Sansheng Holdings (Group) Co

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 registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your shares in Sansheng Holdings (Group) Co. Ltd., 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 registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or the transferee(s). 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 however arising from or in reliance upon the whole or any part of the contents of this circular. This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities for the Company.

Sansheng Holdings (Group) Co. Ltd. 三盛控股（集團）有限公司 (Incorporated in the Cayman Islands with limited liability) (Stock Code: 2183)

(1) MAJOR AND CONNECTED TRANSACTION IN RELATION TO ACQUISITION OF A PROPERTY GROUP; (2) CONNECTED TRANSACTION IN RELATION TO FINANCIAL ASSISTANCE; AND (3) NOTICE OF EGM

Financial Adviser to the Company

Optima Capital Limited

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders ALTUS CAPITAL LIMITED

Unless the context requires otherwise, capitalised terms used on this cover shall have the same meanings as those defined in this circular. A letter from the Board is set out on pages 7 to 29 of this circular. A letter from the Independent Board Committee containing its recommendation to its Independent Shareholders is set out on page 30 to 31 of this circular. A letter from Altus to the Independent Board Committee and the Independent Shareholders is set out on page 32 to 62 of this circular. A notice convening the EGM to be held at Zhiyuan Conference Room on 6th Floor, Sansheng Group Building, Block 8, 18 Xinghong Road, Minhang District, Shanghai, the PRC on Monday, 19 October 2020 at 11:00 a.m. is set out on pages EGM-1 to EGM-4 of this circular. A form of proxy for use at the EGM is also enclosed with this circular. Whether or not you intend to attend and/ or vote in person at the EGM or any adjourned meeting thereof (as the case may be), you are requested to complete the form of proxy enclosed in accordance with the instructions printed thereon and return it to the share registrar and transfer office of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited, at Shop 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as practicable but in any event not later than 48 hours before the time appointed for holding the EGM or any adjourned meeting thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjourned meeting thereof (as the case may be) should you so wish and in such event, the form of proxy will be deemed to have been revoked. 25 September 2020 CONTENTS

Page

DEFINITIONS �� 1

LETTER FROM THE BOARD �� 7

LETTER FROM THE INDEPENDENT BOARD COMMITTEE �� 30

LETTER FROM ALTUS �� 32

APPENDIX I – FINANCIAL INFORMATION OF THE GROUP �� I-1

APPENDIX II – FINANCIAL INFORMATION OF THE TARGET GROUP �� II-1

APPENDIX III – UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP �� III-1

APPENDIX IV – VALUATION REPORT OF THE TARGET PROPERTIES �� IV-1

APPENDIX V – GENERAL INFORMATION �� V-1

NOTICE OF THE EGM �� EGM-1

i DEFINITIONS

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

“Acquisition” the proposed acquisition of the Sale Shares by the Purchaser from Mega Regal pursuant to the terms and conditions of the Agreement

“Agreement” the conditional sale and purchase agreement dated 24 August 2020 entered into between the Purchaser and Mega Regal (as vendor) in relation to the acquisition of the Sale Shares

“Altus” or “Independent Altus Capital Limited, a licensed corporation which is licensed to Financial Adviser” carry out type 4 (advising on securities), type 6 (advising on corporate finance), and type 9 (asset management) regulated activities under the SFO being the Independent Financial Adviser appointed by the Company to advise the Independent Board Committee and the Independent Shareholders in respect of the Agreement (including the issue of the Consideration Shares), the Loan Agreement and the transactions contemplated thereunder

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

“Board” the board of Directors

“Business Day(s)” day(s) (other than a Saturday, Sunday or a public holiday in Hong Kong or the PRC) on which commercial banks are open for business in Hong Kong and the PRC

“BVI” the British Virgin Islands

“Chengdu Jisheng” Chengdu Jisheng Real Estate Co., Ltd.* (成都吉盛置業有限公司), a company established in the PRC with limited liability

“Chengdu Sansheng” Chengdu Sansheng Real Estate Development Co., Ltd.* (成都三盛房地產開發有限公司), a company established in the PRC with limited liability

“Company” Sansheng Holdings (Group) Co. Ltd., a company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the Main Board of the Stock Exchange (stock code: 2183)

“Completion” completion of the Acquisition

“Completion Date” the date of Completion

“connected person(s)” has the meaning ascribed to it under the Listing Rules

1 DEFINITIONS

“Consideration” the consideration for the acquisition of the Sale Shares in the amount of HK$347,349,600

“Consideration Shares” 49,480,000 new Shares to be allotted and issued by the Company to Mega Regal

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

“Director(s)” director(s) of the Company

“EGM” the extraordinary general meeting to be held and convened for the Independent Shareholders to consider, and if thought fit, to approve the Agreement (including the issue of the Consideration Shares), the Loan Agreement and transactions contemplated thereunder

“Enlarged Group” the Group immediately after Completion

“Financial Assistance” the transactions contemplated under the Loan Agreement

“Fujian Minqiao” Fujian Minqiao Real Estate Development Co., Ltd.* (福建閩僑房地產開發有限公司), a company established in the PRC with limited liability

“Fuzhou Bosheng” Fuzhou Bosheng Investment Co., Ltd.* (福州伯盛投資有限公司), a company established in the PRC with limited liability

“Fuzhou Bosheng Group” Fuzhou Bosheng and its subsidiaries

“Fuzhou Sansheng” Fuzhou Sansheng Property Co., Ltd.* (福州三盛置業有限公司), a company established in the PRC with limited liability and is indirectly held by Mr. Lin and Ms. Cheng

“Fuzhou Shenglong” Fuzhou Shenglong Real Estate Development Co., Ltd.* (福州盛隆房地產開發有限公司), a company established in the PRC with limited liability

“Group” the Company and its subsidiaries

“HK Holdco” Sheng Tu (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability and is wholly owned by the Target

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

2 DEFINITIONS

“Independent Board Committee” the independent board committee of the Company comprising Mr. Pan Dexiang, Mr. Yuan Chun and Mr. Zhong Bin, being all the independent non-executive Directors, which is formed to advise the Independent Shareholders on the Agreement (including the issue of the Consideration Shares), the Loan Agreement and the transactions contemplated thereunder

“Independent Shareholders” the Shareholders other than (i) Mega Regal; and (ii) any other Shareholders who have a material interest in the Agreement (including the issue of the Consideration Shares), the Loan Agreement and the transactions contemplated thereunder

“Independent Third Party(ies)” any person(s) or company(ies) and their respective ultimate beneficial owner(s) whom, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, are third parties independent of the Company and its connected persons

“Jiangsu Zheguang” Jiangsu Zheguang Real Estate Co., Ltd.* (江蘇浙廣置業有限公司), a company established in the PRC with limited liability

“Jinan Sansheng” Jinan Sansheng Jundao Investment Co., Ltd.* (濟南三盛君道投資有限公司), a company established in the PRC with limited liability

“Jinan Zuosheng” Jinan Zuosheng Investment Co., Ltd.* (濟南佐盛投資有限公司), a company established in the PRC with limited liability

“Latest Practicable Date” 23 September 2020, being the latest practicable date prior to the despatch of this circular for the purpose of ascertaining information contained herein

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

“Loan Agreement” the loan and counter-guarantee agreement dated 24 August 2020 entered into among Mr. Lin, Fuzhou Sansheng and Fuzhou Bosheng in relation to (i) a non-interest bearing loan of RMB650 million provided by Fuzhou Sansheng to Fuzhou Bosheng Group which in return provided the Pledged Properties and Share Pledge as security for loans obtained by private entities controlled by Mr. Lin; (ii) an unsecured loan in such amount necessary for the development of the property project of the Project Companies provided by Fuzhou Sansheng to Fuzhou Bosheng Group; and (iii) an indemnity provided by Mr. Lin to indemnify Fuzhou Bosheng against any damage, loss or diminution in value of the Pledged Properties and the Share Pledge as a result of any breach in repayment obligations in relation to loan facilities secured by such pledged assets

3 DEFINITIONS

“Loan and Pledge Arrangement” the (i) loan in the amount of RMB650 million to be provided by Fuzhou Sansheng to Fuzhou Bosheng Group at Completion in return for the Pledged Properties and Share Pledge provided by Fuzhou Bosheng Group as security for loan obtained by private entities controlled by Mr. Lin; and (ii) indemnity to be provided by Mr. Lin to Fuzhou Bosheng, pursuant to the terms and conditions of the Loan Agreement

“Mega Regal” or “Vendor” Mega Regal Limited, the controlling Shareholder which holds 318,348,127 Shares, representing approximately 72.17% issued share capital of the Company as at the Latest Practicable Date

“Mr. Lin” Mr. Lin Rongbin, the Chairman of the Board and an executive Director

“Ms. Cheng” Ms. Cheng Xuan, an executive Director and the spouse of Mr. Lin

“Pledged Properties” certain properties pledged by Fujian Minqiao and Yangzhou Sansheng, in relation to the due performance of repayment obligations of banking facilities obtained by another private entity controlled by Mr. Lin from financial institutions in the PRC

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

“Project Companies” collectively (i) Fujian Minqiao; (ii) Fuzhou Shenglong; (iii) Quanzhou Shengchuang; (iv) Chengdu Jisheng; (v) Jiangsu Zheguang; (vi) Yangzhou Sansheng; (vii) Wenling Rongfa; (viii) Qingdao Haishang; and (ix) Putian Shengxiang

“Project Company Group” collectively (i) Chengdu Sansheng; (ii) Chengdu Jisheng; (iii) Qingdao Sansheng; (iv) Qingdao Haishang; (v) Putian Shengxiang; (vi) Jinan Zuosheng; (vii) Jinan Sansheng; (viii) Shanghai Jiayong; (ix) Shandong Jundao; (x) Jiangsu Zheguang; (xi) Fuzhou Shenglong; (xii)Quanzhou Shengchuang; (xiii) Fujian Minqiao; (xiv) Yangzhou Sansheng; and (xv) Wenling Rongfa

“Purchaser” Total Prestige Holdings Limited, a company established in the BVI with limited liability and a wholly owned subsidiary of the Company

“Putian Shengxiang” Putian Shengxiang Real Estate Development Co., Ltd.* (莆田市盛祥房地產開發有限公司), a company established in the PRC with limited liability

4 DEFINITIONS

“Qingdao Haishang” Qingdao Haishang Real Estate Co., Ltd* (青島海上置業有限公司), a company established in the PRC with limited liability

“Qingdao Sansheng” Qingdao Sansheng Investment Co., Ltd.* (青島三盛投資有限公司), a company established in the PRC with limited liability

“Quanzhou Shengchuang” Quanzhou Shengchuang Real Estate Co., Ltd.* (泉州盛創置業有限公司), a company established in the PRC with limited liability

“Reorganisation” the group restructuring to be carried out by Mega Regal and Fuzhou Sansheng with a view to regroup the Project Companies under the Target which will be wholly owned by Mega Regal

“Sale Shares” 100 shares of US$1 in the Target, representing the entire equity interest in the Target, who through its wholly-owned subsidiaries HK Holdco and WFOE, holds 95% equity interest in Fuzhou Bosheng

“SFO” the Securities & Futures Ordinance Chapter 571 of the laws of Hong Kong

“Shandong Jundao” Shandong Jundao Development Holdings Group Co., Ltd.* (山東君道發展控股集團有限公司), a company established in the PRC with limited liability

“Shanghai Jiayong” Shanghai Jiayong Duogan Investment Center (Limited Partnership)* (上海嘉甬多甘投資中心(有限合夥)), a limited partnership established in the PRC

“Share(s)” ordinary share(s) of HK$0.10 each in the share capital of the Company

“Share Pledge” the share pledge provided by a private entity controlled by Mr. Lin over the entire equity interests in Fujian Minqiao, in relation to the due performance of repayment obligations of a banking facility obtained by another private entity controlled by Mr. Lin from a financial institution in the PRC

“Shareholders” shareholders of the Company

“Stock Exchange” the Stock Exchange of Hong Kong Limited

“Target” Rosy Path Group Limited (盛途集團有限公司), a company incorporated in the BVI on 15 May 2020 with limited liability and wholly owned by Mega Regal

“Target Group” the Target and its subsidiaries upon completion of the Reorgansiation

5 DEFINITIONS

“Target Properties” real estate properties held by the Project Companies

“Wengling Rongfa” Wenling Rongfa Real Estate Development Co., Ltd.* (溫嶺榮發房地產開發有限公司), a company established in the PRC with limited liability

“WFOE” Fuzhou Shengtu Investment Co., Ltd.* (福州盛途投資有限公司), a wholly foreign owned enterprise established on 10 September 2020 in the PRC and which will be wholly owned by HK Holdco upon completion of the Reorganisation

“Yangzhou Sansheng” Yangzhou Sansheng Real Estate Development Co., Ltd.* (揚州三盛房地產開發有限公司), a company established in the PRC with limited liability

“FY2017” the financial year ended 31 December 2017

“FY2018” the financial year ended 31 December 2018

“FY2019” the financial year ended 31 December 2019

“GFA” gross floor area

“1H2020” the six months ended 30 June 2020

“1Q2020” the three months ended 31 March 2020

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

“sq. m.” square metre(s)

“%” per cent.

For ease of reference, any amount denominated in RMB in this circular was translated into HK$ at the rate of RMB1 = HK$1.12 Such translations should not be construed as a representation that the amounts have been, could have been or could be, converted at such rate or at all.

* The English translation of the Chinese names denoted in this circular is for illustration purpose only. Should there be any inconsistencies, the Chinese names prevail.

6 LETTER FROM THE BOARD

Sansheng Holdings (Group) Co. Ltd. 三盛控股（集團）有限公司 (Incorporated in the Cayman Islands with limited liability) (Stock Code: 2183)

Executive Directors: Registered office: Mr. LIN Rongbin (Chairman) Cricket Square Ms. CHENG Xuan (Chief Executive Officer) Hutchins Drive PO Box 2681 Non-executive Directors: Grand Cayman Mr. XIAO Zhong KY1-1111 Cayman Islands Mr. XU Jianwen Head office and principal place of Independent non-executive Directors: business in Hong Kong: Mr. PAN Dexiang Room 3207 Mr. YUAN Chun The Gateway Tower 6 Mr. ZHONG Bin Tsim Sha Tsui Kowloon, Hong Kong

25 September 2020

To the Shareholders

Dear Sir or Madam,

(1) MAJOR AND CONNECTED TRANSACTION IN RELATION TO ACQUISITION OF A PROPERTY GROUP; AND (2) CONNECTED TRANSACTION IN RELATION TO FINANCIAL ASSISTANCE

INTRODUCTION

Reference is made to the announcement of the Company dated 24 August 2020 in relation to the Acquisition.

7 LETTER FROM THE BOARD

On 24 August 2020 (after trading hours of the Stock Exchange), the Purchaser (a direct wholly-owned subsidiary of the Company) entered into the Agreement to conditionally acquire from Mega Regal (being the Controlling Shareholder holding approximately 72.17% of the total issued share capital of the Company as at the Latest Practicable Date) the entire equity interest in the Target for a consideration of HK$347,349,600, which is to be settled by way of issue and allotment of 49,480,000 new Shares at an issue price of HK$7.02 per Share (i.e. the Consideration Shares).

Being part and parcel of the Acquisition, on 24 August 2020, Fuzhou Bosheng (being held as to 95% by the Target upon completion of the Reorganisation) entered into the Loan Agreement with Mr. Lin and Fuzhou Sansheng, by which Fuzhou Sansheng, subject to the conditions detailed below, will continue to provide (i) a loan of RMB650 million to Fuzhou Bosheng Group, which in return will provide the Pledged Properties and the Share Pledge as security for the loan facilities obtained by such private entities controlled by Mr. Lin (i.e. the Loan and Pledge Arrangement which will be subject to Independent Shareholders approval at the EGM); and (ii) an interest bearing unsecured loan to Fuzhou Bosheng Group in such amount necessary for the development of the Target Properties on normal commercial terms (which is fully exempted from announcement, circular and shareholders approval requirements pursuant to Rule 14A. 90 of the Listing Rules). The Loan Agreement will be effective from the Completion Date to 31 October 2021, subject to the conditions detailed below.

The purpose of this circular is to provide you with (i) details of the Agreement; (ii) details of the Loan Agreement; (iii) letter of recommendation from the Independent Board Committee to the Independent Shareholders; (iv) letter of advice from Altus to the Independent Board Committee and the Independent Shareholders; (v) financial information of the Group; (vi) financial information of the Target Group; (vii) unaudited pro forma financial information of the Enlarged Group; (viii) valuation report of the Target Properties; (ix) notice convening the EGM; and (x) other information as required under the Listing Rules for the purpose of considering and approving the Agreement, the Loan Agreement and the transactions contemplated thereunder.

THE AGREEMENT

Date:

24 August 2020 (after trading hours of the Stock Exchange)

Parties:

Purchaser : Total Prestige Holdings limited (全耀控股有限公司), a direct wholly-owned subsidiary of the Company

Vendor : Mega Regal

Mega Regal was the controlling Shareholder holding 318,348,127 Shares (representing approximately 72.17% of the issued share capital of the Company) as at the Latest Practicable Date, and therefore a connected person of the Company under Chapter 14A of the Listing Rules. Mega Regal was incorporated in the BVI with limited liability and principally engaged in investment holding. The ultimate beneficial owner of Mega Regal is Mr. Lin, the Chairman of the Board and an executive Director.

8 LETTER FROM THE BOARD

Subject Matter

The Sale Shares represent the entire issued share capital of the Target. Upon completion of the Reorganisation, the Target will be indirectly interested in 95% equity interest in Fuzhou Bosheng, principal assets of which are its interests in nine Project Companies, which in turn hold the Target Properties.

Further information on the Project Companies is set out in the section headed “Information on the Target Group – Information of the Project Companies” below.

Consideration

The Consideration of HK$347,349,600 (equivalent to approximately RMB310.1 million) shall be payable to Mega Regal by way of issue and allotment of the Consideration Shares, being 49,480,000 new Shares at the issue price of HK$7.02 per Share, by the Company on Completion Date.

The Consideration was determined based on arm’s length negotiation between the parties to the Agreement having considered that (i) the consolidated net asset value attributable to equity shareholder of the Target of approximately RMB745.7 million as at 31 March 2020 (excluding the non-controlling interest of the Target Group) as shown in the accountants’ report of the Target in Appendix II to this circular will turn to minimal level upon completion of the Reorganisation; (ii) the valuation surplus of the Target Properties attributable to the Target (as per its 95% equity interest in Fuzhou Bosheng upon completion of the Reorganisation) of approximately RMB958.9 million as at 30 June 2020 (the “Target Valuation Surplus”) is in substance the subject matter of the Acquisition; (iii) the valuation surplus attributable to the Pledged Properties (as per Target’s 95% equity interest in Fuzhou Bosheng upon completion of the Reorganisation) of approximately RMB21.3 million as at 30 June 2020 (the “Pledged Valuation Surplus”); and (iv) the Consideration represented a discount of approximately 67.7% to the Target Valuation Surplus and a discount of approximately 66.9% to the Target Valuation Surplus excluding the Pledged Valuation Surplus.

In view of the significant discounts represented by the Consideration to the Target Valuation Surplus (being the subject matter of the Acquisition given the net asset value of the Target will turn to minimal level at Completion), the Board considers that the Consideration is fair and reasonable and is in the interest of the Company and the Shareholders as a whole.

The Consideration Shares

The 49,480,000 Consideration Shares represented:

(i) approximately 11.22% of the issued share capital of the Company as at the Latest Practicable Date; and

(ii) approximately 10.09% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares.

9 LETTER FROM THE BOARD

The Consideration Shares, when allotted and issued, shall rank pari passu in all respects with the outstanding Shares in issue on the date of the allotment and issue of the Consideration Shares.

The Consideration Shares will be issued under specific mandate to be sought from the Independent Shareholders at the EGM. Application for the listing of, and permission to deal in, the Consideration Shares to be allotted and issued pursuant to the Agreement will be made by the Company to the Stock Exchange. The allotment and issue of Consideration Shares will not result in a change of control of the Company.

The Issue Price

The issue price of HK$7.02 per Share represented:

(i) a premium over approximately 1.59% to the closing price of HK$6.91 per Share as quoted on the Stock Exchange on the date of the Agreement; and

(ii) a premium over approximately 0.34% to the average closing price of approximately HK$7.00 per Share as quoted on the Stock Exchange for the last five consecutive trading days immediately prior to the date of the Agreement.

(iii) a premium over approximately 8.17% over the closing price of HK$6.49 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and

(iv) a premium over approximately 107.08% over the consolidated net asset value per Share of approximately HK$3.39 (based on the equity attributable to the Shareholders of approximately RMB1,335.2 million (equivalent to approximately to HK$1,495.4 million) as at 30 June 2020 as disclosed in the interim report of the Company for the six months ended 30 June 2020 and 441,114,000 Shares in issue as at the Latest Practicable Date).

The issue price was determined after negotiations between the Purchaser and Mega Regal, with reference to the recent price performance of the Shares and current market conditions.

Conditions Precedent

Completion is subject to the fulfilment of the following conditions:

(i) the Company having obtained the Independent Shareholders’ approval of the Agreement (including the issue of the Consideration Shares), the Loan Agreement and the transactions contemplated thereunder in the manner required by the Listing Rules;

(ii) the Company, the Purchaser and the Vendor each having obtained all requisite consents, authorisations and approvals in connection with the entering into and performance of the terms of the Agreement;

10 LETTER FROM THE BOARD

(iii) the Purchaser having obtained a PRC legal opinion issued by a PRC legal counsel acceptable to the Purchaser in the form and substance satisfactory to the Purchaser in relation to, inter alia, due incorporation, valid existence, legality and regulatory compliance (including having obtained the relevant approvals, permits and licenses with respect to operations) of the members of the Target Group established in the PRC (including the Project Companies) and beneficial ownership of the Target Properties;

(iv) the Company having obtained approval from the Stock Exchange for the listing of and permission to deal in the Consideration Shares;

(v) the allotment and issuance of the Consideration Shares not being prohibited by any statute, order, rule, regulation or directive promulgated or issued after the date of the Agreement by any legislative, executive or regulatory body or authority of the Cayman Islands or Hong Kong;

(vi) completion of the Reorganisation, in form and substance satisfactory to the Purchaser and its PRC legal counsel;

(vii) all of the warranties and representations contained in the Agreement being true, correct, complete, accurate and not misleading in all material respects at Completion, as if repeated at Completion and all undertakings contained herein, to the extent being capable of being fulfilled prior to the Completion Date, having been fulfilled in all respects;

(viii) no material adverse change having occurred in relation to the Target Group between the date of the Agreement and the Completion Date;

(ix) the Purchaser, the Vendor and the Company having complied with the Listing Rules in all respects in connection with the Acquisition;

(x) the Purchaser being satisfied with the results of the legal, financial and business aspects due diligence review of the Target Group, including having obtained sufficient evidence showing good title of the Target Properties pursuant to relevant PRC laws and regulations;

(xi) the Purchaser having satisfied that the Vendor and each of the member of the Target Group is duly incorporated, validly existing, of good standing and has due capacity and authority to enter into each of the Agreement and the agreements to the Reorganisation to which it is a party, and that the shareholding structure of the Target Group pursuant to the Agreement is true, correct, accurate, complete, legal and valid; and

(xii) the Loan Agreement having become unconditional in all respects (other than the one relating to the Agreement having become unconditional).

None of the conditions is capable of being waived by the Purchaser or the Vendor.

11 LETTER FROM THE BOARD

If the conditions above have not been fulfilled within six (6) months from the date of the Agreement (or such other date as the parties may agree), the Agreement shall terminate and neither party shall have any obligations and liabilities towards each other thereunder save for any antecedent breaches of the Agreement. Should there be any material variation of the terms of the Agreement or material delay in the completion of the Agreement, the Company will comply with Rule 14.36 and Rule 14A.35 of the Listing Rules as and when appropriate.

As at the Latest Practicable Date, none of the conditions had been fulfilled.

Indemnity provided by Mega Regal

Pursuant to the Agreement, Mega Regal (as Vendor) will indemnify the Purchaser for any damage or loss arising from among others, (i) any breach of terms, conditions, warranties, representations or undertakings provided by Mega Regal in the Agreement (including the Target having good title to the Target Properties); and (ii) any non-compliance with applicable laws, rules or regulations by each member of the Target Group on or before Completion Date.

As advised by the PRC legal counsel engaged by the Company, the members of the Target Group established in the PRC (including the Project Companies) are in compliance, in all material respect, with the laws and regulations applicable to them, save for three non-compliance incidents involving: (i) in-complete payment of social insurance and housing provident fund contribution; (ii) non-registration of lease agreements of certain Project Companies; and (iii) delay in completion of a property project on one of the land owned by Jiangsu Zheguang, one of the Project Companies as required by land resources department of the PRC. As at 31 March 2020, the outstanding social insurance and housing provident fund contribution of the Target Group was not more than approximately RMB4.96 million, which has been accounted for as provision on the combined accounts of the Target and is covered and protected by the indemnity provided by Mega Regal pursuant to the Agreement. As advised by the PRC legal counsel, the statutory penalty for each non-registration of the lease agreements shall be not more than RMB10,000, which is considered by the Board as immaterial to the financial and operation of the Target Group. As advised by Mega Regal, in March 2020, Jiangsu Zheguang has obtained a new certificate of the land use rights for the new property construction plan from the land resources department of the PRC and the development of the property project has been kick started in 2020, and therefore it is believed that the risk of the land use rights being revoked by the relevant land resources department due to the delay in completion of the property project is remote.

Completion

Completion shall take place within 7 Business Days after fulfilment of all of the conditions precedent to the Agreement, or such other date as the parties to the Agreement may agree in writing.

Upon Completion, the Target will become an indirect wholly-owned subsidiary of the Company and its financial results will be consolidated into the financial statements of the Group.

12 LETTER FROM THE BOARD

THE LOAN AGREEMENT

Prior to entering into of the Agreement, certain private entities controlled by Mr. Lin had provided loan facilities to Fujian Minqiao and Yangzhou Sansheng, which in return had provided the Pledged Properties and the Share Pledge as security for such private entities controlled by Mr. Lin to obtain loan facilities from financial institutions in the PRC as a way of financing the development of the property projects of Mr. Lin’s private group. The loan exposure as to the loan facilities obtained by the private entities of Mr. Lin secured by the Pledged Properties was not more than RMB930 million. The Pledged Properties included certain commercial and retail units and a portion of a hotel of the property projects, namely Sansheng International Centre and Sansheng International Plaza, owned by Fujian Minqiao and Yangzhou Sansheng, details of which are set out in section headed “Information on the Pledged Properties” below. Upon Completion, it is estimated that the total payable to Mr. Lin’s private entities from the Target Group would amount to RMB1,194.0 million, of which RMB650.0 million will be an non-interesting bearing loans based on the provision of the Pledged Properties as security to loan facilities to Mr. Lin’s private entities (i.e. the Loan and Pledge Arrangement), while the remaining amount will be an interesting bearing unsecured loan provided by Mr. Lin’s private entities on normal commercial terms.

To this end, being part and parcel of the Acquisition, on 24 August 2020, Mr. Lin and Fuzhou Sansheng (a property development and property investment company indirectly owned by Mr. Lin and Ms. Cheng) entered into the Loan Agreement with Fuzhou Bosheng, to reflect and govern the above. Pursuant to the Loan Agreement, Fuzhou Sansheng conditionally agreed to continue to provide (i) a RMB650 million non-interest-bearing loan under the Loan and Pledge Arrangement (which will be subject to the Independent Shareholders’ approval); and (ii) an interest bearing unsecured loan to Fuzhou Bosheng Group on normal commercial terms (as to the interest rate, maturity, and conditions) in such amount necessary (estimated to be approximately RMB544.0 million upon Completion) for the development of the property projects of the Project Companies (which is fully exempted from announcement, circular and Shareholders approve requirement under Rule 14A.90 of the Listing Rules). The unsecured loan will be solely used for the development of the Target Properties.

The Loan Agreement will become effective from the Completion Date to 31 October 2021 upon (i) obtaining of the Independent Shareholders’ approval at the EGM for the resolution relating to the transactions contemplated under the Loan Agreement; and (ii) fulfilment of all conditions precedent of the Agreement (other than the one relating to the completion of the Loan Agreement).

The Pledged Properties include certain office and retail units and a portion of a hotel of the property projects, namely Sansheng International Centre and Sansheng International Plaza, owned by two Project Companies, being Fujian Minqiao and Yangzhou Sansheng, respectively. The aggregate market value of the Pledged Properties as at 30 June 2020 was RMB1,000.3 million, representing approximately 9.9% of the total market value of the Target Properties.

As part of the Loan and Pledge Arrangement under the Loan Agreement, Mr. Lin will also fully indemnify Fuzhou Bosheng against any damage, loss or diminution in value of the Pledged Properties and the Share Pledge as a result of breach of repayment obligations in relation to loan facilities secured by the Pledged Properties and the Share Pledge under the Loan and Pledge Arrangement, by way of cash or by offsetting the outstanding loans owed by Fuzhou Bosheng to Mr. Lin’s controlled entities or a combination of both. 13 LETTER FROM THE BOARD

Information of the Pledged Properties

Set out below are the details of the Pledged Properties:

Unaudited Valuation book value as at as at 30 June 30 June Project Company Property GFA 2020 2020 (sq.m) (RMB’000) (RMB’000)

1. Fujian Minqiao Office units located in Sansheng International Center 20,403 473,600 473,391

2. Fujian Minqiao Retail units located in Sansheng International Center 3,123 80,700 81,400

Subtotal 23,526 554,300 554,791

3. Yangzhou Sansheng Retail units located in Sansheng International Plaza 2,328 37,100 37,100

4. Yangzhou Sansheng Retail units and carparks located in Sansheng International Plaza 35,078 93,100 93,100

5. Yangzhou Sansheng Hotel and office units located in Sansheng International Plaza 26,486 315,800 292,888

Subtotal 63,892 446,000 423,088

Total 87,418 1,000,300 977,879

As appraised by Jones Lang LeSalle Corporate Appraisal and Advisory Limited, an independent valuer, the aggregate market value of the Pledged Properties as at 30 June 2020 was RMB1,000.3 million, representing approximately 9.9% of the total market value of the Target Properties.

The aggregate valuation surplus of the Pledged Properties amounted to RMB22.4 million, being the difference between (i) the market value of the Pledged Properties as at 30 June 2020 of RMB1,000.3 million; and (ii) the unaudited book value of the Pledged Properties of RMB977.9 million as at 30 June 2020. Taking into account the Target’s 95% equity interest in Fuzhou Bosheng, the valuation surplus of the Pledged Properties attributable to the Target (i.e. the Pledged Valuation Surplus) amounted to RMB21.3 million.

The Agreement and the Loan Agreement are inter-conditional and the completion of the Agreement and the Loan Agreement shall take place simultaneously.

14 LETTER FROM THE BOARD

INFORMATION ON THE TARGET GROUP

Information of the Target

The Target was incorporated in the BVI on 15 May 2020 with limited liability and is principally engaged in investment holding.

As part of the Reorganisation, Fuzhou Sansheng will transfer its interest in the Project Company Group to Fuzhou Bosheng at cost (being the net asset value attributable to equity shareholders of the Project Company Group of approximately RMB715.7 million as at 31 March 2020 as shown in the Accountants’ Report in Appendix II). Fuzhou Sansheng will then transfer its 95% of equity interest in Fuzhou Bosheng to the newly set up WFOE held by the Target at cost (being the net asset value of Fuzhou Bosheng of approximately RMB36.2 million). After these two transfers, the payable of the Target Group due to Fuzhou Sansheng will be increased from approximately RMB442.1 million to approximately RMB1,194.0 million, which will be governed by the Loan Agreement upon Completion. Upon completion of the Reorganisation, the equity attributable to shareholders of the Target Group will be reduced to a minimal level all the capital and retained earnings will be distributed to the original shareholder before the Acquisition.

We set out below the key steps of the Reorganisation.

1. Set out below is the shareholding of the Project Company Group prior to Fuzhou Sansheng transferring its interests in the Project Company Group to Fuzhou Bosheng as part of the Reorganisation:

Mr. Lin Ms. Cheng

90.10% 9.90%

Sansheng Group Co., Ltd.* (三盛集團有限公司)

100% Fuzhou Sansheng Fuzhou Bosheng

100% 74% 100% 100% 100% 100% 100% 80% Chengdu Qingdao Jinan Fuzhou Quanzhou Fujian Yanzhou Wenling Sansheng Sansheng Zuosheng Shenglong Shengchuang Minqiao Sansheng Rongfa 100% 100% 51% Chengdu Qingdao Jinan Jisheng Haishang Sansheng Collectively 100% 100% the Project Company Putain Shanghai Note: Group Shengxiang Jiayong The Project Companies 99% Shandong Jundao 100% Jiangsu Zheguang

15 LETTER FROM THE BOARD

2. Set out below is the shareholding of the Project Company Group upon Fuzhou Sansheng transferring its interests in the Project Company Group to Fuzhou Bosheng:

Mr. Lin Ms. Cheng

90.10% 9.90%

Sansheng Group Co., Ltd.* (三盛集團有限公司)

Fuzhou Sansheng 100% Fuzhou Bosheng

Project Company Group

3. Set out below is the Target Group upon completion of Reorganisation:

Target

100%

HK Holdco

100% Independent WFOE Third Party

95% 5%

Fuzhou Bosheng

Project Company Group

Upon completion of the Reorganisation, the Target will wholly own the HK Holdco, which in turn owns 95% equity interest in Fuzhou Bosheng through the WFOE. As at the Latest Practicable Date, the Group had no intention to acquire the 5% equity interest in Fuzhou Bosheng held by the independent third party. As at the Latest Practicable Date, the Reorganisation has not been completed, the transfer of the interests in Fuzhou Bosheng was underway.

16 LETTER FROM THE BOARD

Information on Fuzhou Bosheng

Fuzhou Bosheng is a company established in the PRC on 23 June 2017 with limited liability and is principally engaged in investment holding. Upon completion of the Reorganisation, it is owned as to 95% by the WFOE and 5% by Royal City Limited, which is beneficially owned by Mr. Qi Xiaoxi, an independent third party of the Company. The principal asset of Fuzhou Bosheng is its interests in the Project Company Group, comprising the investment holding companies and nine Project Companies, namely (i) Fujian Minqiao; (ii) Fuzhou Shenglong; (iii) Quanzhou Shengchuang; (iv) Chengdu Jisheng; (v) Jiangsu Zheguang; (vi) Yangzhou Sansheng; (vii) Wenling Rongfa; (viii) Qingdao Haishang; and (ix) Putian Shengxiang, which together hold the Target Properties.

Information of the Project Companies

1. Fujian Minqiao

Fujian Minqiao is a company established in the PRC on 21 March 2011 with limited liability and is principally engaged in property development in the PRC. Upon completion of the Reorganisation, it will be wholly owned by Fuzhou Bosheng.

The principal asset of Fujian Minqiao is a parcel of land of approximately 7,678 sq.m. located at Wusi Road, Gulou District, Fuzhou City, Fujian Province, the PRC which has been developed into a office/commercial complex named “三盛國際中心” (Sansheng International Center*) comprising two commercial buildings of 40-storeys and 29-storeys, respectively. Construction of the complex was completed in 2017. As at 30 June 2020, Fujian Minqiao held the unsold office units, retail units and car parking spaces of the complex with a total GFA of approximately 32,452 sq.m. for investment of which 23,526 sq.m. constituted the Pledged Properties. Portions of the property with a total GFA of approximately 15,066 sq.m. were leased out at RMB60 - RMB400 per sq.m. per month, while the remaining portions were vacant as at 30 June 2020. In addition, construction of certain ancillary units and car parking spaces of 8,926 sq.m. have been completed, of which Fujian Minqiao will apply for the certificates of ownership according to the sales and marketing plan of the project. As at 30 June 2020, these units had no commercial value.

2. Fuzhou Shenglong

Fuzhou Shenglong is a company established in the PRC on 22 June 2017 with limited liability and is principally engaged in property development in the PRC. Upon completion of the Reorganisation, it will be wholly owned by Fuzhou Bosheng.

The principal asset of Fuzhou Shenglong is a parcel of land of approximately 51,955 sq.m. located at Hexie Road, Changle District, Fuzhou City, Fujian Province, the PRC which is to be developed into a residential and commercial complex named “三盛璞悅濱江” (Sansheng Puyuebinjiang*) with a planned GFA of approximately 164,908 sq.m. The project was completed in 2020. As at 30 June 2020, a GFA of approximately 118,215 sq.m has been pre-sold.

17 LETTER FROM THE BOARD

3. Quanzhou Shengchuang

Quanzhou Shengchuang is a company established in the PRC on 4 September 2019 with limited liability and is principally engaged in property development in the PRC. Upon completion of the Reorganisation, it will be wholly owned by Fuzhou Bosheng.

The principal asset of Quanzhou Shengchuang is a parcel of land of approximately 16,960 sq.m. located in Jiangnan New District, Licheng District, Fujian Province, the PRC which is to be developed into a residential and commercial complex named “三盛璞悅里” (Sansheng Puyueli*) comprising residential units, retail units, car parking space, a kindergarten and ancillary facilities covering a planned GFA of 40,716 sq.m. The project was under construction as at the Latest Practicable Date and is expected to be completed in June 2021.

4. Chengdu Jisheng

Chengdu Jisheng is a company established in the PRC on 14 December 2017 and is wholly owned by Chengdu Sansheng, which is a company established in the PRC on 19 June 2009 with limited liability. Upon completion of the Reorganisation, Chengdu Sansheng will be wholly owned by Fuzhou Bosheng.

The principal assets of Chengdu Jisheng is a parcel of land of approximately 133,333 sq.m. located at Chencheng East 7th Road, Longquanyi District, Chengdu City, Sichuan Province, the PRC, which will be developed in five phases into a residential and commercial complex named “三盛都會城”（Sansheng Metropolis*）covering a GFA of approximately 442,827 sq.m.. Construction for phases I and III which comprise residential units, retail units, apartments and car parking space covering a GFA of approximately 246,914 sq.m has been completed in 2016. As at 30 June 2020 approximately 45.417 sq.m. of phases I and III was unsold including approximately 26,917 sq.m. have been presold but not delivered. Phase IV with a GFA of approximately 182,773 sq.m is under construction and is scheduled to be completed by October 2020 of which approximately 134,316 sq.m have been presold. Phases II and V will cover an aggregate GFA of approximately 137,442 sq.m and has not commence construction.

5. Jiangsu Zheguang

Jiangsu Zheguang is a company established in the PRC on 5 September 2008 with limited liability and is principally engaged in property development in the PRC. Jiangsu Zheguang is wholly-owned by Shandong Jundao, which is owned as to 99% by Shanghai Jiayong. Shanghai Jiayong is effectively wholly owned by Jinan Sansheng given the 55.85% legal interest held by China Orient Asset Management Co., Ltd. (中國東方資產管理股份有限公司*), a state-owned financial enterprise and an independent third party is subject to mezzanine financing arrangement (明股實債), details of which is set out in Note 1 to the financial statement in Appendix II to this Circular.

The principal asset of Jiangsu Zheguang is a parcel of land with a site area of 118,546 sq.m. for commercial and residential use located at eastern of Beijing Road and northern of Xiangjiang Road, Tongshan District, Xuzhou City, Jiangsu Province, the PRC. Jiangsu Zheguang obtained the certificate of land use right for the land in 2019 and the construction land plan has been approved by the relevant land resources department in the PRC in March 2020.

18 LETTER FROM THE BOARD

6. Yangzhou Sansheng

Yangzhou Sansheng is a company established in the PRC on 5 March 2012 with limited liability and is principally engaged in property development in the PRC. Upon completion of the Reorganisation, it will be wholly owned by Fuzhou Bosheng. Its principal asset is a property development project set out below.

The principal asset of Yangzhou Sansheng is a parcel of land of approximately 39,813 sq.m located at Hanjiang Middle Road, Hangjing District, Yangzhou City, Jiangsu Province, the PRC which has been developed into a complex community named “三盛國際廣場” (Sansheng International Plaza*). Construction of the complex was completed in 2016. As at 30 June 2020, Yanzhou Sansheng held 144,705 sq.m, of which 63,892 sq.m constituted the Pledged Properties. The property comprise (i) residential and retail units, of which 2,587 sq.m is currently held for sale; (ii) shopping mall, office units and car parking space with a total GFA of 120,579 sq.m, which is leased out at RMB34 – RMB510 per sq.m per month with a total leasable area 31,651 sqm; and (iii) a hotel with a GFA of 21,542 sq.m, which is currently managed by Hilton Hotel Management (Shanghai) Co., Ltd, an affiliate of Hilton Worldwide Inc.

7. Wenling Rongfa

Wenling Rongfa is a company established in the PRC on 10 September 2019 with limited liability and is principally engaged in property development in the PRC. Upon completion of the Reorganisation, it will be effectively owned as to 80% by Fuzhou Bosheng and 20% by Shanghai Zetai Real Estate Co., Ltd. (上海澤泰置業有限公司*), an independent third party. 10% effective interest owned by Fuzhou Bosheng is held by Zhejiang Shuoqing Changsheng Asset Management Co., Ltd (浙江朔青長晟資產管理有限公司* ), an independent third party and subject to mezzanine financing arrangement (明股實債), details of which are set out in Note 1 to financial statement in Appendix II to this Circular.

The principal asset of Wenling Rongfa is a parcel of land with a site area of approximately 35,631 sq.m. located in East side of Jinping Avenue, West side of Casping Road, Wengdong Street, Wengdong City, Zhejang Province, the PRC. The land is to be developed into a residential and commercial complex named 温嶺璞悅府 (Sansheng Puyue Mansion*) comprising residential units, retail units, offices, car parking spaces and ancillary facilities, covering a GFA of 117,361 sq.m. The project was currently under construction as at the Latest Practicable Date and is scheduled to be completed in August 2022.

8. Qingdao Haishang

Qingdao Haishang is a company established in the PRC on 18 March 2009 with limited liability and is principally engaged in property development in the PRC. Upon completion of the Reorganisation, it will be wholly owned by Qingdao Sansheng, which will be owned as to 74% by Fuzhou Bosheng and as to 26% by Mr. Qi Xiaoxi, an independent third party of the Company.

19 LETTER FROM THE BOARD

The principle assets of Qingdao Haishang consist of 9 parcels of land with an aggregate site area of approximately 532,518 sq.m., located at Linghai West Road, Wenquan Street Office, Jimo District, Qingdao City, Shandong Province, the PRC. The lands will be developed into a high-end residential project named “三盛國際海岸” (Sansheng International Coast*) comprising villas, residential units, retail space, and car parking space covering a GFA of approximately 879,620 sq.m.. Construction of phases I and a portion of phase II with an aggregate GFA of approximately 209,206 sq.m. has been completed in 2017, of which approximately 151,497 sq.m. have been sold and delivered, approximately 1,325 sq.m. have been pre-sold and approximately 56,384 sq.m. is held for sale as at 30 June 2020. A portion of phase II with a planned GFA of approximately 5,082 sq.m. was bare land for future development as at the Latest Practicable Date. Phases III to VI covering an aggregate GFA of approximately 665,332 sq.m. is under construction and is scheduled to be completed by February 2022, of which various residential units, villa units and retail units with a total GFA of approximately 290,406 sq.m. have been presold.

9. Putian Shengxiang

Putian Shengxiang is a company established in the PRC on 26 September 2019 with limited liability and is principally engaged in property development in the PRC. Upon completion of the Reorganisation, it will be indirectly wholly owned by Qingdao Sansheng.

The principal assets of Putian Shengxiang is a parcel of land of approximately 20,897 sq.m. located in Hanjiang District, Putian City, Fujian Province, the PRC. The land is to be developed into a residential project named “三盛璞悅公館” (Sansheng Puyue Gongguan*) comprising residential units, car parking space and ancillary facilities covering a planned GFA of approximately 69,011 sq.m. The project is undergoing construction and is expected to be completed in October 2021. As at 30 June 2020, a GFA of approximately 4,311 sq.m has been pre-sold.

20 LETTER FROM THE BOARD

Set out below is a summary of the status of Target Properties held by each Project Company as at 30 June 2020:

Construction Stage as at Project Planned Latest Estimated Company Property Site Area GFA Pre-Sold Sold Practicable Date Completion Date (sq.m.) (sq.m.) (sq.m.) (sq.m.)

1. Fujian Unsold units of Sansheng 7,678 32,452 – – completed in 2017 – Minqiao International Center located at No. 118 Wusi Road Gulou District Fuzhou City, Fujian Province, the PRC

2. Fuzhou Sansheng Puyue Binjiang 51,955 164,908 118,215 – completed in 2020 – Shenglong (三盛璞悅濱江) located at No. 288, Hexie Road Changle District, Fuzhou City, Fujian Province, the PRC

3. Quanzhou Sansheng Puyueli (三盛璞 16,960 40,716 – – under June 2021 Shengchuang 悅里) located at Chifeng construction Road, Jiangnan New District, Licheng District, Quanzhou City, Fujian Province, the PRC

4. Chengdu Sansheng Metropolis (三盛 133,333 442,827 161,233 77,195 Phase I & III was Phase II & V has not Jisheng 都會城)located at No. 733, completed in commenced Chencheng East 7th Road, 2016. Phase IV is construction. Phase Longquanyi District, currently under IV is expected to Chengdu City, Sichuan construction. complete by October Province, the PRC Phase II and V are 2020. bare land

5. Jiangsu A parcel of bare land 118,546 – – – construction and By 2024 Zheguang located at the eastern side of plan has been Beijing Road and northern approved by the side of Xiangjiang Road, relevant land Tongshan District, Xuzhou resources City, Jiangsu Province, the department in the PRC PRC in March 2020

6. Yangzhou Sansheng International 39,813 144,707 – – completed in 2016 – Sansheng Plaza (三盛國際廣場 located at No. 358, Hanjiang Middle Road, Hanjiang District, Yangzhou City, Jiangsu Province, the PRC

7. Wenling Sansheng Puyue Mansion 35,631 117,361 – – under August 2022 Rongfa (三盛璞悅府) located at the construction eastern side of Jinping Avenue and western side of Caiping Road, Chengdong Street, Wenling City, Zhejiang Province, the PRC

21 LETTER FROM THE BOARD

Construction Stage as at Project Planned Latest Estimated Company Property Site Area GFA Pre-Sold Sold Practicable Date Completion Date (sq.m.) (sq.m.) (sq.m.) (sq.m.)

8. Qingdao Sansheng International 532,518 879,620 291,730 151,497 Phase I and Phase III to VI Haishang Coast (三盛國際海岸) portion of phase scheduled to be located at Linghai West II completed, completed by Road, Wenquan Street phase III to VI is February 2022 Office, Jimo District, under Qingdao City, Shandong construction Province, the PRC

9. Putian Sansheng Puyue Gongguan 20,897 69,011 4,311 –- Under October 2021 Shengxiang (三盛璞悅公館) located at construction Puwei Community, Hanjiang District, Putian City, Fujian Province, the PRC

The total site area of the Target Properties amounted to 957,331 sq.m., and the total original land cost was approximately RMB4,301.6 million. According to the valuation report set out in Appendix IV to this Circular, the valuation of the Target Properties, based on approaches including comparison and income approach, as at 30 June 2020 (before excluding minority interests) amounted to approximately RMB10,115.2 million. As mentioned in the paragraph “1. Fujian Minqiao” above, certain ancillary units and car parking spaces owned by Fujian Minqiao of 8,925 sq.m. have been completed and Fujian Minqiao will apply for the building title certificate according to the sales and marketing plan of the project. Accordingly, no commercial value is yet to be assigned to it as at 30 June 2020 in the valuation report. However, these units of approximately RMB34.5 million was accounted for as investment properties on the accounts of the Target as at 31 March 2020. The Target Valuation Surplus was therefore calculated based on the valuation of the Target Properties after taking into account the value of these units (being approximately RMB10,149.7 million in total) and the book value of the Target Properties as at 31 March 2020 of approximately RMB8,870.5 million plus the construction costs of approximately RMB105.8 million incurred from 1 April 2020 up to 30 June 2020. Accordingly, the total valuation surplus before and after excluding the minority interests in the Project Companies) would amount to approximately RMB1,173.4 million and approximately RMB1,009.4 million, respectively. The Target Valuation Surplus of approximately RMB958.9 million represented the valuation surplus excluding all minority interests in the Project Companies and solely attributable to Target’s 95% interest in the Target Properties.

22 LETTER FROM THE BOARD

Overview of the property market where the Target Properties are located

Set out below is a summary of year-on-year (yoy) growth in the housing price index of each city where the Target Properties are located.

Yoy growth in Corresponding City housing price index Yoy growth in GDP Project Companies and province in June 2020 in 2019

#1 Fujian Minqiao Fuzhou, Fujian 3.7% 7.9% #2 Fuzhou Shenlong

#3 Quanzhou Shengchuang Quanzhou, Fujian 5.2% 8.0%

#4 Chengdu Jisheng Chengdu, Sichuan 10.0% 7.8%

#5 Jiangsu Zheguang Xuzhou, Jiangsu 11.2% 6.0%

#6 Yangzhou Sansheng Yangzhou, Jiangsu 9.3% 6.8%

#7 Wenling Rongfa Taizhou, Zhejiang N/A (note) 5.1%

#8 Qingdao Haishang Qingdao, Shandong 2.5% 6.5%

#9 Putian Shengxiang Putian, Fuzhou N/A (note) 6.6%

Source: National Bureau of Statistics of China

Note: No index is published.

The GDP in the cities where the Target Properties are situated showed a significant yoy growth in 2019, ranging from the lowest growth of 5.1% in Taizhou City, Zhejiang Province, to the highest one of 8.0% in Quanzhou City, Fujian Province. The growth momentum in GDP may be transformed into purchasing power of the local residents, which in turn benefits the property market in the city as a whole. In addition, the housing price index published by National Bureau of Statistics of China for 70 largest cities in the PRC also showed that the property market in the subject cities remained resilient amid the outbreak of COVID-19 pandemic since early this year, with an yoy growth ranging from 2.5% to 11.2% in June 2020.

23 LETTER FROM THE BOARD

Financial Information of the Target Group

Set out below is combined financial information of Target Group for FY2018 and FY2019 as prepared in accordance with the Hong Kong Financial Reporting Standards as extracted from the accountants’ report of the Target Group set out in Appendix II of this circular.

FY2019 FY2018 (RMB in million) (audited) (audited)

Revenue 291.4 663.3 (Loss)/profit before taxation (1.7) 8.4 (Loss) after taxation (33.7) (19.7)

The net loss after taxation of the Target Group for FY2018 and FY2019 was mainly because properties delivered and recognised as revenue in FY2018 and FY2019 were pre-sold in downturn market with low selling prices. Revenue in respect of the pre-sold units will only be recognised upon delivery of the units to the customers. Further loss after taxation in FY2018 and FY2019 was mainly because certain Project Companies recorded land appreciation tax against the appreciation of the land value which is calculated based on the sale proceeds of the properties less deductible expenditures under applicable regulations.

As at 31 March 2020, the net asset value of Target Group attributable to equity shareholder of the Target was approximately RMB745.7 million, which upon completion of the Reorganisation pursuant to the Agreement will close to zero. As at 31 March 2020, the outstanding commitments of the Target Group of approximately RMB1,655.4 million, which mainly related to land and development costs, is expected to be financed by internal resources of the Target Group and/or its external financing upon Completion.

CHANGES IN SHAREHOLDING STRUCTURE OF THE COMPANY

As at the Latest Practicable Date, the Company has 441,114,000 Shares in issue. Set out below is the shareholding structure of the Company (i) as at the Latest Practicable Date; and (ii) immediately upon Completion and the allotment and issue of the Consideration Shares:

(ii) Immediately upon Completion and (i) As at the the allotment and issue Latest Practicable Date of the Consideration Shares Number of Approximate Number of Approximate Shares % Shares %

Mega Regal 318,348,127 72.17 367,828,127 74.98 Public Shareholders 122,765,873 27.83 122,765,873 25.02

Total 441,114,000 100.00 490,594,000 100.00

24 LETTER FROM THE BOARD

REASONS AND BENEFITS OF THE ACQUISITION

It has been a long-established business strategy of the Group to focus on and expand the existing principal business (i.e. property development and sales, and property investment). The Group has expanded its property portfolio from a total site area of approximately 31,000 sq.m in April 2017 to approximately 1,998,483 sq.m. as at 30 June 2020, of which 1,583,477 sq.m. was acquired directly from independent third parties or by way of bid, auction and listing (招拍掛), representing approximately 79.2% of the total site area owned by the Group.

Amid the Group’s continuing property or land acquisitions via bid, auction and listing or from independent third parties in Fujian and other provinces, in November 2019, the Group acquired certain property projects in Fujian Province owned by Mr. Lin (the “2019 Acquisition”) taking into account the growth momentum in Fujian property market. It was stated in the circular of the Company dated 25 November 2019 in respect of 2019 Acquisition that the Company did not have intention to acquire other projects owned by Mr. Lin in Fujian Province given, among other things, the transfer of those projects would require joint venture partner’s consent. After the 2019 Acquisition, the Company continued to review the property projects available in the market and acquired certain land and properties with aggregate site area of 723,906 sq.m. from independent third parties in Fujian and other provinces. In May 2020, after reviewing the monthly report of Mr. Lin’s property projects provided to the Group pursuant to the internal control procedures of Group established by the Group to monitor status of competing business between the Group and Mr. Lin, it came to the Board’s knowledge that two property projects in Fujian Province owned by Putian Shengxiang and Quanzhou Shengchuang, which were not held by Mr. Lin at the time the Company contemplated the 2019 Acquisition, have been developed by Mr. Lin to a mature stage with completion date of the construction in 2021 as disclosed in the section headed “Information on the Target Group” above. Another two Fujian projects owned by Fujian Minqiao and Fuzhou Shenglong which once lacked consent for transfer became free of restriction. Accordingly, the Board conducted a review on the possible target properties as a whole and commenced the legal and financial due diligence. The Target Properties were selected based on the results of the due diligence and, in the view of the Board, they would bring about (i) stable revenue and cashflow for projects under development in the future; (ii) stable rental income and cashflow from investment properties and unsold properties; and (iii) additional land bank for future development; and (iv) wider geographic coverage of different tier cities, such as Quanzhou, Chengdu, Xuzhou, Qingdao, Putian and Fuzhou.

The Board considers that the Acquisition is in line with the Group’s well-established strategy to persistently establish its market position and image through expansion of land bank and property portfolio, and to gain a better global rating for debt issuance through legitimate and organic growth of the Group’s asset size. It is also in line with the stated intention of Mega Regal to have leverage on Mr. Lin’s experience in the PRC property market to facilitate the development of the property business of the Group. The Group had no intention to acquire the remaining property projects owned by Mr. Lin as at the Latest Practicable Date.

Given the net asset value of the Target upon completion of the Reorganisation will turn to a minimal level as a way to distribute all capital and retained earnings back to the original shareholders before any disposal, the subject matter of the Acquisition is in substance the Target Valuation Surplus. The Consideration represented a significant discount of approximately 67.7% to the Target Valuation Surplus of approximately RMB958.9 million, which is expected to be materialised through future revenue

25 LETTER FROM THE BOARD and cashflow from properties sale and rental income to the Group. The Board therefore considers that the Consideration is favourable to the Company and the Shareholders as a whole. Being part and parcel of the Acquisition, the Board also considers that the Loan Agreement as a whole would provide adequate financing for the Group’s development of the property projects of the Project Companies upon Completion and the financing terms offered by Fuzhou Sansheng are more favourable than those available in the market having considered that (i) the loan-to-value ratio of the loan granted by Mr. Lin to Fuzhou Bosheng Group upon Completion is higher than that available in the market from other financial institutions; (ii) the loan is interest free; and (iii) the associated risks of the Pledged Properties are largely contained in the sense that the Pledged Valuation Surplus of approximately RMB21.3 million constituted less than 3% of the total Target Valuation Surplus and Mr. Lin agrees to indemnify any loss or diminution in value of the Pledged Properties under the Loan Agreement.

In view of the above, the Board considers that it is in the interests of the Company and the Shareholders as a whole to enter into the Acquisition and the Financial Assistance.

BUSINESS DELINEATION UPON COMPLETION

Upon Completion, the Target Group will become a wholly-owned subsidiary of the Company, and the Board will operate the property development and investment business independently of and clearly delineated from Mr. Lin’s private group based on the following:

(i) the property business of the Group and that of Mr. Lin’s private group will be operated by separate and independent management teams, operation teams and business entities with their own licenses, approvals, qualifications, finance and accounting system, know-how;

(ii) the Group has independent access to suppliers/contractors and sources such suppliers/ contractors independent of Mr. Lin’s private group;

(iii) the independent non-executive Directors will effectively exercise independent judgment to address situations of conflict of interest and protect the interests of independent Shareholders;

(iv) in the event there is potential conflict of interest arising out of any transaction to be entered into between the Group and the Directors or their respective associates, the interested Directors will abstain from voting at the relevant Board meetings of the Company in respect of such transactions and will not be counted in the quorum; and

(v) having considered Mr. Lin’s private group’s ownership of property projects in the PRC, Mr. Lin, Modern Times and Mega Regal entered into a deed of non-competition on 1 November 2019 in favour of the Company (for the company itself and for the benefit of each of the members of the Group) to safeguard the interests of the Company and the Shareholders as a whole. Details are set out on pages 105 and 106 of the annual report of the Company for FY2019.

26 LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE ACQUISITION

Upon Completion, the Target will become an indirect wholly-owned subsidiary of the Company. The financial statements of the Target Group will be consolidated into the financial statements of the Group. Based on the unaudited pro forma financial information of the Enlarged Group set out in Appendix III to this circular, the financial effects of the Acquisition are summarised below:

Earnings

Upon Completion, the Target will become an indirect wholly-owned subsidiary of the Company and all future financial results of the Target Group will be consolidated in the consolidated financial statements of the Group.

Assets and liabilities

As extracted from the interim report of the Company published on 23 September 2020 for 1H2020, the consolidated total assets and total liabilities of the Group were approximately RMB34,116.7 million and RMB32,266.1 million respectively. The net asset value as at 30 June 2020 was approximately RMB1,850.6 million. As set out in Appendix III to this circular, assuming Completion had taken place on 30 June 2020, the unaudited pro forma consolidated total assets and total liabilities of the Enlarged Group would increase to approximately RMB44,393.7 million and RMB42,632.3 million respectively. As the net asset value attributable to the equity holders of the Target Group would turn to a minimal level upon completion of the Reorganisation, the Acquisition as a whole would not have a material impact on the net asset value attributable to the equity holders of the Enlarged Group. The decrease in the net assets value shown in the pro forma financial information in Appendix III to this circular was merely attributable to the 5% non-controlling interest in the Target Group and transaction costs of approximately RMB4.4 million. Despite the minimal effect on the net assets of the Enlarged Group upon Completion, the pro forma financial information using merger basis of accounting in Appendix III did not reflect the valuation surplus of the Target Properties of approximately RMB958.9 million, which is in substance the subject matter of the Acquisition. Therefore, the increases in assets and liabilities of the Group upon Completion are solely based on the book value of the Target Group without the effect of the Target Valuation Surplus.

LISTING RULES IMPLICATIONS

As certain percentage ratios (defined under Chapter 14 of the Listing Rules) in respect of the Acquisition exceeds 25% but under 100%, the Acquisition constitutes a major transaction for the Company under Chapter 14 of the Listing Rules. In addition, as the Vendor and Mr. Lin are connected persons of the Company, the Acquisition would constitute a connected transaction for the Company under Chapter 14A of the Listing Rules.

27 LETTER FROM THE BOARD

Upon Completion, Fuzhou Bosheng will become an indirect non-wholly-owned subsidiary of the Company and the Loan and Pledge Arrangement (including the indemnity to be provided by Mr. Lin) will therefore constitute a non-exempt connected transaction of the Company under Chapter 14A of the Listing Rules. The unsecured loan to be provided by Fuzhou Sansheng on normal commercial terms subsequent to Completion will be exempted under Rule 14A.90 of the Listing Rules. The Acquisition as aggregated with the Loan and Pledge Arrangement (including the indemnity to be provided by Mr. Lin) would constitute a major and connected transaction of the Company under the Listing Rules and therefore are subject to reporting, announcement and Shareholders’ approval requirements under the Listing Rules.

The Consideration Shares will be issued under specific mandate to be sought from the Independent Shareholders at the EGM.

EGM

The EGM will be convened and held to consider and, if thought fit, approve the resolutions in respect of the Agreement, the Loan Agreement and the transactions contemplated thereunder. Mr. Lin (being the Chairman of the Board and an executive Director) and Ms. Cheng (being an executive Director and the spouse of Mr. Lin) had abstained from voting on the Board’s resolutions approving the Agreement, the Loan Agreement and the transactions contemplated thereunder in light of their material interests in the Acquisition and the Financial Assistance. Mega Regal will also be abstained from voting on the resolutions approving the Agreement (including the issue of the Consideration Shares), the Loan Agreement and the transactions contemplated thereunder at the EGM. The voting in relation to the aforesaid resolution to be proposed at the EGM will be conducted by way of poll. A notice convening the EGM to be held is set out on pages EGM-1 to EGM-4 of this circular. A form of proxy for use at the EGM is also enclosed with this circular.

Whether or not you intend to attend and/or vote in person at the EGM or any adjourned meeting thereof (as the case may be), you are requested to complete the form of proxy enclosed in accordance with the instructions printed thereon and return it to the share registrar and transfer office of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited, at Shop 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as practicable but in any event not later than 48 hours before the time appointed for holding the EGM or any adjourned meeting thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjourned meeting thereof (as the case may be) should you so wish and in such event, the form of proxy will be deemed to have been revoked.

28 LETTER FROM THE BOARD

CLOSURE OF REGISTER OF MEMBERS

The transfer books and register of members of the Company will be closed from Wednesday, 14 October 2020 to Monday, 19 October 2020 (both dates inclusive) for determining the identity of the Shareholders who are entitled to attend and vote at the EGM. No transfer of Shares will be registered during this period. Shareholders whose names appear on the register of members of the Company on Monday, 19 October 2020 shall be entitled to attend and vote at the EGM. In order to be eligible to attend and vote at the EGM, unregistered holders of the Shares should ensure that all transfer forms accompanied by the relevant share certificates must be lodged with the share registrar and transfer office of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited, at Shop 1712- 1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong for registration no later than 4:30 p.m. on Tuesday, 13 October 2020.

INDEPENDENT BOARD COMMITTEE & INDEPENDENT FINANCIAL ADVISER

The Independent Board Committee (comprising all the independent non-executive Directors) has been formed in accordance with Chapter 14A of the Listing Rules to advise the Independent Shareholders in respect of the Agreement, the Loan Agreement and the transactions contemplated thereunder. Altus has been appointed by the Company as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

RECOMMENDATIONS

Your attention is drawn to the letter from the Independent Board Committee set out on pages 30 to 31 of this circular and the letter from Altus set out on pages 32 to 62 of this circular in relation to the Agreement (including the issue of the Consideration Shares), the Loan Agreement and the transactions contemplated thereunder.

The Board (including the independent non-executive Directors whose recommendation is set out in the letter from the Independent Board Committee having considered the advice of Altus) considers that (i) the terms of the Agreement, the Loan Agreement and the transactions contemplated thereunder are fair and reasonable and (ii) the entering in the Agreement (including the issue of Consideration Shares) and the transactions contemplated thereunder are on normal commercial terms, in the ordinary course of business of the Group and in the interests on the Company and its Shareholders as a whole.

ADDITIONAL INFORMATION

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

By order of the Board Sansheng Holdings (Group) Co. Ltd. Lin Rongbin Chairman

29 LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of a letter from the Independent Board Committee to the Independent Shareholders in relation to the Agreement and the Loan Agreement and the transactions contemplated thereunder

Sansheng Holdings (Group) Co. Ltd. 三盛控股（集團）有限公司 (Incorporated in the Cayman Islands with limited liability) (Stock Code: 2183)

25 September 2020

To the Independent Shareholders

Dear Sir or Madam,

(1) MAJOR AND CONNECTED TRANSACTION IN RELATION TO ACQUISITION OF A PROPERTY GROUP; (2) CONNECTED TRANSACTION IN RELATION TO FINANCIAL ASSISTANCE

We refer to the circular of the Company dated 25 September 2020 (the “Circular”), of which this letter forms a part. Unless the context requires otherwise, capitalised terms used in this letter shall have the same meanings as defined in the Circular.

We have been appointed by the Board as the members of the Independent Board Committee to advise the Independent Shareholders in relation to the Agreement, the Loan Agreement and transactions contemplated thereunder. Altus has been appointed as the Independent Financial Adviser to advise us in this regard. We wish to draw your attention to the letter from the Board as set out on pages 7 to 29 of the Circular and the letter from Altus as set out on pages 32 to 62 of the Circular.

Having considered the terms and conditions of the Agreement and the Loan Agreement, as well as the advice of Altus as set out in its letter of advice, we consider that (i) the terms of the Agreement, the Loan Agreement and the transactions contemplated thereunder are fair and reasonable; and (ii) the entering into the Agreement (including the issue of the Consideration Shares) and the transactions contemplated thereunder are on normal commercial terms, in the ordinary and usual course of business of the Group and in the interests of the Company and its Shareholders as a whole.

30 LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM to approve the Agreement (including the issue of the Consideration Shares) and the Loan Agreement and the transactions contemplated thereunder.

Yours faithfully, For and on behalf of the Independent Board Committee Mr. Pan Dexiang Mr. Yuan Chun Mr. Zhong Bin Independent non-executive Directors

31 LETTER FROM ALTUS

The following is the text of a letter of advice from Altus, to the Independent Board Committee and the Independent Shareholders in relation to the Agreement, the Loan Agreement and the transactions contemplated thereunder, which has been prepared for the purpose of incorporation in this circular.

Altus Capital Limited 21 Wing Wo Street Central Hong Kong

25 September 2020

To the Independent Board Committee and the Independent Shareholders

Sansheng Holdings (Group) Co. Ltd. Room 3207 The Gateway Tower 6 Tsim Sha Tsui Kowloon, Hong Kong

Dear Sirs,

MAJOR AND CONNECTED TRANSACTION IN RELATION TO THE ACQUISITION OF A PROPERTY GROUP AND CONNECTED TRANSACTION IN RELATION TO THE FINANCIAL ASSISTANCE

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Acquisition and the Financial Assistance. Details are set out in the “Letter from the Board” contained in the circular of the Company dated 25 September 2020 (the “Circular”), of which this letter forms part. Terms used in this letter shall have the same meanings as those defined in the Circular unless the context requires otherwise.

32 LETTER FROM ALTUS

On 24 August 2020 (after trading hours of the Stock Exchange), the Purchaser (a direct wholly-owned subsidiary of the Company) entered into the Agreement to conditionally acquire from Mega Regal (being the Controlling Shareholder) the entire equity interest in the Target for a consideration of HK$347,349,600, (equivalent to approximately RMB310.1 million) which is to be settled by way of issue and allotment of 49,480,000 new Shares at an issue price of HK$7.02 per Share. Upon completion of the Reorganisation, the Target will indirectly hold 95.0% equity interest in Fuzhou Bosheng, the principal assets of which are the Target Properties. Details of the shareholding and organisational structure before and upon Completion are set out in the “Letter from the Board” of the Circular.

The Consideration Shares represent approximately 11.22% of the issued share capital of the Company as at the Latest Practicable Date and approximately 10.09% of the issued share capital of the Company as enlarged by the issue of the Consideration Shares. Upon Completion, Mega Regal will be interested in approximately 74.98% of the issued share capital of the Company as enlarged by the issue of the Consideration Shares.

Prior to the entering into of the Agreement, certain private entities controlled by Mr. Lin (the “Private Group”) had provided loan facilities to two Project Companies, which in return had provided the Pledged Properties and the Share Pledge as security for the Private Group to obtain loan facilities from financial institutions in the PRC as a way of financing the development of the property projects of the Private Group.

As a result, being part and parcel of the Acquisition, on 24 August 2020, Mr. Lin and Fuzhou Sansheng entered into the Loan Agreement with Fuzhou Bosheng, conditionally effective from the Completion Date to 31 October 2021, pursuant to which Fuzhou Sansheng agreed to continue to provide funding to Fuzhou Bosheng Group comprising (i) a RMB650.0 million non-interest-bearing loan to Fuzhou Bosheng Group in return for the Pledged Properties and the Share Pledge provided by Fuzhou Bosheng Group as security for loans obtained by the Private Group from financial institutions in the PRC; and (ii) an interest bearing unsecured loan to (as to the interest rate, maturity and conditions which will be determined as and when appropriate) on normal commercial terms in such amount necessary for the sole purpose of developing the Target Properties.

As part of the Loan and Pledge Arrangement under the Loan Agreement, Mr. Lin will fully indemnify Fuzhou Bosheng against any damage, loss or diminution in value of the Pledged Properties and the Share Pledge as a result of breach of repayment obligations in relation to loan facilities secured by the Pledged Properties and the Share Pledge under the Loan and Pledge Arrangement, by way of cash or by offsetting the outstanding loans owed by Fuzhou Bosheng to Mr. Lin’s controlled entities or a combination of both.

LISTING RULES IMPLICATION

As certain percentage ratios (defined under Chapter 14 of the Listing Rules) in respect of the Acquisition exceeds 25% but under 100%, the Acquisition constitutes a major transaction for the Company under Chapter 14 of the Listing Rules. In addition, as the Vendor and Mr. Lin are connected persons of the Company, the Acquisition would also constitute a connected transaction for the Company under Chapter 14A of the Listing Rules.

33 LETTER FROM ALTUS

Upon Completion, Fuzhou Bosheng will become an indirect non-wholly-owned subsidiary of the Company and the Loan and Pledge Arrangement (including the indemnity to be provided by Mr. Lin) would therefore constitute a connected transaction of the Company under Chapter 14A of the Listing Rules. The unsecured loan to be provided by Fuzhou Sansheng on normal commercial terms subsequent to Completion under the Loan Agreement will be exempted under Rule 14A.90 of the Listing Rules. Accordingly, the Acquisition as aggregated with the Loan and Pledge Arrangement would constitute a major and connected transaction of the Company under the Listing Rules and are subject to reporting, announcement and Shareholders’ approval requirements under the Listing Rules.

Pursuant to Rule 13.36(1) of the Listing Rules, the Consideration Shares will be allotted and issued under the Specific Mandate. Accordingly, the Company will convene an EGM to consider and, if thought fit, approve the resolutions in respect of the Agreement (including the issue of the Consideration Shares), the Loan Agreement and the transactions contemplated thereunder.

As at the Latest Practicable Date, Mr. Lin (being the Chairman of the Board and an executive Director) and Ms. Cheng (being an executive Director and the spouse of Mr. Lin) are considered to be materially interested in the Acquisition and the Financial Assistance. Hence, Mr. Lin and Ms. Cheng abstained from voting on the Board’s resolutions approving the Agreement, the Loan Agreement and the transactions contemplated thereunder.

Mega Regal being the controlling Shareholder of the Company, holding 318,348,127 Shares, representing approximately 72.17% of the issued share capital of the Company as at the Latest Practicable Date, and therefore a connected person of the Company under Chapter 14A of the Listing Rules, will abstain from voting on the resolutions approving the Agreement (including the issue of the Consideration Shares), the Loan Agreement and the transactions contemplated thereunder at the EGM. Save as disclosed above, no other Shareholders are required to abstain from voting on the relevant resolutions at the EGM.

THE INDEPENDENT BOARD COMMITTEE

The Independent Board Committee, comprising all of the independent non-executive Directors, namely Mr. Pan Dexiang, Mr. Yuan Chun and Mr. Zhong Bin, has been established to consider and advise the Independent Shareholders as to (i) whether the terms of the Agreement, the Loan Agreement the transactions contemplated thereunder are fair and reasonable; (ii) whether the entering into the Agreement (including the issue of the Consideration Shares), the Loan Agreement and the transactions contemplated thereunder are on normal commercial terms, in the ordinary and usual course of business of the Group and in the interests of the Company and its Shareholders as a whole; and (iii) how the Independent Shareholders should vote in respect of the resolutions relating thereto to be proposed at the EGM, taking into account the recommendation of the Independent Financial Adviser.

34 LETTER FROM ALTUS

THE INDEPENDENT FINANCIAL ADVISER

As the independent financial adviser to the Independent Board Committee and the Independent Shareholders, our role is to give an independent opinion to the Independent Board Committee and the Independent Shareholders as to (i) whether the terms of the Agreement, the Loan Agreement and the transactions contemplated thereunder are fair and reasonable; (ii) whether the entering into the Agreement (including the issue of the Consideration Shares), the Loan Agreement and the transactions contemplated thereunder are on normal commercial terms, in the ordinary and usual course of business of the Group and in the interests of the Company and its Shareholders as a whole; and (iii) how the Independent Shareholders should vote in respect of the resolutions relating thereto to be proposed at the EGM.

We have not acted as an independent financial adviser or financial adviser for other transactions of the Group in the last two years prior to the date of the Circular. Pursuant to Rule 13.84 of the Listing Rules, and given that remuneration for our engagement to opine on the Acquisition and the Financial Assistance is at market level and not conditional upon successful passing of the resolutions to be proposed at the EGM, and that our engagement is on normal commercial terms, we are independent of and not associated with the Company, its controlling shareholder(s) or connected person(s).

BASIS OF OUR ADVICE

We have reviewed, amongst others (i) the Agreement; (ii) the Loan Agreement; (iii) the Company’s interim results announcement for the six months ended 30 June 2020 (the “2020 Interim Results”); (iv) the Company’s annual report for the year ended 31 December 2019 (the “2019 Annual Report”); (v) the valuation report of the Target Properties as at 30 June 2020 prepared by an independent valuer (the “Valuation Report”); (vi) legal opinions from the PRC legal counsel of the Company in relation to the Target Group and the Target Properties; (vii) financial information of the Target Group and pro forma financial information of the Enlarged Group prepared by the Company’s reporting accountants; and (viii) other information as set out in the Circular.

We have relied on the statements, information, opinions and representations contained or referred to in the Circular and/or provided to us by the Company, the Directors and the management of the Company (the “Management”). We have assumed that all statements, information, opinions and representations contained or referred to in the Circular and/or provided to us were true, accurate and complete at the time they were made and continued to be so as at the date of the EGM. The Directors collectively and individually accept full responsibility, including particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in the Circular are accurate and complete in all material respects and not misleading or deceptive, and there are no other facts the omission of which would make any statement in the Circular misleading.

We have no reason to believe that any statements, information, opinions or representations relied on by us in forming our opinion are untrue, inaccurate or misleading, nor are we aware of any material facts the omission of which would render the statements, information, opinions or representations provided to us to be untrue, inaccurate or misleading.

35 LETTER FROM ALTUS

We consider that we have been provided with and have reviewed sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent investigation into the business, financial conditions and affairs or the future prospects of the Group and the Target Group. The Company will notify the Shareholders of any material change after the despatch of the Circular.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation, we have taken into account the following principal factors and reasons:

1. Background information of the Group

1.1 Principal business activities

The Group is principally engaged in property development and sale, and property investment and the majority of its property assets is located in the PRC. Since 2018, the Group has expanded its project coverage with a focus on the Western Straits Economic Zone, the Yangtze River Delta Economic Zone and the Bohai Economic Rim, and has acquired land plots in Fuzhou, Zhangzhou and Ningde in Fujian; Nantong and Wuxi in Jiangsu; Wenzhou in Zhejiang; Jinan in Shandong and other regions. The investment properties portfolio of the Group comprises certain properties in Hong Kong and the PRC. The Group acquired or planned to acquire interests in a total of eight and 13 new land parcels during FY2019 and the six months ended 30 June 2020 (“6MFY2020”) respectively. The Group also had a total of 22 and 35 property projects under development or held or planned for future development as at 31 December 2019 and 30 June 2020 respectively.

1.2 Financial information

Set out below is a table summarising certain financial information of the Group extracted from the 2020 Interim Results and 2019 Annual Report. The Group restated the comparative information for FY2018 and the six months ended 30 June 2019 (“6MFY2019”) as a result of business combination under common control.

Extract of consolidated statement of profit or loss and other comprehensive income

6MFY2020 6MFY2019 (1) FY2019 FY2018 (1) RMB’000 RMB’000 RMB’000 RMB’000

Revenue 1,595,298 53,685 2,046,280 2,111,930 – Revenue from sale of properties 1,558,372 37,039 2,016,509 2,097,552 Gross profit 622,524 39,914 750,710 381,135 Gross profit margin (%) 39.0% 74.3% 36.7% 18.0% Profit/(loss) for the period/year 147,272 (65,983) 30,725 (165,932)

36 LETTER FROM ALTUS

Extract of consolidated statement of financial position

As at 30 June As at 31 December 2020 2019 2018 (1) RMB’000 RMB’000 RMB’000

Total assets 34,116,717 23,476,627 19,110,849 – Investment properties 949,556 759,008 716,067 – Prepaid lease payments 456,729 463,979 478,478 – Inventories and other contract costs and properties under development (2) 25,691,672 18,390,372 15,310,146 Total liabilities 32,266,137 21,969,959 17,778,560 – Contract liabilities 11,723,404 8,381,797 3,752,863 – Bank loans and other borrowings 10,139,111 7,634,692 5,742,130 – Bond payable 1,235,476 1,000,174 894,078 – Loans from a related party 693,932 – 1,701,092 Net assets 1,850,580 1,506,668 1,332,289 Adjusted debt-to-asset ratio (%) (3) 60.2% 57.9% 73.4%

Notes:

1. The consolidated financial statements have been restated as a result of the acquisition of Time Fortune Investments Limited under the requirements of Accounting Guideline 5, Merger Accounting for Common Control Combinations. For further details, please refer to the 2019 Annual Report and the 2020 Interim Results.

2. Inventories and other contact costs consists of property held for development for sales, properties under development for sale, completed properties for sales and other contract costs

3. The adjusted debt-to-asset ratio is calculated by dividing the Group’s total liabilities less contract liabilities and divided by total assets.

37 LETTER FROM ALTUS

1.2.1 6MFY2020 compared to 6MFY2019

The Group recorded revenue from sale of properties of approximately RMB1,558.4 million for 6MFY2020, representing approximately 97.7% of the total revenue for the period. The significant rise in revenue from sale of properties for 6MFY2020 compared to that of 6MFY2019 was mainly due to the increase in the number of properties delivered in (i) Binjiang International (“濱江國際”) and International Coast (“國際海岸”) in Fujian province; and (ii) The Puyue Bay (“璞悅灣”) in Shangdong province.

The Group recorded a significant improvement in gross profit for 6MFY2020, which was mainly due to the increase in properties sold during the period when compared to 6MFY2019. The Group’s gross profit margin amounted to approximately 39.0% for 6MFY2020, which was lower than that of 6MFY2019. Such decrease was primarily due to the lower gross profit margin of the properties sold during 6MFY2020. The turnaround of the Group’s net profit for 6MFY2020 from a net loss in 6MFY2019 was mainly due to the increase in revenue during the period as described above.

The Group’s total assets mainly consist of inventories and other contract costs and properties under development, investment properties and prepaid lease payments. The Group recorded 45.3% increase in total assets to approximately RMB34.1 billion as at 30 June 2020, which was predominately due to the increase in inventories and other contract costs of approximately RMB7.3 billion.

The Group’s total liabilities mainly consist of contract liabilities, bank loans and other borrowings and bond payables. The Group’s total liabilities increased by 46.9% to approximately RMB32.3 billion as at 30 June 2020. This was mainly due to the increase in (i) contract liabilities of approximately 39.9% when compared to that of 31 December 2019, which corresponds to the increase in the Group’s contracted sales during 6MFY2020; and (ii) bank loans and other borrowings of approximately 32.8%.

As a result of the above, the Group’s net assets increased to approximately RMB1.9 billion as at 30 June 2020 while the Group’s adjusted debt-to-asset ratio remained relatively stable at approximately 60.2% as at 30 June 2020 as compared to 57.9% in 31 December 2019.

38 LETTER FROM ALTUS

1.2.2 FY2019 compared to FY2018

Upon completion of International Coast (“國際海岸”) and Binjiang International (“濱江國際”) in Fujian province, the Group commenced delivery of the two aforementioned projects. The previously pre-sold and contracted GFA of approximately 134,000 sq.m. for the aforementioned projects generated approximately RMB2.0 billion of revenue from sale of properties (representing approximately 98.5% of the Group’s total revenue in FY2019) for the Group, which is comparable to the amount of revenue from sales of properties recorded in FY2018 (representing approximately 99.3% of the Group’s total revenue in FY2018) where the Group delivered properties in International Coast (“國際海岸”) and Binjiang International (“濱江國際”) in Fujian province and The Puyue Bay (“璞悅灣”) in Shandong province.

The Group’s profit for the year had turned around from a loss for the year of approximately RMB165.9 million in FY2018 to a profit of approximately RMB30.7 million in FY2019. This was mainly attributable to:

(i) an improved gross profit of approximately RMB750.7 million (FY2018: approximately RMB381.1 million) and gross profit margin of approximately 36.7% (FY2018: approximately 18.0%) as a result of, (a) higher average selling price per sq.m. for those property projects previously sold but delivered in FY2019 as compared to those pre-sold but delivered in FY2018; and (b) lower cost of sales as compared to FY2018 as the cost of sales for The Puyue Bay included an acquisition premium paid to previous shareholders; and

(ii) the increase in forfeited deposit from customers (FY2019: approximately RMB36.4 million vs FY2018: approximately RMB7.0 million), realised gain on listed equity securities (FY2019: other gain of approximately RMB8.5 million vs FY2018: other loss of approximately RMB10.6 million) and decrease in net exchange loss (FY2019: approximately RMB6.2 million vs FY2018: approximately RMB41.0 million). Such increase was partially offset by, (a) the increase in staff cost (FY2019: approximately RMB113.7 million vs FY2018: approximately RMB82.1 million) and advertisements and marketing costs (FY2019: approximately RMB328.1 million vs FY2018: RMB159.2 million) due to the substantial increase in the number of properties and business scale of the Group during FY2019; and (b) higher land appreciation tax (FY2019: approximately RMB201.2 million vs FY2018: approximately RMB108.6 million) and PRC corporate income tax (FY2019: approximately RMB143.2 million vs FY2018: approximately RMB75.9 million) as a result of a higher gross profit and higher taxable income recorded in FY2019.

39 LETTER FROM ALTUS

The Group’s total asset increased by approximately 22.8% to approximately RMB23.5 billion as at 31 December 2019. This was predominately due to the increase in the Group’s properties under development for sale from 14 property projects as at 31 December 2018 to 22 property projects as at 31 December 2019.

The primary reason for the increase in the Group’s total liabilities as at 31 December 2019 as compared to 2018 was the 1.2 times increase in the Group’s contract liabilities. Such increase was resulted from the exponential growth from the Group’s pre-sold and contracted GFA of 95,487 sq.m. as at 31 December 2018 to 815,509 sq.m. as at 31 December 2019. Hence, the net assets of the Group increased by approximately 13.1% from approximately RMB1.3 billion as at 31 December 2018 to approximately RMB1.5 billion as at 31 December 2019 due to the aforementioned reasons. The Group’s adjusted debt-to-asset ratio also improved from approximately 73.4% as at 31 December 2018 to approximately 57.9% as at 31 December 2019.

1.3 Prospects of the Group

The Group has been actively and will continue to acquire quality land for its land bank resources through both acquisitions and cooperation as well as participation in public land auctions. Currently, the residents and property buyers in the PRC are seeking for higher living quality which has led to the rising demand in high quality residential products. In order to meet the development need and capture the demand in the future, the Group will pursue industrial and real estate integration and explore development models to cooperate with third-party industries and explore opportunities for acquisition and merger of small and medium-sized, project-based real estate enterprises in order to increase the amount and quality of the lands that the Group can obtain.

The Group is focusing on establishing a scientific and efficient project development evaluation system, which takes into account the characteristics of different regions, future business development objectives combining with various land acquisition models, to increase land reserve resources and plan for long-term business growth. While expanding the scale of business in districts such as Western Straits Economic Zone, the Yangtze River Delta Economic Zone and the Bohai Economic Rim, the Group is also pursuing new growth opportunities in emerging markets such as Guangdong-Hong Kong-Macau Greater Bay Area and Yangtze River Economic Belt to realise the continuous optimisation of the overall business strategies.

40 LETTER FROM ALTUS

Despite the fact that the COVID-19 pandemic since early 2020 has brought about additional uncertainties to the Group’s operating environment and impacted the Group’s operations and financial position, the Management considers the impact to be limited in view of the epidemic in Mainland China has been basically contained and the disruption to social and economic activities is fading out. In order to cope with the new norm under the COVID-19 pandemic, the Group has actively adopted a series of measures, such as (i) shifting to online sales and marketing; (ii) tightening capital flow management; and (iii) conducting monthly stress test on capital. These measures were implemented by the Group in order to (i) achieve sales completion; (ii) ensure ample financial liquidity; (iii) monitor and comply with the relevant government policies against the epidemic; and (iv) explore opportunities for acquisition and merger.

Taking into account the factors mentioned above as well as the reasons for and benefits of the Acquisition set out in the section headed “5. Reasons for and benefits of the Acquisition” below, the Management believes and we concur that the Acquisition offers an opportunity for the Group to secure developing and ready for sale for projects as well as further expand its land bank resources for future development, which is adhered to its stated business strategy and in the ordinary and usual course of business of the Group. In addition, by issuing Consideration Shares to satisfy the Consideration in full upon Completion, there will be no significant cash outlay for the Group and will reserve working capital in preparation for the Group’s enlarged operations after the Completion and future acquisitions and/or other business opportunities, whilst achieving the potential earnings and cashflow enhancement from the Acquisition going forward.

2. Background information of the Target Group

2.1 Principal business activities

Information of the Target and Fuzhou Bosheng

The Target was incorporated in the BVI on 15 May 2020 with limited liability and is principally engaged in investment holding. Upon completion of the Reorganisation, the Target shall wholly own the HK Holdco, which in turn owns 95.0% equity interest in Fuzhou Bosheng through the WFOE. A corporate structure of the Target Group upon completion of the Reorganisation is set out in the “Letter from the Board” of the Circular.

Fuzhou Bosheng is a company established in the PRC on 23 June 2017 with limited liability and is principally engaged in investment holding. Upon completion of the Reorganisation, it is owned as to 95.0% by the WFOE and 5.0% by an Independent Third Party. Its principal asset is its interests in the Project Company Group comprising the investment holding companies and nine Project Companies, namely (i) Fujian Minqiao; (ii) Fuzhou Shenglong; (iii) Quanzhou Shengchuang; (iv) Chengdu Jisheng; (v) Jiangsu Zheguang; (vi) Yangzhou Sansheng; (vii) Wenling Rongfa; (viii) Qingdao Haishang; and (ix) Putian Shengxiang, which together hold the Target Properties. Most of these projects are located in coastal regions and different from those the Group currently operates in, which is an expansion of the market reach and sellable property projects for the Group. For corporate structure of the Target Group upon completion of the Reorganisation and detailed information of the Project Companies and the Target Properties, please refer to the “Letter from the Board” of the Circular.

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2.2 Financial information of the Target Group

Set out below is a table summarising certain financial information of the Target Group for FY2018, FY2019, for the financial period ended 31 March 2019 (“1QFY2019”) and for the financial period ended 31 March 2020 (“1QFY2020”) extracted from the combined financial statements of the Target Group prepared in accordance with the Hong Kong Financial Reporting Standards and set out in Appendix II to the Circular.

1QFY2020 1QFY2019 FY2019 FY2018 RMB’million RMB’million RMB’million RMB’million (audited) (unaudited) (audited) (audited)

Revenue 26.1 71.8 291.4 663.3 Gross profit 16.2 26.2 132.7 113.7 Gross margin (%) 62.1% 36.5% 45.5% 17.1% (Loss)/profit before taxation (31.5) (8.5) (1.7) 8.4 Loss for the period/year (27.9) (8.1) (33.7) (19.7) Loss for the period/year attributable to the equity shareholders of the Target (26.6) (7.2) (29.3) (10.5)

As at 31 As at 31 As at 31 March December December 2020 2019 2018 RMB’million RMB’million RMB’million (audited) (audited) (audited)

Non-current assets 1,673.2 1,700.9 1,591.6 Current assets 8,600.1 8,544.7 6,124.5 Total assets 10,273.3 10,245.6 7,716.1

Non-current liabilities 1,190.4 1,386.8 1,340.1 Current liabilities 8,423.8 8,171.7 5,685.2 Total liabilities 9,614.2 9,558.5 7,025.3

Net assets 659.1 687.1 690.7 Net assets attributable to equity shareholders of the Target 745.7 772.3 771.7

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The Target Group recorded revenue of approximately RMB663.3 million, RMB291.4 million, RMB71.8 million and RMB26.1 million for FY2018, FY2019, 1QFY2019 and 1QFY2020 respectively. The revenue for FY2018 was primarily contributed by the delivery of property units of Sansheng Metropolis (“三盛都會城”) and Sansheng International Coast (“三盛國際海岸”) of approximately RMB583.0 million with a total delivered GFA of 73,959.3 sq.m. and gross rentals from investment properties held by Fujian Minqiao and Yangzhou Sansheng of approximately RMB46.1 million. The decrease in revenue for FY2019 and 1QFY2020 was mainly due to the fact that most of the properties pre-sold in FY2018 were under development in FY2019 and 1QFY2020 and expected to be delivered after 1Q2020. Revenue in respect of the pre-sold units will only be recognised upon delivery of the units to the customers.

The Target Group recorded gross profit of approximately RMB113.7 million, RMB132.7 million and RMB26.2 million and RMB16.2 million for FY2018, FY2019, 1QFY2019 and 1QFY2020 respectively, representing gross profit margin of approximately 17.1%, 45.5% and 36.5% and 62.1% respectively. The significant increase in gross profit margin for FY2019 and 1Q2020 resulted from the higher selling price of villa units as compared to that of the high-rise units sold in FY2018;

The net loss after taxation of the Target Group for FY2018, FY2019, 1QFY2019 and 1QFY2020 were mainly because properties delivered and recognised as revenue during the year/ period were pre-sold in a downturn market with a relatively lower selling prices. Revenue in respect of the pre-sold units will only be recognised upon delivery of the units to the customers. Further loss after taxation recorded in FY2018 and FY2019 was mainly because certain Project Companies recorded land appreciation tax against the appreciation of the land value which is calculated based on the sale proceeds of the properties less deductible expenditures under applicable regulations. Moreover, during FY2018 to 1QFY2020, out of the nine project companies, only four of which, including Yangzhou Sansheng, Fujian Minqiao, part of properties of Chengdu Jisheng and Qingdao Haishang, have delivered properties, and the remaining were still under various stages of construction, development and pre-sale. Significant costs were incurred for marketing activities and staff costs before the properties are delivered, hence the loss after taxation.

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The Target Group’s total assets mainly consist of inventories and other contract costs and investment properties. The Target Group’s total assets increased by approximately 33.1% from approximately RMB7.7 billion as at 31 December 2018 to approximately RMB10.3 billion as at 31 March 2020 predominately due to the increase in properties under development for sale of approximately RMB3.6 billion over the period.

The Target Group’s total liabilities mainly consist of (i) contract liabilities; and (ii) bank loans and other borrowings. The rise in the Target Group’s total liabilities as at 31 March 2020 compared to 31 December 2018 was mainly due to the increase contract liabilities, partially offset by the decrease in bank loans and other borrowings.

As at 31 March 2020, the net asset value attributable to the equity shareholders of the Target was approximately RMB745.7 million, which upon completion of the Reorganisation pursuant to the Agreement will be reduced to minimal level.

3. Principal terms of the Agreement

To assess the fairness and reasonableness of the Agreement, we have reviewed the following factors:

3.1 Subject matter

The Purchaser entered into the Agreement to conditionally acquire from Mega Regal the Sale Shares, being the entire equity interest in the Target, for a consideration of HK$347,349,600, which is to be settled by way of issue and allotment of Consideration Shares at the issue price of HK$7.02 per Share.

3.2 Consideration of the Acquisition

The Consideration of the Acquisition is approximately HK$347.3 million (equivalent to approximately RMB310.1 million), which was determined based on negotiation between the parties to the Agreement with reference to (i) the consolidated net asset value of the Target will turn to minimal level upon completion of the Reorganisation; (ii) the Target Valuation Surplus; and (iii) the Pledged Valuation Surplus. In essence, the Management is considering the reassessed Target Valuation Surplus (the “Reassessed Target Valuation Surplus”) (which in essence is the reassessed net asset value of the Target Group upon completion of the Reorganisation) of the Target Group. Given that the Company and Target are in property development business, which is asset heavy by nature, the Management believes and we concur that it is common and appropriate to determine the Consideration by reference to the latest available net asset value of the Target Group and the underlying valuation of the Target Properties. Based on the financial information of the Target Group as set out in appendix II to the Circular, the net asset value attributable to the equity shareholders of the Target as at 31 March 2020 was approximately RMB745.7 million. Further, based on the “Letter from the Board” and the unaudited pro forma financial information of the Enlarged Group as set out in Appendix III to the Circular, upon completion of the Reorganisation, the net asset value attributable to the equity shareholders of the Target Group will be reduced to a minimal level, which is one of the common way to distribute all capital and retained earnings back to the original shareholders before any disposal.

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Target Valuation Surplus is the difference between market value and book value of the Target Properties attributable to the Target. Set out below the illustrative computation of the Target Valuation Surplus adjusted for the changes from 1 April 2020 to 30 June 2020 to reflect the market value of the Target Properties as at 31 March 2020 to align with the Target Group’s net asset value as at 31 March 2020 and the Reassessed Target Valuation Surplus. For further details on the Target Properties’ valuation, please refer to Valuation Report set out in Appendix IV to the Circular:

Computation of the Target Valuation Surplus and the Reassessed Target Valuation Surplus

RMB’million

Market value of the Target Properties as at 30 June 2020 attributable to the equity shareholders of the Target (Note 1) A 8,584.8 Less: changes of the unaudited book value of the Target Properties attributable to the equity shareholders of the Target between 1 April 2020 and 30 June 2020 (Note 2) B 82.5 Less: book value of the Target Properties attributable to the equity shareholders of the Target as at 31 March 2020 (Note 1) C 7,492.9 Target Valuation Surplus as at 31 March 2020 D=A-B-C 1,009.4 Equity interest attributable to the equity shareholders of the Target upon the completion of the Reorganisation (%) E 95.0% Reassessed Target Valuation Surplus F=D*E 958.9

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Notes:

1. Set out below the detailed valuation as at 30 June 2020 attributable to Fuzhou Bosheng and book value of the Target Properties as at 31 March 2020 attributable to Fuzhou Bosheng by Project Companies.

Book value of the Target Valuation Properties Equity as at Book value as at 31 interest 30 June 2020 of the Target March 2020 owned by Valuation attributable Properties attributable Fuzhou as at to Fuzhou as at 31 to Fuzhou Project Company Bosheng 30 June 2020 Bosheng March 2020 Bosheng RMB’ million RMB’ million RMB’ million RMB’ million A B C = A x B D E = A x D

Fujian Minqiao (a) 100.0% 588.8 588.8 593.6 593.6 Fuzhou Shenglong 100.0% 1,653.4 1,653.4 1,471.2 1,471.2 Quanzhou Shengchuang 100.0% 172.4 172.4 164.0 164.0 Chengdu Jisheng 100.0% 1,597.0 1,597.0 1,249.0 1,249.0 Jiangsu Zheguang 51.0% 1,218.0 621.1 1,200.0 612.0 Yangzhou Sansheng 100.0% 1,048.7 1,048.7 1,038.6 1,038.6 Wenling Rongfa 80.0% 642.1 513.7 507.5 406.0 Qingdao Haishang 74.0% 3,006.3 2,224.7 2,438.6 1,804.6 Putian Shengxiang 74.0% 223.0 165.0 207.9 153.9

10,149.7 8,584.8 8,870.4 7,492.9

(a) The valuation includes the market value of the ancillary units and car parking spaces owned by Fuji an Minqiao of RMB34.5 million. As disclosed in the valuation report in Appendix IV to the Circular, Fujian Minqiao has not applied building title certificates for the ancillary units and car parking spaces but there is no material legal impediment for Fujian Minqiao to apply such certificates as advised by the Company’s PRC legal advisers.

2. For a fair comparison, various adjustments were made to the valuation of Target Properties as at 30 June 2020 to reflect the condition and status of Target Properties as at 31 March 2020. Based on our understanding from the Management, the changes of the unaudited book value between 1 April 2020 and 30 June 2020 for the Target Properties of approximately RMB105.8 million (before excluding non-controlling interests) have taken into account the actual construction costs incurred, fair value changes of investment properties and depreciation charges for the period.

As shown from the table above, the Consideration represents a significant discount of approximately 67.7% to the Reassessed Target Valuation Surplus (which is in essence the reassessed net asset value of the Target Group upon completion of the Reorganisation).

Considering the potential risk of the Pledged Properties owned by Fujian Minqiao and Yangzhou Sansheng arisen from the Loan and Pledge Arrangement mentioned below, Pledged Valuation Surplus is also calculated, for illustration purpose only, in the scenario when the rights on the Pledged Properties and the Share Pledge are enforced, and the Reassessed Target Valuation Surplus (excluding the Pledged Valuation Surplus) as well as relative to the Consideration is presented below.

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Computation of the Pledged Valuation Surplus and the Reassessed Target Valuation Surplus (excluding the Pledged Valuation Surplus)

RMB’million

Market value of the Pledged Properties as at 30 June 2020 G 1,000.3 Add: changes of the unaudited book value of the Pledge Properties attributable to the equity shareholders of the Target between 1 April 2020 and 30 June 2020 (Note) H 7.5 Less: book value of the Pledged Properties attributable to the equity shareholders of the Target as at 31 March 2020 I 985.4 Pledged valuation surplus as at 31 March 2020 J=G-H-I 22.4 Equity interest attributable to the equity shareholders of the Target upon the completion of the Reorganisation (%) E 95.0% Pledged Valuation Surplus K=J*E 21.3 Reassessed Target Valuation Surplus F 958.9 Less: Pledged Valuation Surplus K 21.3 Reassessed Target Valuation Surplus (excluding Pledged Valuation Surplus) L=F-K 937.6

Note:

Based on our understanding from the Management, there are no additional constructions costs capitalised for the Pledged Properties. Depreciation expenses incurred and fair value changes of investment properties during the period were adjusted for a fair comparison.

As shown from the table above, the Consideration will represent a discount of approximately 66.9% to the Reassessed Target Valuation Surplus (excluding Pledged Valuation Surplus) in the event that the rights on the Pledged Properties and the Share Pledge under the Loan Agreement are enforced. Further, the Pledged Valuation Surplus only contributes an insignificant amount of approximately 2.2% to the Target Valuation Surplus as a whole. Hence, in the unlikely event where there is any loss or diminution in value of the Pledged Properties and the Share Pledge as a result of breach of repayment obligations in relation to loan facilities (which is fully indemnified by Mr. Lin as detailed in the section headed 4.2.3 Indemnity below), the Consideration still represents a significant discount to the Reassessed Target Valuation Surplus (excluding the Pledged Valuation Surplus).

Taking into account the above, the Group will be able to capture a substantial amount of valuation surplus through the Acquisition (where these valuation surplus of Target Properties are expected to be materialise through future revenue and cashflow from properties sale and rental income to the Group in the next few years), which is in substance, the basis of determining the Consideration. Hence, we are of the view that the Consideration is fair and reasonable and is in the interests of the Company and the Shareholders as a whole.

3.3 Valuation of the Target Properties

When assessing the fairness of the valuation for the Target Properties, we have in particular considered the Valuation Report. In this respect, we noted that an independent professional valuer, being Jones Lang LaSalle Corporate Appraisal and Advisory Limited (the “Valuer”), has been appointed to conduct a valuation on the Target Properties. According to the Valuation Report, the market value of the Target Properties amounted to RMB10,149.7 million as at the Valuation Date.

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To assess the fairness and reasonableness of the valuation, we have reviewed the Valuation Report and interviewed the Valuer with regard to (i) the methodology and assumptions used in performing the valuation on the Target Properties as well as whether such methodology and assumptions are appropriate and acceptable; (ii) their scope of work for conducting the valuation on the Target Properties; and (iii) their relevant professional qualifications as a property valuer.

3.3.1 Valuation methodology

As stated in the Valuation Report, the Valuer categorised the Target Properties into five groups (being held for sale, held for investment, held under development, held for future development and held for hotel operation) according to nature and status of properties. We noted that the Valuer adopted different approaches of valuation for different types of properties, including market comparison approach, income approach and discounted cash flow analysis. For detailed information of the valuation methodologies adopted, please refer to the Valuation Report contained in Appendix IV to the Circular.

For the Target Properties valued by market comparison approach, we have obtained from the Valuer the information of the comparable properties and discussed with the Valuer. We noted that the market comparison method adopted by the Valuer was making reference to comparable sales transactions available in the relevant market, subject to appropriate adjustments including but not limited to size, location, decoration and other factors. We also noted that the comparable properties are within the locality and have similar characteristics to the respective Target Properties. We have also (i) reviewed historical sales record of the properties available for sale and pre-sales record of the properties under development for sale under the Target Group and reviewed more than 20 samples of recent sales contracts of different property types to ascertain the recent market price for the properties; and (ii) conducted research on the selling price of comparable properties in the adjacent area of similar scale and condition of the respective property projects. Further, based on independent research on property valuation performed for similar PRC property projects as disclosed by listed companies on the Stock Exchange, we are of the view that the methodology and comparable properties chosen by the Valuer are adequate, appropriate and relevant for providing a fair and reasonable basis for the property valuer’s opinion.

Apart from the market comparison approach, we noted that income approach was adopted for the valuation of Target Properties held for investment; and discounted cash flow analysis was adopted for the valuation of Target Properties held for hotel operation. We have discussed with the Valuer on the basis and assumptions used for the valuation of Target Properties held for investment; and discounted cash flow analysis was adopted for the valuation of Target Properties held for hotel operation. Based on our independent research on property valuation performed for similar PRC investment properties and/or properties held for hotel operation as disclosed by listed companies on the Stock Exchange, we noted that the methodology adopted (based on income approach and discounted cash flow analysis) and assumptions used (as described in the section headed “3.3.2 Valuation basis and assumptions” below) for such types of properties are commonly adopted by the industry. We, therefore, are of the view that the methodology used by the Valuer is appropriate and relevant for providing a fair and reasonable basis for their opinion.

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Following our discussions with the Valuer and the result of our independent research as mentioned above, we concur with the Valuer that the valuation methodologies adopted are common approaches for determining the market value of the various types of properties.

3.3.2 Valuation basis and assumptions

We noted that the valuation of the property represents its market value, which is defined as “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion” in accordance with the HKIS Valuation Standards.

We also noted that the Valuer relied on the information provided by the Company and the Target and , PRC legal opinion issued by a PRC legal counsel of the Company and made assumptions in regard to the Target Properties, such as (i) the seller sells the property interests in the market without the benefit of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement, which could serve to affect the values of the property interests; (ii) no allowance has been made for any charge, mortgage or amount owing on any of the property interests valued nor for any expense or taxation which may be incurred in effecting a sale; and (iii) the properties are free from encumbrances, restrictions and outgoings of an onerous nature, which could affect their values (unless otherwise stated).

For the market comparison approach, it is assuming sale of the property interests in their existing states with the benefit of immediate vacant possession and by making reference to comparable sales transactions as available in the market, which rests on the wide acceptance of the market transactions as the best indicator and pre-supposes that evidence of relevant transactions in the market place can be extrapolated to similar properties, whereby actual market sales data will be the relevant benchmark for providing a fair and reasonable basis for the property valuer’s opinion. We noted the Valuer has made reference to recent sales record of the Target Properties and market transactions from two to five comparable properties (which the Valuer believed to be in close vicinity of the Target Properties and available in the relevant market), subject to appropriate adjustments including but not limited to size, location, decoration and other factors. As mentioned in the section headed “3.3.1 Valuation methodology” above, we have reviewed samples of completed sales and selling price list of the relevant Target Properties and also conducted research on the comparable properties to independently verify the information adopted by the Valuer. Based on the foregoing, we are of the view that the basis and assumptions adopted for the valuation of the Target Properties using market comparison approach are fair and reasonable.

For the income approach, the Valuer takes into account the net rental income of the property derived from the existing leases and/or achievable in the existing market with due allowance for the reversionary income potential of the leases, which has been then capitalised to determine the market value at an appropriate capitalisation rate. We noted the Valuer has made reference to the lease information of the Target Properties and two to nine

49 LETTER FROM ALTUS comparable leased properties (which the Valuer believed to be in close vicinity of the Target Properties and available in the relevant market), subject to appropriate adjustments including but not limited to size, location, decoration and other factors. We have reviewed summary of all leases under the investment properties and also noted that the comparable properties are within the locality and have similar characteristics to the respective Target Properties. We noted from the Valuer that the assumptions (such as occupancy rate and capitalisation rate) used in the income approach are based on existing lease information of the Target Properties and comparable properties available in the market. We also conducted research on the comparable properties to independently verify the information provided by the Valuer. We are of the view that the basis and assumptions adopted for the valuation of the Target Properties using income approach are fair and reasonable.

For the discounted cash flow approach (in valuing the property held for hotel operation), it involves discounting future cash flow of the property to its present value by using an appropriate discount rate with due allowance for the reversionary net income of the property, which is capitalised with an terminal capitalisation rate. In the course of valuation, it is assumed that the property is available for lease and the incomes and expenses, stabilisation period and rental growth for each component of the property are estimated to reflect the property performance in the market with regards to the existing market conditions. We noted the Valuer has made reference to similar types of hotels in terms of size, scale and ranking in comparable cities. We have also reviewed the hotel management agreement with the hotel manager under the Hilton Double Tree brand and also conducted research on the comparable hotel properties. We have performed research on (i) the daily room rate of comparable hotels in Yangzhou of the same ranking (i.e. five-star), size and scale; (ii) the average occupancy rate of the Target Group’s hotel since commencement of operations in October 2019; (iii) the average occupancy rate of hotels in Jiangsu province; and (iv) discount rates generally adopted in valuation for hotel operation in tier-2 cities in the PRC to independently verify the information adopted by the Valuer. Based on our independent research, as the hotel of the Target Group is one of the newest international hotel in Yangzhou, the daily room rate demanded by the Target Group and adopted in the valuation are of a reasonable price as compared to other five-star hotels in the adjacent area and the occupancy rate are in line with the historical and future industry projection in Jiangsu province. We are of the view that the basis and assumptions adopted for the valuation of the Target Properties using discounted cash flow approach are fair and reasonable.

Considering the potential impact of COVID-19, the Valuer considered that less weight should be attached to previous market evidence for comparison purposes, and the valuations are reported on the basis of “material valuation uncertainty”. Since the Valuer suggested a higher-than-normal degree of caution for the Valuation Report, we conducted independent research on the properties market in the PRC, especially the cities where the Target Properties are located, to evaluate the property market activities after the Valuation Date up to the date of the Circular and did not notice any material adverse change. As such, we are of the view that the basis and assumptions adopted for the valuation of the Target Properties as at 30 June 2020 remains valid, fair and reasonable.

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3.3.3 Valuer’s scope of work and competence

We have reviewed the scope of work of the Valuer detailed in its engagement letter and we are satisfied that the scope of work is sufficient and appropriate for the Acquisition.

We have also reviewed the Valuer’s qualification and experience in relation to the preparation of the Valuation Report and noted that the Valuer is a well-established professional services firm that specialises in real estate with extensive experience in property valuation globally. In particular, the principal signing off the Valuation Report is a Chartered Surveyor who has 26 years’ experience in the valuation of properties in Hong Kong and the PRC as well as relevant experience in the Asia-Pacific region.

3.3.4 Summary of the valuation of the Target Properties

In consideration of the above, we are of the view that (i) the valuation methodologies adopted by the Valuer are common approaches for valuation of the respective types of properties; (ii) the valuation basis and assumptions adopted by the Valuer are fair and reasonable; (iii) the scope of work of the Valuer is sufficient and appropriate for performing the valuation on the Target Properties; and (iv) the Valuer has sufficient experience and competency to perform the valuation of the Target Properties. As such, we are of the view that the valuation on the Target Properties prepared by the Valuer is fair and reasonable.

3.3.5 Section summary

Having considered that (i) the net asset value of the Target Group as at 31 March 2020 are adjusted to take into account the market value of the Target Properties; (ii) the valuation methodologies adopted by the Valuer are common approaches for determining the market value for the Target Properties and the underlying basis and assumptions used are fair and reasonable; and (iii) the Consideration is in essence determined by reference to the Reassessed Target Valuation Surplus of the Target Group (which in essence is the reassessed net asset value of the Target Group upon completion of the Reorganisation) and net asset value is a customary valuation approach for property companies and portfolios, we concur with the Directors’ view that the basis for determining the Consideration is fair and reasonable and is in the interests of the Company and the Shareholders as a whole.

3.4 Issue price of consideration shares

As stated in the “Letter from the Board”, the issue price was determined after negotiations between the Purchaser and Mega Regal, with reference to the recent price performance of the Shares and current market conditions, and it represents:

(i) a premium over approximately 1.59% to the closing price of HK$6.91 per Share as quoted on the Stock Exchange on the date of the Agreement;

(ii) a premium over approximately 0.34% to the average closing price of approximately HK$6.996 per Share as quoted on the Stock Exchange for the last five consecutive trading days immediately prior to the date of the Agreement;

(iii) a premium over approximately 8.17% over the closing price of HK$6.49 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and

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(iv) a premium over approximately 107.1% over the consolidated net asset value per Share of approximately HK$3.39 (based on the equity attributable to the Shareholders of approximately RMB1,335.2 million (equivalent to approximately to HK$1,495.4 million as at 30 June 2020 as disclosed in the 2020 Interim Results and 441,114,000 Shares in issue as at the Latest Practicable Date.

3.4.1 Analysis of historical price performance of the Share

Set out below is a chart showing the movement of the closing prices during the period from 23 January 2020, up to the Last Trading Day the (“Review Period”) to illustrate the general trend, level of movement of the closing prices of the Shares. The length of the Review Period was determined to capture the latest market conditions after the outbreak of the COVID-19 in mainland China and Hong Kong in late January 2020 and the global outbreak subsequently.

Historical daily closing price of the Share and the Hang Seng Index

29,000 HK$8.80 28,000 HK$8.40 27,000 HK$8.00 26,000 HK$7.60 25,000 HK$7.20 24,000 Issue price HK$7.02 HK$6.80 23,000 HK$6.40 22,000

HK$6.00 21,000 2020/01/23 2020/03/06 2020/04/20 2020/06/02 2020/07/15 2020/08/24 Closing price of the Shares Hang Seng Index

Over the Review Period, the highest and lowest closing price of the Shares as quoted on the Stock Exchange were HK$8.92 and HK$6.70 on 23 January 2020 and 16 July 2020 respectively. The average closing price of the Shares over Review Period was approximately HK$7.36.

As shown in the graph above, the closing price of the Shares over the Review Period have been on a decreasing trend. During the period from late-January 2020 to early-March 2020, the closing price of the Share was generally on a decline after the outbreak of COVID-19 in Mainland China and Hong Kong. On 4 March 2020, the Company published a positive profit alert, which drove the closing price to rebound. On 12 March 2020, due to the worsening circumstances globally, the World Health Organisation announced COVID-19 outbreak a pandemic, which subsequently lead to many prominent stock exchanges including the Hong Kong recording a sharp decline in its overall market value. Since then the closing price of the Share is on a general trend of decline until reaching its lowest closing price at HK$6.70 on 16 July 2020 during the Review Period. As at the Last Trading Day, the closing price of the Share was HK$6.91, which is close to the low-end stock price of HK$6.70 during the Review Period. 52 LETTER FROM ALTUS

The Issue Price is within the range of the lowest and highest closing prices of the Shares as quoted on the Stock Exchange during the Review Period and represent a premium of approximately 1.59% to the closing price of the Share as at the Last Trading Day.

3.4.2 Comparable Issues analysis

In order to assess the fairness and reasonableness of the Issue Price, we have reviewed recent transactions and conducted a comparable analysis through identifying companies listed on the Main Board of the Stock Exchange which announced notifiable transactions with consideration satisfied by the issuance of consideration shares during the period from 25 May 2020, being three months before the date of the Agreement (i.e. 24 August 2020) (the “Last Trading Day”), up to the Last Trading Day (the “Shares Comparables Review Period”). On such basis, we have identified ten issues of consideration shares by ten comparable companies (the “Consideration Shares Comparables”), which we consider an exhaustive list of relevant comparable companies based on the abovementioned criteria.

It should be noted that the Consideration Shares Comparables may have different principal activities, market capitalisation, profitability, and financial position as compared with those of the Company. Circumstances leading the Consideration Shares Comparables to issue consideration shares may differ from that of the Company. The analysis is meant to be used as a general reference to similar types of transactions in Hong Kong to reflect recent market sentiment, and we consider them to be one of the appropriate basis to assess the fairness and reasonableness of the Issue Price.

Premium/(discount) of the issue price over/(to) (%) Last five consecutive Closing price trading days on the Last preceding the Trading Day Last Trading prior to/on the Day prior to/on date of the the date of the Date of Issue price relevant relevant announcement Company name Stock code (HK$) announcement announcement

25-May-20 Green Leader Holdings 61 0.013 8.30 0.00 Group Limited

4-Jun-20 Jiyi Household International 1495 0.65 (7.14) (5.25) Holdings Limited

17-Jun-20 Xinming China Holdings 2699 1.0 (4.76) (4.76) Limited

18-Jun-20 Differ Group Holdings 6878 0.4 (12.09) (11.31) Company Limited

14-Jul-20 Man Sang International 938 0.37 (9.76) (9.09) Limited

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20-Jul-20 Union Medical Healthcare 2138 4.2 4.20 (1.18) Limited

24-Jul-20 Boill Healthcare Holdings 1246 0.35 (10.26) (14.63) Limited

28-Jul-20 Link-Asia International Co. 1143 0.379 (10.80) 5.90 Ltd.

29-Jul-20 China Ever Grand Financial 379 0.186 (11.40) (15.10) Leasing Group Co., Ltd.

31-Jul-20 E-House (China) Enterprise 2048 9.22 (15.57) (10.12) Holdings Limited

The Company 2183 7.02 1.59 0.34

Max 8.30 5.90 Min (15.57) (15.10) Mean (6.93) (6.55) Median (10.01) (7.17)

Source: hkexnew

As shown in the above table, we noted that (i) premium of the Issue Price to the closing price of the Shares on the date of the Agreement of approximately 1.59% is higher than the median discount and mean discount of approximately 10.01% and 6.93% respectively; and (ii) discount of the Issue Price to the average closing price of the Shares for the last five consecutive trading days up to and including the Last Trading Day of approximately 0.34% is higher than the median discount and mean discount of approximately 7.17% and 6.55% respectively.

Considering the Issue price is (i) within range of the closing prices of the Shares in the Review Period; and (ii) at a higher premium as compared to the Consideration Shares Comparables and is within the market range relative to the Share’s closing price on its Last Trading Day and last five consecutive trading days, we are of the view that the Issue Price is fair and reasonable as far as the Company and the Independent Shareholders are concerned.

54 LETTER FROM ALTUS

4. Financial Assistance

4.1 Background of the Financial Assistance

Prior to entering into of the Agreement, certain private entities controlled by Mr. Lin had provided loan facilities to Fujian Minqiao and Yangzhou Sansheng, which in return had provided the Pledged Properties and the Share Pledge as security for the Private Group to obtain loan facilities from financial institutions in the PRC as a way of financing the development of the property projects of the Private Group. Upon Completion, it is estimated that the total payable to the Private Group from the Target Group would amount to approximately RMB1,194.0 million. Pursuant to the Loan Agreement entered into on 24 August 2020 between Mr. Lin, Fuzhou Sansheng and Fuzhou Bosheng, Fuzhou Sansheng agreed to continue to provide a RMB650.0 million non-interest-bearing loan to Fuzhou Bosheng Group in return for the Pledged Properties and the Share Pledge and the remaining amount will be an interest bearing unsecured loan provided by the Private Group to Fuzhou Bosheng Group on normal commercial terms. The Agreement and the Loan Agreement are inter-conditional and the completion of the Agreement and the Loan Agreement shall take place simultaneously.

The Pledged Properties include certain commercial and retail units and a portion of a hotel of the property projects, namely Sansheng International Centre and Sansheng International Plaza, owned by two Project Companies, being Fujian Minqiao and Yangzhou Sansheng, respectively. Details of the Pledged Properties are set out in the “Letter from the Board” of the Circular. The aggregate market value of the Pledged Properties as at 30 June 2020 was RMB1,000.3 million, representing approximately 9.9% of the total market value of the Target Properties.

We have reviewed the relevant loan documents in relation to the Pledged Properties and Share Pledge and noted that the loans obtained had already been applied as part of the securities for the Private Group to obtain financing from other financial institutions in the PRC as a way of financing the development of the property projects of Mr. Lin’s private group. We have discussed with the Management and noted that (i) due to the Pledged Properties and Share Pledge are pooled together with other securities used by the Private Group; and (ii) only few property projects of the Private Group (other than those under the Target Group) can generate cash flow through pre-sale, it is impractical for the Private Group to obtain sufficient funds prior to the completion of the Acquisition to release the Pledged Properties and Share Pledge from the rest of the other securities for the loans amounting to approximately RMB2.0 billion obtained by the Private Group from financial institutions in the PRC due to be repaid by 31 October 2021. Therefore, being part and parcel of the Acquisition, upon Completion, pursuant to the Loan Agreement, Fuzhou Sansheng agreed to provide (i) RMB650.0 million non-interest-bearing loan to Fuzhou Bosheng (“Fuzhou Sansheng Loan”) which in return the Group will have to continue to provide the Pledged Properties and Share Pledge under the Loan and Pledge Arrangement so that the Private Group can continue to fulfil the obligations required by the relevant loan facilities; and (ii) an unsecured loan to Fuzhou Bosheng Group on normal commercial terms in such amount necessary for the development of the property projects of the Project Companies.

55 LETTER FROM ALTUS

4.2 Principal terms of the Loan Agreement

4.2.1 Principal loan amount and interest rate

As stated in the “Letter from the Board” of the Circular, the principal loan amount of the Fuzhou Sansheng Loan is RMB650.0 million. When assessing the reasonableness of the principal loan amount, we have considered the loan-to-value ratio (“LTV Ratio”) of the Fuzhou Sansheng Loan.

As at 30 June 2020, the aggregate market value of the Pledged Properties was RMB1,000.3 million. Accordingly, the LTV Ratio of the Fuzhou Sansheng Loan will be approximately 65.0%. We understand from the Management that the usual LTV Ratio of the loans obtained from the PRC financial institutions would normally be not higher than 60.0% by referencing to the Group’s loan agreements with PRC financial institutions. Furthermore, we have reviewed a research report (the “Research Report”), published by a renowned international consulting firm in 2020, in relation to the area of financing for PRC real estate developers. The Research Report stated that domestic banks in the PRC typically will lend up to a LTV Ratio of 50.0% to 60.0%, depending on the attractiveness of the location and the property itself.

Furthermore, as stated in the Loan Agreement, the Fuzhou Sansheng Loan carries zero interest rate. According to the 2020 Interim Results, the Group’s banks loans and other borrowings are interest-bearing at 4.99% to 9.31% per annum and 8.27% to 18.00% per annum respectively. According to the Research Report, domestic banks in the PRC usually charge an interest ranging from 6.0% to 9.5% per annum for loans secured by property. Further, the People’s Bank of China’s benchmark interest rate for loan is currently at 4.75% per annum for loans between one year to five years.

Considering that the Fuzhou Sansheng Loan have (i) a LTV Ratio of approximately 65.0%, which is higher than the LTV Ratio of the loan facilities the Group could likely obtain from other PRC financial institutions; and (ii) non-interest bearing, we are of the view that the principal loan amount and the interest rate are beneficial to the Group and is fair and reasonable as far as the Company and the Independent Shareholders are concerned.

4.2.2 Term

The Loan Agreement shall be conditionally effective upon Completion Date until 31 October 2021. We understand from the Management that the loans obtained by the Private Group from financial institutions in the PRC will be due for repayment on or before 31 October 2021.

Having considered that the provision of the Pledged Properties and the Share Pledge as security will expire on 31 October 2021, which is the same as the due date for the repayment of the loans obtained by the Private Group from financial institutions in the PRC, we are of the view that the term of Loan Agreement is fair and reasonable.

56 LETTER FROM ALTUS

4.2.3 Indemnity

Mr. Lin will fully indemnify Fuzhou Bosheng against any damage, loss or diminution in value of the Pledged Properties and the Share Pledge as a result of breach of repayment obligations in relation to loan facilities secured by the Pledged Properties and the Share Pledge under the Loan and Pledge Arrangement, by way of cash or by offsetting the outstanding loans owed by Fuzhou Bosheng to the Private Group or a combination of both. In other words, by means of the above indemnity, the Group is not expected to suffer any losses of value in its Pledged Properties and Share Pledge in any events, including but not limited to, a loan default or breach of covenants. Having taken into account (i) the businesses and assets of the Private Group (excluding the Target Group); (ii) the market value of the shares of Sansheng Intellectual Education Technology Co.,Ltd. (300282.SZ) currently held by Mr. Lin and his associates; and (iii) the market value of the Shares currently held by Mr. Lin and his associates at the closing price of the Shares as at the Latest Practicable Date, we are of the view that the indemnity provided by Mr. Lin under the Loan and Pledge Agreement is fair and reasonable and is in the interests of the Company and its Shareholders as a whole.

4.3 Section summary

Having reviewed the relevant documents mentioned above, and having considered that (i) the loan was a legacy arrangement when the Target Group was still under the Private Group; (ii) the LTV ratio of 65.0%; and (iii) the interest free loan of RMB650.0 million and the unsecured loan at commercial terms under the Loan Agreement will be used solely as financing for the development of the Target Properties, we concur with the Management’s view that the Loan Agreement would help to secure financing for the Group’s development of the property projects of the Project Companies upon Completion and the financing terms offered by Fuzhou Sansheng are more favourable than those available in the market.

Taking into account the above, and the Loan and Pledge Arrangement is only incidental to the Acquisition, we are of the view that the terms of the Loan Agreement are beneficial to the Group and are fair and reasonable as far as the Company and the Independent Shareholders are concerned.

5. Reasons for and benefits of the Acquisition

5.1 Achieve the Group’s objective to expand market reach

As mentioned in the “Letter from the Board” of the Circular, the Group’s strategy is to focus and expand their existing principal business of property development and investment. The Acquisition will enable the Group to expand to a wider geographic coverage of coastal areas and different tier cities, in particular, begin its presence in five new cities, namely Chengdu, Quanzhou, Taizhou, Xuzhou and Yangzhou (the “New Cities”). As a result of the Acquisition, the Group will further expand its market coverage to a population of approximately 44.9 million with total nominal gross domestic product (“GDP”) of approximately RMB4,483.5 billion in the New Cities 1, which further enhance the Group’s objective to establish itself as a well-known and high quality national property developer in the Mainland.

Moreover, prior to the Acquisition, we noted the Group recently entered into two separate acquisitions, being, (i) an agreement on 19 August 2020 to acquire 25.0% equity interest in a company which owns 100.0% of a project company holding the land use rights of a parcel of land of approximately 34,109.48 sq.m. in Wenzhou City, Jiangsu province; and (ii) agreement on 20 August 2020 to acquire 100.0% equity interest in a company which owns a parcel of land of approximately 44,031.00 sq.m. with planned GFA of appriximately 115,362 sq.m. in Hanzhong City, Shannxi province. The acquisition in Hanzhong City also marks the Company’s first property development project in Shannxi province. For further information, please refer to the announcements of the Company dated 19 and 20 August 2020 respectively.

1 Sources: Fujian Bureau of Statistics, Jiangsu Bureau of Statistics, Sichuan Bureau of Statistics, Zhejiang Bureau of Statistics

57 LETTER FROM ALTUS

5.2 Expand into the New Cities to capture growth potential

We noted that the GDP of the PRC continued to grow at rates between 6.1% and 6.9% during the period from 2015 to 2019 2 and the total sales amount and sales area of commercial housing (including residential, office and commercial properties) also shown an increasing trend from 2017 to 2019. The average selling price of housing in the PRC increased continuously during the period from approximately RMB7,893 per sq.m. in 2017 to approximately RMB9,310 per sq.m. in 2019, representing a compound annual growth rate (“CAGR”) of approximately 8.6%. Details are set out in the table below. Despite the outbreak of COVID-19 in mid-January 2020, the average selling price of housing in the PRC had further increased to approximately RMB9,638 per sq.m. for the six months ended 30 June 2020.

National sales of commercial housing

January to January to 2017 2018 2019 June 2019 June 2020

Total sales amount (RMB’billion) 13,370 14,997 15,973 7,070 6,690 Total sales area (million sq.m.) 1,694 1,717 1,716 758 694 Average selling price (RMB/sq.m.) 7,893 8,735 9,310 9,329 9,638 Increase in average selling price 5.5% 10.7% 6.6% N/A 3.3%

Source: National Bureau of Statistics of China

Since the majority of the property projects owned by the Target Group are located in Fujian, Zhejiang and Jiangsu provinces, we have also considered the latest available statistics released by National Bureau of Statistics of China regarding the sales of housing in the Eastern region of the PRC, which includes these three provinces. We noted that the average selling price of housing in the Eastern region of the PRC increased from approximately RMB10,455 per sq.m. in 2017 to approximately RMB12,586 per sq.m. in 2019, representing a CAGR of approximately 9.7%. Further, the average selling price of housing in the Eastern region of the PRC further increased to approximately RMB13,019 per sq.m. for the six months ended 30 June 2020 regardless of the outbreak of COVID-19. Comparing to the average selling prices of housing in the entire nation mentioned above, the average selling prices of housing of the Eastern region of the PRC had consecutively been higher in the past three years as well as in the midst of the COVID-19 pandemic during the first six months of 2020.

2 Source: National Bureau of Statistics of China

58 LETTER FROM ALTUS

As mentioned in the “Letter from the Board” of the Circular, we noted the housing price index published by National Bureau of Statistics of China for 70 largest cities in the PRC also showed that the property market in the subject cities remained resilient amid the outbreak of COVID-19 since early this year, with an year-on-year growth ranging from 2.5% to 11.2% in June 2020. Separately, we have conducted research on the New Cities. According to Bureau of Statistics of different provinces and our independent research, the CAGR of the New Cities’ combined GDP was approximately 9.7% from 2017 to 2019, which was notably higher than the CAGR of national GDP of 6.5%. Moreover, the population growth rates of the New Cities are higher than that of the cities where the Group currently has presence. From December 2019 to June 2020, unit selling price of newly built residential properties has been stable in the New Cities, despite the outbreak of COVID-19. Based on our independent research, as most of the New Cities (except Chengdu, being a new tier-1 city) are classified as tier-2 cities in the PRC, the governmental restriction on property purchase by individuals are less stringent than tier-1 cities. Therefore, the Management considers, and we concur, that the Acquisition manifests a persistent and consistent pursuit of the Group to establish its market position and image through expansion of land bank and property portfolio, and to gain a better global rating for debt issuance through legitimate and organic growth of the Group’s asset size, which is in line with the Group’s well-established strategy.

5.3 Increase project pipeline and land bank reserves

Based on the 2020 Interim Results, the Group has a total of 35 property projects with planned total GFA of approximately 6.0 million sq.m. under development or planned for future development. As shown in the breakdown of the GFA of the Target Group below, the Target Group has (i) approximately 105,713 sq.m. of GFA of properties held for sale; and (ii) a total of approximately 1.5 million sq.m. of planned GFA of properties held under development for sale (of which, construction of six property projects are expected to be completed between 2020 and 2024 according to the current delivery schedule) and properties held for future development. As a result of the Acquisition, the Group will be able to increase its planned GFA of properties held under development for sale and properties held for future development by approximately 24.6%.

Total GFA under the Target Group sq.m.

GFA of investment properties 153,030 GFA of properties held for sale 105,713 GFA of property held for hotel operation 21,542 Planned GFA of properties held under development for sale 1,240,100 Planned GFA of properties held for future development 261,070

Furthermore, the Group currently possesses three investment properties located in Qingdao, Harbin and Fuzhou with total GFA of 61,751 sq.m. Together with the two investment properties and hotel building located in Fuzhou and Yangzhou under the Target Group, the GFA of the Group’s investment properties and hotel building will be substantially enhanced by 174,572 sq.m. after the Acquisition. Following the completion of the Acquisition, it will also mark the Group’s first property held for hotel operation. In view of the above, the Management believes and we share the same that the Acquisition enables the Group to maintain a sustainable project pipeline and to increase quality land bank reserves for future development.

59 LETTER FROM ALTUS

Going forward, the Acquisition will bring future revenue from unsold properties and the Target Group’s projects under development for sale in the next few years. Including the portion of pre-sold properties, the total GFA of the Target Properties held for sale and held under development for sale are approximately 1.3 million sq.m.. In addition, there are properties held for future development for sale with planned GFA of approximately 261,070 sq.m. under the Target Group, which will primarily be developed as residential and commercial properties. Moreover, investment properties and the property held for hotel operation will generate recurring income and cash flow for the Group.

Thus, the Management therefore considers, and we concur, that the Acquisition is in the interests of the Company and the Shareholders as a whole considering the Consideration and prospects of the projects.

6. Potential dilution effect on shareholding interests

As at the Latest Practicable Date, the Company had 441,114,000 Shares in issue. Pursuant to the Agreement, 49,480,000 Consideration Shares will be issued upon Completion, representing (i) approximately 11.22% of the total issued share capital of the Company as at the Latest Practicable Date; and (ii) approximately 10.09% of the total issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares, assuming that there shall be no changes in the issued share capital of the Company other than the issue of the Consideration Shares after the Latest Practicable Date and up to Completion Date.

The following table sets out the shareholding structure of the Company (i) as at the Latest Practicable Date; and (ii) immediately upon Completion and the allotment and issue of the Consideration Shares:

Immediately upon Completion and As at the Latest the allotment and issue of Practicable Date the Consideration Shares Number of Number of Shares Approximate% Shares Approximate%

Mega Regal 318,348,127 72.17 367,828,127 74.98 Public Shareholders 122,765,873 27.83 122,765,873 25.02

Total 441,114,000 100.00 490,914,000 100.00

As shown in the above table, for illustrative purpose only, the shareholding of the public Shareholders shall be diluted from approximately 27.83% to approximately 25.02% upon Completion. Having considered the fairness and reasonableness of the Consideration, the issue price of the Consideration Shares and the potential benefits of the Acquisition without significant cash outlay, we consider that the dilution effect on the shareholding interests of the Independent Shareholders is acceptable and justifiable.

60 LETTER FROM ALTUS

7. Financial effects of the Acquisition to the Group

Upon Completion, the Target will become an indirect wholly-owned subsidiary of the Company and its financial results will be consolidated into the financial statements of the Group. The financial effects of the Acquisition on the Group are set out below. However, it should be noted that the analysis below is for illustrative purpose only and does not purport to represent how the financial position of the Group would become upon Completion.

7.1 Net asset value and adjusted debt-to-asset ratio

Based on the unaudited pro forma financial information of the Enlarged Group as set out in Appendix III to the Circular, had the Acquisition been completed on 30 June 2020, the total assets of the Group would have increased by approximately RMB10.3 billion from approximately RMB34.1 billion to approximately RMB44.4 billion while the total liabilities of the Group would have increased by approximately RMB10.3 billion from approximately RMB32.3 billion to approximately RMB42.6 billion. Given that the unaudited net asset value attributable to the equity shareholders of the Target will become close to zero upon completion of the Reorganisation pursuant to the Agreement, the unaudited pro forma net asset value of the Enlarged Group would decrease slightly to approximately RMB1.8 billion as a result.

Having considered the effects of the Acquisition on the total assets and total liabilities of the Group as mentioned above, the Group’s adjusted debt-to-asset ratio would have decreased to approximately 56.3% had the Acquisition been completed on 30 June 2020.

7.2 Earnings

Following the completion of the Acquisition, the financial results of the Target Group will be consolidated into the Group. Based on the current completion and delivery timetable for each of the property projects of the Target Group, the Group is expected to recognise revenue from the Target Group’s investment properties and hotel building; and those pre-sold properties upon delivery. As a result of the recognition of additional revenue from the property projects, it is expected to enhance the Group’s earnings.

7.3 Cashflow

The Consideration of HK$347.3 million (equivalent to approximately RMB310.1 million) will be settled by way of issue and allotment of the Consideration Shares upon Completion. Save for the estimated transaction costs in connection with the Reorganisation and the Acquisition of approximately RMB4.4 million, the Group will have no other immediate cash outflow arising from the Acquisition.

61 LETTER FROM ALTUS

RECOMMENDATION

In view of the above principal factors and reasons, we are of the view that (i) the terms of the Agreement and the transactions contemplated thereunder are fair and reasonable; and (ii) the entering into the Agreement (including the issue of the Consideration Shares) and the transactions contemplated thereunder are on normal commercial terms, in the ordinary and usual course of business of the Group and in the interests of the Company and its Shareholders as a whole.

However, Independent Shareholders should note that it is not in the usual and ordinary course of business of the Group to enter into the Loan Agreement and to continue the Loan and Pledge Arrangement. Notwithstanding the above, the Loan and Pledge Arrangement is incidental to the Acquisition and Mr. Lin will also fully indemnify Fuzhou Bosheng against any damages, loss or diminution in value of the Pledged Properties and the Share Pledge under such arrangement. Hence, in view of the above principal factors and reasons, we consider that (i) the terms of the Loan Agreement and the Loan and Pledge Arrangement are fair and reasonable; and (ii) the entering into the Loan Agreement are on normal commercial terms or better, and are in the interests of the Company and the Shareholders as a whole.

Accordingly, we recommend the Independent Shareholders, as well as the Independent Board Committee to advise the Independent Shareholders, to vote in favour of the resolutions to be proposed at the EGM for the approval of the Acquisition and the Financial Assistance.

Yours faithfully, For and on behalf of Altus Capital Limited Jeanny Leung Executive Director

Ms. Jeanny Leung (“Ms. Leung”) is a Responsible Officer of Altus Capital Limited licensed to carry on Type 6 (advising on corporate finance) regulated activity under the SFO and permitted to undertake work as a sponsor. She is also a Responsible Officer of Altus Investments Limited licensed to carry on Type 1 (dealing in securities) regulated activity under the SFO. Ms. Leung has over 30 years of experience in corporate finance advisory and commercial field in Greater China, in particular, she has participated in sponsorship work for initial public offerings and acted as financial adviser or independent financial adviser in various corporate finance transactions.

62 APPENDIX I FINANCIAL INFORMATION OF THE GROUP

1. FINANCIAL INFORMATION OF THE GROUP

Financial information of the Group for the FY2017, FY2018, FY2019 and 1H2020 were disclosed in the following documents which have been published on the websites of the Stock Exchange (http:// www.hkexnews.hk) and of the Company (http://www.sansheng.hk):

(i) annual report of the Company for FY2017 published on 23 April 2018 (pages 88 to 170);

(ii) annual report of the Company for FY2018 published on 15 April 2019 (pages 91 to 210); and

(iii) annual report of the Company for FY2019 published on 23 April 2020 (pages 113 to 242);

(iv) interim report of the Company for 1H2020 published on 23 September 2020 (page 25 to 64).

2. INDEBTEDNESS STATEMENT

As at the close of business on 31 July 2020, being the latest practicable date for the purpose of determining this indebtedness of the Enlarged Group prior to the printing of this circular, the Enlarged Group had the following outstanding indebtedness:

Borrowings

RMB’000

Bank loans and other borrowings Short-term loans — secured 8,982,151 Long-term loans — secured 6,483,360

15,465,511

Loan from a related party – unsecured 1,420,916

Bond payable – secured 824,434 – unsecured 399,660

1,224,094

I-1 APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Lease liabilities

After the initial recognition of right-of-use assets and lease liabilities as at 1 January 2019, the Enlarged Group as a lessee is required to recognise interest expense accrued on the outstanding balance of the lease liabilities over the lease term. As at 31 July 2020, the Enlarged Group has lease liabilities with outstanding principal amount of approximately RMB18,269,000.

Contingent liabilities

As at 31 July 2020, the Enlarged Group has issued guarantees to banks to secure the mortgage arrangements of certain property buyers. The outstanding guarantees to the banks amounted to RMB9,768,284,000 as at 31 July 2020, which will be terminated upon the completion of the transfer procedures with the property buyers in respect of the legal title of the properties.

As at 31 July 2020, certain properties and share of the Enlarged Group are pledge as security for related parties to obtain loan facilities from financial institutions.

Save as aforementioned and apart from intra-group liabilities, as at the close of business on 31 July 2020, the Enlarged Group did not have any other outstanding borrowings, loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances (other than normal trade bills), acceptance credits, debentures, mortgages, charges, finance leases, hire purchase commitments, guarantees or other material contingent liabilities.

3. WORKING CAPITAL

The Directors are of the opinion that, taking into account the internal and banking resources presently available, in the absence of unforeseeable circumstances, the Enlarged Group has sufficient working capital for its present requirements, that is, for at least the 12 months from the date of this circular.

4. FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

The Group is principally engaged in property development and property investment. As disclosed in the interim report for 1H2020, the Group has proactively grasped the market dynamics and macro policy changes in the PRC real estate industry, flexibly adjusted its strategies in phases, and gave full play to its own strengths to achieve further growth in performance and scale development. It has been the Group’s long established strategy to increase its land banks and enhance its property portfolios through acquisitions of quality property projects in different regions of the PRC, and the Group will continue this strategy when the opportunities arise. Leveraging on the extensive network and expertise in the PRC’s real estate industry of Sansheng Group Limited (“Sansheng Group”), which is controlled by the executive Directors, Mr. Lin and Ms. Cheng, the Group is able to integrate the brand advantages of Sansheng Group and developed products that catered to different markets and provides services to meet the needs of different regions. As a result, the Group won market recognitions and achieved a rapid growth in business size, which laid a solid foundation for the future sustainability of the Group. In addition, with a view to expand its presence in the PRC property market, the Group has moved its headquarters to Shanghai, and has recruited outstanding talents to upgrade its management team.

I-2 APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The Acquisition is in line with the Group’s aforesaid strategy to expand its existing property investment and development business in the PRC and will also allow the Group to utilise Sansheng Group’s branding and resources to deliver high quality properties for sale or investment in order to enhance the investment returns and the global ratings of the Group.

The Group has been expanding the scale of business in districts such as Western Straits Economic Zone, the Yangtze River Delta Economic Zone and the Bohai Economic Rim, and is also pursuing new growth opportunities in emerging markets such as Guangdong-Hong Kong-Macau Greater Bay Area and Yangtze River Economic Belt to realize the continuous optimization of the overall business strategies. Despite the outbreak of COVID-19 since early 2020 has brought uncertainties in the global economy and has brought on short-term impact to the market, the Group has assessed the impact of the epidemic on the Group’s capital adequacy and liquidity. Taking into account relaxation policies introduced by certain local governments for PRC real estate industry, the Group expects that the capital and liquidity levels of the Group are sufficient to absorb the impact of the stress. More importantly, The Group believes that the epidemic is a temporary situation and its effects on the general real estate industry in the Mainland China are not decisive.

Following the Completion, the Enlarged Group will continue to be principally engaged in property development and property investment, and continue to explore the business opportunities which would strengthen profitability under the acceptable risk and expand its reserve of new high-quality land resources.

I-3 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

The following is the text of a report set out on pages II-1 to II-62 received from the Company’s reporting accountants, KPMG, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular.

ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF SANSHENG HOLDINGS (GROUP) CO. LTD.

Introduction

We report on the historical financial information of Rosy Path Group Limited (the “Target Company”) and its subsidiaries (together, the “Target Group”) set out on pages II-4 to II-62, which comprises the combined statements of financial position of the Target Group as at 31 December 2017, 2018 and 2019 and 31 March 2020, the combined statements of profit or loss and other comprehensive income, the combined statements of changes in equity and the combined statements of cash flows, for each of the years ended 31 December 2017, 2018 and 2019 and the three months ended 31 March 2020 (the “Relevant Periods”), and a summary of significant accounting policies and other explanatory information (together, the “Historical Financial Information”). The Historical Financial Information set out on pages II-4 to II-62 forms an integral part of this report, which has been prepared for inclusion in the circular of Sansheng Holdings (Group) Co. Ltd. (the “Company”) dated 25 September 2020 (the “Circular”) in connection with the proposed acquisition of the entire issued share capital of the Target Company by the Company.

Directors’ responsibility for Historical Financial Information

The directors of the Company are responsible for the preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information.

The Underlying Financial Statements of the Target Group as defined on page II-4, on which the Historical Financial Information is based, were prepared by the directors of the Target Company. The directors of the Target Company are responsible for the preparation of the Underlying Financial Statements that gives a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), and for such internal control as the directors of the Target Company determine is necessary to enable the preparation of the Underlying Financial Statements that is free from material misstatement, whether due to fraud or error.

II-1 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Reporting accountants’ responsibility

Our responsibility is to express an opinion on the Historical Financial Information and to report our opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 200 “Accountants’ Reports on Historical Financial Information in Investment Circulars” issued by the HKICPA. This standard requires that we comply with ethical standards and plan and perform our work to obtain reasonable assurance about whether the Historical Financial Information is free from material misstatement.

Our work involved performing procedures to obtain evidence about the amounts and disclosures in the Historical Financial Information. The procedures selected depend on the reporting accountants’ judgement, including the assessment of risks of material misstatement of the Historical Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountants consider internal control relevant to the entity’s preparation of Historical Financial Information that give a true and fair view in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our work also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the Historical Financial Information.

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

Opinion

In our opinion, the Historical Financial Information gives, for the purpose of the accountants’ report, a true and fair view of the Target Group’s financial position as at 31 December 2017, 2018 and 2019 and 31 March 2020 and of the Target Group’s financial performance and cash flows for the Relevant Periods in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information.

Review of stub period corresponding financial information

We have reviewed the stub period corresponding financial information of the Target Group which comprises the combined statement of profit or loss and other comprehensive income, the combined statement of changes in equity and the combined statement of cash flows for the three months ended 31 March 2019 and other explanatory information (the “Stub Period Corresponding Financial Information”). The directors of the Company are responsible for the preparation and presentation of the Stub Period Corresponding Financial Information in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information. Our responsibility is to express a conclusion on the Stub Period Corresponding Financial Information based on our review. We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA. A review consists of making enquiries, primarily of persons responsible for financial and accounting matters, and

II-2 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the Stub Period Corresponding Financial Information, for the purpose of the accountants’ report, is not prepared, in all material respects, in accordance with the basis of preparation and presentation set out in Note 1 to the Historical Financial Information.

Report on matters under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

Adjustments

In preparing the Historical Financial Information, no adjustments to the Underlying Financial Statements as defined on page II-4 have been made.

KPMG Certified Public Accountants 8th Floor, Prince’s Building 10 Chater Road Central, Hong Kong

25 September 2020

II-3 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

HISTORICAL FINANCIAL INFORMATION

Set out below is the Historical Financial Information which forms an integral part of this accountants’ report.

The combined financial statements of the Target Group for the Relevant Periods, on which the Historical Financial Information is based, were audited by KPMG Huazhen LLP in accordance with Hong Kong Standards on Auditing issued by the HKICPA (“Underlying Financial Statements”).

II-4 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Combined statements of profit or loss and other comprehensive income (Expressed in Renminbi)

Three months ended Year ended 31 December 31 March 2017 2018 2019 2019 2020 note RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Revenue 4 641,901 663,280 291,361 71,809 26,145

Cost of sales (547,002) (549,592) (158,671) (45,647) (9,898)

Gross profit 94,899 113,688 132,690 26,162 16,247

Net valuation gain/(loss) on investment properties 10 49,357 37,464 27,980 324 (23,045) Other income 5 576 312 5,224 582 451 Selling and marketing expenses (46,483) (80,511) (79,216) (12,262) (10,885) Administrative expenses (60,238) (61,417) (67,014) (11,823) (14,255)

Profit/(loss) from operations 38,111 9,536 19,664 2,983 (31,487) Finance costs 6(a) (19,363) (1,119) (21,339) (11,474) (62)

Profit/(loss) before taxation 6 18,748 8,417 (1,675) (8,491) (31,549) Income tax 7 (51,028) (28,138) (32,010) 434 3,600

Loss and total comprehensive income for the year/period (32,280) (19,721) (33,685) (8,057) (27,949)

Attributable to:

Equity shareholders of the Target Company (22,626) (10,512) (29,347) (7,225) (26,621) Non-controlling interests (9,654) (9,209) (4,338) (832) (1,328)

Loss and total comprehensive income for the year/period (32,280) (19,721) (33,685) (8,057) (27,949)

The accompanying notes form part of the Historical Financial Information.

II-5 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Combined statements of financial position (Expressed in Renminbi)

As at As at 31 December 31 March 2017 2018 2019 2020 note RMB’000 RMB’000 RMB’000 RMB’000

Non-current assets Investment properties 10 1,262,654 1,305,333 1,338,754 1,315,709 Other property, plant and equipment 11 209,869 280,196 354,689 348,282 Deferred tax assets 22(b) 5,575 6,040 7,480 9,198

1,478,098 1,591,569 1,700,923 1,673,189

Current assets Inventories and other contract costs 13 3,394,220 3,785,580 7,081,662 7,345,982 Trade and other receivables 14 760,199 1,209,954 547,548 590,964 Financial assets at fair value through profit or loss 15 26,000 26,000 20,000 20,980 Restricted deposits 16 5,073 11,730 15,177 15,179 Cash and cash equivalents 17 183,440 1,091,193 880,292 627,000

4,368,932 6,124,457 8,544,679 8,600,105

Current liabilities Bank loans and other borrowings 18 775,000 1,763,890 330,700 621,800 Trade and other payables 19 1,297,060 768,438 2,047,037 1,730,815 Lease liabilities 21 550 487 2,569 2,608 Contract liabilities 20 1,087,065 3,057,422 5,644,705 5,918,993 Current taxation 22(a) 33,144 94,973 146,714 149,616

3,192,819 5,685,210 8,171,725 8,423,832

Net current assets 1,176,113 439,247 372,954 176,273

Total assets less current liabilities 2,654,211 2,030,816 2,073,877 1,849,462

II-6 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

As at As at 31 December 31 March 2017 2018 2019 2020 note RMB’000 RMB’000 RMB’000 RMB’000

Non-current liabilities Bank loans and other borrowings 18 1,903,890 1,281,800 1,322,300 1,128,411 Lease liabilities 21 – 11,277 9,892 9,606 Deferred tax liabilities 22(b) 39,856 46,995 54,626 52,335

1,943,746 1,340,072 1,386,818 1,190,352

Net assets 710,465 690,744 687,059 659,110

Capital and reserves 23 Paid-in capital 890,000 890,000 920,000 920,000 Reserves (107,809) (118,321) (147,668) (174,289)

Total equity attributable to equity shareholders of the Target Company 782,191 771,679 772,332 745,711

Non-controlling interests (71,726) (80,935) (85,273) (86,601)

Total equity 710,465 690,744 687,059 659,110

The accompanying notes form part of the Historical Financial Information.

II-7 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Combined statements of changes in equity (Expressed in Renminbi)

Attributable to equity shareholders of the Target Company Non- Paid-in Statutory Accumulated controlling Total capital reserve losses Total interests equity RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (note 23(a)) (note 23(d))

Balance at 1 January 2017 860,000 – (85,183) 774,817 (62,072) 712,745

Changes in equity for 2017: Loss and total comprehensive income for the year – – (22,626) (22,626) (9,654) (32,280) Capital injection (note 23(a)) 30,000 – – 30,000 – 30,000 Appropriation to statutory reserve – 3,296 (3,296) – – –

Balance at 31 December 2017 and 1 January 2018 890,000 3,296 (111,105) 782,191 (71,726) 710,465

Changes in equity for 2018: Loss and total comprehensive income for the year – – (10,512) (10,512) (9,209) (19,721) Appropriation to statutory reserves – 4,346 (4,346) – – –

Balance at 31 December 2018 and 1 January 2019 890,000 7,642 (125,963) 771,679 (80,935) 690,744

Changes in equity for 2019: Loss and total comprehensive income for the year – – (29,347) (29,347) (4,338) (33,685) Capital injection (note 23(a)) 30,000 – – 30,000 – 30,000 Appropriation to statutory reserves – 2,925 (2,925) – – –

Balance at 31 December 2019 920,000 10,567 (158,235) 772,332 (85,273) 687,059

II-8 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Balance at 1 January 2019 890,000 7,642 (125,963) 771,679 (80,935) 690,744 Change in equity for the three months ended 31 March 2019: Loss and total comprehensive income for the period – – (7,225) (7,225) (832) (8,057)

Balance at 31 March 2019 (unaudited) 890,000 7,642 (133,188) 764,454 (81,767) 682,687

Balance at 31 December 2019 920,000 10,567 (158,235) 772,332 (85,273) 687,059

Change in equity for the three months ended 31 March 2020: Loss and total comprehensive income for the period – – (26,621) (26,621) (1,328) (27,949)

Balance at 31 March 2020 920,000 10,567 (184,856) 745,711 (86,601) 659,110

The accompanying notes form part of the Historical Financial Information.

II-9 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Combined statements of cash flows (Expressed in Renminbi)

Three months ended Year ended 31 December 31 March 2017 2018 2019 2019 2020 note RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Operating activities Cash (used in)/generated from operations 17(b) (536,853) 1,732,017 446,377 88,888 50,872 Income tax paid (5,969) (57,728) (110,391) (49,128) (15,885)

Net cash (used in)/generated from operating activities (542,822) 1,674,289 335,986 39,760 34,987

Investing activities Payment for the purchase of other property, plant and equipment (5,414) (73,349) (90,326) (7,172) (341) Disposal of other property, plant and equipment 2,098 82 29 – 155 Placement of financial assets at fair value through profit or loss – – – – (980) Withdrawal of financial assets at fair value through profit or loss – – 6,000 6,000 – Interest received 1,074 909 3,059 651 13

Net cash used in investing activities (2,242) (72,358) (81,238) (521) (1,153)

Financing activities Capital element of lease rentals paid 17(c) (52) (1,135) (1,385) (346) (247) Interest element of lease rentals paid 17(c) (46) (990) (259) (74) (62) Proceeds from bank loans and other borrowings 17(c) 1,750,000 1,381,800 868,700 – 157,211 Repayment of bank loans and other borrowings 17(c) (716,000) (1,015,000) (2,261,390) (655,000) (60,000) Proceeds from a related party 17(c) 2,456,440 1,063,998 2,490,066 263,185 302,145 Repayment to a related party 17(c) (2,730,015) (1,892,885) (1,454,973) (64,693) (668,255) Capital injections from shareholders 30,000 – 30,000 – – Interest and other borrowing cost paid 17(c) (211,863) (229,966) (136,408) (48,890) (17,918)

Net cash generated from/ (used in) financing activities 578,464 (694,178) (465,649) (505,818) (287,126)

Net increase/(decrease) in cash and cash equivalents 33,400 907,753 (210,901) (466,579) (253,292) Cash and cash equivalents at 1 January 150,040 183,440 1,091,193 1,091,193 880,292

Cash and cash equivalents at 31 December/31 March 17(a) 183,440 1,091,193 880,292 624,614 627,000

The accompanying notes form part of the Historical Financial Information.

II-10 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Notes to the Historical Financial Information (Expressed in Renminbi and unless otherwise indicated)

1 Basis of preparation and presentation of Historical Financial Information

Pursuant to the announcement dated 24 August 2020 (the “Announcement”), Total Prestige Holdings Limited (the “Purchaser”), a direct wholly-owned subsidiary of the Company, entered into a sale and purchase agreement to conditionally acquire the entire issued share capital of Rosy Path Group Limited (the “Target Company”) from Mega Regal Limited (“Mega Regal” or “Vendor”) which is controlled by Mr. Lin Rongbin.

The Target Company was incorporated in the British Virgin Islands (“BVI”) on 15 May 2020 and is an investment holding company which has not carried on any business since the date of its incorporation save for the reorganisation below. The Target Company and its subsidiaries (together, the “Target Group”) are principally engaged in property investment and development in the People’s Republic of China (the “PRC”) (the “Relevant Businesses”).

Prior to the incorporation of the Target Company, the Relevant Businesses were conducted through certain domestic project companies established in the PRC which are indirectly controlled by Mr. Lin Rongbin. To facilitate the Purchaser’s proposed acquisition of the Target Company, the Target Group underwent a reorganisation (the “Reorganisation”) as disclosed in the section headed “Information on the Target Group” in the Circular. Upon completion of the Reorganisation, the Target Company will become the holding company of the Target Group.

Prior to and after the Reorganisation, the companies now comprising the Target Group were under the common control of Mr. Lin Rongbin. The control is not transitory and, consequently, there was a continuation of risks and benefits to Mr. Lin Rongbin. Accordingly, the Reorganisation is treated as a combination of businesses under common control, and the Historical Financial Information has been prepared and presented using the merger basis of accounting as if the Target Group has always been in existence throughout the Relevant Periods. The net assets of the companies now comprising the Target Group are combined using the existing book values from the perspective of Mr. Lin Rongbin.

The combined statements of profit or loss and other comprehensive income, combined statements of changes in equity and combined statements of cash flows of the Target Group for the Relevant Periods include the financial performance and cash flows of the companies now comprising the Target Group as if the current group structure had been in existence and remained unchanged throughout the Relevant Periods. The combined statements of financial position of the Target Group as at 31 December 2017, 2018 and 2019 and 31 March 2020 as set out in this report have been prepared to present the financial position of the companies now comprising the Target Group as at those dates as if the current group structure had been in existence as at the respective dates.

Intra-group balances and transactions are eliminated in full in preparing the Historical Financial Information.

As of the date of this report, no audited financial statements have been prepared for the Target Company, as it is not subject to statutory audit requirement under relevant rules and regulations in the jurisdiction of incorporation.

II-11 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

As at 31 March 2020, the Target Company will have direct or indirect interests in the following subsidiaries, all of which are private companies:

Particular of Date and place of registered capital/ incorporation/ issued and Proportion of Principal Statutory Name of company established paid-up capital ownership interest activity auditors Held by the Target Held by a Company subsidiary

Sheng Tu (Hong Kong) Limited 23 July 2020 HKD1/HKD1 100% – Investment (a) Hong Kong holding Fuzhou Shengtu Investment Co., Ltd.** 10 September 2020 RMB 250,000,000/ – 100% Investment (a) (福州盛途投資有限公司) (“Fuzhou Shengtu”) Fuzhou RMB Nil (c) holding Fuzhou Bosheng Investment Co., Ltd.** 23 June 2017 RMB30,000,000/ – 100% Investment (b) (福州伯盛投資有限公司) (“Fuzhou Bosheng”) Fuzhou RMB30,000,000 holding Chengdu Sansheng Real Estate Development 19 June 2009 RMB8,000,000/ – 100% Real estate (b) Co., Ltd.** (成都三盛房地產開發有限公司) Chengdu RMB8,000,000 development Chengdu Jisheng Real Estate Co., Ltd.** 14 December 2007 RMB290,000,000/ – 100% Real estate (b) (成都吉盛置業有限公司) (“Chengdu Jisheng”) Chengdu RMB290,000,000 development Yangzhou Sansheng Real Estate Development 5 March 2012 RMB420,000,000/ – 100% Real estate (b) Co., Ltd.** (揚州三盛房地產開發有限公司) Yangzhou RMB420,000,000 development (“Yangzhou Sansheng”) Yangzhou Sansheng Real Estate Development 27 April 2018 RMB Nil/RMB Nil – 100% Hotel (b) Co., Ltd. Doubletree by Hilton Yangzhou Branch** Yangzhou management (揚州三盛房地產開發有限公司希爾頓逸林酒店分公司) Fujian Minqiao Real Estate Development Co., Ltd.** 21 March 2011 RMB50,000,000/ – 100% Real estate (b) (福建閩僑房地產開發有限公司) (“Fujian Minqiao”) Fuzhou RMB50,000,000 development Qingdao Sansheng Investment Co., Ltd.** 18 August 2010 RMB100,000,000/ – 74% Investment (b) (青島三盛投資有限公司) Qingdao RMB100,000,000 holding Qingdao Haishang Real Estate Co., Ltd.** 18 March 2009 RMB103,896,000/ – 74% Real estate (b) (青島海上置業有限公司) (“Qingdao Haishang”) Qingdao RMB103,896,000 development Wenling Rongfa Real Estate Development Co., Ltd.** 10 September 2019 RMB11,111,100/ – 100%* Real estate (a) (溫嶺榮發房地產開發有限公司) (“Wenling Rongfa”) Wenling RMB11,111,100 development Jinan Zuosheng Investment Co., Ltd.** 31 May 2019 RMB100,000,000/ – 100% Investment (a) (濟南佐盛投資有限公司) Jinan RMB Nil holding Jinan Sansheng Jundao Investment Co., Ltd.** 31 May 2019 RMB10,000,000/ – 51%# Investment (a) (濟南三盛君道投資有限公司) (“Jinan Sansheng”) Jinan RMB Nil holding Jiangsu Zheguang Real Estate Co., Ltd.** 5 September 2008 RMB30,000,000/ – 51%# Real estate (b) (江蘇浙廣置業有限公司) (“Jiangsu Zheguang”) Xuzhou RMB30,000,000 development Fuzhou Shenglong Real Estate Development Co., Ltd.** 22 June 2017 RMB50,000,000/ – 100% Real estate (b) (福州盛隆房地產開發有限公司) Fuzhou RMB50,000,000 development Putian Shengxiang Real Estate Development Co., Ltd.** 26 September 2019 RMB20,000,000/ – 100% Real estate (b) (莆田市盛祥房地產開發有限公司) Putian RMB Nil (d) development (“Putian Shengxiang”) Quanzhou Shengchuang Real Estate Co., Ltd.** 4 September 2019 RMB30,000,000/ – 100% Real estate (b) (泉州盛創置業有限公司) Quanzhou RMB30,000,000 development

II-12 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

* As at 31 March 2020, Wenling Rongfa was 90% held by the Target Group and 10% held by an independent third party. Pursuant to the share purchase agreement and its supplementary agreement, the 10% interest held by the third party is subject to a guaranteed return provided by Wenling Rongfa and Fuzhou Bosheng has obligation to purchase such interests upon the end of the investment period. As such, such interest in Wenling Rongfa is treated as financial liabilities of the Target Group in the Historical Financial Information and the Target Group’s effective interest in Wenling Rongfa was 100% as at 31 March 2020. Subsequent to 31 March 2020, the Target Group disposed its 20% interest in Wenling Rongfa to another independent third party and accordingly, the effective equity interest in Wenling Rongfa held by the Target Group reduced to 80%.

# Pursuant to the cooperation agreement and its supplementary agreement of Jiangsu Zheguang, Jinan Sansheng, a subsidiary in which the Target Group has 51% equity interest, has 44.15% interest in Jiangsu Zheguang and the remaining 55.85% interest is held by an independent third party. The 55.85% interest held by the independent third party is subject to a guaranteed return provided by Jiangsu Zheguang and Jinan Sansheng has obligation to purchase such interests upon the end of the investment period. As such, such interest in Jiangsu Zheguang is treated as financial liabilities of the Target Group in the Historical Financial Information and Jiangsu Zheguang is effectively wholly owned by Jinan Sansheng, and thus the Target Group has an effective interest of 51% through its holding in Jinan Sansheng as at 31 March 2020.

Notes:

(a) At the date of the report, no audited financial statements have been prepared for these entities, as they were newly incorporated companies and have not carried on any business since the date of incorporation.

(b) At the date of the report, no audited financial statements have been prepared for these entities, as they are not subject to audit requirements under the relevant rules and regulations in the jurisdiction of incorporation.

(c) Upon completion of the Reorganisation, 5% of equity interest in Fuzhou Bosheng will be transferred to Royal City Limited, an independent third party. The Target Company will indirectly hold 95% equity interest in Fuzhou Bosheng through Fuzhou Shengtu. Therefore, the proportion of ownership interest of the subsidiaries directly and indirectly held by Fuzhou Bosheng, which comprised the Target Group, will be reduced accordingly.

(d) Upon completion of the Reorganisation, Putian Shengxiang will be indirectly wholly owned by Qingdao Haishang which will be owned as to 74% by Fuzhou Bosheng and as to 26% by an independent third party.

** The English translation of the company names is for reference only. The official names of the companies are in Chinese.

All companies now comprising the Target Group have adopted 31 December as their financial year end date.

The Historical Financial Information has been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (“HKFRSs”) which collective term includes all applicable individual HKFRSs, Hong Kong Accounting Standards and Interpretations issued by the HKICPA. Further details of the significant accounting policies adopted are set out in note 2.

The HKICPA has issued a number of new and revised HKFRSs. For the purpose of preparing this Historical Financial Information, the Target Group has consistently adopted all applicable new and revised HKFRSs that are effective for the financial year beginning on 1 January 2020 throughout the Relevant Periods, including HKFRS 9, Financial instruments, HKFRS 15, Revenue from contracts with customers and HKFRS 16, Lease.

The revised and new accounting standards and interpretations issued but not yet effective for the accounting year beginning 1 January 2021 which the Target Group has not early adopted are set out in note 31.

The Historical Financial Information also complies with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

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

The Stub Period Corresponding Financial Information has been prepared in accordance with the same basis of preparation and presentation adopted in respect of the Historical Financial Information.

II-13 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

2 Significant accounting policies

(a) Basis of measurement

The measurement basis used in the preparation of the Historical Financial Information is the historical cost basis except that the following assets are stated at their fair value as explained in the accounting policies set out below:

– investment properties (see note 2(d)); and

– financial assets at fair value through profit or loss.

The Historical Financial Information presented in RMB have been rounded to the nearest thousand, unless otherwise indicated.

(b) Use of estimates and judgments

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

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

Judgements made by management in the application of HKFRSs that have significant effect on the Historical Financial Information and major sources of estimation uncertainty are discussed in note 3.

Subsidiaries are entities controlled by the Target Group. The Target Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. When assessing whether the Target Group has power, only substantive rights (held by the Target Group and other parties) are considered.

An investment in a subsidiary is included in the Historical Financial Information from the date that control commences until the date that control ceases. Intra-group balances, transactions and cash flows and any unrealised profits arising from intra-group transactions are eliminated in full in preparing the Historical Financial Information. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment.

Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Target Company, and in respect of which the Target Group has not agreed any additional terms with the holders of those interests which would result in the Target Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. For each business combination, the Target Group can elect to measure any non-controlling interests either at fair value or at the non-controlling interests’ proportionate share of the subsidiary’s net identifiable assets.

II-14 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Non-controlling interests are presented in the combined statement of financial position within equity, separately from equity attributable to the equity shareholders of the Target Company. Non-controlling interests in the results of the Target Group are presented on the face of the combined statements of profit or loss and other comprehensive income as an allocation of the total profit or loss and total comprehensive income for the year/period between non-controlling interests and the equity shareholders of the Target Company. Loans from holders of non-controlling interests and other contractual obligation towards these holders are presented as financial liabilities in the combined statement of financial position in accordance with notes 2(k) or 2(l) depending on the nature of the liability.

Changes in the Target Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within combined equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain or loss is recognised.

When the Target Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former subsidiary at the date when control is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset or, when appropriate, the cost on initial recognition of an investment in an associate or a joint venture.

(d) Investment properties

Investment properties are land and/or buildings which are owned or held under a leasehold interest (see note 2(f)) to earn rental income and/or for capital appreciation. These include land held for a currently undetermined future use and property that is being constructed or developed for future use as investment property.

Investment properties are stated at fair value, unless they are still in the course of construction or development at the end of the reporting period and their fair value cannot be reliably measured at that time. Any gain or loss arising from a change in fair value or from the retirement or disposal of an investment property is recognised in profit or loss. Rental income from investment properties is accounted for as described in note 2(q)(ii).

(e) Other property, plant and equipment

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

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

Properties leased for own use and the interests in leasehold land are depreciated over the unexpired term of lease.

– Hotel buildings 20 years

– Equipment and vehicle 3-5 years

– Improvements to premises 3 years

Both the useful life of an asset and its residual value, if any, are reviewed annually.

The carrying amounts of other property, plant and equipment are reviewed for indications of impairment at the end of each reporting period.

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

II-15 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Construction in progress represents buildings and property and plant under construction, and is stated at cost less impairment losses (see note 2(g)(iii)). Cost comprises direct costs of construction. Capitalisation of these costs ceases and the construction in progress is transferred to property and plant when substantially all of the activities necessary to prepare the assets for their intended use are complete.

No depreciation is provided in respect of construction in progress until it is substantially completed and ready for its intended use.

(f) Leased assets

At inception of a contract, the Target Group assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control is conveyed where the customer has both the right to direct the use of the identified asset and to obtain substantially all of the economic benefits from that use.

(i) As a lessee

Where the contract contains lease component(s) and non-lease component(s), the Target Group has elected not to separate non-lease components and accounts for each lease component and any associated non-lease components as a single lease component for all leases.

At the lease commencement date, the Target Group recognises a right-of-use asset and a lease liability, except for short-term leases that have a lease term of 12 months or less and leases of low-value assets which, for the Target Group are primarily laptops and office furniture. When the Target Group enters into a lease in respect of a low-value asset, the Target Group decides whether to capitalise the lease on a lease-by-lease basis. The lease payments associated with those leases which are not capitalised are recognised as an expense on a systematic basis over the lease term.

Where the lease is capitalised, the lease liability is initially recognised at the present value of the lease payments payable over the lease term, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, using a relevant incremental borrowing rate. After initial recognition, the lease liability is measured at amortised cost and interest expense is calculated using the effective interest method. Variable lease payments that do not depend on an index or rate are not included in the measurement of the lease liability and hence are charged to profit or loss in the accounting period in which they are incurred.

The right-of-use asset recognised when a lease is capitalised is initially measured at cost, which comprises the initial amount of the lease liability plus any lease payments made at or before the commencement date, and any initial direct costs incurred. Where applicable, the cost of the right-of-use assets also includes an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, discounted to their present value, less any lease incentives received.

The right-of-use asset is subsequently stated at cost less accumulated depreciation and impairment losses (see notes 2(e) and 2(g)(iii)), except for the following types of right-of-use asset:

– right-of-use assets that meet the definition of investment property are carried at fair value in accordance with note 2(d); and

– right-of-use assets related to interests in leasehold land where the interest in the land is held as inventory are carried at the lower of cost and net realisable value in accordance with note 2(h).

The lease liability is remeasured when there is a change in future lease payments arising from a change in an index or rate, or there is a change in the Target Group’s estimate of the amount expected to be payable under a residual value guarantee, or there is a change arising from the reassessment of whether the Target Group will be reasonably certain to exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

II-16 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

The Target Group presents right-of-use assets that do not meet the definition of investment property and inventory in “property, plant and equipment” and presents lease liabilities separately in the combined statements of financial position.

(ii) As a lessor

When the Target Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to the ownership of an underlying assets to the lessee. If this is not the case, the lease is classified as an operating lease.

When a contract contains lease and non-lease components, the Target Group allocates the consideration in the contract to each component on a relative stand-alone selling price basis. The rental income from operating leases is recognised in accordance with note 2(q)(ii).

When the Target Group is an intermediate lessor, the sub-leases are classified as a finance lease or as an operating lease with reference to the right-of-use asset arising from the head lease. If the head lease is a short-term lease to which the Target Group applies the exemption described in note 2(f)(i), then the Target Group classifies the sub-lease as an operating lease.

(g) Credit losses and impairment of assets

(i) Credit losses from financial instruments and lease receivables

The Target Group recognises a loss allowance for expected credit losses (ECLs) on the following items:

– financial assets measured at amortised cost (including cash and cash equivalents, restricted deposits, trade and other receivables); and

– lease receivables.

Financial assets measured at fair value like units in trust protection funds are not subject to the ECL assessment.

Measurement of ECLs

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all expected cash shortfalls (i.e. the difference between the cash flows due to the Target Group in accordance with the contract and the cash flows that the Target Group expects to receive).

The expected cash shortfalls are discounted using the following discount rates where the effect of discounting is material:

– fixed-rate financial assets, trade and other receivables: effective interest rate determined at initial recognition or an approximation thereof;

– variable-rate financial assets: current effective interest rate;

– lease receivables: discount rate used in the measurement of the lease receivables.

The maximum period considered when estimating ECLs is the maximum contractual period over which the Target Group is exposed to credit risk.

In measuring ECLs, the Target Group takes into account reasonable and supportable information that is available without undue cost or effort. This includes information about past events, current conditions and forecasts of future economic conditions.

II-17 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

ECLs are measured on either of the following bases:

– 12-month ECLs: these are losses that are expected to result from possible default events within the 12 months after the reporting date; and

– lifetime ECLs: these are losses that are expected to result from all possible default events over the expected lives of the items to which the ECL model applies.

Loss allowances for trade receivables and lease receivables are always measured at an amount equal to lifetime ECLs. ECLs on these financial assets are estimated using a provision matrix based on the Target Group’s historical credit loss experience, adjusted for factors that are specific to the debtors and an assessment of both the current and forecast general economic conditions at the reporting date.

For all other financial instruments, the Target Group recognises a loss allowance equal to 12-month ECLs unless there has been a significant increase in credit risk of the financial instrument since initial recognition, in which case the loss allowance is measured at an amount equal to lifetime ECLs.

Significant increases in credit risk

In assessing whether the credit risk of a financial instrument has increased significantly since initial recognition, the Target Group compares the risk of default occurring on the financial instrument assessed at the reporting date with that assessed at the date of initial recognition. In making this reassessment, the Target Group considers that a default event occurs when the borrower is unlikely to pay its credit obligations to the Target Group in full, without recourse by the Target Group to actions such as realising security (if any is held). The Target Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort.

In particular, the following information is taken into account when assessing whether credit risk has increased significantly since initial recognition:

– failure to make payments of principal or interest on their contractually due dates;

– an actual or expected significant deterioration in a financial instrument’s external or internal credit rating (if available);

– an actual or expected significant deterioration in the operating results of the debtor; and

– existing or forecast changes in the technological, market, economic or legal environment that have a significant adverse effect on the debtor’s ability to meet its obligation to the Target Group.

Depending on the nature of the financial instruments, the assessment of a significant increase in credit risk is performed on either an individual basis or a collective basis. When the assessment is performed on a collective basis, the financial instruments are grouped based on shared credit risk characteristics, such as past due status and credit risk ratings.

ECLs are remeasured at each reporting date to reflect changes in the financial instrument’s credit risk since initial recognition. Any change in the ECL amount is recognised as an impairment gain or loss in profit or loss. The Target Group recognises an impairment gain or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for investments in debt securities that are measured at FVOCI (recycling), for which the loss allowance is recognised in other comprehensive income and accumulated in the fair value reserve (recycling).

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Basis of calculation of interest income

Interest income is calculated based on the gross carrying amount of the financial asset unless the financial asset is credit-impaired, in which case interest income is calculated based on the amortised cost (i.e. the gross carrying amount less loss allowance) of the financial asset.

At each reporting date, the Target Group assesses whether a financial asset is credit-impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable events:

– significant financial difficulties of the debtor;

– a breach of contract, such as a default or delinquency in interest or principal payments;

– it becoming probable that the borrower will enter into bankruptcy or other financial reorganisation;

– significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; or

– the disappearance of an active market for a security because of financial difficulties of the issuer.

Write-off policy

The gross carrying amount of a financial asset or lease receivable is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Target Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off.

Subsequent recoveries of an asset that was previously written off are recognised as a reversal of impairment in profit or loss in the period in which the recovery occurs.

(ii) Credit losses from financial guarantees issued

Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to reimburse the beneficiary of the guarantee (the “holder”) for a loss the holder incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.

Financial guarantees issued are initially recognised within “trade and other payables” at fair value, which is determined by reference to fees charged in an arm’s length transaction for similar services, when such information is obtainable, or to interest rate differentials, by comparing the actual rates charged by lenders when the guarantee is made available with the estimated rates that lenders would have charged, had the guarantees not been available, where reliable estimates of such information can be made. Where consideration is received or receivable for the issuance of the guarantee, the consideration is recognised in accordance with the Target Group’s policies applicable to that category of asset. Where no such consideration is received or receivable, an immediate expense is recognised in profit or loss.

Subsequent to initial recognition, the amount initially recognised as deferred income is amortised in profit or loss over the term of the guarantee as income from financial guarantees issued.

The Target Group monitors the risk that the specified debtor will default on the contract and recognises a provision when ECLs on the financial guarantees are determined to be higher than the amount carried in “trade and other payables” in respect of the guarantees (i.e. the amount initially recognised, less accumulated amortisation).

II-19 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

To determine ECLs, the Target Group considers changes in the risk of default of the specified debtor since the issuance of the guarantee. A 12-month ECL is measured unless the risk that the specified debtor will default has increased significantly since the guarantee is issued, in which case a lifetime ECL is measured. The same definition of default and the same assessment of significant increase in credit risk as described in note 2(g)(i) apply.

As the Target Group is required to make payments only in the event of a default by the specified debtor in accordance with the terms of the instrument that is guaranteed, an ECL is estimated based on the expected payments to reimburse the holder for a credit loss that it incurs less any amount that the Target Group expects to receive from the holder of the guarantee, the specified debtor or any other party. The amount is then discounted using the current risk-free rate adjusted for risks specific to the cash flows.

(iii) Impairment of other non-current assets

Internal and external sources of information are reviewed at the end of each reporting period to identify indications that property, plant and equipment, including right-of-use assets may be impaired or, an impairment loss previously recognised no longer exists or may have decreased.

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

– Calculation of recoverable amount

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

– Recognition of impairment losses

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

– Reversals of impairment losses

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

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

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(h) Inventories and other contract costs

(i) Inventories

Inventories in respect of property development activities are carried at the lower of cost and net realisable value. Cost and net realisable values are determined as follows:

– Property held for development and under development for sale

The cost of properties held for development and under development for sale comprises specifically identified cost, including the acquisition cost of land, aggregate cost of development, materials and supplies, wages and other direct expenses, an appropriate proportion of overheads and borrowing costs capitalised (see note 2(r)). Net realisable value represents the estimated selling price less estimated costs of completion and costs to be incurred in selling the property.

– Completed property held for sale

The cost of completed properties held for sale comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

In the case of completed properties developed by the Target Group, cost is determined by apportionment of the total development costs for that development project, attributable to the unsold properties. Net realisable value represents the estimated selling price less costs to be incurred in selling the property.

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised.

The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

(ii) Other contract costs

Other contract costs are either the incremental costs of obtaining a contract with a customer or the costs to fulfil a contract with a customer which are not capitalised as inventory (see note 2(h)(i)) or property, plant and equipment (see note 2(e)).

Incremental costs of obtaining a contract are those costs that the Target Group incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained e.g. an incremental sales commission. Incremental costs of obtaining a contract are capitalised when incurred if the costs relate to revenue which will be recognised in a future reporting period and the costs are expected to be recovered. Other costs of obtaining a contract are expensed when incurred.

Costs to fulfil a contract are capitalised if the costs relate directly to an existing contract or to a specifically identifiable anticipated contract; generate or enhance resources that will be used to provide goods or services in the future; and are expected to be recovered. Costs that relate directly to an existing contract or to a specifically identifiable anticipated contract may include direct labour, direct materials, allocations of costs, costs that are explicitly chargeable to the customer and other costs that are incurred only because the Target Group entered into the contract (for example, payments to sub-contractors). Other costs of fulfilling a contract, which are not capitalised as inventory or property, plant and equipment, are expensed as incurred.

II-21 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Capitalised contract costs are stated at cost less accumulated amortisation and impairment losses. Impairment losses are recognised to the extent that the carrying amount of the contract cost asset exceeds the net of (i) remaining amount of consideration that the Target Group expects to receive in exchange for the goods or services to which the asset relates, less (ii) any costs that relate directly to providing those goods or services that have not yet been recognised as expenses.

Amortisation of capitalised contract costs is charged to profit or loss when the revenue to which the asset relates is recognised. The accounting policy for revenue recognition is set out in note 2(q).

(i) Contract liabilities

A contract liability is recognised when the customer pays consideration before the Target Group recognises the related revenue (see note 2(q)). A contract liability would also be recognised if the Target Group has an unconditional right to receive consideration before the Target Group recognises the related revenue. In such cases, a corresponding receivable would also be recognised (see note 2(j)).

When the contract includes a significant financing component, the contract balance includes interest accrued under the effective interest method (see note 2(r)).

(j) Trade and other receivables

A receivable is recognised when the Target Group has an unconditional right to receive consideration. A right to receive consideration is unconditional if only the passage of time is required before payment of that consideration is due. If revenue has been recognised before the Target Group has an unconditional right to receive consideration, the amount is presented as a contract asset.

Receivables are stated at amortised cost using the effective interest method less allowance for credit losses (see note 2(g) (i)).

(k) Interest-bearing borrowings

Interest-bearing borrowings are measured initially at fair value less transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between the amount initially recognised and redemption value being recognised in profit or loss over the period of the borrowings, together with any interest and fees payable, using the effective interest method.

(l) Trade and other payables

Trade and other payables are initially recognised at fair value. Except for financial guarantee liabilities measured in accordance with note 2(g)(ii), trade and other payables are subsequently stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

(m) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition. Cash and cash equivalents are assessed for expected credit losses (ECL) in accordance with the policy set out in note 2(g)(i).

(n) Employee benefits

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

II-22 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

(o) Income tax

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

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

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

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

Where investment properties are carried at their fair value in accordance with the accounting policy set out in note 2(d), the amount of deferred tax recognised is measured using the tax rates that would apply on sale of those assets at their carrying value at the reporting date unless the property is depreciable and is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the property over time, rather than through sale. In all other cases, the amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the end of the reporting period. Deferred tax assets and liabilities are not discounted.

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

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

– in the case of current tax assets and liabilities, the Target Company or the Target Group intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously; or

– in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:

– the same taxable entity; or

– different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realise the current tax assets and settle the current tax liabilities on a net basis or realise and settle simultaneously.

II-23 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

(p) Provisions and contingent liabilities

Provisions are recognised for other liabilities of uncertain timing or amount when the Target Group or the Target Company has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation.

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

(q) Revenue and other income

Income is classified by the Target Group as revenue when it arises from the sale of goods, the provision of services or the use by others of the Target Group’s assets under leases in the ordinary course of the Target Group’s business.

Revenue is recognised when control over a product or service is transferred to the customer, or the lessee has the right to use the asset, at the amount of promised consideration to which the Target Group is expected to be entitled, excluding those amounts collected on behalf of third parties. Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts.

Where the contract contains a financing component which provides a significant financing benefit to the customer for more than 12 months, revenue is measured at the present value of the amount receivable, discounted using the discount rate that would be reflected in a separate financing transaction with the customer, and interest income is accrued separately under the effective interest method. Where the contract contains a financing component which provides a significant financing benefit to the Target Group, revenue recognised under that contract includes the interest expense accreted on the contract liability under the effective interest method. The Target Group takes advantage of the practical expedient in paragraph 63 of HKFRS 15 and does not adjust the consideration for any effects of a significant financing component if the period of financing is 12 months or less.

Further details of the Target Group’s revenue and other income recognition policies are as follows:

(i) Sale of properties

Revenue arising from the sale of properties developed for sale in the ordinary course of business is recognised when the property is delivered to customer, which is the point in time when the customer has the ability to direct the use of the property and obtain substantially all of the remaining benefits of the property. Deposits and instalments received on properties sold prior to the date of revenue recognition are included in the statement of financial position under contract liabilities (see note 2(i)).

For contracts where the period between the payment by the customer and the transfer of the promised property exceeds one year, the transaction price and the amount of revenue from the sales of completed properties is adjusted for the effects of a financing component. If the advance payments by the customer are regarded as providing a significant financing benefit to the Target Group, interest expense arising from the adjustment of time value of money will be accrued by the Target Group during the period between the payment date and the date of delivery of property. This accrual increases the balance of the contract liability during the period of construction, and therefore increases the amount of revenue recognised when control of the completed property is transferred to the customer. The interest is expensed as accrued unless it is eligible to be capitalised under HKAS 23, Borrowing costs, in accordance with the policies set out in note 2(r).

II-24 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

(ii) Rental income from operating leases

Rental income receivable under operating leases is recognised in profit or loss in equal instalments over the periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the use of the leased asset. Lease incentives granted are recognised in profit or loss as an integral part of the aggregate net lease payments receivable. Variable lease payments that do not depend on an index or a rate are recognised as income in the accounting period in which they are earned.

(iii) Hotel revenue

Hotel revenue is recognised when the services have been rendered.

(iv) Interest income

Interest income is recognised as it accrues using the effective interest method. For financial assets measured at amortised cost or FVOCI (recycling) that are not credit-impaired, the effective interest rate is applied to the gross carrying amount of the asset. For credit-impaired financial assets, the effective interest rate is applied to the amortised cost (i.e. gross carrying amount net of loss allowance) of the asset (see note 2(g)(i)).

(r) Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of that asset. Other borrowing costs are expensed in the period in which they are incurred.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or complete.

(s) Related parties

(a) A person, or a close member of that person’s family, is related to the Target Group if that person:

(i) has control or joint control over the Target Group;

(ii) has significant influence over the Target Group; or

(iii) is a member of the key management personnel of the Target Group or the Target Group’s parent.

(b) An entity is related to the Target Group if any of the following conditions applies:

(i) The entity and the Target Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third party.

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

(v) The entity is a post-employment benefit plan for the benefit of employees of either the Target Group or an entity related to the Target Group.

(vi) The entity is controlled or jointly controlled by a person identified in (a).

(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

II-25 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

(viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the Target Group or to the Target Group’s parent.

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

(t) Segment reporting

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

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

The Target Group’s operating activities are attributable to a single operating segment focusing on property investment and development in Mainland China. This operating segment has been identified on the basis of internal management reports prepared in accordance with accounting policies conform with HKFRS 8, that are regularly reviewed by the chief operating decision maker (“CODM”). The CODM regularly reviews property portfolio by locations and considers them as one single operating segment since all properties are held by the Target Group for development and earning rental income. No revenue analysis, operating results or other discrete financial information is available for the assessment of performance of the respective locations.

3 Accounting judgement and estimates

(a) Critical accounting judgements in applying the Target Group’s accounting policies

In the process of applying the Target Group’s accounting policies, management has made the follow accounting judgements:

Classification between investment properties and properties held for sale

The Target Group develops properties held for sale and properties held to earn rentals and/or for capital appreciation. Judgement is made by management on determining whether a property is designated as an investment property or a property held for sale.

For purchased properties, the Target Group considers its intention for holding the properties at an early stage when initially obtaining control of the related properties. The related properties are accounted for as inventories included in current assets if the properties are intended for sale, whereas, the properties are accounted for as investment properties if the properties are intended to be held to earn rentals and/or for capital appreciation.

(b) Sources of estimation uncertainty

Notes 10 and 24 contain information about the assumptions and their risk factors relating to valuation of investment property and financial instruments. Other key sources of estimation uncertainty are as follows:

(i) Income tax

Deferred tax assets in respect of tax losses and other deductible temporary differences carried forward are recognised and measured based on the expected manner of realisation or settlement of the carrying amount of the assets, using tax rates enacted or substantively enacted at the end of the reporting period. In determining the carrying amounts of deferred tax assets, expected taxable profits are estimated which involves a number of assumptions relating to the operating environment of the Target Group and require a significant level of judgement exercised by the directors. Any change in such assumptions and judgement would affect the carrying amounts of deferred tax assets to be recognised and hence the net profit in future years.

II-26 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

(ii) Investment properties

As described in note 10, the fair value of the Target Group’s investment properties situated in Mainland China had been arrived at based on a valuation carried out at that date by Jones Lang LaSalle Corporate Appraisal and Advisory Limited (“JLL”), an independent professional valuer. The fair values of the Target Group’s investment properties at each reporting date were arrived at based on income approach.

The carrying amount of the Target Group’s investment properties at each reporting date are disclosed in note 10. With the valuation performed by independent professional valuer, the management has exercised its judgment and is satisfied that the method of valuation is reflective of the market conditions prevailing at the end of each reporting period. Any changes in the market conditions will affect the fair value of the investment properties of the Target Group.

(iii) Inventories

As explained in note 2(h), the Target Group’s inventories are stated at the lower of cost and net realisable value. Based on the Target Group’s recent experience and the nature of the subject property, the Target Group makes estimates of the selling price, the costs of completion in case for properties under development, and the costs to be incurred in selling the properties. If there is an increase in costs to completion or a decrease in net sales value, impairment provision for inventories may be resulted. Such provision requires the use of judgment and estimates. Where the expectation is different from the original estimate, the carrying value and provision for properties in the periods in which such estimate is changed will be adjusted accordingly.

Given the volatility of Mainland China’s property market and the distinctive nature of individual properties, the actual outcomes in terms of costs and revenue may be higher or lower than estimated at the end of the reporting period. Any increase or decrease in the provision would affect profit or loss in future years.

4 Revenue

The principal business activities of the Target Group include property investment and development and sales of commercial properties and residential properties. All the revenue are generated in Mainland China.

Three months ended Year ended 31 December 31 March 2017 2018 2019 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Revenue from contracts with customers within the scope of HKFRS 15 – Sale of properties 611,846 617,225 220,844 58,305 10,377 – Hotel revenue – – 8,717 – 2,518 Revenue from other sources – Gross rentals from investment properties 30,055 46,055 61,800 13,504 13,250

641,901 663,280 291,361 71,809 26,145

The Target Group’s customer base is diversified. None of the Target Group’s client with whom transactions have exceeded 10% of the Target Group’s revenue during the Relevant Periods.

II-27 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Revenue from contracts with customers within the scope of HKFRS 15 recognised at a point in time.

The following table includes revenue expected to be recognised in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at 31 December 2017, 2018 and 2019 and 31 March 2020.

As at Year ended 31 December 31 March 2017 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000

Remaining performance obligations expected to be satisfied: Within 1 year 523,238 184,871 4,252,542 4,428,437 Within 1 year to 2 years 167,986 3,118,254 7,967 21,615 Within 2 years to 3 years 503,695 7,967 1,412,642 1,546,479 Within 3 years to 4 years – 75,984 – –

1,194,919 3,387,076 5,673,151 5,996,531

These amounts represent revenue expected to be recognised in the future from pre-completion sales contracts for properties under development entered into by the customers with the Target Group. These amounts include the significant financing components of the pre-completion properties sales contracts under which the Group obtains significant financing benefits from the customers (see note 2(q)(i)).

5 Other income

Three months ended Year ended 31 December 31 March 2017 2018 2019 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Interest income 1,074 909 3,059 651 601 Sales commission fee received from a related party – – 1,999 – – Others (498) (597) 166 (69) (150)

576 312 5,224 582 451

II-28 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

6 Profit/(loss) before taxation

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

(a) Finance costs

Three months ended Year ended 31 December 31 March 2017 2018 2019 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Interest on borrowings (note 17(c)) 211,909 230,226 128,461 45,699 32,523 Interest accrued on significant financing component of contract liabilities (note 20) 79,328 223,981 367,771 65,141 98,804 Interest on lease liabilities 46 990 259 74 62 Less: interest expenses capitalised into inventories* (271,920) (454,078) (475,152) (99,440) (131,327)

19,363 1,119 21,339 11,474 62

* The borrowing costs have been capitalised at a rate of 6.18%~12.00%, 5.70%~12.00% and 5.70%~12.31% per annum for each of the years ended 31 December 2017, 2018 and 2019, and 5.70%~12.31% and 5.70%~12.31% per annum for each of the three months ended 31 March 2019 and 2020, respectively.

(b) Staff costs

Three months ended Year ended 31 December 31 March 2017 2018 2019 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Salaries, wages and other benefits 27,133 43,890 50,134 10,689 15,598 Contributions to defined contribution retirement plans 1,625 2,594 3,901 518 327

28,758 46,484 54,035 11,207 15,925

The employees of the Target Group in the Mainland China are members of state-managed retirement benefit schemes operated by the respective local governments in relevant jurisdictions. The Target Group is required to contribute and recognise a specified percentage of payroll costs to the schemes to fund the benefits. The only obligations of the Target Group with respect to these schemes are to make the specified contributions and recognise the respective retirement pay in accordance with terms set out in the schemes and relevant jurisdiction requirements.

II-29 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Three months ended Year ended 31 December 31 March 2017 2018 2019 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Depreciation charge – owned property, plant and equipment 2,195 1,985 13,971 3,827 5,865 – right-of-use assets 548 954 1,833 577 728

Cost of inventories 547,002 549,592 158,671 45,647 9,898

Gross amount of rentals income from investment properties (30,055) (46,055) (61,800) (13,504) (13,250) Less: direct outgoings 7,640 8,344 9,407 2,352 1,988

Rentals income from investment properties (22,415) (37,711) (52,393) (11,152) (11,262)

7 Income tax in the combined statements of profit or loss and other comprehensive income

(a) Taxation in the combined statements of profit or loss and other comprehensive income represents:

Three months ended Year ended 31 December 31 March 2017 2018 2019 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Current tax Provision for Land Appreciation Tax (“LAT”) 24,799 21,464 25,819 1,039 409

Deferred tax Origination of temporary differences (note 22(b)) 26,229 6,674 6,191 (1,473) (4,009)

51,028 28,138 32,010 (434) (3,600)

(i) The provision for CIT is calculated based on the estimated taxable income at the rates applicable to the entities comprising the Target Group in Mainland China. The income tax rates applicable in the Relevant Periods are 25%.

(ii) LAT is levied on properties developed by the Target Group for sale, at progressive rates ranging from 30% to 60% on the appreciation of land value, which under the applicable regulations is calculated based on the proceeds of sales of properties less deductible expenditures including lease charges of land use rights, borrowing costs and relevant property development expenditures.

II-30 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

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

Three months ended Year ended 31 December 31 March 2017 2018 2019 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Profit/(loss) before taxation 18,748 8,417 (1,675) (8,491) (31,549) Less: LAT 24,799 21,464 25,819 1,039 409

Loss before CIT (6,051) (13,047) (27,494) (9,530) (31,958)

Notional tax calculated applicable income tax rate (1,513) (3,262) (6,874) (2,383) (7,990) Tax effect of non-deductible expenses 27,412 9,479 10,948 799 2,183 Tax effect of unused tax losses not recognised 330 457 2,117 111 1,798

CIT expense/(credit) 26,229 6,674 6,191 (1,473) (4,009)

Add: LAT 24,799 21,464 25,819 1,039 409

Income tax expense/(credit) 51,028 28,138 32,010 (434) (3,600)

8 Director’s emoluments

The director believes the presentation of such information is not meaningful for the purpose of this report.

9 Individual with highest emoluments

The five highest paid individuals for the years ended 31 December 2017, 2018 and 2019 and for the three months ended 31 March 2019 and 2020 are all non-directors.

The aggregate of the emoluments in respect of the non-directors included in the five highest paid individuals are as follows:

Three months ended Year ended 31 December 31 March 2017 2018 2019 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Salaries and other emoluments 3,252 3,125 3,141 785 754 Retirement scheme contributions 187 204 208 52 49

3,439 3,329 3,349 837 803

II-31 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

The emoluments of the five individuals with the highest emoluments are within the following bands:

Three months ended Year ended 31 December 31 March 2017 2018 2019 2019 2020 Number of Number of Number of Number of Number of Individuals Individuals Individuals Individuals Individuals (unaudited)

Nil – HK$1,000,000 5 5 5 5 5

10 Investment properties

(a) Reconciliation of carrying amount

RMB’000

Fair Value At 1 January 2017 1,212,600 Additions 697 Valuation gain 49,357

At 31 December 2017 and 1 January 2018 1,262,654

Additions 5,215 Valuation gain 37,464

At 31 December 2018 and 1 January 2019 1,305,333

Additions 5,441 Valuation gain 27,980

At 31 December 2019 and 1 January 2020 1,338,754

Valuation loss (23,045)

At 31 March 2020 1,315,709

As at 31 December 2018, 2019 and 31 March 2020, the Target Group’s investment properties with the carrying amount of RMB35,000,000, RMB702,900,000 and RMB689,200,000 respectively were pledged for bank loans and other borrowings borrowed by related parties.

Certain investment properties were pledged for bank loans and other borrowings of subsidiaries of the Target Group, please refer to Note 18 for detail.

(b) Fair value hierarchy

The fair values of the Target Group’s investment properties situated in Fuzhou and Yangzhou, Mainland China at the end of each reporting period had been arrived based on a valuation carried out by JLL, an independent qualified professional valuer not connected to the Target Group whose address is 7th Floor, One Taikoo Place 979 King’s Road, Hong Kong. JLL is a member of the Hong Kong Institute of Surveyors with recent experience in the location and category of property being valued. The Target Group’s management have discussion with the surveyors on the valuation assumptions and valuation results when the valuation is performed for financial reporting.

II-32 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

In estimating the fair value of the properties, the highest and best use of the properties is their current use. The same valuation techniques were used when carrying out the valuations on respective date during the Relevant Periods.

The fair value of the Target Group’s investment properties measured at the end of each reporting period on a recurring basis, are categorised into the three-level fair value hierarchy as defined in HKFRS 13, Fair value measurement. The level into which a fair value measurement is classified is determined with reference to the observability and significance of the inputs used in the valuation technique as set out below:

– Level 1 valuations: Fair value measured using only Level 1 inputs i.e. unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date

– Level 2 valuations: Fair value measured using Level 2 inputs i.e. observable inputs which fail to meet Level 1, and not using significant unobservable inputs. Unobservable inputs are inputs for which market data are not available

– Level 3 valuations: Fair value measured using significant unobservable inputs

The following tables give information about how the fair values of these investment properties are determined (in particular, the valuation techniques and inputs used), as well as the fair value hierarchy into which the fair value measurements are categorised.

As at 31 December 2017, 31 December 2018, 31 December 2019 and 31 March 2020

Valuation Significant Relationship of Fair value technique(s) and unobservable unobservable Item hierarchy key input(s) input(s) inputs to fair value

Offices and commercial Level 3 Term and reversion Reversion rate based on The higher the properties in Fuzhou, method market research on reversion rent, the Mainland China comparable rentals and higher the fair value. making adjustments on factors such as location, floor size and facilities.

The key inputs are: Reversionary yield which is The higher the (1) reversion rent; 5% for offices, 6% for retail reversionary yield, the and commercial properties and lower the fair value. (2) reversionary 3% for car parking spaces yield at each valuation date.

Offices and retail Level 3 Term and reversion Reversion rate based on The higher the commercial properties method market research on reversion rent, the in Yangzhou, Mainland comparable rentals and higher the fair value. China making adjustments on factors such as location, floor size and facilities.

II-33 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

In estimating the fair value of the Target Group’s investment properties, the Target Group uses market-observable data to the extent it is available. Where Level 1 inputs are not available, the Target Group engages third party qualified valuers to perform the valuation of the Target Group’s investment properties. At the end of each reporting period, the management of the Target Group works closely with the qualified external valuers to establish and determine the appropriate valuation techniques and inputs for Level 2 and Level 3 fair value measurements. The Target Group will first consider and adopt Level 2 inputs where inputs can be transaction prices or derived observable quoted prices in the active market. When Level 2 inputs are not available, the Target Group will adopt valuation techniques that include Level 3 inputs. Where there is a material change in the fair value of the assets, the causes of the fluctuations will be reported to the board of directors of the Target Company.

During the Relevant Periods, there were no transfers between Level 1 and Level 2, or transfers into or out of Level 3.

As at As at 31 December 31 March 2017 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000

Within 1 year 35,478 45,356 57,021 60,488 After 1 year but within 5 years 191,334 205,942 275,003 286,520 After 5 years 35,746 34,701 43,798 44,665

262,558 285,999 375,822 391,673

II-34 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

11 Other property, plant and equipment

Properties leased for own use Interests in carried at Construction leasehold land Improvements Hotel Equipment depreciated in progress for own use to premises building and vehicle cost Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Cost: At 1 January 2017 178,321 23,044 2,376 – 16,265 1,645 221,651 Additions 4,084 – 310 – 1,623 – 6,017 Transfer 648 (648) – – – – – Disposals – – – – (2,098) – (2,098)

At 31 December 2017 and 1 January 2018 183,053 22,396 2,686 – 15,790 1,645 225,570 Additions 48,797 – 18,938 – 2,127 3,486 73,348 Transfer 648 (648) – – – – – Disposals – – – – (663) – (663)

At 31 December 2018 and 1 January 2019 232,498 21,748 21,624 – 17,254 5,131 298,255 Additions 155 – 30,594 50,900 6,266 2,411 90,326 Transfer (232,498) (648) – 233,146 – – – Disposals – – – – (992) – (992)

At 31 December 2019 and 1 January 2020 155 21,100 52,218 284,046 22,528 7,542 387,589 Additions – – 4 – 182 – 186 Transfer (155) – 155 – – – – Disposals – – – – – (1,959) (1,959)

At 31 March 2020 – 21,100 52,377 284,046 22,710 5,583 385,816

Accumulated depreciation: At 1 January 2017 – – (1,795) – (12,961) (46) (14,802) Charge for the year – – (175) – (2,020) (548) (2,743) Written back on disposals – – – – 1,844 – 1,844

At 31 December 2017 and 1 January 2018 – – (1,970) – (13,137) (594) (15,701) Charge for the year – – (801) – (1,184) (954) (2,939) Written back on disposals – – – – 581 – 581

At 31 December 2018 and 1 January 2019 – – (2,771) – (13,740) (1,548) (18,059) Charge for the year – – (6,985) (5,086) (1,900) (1,833) (15,804) Written back on disposals – – – – 963 – 963

At 31 December 2019 and 1 January 2020 – – (9,756) (5,086) (14,677) (3,381) (32,900) Charge for the period – (162) (1,532) (3,652) (681) (566) (6,593) Written back on disposals – – – – – 1,959 1,959

At 31 March 2020 – (162) (11,288) (8,738) (15,358) (1,988) (37,534)

Net book value: At 31 December 2017 183,053 22,396 716 – 2,653 1,051 209,869

At 31 December 2018 232,498 21,748 18,853 – 3,514 3,583 280,196

At 31 December 2019 155 21,100 42,462 278,960 7,851 4,161 354,689

At 31 March 2020 – 20,938 41,089 275,308 7,352 3,595 348,282

II-35 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Note:

As at 31 December 2019 and 31 March 2020, the Target Group’s properties and respective interests in leasehold land for own use with carrying amount of RMB300,060,000 and RMB296,246,000 respectively were pledged for bank loans and other borrowings borrowed by related parties.

(a) Right-of-use assets

The analysis of the net book value of right-of-use assets by class of underlying assets is as follows:

As at As at 31 December 31 March 2017 2018 2019 2020 note RMB’000 RMB’000 RMB’000 RMB’000

Included in “Property, plant and equipment”: Ownership interests in leasehold land, carried at depreciated cost (i) 22,396 21,748 21,100 20,938 Other properties leased for own use, carried at depreciated cost (ii) 1,051 3,583 4,161 3,595

23,447 25,331 25,261 24,533

Included in “Investment properties”: 10(a) Ownership interests in leasehold investment properties, at fair value 1,262,654 1,305,333 1,338,754 1,315,709

Included in “Inventories and other contract costs”: 13(b) Properties under development for sale 1,581,545 1,463,479 3,439,734 3,442,834 Completed properties for sale 44,191 42,944 26,939 26,069

1,625,736 1,506,423 3,466,673 3,468,903

2,911,837 2,837,087 4,830,688 4,809,145

Note:

(i) Ownership interests in leasehold land

The Target Group holds a parcel of leasehold land for the construction of commercial properties comprising a hotel. The Target Group is the registered owner of this leasehold land. Lump sum payments were made upfront to acquire the leasehold land and there are no ongoing payments to be made under the terms of land lease.

(ii) Other properties leased for own use

The Target Group has obtained the right to use other properties as its offices through tenancy agreements. The leases typically run for an initial period of 2 years and do not include an option to renew the lease for an additional period after the end of the contract term.

II-36 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

12 Investment in subsidiaries

The particulars of subsidiaries of the Target Group are set out in note 1.

The following table lists out the information relating to Qingdao Haishang which have material non-controlling interests (NCI). The summarised financial information presented below represents the amounts before any inter-company elimination.

As at As at 31 December 31 March 2017 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000

NCI percentage 26% 26% 26% 26%

Current assets 2,439,438 3,260,444 4,638,797 4,671,295 Non-current assets 7,754 6,127 9,644 10,391 Current liabilities 1,864,326 2,839,383 4,288,408 4,326,224 Net assets 328,976 295,388 280,733 276,163 Carrying amount of NCI 85,534 76,801 72,991 71,802

Loss and total comprehensive income attributable to shareholder for the year/ period (26,501) (24,855) (10,845) (3,381) Loss and total comprehensive income allocated to NCI (9,311) (8,733) (3,810) (1,189)

Cash flows generated from/(used in) – operating activities 119,685 342,392 655,690 (217,444) – investing activities (632) (690) (1,252) (11) – financing activities (116,000) (13,200) (343,028) (5,676)

13 Inventories and other contract costs

As at As at 31 December 31 March 2017 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000

Properties under development for sale 2,655,269 3,165,454 6,529,723 6,800,405 Completed properties for sale 734,323 608,083 464,807 458,146

3,389,592 3,773,537 6,994,530 7,258,551

Other contract costs 4,628 12,043 87,132 87,431

3,394,220 3,785,580 7,081,662 7,345,982

As at 31 December 2017, 2018 and 2019 and 31 March 2020, certain of the Target Group’s inventories were pledged for bank loans and other borrowings of subsidiaries of the Target Group (see note 18).

II-37 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

(a) At 31 December 2017, 2018 and 2019 and 31 March 2020, the amount of properties under development for sale expected to be recovered after more than one year is RMB2,844,628,000, RMB3,626,909,000 and RMB5,483,907,000 and RMB4,750,362,000 respectively. All of the other inventories are expected to be recovered within one year.

(b) The analysis of carrying value of land held for property development for sale is as follows:

As at As at 31 December 31 March 2017 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000

In Mainland China – 50 years or more (long leases) 1,552,512 1,434,446 3,022,827 3,025,927 – between 10 and 50 years (medium-term leases) 29,033 29,033 416,907 416,907

1,581,545 1,463,479 3,439,734 3,442,834

Contract costs capitalised as at 31 December 2017, 2018 and 2019 and 31 March 2020 relate to the incremental sales commissions paid to property agents and employees whose selling activities resulted in customers entering into sale and purchase agreements for the Target Group’s properties included in inventories at the reporting date. Contract costs are recognised as part of “selling and marketing expenses” in the statement of profit or loss in the period in which revenue from the related property sales is recognised. The amount of capitalised costs recognised in profit or loss during the years ended 31 December 2017, 2018 and 2019 and three months ended 31 March 2019 and 2020 were RMB4,802,000, RMB8,482,000 and RMB7,371,000 and RMB1,802,000 and RMB333,000 respectively. There was no impairment in relation to the balance of capitalised costs or the costs capitalised during the years ended 31 December 2017, 2018 and 2019 and three months ended 31 March 2019 and 2020 respectively.

The Target Group applies the practical expedient in paragraph 94 of HKFRS 15 and recognises the incremental costs of obtaining contracts relating to the sale of inventories as an expense when incurred if the amortisation period of the assets that the Target Group otherwise would have recognised is within the same reporting period as the date of entering into the contract.

The amount of capitalised contract costs that is expected to be recovered after more than one year were RMB2,601,000, RMB11,386,000 and RMB21,819,000 and RMB23,274,000 as at 31 December 2017, 2018 and 2019 and 31 March 2020, respectively.

II-38 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

14 Trade and other receivables

As at As at 31 December 31 March 2017 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000

Trade receivables, net of loss allowance (note (a)) 17,655 45,227 2,580 2,941 Other receivables, net of loss allowance (note (b)) 26,560 35,500 25,516 27,635 Amounts due from related parties (note (c)) 600,513 826,953 40,468 40,098 Amounts due from non-controlling shareholder (note (d)) 26,301 30,944 86,732 86,732

Financial assets measured at amortised cost 671,029 938,624 155,296 157,406 Prepaid tax and surcharges (note (e)) 70,601 232,937 377,407 389,752 Deposits 15,393 36,451 7,071 7,938 Prepayment 3,176 1,942 7,774 35,868

760,199 1,209,954 547,548 590,964

Notes:

(a) All of the trade receivables are with ageing of within one year based on the invoice date.

(b) Other receivables mainly represent maintenance funds and property management fee paid on behalf of the property owners by certain project companies comprising the Target Group. The Target Group does not hold any collateral over these balances.

(c) The balance of amounts due from related parties as at 31 December 2017 and 2018 include amounts of RMB600,000,000 and RMB600,000,000 respectively arising from financing arrangements with financial institutions where a project company comprising the Target Group act as co-obligators (“Co-obligators”) for the loans borrowed by certain related parties (“Original Obligators”). According to the agreements between Co-obligators and Original Obligators, the principal and interest paid by Co-obligators, if any, would be recovered from Original Obligators or other related parties ultimately controlled by Mr. Lin Rongbin. The balance of was fully settled in August 2019.

Amounts due from related parties as at 31 March 2020 will be settled upon completion of the reorganisation.

(d) Amounts due from non-controlling shareholder are repayable on demand, unsecured and interest free.

Given that the amount could be recovered by offsetting with the distributable profits to non-controlling shareholders in accordance with the terms of the acquisition agreement, management considered that the risk of default in repayment from these entities is low.

II-39 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

(e) The amount of prepaid tax and surcharges expected to be recovered or recognised as expense after more than one year were RMB39,686,000, RMB220,223,000 and RMB94,506,000 and RMB103,750,000 at 31 December 2017, 2018 and 2019 and 31 March 2020, respectively. All of the remaining are expected to be recovered or recognised as expense within one year.

15 Financial assets at fair value through profit or loss

As at 31 December 2017, 2018 and 2019 and 31 March 2020, the financial assets at fair value through profit or loss represent units in trust protection fund. The fair value of unit in trust protection fund is determined by discounting the expected future cash flows at prevailing market interest rates as at the end of the reporting period. The discount rate used is derived from the bank deposit rate as at the end of the reporting period plus an adequate constant credit spread.

16 Restricted deposits

As at As at 31 December 31 March 2017 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000

Pledged for mortgage arrangement of the property buyers (note (a)) 140 3,001 5,004 5,005 Pledged for construction of pre-sold properties (note (b)) 4,933 8,729 10,173 10,174

5,073 11,730 15,177 15,179

Note:

(a) In accordance with relevant contracts, certain property development companies of the Target Group are required to place cash deposits as collateral for mortgage loans advanced to property buyers in designated bank accounts. Such guarantee deposits will be released after the property ownership certificates of the relevant properties are passed to the banks.

(b) In accordance with the relevant documents issued by the local state-owned land and resource bureau, certain property development companies of the Target Group are required to place the pre-sale proceeds of properties received in designated bank accounts as the guarantee deposits for constructions of the respective properties. The deposits can only be used for purchases of construction materials and payments of construction costs of the respective property projects upon the approval of the respective local government authorities. Such guarantee deposits will be released in accordance with the completion stage of the respective pre-sold properties.

II-40 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

17 Cash and cash equivalents and other cash flow information

(a) Cash and cash equivalents comprise:

As at As at 31 December 31 March 2017 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000

Cash at bank and on hand 183,440 1,091,193 880,292 627,000

At the end of each reporting period, all cash at bank and on hand was placed at the banks in Mainland China. Remittance of funds out of the Mainland China is subject to exchange restrictions imposed by the PRC government.

(b) Reconciliation of profit/(loss) before taxation to cash (used in)/generated from operations:

Three months ended Year ended 31 December 31 March 2017 2018 2019 2019 2020 note RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Profit/(loss) before taxation 18,748 8,417 (1,675) (8,491) (31,549)

Adjustments for: Depreciation 6(c) 2,743 2,939 15,804 4,404 6,593 Interest income 5 (1,074) (909) (3,059) (651) (601) Net valuation (gain)/loss on investment property 10 (49,357) (37,464) (27,980) (324) 23,045 Finance costs 6(a) 19,363 1,119 21,339 11,474 62

Changes in working capital: (Increase)/decrease in restricted bank deposits (5,073) (6,657) (3,447) 11,730 (2) Increase in inventories and other contract costs (473,161) (225,388) (3,215,480) (293,256) (246,167) Decrease/(increase) in trade and other receivables 569,790 (339,472) 798,719 (890,593) (24,448) (Decrease)/increase in trade and other payables (889,666) 359,075 274,873 831,335 49,651 Increase in contract liabilities 270,834 1,970,357 2,587,283 423,260 274,288

Cash (used in)/generated from operations (536,853) 1,732,017 446,377 88,888 50,872

II-41 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Bank loans and Funds from/ other Interest (to) a related Lease borrowings payable party liabilities Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (note 18) (note 19) (note 21)

At 1 January 2017 1,644,890 8,513 875,549 – 2,528,952

Changes from financing cash flows: Proceeds from bank loans and other borrowings 1,750,000 – – – 1,750,000 Repayment of bank loans and other borrowings (716,000) – – – (716,000) Proceeds from a related party – – 2,456,440 – 2,456,440 Repayment to a related party – – (2,730,015) – (2,730,015) Capital element of lease rentals paid – – – (52) (52) Interest element of lease rentals paid – – – (46) (46) Interest and other borrowing cost paid – (211,863) – – (211,863)

Total changes from financing cash flows 1,034,000 (211,863) (273,575) (98) 548,464

Other changes: Finance costs (note 6(a)) – 211,909 – 46 211,955 Addition of right-of-use assets – – – 602 602

Total other changes – 211,909 – 648 212,557

At 31 December 2017 2,678,890 8,559 601,974 550 3,289,973

II-42 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Bank loans and Funds from/ other Interest (to) a related Lease borrowings payable party liabilities Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (note 18) (note 19) (note 21)

At 1 January 2018 2,678,890 8,559 601,974 550 3,289,973

Changes from financing cash flows: Proceeds from bank loans and other borrowings 1,381,800 – – – 1,381,800 Repayment of bank loans and other borrowings (1,015,000) – – – (1,015,000) Proceeds from a related party – – 1,063,998 – 1,063,998 Repayment to a related party – – (1,892,885) – (1,892,885) Capital element of lease rentals paid – – – (1,135) (1,135) Interest element of lease rentals paid – – – (990) (990) Interest and other borrowing cost paid – (229,966) – – (229,966)

Total changes from financing cash flows 366,800 (229,966) (828,887) (2,125) (694,178)

Other changes: Finance costs (note 6(a)) – 230,226 – 990 231,216 Addition of right-of-use assets – – – 12,349 12,349

Total other changes – 230,226 – 13,339 243,565

At 31 December 2018 3,045,690 8,819 (226,913) 11,764 2,839,360

II-43 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Bank loans and Funds from/ other Interest (to) a related Lease borrowings payable party liabilities Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (note 18) (note 19) (note 21)

At 1 January 2019 3,045,690 8,819 (226,913) 11,764 2,839,360

Changes from financing cash flows: Proceeds from bank loans and other borrowings 868,700 – – – 868,700 Repayment of bank loans and other borrowings (2,261,390) – – – (2,261,390) Proceeds from a related party – – 2,490,066 – 2,490,066 Repayment to a related party – – (1,454,973) – (1,454,973) Capital element of lease rentals paid – – – (1,385) (1,385) Interest element of lease rentals paid – – – (259) (259) Interest and other borrowing cost paid – (136,408) – – (136,408)

Total changes from financing cash flows (1,392,690) (136,408) 1,035,093 (1,644) (495,649)

Other changes: Finance costs (note 6(a)) – 128,461 – 259 128,720 Addition of right-of-use assets – – – 2,082 2,082

Total other changes – 128,461 – 2,341 130,802

At 31 December 2019 1,653,000 872 808,180 12,461 2,474,513

II-44 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Bank loans and Funds from/ other Interest (to) a related Lease borrowings payable party liabilities Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (note 18) (note 19) (note 21)

At 1 January 2020 1,653,000 872 808,180 12,461 2,474,513

Changes from financing cash flows: Proceeds from bank loans and other borrowings 157,211 – – – 157,211 Repayment of bank loans and other borrowings (60,000) – – – (60,000) Proceeds from a related party – – 302,145 – 302,145 Repayment to a related party – – (668,255) – (668,255) Capital element of lease rentals paid – – – (247) (247) Interest element of lease rentals paid – – – (62) (62) Interest and other borrowing cost paid – (17,918) – – (17,918)

Total changes from financing cash flows 97,211 (17,918) (366,110) (309) (287,126)

Other change: Finance costs (note 6(a)) – 32,523 – 62 32,585

Total other change – 32,523 – 62 32,585

At 31 March 2020 1,750,211 15,477 442,070 12,214 2,219,972

II-45 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

(unaudited)

Bank loans and Funds from/ other Interest (to) a related Lease borrowings payable party liabilities Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (note 18) (note 19) (note 21)

At 1 January 2019 3,045,690 8,819 (226,913) 11,764 2,839,360

Changes from financing cash flows: Proceeds from bank loans and other borrowings – – – – – Repayment of bank loans and other borrowings (655,000) – – – (655,000) Proceeds from a related party – – 263,185 – 263,185 Repayment to a related party – – (64,693) – (64,693) Capital element of lease rentals paid – – – (346) (346) Interest element of lease rentals paid – – – (74) (74) Interest and other borrowing cost paid – (48,890) – – (48,890)

Total changes from financing cash flows (655,000) (48,890) 198,492 (420) (505,818)

Other changes: Finance costs (note 6(a)) – 45,699 – 74 45,773 Addition of right-of-use assets – – – 420 420

Total other changes – 45,699 – 494 46,193

At 31 March 2019 (unaudited) 2,390,690 5,628 (28,421) 11,838 2,379,735

II-46 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

(d) Total cash outflow for leases

Amounts included in the combined statements of cash flow for leases comprise the following:

Three months ended Year ended 31 December 31 March 2017 2018 2019 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Within operating cash flows 957,947 990 1,976,515 74 61 Within financing cash flows 52 1,135 1,385 346 247

957,999 2,125 1,977,900 420 308

These amounts relate to the following:

Three months ended Year ended 31 December 31 March 2017 2018 2019 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Lease rentals paid 98 2,125 1,644 420 308 Purchase of leasehold land use right 957,901 – 1,976,256 – –

957,999 2,125 1,977,900 420 308

18 Bank loans and other borrowings

At 31 December 2017, 2018 and 2019 and 31 March 2020, the analysis of the carrying amount of bank loans and other borrowings were as follows:

As at As at 31 December 31 March 2017 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000

Current Secured – Bank loans 53,000 910,000 160,000 100,000 – Other borrowings 722,000 853,890 170,700 521,800

775,000 1,763,890 330,700 621,800

Non-current Secured – Bank loans 600,000 621,800 79,300 79,300 – Other borrowings 1,303,890 660,000 1,243,000 1,049,111

1,903,890 1,281,800 1,322,300 1,128,411

II-47 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Other borrowings as at 31 December 2017 and 2018 include amounts of RMB600,000,000 and RMB540,000,000 respectively arising from financing arrangements with financial institutions where certain companies comprising the Target Group act as co-obligators, please refer to Note 14(c) for details.

At 31 December 2017, 2018 and 2019 and 31 March 2020, all non-current interest-bearing bank loans and other borrowings were repayable as follows:

As at As at 31 December 31 March 2017 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000

Non-current – After 1 year but within 2 years 1,393,890 700,000 274,300 778,411 – After 2 years but within 5 years 510,000 581,800 1,048,000 350,000

1,903,890 1,281,800 1,322,300 1,128,411

As at 31 December 2017, 2018 and 2019 and 31 March 2020, all bank loans were denominated in RMB and interest-bearing at 6.18%~12.00%, 5.70%~12.00% and 5.70% ~12.31% and 5.70%~12.31% per annum, respectively.

All of the Target Group’s banking facilities are subject to the fulfilment of covenants which are commonly found in lending arrangements with financial institutions. If the Target Group breached the covenants, the banking facilities would become payable on demand. The Target Group regularly monitors its compliance with these covenants. Further details of the Target Group’s management of liquidity risk are set out in note 24(b). As at 31 December 2017, 2018 and 2019 and 31 March 2020, none of the covenants relating to the banking facilities had been breached.

The secured bank loans and other borrowings were secured over share of interest in certain subsidiaries of the Target Group and other assets as below:

As at As at 31 December 31 March 2017 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000

Inventories (note 13) 1,690,735 1,957,763 1,339,685 1,407,787 Investment properties (note 10) 1,119,354 1,154,033 573,400 566,200

2,810,089 3,111,796 1,913,085 1,973,987

At each reporting date, certain bank loans and other borrowings are also secured by related parties, by properties and shareholdings of the companies owned by Mr. Lin Rongbin (see note 27(c)).

II-48 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

19 Trade and other payables

As at As at 31 December 31 March 2017 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000

Trade creditors and accrued charges (note (a)) 474,929 411,734 470,399 423,763 Amounts due to related parties (note (b)) 602,565 341 808,811 442,639 Amount due to non-controlling shareholder (note (c)) 43,995 20,915 362,224 465,109 Other payables 72,860 81,135 37,170 18,820 Interest payable 8,559 8,819 872 15,477

Financial liabilities measured at amortised cost 1,202,908 522,944 1,679,476 1,365,808

Accrued business tax, value added tax and other taxes 59,860 216,327 304,449 302,862 Deposits received 32,027 25,539 59,183 61,517 Receipts in advance 2,265 3,628 3,929 628

1,297,060 768,438 2,047,037 1,730,815

Notes:

(a) Trade creditors mainly represent amounts due to contractors. Payment to contractors are in instalments in accordance with the property’s development progress and agreed milestones. Ageing of trade creditors were within 1 year based on the invoice date.

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

(c) The amount represents advance from non-controlling shareholders of certain subsidiary for the respective property development projects. The amount is interest-free, unsecured and repayable on demand.

(d) All of the other trade and other payables are expected to be settled within one year or repayable on demand.

II-49 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

20 Contract liabilities

As at As at 31 December 31 March 2017 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000

Receipts in advance from property sales 1,087,065 3,057,422 5,644,705 5,918,993

Typical payment terms of property development which impact the amount of contract liabilities recognised are as follows:

Depending on market conditions, the Target Group may require customers to pay off the full consideration within an agreed time frame while developments are still ongoing, rather than on the completion of the relevant properties. Such advance payment schemes result in contract liabilities being recognised throughout the remaining property development period for the full amount of the contract price. In addition, the contract liabilities will be increased by the amount of interest expense being accrued by the Group to reflect the effect of any significant financing benefit obtained from the customers during the period between the payment date and the date of delivery of property to customers. As this accrual increases the amount of the contract liabilities during the period of development, it therefore increases the amount of revenue recognised when control of the completed property is transferred to the customer.

Movement in contract liabilities

2017 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000

Balance at 1 January 621,764 1,087,065 3,057,422 5,644,705 Decrease in contract liabilities as a result of recognising revenue during the year/period (372,600) (464,989) (200,840) (1,039) Increase in contract liabilities as a result of receipts in advance from property sales during the year/period in respect of properties still under construction as at the year/period end 758,573 2,211,365 2,420,352 176,523 Increase in contract liabilities as a result of accruing interest expense on receipts in advance 79,328 223,981 367,771 98,804

Balance at 31 December/31 March 1,087,065 3,057,422 5,644,705 5,918,993

The amount of billings in advance of performance and forward sales deposits and instalments received expected to be recognised as income after more than one year is RMB611,055,000, RMB2,890,544,000 and RMB1,413,486,000 and RMB1,547,818,000 as at 31 December 2017, 2018 and 2019 and 31 March 2020 respectively.

II-50 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

21 Lease liabilities

As at 31 December 2017 2018 2019 As at 31 March 2020 Present Present Present Present value of the Total value of the Total value of the Total value of the Total minimum minimum minimum minimum minimum minimum minimum minimum lease lease lease lease lease lease lease lease payments payments payments payments payments payments payments payments RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Within 1 year 550 572 487 616 2,569 3,078 2,608 3,508

After 1 year but within 2 years – – 1,385 1,293 1,853 2,585 1,663 2,277 After 2 years but within 5 years – – 3,957 5,485 3,188 4,448 3,283 4,496 After 5 years – – 5,935 8,315 4,851 6,768 4,660 6,381

– – 11,277 15,093 9,892 13,801 9,606 13,154

550 572 11,764 15,709 12,461 16,879 12,214 16,662

Less: total future interest expenses (22) (3,945) (4,418) (4,448)

Present value of lease liabilities 550 11,764 12,461 12,214

22 Income tax in the combined statements of financial position

(a) Current taxation in the combined statements of financial position represents:

As at As at 31 December 31 March 2017 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000

CIT payable 14,206 75,527 126,005 128,915 LAT payable 18,938 19,446 20,709 20,701

33,144 94,973 146,714 149,616

II-51 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

(b) Deferred tax assets and liabilities recognised:

(i) Movement of each component of deferred tax assets and liabilities

The component of deferred tax (liabilities)/assets recognised in the combined statements of financial position and the movements during the Relevant Periods are as follows:

Fair value change of Amortisation Other investment of capitalised Capitalised temporary properties contract costs Tax losses interest differences Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Deferred tax arising from:

At 1 January 2017 (56,231) (406) 41,728 – 6,857 (8,052) (Charged)/credited to profit or loss (25,695) (2,243) 25,285 (17,657) (5,919) (26,229)

At 31 December 2017 and 1 January 2018 (81,926) (2,649) 67,013 (17,657) 938 (34,281)

(Charged)/credited to profit or loss (23,851) (1,835) 18,212 – 800 (6,674)

At 31 December 2018 and 1 January 2019 (105,777) (4,484) 85,225 (17,657) 1,738 (40,955)

(Charged)/credited to profit or loss (21,537) (18,811) 41,574 (7,829) 412 (6,191)

At 31 December 2019 and 1 January 2020 (127,314) (23,295) 126,799 (25,486) 2,150 (47,146)

Credited/(charged) to profit or loss 2,466 228 3,185 (1,763) (107) 4,009

At 31 March 2020 (124,848) (23,067) 129,984 (27,249) 2,043 (43,137)

(ii) Reconciliation to the combined statements of financial position

As at As at 31 December 31 March 2017 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000

Net deferred tax assets recognised in the combined statements of financial position 5,575 6,040 7,480 9,198 Net deferred tax liabilities recognised in the combined statements of financial position (39,856) (46,995) (54,626) (52,335)

(34,281) (40,955) (47,146) (43,137)

II-52 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

As at 31 December 2017, 2018 and 2019 and 31 March 2020, the Target Group has not recognised deferred tax assets in respect of cumulative tax losses of RMB1,320,000, RMB3,148,000 and RMB11,616,000 and RMB18,808,000 respectively as it is not probable that future taxable income against which the losses can be utilised will be available in the relevant tax jurisdiction and entity. The tax losses of the Target Group’s subsidiaries in Mainland China expire in 5 years from the year of the tax losses were incurred.

23 Capital, reserves and dividends

(a) Share capital/paid-in capital

The Target Company was incorporated in BVI on 15 May 2020 with an issued and paid-up share capital of USD100 divided into 100 shares of par value of USD1 each.

For the purposes of this report, the paid-in capital as at 1 January 2017, 31 December 2017, 31 December 2018, 31 December 2019, and 31 March 2020 represented the aggregated amount of the paid-in capital of the companies now comprising the Target Group at the respective dates, after the elimination of investments in subsidiaries.

(b) Capital management

The Target Group’s primary objectives when managing capital are to safeguard the Target Group’s ability to continue as a going concern, so that it can continue to fund its property development projects, provide returns for equity-holders and benefits for other stakeholders, by pricing products and services commensurately with the level of risk and by securing access to finance at a reasonable cost.

The Target Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher equity-holder returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions.

The Target Group monitors its capital structure on the basis of debt-to-assets ratio and adjusted net debt-to-assets ratio which deducted contract liabilities from total liabilities. The Target Group’s debt-to-assets ratio and adjusted net debt-to-assets ratio at 31 December 2017, 2018 and 2019 and 31 March 2020 was as follows:

As at As at 31 December 31 March 2017 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000

(i) Debt-to-assets ratio

Total liabilities 5,136,565 7,025,282 9,558,543 9,614,184 Total assets 5,847,030 7,716,026 10,245,602 10,273,294 Debt-to-assets ratio 87.85% 91.05% 93.29% 93.58%

(ii) Adjusted debt-to-assets ratio

Total liabilities 5,136,565 7,025,282 9,558,543 9,614,184 Less: Contract liabilities and receipt-in-advance 1,089,330 3,061,050 5,648,634 5,919,621

Adjusted total liabilities 4,047,235 3,964,232 3,909,909 3,694,563 Total assets 5,847,030 7,716,026 10,245,602 10,273,294 Adjusted debt-to-assets ratio 69.22% 51.38% 38.16% 35.96%

II-53 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

No dividends have been declared or paid by the Target Company and its subsidiaries during the Relevant Periods.

(d) Statutory reserves

According to the PRC Company Law, the Target Company’s PRC subsidiaries are required to transfer 10% of their profit after taxation, as determined under the PRC accounting regulations, to statutory surplus reserve until the reserve balance reaches 50% of the registered capital. The transfer to this reserve must be made before distribution of a dividend to shareholders.

Statutory surplus reserve can be used to reduce previous years’ losses, if any, and may be converted into paid-in capital in proportion to the existing equity interest of investors.

24 Financial risk management and fair values

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

The Target Group’s exposure to these risks and the financial risk management policies and practices used by the Target Group to manage these risks are described below.

(a) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Target Group. The Target Group’s credit risk is primarily attributable to trade and other receivables. The Target Group’s exposure to credit risk arising from cash and cash equivalents is limited because the counterparties are banks and financial institutions for which the Target Group considers to have low credit risk. Thus the carrying amounts of trade and other receivables represent the Target Group’s maximum exposure to credit risk in relation to financial assets. Management has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis.

Trade receivables

In respect of trade receivables, the Target Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer rather than the industry in which the customers operate and therefore significant concentrations of credit risk primarily arise when the Target Group has significant exposure to individual customers.

The Target Group’s trade receivables mainly arise from lease of properties. The Target Group has policies in place to ensure that rental contracts are entered into only with lessees with an appropriate credit history, and the Target Group monitors the credit quality of receivables on an ongoing basis. Deposits may be withheld by the Target Group in part or in whole if receivables due from the tenant are not settled or in case of other breaches of contract. The Target Group also regularly reviews the recoverable amount of each individual trade receivable to ensure that adequate impairment losses are made for irrecoverable amounts.

Other receivables

In respect of other receivables due from third parties, the Target Group reviews the exposures and manages them based on the need of operation.

In respect of amounts due from non-controlling interests and related parties, the Target Group facilitates their capital demand by assessing and closely monitoring their financial conditions and profitability.

At each reporting date, the Target Group measures the expected credit losses of other receivables in following ways:

If, at the reporting date, the credit risk on other receivable has not increased significantly since initial recognition, the Target Group measures the loss allowance for other receivable at an amount equal to 12-month expected credit loss. The Target Group measures the loss allowance for other receivables at an amount equal to the lifetime expected credit loss if the credit risk on other receivable has increased significantly since initial recognition.

II-54 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

The following tables provide information about the Group’s exposure to credit risk and ECLs for trade and other receivables at 31 December 2017, 2018 and 2019 and 31 March 2020:

As at 31 December 2017 Gross carrying Expected loss rate amount Loss allowance % RMB’000 RMB’000

Current (not past due) 0.10% 44,259 44

As at 31 December 2018 Gross carrying Expected loss rate amount Loss allowance % RMB’000 RMB’000

Current (not past due) 0.13% 79,631 104 Less than 1 year past due 1.00% 1,212 12

80,843 116

As at 31 December 2019 Gross carrying Expected loss rate amount Loss allowance % RMB’000 RMB’000

Current (not past due) 0.51% 26,400 135 Less than 1 year past due 3.68% 842 31 More than 1 year past due 15.00% 1,200 180

28,442 346

As at 31 March 2020 Gross carrying Expected loss rate amount Loss allowance % RMB’000 RMB’000

Current (not past due) 0.63% 29,048 183 Less than 1 year past due 2.35% 851 20 More than 1 year past due 20.00% 1,100 220

30,999 423

Expected loss rates are based on actual loss experience over the past years. These rates are adjusted to reflect differences between economic conditions during the period over which the historic data has been collected, current conditions and the Target Group’s view of economic conditions over the expected lives of the receivables.

II-55 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

The management considered there is no significant increase in credit risk and no possible default events are expected within the 12 months after the end of the relevant periods. Accordingly, the Target Group expects the credit loss is immaterial.

Financial guarantees

Except for the financial guarantees given by the Target Group as set out in note 26, the Target Group does not provide any other guarantees which would expose the Target Group to credit risk. The maximum exposure to credit risk in respect of these financial guarantees at the end of the reporting period is disclosed in note 26.

(b) Liquidity risk

The Target Group are responsible for all individual operating subsidiaries’ cash management, including the short-term investment of cash surpluses and the raising of loans to cover expected cash demands. The Target Group regularly monitors its liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient reserves of cash and readily realisable marketable securities and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term.

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

At 31 December 2017 Contractual undiscounted cash outflow More than More than Within 1 1 year but 2 years but year or on less than less than More than Carrying demand 2 years 5 years 5 years Total amount RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Trade and other payables 1,202,908 – – – 1,202,908 1,202,908 Lease liabilities 572 – – – 572 550 Bank loans and other borrowings 947,260 1,603,511 360,786 161,351 3,072,908 2,678,890

2,150,740 1,603,511 360,786 161,351 4,276,388 3,882,348

At 31 December 2018 Contractual undiscounted cash outflow More than More than Within 1 1 year but 2 years but year or on less than less than More than Carrying demand 2 years 5 years 5 years Total amount RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Trade and other payables 522,944 – – – 522,944 522,944 Lease liabilities 616 1,293 5,485 8,315 15,709 11,764 Bank loans and other borrowings 1,891,281 763,453 663,186 78,325 3,396,245 3,045,690

2,414,841 764,746 668,671 86,640 3,934,898 3,580,398

II-56 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

At 31 December 2019 Contractual undiscounted cash outflow More than More than Within 1 1 year but 2 years but year or on less than less than More than Carrying demand 2 years 5 years 5 years Total amount RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Trade and other payables 1,679,476 – – – 1,679,476 1,679,476 Lease liabilities 3,078 2,585 4,448 6,768 16,879 12,461 Bank loans and other borrowings 463,505 460,985 1,028,618 – 1,953,108 1,653,000

2,146,059 463,570 1,033,066 6,768 3,649,463 3,344,937

At 31 March 2020 Contractual undiscounted cash outflow More than More than Within 1 1 year but 2 years but year or on less than less than More than Carrying demand 2 years 5 years 5 years Total amount RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Trade and other payables 1,365,808 – – – 1,365,808 1,365,808 Lease liabilities 3,508 2,277 4,496 6,381 16,662 12,214 Bank loans and other borrowings 821,362 182,379 1,009,038 – 2,012,779 1,750,211

2,190,678 184,656 1,013,534 6,381 3,395,249 3,128,233

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Target Group’s interest rate risk arises primarily from cash and cash equivalent, restricted deposits and bank loans and other borrowings at variable rates. The Target Group does not anticipate significant impacts on the interest rates of cash and cash equivalent and deposits as the related interest rates are not expected to change significantly. As at 31 December 2017, 2018 and 2019 and 31 March 2020, the Target Group’s outstanding bank loans and other borrowings of RMBNil, RMB131,800,000, RMB79,300,000 and RMB79,300,000 are issued at variable rates.

The interest rate and terms of repayment of the Target Group’s interest-bearing borrowings are disclosed in note 18.

II-57 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Sensitivity analysis

At 31 December 2017, 2018 and 2019 and 31 March 2020, it is estimated that a general increase/decrease of 100 basis points in interest rates, with all other variables held constant, would decrease/increase the Target Group’s profit after tax and total equity attributable to equity shareholders of the Target Company by approximately RMB Nil, RMB988,500, RMB793,000 and RMB793,000 in response to the general increase/decrease in interest rates.

The sensitivity analysis above has been determined assuming that the changes in interest rates had occurred at the end of the reporting period and had been applied to the exposure to interest rate risk for non-derivative financial instruments in existence at that date.

(d) Currency risk

The Target Group is not exposed to foreign currency risk since all the financial assets and liabilities of the companies comprising the Target Group are denominated in their respective functional currencies.

(e) Fair value measurement

(i) Fair value of financial assets and liabilities carried at other than fair value

The carrying amounts of the financial instruments carried at cost or amortised cost are not material different from their fair values as at 31 December 2017, 2018 and 2019 and 31 March 2020.

(ii) Financial assets and liabilities measured at fair value

The Target Group measured the financial assets at fair value through profit or loss (see note 15) at the end of the reporting period on a recurring basis, categorised into the Level 2 fair value hierarchy as defined in HKFRS 13, Fair value measurement. The level into which a fair value measurement is classified is determined with reference to the observability and significance of the inputs used in the valuation technique as follows:

– Level 1 valuations: Fair value measured using only Level 1 inputs i.e. unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date

– Level 3 valuations: Fair value measured using significant unobservable inputs

Valuation techniques and inputs used in Level 2 fair value measurements

The fair value of financial assets in Level 2 is determined by discounting the expected future cash flows at prevailing market interest rate as at the end of the reporting period. The discount rate used in derived from the relevant China Government Benchmark Yield Curve as at the end of the reporting period plus an adequate constant credit spread.

During the Relevant Periods, there were no transfers between Level 1 and Level 2, or transfers into or out of Level 3. The Target Group’s policy is to recognise transfers between levels of fair value hierarchy as at the end of the reporting period in which they occur.

II-58 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

25 Commitments

Commitments outstanding at 31 December 2017, 2018 and 2019 and 31 March 2020 not provided for in the Historical Financial Information were as follows:

As at As at 31 December 31 March 2017 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000

Contracted for: Construction and development contracts 484,511 1,041,425 1,465,287 1,655,415

Commitments mainly related to land and development costs for the Target Group’s properties under development for sale.

26 Contingent liabilities

As at 31 December 2017, 2018 and 2019 and 31 March 2020, the Target Group has issued guarantees to banks to secure the mortgage arrangements of certain property buyers. The outstanding guarantees to the banks amounted to RMB211,003,000, RMB509,250,000 and RMB857,468,000 and RMB1,376,731,000 as at 31 December 2017, 2018 and 2019 and 31 March 2020 respectively, which will be terminated upon the completion of the transfer procedures with the property buyers in respect of the legal title of the properties.

The directors do not consider that the Target Group will sustain a loss under these guarantees as the bank has the rights to sell the property and recovers the outstanding loan balance from the sale proceeds if the property buyers default their payments. The Target Group has not recognised any deferred income in respect of these guarantees as its fair value is considered to be insignificant by the directors.

As at 31 March 2020, certain properties and share of the Target Group are pledge as security for related parties to obtain loan facilities from financial institutions (note 27(d)).

27 Material related party transactions

In addition to the related party information disclosed elsewhere, the Target Group entered into the following significant related party transactions during the Relevant Periods. Transactions with the following parties are considered to be related party transactions:

Name of related party Relationship Mr. Lin Rongbin Ultimate shareholder Ms. Cheng Xuan The spouse of Mr. Lin Rongbin Fuzhou Sansheng Property Co., Ltd.* (福州三盛置業 Companies owned by Mr. Lin Rongbin and Ms. Cheng Xuan 有限公司) (“Fuzhou Sansheng”) and its subsidiaries Fujian Wuhe Investment & Development Co., Ltd.* Joint Venture of companies controlled Mr. Lin Rongbin (福建五和建設發展有限公司) (“Fujian Wuhe”) Fujian Bo En Property Group Company Limited* Companies controlled by Mr. Lin Rongbin and Ms. Cheng Xuan (福建伯恩物業集團有限公司) (“Fujian BE”)

* The English translation of the name is for reference only. The official name of the entity is in Chinese.

(a) Transaction with key management personnel

Key management personnel are those persons holding positions with authority and responsibility for planning, directing and controlling the activities of the Target Group, directly or indirectly, including the Target Company’s director.

II-59 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Remuneration for key management personnel, including certain of the highest paid employees as disclosed in note 9, is as follows:

Three months ended Year ended 31 December 31 March 2017 2018 2019 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Short-term employee benefits 642 582 647 162 162 Contributions to retirement benefit scheme 32 34 35 9 9

674 616 682 171 171

The above remuneration to key management personnel is included in “staff costs” (see note 6(b)).

(b) Transactions with related parties

Three months ended Year ended 31 December 31 March 2017 2018 2019 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Property management service received from Fujian BE 16,469 13,663 12,490 982 210 Consultation service received from Fuzhou Sansheng – 2,453 – – – Sales commission services provided to Fujian Wuhe – – 1,999 – –

(c) Bank loans and other borrowings secured by related parties, by properties and shareholdings of the companies owned by Mr. Lin Rongbin:

As at As at 31 December 31 March 2017 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000

Secured by properties collateral of subsidiaries of Fuzhou Sansheng 450,000 – – –

Secured by related parties – Fuzhou Sansheng and Mr. Lin Rongbin 583,000 720,000 645,000 645,000 – Fuzhou Sansheng, Mr. Lin Rongbin and Ms. Cheng Xuan 1,645,890 2,093,890 120,500 178,110 – Fuzhou Sansheng 450,000 100,000 100,000 100,000

2,678,890 2,913,890 865,500 923,110

Secured by the pledge of – shareholdings of a subsidiary of Fuzhou Sansheng 450,000 – – –

II-60 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

(d) Assets secured for loan facilities from financial institutions borrowed by related parties

Fujian Minqiao, Yangzhou Sansheng and some private entities controlled by Mr. Lin Rongbin had jointly provided pledged properties and share pledge as security for other private entities owned by Mr Lin Rongbin to obtain loan facilities from financial institutions. In return, on 24 August 2020, Mr. Lin and Fuzhou Sansheng entered into a loan agreement with Fuzhou Bosheng, conditionally effective from the completion date of the Acquisition to 31 October 2021, pursuant to which Fuzhou Sansheng agreed to provide funding to Fuzhou Bosheng and its subsidiaries a RMB650 million non-interest-bearing loan for the pledged properties and the share pledge provided by Fujian Minqiao and Yangzhou Sansheng as mentioned above. The carrying value of the pledged properties is set out in Note 10 and 11 to this accountants’ report.

28. Non-adjusting events after the Relevant Periods

On 9 September 2020, as part of the Reorganisation, 5% of equity interest in Fuzhou Bosheng was transferred to Royal City Limited, an independent third party for a consideration of RMB8,121,000 by way of capital injection.

29. Impacts of COVID-19 pandemic

The COVID-19 pandemic since early 2020 has brought about additional uncertainties in the operations and financial conditions of various industry sectors at the Mainland China, including the real estate industry.

The Target Group has been closely monitoring the impact of the developments on its business and has put in place contingency measures. These contingency measures include: proactively adjusting the business plans to secure the safety of cashflows; adopting contactless online innovative marketing model to achieve sales completion; keep an eye on the government’s assistance policies implemented against the pandemic and fight for help and preferential conditions. The Target Group will keep the contingency measures under review as the situation evolves.

As far as the Target Group’s businesses are concerned, the COVID-19 pandemic caused a slightly lower completion rate of sales and payment received, compared to the Target Group’s expectation. The construction periods of properties under development were of slight delayed by about one to two months due to the suspension during the outbreak. The valuations of investment properties were negatively impacted, since the disruption to economic activities caused by the outbreak COVID-19 has increased the risk towards the achievability of the rental assumptions and has a negative impact towards investment sentiment, and hence any form of required rate of return as well as liquidity of any asset. However, the above impacts have been limited in view of the fact that the pandemic in China has been basically controlled, the disruption to business activities is fading out, and the contingency measures carried out by the Target Group are effective.

The Target Group has assessed the impact of stressed business condition on the Target Group’s capital adequacy and liquidity. With relaxation policies introduced to the real estate industry by certain local governments in China, the Target Group expected that the capital and liquidity levels of the Target Group are sufficient to absorb the impact of the stress. The Target Group will keep closely monitor the development of COVID-19, and continue to assess the impact of the pandemic on the Target Group’s operations and financial position.

30 Immediate and ultimate controlling party

At the reporting date, the directors consider the immediate parent and ultimate controlling party of the Target Group to be Mega Regal, which is incorporated in BVI. This entity does not produce financial statements available for public use.

II-61 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

31 Possible impact of amendments, new standards and interpretations issued but not yet effective for the Relevant Periods

Up to the date of issue of the Historical Financial Information, the HKICPA has issued a number of amendments and a new standard, which are not yet effective for the Relevant Periods. The following table shows developments that may be relevant to the Target Group but have not been adopted in the Historical Financial Information.

Effective for accounting periods beginning on or after

Amendments to HKFRS 3, Reference to the Conceptual 1 January 2022 Amendments to HKAS 16, Property, Plant and Equipment: Proceeds before Intended Use 1 January 2022 Amendments to HKAS 37, Onerous Contracts — Cost of Fulfilling a Contract 1 January 2022 Annual Improvements to HKFRSs 2018-2020 Cycle 1 January 2022 HKFRS 17, Insurance contracts 1 January 2023

The Target Group is in the process of making an assessment of what the impact of these developments is expected to be in the period of initial application. So far the Target Group has concluded that the adoption of the amendments and new standards is unlikely to have a significant impact on the combined financial statements.

SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Target Company and its subsidiaries in respect of any period subsequent to 31 March 2020.

II-62 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

II. MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET GROUP

Set out below is the management discussion and analysis of the Target Group for FY2017, FY2018, FY2019 and 1Q2020.

BUSINESS REVIEW

The Target Company was incorporated in the British Virgin Islands on 15 May 2020 with limited liability and is principally engaged in investment holding. Upon completion of the Reorganisations, the Target Company will hold the Project Companies which are principally engaged in property development and sale of property units in the PRC. The combined financial statements of the Target Group was prepared and presented using merger basis of accounting as if the Target Group has always been in existence throughout the Relevant Periods.

FINANCIAL REVIEW

Financial Results

For FY2017, FY2018, FY2019 and 1Q2020, the Target Group recorded:

(i) revenue of approximately RMB641.9 million, RMB663.3 million and RMB291.4 million and RMB26.1 million, respectively. The revenue was mainly contributed by delivery of property units of Chengdu Jisheng and Qingdao Haishang and gross rentals from investment properties held by Fujian Minqiao and Yangzhou Sansheng. Revenue for FY2019 and 1Q2020 decreased because Chengdu Jisheng delivered less GFA during the period and the villa units delivered by Qingdao Haishang during the period had less GFA as compared to that of the high-rise units sold in FY2017 and FY2018.

(ii) gross profit of approximately RMB94.9 million, RMB113.7 million and RMB132.7 million and RMB16.2 million, respectively, and gross profit margin of approximately 14.8%, 17.1% and 45.5% and 62.1% respectively. The significant increases in gross profit margins for FY2019 and 1Q2020 resulted from the higher selling price of villa units as mentioned in (i) above and the portion of revenue from rental increased, which has a higher gross profit margin;

(iii) net valuation gain on investment properties of approximately RMB49.4 million, RMB37.5 million and RMB28.0 million and a net valuation loss of RMB23.0 million, respectively which was contributed by commercial properties held by Yangzhou Sansheng and Fujian Minqiao.

(iv) other income of approximately RMB0.6 million, RMB0.3 million, RMB5.2 million and RMB0.5 million, respectively, which mainly comprised interest income. The increase in FY2019 was due to a sales commission received in respect of temporary share of sales and marketing team to a related party.

II-63 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

(v) selling and marketing expenses of approximately RMB46.5 million, RMB80.5 million and RMB79.2 million and RMB10.9 million respectively, which mainly comprised salary of selling and marketing staff, promotion and advertising fees; The increase in FY2018 and FY2019 was mainly driven by the launch of pre-sales for Fuzhou Shenglong’s project which brought on increase in salary for selling and marketing staff, promotion, advertising fees and demolition fees for the showrooms of Fuzhou Shenglong’s project.

(vi) administrative expenses of approximately RMB60.2 million, RMB61.4 million and RMB67.0 million and RMB14.3 million respectively, which mainly comprised staff costs, generals office expenses, professional fees, other taxes and surcharges and depreciation.

(vii) finance costs of approximately RMB19.4 million, RMB1.1 million, RMB21.3 million and RMB0.1 million respectively, after capitalising certain borrowing costs into inventories. The borrowing costs comprised primarily interest on borrowings and interest accrued on receipts in advance from property pre-sales.

(viii) income tax expense of approximately RMB51.0 million, RMB28.1 million, RMB32.0 million and income tax credit of approximately RMB3.6 million, respectively which comprised (a) provision for land appreciation tax calculated based on proceeds of a sales of properties less deductible expenditures including lease charges of land use rights, borrowing costs and relevant property development expenditure; and (b) reversal of temporary difference on deferred tax; and

(ix) loss after taxation of approximately RMB32.3 million, RMB19.7 million, RMB33.7 million and RMB27.9 million, respectively. In addition to the aforesaid factors, the recorded loss was also due to lower selling prices of the pre-sold properties amid the downturn market.

Financial position and other financial information of Target Group:

As at 31 December 2017, 31 December 2018, 31 December 2019 and 31 March 2020, the Target Group had:

(i) investment properties of approximately RMB1,262.7 million, RMB1,305.3 million, RMB1,338.8 million and RMB1,315.7 million, respectively, which represented office and retail commercial properties, retail units and carparks held by Yangzhou Sansheng and Fujian Minqiao;

(ii) other property, plant and equipment of approximately RMB209.9 million, RMB280.2 million, RMB354.7 million and RMB348.3 million respectively, which mainly consisted of construction in progress, interest in leasehold land to premises, hotel building and equipment and vehicle;

II-64 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

(iii) inventories and other contract costs of approximately RMB3,394.2 million, RMB3,785.6 million, RMB7,081.7million and RMB7,346.0 million, respectively, which mainly represented properties under development for sale, completed properties for sale and other contract costs;

(iv) trade and other receivables of approximately RMB760.2 million, RMB1,210.0 million, RMB547.5 million and RMB591.0 million respectively, which mainly represented trade receivables, other receivables, amounts due from related parties, amount due from non-controlling shareholder and prepaid tax and surcharges;

(v) cash and cash equivalents of approximately RMB183.4 million, RMB1,091.2 million, RMB880.3 million and RMB627.0 million, respectively;

(vi) bank loans and other borrowings of approximately RMB2,678.9 million, RMB3,045.7 million, RMB1,653.0 million and RMB1,750.2 million, respectively;

(vii) trade and other payables of approximately RMB1,297.1 million, RMB768.4 million, RMB2,047.0 million and RMB1,730.8 million, respectively, which are mainly amounts due to contractors and amounts due to related parties; and

(viii) contract liabilities of approximately RMB1,087.1 million, RMB3,057.4 million, RMB5,644.7 million and RMB5,919.0 million respectively, which is mainly the advance payment received by the Target Group according to the contract in relation to pre-sale of properties.

Capital structure

The Target Group utilises external financing from independent financial institutions, amount due to related parties and internal generated cash to finance its operating activities. They were all denominated in RMB and the bank loans and other borrowings bore interest rates ranging from 5.70% to 12.31% per annum while amount due to related parties are interest free.

Gearing Ratio

As at as at 31 December 2017, 31 December 2018, 31 December 2019 and 31 March 2020, the gearing ratio of Target Group was 45.8%, 39.5%, 16.1% and 17.0% respectively, which was calculated based on the Target Group’s total bank loans and other borrowings of approximately RMB2,678.9 million, RMB3,045.7 million, RMB1,653.0 million and RMB1,750.2 million, respectively, to total assets of approximately RMB5,847.0 million, RMB7,716.0 million, RMB10,245.6 million and RMB10,273.3 million, respectively.

II-65 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Capital commitments

The Target Group’s commitments, as contracted but not provided for, in respect of land and development costs for the Target Group’s properties under development for sale as at 31 December 2017, 31 December 2018, 31 December 2019 and 31 March 2020 were approximately RMB485.5 million, RMB1,041.4 million, RMB1,465.3 million and RMB1,655.4 million respectively.

Contingent liabilities

Pledge of assets

As at 31 December 2017, 31 December 2018, 31 December 2019 and 31 March 2020, the Target Group pledged (i) certain investment properties, inventories, properties and respective interests in leasehold land for own use for securing bank loans and other borrowings for the Target Group; (ii) cash deposits for as collateral for mortgage loans advanced to property buyers and pre-sale proceeds as the guarantee deposits for constructions of the respective properties; and (iii) the Pledged Properties and Share Pledge as securities for other private entities owned by Mr Lin to obtain loan facilities from financial institutions.

Foreign exchange exposure

During FY2017, FY2018, FY 2019 and 1Q2020, the Directors considers that the Target Group was not exposed to foreign currency risk given that all the financial assets and liabilities of the Target and its subsidiaries are denominated in RMB.

Employees

As at 31 December 2017, 31 December 2018 and 31 December 2019 and 31 March 2020, the Target Group had a total of 161, 227, 258 and 310 employees respectively. The total staff costs of the Target Group for FY2017, FY2018, FY 2019 and 1Q2020 was approximately RMB28.8 million, RMB46.5 million, RMB54.0 million and RMB15.9 million employees respectively. Staff recruitment and promotion of Target Group are primarily based on the employee’s experience, potential and performance. The remuneration and staff benefit policies are also performance based and are determined with reference to the competitive market salary levels.

II-66 APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Hedging

During FY2017, FY2018, FY2019 and 1Q2020 the Target Group did not hold any financial instruments for hedging purposes.

Significant investments

The offices and commercial properties, retail units and carparks held by Fujian Minqiao and Yangzhou Sansheng in the PRC generated rental income to the Target Group. As at 31 December 2017, 31 December 2018, 31 December 2019 and 31 March 2020, the Target Group had investment properties of approximately RMB1,262.7 million, RMB1,305.3 million and RMB1,338.8 million, and RMB1,315.7 million which are valued by external property valuer.

Major acquisitions and disposals

On 13 August 2019, Chengdu Jisheng entered into an acquisition agreement pursuant to which Chengdu Jisheng acquired 80% equity interest in Huangshi Jiashun Property Co. Limited*(黄石佳舜盛世置業有限公司) (“Huangshi Jiashun”). Huangshi Jiashun shall be disposed as part of the Reorganisation.

Save as above, the Target Group had no other material acquisitions and disposals during FY2017, FY 2018, FY 2019 and 1Q2020.

Future plans for material investments or capital assets

As at 31 March 2020, the Target Group did not have any future plans for material investments or acquisitions of capital assets.

II-67 APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(A) UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is the unaudited pro forma financial information of the Enlarged Group (the “Unaudited Pro Forma Financial Information”) after the completion of the Acquisition of the Target Group by the Group. The unaudited pro forma financial information presented below is prepared to illustrate the effect of the Acquisition on the Group’s financial position as at 30 June 2020 as if the Acquisition had been taken place and had been completed on 30 June 2020.

The Unaudited Pro Forma Financial Information has been prepared by the directors of the Company (the “Directors”) in accordance with Paragraphs 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, for the purpose of illustrating the effects of the Acquisition on the Group for inclusion in this circular.

The Unaudited Pro Forma Financial Information is prepared based on (1) the unaudited consolidated financial statements extracted from the published interim report of the Group for the six months ended 30 June 2020; and (2) the combined statement of financial position of the Target Group at 31 March 2020 extracted from the Accountants’ Report of the Target Group set out in Appendix II to this circular, as if the Acquisition had been completed on 30 June 2020.

The Unaudited Pro Forma Financial Information is prepared based on a number of assumptions, estimations and uncertainties. Because of its hypothetical nature, it may not give a true picture of the financial position of the Enlarged Group had the Acquisition been completed as of the specified dates or any future dates.

These pro forma adjustments are directly attributable to the Acquisition and are not related to other future events or decisions and are factually supportable.

The Unaudited Pro Forma Financial Information should be read in conjunction with the financial information of the Group set out in the interim report of the Group for the six months ended 30 June 2020, the accountants’ report of the Target Group as set out in Appendix II to this circular and other financial information contained in this circular.

III-1 APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

1. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES OF THE ENLARGED GROUP

The Enlarged The Group Group as as at at 30 June 30 June 2020 Pro forma adjustments 2020 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note 1) (Note 2) (Note 3) (Note 4) (Note 5)

Non-current assets Investment properties 949,556 1,315,709 – – – 2,265,265 Other property, plant and equipment 590,532 348,282 – – – 938,814 Properties under development 110,312 – – – – 110,312 Prepaid lease payments 442,230 – – – – 442,230 Interests in joint ventures 130,152 – – – – 130,152 Deferred tax assets 232,513 9,198 – – – 241,711

2,455,295 1,673,189 – – – 4,128,484

Current assets Inventories and other contract costs 25,581,360 7,345,982 – – – 32,927,342 Prepaid lease payments 14,499 – – – – 14,499 Trade and other receivables 4,004,119 590,964 – – – 4,595,083 Financial assets at fair value through profit or loss 19,831 20,980 – – – 40,811 Restricted deposits 95,577 15,179 – – – 110,756 Cash and cash equivalents 1,946,036 627,000 8,121 (4,420) – 2,576,737

31,661,422 8,600,105 8,121 (4,420) – 40,265,228

III-2 APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The Enlarged The Group Group as as at at 30 June 30 June 2020 Pro forma adjustments 2020 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note 1) (Note 2) (Note 3) (Note 4) (Note 5)

Current liabilities Bank loans and other borrowings 6,582,558 621,800 – – – 7,204,358 Bonds payable 708,285 – – – – 708,285 Trade and other payables 7,154,412 1,730,815 751,929 – (1,193,999) 8,443,157 Lease liabilities 2,752 2,608 – – – 5,360 Contract liabilities 11,723,404 5,918,993 – – – 17,642,397 Current taxation 1,154,815 149,616 – – – 1,304,431

27,326,226 8,423,832 751,929 – (1,193,999) 35,307,988

Net current assets 4,335,196 176,273 (743,808) (4,420) 1,193,999 4,957,240

Total assets less current liabilities 6,790,491 1,849,462 (743,808) (4,420) 1,193,999 9,085,724

Non-current liabilities Bank loans and other borrowings 3,556,553 1,128,411 – – – 4,684,964 Bonds payable 527,191 – – – – 527,191 Derivative financial liabilities 18,427 – – – – 18,427 Loan from a related party 693,932 – – – 1,193,999 1,887,931 Lease liabilities 3,442 9,606 – – – 13,048 Deferred tax liabilities 140,366 52,335 – – – 192,701

4,939,911 1,190,352 – – 1,193,999 7,324,262

Net assets 1,850,580 659,110 (743,808) (4,420) – 1,761,462

III-3 APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Notes to the Unaudited Pro Forma Financial Information

1) The financial information of the Group as at 30 June 2020 are extracted from the consolidated statement of financial position of the Group at 30 June 2020 as set out in the published interim report of the Group for six months ended 30 June 2020.

2) The financial information of the Target Group as at 31 March 2020 are extracted from the combined statement of financial position of the Target Group at 31 March 2020 as set out in Appendices II to this circular.

3) As one of the conditions precedent to the Acquisition, a Reorganisation of the Target Group is required prior to the Acquisition. For the purpose of the unaudited pro forma consolidated statement of assets and liabilities, the adjustments represent:

(a) Fuzhou Sansheng Property Co., Ltd. (“Fuzhou Sansheng”) transferred the shareholdings of project companies to Fuzhou Bosheng Investment Co., Ltd. (“Fuzhou Bosheng”, one of the subsidiaries of the Target Group) at the asset value attributable to equity shareholders of these project companies of RMB715,714,000 as at 31 March 2020. The consideration will be settled through current account with Fuzhou Sansheng.

(b) capital injection of RMB8,121,000 by an independent third party for 5% interest in Fuzhou Bosheng. The capital injection was received by cash;

(c) the transfer of 95% of equity interest in Fuzhou Bosheng held by Fuzhou Sansheng to Fuzhou Shengtu Investment Co., Ltd. (“Fuzhou Shengtu”) for a consideration of RMB36,215,000. The consideration will be settled through current account with Fuzhou Sansheng.

(d) Pursuant to the Agreement, the Consideration of HK$347,349,600 (equivalent to approximately RMB310,100,000) for the Acquisition shall be payable to the Vendor by way of issue and allotment of the Consideration Shares, being 49,480,000 new Shares, at the issue price of HK$7.02 per Consideration Share, by the Company to the Vendor on Completion Date. The par value of the 49,480,000 new shares allotted and issued by the Company is HK$4,948,000 (equivalent to approximately RMB4,418,000 using the exchange rate of RMB1: HK$1.12).

Upon completion of the Reorganisation, the equity attributable to equity shareholders of the Target Group will be reduced to a minimal level. Accordingly, there is no material impact on the equity attributable to equity shareholders of the Enlarged Group upon completion of the Acquisition. The decrease in net assets upon Completion of approximately RMB89.1 million is due to the non-controlling interest of the Target Group and the transaction costs set out in note 4 below.

As at the Latest Practicable Date, the Reorganisation has been completed. Upon completion of the Reorganisation, Fuzhou Shengtu and the independent third party held 95% and 5% equity interest in Fuzhou Bosheng respectively.

4) The adjustment represents the estimated transaction costs (including fees to legal advisers, financial adviser, reporting accountants, valuer and other expenses) of RMB4,420,000 payable by the Enlarged Group in connection with the Reorganisation and Acquisition.

5) Being part and parcel of the Acquisition, on 24 August 2020, Mr. Lin Rongbin, the ultimate shareholder, and Fuzhou Sansheng entered into a loan agreement with Fuzhou Bosheng, conditionally effective from the Completion Date to 31 October 2021, pursuant to which Fuzhou Sansheng agreed to provide funding to Fuzhou Bosheng Group comprising (i) a RMB650 million non-interest-bearing loan to Fuzhou Bosheng Group in return for the Pledged Properties and the Share Pledge provided by Fuzhou Bosheng Group as security for loans obtained by the private entities controlled by Mr. Lin from financial institutions in the PRC (i.e. the Loan and Pledge Arrangement); and (ii) an unsecured loan to be provided by Fuzhou Sansheng on normal commercial terms in such amount necessary for the development of the property projects of the Project Companies.

As set out in the part of letter from the board to this circular, upon Completion, the other payables of the Target Group due to Fuzhou Sansheng amounted to RMB1,193,999,000 will be reclassified to loan from a related party, among which RMB650,000,000 is treated as non-interest-bearing loan and the remaining RMB543,999,000 will be unsecured and interest-bearing pursuant to the Loan Agreement. The loan is repayable by 31 October 2021.

The interest-bearing loan will be charged at 7% per annum, and the interest expense is expected to have a continuing effect on the Enlarged Group.

III-4 APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

6) The Target Group’s Target Properties as at 31 March 2020 have been valued by JLL, an independent property valuer. Details of the valuation as at 30 June 2020 is set out in Appendix IV to this circular. The above unaudited pro forma financial information does not take into account the surplus arising from the revaluation of the Target Group’s Target Properties of approximately RMB958.9 million. The valuation surplus has not been recorded in the historical financial information of the Target Group as at 31 March 2020 and will not be recorded in the consolidated financial statements of the Group in future periods as the Group’s inventories and other property, plant and equipment are stated at historical cost basis.

7) Other than the adjustments in relation to the Acquisition set out in the notes above, no other adjustment have been made to the Unaudited Pro Forma Financial Information to reflect any trading results or other transactions of the Enlarged Group subsequent to 30 June 2020 for the unaudited pro forma consolidated statement of assets and liabilities.

III-5 APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

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

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

TO THE DIRECTORS OF SANSHENG HOLDINGS (GROUP) CO. LTD.

We have completed our assurance engagement to report on the compilation of pro forma financial information of Sansheng Holdings (Group) Co. Ltd. (the “Company”) and its subsidiaries (collectively the “Group”) by the directors of the Company (the “Directors”) for illustrative purposes only. The pro forma financial information consists of the unaudited pro forma consolidated statement of assets and liabilities as at 30 June 2020 and related notes as set out in Part A of Appendix III to the circular dated 25 September 2020 (the “Circular”) issued by the Company. The applicable criteria on the basis of which the Directors have compiled the pro forma financial information are described in Part A of Appendix III to the Circular.

The pro forma financial information has been compiled by the Directors to illustrate the impact of the proposed acquisition of Rosy Path Group Limited (the “Target Company”) and its subsidiaries (collectively the “Target Group”) (the “Proposed Acquisition”) on the Group’s financial position as at 30 June 2020 as if the Proposed Acquisition had taken place at 30 June 2020. As part of this process, information about the Group’s financial position as at 30 June 2020 has been extracted by the Directors from the consolidated financial statements of the Company for the six months ended 30 June 2020, on which a review report has been published.

Directors’ Responsibilities for the Pro Forma Financial Information

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

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

III-6 APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The firm applies Hong Kong Standard on Quality Control 1 “Quality Control for Firms That Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements” issued by the HKICPA and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountants’ Responsibilities

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

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

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

The purpose of pro forma financial information included in an investment circular is solely to illustrate the impact of a significant event or transaction on the unadjusted financial information of the Group as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the events or transactions at 30 June 2020 would have been as presented.

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

• the related pro forma adjustments give appropriate effect to those criteria; and

• the pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

III-7 APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

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

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

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

Opinion

In our opinion:

a) the pro forma financial information has been properly compiled on the basis stated;

b) such basis is consistent with the accounting policies of the Group, and

c) the adjustments are appropriate for the purposes of the pro forma financial information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

KPMG Certified Public Accountants Hong Kong

25 September 2020

III-8 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

The following is the text of a letter, summary of values and valuation certificates prepared for the purpose of incorporation in this circular received from Jones Lang LaSalle Corporate Appraisal and Advisory Limited, an independent valuer, in connection with its valuation as at 30 June 2020 of the property interests held by the Project Companies.

Jones Lang LaSalle Corporate Appraisal and Advisory Limited 7th Floor, One Taikoo Place 979 King’s Road, Hong Kong tel +852 2846 5000 fax +852 2169 6001 Company Licence No.: C-030171

仲量聯行企業評估及咨詢有限公司香港英皇道979號太古坊一座7樓電話 +852 2846 5000 傳真 +852 2169 6001 公司牌照號碼：C-030171

The Board of Directors Sansheng Holdings (Group) Co. Ltd. Room 3207 The Gateway Tower 6 Tsim Sha Tsui Kowloon, Hong Kong

25 September 2020

Dear Sirs,

Jones Lang LaSalle Corporate Appraisal and Advisory Limited (“JLL” or “we”) is instructed by Sansheng Holdings (Group) Co. Ltd. (the “Company”) to provide valuation service on the properties in which Fujian Minqiao Real Estate Development Co., Ltd. (“Fujian Minqiao”), Fuzhou Shenglong Real Estate Development Co., Ltd. (“Fuzhou Shenglong”), Quanzhou Shengchuang Real Estate Co., Ltd. (“Quanzhou Shengchuang”), Chengdu Jisheng Real Estate Co., Ltd. (“Chengdu Jisheng”), Jiangsu Zheguang Real Estate Co., Ltd. (“Jiangsu Zheguang”), Yangzhou Sansheng Real Estate Development Co., Ltd. (“Yangzhou Sansheng”), Wenling Rongfa Real Estate Development Co., Ltd. (“Wengling Rongfa”), Qingdao Haishang Real Estate Co., Ltd. (“Qingdao Haishang”) and Putian Shengxiang Real Estate Development Co., Ltd. (“Putian Shengxiang”) (hereinafter together referred to as the “Project Companies”) have interests in the People’s Republic of China (the “PRC”) for disclosure purpose.

We confirm that we have carried out inspections, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion on the market values of the property interests as at 30 June 2020 (the “valuation date”).

Our valuation is carried out on a market value basis. Market value is defined as “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion”.

IV-1 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

We have valued the property interests in Group I which are held for sale and the property interests in Group IV which are held for future development by the comparison approach assuming sale of the property interests in their existing states with the benefit of immediate vacant possession and by making reference to comparable sales transactions as available in the market. This approach rests on the wide acceptance of the market transactions as the best indicator and pre-supposes that evidence of relevant transactions in the market place can be extrapolated to similar properties, subject to allowances for variable factors.

For the purpose of our valuation, real estate developments for sale are those the Construction Work Completion and Inspection Certificate/Tables or Building Ownership Certificates/Real Estate Title Certificates thereof are issued by the relevant local authorities, and this also includes those property interests which have been contracted to be sold, but the formal assignment procedures of which have not yet been completed; and property developments for future development are those the Construction Work Commencement Permits are not issued while the State-owned Land Use Rights Certificates have been obtained.

For the property interests in Group II which are held for investment by the Project Companies, we have adopted the income approach in our valuation by taking into account the net rental income of the property derived from the existing leases and/or achievable in the existing market with due allowance for the reversionary income potential of the leases, which has been then capitalized to determine the market value at an appropriate capitalization rate. Where appropriate, reference has also been made to comparable sale transactions as available in the relevant market.

In valuing the property interests in Group III which are held under development by the Project Companies, we have assumed that they will be developed and completed in accordance with the latest development proposals provided to us by the Project Companies. In arriving at our opinion of values, we have adopted the comparison approach by making reference to comparable sales evidence as available in the relevant market and have also taken into account the accrued construction cost and professional fees relevant to the stage of construction as at the valuation date and the remainder of the cost and fees expected to be incurred for completing the development. We have relied on the accrued construction cost and professional fees information provided by the Project Companies according to the different stages of construction of the properties as at the valuation date, and we did not find any material inconsistency from those of other similar developments.

For the purpose of our valuation, real estate developments under development are those for which the Construction Works Commencement Permit(s) has(have) been issued while the Construction Works Completion and Inspection Certificate(s)/Table(s) of the building(s) have not been issued.

IV-2 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

We have valued portion of property no. 7 classified in Group V which is held for hotel operation by Discounted Cash Flow (“DCF”) Analysis which derives the market value by discounting the future net cash flow of the property until the end of the unexpired land use term to its present value by using an appropriate discount rate that reflects the rate of return required by a third party investor for an investment of this type. We have prepared a 10-year cash flow forecast with reference to the current and anticipated market conditions.

Our valuation has been made on the assumption that the seller sells the property interests in the market without the benefit of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement, which could serve to affect the values of the property interests.

No allowance has been made in our report for any charge, mortgage or amount owing on any of the property interests valued nor for any expense or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions and outgoings of an onerous nature, which could affect their values.

In valuing the property interests, we have complied with all requirements contained in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities issued by the Stock Exchange of Hong Kong Limited; the RICS Valuation — Global Standards published by the Royal Institution of Chartered Surveyors; the HKIS Valuation Standards published by the Hong Kong Institute of Surveyors, and the International Valuation Standards published by the International Valuation Standards Council.

We have relied to a very considerable extent on the information given by the Company and the Project Companies and have accepted advice given to us on such matters as tenure, planning approvals, statutory notices, easements, particulars of occupancy, lettings, and all other relevant matters.

We have been shown copies of title documents including State-owned Land Use Rights Certificates, Real Estate Title Certificates, Building Ownership Certificates and other official plans relating to the property interests and have made relevant enquiries. Where possible, we have examined the original documents to verify the existing title to the property interests in the PRC and any material encumbrance that might be attached to the property interests or any tenancy amendment. We have relied considerably on the advice given by the Company’s PRC Legal Advisors – Commerce & Finance Law Offices, concerning the validity of the property interests in the PRC.

We have had no reason to doubt the truth and accuracy of the information provided to us by the Company and the Project Companies. We have also sought confirmation from the Company and the Project Companies that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to arrive an informed view, and we have no reason to suspect that any material information has been withheld.

IV-3 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

We have not carried out detailed measurements to verify the correctness of the areas in respect of the properties but have assumed that the areas shown on the title documents and official site plans handed to us are correct. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations. No on-site measurement has been taken.

We have inspected the exterior and, where possible, the interior of the properties. However, we have not carried out investigation to determine the suitability of the ground conditions and services for any development thereon. Our valuation has been prepared on the assumption that these aspects are satisfactory and that no unexpected cost and delay will be incurred during construction. Moreover, no structural survey has been made, but in the course of our inspection, we did not note any serious defect. We are not, however, able to report whether the properties are free of rot, infestation or any other structural defect. No tests were carried out on any of the services.

Inspection of the properties was carried out in May 2020 by Mr. Owen Zhang, Mr. Lucas Lu, Ms. Raina Zheng, Mr. Jimmy Gu, Ms. Tony Xu and Ms. Queena Qiao. Mr. Owen Zhang, Mr. Lucas Lu and Ms. Raina Zheng are China Certified Real Estate Appraisers. All of these staff have more than 4 years’ experience in the property valuation in the PRC.

Unless otherwise stated, all monetary figures stated in this report are in Renminbi (RMB).

We are instructed to provide our opinion of value as per the valuation date only. It is based on economic, market and other conditions as they exist on, and information made available to us as of, the valuation date and we assume no obligation to update or otherwise revise these materials for events in the time since then. In particular, the outbreak of the Novel Coronavirus (COVID-19) since declared Global Pandemic on the 11th March 2020 has caused much disruption to economic activities around the world. As of the report date, China’s economy is experiencing gradual recovery and it is anticipated that disruption to business activities will steadily reduce. We also note that market activity and market sentiment in these particular market sectors remains stable. However, we remain cautious due to uncertainty for the pace of global economic recovery in the midst of the outbreak which may have future impact on the real estate market. Therefore, we recommend that you keep the valuation of the properties under frequent review.

Our summary of values and valuation certificates are attached below for your attention.

Yours faithfully, For and on behalf of Jones Lang LaSalle Corporate Appraisal and Advisory Limited Eddie T. W. Yiu MRICS MHKIS RPS (GP) Senior Director

Note: Eddie T.W. Yiu is a Chartered Surveyor who has 26 years’ experience in the valuation of properties in Hong Kong and the PRC as well as relevant experience in the Asia-Pacific region.

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SUMMARY OF VALUES

Abbreviation:

Group I: Completed properties held for sale by the Project Companies in the PRC Group II: Properties held for investment by the Project Companies in the PRC Group III: Properties held under development by the Project Companies in the PRC Group IV: Properties held for future development by the Project Companies in the PRC Group V: Properties held for hotel operation by the Project Companies in the PRC

The total Market value Market value Market value Market value Market value market value in existing state in existing state in existing state in existing state in existing state in existing as at the as at the as at the as at the as at the state as at the No. Property valuation date valuation date valuation date valuation date valuation date valuation date RMB RMB RMB RMB RMB RMB

Group I: Group II: Group III: Group IV: Group V:

1. Unsold units of Project Sansheng International – 554,300,000 – – – 554,300,000 Center (三盛國際中心) No. 118 Wusi Road Gulou District Fuzhou City Fujian Province The PRC

2. Project Sansheng Puyuebinjiang (三盛璞悅濱江) – – 1,653,400,000 – – 1,653,400,000 No. 288 Hexie Road Changle District Fuzhou City Fujian Province The PRC

3. Project Sansheng Puyue gongguan (三盛璞悅公館) – – 223,000,000 – – 223,000,000 located at Puwei Community Hanjiang District Putian City Fujian Province The PRC

4. Project Sansheng Puyueli (三盛璞悅里) located at – – 172,400,000 – – 172,400,000 Chifeng Road Jiangnan New District Licheng District Quanzhou City Fujian Province The PRC

IV-5 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

Group I: Group II: Group III: Group IV: Group V:

5. Project Sansheng Metropolis (三盛都會城) 173,800,000 – 926,800,000 496,400,000 – 1,597,000,000 No. 733 Chencheng East 7th Road Longquanyi District Chengdu City Sichuan Province The PRC

6. A parcel of bare land located at the eastern side of – – – 1,218,000,000 – 1,218,000,000 Beijing Road and the northern side of Xiangjiang Road Tongshan District Xuzhou City Jiangsu Province the PRC

7. Project Sansheng International Plaza (三盛國際廣場) 67,000,000 708,900,000 – – 272,800,000 1,048,700,000 No. 358 Hanjiang Middle Road Hanjiang District Yangzhou City Jiangsu Province The PRC

8. Project Sansheng Puyue Mansion (三盛璞悅府) – – 642,100,000 – – 642,100,000 located at the eastern side of Jinping Avenue and the western side of Caiping Road Chengdong Street Wenling City Zhejiang Province The PRC

9. Project Sansheng International Coast (三盛國際海岸) 183,200,000 – 2,812,000,000 11,100,000 – 3,006,300,000 located at Linghai West Road Wenquan Street Office Jimo District Qingdao City Shandong Province The PRC

Total: 424,000,000 1,263,200,000 6,429,700,000 1,725,500,000 272,800,000 10,115,200,000

IV-6 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

VALUATION CERTIFICATE

Market value in existing state as at Particulars of the valuation No. Property Description and tenure occupancy date RMB

1. Unsold units of Project Sansheng Project Sansheng International Center comprises As at the valuation date, 554,300,000 International Center a 40-storey and a 29-storey office/commercial portions of the property (三盛國際中心) buildings completed in 2017. It is located at were leased to various No. 118 Wusi Road Wusi Road of Gulou District. The locality is well tenants for retail and Gulou District served by public transportation and supporting office uses, whilst the Fuzhou City facilities. remaining portions were Fujian Province vacant. The PRC The property comprises the unsold office units, retail units, ancillary and car parking spaces of Project Sansheng International Center, which are currently held for investment. The property has a total gross floor area (“GFA”) of approximately 32,451.53 sq.m., details of which are set out in note 4.

The land use rights of the property have been granted for terms expiring on 9 July 2035 for commercial use and 9 July 2045 for office use.

IV-7 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

Notes:

1. Pursuant to a State-owned Land Use Rights Certificate – Rong Guo Yong (2011) Di No. 3243333401, the land use rights of Project Sansheng International Center (including the property) with a site area of approximately 7,678 sq.m. have been granted to Fujian Minqiao for terms expiring on 9 July 2035 for commercial use and 9 July 2045 for office use.

2. Pursuant to 114 Real Estate Title Certificates, the office and retail units of the property with a total GFA of approximately 23,525.63 sq.m. are owned by Fujian Minqiao.

3. We have not been provided with any title certificates for the ancillary units and car parking spaces of the property with a total GFA of approximately 8,925.90 sq.m. (refer to notes 8b and 9 for details).

4. According to the information provided by Fujian Minqiao, the GFA of the property is set out as below:

No. of Car Parking Usage Floor GFA Space (sq.m.)

Office 4F, 6F, 10F, 14F, 16F, 21F to 23F, 28F to 30F, 32F to 40F 20,403.03 Retail 1F to 3F 3,122.60 Ancillary 1F to 3F 1,238.71 Car parking space B1 to B3 7,687.19 193

Total: 32,451.53 193

5. Pursuant to 19 Tenancy Agreements, various retail units and office units of the property with a total lettable area of approximately 15,056.95 sq.m. were leased to various tenants with the latest expiry date on 19 March 2025 at a current monthly rent ranging from RMB60 to RMB400 per sq.m., inclusive of VAT and exclusive management fees.

6. Pursuant to 2 mortgage contracts, the office and retail units of the property with a total GFA of approximately 23,525.63 sq.m. were subject to 2 mortgages for a total loan amount of RMB625,000,000 expiring on 31 October 2021.

7. Our valuation has been made on the following basis and analysis:

a. we have considered the actual rents in the existing tenancy agreements and also compared with similar properties located in the same business circle and/or nearby within reasonable walking distance. We adopted market rent when calculating (i) the reversionary rental income after the expiry of the existing lease for occupied area, and (ii) the rental income of vacant area;

b. the monthly unit rents of the comparable properties are in the range of RMB120 to RMB180 per sq.m. for office units, RMB320 to RMB400 per sq.m. for ground floor retail units and RMB800 to RMB1,000 per space for car parking spaces, exclusive of VAT and management fees. Appropriate adjustments and analysis are considered to the differences in location, decoration and other characters between the comparable properties and the properties to arrive at the average market rent; and

c. based on our research, the stabilized market yield of similar properties is in the range of 3% to 6% as at the valuation date. Considering the location and characteristics of the property, we have applied a market yield of 3% in the car parking space valuation, 5% in the office valuation and 6% in the retail valuation.

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8. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisors, which contains, inter alia, the following:

a. Fujian Minqiao legally owns the building ownership rights for the office and retail units mentioned in note 2, and Fujian Minqiao is entitled to occupy and use these units, whilst the transfer and disposal of these units are subject to the mortgage contracts and relevant laws in the PRC; and

b. there is no material legal impediment for Fujian Minqiao to apply for title certificates for Sansheng International Center. As advised by Fujian Minqiao, the title certificates for the ancillary units and car parking spaces have not been applied.

9. In the valuation of this property, we have relied on the aforesaid legal opinion and attributed no commercial value to the ancillary units and car parking spaces of the property mentioned in note 3. However, for reference purpose, we are of the opinion that the market value of these portions as at the valuation date would be RMB34,500,000 assuming all relevant title certificates have been obtained and these ancillary units and car parking spaces could be freely transferred.

10. A summary of major certificates/approvals is shown as follows:

a. State-owned Land Use Rights Certificate Yes

b. Real Estate Title Certificate Portion

11. For the purpose of this report, the property is classified in Group II according to the purpose for which it is held, we are of the opinion that the market value of such group as at the valuation date in its existing state is set out as below:

Market value in existing state as at Group the valuation date (RMB)

Group II – Held for investment by the Project Companies 554,300,000

IV-9 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

VALUATION CERTIFICATE

Market value in existing Particulars of state as at the No. Property Description and tenure occupancy valuation date RMB

2. Project Sansheng Puyuebinjiang Project Sansheng Puyuebinjiang is located at As at the valuation date, 1,653,400,000 (三盛璞悅濱江) Hexie Road of Changle District where there are the property was under No. 288 Hexie Road some residential developments nearby. Besides, construction. Changle District the public transportation network and amenities Fuzhou City are under further improvement. Fujian Province The PRC The property occupies a parcel of land with a site area of approximately 51,955 sq.m., and will be developed into a residential and commercial complex. The property was under construction as at the valuation date and was completed in August 2020.

The property has a planned gross floor area (“GFA”) of approximately 164,907.98 sq.m., details of which are set out in note 6.

As advised by Fuzhou Shenglong, the total construction cost of the property is estimated to be approximately RMB646,000,000, of which approximately RMB633,000,000 had been incurred up to the valuation date.

The land use rights of the property have been granted for terms expiring on 10 August 2087 for residential use and 10 August 2057 for commercial use.

IV-10 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

Notes:

1. Pursuant to a State-owned Land Use Rights Grant Contract dated 2 June 2017 and 2 Supplemental Agreements dated 26 May 2017 and 6 July 2017, the land use rights of a parcel of land with a site area of approximately 51,955 sq.m. were contracted to be granted to Fuzhou Shenglong for terms of 70 years for residential use and 40 years for commercial use. Plot ratio of the property is 2.3. The total land premium was RMB930,000,000. As advised by Fuzhou Shenglong, the land premium has been fully paid.

2. Pursuant to a Real Estate Title Certificate – Min (2017) Chang Le Shi Bu Dong Chan Quan Di No. 0006326, the land use rights of a parcel of land with a site area of approximately 51,955 sq.m. have been granted to Fuzhou Shenglong for terms expiring on 10 August 2087 for residential use and 10 August 2057 for commercial use.

3. Pursuant to a Construction Work Planning Permit – Jian Zi Di No. 35018220180019 in favour of Fuzhou Shenglong, Project Sansheng Puyuebinjiang with a planned GFA of approximately 164,907.98 sq.m. has been approved for construction.

4. Pursuant to 4 Construction Work Commencement Permits – Nos. 350182201802090201, 350182201804040101, 350182201804250201 and 350182201804250301 in favour of Fuzhou Shenglong, permissions by the relevant local authority was given to commence the construction of Project Sansheng Puyuebinjiang with a total planned GFA of approximately 164,907.98 sq.m.

5. Pursuant to 3 Pre-sale Permits – (2018) Chang Jian Fang Xu Zi Di Nos. 35 and 48 and (2019) Chang Jian Fang Xu Zi Di No. 20, Fuzhou Shenglong is entitled to sell Project Sansheng Puyuebinjiang (representing a total GFA of approximately 142,881.23 sq.m.) to purchasers.

6. According to the information provided by Fuzhou Shenglong, the planned GFA of the property is set out as below:

No. of Car Usage Planned GFA Parking Space (sq.m.)

Residential 52,119.47 Resettlement housing 62,387.70 Commercial 2,214.56 Underground car parking space 33,297.70 1,170 Ancillary 14,888.55

Total: 164,907.98 1,170

7. As advised by Fuzhou Shenglong, various residential units, retail units and car parking spaces with a total GFA of approximately 118,215.42 sq.m. of the property have been pre-sold to various third parties at a total consideration of RMB1,503,200,632. Such portions of the property have not been legally and virtually transferred and therefore we have included the units in our valuation. In arriving at our opinion on the market value of the property, we have taken into account the contracted prices of such portions of the property.

IV-11 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

8. We have identified and analyzed various relevant sales evidences in the locality which have similar characteristics as the property. The unit price of these comparable properties ranges from RMB22,000 to RMB26,000 per sq.m. for residential units, RMB34,000 to RMB38,000 per sq.m. for ground floor retail units and RMB180,000 to RMB220,000 per space for car parking spaces. Appropriate adjustments and analysis are considered to the differences in location, size and other characters between the comparable properties and the property to arrive at an assumed unit rate for the property.

9. The market value of the property as if completed as at the valuation date was estimated to be RMB1,675,000,000.

10. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisors, which contains, inter alia, the following:

a. Fuzhou Shenglong has legally obtained the land use rights of the property;

b. Fuzhou Shenglong has obtained the requisite approvals in respect of the actual development stage; and

c. Fuzhou Shenglong has the rights to pre-sell portion of the property based on the Pre-sale Permits mentioned in note 5.

11. A summary of major certificates/approvals is shown as follows:

a. State-owned Land Use Rights Grant Contract Yes b. Real Estate Title Certificate (for land) Yes c. Construction Work Planning Permit Yes d. Construction Work Commencement Permit Yes e. Pre-sale Permit Yes f. Construction Work Completion and Inspection Certificate/Table/Report N/A g. Real Estate Title Certificate (for building) N/A

12. For the purpose of this report, the property is classified in Group III according to the purpose for which it is held, we are of the opinion that the market value of such group as at the valuation date in its existing state is set out as below:

Market value in existing state as at the Group valuation date (RMB)

Group III – Held under development by the Project Companies 1,653,400,000

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VALUATION CERTIFICATE

Market value in existing Particulars of state as at the No. Property Description and tenure occupancy valuation date RMB

3. Project Sansheng Puyuegongguan Project Sansheng Puyuegongguan is located at As at the valuation date, 223,000,000 (三盛璞悅公館) located at Puwei Community of Hanjiang District where the property was under Puwei Community there are some residential developments nearby. construction. Hanjiang District Besides, the public transportation network and Putian City amenities are under be further improvement. Fujian Province The PRC The property occupies a parcel of land with a site area of approximately 20,897.02 sq.m., and will be developed into a residential development. It is currently under construction and scheduled to be completed in October 2021.

The property has a planned gross floor area (“GFA”) of approximately 69,010.58 sq.m, details of which are set out in note 7.

As advised by Putian Shengxiang, the total construction cost of the property is estimated to be approximately RMB203,000,000, of which approximately RMB35,000,000 had been incurred up to the valuation date.

The land use rights of the property have been granted for a term expiring on 30 October 2089 for residential use.

IV-13 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

Notes:

1. Pursuant to a State-owned Land Use Rights Grant Contract dated 30 October 2019, the land use rights of a parcel of land with a site area of approximately 20,897.02 sq.m. were contracted to be granted to Putian Shengxiang for a term of 70 years for residential use. Plot ratio of the property is 2.6. The total land premium was RMB153,000,000. As advised by Putian Shengxiang, the land premium has been fully paid.

2. Pursuant to a Real Estate Title Certificate (for land) – Min (2019) Pu Tian Shi Bu Dong Chan Quan Di No. HJ035370, the land use rights of a parcel of land with a site area of approximately 20,897.02 sq.m. have been granted to Putian Shengxiang for a term expiring on 30 October 2089 for residential use.

3. Pursuant to a Construction Work Planning Permit – Jian Zi Di No. 350300201908009 (Han) in favour of Putian Shengxiang, Project Sansheng Puyuegongguan with a planned GFA of approximately 69,010.58 sq.m. has been approved for construction.

4. Pursuant to a Construction Work Commencement Permit – No. 350303201911290101 in favour of Putian Shengxiang, permission by the relevant local authority was given to commence the construction of Project Sansheng Puyuegongguan with a planned GFA of approximately 69,010.58 sq.m.

5. Pursuant to a Pre-sale Permit – (2020) Pu Fang Xu Zi Di No.1, Putian Shengxiang is entitled to sell portions of Project Sansheng Puyuegongguan (representing a total GFA of approximately 18,229.14 sq.m.) to purchasers.

6. Pursuant to a mortgage contract dated 13 December 2019 entered into between Putian Shengxiang and Daye Trust Co., Ltd, the land use rights of the property with a site area of approximately 20,897.02 sq.m. were subject to a mortgage for a loan amount of RMB98,000,000 expiring on 21 January 2021.

7. According to the information provided by Putian Shengxiang, the planned GFA of the property is set out as below:

No. of Car Usage Planned GFA Parking Space (sq.m.)

Residential 53,481.12 Underground car parking space 13,428.00 467 Ancillary 2,101.46

Total: 69,010.58 467

8. As advised by Putian shengxiang, various residential units with a total GFA of approximately 4,310.85 sq.m. of the property have been pre-sold to various third parties at a total consideration of RMB38,440,491. Such portions of the property have not been legally and virtually transferred and therefore we have included the units in our valuation. In arriving at our opinion on the market value of the property, we have taken into account the contracted prices of such portions of the property.

9. We have identified and analyzed various relevant sales evidences in the locality which have similar characteristics as the property. The unit price of these comparable properties ranges from RMB8,000 to RMB10,000 per sq.m. for residential units and RMB120,000 to RMB140,000 per space for car parking spaces. Appropriate adjustments and analysis are considered to the differences in location, size and other characters between the comparable properties and the property to arrive at an assumed unit rate for the property.

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10. The market value of the property as if completed as at the valuation date was estimated to be RMB491,000,000.

11. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisors, which contains, inter alia, the following:

a. Putian Shengxiang has legally obtained the land use rights of the property and is entitled to occupy and use the land parcel of the property, whilst the transfer and disposal of the land parcel are subject to the mortgage contract and relevant laws in the PRC;

b. Putian Shengxiang has obtained the requisite approvals in respect of the actual development stage ; and

c. Putian Shengxiang has the rights to pre-sell portion of the property based on the Pre-sale Permit mentioned in note 5.

12. A summary of major certificates/approvals is shown as follows:

a. State-owned Land Use Rights Grant Contract Yes b. Real Estate Title Certificate (for land) Yes c. Construction Work Planning Permit Yes d. Construction Work Commencement Permit Yes e. Pre-sale Permit Portion f. Construction Work Completion and Inspection Certificate/Table/Report N/A g. Real Estate Title Certificate (for building) N/A

13. For the purpose of this report, the property is classified in Group III according to the purpose for which it is held, we are of the opinion that the market value of such group as at the valuation date in its existing state is set out as below:

Market value in existing state as at the Group valuation date (RMB)

Group III – Held under development by the Project Companies 223,000,000

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VALUATION CERTIFICATE

Market value in existing Particulars of state as at the No. Property Description and tenure occupancy valuation date RMB

4. Project Sansheng Puyueli Project Sansheng Puyueli is located at Chifeng As at the valuation date, 172,400,000 (三盛璞悅里) located at Road of Jiangnan New District. The locality of the property was under Chifeng Road the project is well served by public transportation construction. Jiangnan New District and supporting facilities. Licheng District Quanzhou City The property occupies a parcel of land with a site Fujian Province area of approximately 16,960.30 sq.m. and will The PRC be developed into a residential and commercial complex. It is currently under construction and scheduled to be completed in June 2021.

The property has a planned gross floor area (“GFA”) of approximately 40,716.26 sq.m, details of which are set out in note 6.

As advised by Quanzhou Shengchuang, the total construction cost of the property is estimated to be approximately RMB111,000,000, of which approximately RMB8,000,000 had been incurred up to the valuation date.

The land use rights of the property have been granted for terms expiring on 16 August 2059 and 16 August 2089 for commercial and residential uses respectively.

IV-16 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

Notes:

1. Pursuant to a State-owned Land Use Rights Grant Contract dated 16 August 2019 and a Supplemental Agreement dated 16 September 2019, the land use rights of a parcel of land with a site area of approximately 16,960.30 sq.m. were contracted to be granted to Quanzhou Shengchuang for terms of 70 years for residential use and 40 years for commercial use. Plot ratio of the property is 1.8. The total land premium was RMB153,000,000. As advised by Quanzhou Shengchuang, the land premium has been fully paid.

2. Pursuant to a Real Estate Title Certificate (for land) – Min (2019) Quan Zhou Shi Bu Dong Chan Quan Zheng Di No.0062382, the land use rights of a parcel of land with a site area of approximately 16,960.30 sq.m. have been granted to Quanzhou Shengchuang for terms expiring on 16 August 2059 for commercial use and 16 August 2089 for residential use.

3. Pursuant to a Construction Work Planning Permit – Jian Zi Di No. 350502202030001 in favour of Quanzhou Shengchuang, Project Sansheng Puyueli with a planned GFA of approximately 40,716.26 sq.m has been approved for construction.

4. Pursuant to 2 Construction Work Commencement Permits – Nos. 350502202001100000, and 350502201911120000 in favour of Quanzhou Shengchuang, permissions by the relevant local authority were given to commence the construction of Project Sansheng Puyueli with a total planned GFA of approximately 39,398.63 sq.m.

5. Pursuant to a Pre-sale Permit – (Quan Zhu) Yu Shou (2020) Di No. 7, Quanzhou Shengchuang is entitled to sell portions of Project Sansheng Puyueli (representing a total GFA of approximately 28,871.04 sq.m.) to purchasers.

6. According to the information provided by Quanzhou Shengchuang, the planned GFA of the property is set out as below:

No. of Car Usage Planned GFA Parking Space (sq.m.)

Residential 26,062.76 Retail 509.14 Kindergarten 3,179.02 Underground car parking space 8,634.93 262 Ancillary 2,330.41

Total: 40,716.26 262

7. Our valuation has been made on the following basis and analysis:

a. we have identified and analyzed various relevant sales evidences in the locality which have similar characteristics as the property. The unit price of these comparable properties ranges from RMB9,000 to RMB12,000 per sq.m. for residential units, RMB26,000 to RMB33,000 per sq.m. for ground floor retail units and RMB150,000 to RMB220,000 per space for car parking spaces. Appropriate adjustments and analysis are considered to the differences in location, size and other characters between the comparable properties and the property to arrive at an assumed unit rate for the property.

b. we have also made reference to sales prices of land within the locality which have the similar characteristics as to the property. The accommodation value of these comparable land sites ranges from about RMB4,500 to RMB5,500 per sq.m. Appropriate adjustments and analysis are considered to the differences in location, size and other characters between the comparable properties and the property to arrive at our assumed accommodation value.

IV-17 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

8. The market value of the property as if completed as at the valuation date was estimated to be RMB316,000,000.

9. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisors, which contains, inter alia, the following:

a. Quanzhou Shengchuang has legally obtained the land use rights of the property;

b. Quanzhou Shengchuang has obtained the requisite approvals in respect of the actual development stage; and

c. Quanzhou Shengchuang has the rights to pre-sell portions of the property based on the Pre-sale Permit mentioned in note 5.

10. A summary of major certificates/approvals is shown as follows:

a. State-owned Land Use Rights Grant Contract Yes b. Real Estate Title Certificate (for land) Yes c. Construction Work Planning Permit Yes d. Construction Work Commencement Permit Yes e. Pre-sale Permit Portion f. Construction Work Completion and Inspection Certificate/Table/Report N/A g. Real Estate Title Certificate (for building) N/A

11. For the purpose of this report, the property is classified in Group III according to the purpose for which it is held, we are of the opinion that the market value of such group as at the valuation date in its existing state is set out as below:

Market value in existing state as at the Group valuation date (RMB)

Group III – Held under development by the Project Companies 172,400,000

IV-18 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

VALUATION CERTIFICATE

Market value in existing Particulars of state as at the No. Property Description and tenure occupancy valuation date RMB

5. Project Sansheng Metropolis Project Sansheng Metropolis is located at As at the valuation date, 1,597,000,000 (三盛都會城) Chencheng East 7th Road of Longquanyi District the unsold units of Phases No. 733 Chencheng East 7th Road where there are some residential developments I and III were vacant for Longquanyi District nearby. Besides, the public transportation sale, Phase IV was under Chengdu City network and amenities are under further construction, and Phases II Sichuan Province improvement. and V were bare land. The PRC It occupies a parcel of land with a site area of approximately 133,333.33 sq.m. and will be developed into a residential and commercial complex in five phases. Phases I and III of this project were completed in 2016, Phase IV is currently under construction and scheduled to be completed in October 2020, and the construction works of Phases II and V had not been commenced as at the valuation date.

The property comprises the unsold units of Phases I and III, and the whole of Phases II, IV and V of this project. Details of the GFA/planned GFA of the property are set out in note 8.

As advised by Chengdu Jisheng, the total construction cost of Phase IV is estimated to be approximately RMB679,000,000, of which approximately RMB640,000,000 had been incurred up to the valuation date.

The land use rights of the property have been granted for terms expiring on 29 December 2077 for residential use and 29 December 2047 for commercial use.

IV-19 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

Notes:

1. Pursuant to a State-owned Land Use Rights Certificate – Long Guo Yong (2008) Di No. 99080, the land use rights of a parcel of land with a site area of approximately 133,333.33 sq.m. have been granted to Chengdu Jisheng for terms expiring on 29 December 2077 for residential use and 29 December 2047 for commercial use.

2. Pursuant to 6 Construction Work Planning Permits – Jian Zi Di Nos. 510112201330008, 510112201430017, 510112201330056, 510112201530015, 510112201530016 and 51011220173003 in favour of Chengdu Jisheng, Project Sansheng Metropolis with a total planned GFA of approximately 442,827.24 sq.m. has been approved for construction.

3. Pursuant to 10 Construction Work Commencement Permits – Nos. 510112201303280101, 510112201303280201, 510112201406230101, 510112201403070101, 510112201401080101, 510112201710100101, 510112201702100101S, 510112201702100201S, 510112201704100101 and 51011220170050201 in favour of Chengdu Jisheng, permissions by the relevant local authority were given to commence the construction of Project Sansheng Metropolis with a total planned GFA of approximately 442,827.24 sq.m.

4. Pursuant to 17 Pre-sale Permits, Chengdu Jisheng is entitled to sell portions of Project Sansheng Metropolis (representing a total GFA of approximately 363,489.60 sq.m.) to purchasers.

5. Pursuant to 3 Construction Work Completion and Inspection Reports in favour of Chengdu Jisheng, the construction of Phases I and III of Project Sansheng Metropolis (representing a total GFA of approximately 246,914.15 sq.m.) has been completed and passed the inspection acceptance.

6. Pursuant to 8 Real Estate Title Certificates and 10 Building Ownership Certificates, portions of Project Sansheng Metropolis with a total GFA of approximately 204,309.16 sq.m. (including the property in Phases I and II) are owned by Chengdu Jisheng.

7. Pursuant to a mortgage contract entered into between Chengdu Jisheng and China Orient Asset Management Co., Ltd. Shanghai Branch, the land use rights of the project with a site area of approximately 133,333.33 sq.m. were subject to a mortgage for a loan amount of RMB450,000,000 expiring on 14 January 2021.

IV-20 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

8. According to the information provided by Chengdu Jisheng, the GFA/planned GFA of the property is set out as below:

GFA/planned No. of Car Part Usage GFA Parking Space (sq.m.)

Phases I and III (unsold portion only) Residential 1,820.82 Retail 12,464.78 Apartment 3,324.72 Underground car parking space 27,806.48 974 Sub-total: 45,416.80 974

Phase IV Residential 127,566.56 Retail 9,699.89 Underground car parking space 36,750.72 1,078 Ancillary 8,755.96 Sub-total: 182,773.13 1,078

Phase II and Retail 26,080.00 Phase V Office 64,693.56 Hotel 27,572.50 Underground car parking space 6,183.80 174 Ancillary 12,912.15 Sub-total: 137,442.01 174

Grand total: 365,631.94 2,226

9. As advised by Chengdu Jisheng, various residential units, retail units, apartments and car parking spaces with a total GFA of approximately 26,917.27 sq.m. of Phases I and III of the property have been pre-sold to various third parties at a total consideration of RMB104,172,057. Such portions of the property have not been legally and virtually transferred and therefore we have included the units in our valuation. In arriving at our opinion on the market value of the property, we have taken into account the contracted prices of such portions of the property.

10. As advised by Chengdu Jisheng, various residential units, retail units and apartments with a total GFA of approximately 134,316.12 sq.m. of Phase IV of the property have been pre-sold to various third parties at a total consideration of RMB937,124,192. Such portions of the property have not been legally and virtually transferred and therefore we have included the units in our valuation. In arriving at our opinion on the market value of the property, we have taken into account the contracted prices of such portions of the property.

11. Our valuation has been made on the following basis and analysis:

a. We have identified and analyzed various relevant sales evidences in the locality which have similar characteristics as the property. The unit price of these comparable properties ranges from RMB8,500 to RMB11,000 per sq.m. for residential units, RMB12,000 to RMB20,000 per sq.m. for ground floor retail units and RMB60,000 to RMB90,000 per space for car parking spaces. Appropriate adjustments and analysis are considered to the differences in location, size and other characters between the comparable properties and the property to arrive at an assumed unit rate for the property.

b. we have also made reference to sales prices of land within the locality which have the similar characteristics as to the property. The accommodation value of these comparable land sites ranges from about RMB3,500 to RMB4,500 per sq.m. Appropriate adjustments and analysis are considered to the differences in location, size and other characters between the comparable properties and the property to arrive at our assumed accommodation value.

IV-21 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

12. The market value of Phase IV of the property as if completed as at the valuation date was estimated to be RMB1,018,000,000.

13. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisors, which contains, inter alia, the following:

a. Chengdu Jisheng has legally obtained the land use rights of the property and is entitled to occupy and use the land parcel of the property, whilst the transfer and disposal of the land parcel are subject to relevant mortgage contracts and relevant laws in the PRC;

b. Chengdu Jisheng has obtained the requisite approvals in respect of the actual development stage;

c. Chengdu Jisheng has the rights to pre-sell portion of the property based on the Pre-sale Permits mentioned in note 4; and

d. Chengdu Jisheng has legally owned the building ownership rights for the unsold portions registered in the title certificates mentioned in note 6, and Chengdu Jisheng is entitled to occupy, use, earn income from and dispose of these units.

14. A summary of major certificates/approvals is shown as follows:

a. State-owned Land Use Rights Certificate Yes b. Construction Work Planning Permit Portion c. Construction Work Commencement Permit Portion d. Pre-sale Permit Portion e. Construction Work Completion and Inspection Certificate/Table/Report Portion f. Building Ownership Certificate Portion

15. For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the market value of each group as at the valuation date in its existing state is set out as below:

Market value in existing state as at the Group valuation date (RMB)

Group I – Held for sale by the Project Companies 173,800,000 Group III – Held under development by the Project Companies 926,800,000 Group IV – Held for future development by the Project Companies 496,400,000

Total: 1,597,000,000

IV-22 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

VALUATION CERTIFICATE

Market value in existing Particulars of state as at the No. Property Description and tenure occupancy valuation date RMB

6. A parcel of bare land located The property is located at the south-eastern part As at the valuation date, 1,218,000,000 at the eastern side of Beijing Road of Xuzhou City. The locality is newly developed the property was bare land and the northern side of area and the public transportation network and for future development. Xiangjiang Road supporting facilities are under further Tongshan District improvement. Xuzhou City Jiangsu Province The property comprises a parcel of land with the PRC a site area of approximately 118,546 sq.m. which is currently vacant.

The property has a plot ratio accountable gross floor area of approximately 343,783 sq.m.

The land use rights of the property have been granted for terms expiring on 14 July 2051 for commercial use and 14 July 2081 for residential use.

Notes:

1. Pursuant to a Real Estate Title Certificate (for land) – Su (2020) Tong Shan Qu Bu Dong Chan Quan Di No. 0002164, the land use rights of a parcel of land with a site area of approximately 118,546 sq.m. have been granted to Jiangsu Zheguang for terms expiring on 14 July 2051 for commercial use and 14 July 2081 for residential use.

2. In our valuation, we have made reference to sales prices of land within the locality which have the similar characteristics as to the property. The accommodation value of these comparable land sites ranges from about RMB3,200 to RMB4,200 per sq.m. Appropriate adjustments and analysis are considered to the differences in location, size and other characters between the comparable properties and the property to arrive at our assumed accommodation value.

3. Pursuant to 2 mortgage contracts entered into between Jiangsu Zheguang and China Orient Asset Management Co., Ltd., the land use rights of the property with a site area of approximately 118,546 sq.m. were subject to 2 mortgages for a total loan amount of RMB698,000,000 expiring on 21 November 2022.

IV-23 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

4. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisors, which contains, inter alia, the following:

a. Jiangsu Zheguang has legally obtained the land use rights of the property and is entitled to occupy and use the land parcel of the property, whilst the transfer and disposal of the land parcel are subject to the mortgage contracts and relevant laws in the PRC; and

b. as advised by Jiangsu Zheguang, Jiangsu Zheguang has not been held accountable or punished by the relevant government departments due to the delayed commencement and completion for the construction of the property.

5. A summary of major certificates/approvals is shown as follows:

a. State-owned Land Use Rights Certificate/Real Estate Title Certificate (for land) Yes b. Construction Work Planning Permit N/A c. Construction Work Commencement Permit N/A d. Pre-sale Permit N/A e. Construction Work Completion and Inspection Certificate/Table N/A f. Real Estate Title Certificate (for building) N/A

6. For the purpose of this report, the property is classified in Group IV according to the purpose for which it is held, we are of the opinion that the market value of such group as at the valuation date in its existing state is set out as below:

Market value in existing state as at the Group valuation date (RMB)

Group IV – Held for future development by the Project Companies 1,218,000,000

IV-24 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

VALUATION CERTIFICATE

Market value in existing Particulars of state as at the No. Property Description and tenure occupancy valuation date RMB

7. Project Sansheng International Project Sansheng International Plaza is located As at the valuation date, 1,048,700,000 Plaza (三盛國際廣場) at Hanjiang Middle Road of Hanjiang District. Part A of the property was No. 358 Hanjiang Middle Road The locality is well served by public for sale. Hanjiang District transportation and supporting facilities. Yangzhou City Portions of Part B were Jiangsu Province Project Sansheng International Plaza is a leased to various tenants The PRC development complex with residential, retail, for retail and office uses, office, hotel, apartment and ancillary whilst the remaining components. The project was completed in 2016. portion of Part B was vacant. The property comprises the unsold residential and retail units of the project held for sale Part C was held by (“Part A”), the shopping mall and office units Yangzhou Sansheng for of the project held for investment (“Part B”) hotel use and managed by and the hotel of the project (“Part C”). Details Hilton Hotel Management of the gross floor areas (“GFA”) are set out in (Shanghai) Co., Ltd. note 4.

The land use rights of the property have been granted for terms expiring on 11 May 2052 for commercial use and 11 May 2082 for residential use.

Notes:

1. Pursuant to a State-owned Land Use Rights Certificate – Yang Guo Yong (2012) Di No. 0314, the land use rights of Project Sansheng International Plaza (including the property) with a site area of approximately 39,813 sq.m. have been granted to Yangzhou Sansheng for terms expiring on 11 May 2052 for commercial use and 11 May 2082 for residential use.

2. Pursuant to 113 Real Estate Title Certificates, the property with a total GFA of approximately 144,707.59 sq.m are owned by Yangzhou Sansheng.

3. Pursuant to 108 Tenancy Agreements, portions of Part B of the property with a total net lettable area of approximately 31,650.50 sq.m. were leased to various tenants with the latest expiry date on 23 December 2034 at a current monthly unit rent ranging from RMB34 to RMB510 per sq.m., inclusive of VAT and exclusive of management fee.

IV-25 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

4. According to the information provided by the Group, the gross floor area of the property is set out as below:

No. of Car Part Usage GFA Parking Space (sq.m.)

Part A Residential 83.45 Retail 2,503.45 Sub-total: 2,586.90

Part B Shopping Mall 80,203.40 Office 7,464.40 Underground car parking space 32,911.06 700 Sub-total: 120,578.86 700

Part C Hotel 21,541.83 Sub-total: 21,541.83

Grand-total: 144,707.59 700

5. Pursuant to 4 mortgage contracts, portions of the property with a total GFA of approximately 141,456.30 sq.m. were subject to the mortgages for a total loan amount of RMB2,303,865,700 with the expiry dates between 5 January 2021 and 20 December 2024.

6. Our valuation has been made on the following basis and analysis:

a. For Part A of the property in Group I, we have identified and analyzed various relevant sales evidences in the locality which have similar characteristics as the property. The unit price of these comparable properties ranges from RMB14,900 to RMB16,200 per sq.m. for residential units, RMB26,800 to RMB30,400 per sq.m. for ground floor retail units. Appropriate adjustments and analysis are considered to the differences in location, size and other characters between the comparable properties and the property to arrive at an assumed unit rate for the property;

b. For Part B of the property in Group II, we have considered the actual rents in the existing tenancy agreements and also compared with similar developments which are located in the similar areas as the shopping mall of the subject property, for the calculation of market rent in considering (1) the reversionary rental income after the expiry of the existing leases for occupied area, and (2) the rental income of vacant area;

c. the monthly unit rents of the comparable properties are in the range of RMB35 to RMB50 per sq.m. for office units, RMB180 to RMB280 per sq.m. for ground floor retail units and RMB200 to RMB250 per space for car parking spaces, exclusive of VAT and management fees. Appropriate adjustments and analysis are considered to the differences in location, decoration and other characters between the comparable properties and the properties to arrive at the average market rent;

d. based on our research, the stabilized market yield of similar properties is in the range of 3% to 6% as at the valuation date. Considering the location and characteristics of the property, we have applied a market yield of 3% in the car parking space valuation, 5.0% in the office valuation and 6% in the retail valuation; and

e. the main parameters and assumptions of the valuation for Part C of the property in Group V are considered as below:

Average Daily Room Occupancy rate Stabilized Stabilized Rate in the 1st year in the 1st year occupancy rate growth rate Discount rate

450 40% 61% 3.0% 8.0%

IV-26 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

7. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisors, which contains, inter alia, the following:

a. Yangzhou Sansheng legally owns the building ownership rights of the property, except for the mortgaged portions, Yangzhou Sansheng is entitled to occupy, use, earn income from and dispose of the portion; and

b. for the mortgaged portions of the property, Yangzhou Sansheng is entitled to occupy and use the portions, whilst the transfer and disposal of the portions are subject to the mortgage contracts and relevant laws in the PRC.

8. A summary of major certificates/approvals is shown as follows:

a. State-owned Land Use Rights Certificate Yes

b. Real Estate Title Certificate Yes

9. For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the market value of each group as at the valuation date in its existing state is set out as below:

Market value in existing state as at the Group valuation date (RMB)

Group I – Held for sale by the Project Companies 67,000,000 Group II – Held for investment by the Project Companies 708,900,000 Group V – Held for hotel operation by the Project Companies 272,800,000

Total: 1,048,700,000

IV-27 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

VALUATION CERTIFICATE

Market value in existing Particulars of state as at the No. Property Description and tenure occupancy valuation date RMB

8. Project Sansheng Puyue Mansion Project Sansheng Puyue Mansion is located at As at the valuation date, 642,100,000 (三盛璞悅府) located at the eastern side of Jinping Avenue and the the property was under the eastern side of Jinping Avenue western side of Caiping Road Chengdong Street, construction. and the western side of Wenling City. The locality is well served by Caiping Road public transportation and supporting facilities. Chengdong Street Wenling City It occupies a parcel of land with a site area of Zhejiang Province approximately 35,631 sq.m. and will be The PRC developed into a residential development with ancillary commercial and office components. The property is currently under construction and scheduled to be completed in August 2022.

Details of planned gross floor areas (“GFA”) of the property are set out in note 7.

As advised by Wenling Rongfa, the total construction cost is estimated to be approximately RMB517,000,000, of which approximately RMB109,000,000 had been incurred up to the valuation date.

The land use rights of the property have been granted for terms expiring on 5 December 2089 for residential use and 5 December 2059 for commercial use.

IV-28 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

Notes:

1. Pursuant to a State-owned Land Use Rights Grant Contract dated 5 September 2019 and a Supplemental Agreement dated 16 September 2019, the land use rights of a parcel of land with a site area of approximately 35,631 sq.m. were contracted to be granted to Wengling Rongfa for terms of 70 years for residential use and 40 years for commercial use. Plot ratio of the property is 2.5. The total land premium was RMB455,000,000. As advised by Wenling Rongfa, the land premium has been fully paid.

2. Pursuant to a Real Estate Title Certificate (for land) – Zhe (2019) Wen Ling Shi Bu Dong Chan Quan Di No. 0046786, the land use rights of a parcel of land with a site area of approximately 35,631 sq.m. have been granted to Wengling Rongfa for terms expiring on 5 December 2089 for residential use and 5 December 2059 for commercial use.

3. Pursuant to a Construction Work Planning Permit – Jian Zi Di (2019) No. 1150030 in favour of Wenling Rongfa, Project Sansheng Puyue Mansion with a planned GFA of approximately 117,360.87 sq.m. has been approved for construction.

4. Pursuant to a Construction Work Commencement Permit – No. 31081201912260100 in favour of Wenling Rongfa, permission by the relevant local authority was given to commence the construction of Project Sansheng Puyue Mansion with a planned GFA of approximately 117,360.87 sq.m.

5. Pursuant to a Pre-sale Permit, Wenling Rongfa is entitled to sell portions of Project Sansheng Puyue Mansion (representing a total GFA of approximately 32,511.47 sq.m.) to purchasers.

6. Pursuant to a mortgage contract entered into between Wenling Rongfa and Huaxia Bank Co., Ltd. Fuzhou Financial Street Sub-branch, the land use rights of the property with a site area of approximately 35,631 sq.m. were subject to a mortgage for a loan amount of RMB450,000,000 expiring on 19 October 2020.

7. According to the information provided by Wenling Rongfa, the planned GFA of the property is set out as below:

No. of Car Usage Planned GFA Parking Space (sq.m.)

Residential 62,352.78 Retail & Office 25,499.75 Underground car parking space 13,894.51 588 Ancillary 15,613.83

Total: 117,360.87 588

8. Our valuation has been made on the following basis and analysis:

a. we have identified and analyzed various relevant sales evidences in the locality which have similar characteristics as the property. The unit price of these comparable properties ranges from RMB15,000 to RMB20,000 per sq.m. for residential units and RMB130,000 to RMB180,000 per space for car parking spaces. Appropriate adjustments and analysis are considered to the differences in location, size and other characters between the comparable properties and the property to arrive at an assumed unit rate for the property; and

b. we have also made reference to sales prices of land within the locality which have the similar characteristics as the property. The accommodation value of these comparable land sites ranges from about RMB5,000 to RMB6,000 per sq.m. Appropriate adjustments and analysis are considered to the differences in location, size and other characters between the comparable properties and the property to arrive at our assumed accommodation value.

IV-29 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

9. Pursuant to a repurchase agreement, all retail and office units of the project will be repurchased by Xiaonan Village, Xiaobei Village, Shanhe Stock Economic Cooperative of Chengdong Street, Wenling City at a price of RMB5,500 per sq.m.

10. The market value of the property as if completed as at the valuation date was estimated to be RMB1,249,000,000.

11. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisors, which contains, inter alia, the following:

a. Wenling Rongfa has legally obtained the land use rights of the property and is entitled to occupy and use the land parcel of the property, whilst the transfer and disposal of the land parcel are subject to the mortgage contract and relevant laws in the PRC;

b. Wenling Rongfa has obtained the requisite approvals in respect of the actual development stage ; and

c. Wenling Rongfa has the rights to pre-sell portion of the property based on the Pre-sale Permit mentioned in note 5.

12. A summary of major certificates/approvals is shown as follows:

a. State-owned Land Use Rights Grant Contract Yes b. Real Estate Title Certificate (for land) Yes c. Construction Work Planning Permit Yes d. Construction Work Commencement Permit Yes e. Pre-sale Permit Portion f. Construction Work Completion and Inspection Certificate/Table N/A g. Real Estate Title Certificate (for building) N/A

Market value in existing state as at the Group valuation date (RMB)

Group III – Held under development by the Project Companies 642,100,000

IV-30 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

VALUATION CERTIFICATE

Market value in existing Particulars of state as at the No. Property Description and tenure occupancy valuation date RMB

9. Project Sansheng International Project Sansheng International Coast is located As at the valuation date, 3,006,300,000 Coast (三盛國際海岸) at Linghai West Road, Wenquan Street Office of the unsold units of the located at Jimo District. The locality is well served by Completed Part were Linghai West Road public transportation and supporting facilities. vacant for sale, the CIP Wenquan Street Office were under construction, Jimo District It occupies 9 parcels of land with a total site area and the Land Part was bare Qingdao City of approximately 532,518 sq.m. and will be land for future Shandong Province developed into a high-end residential development. The PRC development with ancillary commercial component. The project is constructed in six phases. Phase I and part of Phase II have been completed in July 2017 (“Completed Part”). Phases III to VI are currently under construction and scheduled to be completed in February 2022 (“CIP”). The remaining part of Phase II is currently vacant Land (“Land Part”).

The property comprises the unsold units of the Completed Part, CIP and Land Part of this project. Details of the gross floor areas (“GFA”) or planned GFA of the property are set out in note 6.

As advised by Qingdao Haishang, the total construction cost of the CIP is estimated to be approximately RMB3,378,000,000, of which approximately RMB1,301,000,000 had been incurred up to the valuation date.

The land use rights of the property have been granted for terms expiring on 3 January 2080 for residential use and 3 January 2050 for commercial use.

IV-31 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

Notes:

1. Pursuant to 9 Real Estate Title Certificates (for land) – Ji Fang Di Quan Shi Zi Nos. 201473418, 201473556, Lu (2016) Jimo Real Estate Nos. 0015082, 0015087, 0015081, Lu (2017) Jimo Real Estate Property Nos. 0011619, 0011620, 00116332 and 00116333, the land use rights of 9 parcel of land with a total site area of approximately 532,518 sq.m. have been granted to Qingdao Haishang for terms expiring on 3 January 2080 for residential use and 3 January 2050 for commercial use.

2. Pursuant to 9 Construction Work Planning Permits – Jian Zi Di Nos. 370282201309040101, 370282201505290101, 370282LSGG201709280301, 370282LSGG201709280201, 370282LSGG201709280101, 370282LG201909290301, 370282LG201807130101, 370282LG201808130101, and 370282LG202003200101 in favour of Qingdao Haishang, Project Sansheng International Coast with a total planned GFA of approximately 879,620.35 sq.m. has been approved for construction.

3. Pursuant to 16 Construction Work Commencement Permits – Nos. 370282201310300301, 370282201310300201, 370282201310300101, Ji Jian Lan Gui 370282201508210101, Ji Jian Lan Gui 370282201604290101, Ji Jian Lan Gui 370282201801120101, Ji Jian Lan Gui 370282201801120201, Ji Jian Lan Gui 370282201712200101, Ji Jian Lan Gui 370282201712200201, Ji Jian Lan Gui 370282201712200301, Ji Jian Lan Gui 370282201711070101, Ji Jian Lan Gui 370282201910280101, Ji Jian Lan Gui 370282201812200101, Ji Jian Lan Gui 370282201809030101, Ji Jian Lan Gui 370282201812200201 and Ji Jian Lan Gui 370282202004140201 in favour of Qingdao Haishang, permissions by the relevant local authority were given to commence the construction of Project Sansheng International Coast with a total planned GFA of approximately 879,620.35 sq.m.

4. Pursuant to 29 Pre-sale Permits, Qingdao Haishang is entitled to sell portions of Project Sansheng International Coast (representing a total planned GFA of approximately 414,227.40 sq.m.) to purchasers.

5. Pursuant to 38 Construction Work Completion acceptance record form/certificate in favour of Qingdao Haishang, the construction of the Completed Part of Project Sansheng International Coast (representing a total GFA of approximately 97,584.63 sq.m.) has been completed and passed the inspection acceptance.

6. According to the information provided by Qingdao Haishang, the GFA/planned GFA of the property is set out as below:

GFA/planned No. of Car Part Usage GFA Parking Space (sq.m.)

Completed Part (unsold portion only) Villa 2,837.02 (Phases I and II) Retail 5,923.10 Underground car parking space 48,949.00 541 Sub-total: 57,709.12 541

CIP (Phases III to VI) Residential 357,760.51 Villa 92,871.54 Retail 5,792.45 Underground car parking space 136,509.03 5,094 Ancillary 72,398.07 Sub-total: 665,331.60 5,094

Land Part (portion of Phase II) Villa 5,082.36 Sub-total: 5,082.36

Total: 728,123.08 5,635

IV-32 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

7. As advised by Qingdao Haishang, various residential units and villa units with a total GFA of approximately 1,324.52 sq.m. of the Completed Part of the property have been pre-sold to various third parties at a total consideration of RMB21,398,362. Such portions of the property have not been legally and virtually transferred and therefore we have included the units in our valuation. In arriving at our opinion on the market value of the property, we have taken into account the contracted prices of such portions of the property.

8. As advised by Qingdao Haishang, various residential units, villa units and retail units with a total GFA of approximately 290,405.62 sq.m. of the CIP of the property have been pre-sold to various third parties at a total consideration of RMB3,964,005,943. Such portions of the property have not been legally and virtually transferred and therefore we have included the units in our valuation. In arriving at our opinion on the market value of the property, we have taken into account the contracted prices of such portions of the property.

9. Our valuation has been made on the following basis and analysis:

a. have identified and analyzed various relevant sales evidences in the locality which have similar characteristics as the property. The unit price of these comparable properties ranges from RMB12,000 to RMB13,000 per sq.m. for residential units, RMB16,000 to RMB17,000 per sq.m. for villa units, RMB16,000 to RMB18,000 per sq.m. for retail units and RMB80,000 per space for car parking spaces. Appropriate adjustments and analysis are considered to the differences in location, size and other characters between the comparable properties and the property to arrive at an assumed unit rate for the property; and

b. we have also made reference to sales prices of land within the locality which have the similar characteristics as the property. The accommodation value of these comparable land sites ranges from about RMB1,900 to RMB2,500 per sq.m. Appropriate adjustments and analysis are considered to the differences in location, size and other characters between the comparable properties and the property to arrive at our assumed accommodation value.

10. The market value of the CIP of the property as if completed as at the valuation date was estimated to be RMB5,845,000,000.

11. Pursuant to a mortgage contract entered into between Qingdao Haishang and China Construction Bank Corporation Qingdao Yangcheng Branch, the land use rights of a parcel of land of the property with a site area of approximately 94,565 sq.m. was subject to a mortgage for a loan amount of RMB132,000,000 expiring on 13 May 2021.

12. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisors, which contains, inter alia, the following:

a. Qingdao Haishang has legally obtained the land use rights of the property and is entitled to occupy and use the land parcels of the property, whilst the transfer and disposal of the land parcels are subject to the mortgage contract and relevant laws in the PRC;

b. Qingdao Haishang has obtained the requisite approvals in respect of the actual development stage; and

c. Qingdao Haishang has the rights to pre-sell portion of the property based on the Pre-sale Permits mentioned in note 4.

IV-33 APPENDIX IV VALUATION REPORT OF THE TARGET PROPERTIES

13. A summary of major certificates/approvals is shown as follows:

a. State-owned Land Use Rights Grant Contract Yes b. Real Estate Title Certificate(for land) Yes c. Construction Work Planning Permit Yes d. Construction Work Commencement Permit Yes e. Pre-sale Permit Portion f. Construction Work Completion and Inspection Certificate/Table Portion g. Real Estate Title Certificate (for building) N/A

14. For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the market value of each group as at the valuation date in its existing state is set out as below:

Market value in existing state as at the Group valuation date (RMB)

Group I – Held for sale by the Project Companies 183,200,000 Group III – Held under development by the Project Companies 2,812,000,000 Group IV – Held for future development by the Project Companies 11,100,000

Total: 3,006,300,000

IV-34 APPENDIX V GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

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

2. SHARE CAPITAL

The authorised and issued share capital of the Company, as at the Latest Practicable Date and immediately after allotment and issue of 49,480,000 Consideration Shares at the issue price of HK$7.02 per Consideration Share (assuming there is no other change in the issue share capital of the Company since the Latest Practicable Date) will be as follows:

Authorised: HK$

2,000,000,000 Shares of HK$0.10 each 200,000,000

Issued and fully paid or to be credited as fully paid: HK$

441,114,000 Shares in issue as at the Latest Practicable Date 44,111,400 49,480,000 Consideration Shares to be allotted and 4,948,000 issued under the Agreement

490,594,000 Shares of HK$0.10 each 49,059,400

V-1 APPENDIX V GENERAL INFORMATION

3. DISCLOSURE OF INTERESTS

(a) Directors’ and chief executive’s interests in the Shares, underlying Shares and debentures of the Company

As at the Latest Practicable Date, the Directors’ and the chief executive’s interest and short positions in the Shares, underlying Shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), (i) as notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) as recorded in the register required to be kept under Section 352 of the SFO; or (iii) as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (“Model Code”) as set out in Appendix 10 to the Listing Rules, were as follows:

Long position in the Shares

Approximate Number of percentage of Name of Director Nature of interest Shares held issued Shares 3

Mr. Lin Interest of controlled corporation 367,828,127 1 74.98% Ms. Cheng2 Interest of spouse 367,828,127 74.98%

Notes:

1. Mega Regal is interested in 318,348,127 Shares and is wholly-owned by Modern Times Development Limited (“Modern Times”), which is in turn wholly-owned by Mr. Lin. By virtue of the SFO, Mr. Lin is deemed to be interested in the same parcel of Shares in which Mega Regal is interested in. Pursuant to the Agreement, 49,480,000 new Shares are conditionally proposed to be allotted and issued as Consideration Shares to Mega Regal. Therefore, together with the 318,348,127 existing Shares in which Mr. Lin is interested in, as at the Latest Practicable Date, Mr. Lin is interested in a total of 367,828,127 Shares. The percentage figure of 74.98% takes into account the additional issuance of the Consideration Shares.

2. Ms. Cheng is the spouse of Mr. Lin. By virtue of the SFO, Ms. Cheng is deemed to be interested in the same parcel of Shares in which Mr. Lin is interested in.

3. As at the Latest Practicable Date, the total number of Shares in issue was 441,114,000.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests or short positions in the Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which had to be (i) notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) recorded in the register required to be kept under Section 352 of the SFO; or (iii) notified to the Company and the Stock Exchange pursuant to the Model Code.

V-2 APPENDIX V GENERAL INFORMATION

(b) Interests of Shareholders discloseable under the SFO

As at the Latest Practicable Date, the following persons (other than a Director or chief executive of the Company) had an interest or short position in the Shares and underlying Shares of the Company (i) as disclosed to the Company and the Stock Exchange under the provisions of Division 2 and 3 of Part XV of the SFO; or (ii) as recorded in the register required to be kept under Section 336 of the SFO or notified to the Company; or (iii) were directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group:

Long position in the Shares

Approximate Number of percentage of Name Nature of interest Shares held issued Shares 3

Mega Regal Beneficial owner 367,828,127 1 74.98%

Modern Times Interest of controlled 367,828,127 1 74.98% corporation

Dongxing Securities Person having security 234,231,775 2 53.10% (Hong Kong) Financial interest in Shares Holdings Limited Beneficial owner 17,236,625 3.91%

Dongxing Securities Co., Ltd Interest of controlled 251,468,400 3 57.01% corporation

China Orient Asset Interest of controlled 251,468,400 3 57.01% Management Corporation corporation

Springboard Holdings Limited Beneficial owner 41,784,975 4 9.47%

Mr. Lau Luen Hung, Thomas Interest of controlled 41,784,975 4 9.47% corporation

Notes:

1. Mega Regal is interested in 318,348,127 Shares. Pursuant to the Agreement, 49,480,000 new Shares are conditionally proposed to be allotted and issued as Consideration Shares to Mega Regal. Therefore, together with the 318,348,127 existing Shares in which Mega Regal is interested in, as at the Latest Practicable Date, Mega Regal is interested in a total of 367,828,127 Shares. Mega Regal is wholly-owned by Modern Times, which is in turn wholly-owned by Mr. Lin. By virtue of the SFO, Mr. Lin and Modern Times are deemed to be interested in the same parcel of Shares in which Mega Regal is interested in. The percentage figure of 74.98% takes into account the additional issuance of the Consideration Shares.

2. Dongxing Securities (Hong Kong) Financial Holdings Limited (“DSHK”) is the chargee of these Shares.

3. DSHK is wholly-owned by Dongxing Securities Co., Ltd (“DSCL”), which is in turn owned as to 52.74% by China Orient Asset Management Corporation (“China Orient”). By virtue of the SFO, DSCL and China Orient are deemed to be interested in the same parcel of Shares in which DSHK is interested in.

V-3 APPENDIX V GENERAL INFORMATION

4. Springboard Holdings Limited (“Springboard”) is wholly-owned by Mr. Lau Luen Hung, Thomas (“Mr. Lau”). By virtue of the SFO, Mr. Lau is deemed to be interested in the same parcel of Shares in which Springboard is interested in.

5. As at the Latest Practicable Date, the total number of Shares in issue was 441,114,000.

Save as disclosed above, as at the Latest Practicable Date, no persons (other than a Director or the chief executive of the Company) had an interest or short position in the Shares and underlying Shares of the Company (i) as disclosed to the Company and the Stock Exchange under the provisions of Division 2 and 3 of Part XV of the SFO; or (ii) as recorded in the register required to be kept under Section 336 of the SFO or notified to the Company; or (iii) were directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group.

4. DIRECTORS’ INTERESTS IN CONTRACT OR ARRANGEMENT

(i) Permitted Indemnity

Pursuant to the Company’s articles of association, every Director shall be entitled to be indemnified out of the assets of the Company against all losses or liabilities which he/she may sustain or incur in or about the execution of the duties of his/her office or otherwise in relation thereto. For further details, please refer to the annual report for FY2019 and the articles of association of the Company.

(ii) Revolving Facilities

Revolving facilities in the aggregate principal amount of RMB4,500 million were provided by Fuzhou Sansheng to the Group on 18 August 2017 and 28 September 2017. Such revolving facilities are renewed and extended two more years to 18 August 2022 and 28 September 2022, respectively, from the original maturity dates of 18 August 2020 and 28 September 2020, respectively. Fuzhou Sansheng is a company indirectly wholly-owned by Mr. Lin and Ms. Cheng.

For further details, please refer to the annual report of the Company for FY2019.

(iii) Joint Venture Formation

On 7 July 2017, Fuzhou Shangsheng Investment Co. Ltd* (福州上盛投資有限公司), a wholly-owned subsidiary of the Company, and Fuzhou Sansheng Investment Co. Ltd* (福州三盛投資有限公司) (“Fuzhou Sansheng Investment”) entered into a joint venture agreement, pursuant to which the parties agreed to set up a joint venture company principally engaged in the investment of property development projects in the PRC.

V-4 APPENDIX V GENERAL INFORMATION

Fuzhou Sansheng Investment is owned as to (i) 80% by Fujian Zesheng Investment Advisory Limited Liability Company* (福建澤盛投資諮詢有限責任公司), a company owned as to 95% by Mr. Lin and as to 5% by Ms. Cheng; and (ii) 20% by Fujian Zhuoxin Investment Company Limited* (福建卓新投資有限公司), a company owned as to 95% by Ms. Cheng and as to 5% by Ms. Lin Guiying, a close relative of Ms. Cheng.

For further details, please refer to the announcement of the Company dated 7 July 2017 and the circular of the Company dated 26 October 2017.

(iv) Supporting Services in Showrooms

On 6 August 2019 and 22 November 2019, the Company has entered into an agreement (“Fujian BE Master Agreement”) and a supplemental agreement (“Fujian BE Supplemental Agreement”), respectively, with Fujian Bo En Property Group Company Limited* (福建伯恩物業集團有限公司) (“Fujian BE”), pursuant to which Fujian BE and/or its subsidiaries agreed to provide the Group with supporting services in showrooms for a term from 6 August 2019 to 31 December 2021 (both days inclusive).

Fujian BE is owned as to (i) 62.19% by Fuijian Jia Men Kou Network Technology Company Limited*(福建家門口網絡科技有限責任公司), which is owned as to 41.1% by Mr. Lin and as to 9.9% by Ms. Cheng; and (ii) 17.77% by Xiamen Bosheng Investment Partnership (Limited Partnership)*(厦門市伯盛投資合伙企業(有限合伙)), which is owned as to 54.12% by Mr. Lin. Mr. Lin and Ms. Cheng are also directors of Fujian BE.

For further details, please refer to the (i) announcements of the Company dated 6 August 2019 and 22 November 2019; and (ii) the circular of the Company dated 25 November 2019.

(v) Design and Construction Services

On 24 April 2020, 福州景雅裝飾工程有限責任公司 (Fuzhou Jingya Decoration Engineering Co., Ltd.*) (“Fuzhou JY”), a wholly-owned subsidiary of the Company, entered into a framework agreement (the “Fuzhou FY Framework Agreement”) with Fuzhou Sansheng, pursuant to which Fuzhou JY agreed to provide, or procure its fellow subsidiaries to provide, design and construction services to Fuzhou Sansheng and its subsidiaries for a term from 24 April 2020 to 31 December 2022 (both days inclusive). Fuzhou Sansheng is a company indirectly wholly-owned by Mr. Lin and Ms. Cheng.

Save as disclosed above, in the Agreement and in Loan Agreement (together with the transactions contemplated thereunder), as at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement subsisting which is significant in relation to the business of the Enlarged Group.

V-5 APPENDIX V GENERAL INFORMATION

5. DIRECTORS’ INTERESTS IN ASSETS

Save for the Agreement and the transactions contemplated thereunder, as at the Latest Practicable Date, none of the Directors had any direct or indirect interests in any assets which have been acquired or disposed of by or leased to, or were proposed to be acquired or disposed of by or leased to, any member of the Enlarged Group since 31 December 2019 (being the date to which the latest published audited financial statements of the Group were made up).

6. DIRECTORS’ INTERESTS IN COMPETING BUSINESS

As at the Latest Practicable Date, the interests of Directors and their respective close associates in businesses which compete or may compete with the business of the Group of which such interests would be required to be disclosed under Rule 8.10 of the Listing Rules were as follows:

Name of Nature of interest Business of Director Name of company in the company the company

1. Mr. Lin Fujian Wuhe Construction being a director and Real estate Development Co., Ltd.* shareholder development (福建五和建設發展有限公司)

2. Mr. Lin Yunsheng (Fujian) being a shareholder Real estate Real Estate Co., Ltd.* development (運盛(福建)地產有限公司)

3. Mr. Lin Fujian Minqiao Real Estate being a director and Real estate Development Co., Ltd.* shareholder development (福建閩僑房地產開發有限公司)

4. Mr. Lin Minhou County Headquarters being a shareholder Real estate Park Real Estate Co., Ltd.* development (閩侯縣總部園房地產有限公司)

5. Mr. Lin Fuzhou Shenglong Real Estate being a shareholder Real estate Development Co., Ltd.* development (福州盛隆房地產開發有限公司)

6. Mr. Lin Jinan Sansheng Real Estate being a director and Real estate Development Co., Ltd.* shareholder development (濟南三盛房地產開發有限公司)

7. Mr. Lin Fujian Province Kowloon being a director and Real estate Real Estate Co., Ltd.* shareholder development (福建省九龍房地產有限公司)

V-6 APPENDIX V GENERAL INFORMATION

Name of Nature of interest Business of Director Name of company in the company the company

8. Mr. Lin Putian City Shengxiang being a director and Real estate Real Estate Development Co., Ltd.* shareholder development (莆田市盛祥房地產開發有限公司)

9. Mr. Lin Guoshitong Real Estate being a director and Real estate Development Co., Ltd.* shareholder development (國世通房地產開發有限公司)

10. Mr. Lin Guan County Sansheng being a director and Real estate Real Estate Development Co., Ltd.* shareholder development (固安縣三盛房地產開發有限公司)

11. Mr. Lin Chengdu Jisheng Property Co., Ltd.* being a director and Real estate (成都吉盛置業有限公司) shareholder development

12. Mr. Lin Chengdu Zhonghai Investment being a director and Real estate Property Co., Ltd.* shareholder development (成都中海投資置業有限公司)

13. Mr. Lin Huangshi Jiashunshengshi being a shareholder Real estate Property Co., Ltd.* development (黃石佳舜盛世置業有限公司)

14. Mr. Lin Qingdao Offshore Real Estate Co., being a director and Real estate Ltd.* (青島海上置業有限公司) shareholder development

15. Mr. Lin Shandong Mengzhita being a director and Real estate Property Co., Ltd.* shareholder development (山東夢之塔置地有限公司)

16. Mr. Lin Jinan Jindongfang Property Co., Ltd.* being a director and Real estate (濟南金東方置業有限公司) shareholder development

17. Mr. Lin Jiangsu Zheguang Property Co., Ltd.* being a shareholder Real estate (江蘇浙廣置業有限公司) development

18. Mr. Lin Wenling Rongfa Real Estate being a director and Real estate Development Co., Ltd.* shareholder development (溫嶺榮發房地產開發有限公司)

19. Mr. Lin Fujian Gusheng Real Estate being a director and Real estate Development Co., Ltd.* shareholder development (福建古盛房地產開發有限公司)

V-7 APPENDIX V GENERAL INFORMATION

Name of Nature of interest Business of Director Name of company in the company the company

20. Mr. Lin Fuding Xinbisheng Real Estate being a director and Real estate Development Co., Ltd.* shareholder development (福鼎新碧盛房地產開發有限公司)

21. Mr. Lin Quanzhou Shengchuang being a director and Real estate Property Co., Ltd.* shareholder development (泉州盛創置業有限公司)

22. Mr. Lin Zhangzhou Weijia Real Estate being a director and Real estate Development Co., Ltd.* shareholder development (漳州市維佳房地產開發有限公司)

23. Mr. Lin Kunshan Binsheng Real Estate being a director and Real estate Development Co., Ltd.* shareholder development (昆山濱盛房地產開發有限公司)

24. Mr. Lin Yangzhou Sansheng Real Estate being a director and Real estate Development Co., Ltd.* shareholder development (揚州三盛房地產開發有限公司)

25. Mr. Lin Nanjing Beisheng Property Co., Ltd.* being a shareholder Real estate (南京北盛置業有限公司) development

26. Mr. Lin Zhangzhou Binbei Property Co., Ltd.* being a shareholder Real estate (漳州市濱北置業有限公司) development

27. Mr. Lin Zhangzhou City Wankebinjiang being a shareholder Real estate Property Co., Ltd.* development (漳州市萬科濱江置業有限公司)

28. Mr. Lin Fujian Sansheng Real Estate being a shareholder Real estate Development Co., Ltd.* development (福建三盛房地產開發有限公司)

* The English translation of the Chinese names denoted in this circular is for illustration purpose only. Should there be any inconsistencies, the Chinese names prevail.

V-8 APPENDIX V GENERAL INFORMATION

The above companies and the Group are managed by separate and independent management respectively. In this respect, coupled with the diligence of the independent non-executive Directors (whose views carry significant weight in the Board’s decisions) and the Audit Committee of the Board, the Group is capable of carrying out its business independently of, and at arm’s length from, the businesses of the above companies.

Having considered his/its ownership of property projects in the PRC, Mr. Lin, Modern Times and Mega Regal entered into a deed of non-competition (the “Deed of Non-Competition”) on 1 November 2019 in favour of the Company (for the Company itself and for the benefit of each of the members of the Group) to safeguard the interests of the Company and the Shareholders as a whole. For further details, please refer to pages 105 and 106 of the annual report of the Company for FY2019.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or any of their respective close associates (as defined under the Listing Rules) was interested in any business apart from the business of the Group which competes or is likely to compete, either directly or indirectly, with that of the Group.

7. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Enlarged Group which does not expire or is not determinable by such member of the Group within one year without payment of compensation (other than statutory compensation).

8. LITIGATION

As at the Latest Practicable Date, to the best of the Directors’ knowledge, information and belief, no member of the Enlarged Group was engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance was known to the Directors to be pending or threatened against any member of the Enlarged Group that would have a material adverse effect on the results of operations or financial conditions of the Enlarged Group.

9. MATERIAL ADVERSE CHANGE

The Directors confirm that, 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 December 2019, being the date to which the latest published audited consolidated financial statements of the Group were made up.

V-9 APPENDIX V GENERAL INFORMATION

10. MATERIAL CONTRACTS

Save as disclosed below, there is no other material contract (being contracts entered into outside the ordinary course of business of the Group) which have been entered into by any member of the Enlarged Group within the two years immediately preceding the Latest Practicable Date:

(i) In relation to the commencement of the exchange offer dated 30 October 2018 for the outstanding US$135,000,000 floating rate secured bonds, (i) the keepwell deed dated 13 November 2018 executed by the Company, Mr. Lin and Ms. Cheng in favour of Industrial Bank Co. Ltd; (ii) the liquidity support deed dated 13 November 2018 executed by the Company and Fuzhou Sansheng as supporting entity in favour of The Bank of New York Mellon, London Branch and The Bank of New York Mellon, Hong Kong Branch; and (iii) the trust deed dated 13 November 2018 entered into between the Company and certain other parties to constitute the bonds;

(ii) the Deed of Non-competition;

(iii) the Fujian BE Master Agreement (as amended by the Fujian BE Supplemental Agreement);

(iv) the Fuzhou FY Framework Agreement;

(v) the sale and purchase agreement dated 27 September 2019 entered into between the purchaser and Mega Regal in relation to the acquisition of Time Fortune Investments Limited (時幸投資有限公司);

(vi) the Agreement; and

(vii) the Loan Agreement

11. EXPERT AND CONSENTS

The following is the qualification of the experts whose opinions or advice are contained in this circular:

Name Qualification

Altus Capital Limited a corporation licensed to carry on Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the SFO

Commerce & Finance law Offices Legal advisers to PRC laws

Jones Lang LaSalle Corporate Independent Valuer Appraisal and Advisory Limited

KPMG Certified Public Accountants

Each of the above experts has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letters or opinions or reports or references to its name in the form and context in which they respectively appear in this circular.

V-10 APPENDIX V GENERAL INFORMATION

As at the Latest Practicable Date, each of the above experts did not have any shareholding in any member of the Group or any right or option (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, each of the above experts did not have any direct or indirect interests in any assets which have been, since 31 December 2019 (being the date to which the latest published audited consolidated financial statements of the Group were made up), acquired or disposed of by or leased to, or were proposed to be acquired or disposed of by or leased to, any member of the Enlarged Group.

12. MISCELLANEOUS

(i) The company secretary of the Company is Mr. Cheng Ching Kit (“Mr. Cheng”). Mr. Cheng is a manager of SWCS Corporate Services Group (Hong Kong) Limited, a professional services provider specialising in corporate services, and his primary corporate contact person at the Company is Mr. Xiao Zhong, one of the Directors. Mr. Cheng has over 7 years of experience in the corporate secretarial field and is an associate member of both the Hong Kong Institute of Chartered Secretaries and The Chartered Governance Institute (formerly known as The Institute of Chartered Secretaries and Administrators) in the United Kingdom.

(ii) The registered office of the Company is situated at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.

(iii) The head office and principal place of business of the Company in Hong Kong is situated at Room 3207, the Gateway Tower 6, Tsim Sha Tsui, Kowloon, Hong Kong.

(iv) The Hong Kong share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited, Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

(v) In the event of inconsistency, the English text of this circular shall prevail over the Chinese text hereof.

V-11 APPENDIX V GENERAL INFORMATION

13. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours from 9:00 a.m. to 5:00 p.m. at Room 3207, the Gateway Tower 6, Tsim Sha Tsui, Kowloon, Hong Kong on any Business Day from the date of this circular up to and including the date of the EGM:

(i) the memorandum and articles of association of the Company;

(ii) the annual reports of the Company for FY2018 and FY2019 and the interim report of the Company for the six months ended 30 June 2020;

(iii) the accountants’ report on the financial information of the Target set out in Appendix II of this circular;

(iv) the report on the unaudited pro forma financial information of the Enlarged Group assuming completion of the Acquisition prepared by KPMG, the text of which is set out in Appendix III to this circular;

(v) the valuation report of the properties held by the Project Companies prepared by Jones Lang LaSalle Corporate Appraisal and Advisory Limited, the text of which is set out in Appendix IV to this circular;

(vi) the letter from the Independent Board Committee dated 25 September 2020, the text of which is set out on page 30 to 31 of this circular;

(vii) the letter from the Altus dated 25 September 2020, the text of which is set out on pages 32 to 62 of this circular;

(viii) the material contracts referred to in the section headed “Material Contracts” in this appendix;

(ix) the written consent as referred to under the section headed “Expert and consents” in this appendix; and

(x) this circular.

V-12 NOTICE OF THE EGM

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this notice, 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 notice.

Sansheng Holdings (Group) Co. Ltd. 三盛控股（集團）有限公司 (Incorporated in the Cayman Islands with limited liability) (Stock Code: 2183)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that the extraordinary general meeting (the “EGM”) of Sansheng Holdings (Group) Co. Ltd. (the “Company”) will be held at Zhiyuan Conference Room on 6th Floor, Sansheng Group Building, Block 8, 18 Xinghong Road, Minhang District, Shanghai, the PRC on Monday, 19 October 2020 at 11:00 a.m. for the purpose of considering and, if thought fit, passing with or without modification the following resolutions as ordinary resolutions of the Company:

ORDINARY RESOLUTION

1. “THAT

(a) the Agreement (as defined in the circular of the Company dated 25 September 2020 (the “Circular”, a copy of which is marked “A” and signed by the chairman of the meeting for identification purpose and has been tabled at the meeting)), dated 24 August 2020 entered into between Total Prestige Holdings Limited (全耀控股有限公司) as purchaser (“Purchaser”) and Mega Regal Limited as vendor (“Vendor”), in relation to among others, the acquisition (the “Acquisition”) of the Sale Shares (as defined in the Circular) for a consideration of HK$347,349,600, which shall be satisfied by the way of the allotment and issue of 49,480,000 new shares in the share capital of the Company (each a “Consideration Share”) at the issue price of HK$7.02 per Consideration Share by the Company to the Vendor at the date of completion of the Agreement (a copy of the Agreement is marked “B” and signed by the chairman of the meeting for identification purpose and has been tabled at the meeting), and the transactions contemplated thereunder, be and are hereby approved, confirmed and ratified;

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(b) subject to completion of the Acquisition, the allotment and issue of the Consideration Shares by the Company to the Vendor to settle the consideration payable by the Purchaser pursuant to the terms and conditions of the Agreement, be and are hereby approved, confirmed and ratified;

(c) the board of directors of the Company be and is hereby granted a specific mandate to allot and issue the Consideration Shares in accordance with the terms and conditions of the Agreement; and

(d) all other transactions contemplated under the Agreement be and are hereby approved and any Director be and is hereby authorised to sign and execute such documents, including under seal where applicable, and do all such acts and things, as he/she considers necessary, desirable or expedient in connection with the implementation of or giving effect to the Agreement and the transactions contemplated thereunder and to agree with such variation, amendment or waiver as, in the opinion of the Directors, in the interests of the Company and its shareholders as a whole.”

2. “THAT

(a) the Loan Agreement (as defined in Circular) (a copy of the Loan Agreement is marked “C” and signed by the chairman of the meeting for identification purpose and has been tabled at the meeting) dated 24 August 2020 entered into among Fuzhou Bosheng Real Estate Development Co., Ltd.* (福州盛隆房地產開發有限公司) (“Fuzhou Bosheng”), Mr. Lin Rongbin (“Mr. Lin”) and Fuzhou Sansheng Property Co., Ltd* (福州三盛置業有限公司) (“Fuzhou Sansheng”), in relation to (i) a non-interest bearing loan of RMB650 million to be provided by Fuzhou Sansheng to Fuzhou Bosheng and its subsidiaries which in return provided the Pledged Properties (as defined in Circular) and Share Pledge (as defined in Circular) as security for loans obtained by private entities controlled by Mr. Lin; (ii) an unsecured loan to be provided by Fuzhou Sansheng to Fuzhou Bosheng and its subsidiaries in such amount necessary for the development of certain property projects; and (iii) an indemnity provided by Mr. Lin to indemnify Fuzhou Bosheng against any damage, loss or diminution in value of the Pledged Properties and the Share Pledge as a result of any breach in repayment of obligations in relation to loan facilities secured by such pledged assets, and the transactions contemplated thereunder, be and are hereby approved, confirmed and ratified; and

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(b) any Director be and is hereby authorised to sign and execute such documents, including seal where applicable, and do all such acts and things, as he/she considers necessary, desirable or expedient in connection with the implementation of or giving effect to the Loan Agreement and the transaction contemplated thereunder and to agree with such variation, amendment or waiver as, in the opinion of the Directors, in the interests of the Company and its shareholders as a whole.”

* The English translation of the Chinese name denoted in this notice is for illustration purpose only. Shall there be any inconsistencies, the Chinese name prevail.

By order of the Board Sansheng Holdings (Group) Co. Ltd. Lin Rongbin Chairman

Hong Kong, 25 September 2020

Registered office: Head office and principal place of Cricket Square business in Hong Kong: Hutchins Drive, P.O. Box 2681 Room 3207 Grand Cayman KY1-1111 The Gateway Tower 6 Cayman Islands Tsim Sha Tsui Kowloon, Hong Kong

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Notes:

1. The transfer books and register of members of the Company will be closed from Wednesday, 14 October 2020 to Monday, 19 October 2020, both dates inclusive, during which no transfer of shares of the Company will be effected. In order to be eligible to attend and vote at the EGM, unregistered holders of shares of the Company should ensure that all share transfer documents accompanied by the relevant share certificates must be lodged with the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong for registration not later than 4:30 p.m. on Tuesday, 13 October 2020.

2. Any shareholder entitled to attend and vote at the EGM is entitled to appoint one, or if he/she/it is the holder of two or more shares, more proxies to attend and vote instead of him/her/it. A proxy need not be a shareholder of the Company.

3. In order to be valid, a form of proxy together with the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy thereof, shall be deposited at the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time for holding the EGM or any adjournment thereof. Completion and return of a form of proxy will not preclude a shareholder from attending and voting in person if he is subsequently able to be present and in such event, the instrument appointing a proxy shall be deemed to be revoked.

4. A form of proxy must be signed by you or your attorney duly authorized in writing or, in the case of a corporation, must be executed under seal or under the hand of an officer or attorney duly authorized to sign the same.

5. In the case of joint holders of any shares, any one of such persons may vote at any meeting, either personally or by proxy, in respect of such share as if he/she/it were solely entitled thereto; but if more than one of such joint holders be present at any meeting personally or by proxy, that one of the said persons so present being the most or, as the case may be, the more senior shall alone be entitled to vote in respect of the relevant joint holding and, for this purpose, seniority shall be determined by reference to the order in which the names of the joint holders stand on the register in respect of the relevant joint holding.

As at the date of this notice, the Board of the Company comprises two executive Directors, namely Mr. Lin Rongbin and Ms. Cheng Xuan; two non-executive Directors, namely Mr. Xiao Zhong and Mr. Xu Jianwen; and three independent non-executive Directors, namely Mr. Pan Dexiang, Mr. Yuan Chun and Mr. Zhong Bin.

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