of the SFO (Note 2) Total 8,445,268,709 64.27%

(iii) Owner of controlled 14,132,500,000 107.55% corporations (Note 3) (iv) Deemed interest under S. 317 of the SFO (Note 2) 9,650,479,894 73.44% Total 23,782,979,894 180.99%

Notes:

1. The total number of issued shares of MAGHL as at the Latest Practicable Date (that is, 13,140,257,612 shares) has been used in the calculation of the approximate percentage.

2. Pursuant to S. 317 of the SFO and by virtue of his controlling shareholding interests in the Company, Dr. Lam was deemed to be interested in the shares and underlying in MAGHL held by the parties (other than MAGHL) to a subscription agreement dated 23 March 2011 (the “Subscription Agreement”) and entered into amongst Perfect Sky and such parties for the subscription of certain shares in and convertible notes of MAGHL, and their respective ultimate beneficial owners.

3. This represents, in aggregate, the 8,632,500,000 underlying shares comprised in the First Completion Convertible Notes issued to Perfect Sky by MAGHL on 9 June 2011 (the “First Completion Date”) and 5,500,000,000 underlying shares comprised in the Second Completion Convertible Notes to be issued to Perfect Sky by MAGHL on the first anniversary of the First Completion Date pursuant to the Subscription Agreement described in Note 2 just above. Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company and their respective associates was interested, or was deemed to be interested in the long and short positions in the Shares, underlying Shares and/or debentures of the Company or any of its associated corporations which were required to be notified under the SFO, recorded in the Register as aforesaid, notified under the Securities Code or otherwise known by the Directors.

– 150 – APPENDIX IV GENERAL INFORMATION

(b) Substantial shareholders’ and other persons’ interests

As at the Latest Practicable Date, so far as it was known by or otherwise notified to any Director or the chief executive of the Company, the particulars of the corporations or persons (other than a Director or the chief executive of the Company) which had 5% or more interests in the following long positions in the Shares and underlying Shares as recorded in the register required to be kept under Section 336 of the SFO or were entitled to exercise, or control the exercise of, 10% or more of the voting power at any general meeting of the Company (the “Voting Entitlements”) (i.e. within the meaning of substantial shareholders of the Listing Rules) were as follows:

Long position in the Shares Approximate percentage of Number of issued share Name Capacity Shares capital

Substantial Shareholders

Lai Sun Development Owner of controlled 471,604,186 37.93% Company Limited corporation (Note 3) (Note 1)

Lai Sun Garment Owner of controlled 471,604,186 37.93% (International) corporations (Note 3) Limited (Note 2)

Dr. Lam Kin Ngok, Peter Beneficial owner/ 474,398,629 38.16% Owner of controlled (Note 3) corporations

SAIF Partners IV LP Beneficial owner 125,000,000 10.05% (Note 4)

SAIF IV GP LP Owner of controlled 125,000,000 10.05% corporation (Note 4)

SAIF IV GP Capital Owner of controlled 125,000,000 10.05% Limited corporations (Note 4)

Mr. Andrew Y. Yan Owner of controlled 125,000,000 10.05% corporations (Note 4)

Other Persons

Atlantis Capital Holdings Owner of controlled 120,000,000 9.65% Limited corporations (Note 5)

Ms. Liu Yang Owner of controlled 120,000,000 9.65% corporation (Note 5)

– 151 – APPENDIX IV GENERAL INFORMATION

Notes:

1. As at the Latest Practicable Date, Dr. Lam, Mr. Lui Siu Tsuen, Richard (“Mr. Lui”) and Mr. Cheung Sum, Sam, all Executive Directors, were also executive directors of LSD. Madam U Po Chu (“Madam U”), a non-executive Director, was also a non-executive director of LSD.

2. As at the Latest Practicable Date, Dr. Lam and Mr. Lui, both Executive Directors, were also executive directors of LSG. Madam U, a non-executive Director, was also a non-executive director of LSG.

3. Dr. Lam and LSG were deemed to be interested in the same 471,604,186 Shares held by LSD. Please refer to Note 1 of item (1) under paragraph 2. (a) “Directors’ Interests” section above for further details.

4. Mr. Yan, a non-executive Director, was deemed to be interested in the same 125,000,000 Shares owned by SAIF Partners IV LP, SAIF IV GP LP and SAIF IV GP Capital Limited. Please refer to Note 2 of item (1) under paragraph 2. (a) “Directors’ Interests” section above for further details.

5. Ms. Liu Yang was deemed to be interested in the same 120,000,000 Shares owned by Atlantis Capital Holdings Limited by virtue of her directorship / controlling interest in such company.

Save as disclosed above, the Directors are not aware of any other corporation or person (other than Directors or the chief executive of the Company) who, as at the Latest Practicable Date, had the Voting Entitlements or 5% or more interests or short positions in the Shares or underlying Shares as recorded in the register required to be kept under the provisions of Divisions 2 and 3 of Part XV of the SFO.

As at the Latest Practicable Date, so far as was known by the Directors and the chief executive of the Company, the following parties (other than the Directors or the chief executive of the Company) were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital (including any options in respect of such capital) carrying rights to vote in all circumstances at general meetings of any other member of the Group:

Approximate percentage of Name of members issued share of the Group Name of Shareholders capital held

北京東亞澤誠廣告北京佐伊廣告有限公司 40% 有限公司 (Beijing Zuo Yi Advertising (Beijing East Asia Ze Company Limited) Cheng Advertising Company Limited)

中影寰亞音像制品中影音像出版發行有限責任公司 30% 有限公司 (CF Audiovisual Publication (China Film Media Asia & Distribution Co., Ltd.) Audio Video Distribution Co., Ltd.)

– 152 – APPENDIX IV GENERAL INFORMATION

Approximate percentage of Name of members issued share of the Group Name of Shareholders capital held

Jacso Artistes Management Jacso Entertainment Limited 30% Limited

Mountain Entertainment Ko Shang Min 20% Limited Wang Hui Chung 10% Chang Po Yu 10%

Rich & Famous Film Wong Yat Cheung 25% & TV Production Limited

Rich & Famous Talent Wong Yat Cheung 25% Management Group Limited

麗星（廣州）廣告有限公司廣州市廣告有限公司 10% (Vision Communications (Guangzhou City Advertising (GZ) Limited) Company Limited)

Xinhua Entertainment Hon Ka Lok, Cario 20% (Hong Kong) Limited

Zhenrong Energy Shipping Fu Chuanyu 25% Limited

Zhenrong Energy Shipping Fu Chuanyu 25% (HK) Limited

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

– 153 – APPENDIX IV GENERAL INFORMATION

3. DIRECTORS’ INTERESTS

(a) Service Contracts

As at the Latest Practicable Date, none of the Directors had any existing or a proposed service contract with any member of the Group which was not expiring or determinable by the relevant member of the Group within one year without payment of compensation, other than statutory compensation.

(b) Assets of the Group

As at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any assets which have been, since 31 July 2011 (being the date to which the latest published audited consolidated financial statements of the Company were made up), acquired or disposed of by, or leased to, the Company or any member of the Group, or were proposed to be acquired or disposed of by, or leased to, the Company or any member of the Group.

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement entered into by any member of the Group subsisting at such date and which was significant in relation to the businesses of the Group.

4. DIRECTORS’ INTERESTS IN COMPETING BUSINESS

As at the Latest Practicable Date, the following Directors were considered to have interests in the businesses which compete or are likely to compete, either directly or indirectly, with the businesses of the Group pursuant to the Listing Rules:

Dr. Lam Kin Ngok, Peter, Mr. Lui Siu Tsuen, Richard, Mr. Cheung Sum, Sam and Madam U Po Chu (together the “Interested Directors”) held shareholding interests and/or directorships in companies engaged in the businesses of property investment and development in Hong Kong and the PRC.

However, the Board is independent of the boards of directors of the aforesaid companies and none of the Interested Directors can personally control the Board. Further, each of the Interested Directors is fully aware of, and has been discharging, his/her fiduciary duty to the Company and has acted and will continue to act in the best interest of the Company and the Shareholders as a whole. Therefore, the Group is capable of carrying on its businesses independently of, and at arm’s length from, the businesses of such companies.

– 154 – APPENDIX IV GENERAL INFORMATION

5. LITIGATION

As at the Latest Practicable Date, save as disclosed below, no member of Group was engaged in any litigation or claims of material importance known by the Directors to be pending or threatened against any member of the Group.

Litigation with Passport Special Opportunities Master Fund, LP and Passport Global Master Fund SPC Limited (“Passport”)

In December 2008, the Company had sought to raise approximately HK$60 million through a share placement exercise (with the prospect of raising an additional HK$60 million if the placees exercised the accompanying warrants in full). The placing, which was primarily intended to finance the Group’s media and entertainment businesses and otherwise for general working capital purposes, did not ultimately proceed because Passport, at that time a substantial shareholder of the Company, obtained an ex-parte injunction temporarily restraining the Company from proceeding. In essence, Passport alleged that the Company and the Directors acted improperly and that there was no good commercial reason for the placement.

On 8 June 2011, the Judge dismissed Passport’s claims against the Company and the Directors. Passport then served a notice to appeal the decision. On 19 January 2012, the Judge further ordered Passport to pay the Company’s entire costs of the legal proceedings.

The Company is defending the appeal and challenging a part of the original decision; the hearing of the appeal will take place between 18 and 22 June 2012. On 29 March 2012, the Court of Appeal further ordered Passport to make an additional payment of HK$2.6 million into court by 12 April 2012 as security for the Company’s costs of the appeal.

Passport and its affiliates disposed of their entire shareholdings in the Company on 30 April 2010.

6. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business) had been entered into by the Company or any of its subsidiaries within the two years immediately preceding the Latest Practicable Date and are or may be material:

(a) a shares swap agreement dated 26 July 2010 between Lai Sun Garment (International) Limited (“LSG”) and the Company, pursuant to which the Company transferred its entire shareholding interest in LSD (approximately 36.72% of the then issued share capital of LSD) at an agreed value of approximately HK$3,704.8 million to LSG in exchange for LSG’s entire shareholding interest in Lai Fung (approximately 40.58% of the issued share capital of Lai Fung) at an agreed value of approximately HK$3,883.2 million with the Company’s settlement of the difference between the above values by a cash transfer of approximately HK$178.4 million to LSG;

– 155 – APPENDIX IV GENERAL INFORMATION

(b) a subscription agreement and a supplemental agreement entered into between MAGHL (formerly known as Rojam Entertainment Holdings Limited (“Rojam”)), a 51.09%-owned subsidiary of the Company and Golden Coach Limited on 30 September 2010 and 4 March 2011 respectively relating to the subscription and issue of a convertible bond in the principal amount of HK$25,000,000 in Rojam; (c) an options subscription agreement and a supplemental agreement entered into between Rojam and Golden Coach Limited on 30 September 2010 and 4 March 2011 respectively relating to the subscription for 250,000,000 new shares in the capital of Rojam;

(d) a subscription agreement dated 23 March 2011 and entered into among Rojam, Sun Great Investments Limited, Next Gen Entertainment Limited, Memestar Limited, On Chance Inc., Grace Promise Limited and Perfect Sky (the “Rojam Subscribers”) in relation to, among other things, (i) the subscription of ordinary shares of HK$0.01 each in the share capital of Rojam; and (ii) the subscription of the Convertible Notes (as defined in the announcement jointly issued by Rojam, Perfect Sky and the Company on 31 March 2011), as amended by the supplemental agreement dated 9 June 2011 as described in item (e) below whereby, amongst other things, Perfect Sky agreed to subscribe for 5,150,000,000 shares in Rojam at a consideration of HK$82,400,000 and two tranches of convertible notes with an aggregate principal amount of HK$316,295,000; (e) a supplemental agreement dated 9 June 2011 and entered into between Rojam and the Rojam Subscribers for the purpose of amending certain terms and conditions of the subscription agreement described in item (d) above; (f) a sale and purchase agreement dated 15 June 2011 and entered into among East Asia Satellite Television (Holdings) Limited (“East Asia”, an indirect majority-owned subsidiary of the Company), Melco Crown Entertainment Limited (“MCE”) and the Company (the “Sale and Purchase Agreement”) relating to the disposal of 60% of the issued share capital of and shareholder loan in Cyber One Agents Limited (which held an indirect interest in a piece of land in the Macau Special Administrative Region of the PRC) by East Asia to MCE and all transactions, matters and amendments contemplated under the Sale and Purchase Agreement; (g) a waiver and termination agreement dated 15 June 2011 and entered into among Boom Faith Limited (“Boom Faith”), East Asia, CapitaLand Commercial Limited (“CapitaLand”), CapitaLand Integrated Resorts Pte. Ltd. (“CIR”) and the Company (the “Waiver and Termination Agreement”) relating to the acquisition of 33.33% of the issued share capital of East Asia by Boom Faith from CIR and all transactions, matters and amendments contemplated under the Waiver and Termination Agreement;

(h) a mutual waiver and consent agreement dated 15 June 2011 and entered into between East Asia, New Cotai, LLC (“New Cotai”), MCE and MCE Cotai Investments Limited relating to New Cotai’s consent to the disposal by East Asia of 60% equity interests in Cyber One to MCE described in item (f) above; (i) a settlement deed dated 15 June 2011 and entered into among CapitaLand, CIR, East Asia, the Company, New Cotai and other settlement parties relating to the settlement of all disputes among them arising out of, or in connection with, the Macao Studio City project and the release from liability between all the settlement parties;

– 156 – APPENDIX IV GENERAL INFORMATION

(j) the placing agreement dated 28 July 2011 and supplemented by a supplemental agreement dated 1 August 2011 and entered into between Rojam as issuer and CLSA Limited as placing agent in relation to the placing of a maximum of 2,022,051,522 new shares (the “Placing Shares’’) of HK$0.01 each in the share capital of Rojam at a placing price of HK$0.20 per Placing Share;

(k) a cooperation agreement dated 16 September 2011 and entered into between the Company, Lai Fung and the Hengqin New District Management Committee, pursuant to which the Company and Lai Fung will jointly invest in and develop the Creative Culture City project (“CCC Project”) located in Hengqin New District, Zhuhai City, Guangdong Province, the PRC;

(l) (i) a banking cooperation agreement dated 25 July 2011 and entered into among the Company, Lai Fung and Industrial Bank Co., Ltd. Guangzhou Branch; and (ii) a strategic banking cooperation framework agreement dated 15 September 2011 and entered into among the Company, Lai Fung and China Construction Bank Corporation Guangdong Branch, in relation to the provision of consolidated credit facilities to the Company and Lai Fung to fund the investment in the CCC Project;

(m) the Underwriting Agreement; and

(n) the CL Undertaking.

7. QUALIFICATIONS OF EXPERT

The following is the name and the qualifications of the expert who has given opinion on the unaudited pro forma financial information (the “Expert”):

Name Qualification

Ernst & Young Certified Public Accountants

8. EXPERT’S INTEREST IN ASSETS

The Expert has confirmed that, as at the Latest Practicable Date, it did not have any shareholding in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for any securities in any member of the Group.

The Expert has further confirmed that as at the Latest Practicable Date, it did not have any direct or indirect interests in any assets or any securities of any member of the Group which have since 31 July 2011 (being the date of which the latest published audited consolidated financial statements of the Company were made up) been acquired or disposed of by, or leased to, the Company or any member of the Group, or which are proposed to be acquired or disposed of by, or leased to, the Company or any member of the Group.

– 157 – APPENDIX IV GENERAL INFORMATION

9. CONSENT OF EXPERT

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

10. VOTING AT THE SGM

In compliance with Rule 13.39(4) of the Listing Rules, save for the resolutions which relate purely to procedural or administrative matters, voting on the resolution in respect of the matters set out in the notice of the SGM and put to the vote of the SGM will be decided by way of a poll.

A demand by a person as proxy for a member or in the case of a member being a corporation, by its duly authorised representatives shall be deemed to be the same as a demand by a member.

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 fully paid share of which he/she/it is the holder.

An announcement will be published by the Company on the respective websites of the Company and the Stock Exchange to inform the Shareholders of the poll results after the conclusion of the SGM.

11. GENERAL

In case of discrepancy, inconsistency or differences in interpretation, the English text of this circular prevails over the Chinese text.

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during the normal business hours (i.e. from 9:30 a.m. to 1:00 p.m. and from 2:00 p.m. to 5:30 p.m.) on Monday to Friday except for public holidays in Hong Kong unless (i) a tropical cyclone warning signal number 8 or above is hoisted; or (ii) a black rainstorm warning signal is issued, at 11th Floor, Lai Sun Commercial Centre, 680 Cheung Sha Wan Road, Kowloon, Hong Kong from the date of this circular until the date of the SGM:

(a) this circular;

(b) the Underwriting Agreement;

(d) the memorandum of association and bye-laws of the Company;

(e) the letter from the Board, the text of which is set out on pages 7 to 23 of this circular;

– 158 – APPENDIX IV GENERAL INFORMATION

(f) the annual reports of the Company for the year ended 31 December 2010 and for the seven months ended 31 July 2011 and the interim report of the Company for the six months ended 31 January 2012;

(g) the written consent referred to in the paragraph headed “Consent of Expert” in this Appendix;

(h) the report from Ernst & Young on the unaudited pro forma financial information of the Enlarged Group, the text of which is set out in Appendix III to this circular; and

(i) The material contracts referred to in the section headed “Material contracts” in this Appendix.

13. MISCELLANEOUS

(a) Mr. Kwok Siu Man (“Mr. Kwok”) is the company secretary of the Company. Mr. Kwok is a fellow member of The Institute of Chartered Secretaries and Administrators and The Institute of Financial Accountants in England and The Hong Kong Institute of Chartered Secretaries (the “HKICS”) and a member of the Hong Kong Securities Institute. He also possesses professional qualifications in arbitration, taxation, financial planning and human resources management. In addition, he holds a Bachelor of Arts Degree in Accountancy and a Post-Graduate Diploma in Laws and has passed the Common Professional Examinations in England and Wales.

Having been the reviewer and the chief examiner of the “Hong Kong Company Secretarial Practice/Corporate Secretaryship” of the international membership qualifying examinations of the HKICS for about a decade, Mr. Kwok holds the record of the HKICS of its longest-serving council member and director. Further, he has been an adjudicator to “The Best Annual Reports Awards” organised by the Hong Kong Management Association in the early 1990’s and the late 2000’s.

(b) The Company’s registered office is situated at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.

(c) The Company’s head office and principal place of business is situated at 11th Floor, Lai Sun Commercial Centre, 680 Cheung Sha Wan Road, Kowloon, Hong Kong.

(d) The branch share registrar and the transfer office of the Company in Hong Kong is Tricor Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.

– 159 – NOTICE OF THE SGM

eSun Holdings Limited (Incorporated in Bermuda with limited liability) (Stock Code: 571)

NOTICE IS HEREBY GIVEN that a special general meeting (the “SGM”) of the members (the “Members”) of eSun Holdings Limited (the “Company”) will be held at Harbour View Room I, 3rd Floor, The Excelsior, Hong Kong, 281 Gloucester Road, Causeway Bay, Hong Kong on Friday, 11 May 2012 at 11:00 a.m. for the purpose of considering and, if thought fit, passing with or without modification the following resolution as an ordinary resolution of the Company: ORDINARY RESOLUTION “THAT: (a) the underwriting agreement dated 27 February 2012 and entered into between Lai Fung Holdings Limited and the Company (a copy of which has been produced at the meeting, marked “A” and initialled by the chairman of the meeting for the purpose of identification) (the “Underwriting Agreement”) and more particularly described in the circular of the Company dated 24 April 2012 (the “Circular”) in relation to the underwriting of the Open Offer (as more particularly described in the Circular) and all transactions, matters and amendments contemplated under the Underwriting Agreement, and the execution, performance and implementation of the Underwriting Agreement and all ancillary matters contemplated under the Underwriting Agreement (including, without limitation, the CL Undertaking (as more particularly described in the Circular)) be and are hereby approved, confirmed and ratified; and (b) any one director of the Company (the “Director”) be and is hereby authorised to take all steps in relation to the Company and/or any of its subsidiary(ies)/jointly-controlled entities and any two Directors or any one Director and the company secretary of the Company be and are hereby authorised to affix the seal of the Company to all such documents and deliver the same as deeds of the Company, in any such case as he/she/they may consider necessary or desirable to implement or give effect to the terms of the Underwriting Agreement (including, without limitation, the CL Undertaking) and the transactions and matters and ancillary agreements or documents contemplated thereunder (including, without limitation, the execution, performance and implementation of any documents and the exercise or enforcement of any right thereunder), and to make and agree to such variations to the terms of the Underwriting Agreement and ancillary agreements or documents contemplated under the Underwriting Agreement (including, without limitation, the CL Undertaking) on behalf of the Company as he/she/they, in his/her/ their absolute discretion, may consider to be desirable, appropriate or necessary and in the interests of the Company.” By Order of the Board eSun Holdings Limited Kwok Siu Man Company Secretary Hong Kong, 24 April 2012

– 160 – NOTICE OF THE SGM

Registered Office: Head Office and Principal Place Clarendon House of Business: 2 Church Street 11/F., Lai Sun Commercial Centre Hamilton HM 11 680 Cheung Sha Wan Road Bermuda Kowloon, Hong Kong

Notes:

1. A Member entitled to attend and vote at the SGM convened by the above notice (the “Notice”) (or any adjournment thereof) is entitled to appoint one (or, if he/she/it holds two or more shares in the Company (the “Shares”), more than one) proxy to attend the SGM and, on a poll, vote on his/her/its behalf in accordance with the bye-laws of the Company. A proxy need not be a Member.

2. A form of proxy for use at the SGM is enclosed with the Notice.

3. To be valid, a form of proxy, together with the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power or authority, must be lodged with Tricor Tengis Limited, the branch share registrar of the Company in Hong Kong (the “Registrar”), at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, not less than 48 hours before the time appointed for holding the SGM or its adjourned meeting (as the case may be) and in default, the proxy will not be treated as valid. Completion and return of the form of proxy shall not preclude Members from attending in person and voting at the SGM or at any of its adjourned meeting should they so wish. In that event, the said form(s) of proxy shall be deemed to be revoked.

The contact phone number of the Registrar is (852) 2980 1333.

4. To ascertain the entitlements to attend and vote at the SGM, Members must lodge the relevant transfer document(s) and share certificate(s) at the office of the Registrar no later than 4:30 p.m. on Tuesday, 8 May 2012 for registration.

5. Where there are joint registered holders of any Share, any one of such joint holders may attend and vote at the SGM or its adjourned meeting (as the case may be), either in person or by proxy, in respect of such Shares as if he/ she/it were solely entitled thereto. However, if more than one of such joint holders are present at the SGM or its adjourned meeting (as the case may be) personally or by proxy, that one of such holders so present whose name stands first in the register/branch register of Members in respect of such Share shall alone be entitled to vote in respect thereof.

6. In compliance with Rule 13.39(4) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”), voting on the resolution proposed in the Notice shall be decided by way of a poll at the SGM.

7. If a tropical cyclone warning signal No. 8 or above is expected to be hoisted or a black rainstorm warning signal is expected to be in force at any time between 9:00 a.m. and 5:00 p.m. on the date of the SGM, then the SGM will be postponed and the Members will be informed of the date, time and venue of the postponed SGM by a supplementary notice posted on the respective websites of the Company and the Stock Exchange.

If a tropical cyclone warning signal No. 8 or above or a black rainstorm warning signal is lowered or cancelled at or before 9:00 a.m. on the date of the SGM and where conditions permit, the SGM will be held as scheduled.

The SGM will be held as scheduled when an amber or red rainstorm warning signal is in force.

Members should decide on their own whether or not they would attend the SGM under any bad weather condition having considered their own situations and if they do so, they are advised to exercise care and caution.

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