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 stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your shares in Chaoyue Group Limited (the “Company”), you should at once hand this circular accompanying with the form of proxy to the purchaser or transferee, or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular. This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities mentioned herein. CHAOYUE GROUP LIMITED 超越集團有限公司 (Incorporated in Bermuda with limited liability) (Stock Code: 147) (I) VERY SUBSTANTIAL ACQUISITION AND (II) NOTICE OF SPECIAL GENERAL MEETING Financial adviser to the Company A notice convening the special general meeting of the Company to be held at Unit 3213, 32nd Floor, COSCO Tower, 183 Queen’s Road Central, Hong Kong on Friday, 23 January 2015 at 11:00 a.m. is set out on pages SGM-1 to SGM-2 of this circular. A form of proxy for use at the special general meeting is enclosed with this circular. Such form of proxy is also published on the website of (i) the Company at www.chaoyuehk.com and (ii) The Stock Exchange of Hong Kong Limited at www.hkex.com.hk. Whether or not you are able to attend and/or vote at the special general meeting of the Company in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon and deposit the same at the Company’s Hong Kong branch share registrar and transfer office, Tricor Secretaries Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from subsequently attending and voting in person at the special general meeting of the Company or any adjournment thereof (as the case may be) should you so wish. 31 December 2014 CONTENTS Page Definitions ........................................................ 1 Letter from the Board................................................ 6 Risk factors relating to the Target Group ................................. 20 Industry overview relating to the Target Group............................. 34 Regulatory overview relating to the Target Group........................... 53 Business of the Target Group .......................................... 94 Management discussion and analysis of the Target Group..................... 126 Appendix I – Financial Information of the Group .................... I-1 Appendix II – Accountants’ Report on the Target Group ................ II-1 Appendix III – Unaudited Pro Forma Financial Information of the Enlarged Group.................................. III-1 Appendix IV – Property Valuation Report of the Target Group ............ IV-1 Appendix V – General Information ................................ V-1 Notice of SGM ..................................................... SGM-1 –i– DEFINITIONS In this circular, the following expressions have the following meanings, unless the context otherwise requires: “Acquisition” the proposed acquisition of the Sale Shares by the Purchaser pursuant to the terms and conditions of the Agreement “Agreement” the conditional agreement dated 27 August 2014 (after trading hours) entered into between the Purchaser and the Vendor in relation to the Acquisition “ASP” average selling price per sq. m. “associate(s)” shall have the same meaning as ascribed to it under the Listing Rules “Board” the board of Directors “Business Day” any day(s) on which government authorities in the PRC are open for business (except statutory holidays in the PRC) “Company” Chaoyue Group Limited, a company incorporated in Bermuda with limited liability, the Shares of which are listed on the Main Board of the Stock Exchange (stock code: 147) “Completion” completion of the Acquisition “completion certificate” construction works completion inspection acceptance certificate/record issued by local urban construction bureaus or competent authorities in the PRC with respect to the completion of property projects (竣工驗收備案) “connected person(s)” has the meaning ascribed to it under the Listing Rules “Consideration” the consideration for the Sale Shares under the Agreement “construction land planning construction land planning permit issued by local urban permit” zoning and planning bureaus or competent authorities in the PRC (建設用地規劃許可證) “construction works construction works commencement permit issued by commencement permit” local construction committees or competent authorities in the PRC (建築工程施工許可證) –1– DEFINITIONS “construction works construction works planning permit issued by local urban planning permit” zoning and planning bureaus or competent authorities in the PRC (建設工程規劃許可證) “controlling shareholder(s)” shall have the same meaning as ascribed to it under the Listing Rules “Director(s)” the director(s) of the Company “Enlarged Group” the Group and the Target Group “GDP” gross domestic product “GFA” gross floor area “Group” the Company and its subsidiaries “Guangxi Changhua” 廣西昌樺投資有限公司 (Guangxi Changhua Investment Company Limited*), a company incorporated in the PRC with limited liability and a wholly-owned subsidiary of the Target “Guangxi Yizheng” 廣西益正貿易有限公司 (Guangxi Yizheng Trading Company Limited*), a company incorporated in the PRC with limited liability and a wholly-owned subsidiary of the Target “Guangxi Zhenghuan” 廣西正桓貿易有限公司 (Guangxi Zhenghuan Trading Company Limited*), a company incorporated in the PRC with limited liability and a wholly-owned subsidiary of the Target “Hainan Zhenghe” 洲際油氣股份有限公司 (Geo-Jade Petroleum Corporation), formerly known as 海南正和實業集團有限公司 (Hainan Zhenghe Industrial Group Co. Ltd., whose name has been changed to 洲際油氣股份有限公司 on 6 August 2014), a company incorporated in the PRC with its shares listed on the Shanghai Stock Exchange (stock code: 600759) and is independent of the Company and its connected person “Hong Kong” the Hong Kong Special Administrative Region of the PRC –2– DEFINITIONS “independent third party(ies)” party(ies) which is/are independent of and not connected (within the meaning ascribed to it in the Listing Rules) with any of the Directors, substantial shareholders or chief executive of the Company or any of the subsidiaries of the Company or any of their respective associates and is not otherwise a connected person “Independent Valuer” DTZ Debenham Tie Leung Limited, an independent professional valuer to conduct the valuation on property of the Target “land grant contract” a land use rights grant contract (土地使用權出讓合同) “land use rights certificate” a certificate (or certificates as the case may be) of the right of a party to use a parcel of land (土地使用權證) “LAT” land appreciation tax (土地增值稅) as defined in the PRC Provisional Regulations on Land Appreciation Tax of 1994 and its implementation rules, as described in the section headed “Regulatory overview relating to the Target Group” in this circular “Latest Practicable Date” 31 December 2014, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained in this circular “Listing Rules” The Rules Governing the Listing of Securities on the Stock Exchange “Liuzhou Dongcheng” 柳州東城投資開發有限公司 (Liuzhou Dongcheng Investment & Development Co., Ltd.*), a company established in the PRC with limited liability and is wholly-owned by independent third parties “Liuzhou Huagui” 柳州華桂房地產開發有限公司 (Liuzhou Huagui Property Development Company Limited*), a property developer based in Liuzhou, being the owner of the 30% equity interest of the Target and is wholly-owned by independent third parties “MOHURD” the Ministry of Housing and Urban Rural Development “mu” 畝, a Chinese area unit, equivalent to approximately 614.4 sq.m. “plot ratio” the ratio of the gross floor area (excluding floor area below ground) of all buildings to their site area –3– DEFINITIONS “PRC” the People’s Republic of China, and for the purpose of this circular only, excluding Hong Kong, Macau Special Administrative Region of the People’s Republic of China and Taiwan “PRC Legal Adviser” Hills & Co, the legal adviser as to PRC laws of the Company “pre-sale permit” the pre-sale permit authorising a developer to start the pre-sale of a property under construction (商品房預售許 可證) “Properties” the properties under development and investment properties in Liuzhou, the PRC held by the Target Group “public tender”, “auction”, public tender, auction or listing at a land exchange or “listing-for-sale” administered by the local government, each of which is a competitive bidding process through which a purchaser acquires land use rights directly from the PRC government; please refer to the section headed “Regulatory overview relating to the Target