Lifestyle Properties Development : (1) VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION IN RELATION TO ACQUISITION OF A PROPERTY GROUP; (2) CONTINUING CONNECTED TRANSACTIONS IN RELATION TO REVISION OF ANNUAL CAPS; AND (3) NOTICE OF EGM

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. VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION IN RELATION TO

ACQUISITION OF A PROPERTY GROUP;

1. CONTINUING CONNECTED TRANSACTIONS IN RELATION TO

REVISION OF ANNUAL CAPS; AND

(3) NOTICE OF EGM

Financial Adviser to the Company

Independent Financial Adviser to the Independent Board Committee

and the Independent Shareholders

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 notice convening the EGM to be held at Lotus Room, 6/F., Marco Polo Hong Kong Hotel, No. 3 Canton Road, Harbour City, Tsim Sha Tsui, Kowloon, Hong Kong on Friday, 13 December 2019 at 9:30 a.m. is set out on pages EGM-1 to EGM-3 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 November 2019

	CONTENTS
			Page
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	.	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	.	7
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . .	.	30
LETTER FROM CRESCENDO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	.	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 PROJECT COMPANIES . . . .	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 the Vendor pursuant to the terms and
	conditions of the Agreement
"Agreement"	the conditional sale and purchase agreement dated 27
	September 2019 entered into between the Purchaser and
	the Vendor in relation to the Acquisition
"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
"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 in accordance with the
	terms and conditions of the Agreement
"Completion Date"	the date of Completion
"connected person(s)"	has the meaning ascribed to it under the Listing Rules
"Consideration"	the consideration for acquisition of the Sale Shares in
	the amount of HK$231.0 million
"Consideration Share(s)"	22,000,000 new Share(s) to be allotted and issued by
	the Company to the Vendor
"controlling shareholder(s)"	has the meaning ascribed to it under the Listing Rules
"Covenantor(s)"	has the meaning ascribed to it under the section headed
	"Directors' interests in competing business" in
	Appendix V to this circular

- 1 -

	DEFINITIONS
"Crescendo" or "Independent	Crescendo Capital Limited, a corporation licensed to
Financial Adviser"	carry out Type 6 (advising on corporate finance)
	regulated activity under the SFO, being the independent
	financial adviser appointed by the Company to advise
	the Independent Board Committee and the Independent
	Shareholders in relation to (i) the Agreement and
	transactions contemplated thereunder; and (ii) the
	Master Agreement as amended by the Supplemental
	Agreement	and	the	transactions	contemplated
	thereunder (including the Revised Annual Caps)
"Deed of Non-Competition"	a deed of non-competition to be given by the
	Covenantors in favour of the Company (for the
	Company itself and for the benefit of each of the
	members of the Group)
"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 (i) the Agreement and
	transactions contemplated thereunder, including the
	allotment and	issue	of the	Consideration	Shares; and

1. the Master Agreement as amended by the Supplemental Agreement and the transactions contemplated thereunder (including the Revised Annual Caps)

"Enlarged Group"	the Group as enlarged by the Acquisition upon
	Completion
"Existing Annual Caps"	the existing annual caps for the continuing connected
	transactions under the Master Agreement
"Fujian BE"	福建伯恩物業集團有限公司 (Fujian Bo En Property
	Group Company Limited*) (formerly known	as
	"福建伯恩物業管理股份有限公司 Fujian Bo En Property
	Management Company Limited*"), a company
	established in the PRC with limited liability
"Fujian JMK"	福建家門口網絡科技有限責任公司 (Fujian Jia Men Kou
	Network Technology Company Limited*), a company
	established in the PRC with limited liability
"Fujian Shengchuang"	福建盛創房地產開發有限公司 (Fujian Shengchuang	Real
	Estate Development Co., Ltd.*), a company established
	in the PRC with limited liability

- 2 -

	DEFINITIONS
"Fujian Tianren"	福建天壬房地產開發有限公司 (Fujian Tianren Real Estate
	Development Co., Ltd.*), a company established in the
	PRC with limited liability
"Fuzhou BEHM"	福州伯恩酒店管理有限公司 (Fuzhou Bo En Hotel
	Management Company Limited*), a company
	established in the PRC with limited liability, which is a
	wholly-owned subsidiary of Fujian BE
"Fuzhou Hongsheng"	福州宏盛房地產開發有限公司 (Fuzhou Hongsheng Real
	Estate Development Co., Ltd.*), a company established
	in the PRC with limited liability
"Fuzhou Sansheng"	福州三盛置業有限公司 (Fuzhou Sansheng Property Co.,
	Ltd.*), a company established in the PRC with limited
	liability which is wholly-owned by 三盛集團有限公司
	(Sansheng Group Limited*), a company indirectly held
	by Mr. Lin and Ms. Cheng
"Fuzhou Shengchun"	福州盛淳投資有限公司(Fuzhou Shengchun Investment
	Co., Ltd.*), 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
"Group"	the Company and its subsidiaries
"HK Holdco"	Sheng Zhen Company Limited （盛瑧有限公司）, a
	company incorporated in Hong Kong on 17 July 2019
	with limited liability and wholly-owned by the Target
	Company
"Hong Kong"	the Hong Kong Special Administrative Region of the
	PRC
"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 (i) the Agreement and the transactions
	contemplated thereunder; and (ii) the Master Agreement
	as amended by the Supplemental Agreement and the
	transactions contemplated thereunder (including the
	Revised Annual Caps)

- 3 -

DEFINITIONS

"Independent Shareholders"	the Shareholders other than	(a) Mega	Regal; and
	(b) any other Shareholders who have a material interest
	in (i) the Agreement and the transactions contemplated
	thereunder; and (ii) the Master Agreement as amended
	by the Supplemental Agreement and the transactions
	contemplated thereunder (including the Revised Annual
	Caps)
"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
"Inter-Company Loans"	the amount due from Fuzhou Sansheng to the Target
	Group
"Latest Practicable Date"	22 November 2019, being the latest practicable date
	prior to the despatch of this circular for the purpose of
	ascertaining certain information contained herein
"Listing Rules"	Rules Governing the Listing of Securities on the Stock
	Exchange
"Master Agreement"	the agreement dated 6 August 2019 entered into
	between the Company and Fujian BE in relation to the
	provision of the Services to the Group
"Mega Regal" or "Vendor"	Mega Regal Limited, the controlling Shareholder which
	holds 296,348,127 Shares, representing approximately
	70.71% 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
"NewCo"	福州盛臻投資有限公司 (Fuzhou	Shengzhen	Investment
	Co., Ltd*), a wholly foreign-owned enterprise (WFOE)
	established in the PRC on 8 August 2019 with limited
	liability and wholly-owned by the HK Holdco
"PRC"	the People's Republic of China, which for the purpose
	of this circular, excludes Hong Kong, the Macau
	Special Administrative Region and Taiwan

- 4 -

	DEFINITIONS
"Project Companies"	collectively, Fujian Shengchuang, Fuzhou Hongsheng,
	Fujian Tianren and Zhangzhou Deyousheng
"Purchaser"	Total Prestige Holdings Limited （全耀控股有限公司）, a
	company established in the British Virgin Islands with
	limited liability and a direct wholly-owned subsidiary
	of the Company
"Reorganisation"	the group restructuring carried out by the Vendor with
	a view to regroup the Project Companies under the
	Target Company
"Revised Annual Caps"	the Revised Annual Caps I or the Revised Annual Caps
	II (as the case may be)
"Revised Annual Caps I"	the revised annual caps proposed to cover the
	additional Services required by the Group under the
	Supplemental Agreement
"Revised Annual Caps II"	the revised annual caps proposed to cover the
	additional Services required by the Group and the
	Target Group under the Supplemental Agreement
"Sale Shares"	100 shares of US$1 each in the Target Company,
	representing 100% of the issued share capital of the
	Target Company
"Services"	the provision of supporting services in showrooms,
	including customer services, sales activities assistance,
	visiting arrangement, catering services, security and
	order maintenance, cleaning services and equipment
	maintenance
"Share(s)"	ordinary share(s) of HK$0.10 each in the share capital
	of the Company
"Shareholders"	shareholders of the Company
"Supplemental Agreement"	the supplemental agreement entered into between the
	Company and Fujian BE dated 22 November 2019 to
	amend the Existing Annual Caps to the Revised Annual
	Caps
"Stock Exchange"	the Stock Exchange of Hong Kong Limited

- 5 -

	DEFINITIONS
"Target Company"	Time Fortune Investments Limited（時幸投資有限公司）,
	a company incorporated in the British Virgin Islands on
	31 May 2019 with limited liabilities and wholly-owned
	by Mega Regal
"Target Group"	the Target Company and its subsidiaries
"Xiamen BS"	廈門市伯盛投資合夥企業（有限合夥） (Xiamen Bosheng
	Investment Partnership (Limited Partnership)*), a
	company established in the PRC with limited liability
"Xiamen Sansheng"	廈門三盛置業有限公司 (Xiamen Sansheng Real Estate
	Co., Ltd.*), a company established in the PRC with
	limited liability
"Zhangzhou Deyousheng"	漳州市德友盛房地產開發有限公司 (Zhangzhou Deyousheng
	Real Estate Development Co., Ltd.*), a company
	established in the PRC with limited liability
"GFA"	gross floor area
"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 RMB0.90 = HK$1. 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.

• For identification only

- 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 November 2019
To the Shareholders
Dear Sir or Madam,

1. VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION IN RELATION TO ACQUISITION OF A PROPERTY GROUP; AND
2. CONTINUING CONNECTED TRANSACTIONS IN RELATION TO

REVISION OF ANNUAL CAPS

INTRODUCTION

Reference is made to (i) the announcement of the Company dated 27 September 2019 in relation to the acquisition of the entire issued share capital of the Target Company by the Group; (ii) the announcement of the Company dated 6 August 2019 in relation to the provision of the Services by Fujian BE and/or its subsidiaries to the Group; and (iii) the announcement of the Company dated 22 November 2019 in relation to the revision of the Existing Annual Caps.

On 27 September 2019 (after trading hours of the Stock Exchange), the Purchaser, (a direct wholly-owned subsidiary of the Company) and the Vendor entered into the Agreement, pursuant to which the Purchaser has conditionally agreed to acquire and the Vendor (the

- 7 -

LETTER FROM THE BOARD

controlling Shareholder) has conditionally agreed to sell the Sale Shares at the Consideration. The Sale Shares represent the entire issued share capital of the Target Company which is engaged in property development projects in the PRC through its subsidiaries upon completion of the Reorganisation. The Acquisition constitutes a very substantial acquisition for the Company under Chapter 14 of the Listing Rules as certain percentage ratios (as defined under Chapter 14 of the Listing Rules) exceed 100%.

On 6 August 2019, the Company entered into the Master Agreement with Fujian BE, pursuant to which Fujian BE and/or its subsidiaries agreed to provide the supporting services in showrooms (i.e. the Services) to property projects owned by the Group for a term from 6 August 2019 to 31 December 2021 (both days inclusive). In view that the development schedule of certain property projects owned by the Group were accelerated and two property projects acquired by the Group since 6 August 2019 were not taken into account in determining the Existing Annual Caps (the "Existing Business Needs"), the Company proposes to increase the Existing Annual Caps to Revised Annual Caps I. In addition, as the Project Companies in relation to the Acquisition have been engaging Fujian BE and its subsidiaries to provide the Services to their respective property projects, upon Completion, it is expected that the Existing Annual Caps will not be sufficient to cover the Services required by the Target Group from 2020 onwards (the "Acquisition Need"). As such, the Company further proposes to increase the Existing Annual Caps to Revised Annual Caps II to cover the Existing Business Needs and the Acquisition Need. On 22 November 2019 (after trading hours of the Stock Exchange), the Company and Fujian BE entered into the Supplemental Agreement to amend the Existing Annual Caps to the Revised Annual Caps under the Master Agreement. Save for the revision of the Existing Annual Caps, all other terms and conditions under the Master Agreement remain unchanged. Given Fujian BE is a connected person of the Company, the transactions contemplated under the Master Agreement as amended by the Supplemental Agreement constitute connected transactions for the Company under Chapter 14A of the Listing Rules.

The purpose of this circular is to provide you with (i) details of the Agreement;

1. details of the Master Agreement (as amended by Supplemental Agreement); (iii) letter of recommendation from the Independent Board Committee to the Independent Shareholders;

(iv) letter of advice from Crescendo to the Independent Board Committee and the

Independent

Shareholders;

(v)

financial

information

of

the

Group;

1. financial information of the Target Group; (vii) unaudited pro forma financial information of the Enlarged Group; (viii) valuation report; (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 Master Agreement (as amended by the Supplement Agreement) and the transactions contemplated thereunder.

1. ACQUISITION OF A PROPERTY GROUP
   THE AGREEMENT
   Date:
   27 September 2019 (after trading hours of the Stock Exchange)

- 8 -

	LETTER FROM THE BOARD
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 296,348,127 Shares (representing approximately 70.71% 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 British Virgin Islands 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.

Subject Matter

The Sale Shares represent the entire issued share capital of the Target Company, which was incorporated in the British Virgin Islands on 31 May 2019. Following completion of the Reorganisation, the Target Company held the Project Companies principally engaged in property development projects in the PRC. Further information on the Project Companies is set out in the section headed "Information on the Target Group" below.

Consideration

Pursuant to the Agreement, the Consideration of HK$231.0 million shall be payable to the Vendor by way of issue and allotment of the Consideration Shares, being 22,000,000 new Shares, at the issue price of HK$10.5 per Consideration Share, by the Company to the Vendor on Completion Date.

The Consideration was determined based on 95% of the valuation surplus derived from (a) the preliminary valuation of the properties held by the Project Companies of RMB9,505.0 million (equivalent to approximately HK$10,561.1 million) applied with a discount of approximately 8.8% as agreed by the parties to the Agreement; and (b) the book value of the properties held by the Project Companies as at 31 May 2019 of approximately RMB8,452.0 million (equivalent to approximately HK$9,391.1 million), having considered that the net asset value of the Target Group as at Completion (before taking into account the valuation surplus) will be close to zero after a dividend of RMB50.0 million (equivalent to approximately HK$55.6 million) is to be distributed by Xiamen Sansheng to its original owner, namely Fuzhou Sansheng, which is indirectly held by Mr. Lin and Ms. Cheng and for the purpose of the Reorganisation, the Project Companies are to be sold to the Newco by Fuzhou Sansheng at its net asset value (i.e. RMB52.4 million (equivalent to approximately HK$58.2 million)), which is to be fully settled by offsetting the Inter-Company Loans owing by Fuzhou Sansheng to the Target Group.

- 9 -

LETTER FROM THE BOARD

The Consideration Shares

The Consideration Shares to be allotted and issued at the issue price of HK$10.5 per Consideration Share represents:

1. a discount of approximately 0.9% to the closing price of HK$10.60 per Share as quoted on the Stock Exchange on the date of the Agreement;
2. the same price as the average closing price of approximately HK$10.50 per Share as quoted on the Stock Exchange for the last five consecutive trading days immediately prior to the date of the Agreement;
3. a premium of approximately 9.6% over the closing price of HK$9.58 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and
4. a premium of approximately 255.9% over the unaudited consolidated net asset value per Share of approximately HK$2.95 (based on the unaudited equity attributable to the Shareholders of approximately RMB1,112.9 million (equivalent to approximately to HK$1,236.6 million) as at 30 June 2019 as disclosed in the interim report of the Company for the six months ended 30 June 2019 and 419,114,000 Shares in issue as at the Latest Practicable Date).

The issue price was determined after arm's length negotiations between the Purchaser and the Vendor, with reference to the recent price performance of the Shares and current market conditions.

The Consideration Shares also represent:

1. approximately 5.2% of the issued share capital of the Company as at the Latest Practicable Date; and
2. approximately 5.0% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares.

The allotment and issue of the Consideration Shares will not result in a change of control of the Company.

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

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.

- 10 -

LETTER FROM THE BOARD

Conditions Precedent

Completion is subject to the fulfilment or waiver (as the case may be) of the following conditions:

1. the Company having obtained the approval of its Independent Shareholders in respect of, inter alia, (a) the Acquisition; and (b) the issue of the Consideration Shares to the Vendor pursuant to the terms of the Agreement, in the manner required by the Listing Rules;
2. the Purchaser and the Vendor each having obtained approval of its board of directors in relation to the transactions contemplated in the Agreement;
3. the Company having obtained approval of the Board in relation to the allotment and issue of the Consideration Shares;
4. the Purchaser having obtained, in form and substance satisfactory to the Purchaser from its PRC legal adviser, a legal opinion in relation to, inter alia, (a) the due incorporation and valid existence of members of the Target Group established in the PRC as well as the legality and compliance with respect to ownership of the properties held by the Target Group and business operations of the Target Group (including having obtained the relevant approvals, permits and licenses); and (b) the legality, validity and enforceability of the PRC aspects of the Reorganisation;
5. the Company having obtained approval from the Stock Exchange for the listing of and permission to deal in the Consideration Shares;
6. the allotment and issue 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;
7. completion of the Reorganisation, in form and substance satisfactory to the Purchaser and its PRC legal counsel;
8. the Purchaser and the Vendor having complied with the terms and conditions of the Agreement and there having been no material breach of the Agreement by any party to the Agreement;
9. 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 in the Agreement, to the extent being capable of being fulfilled prior to the Completion Date, having been fulfilled in all respects;
10. no material adverse change having occurred in relation to the Target Group between the date of the Agreement and the Completion Date;

- 11 -

LETTER FROM THE BOARD

1. the Purchaser, the Vendor and the Company having complied with the Listing Rules in all respects in connection with the Acquisition;
2. the Purchaser being satisfied with the results of the legal and/or financial due diligence review of the Target Group, including having obtained sufficient evidence showing good title of the properties held by the Target Group pursuant to relevant PRC laws and regulations;
3. the distribution of dividend of RMB50.0 million by Xiamen Sansheng to Fuzhou Sansheng prior to completion of the Reorganisation; and
4. the Purchaser having satisfied that the Vendor and each 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 under 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.

The Purchaser may at any time waive the conditions set out in (iv), (vii), (x), (xii) and (xiv) above by notice in writing to the Vendor. The Vendor may at any time waive the condition (xiii) above by notice in writing to the Purchaser. As at the Latest Practicable Date, the Company had no intention to waive any of the above conditions.

If the conditions above have not been fulfilled or waived (as the case may be) within six (6) months from the date of the Agreement (or such later date as the parties may agree), the Agreement shall cease and determine and neither party shall have any obligations and liabilities towards each other thereunder save for any antecedent breaches of the Agreement.

As at the Latest Practicable Date, conditions (ii), (iii), (iv), (vii), (xii), (xiii) and (xiv) had been fulfilled.

Completion

Completion shall take place within seven (7) Business Days after fulfillment or waiver (as the case may be) 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 Company will become an indirect wholly-owned subsidiary of the Company and the financial statements of the Target Group will be consolidated into the financial statements of the Group.

Repayment of the Inter-Company Loans

As at 31 May 2019, Fuzhou Sansheng owed to the Target Group the Inter-Company Loans of approximately RMB731.1 million (equivalent to approximately HK$812.3 million). Pursuant to the Reorganisation, the acquisition cost for the transfer of the Project Companies from Fuzhou Sansheng to the Newco will be offset by the

- 12 -

LETTER FROM THE BOARD

Inter-Company Loans. Immediately upon completion of the Reorganisation the Inter-Company Loans was reduced to approximately RMB671.7 million (equivalent to approximately HK$746.3 million). Pursuant to the Agreement, the Vendor shall procure the Inter-Company Loans to be fully settled at Completion.

INFORMATION ON THE TARGET GROUP

The Target Group

As one of the conditions precedent to Completion, the Vendor shall complete the Reorganisation, upon which the Target Company incorporated in the British Virgin Islands with limited liability will hold the Project Companies which are principally engaged in property development and are currently engaged in construction and development of certain residential/commercial projects in Fujian Province of the PRC. The Target Group will also hold 17 other subsidiaries, comprising (i) two investment holding companies (i.e. the HK Holdco and the Newco); and (ii) 15 non-operating subsidiaries (the "Non-operatingSubsidiaries") with no material assets. Save for the Project Companies comprising Fujian Shengchuang, Fuzhou Hongsheng, Fujian Tianren and Zhangzhou Deyousheng, members of the Target Group have no business operations since their establishment. The Reorganisation was completed on 30 September 2019.

- 13 -

LETTER FROM THE BOARD

Set out below is the shareholding structure of the Target Group immediately (i) before Completion; and (ii) after Completion:

1. immediately before Completion

Mega Regal

100%

Target Company

100%

HK Holdco

100%

Newco

95%

Fujian

Shengchuang

80%			90%		100%
Fuzhou					Xiamen		Non-	operating
	Fujian Tianren			Subsidiaries
Shengchun			Sansheng
					(Note)
100%					100%
Fuzhou					Zhangzhou
Hongsheng					Deyousheng

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LETTER FROM THE BOARD

(ii) immediately after Completion

Mega Regal

72.17%

Company

100%

Purchaser

100%

Target Company

100%

HK Holdco

100%

Newco

95%

Fujian

Shengchuang

80%			90%		100%
Fuzhou					Xiamen		Non-	operating
	Fujian Tianren			Subsidiaries
Shengchun			Sansheng
					(Note)
100%					100%
Fuzhou					Zhangzhou
Hongsheng					Deyousheng

Note: Non-operating Subsidiaries comprise (i) 11 non-operating companies directly or indirectly wholly-owned by Fujian Shengchuang; (ii) a non-operating company together with its wholly-owned subsidiary which is owned as to 70% by Fujian Shengchuang; and (iii) a non-operating company together with its wholly-owned subsidiary which is owned as to 80% by Fujian Shengchuang. Such Non-operating Subsidiaries are companies with no material assets and no business operations.

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LETTER FROM THE BOARD

Fujian Shengchuang

Fujian Shengchuang is a company established in the PRC on 22 November 2013 with limited liability and is principally engaged in property development in the PRC. Upon completion of the Reorganisation, Fuzhou Shengchuang is owned as to 95% by the Newco and as to 5% by Royal City Limited, which is incorporated in Hong Kong with limited liability and principally engaged in investment holdings. Royal City Limited and its ultimate beneficial owner, Mr. Qi Xiaoxi are Independent Third Parties.

In December 2013, Fujian Shengchuang acquired a land parcel with a total site area of approximately 57,000 sq.m. in Cangshan District, Fuzhou City, Fujian Province, the PRC. The land use rights was obtained in July 2015. Pursuant to the construction work planning permits and the construction work commencement permits obtained, the project will be developed into a commercial property named 濱江國際 (Binjiang International*) in two phases with a total planned GFA of approximately 321,800 sq.m.. Construction of Phase I of the project with a GFA of approximately 83,600 sq.m. was completed in May 2016, of which approximately 65,300 sq.m. was sold and delivered, approximately 7,500 sq.m. was rented and approximately 10,800 sq.m. was held for sale. Construction of Phase II with a GFA of approximately 238,200 sq.m. comprising office, hotel and shopping complex commenced in October 2016 and is expected to complete and be ready for delivery in May 2020. The remaining construction cost as of 31 August 2019 is expected to be approximately RMB272 million and to be financed by proceeds from pre-sale. As at 31 August 2019, Fujian Shengchuang obtained 5 pre-sale permits and launched pre-sale of approximately 171,600 sq.m., of which approximately 130,200 sq.m. were pre-sold or sold and delivered.

Fuzhou Hongsheng

Fuzhou Hongsheng is a company established in the PRC on 17 November

2016 with limited liability and is principally engaged in property development in the PRC. Fuzhou Hongsheng is wholly-owned by Fuzhou Shengchun and upon completion of the Reorganisation, Fuzhou Shengchun is owned as to 80% by Fujian Shengchuang and as to 20% by 義烏淳醇投資管理合夥企業（有限合夥）(Yiwu Chunchun Investment Management Partnership (Limited Partnership)*, "Yiwu Investment"), which is principally engaged in investment management, asset management and investment consultancy service. Yiwu Investment and its ultimate beneficial owner, Mr. Yao Weishi are Independent Third Parties. Pursuant to certain contractual arrangements, Yiwu Investment will receive a guaranteed return on its investment in the principal amount of RMB400 million in Fuzhou Shengchun and its ownership interests shall be purchased by Fujian Shengchuang upon the end of the investment period which shall be on or before 31 December 2021. As such, the investment in Fuzhou Shengchun by Yiwu Investment was treated as a debt and booked as borrowing from a financial institution, and no non-controlling interest with respect to Yiwu Investment is accounted for in the Target Group's combined financial information in accordance with the Hong Kong Financial Reporting Standards.

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LETTER FROM THE BOARD

In November 2016, Fuzhou Hongsheng acquired two land parcels with a total site area of approximately 78,000 sq.m. in Nantong Town, Fuzhou City, Fujian Province, the PRC. The land use rights was also obtained in May 2017, Pursuant to the construction working planning permits and the construction work commencement permits obtained, the project will be developed into a residential development named 璞悅灣 (Puyue Bay*) with a total planned GFA of approximately 257,300 sq.m.. Construction of the project commenced in June 2017 and is expected to complete and be ready for delivery in September 2021. The remaining construction cost as of 31 August 2019 is expected to be approximately RMB268 million and to be financed by proceeds form pre-sale. As at 31 August 2019, Fuzhou Hongsheng obtained 7 pre-sale permits and launched pre-sale of GFA of approximately 159,000 sq.m. of which approximately 85,800 sq.m. were pre-sold.

Fujian Tianren

Fujian Tianren is a company established in the PRC on 25 May 2017 with limited liability and is principally engaged in property development in the PRC. Fujian Tianren is owned as to 90% by Fujian Shengchuang and as to 10% by 南平 新天地房地產開發有限公司 (Nanping Xintiandi Real Estate Development Co., Ltd.*, "Nanping Xintiandi"), which is established in the PRC with limited liability and principally engaged in property development. Nanping Xintiandi and its beneficial owner, Mr. Chen Jinliang are Independent Third Parties.

In May 2017, Fujian Tianren acquired two land parcels with a total site area of approximately 65,400 sq.m. in Xiapu County, Ningde City, Fujian Province, the PRC. The updated land use rights was obtained in June 2019. Pursuant to the construction work planning permits and the construction work commencement permits obtained, the project will be developed into a residential development named 福臨御景 (Fulin Royal Landscape*) in two phases with a total planned GFA of approximately 219,900 sq.m.. Construction of the project commenced in January 2019 and is expected to complete and be ready for delivery in August 2022. The remaining construction cost as of 31 August 2019 is expected to be approximately RMB639 million and to be financed by the proceeds from pre-sale. As at 31 August 2019, Fujian Tianren obtained two pre-sale permits and launched pre-sale of GFA of approximately 35,800 sq.m. of which approximately 31,600 sq.m. were pre-sold.

Zhangzhou Deyousheng

Zhangzhou Deyousheng is a company established in the PRC on 10 December 1999 with limited liability and is principally engaged in property development in PRC. Zhangzhou Deyousheng is wholly-owned by Xiamen Sansheng, which is wholly-owned by Fujian Shengchuang.

In November 2009, Zhangzhou Deyousheng acquired a land parcel with a total site area of approximately 237,700 sq.m. in Gangwei Town, Longhai City, Fujian Province, the PRC. The updated land use rights was obtained in September

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LETTER FROM THE BOARD

2017, Pursuant to the construction work planning permits and the construction work commencement permits obtained, the land will be developed into a residential and villa complex named 國際海岸 (International Harbour*) in two phases with a total planned GFA of approximately 411,100 sq.m.. Construction of Phase I with a GFA of approximately 214,600 sq.m. commenced in June 2015 and completed in December 2018, of which approximately 191,400 sq.m. was sold and delivered, approximately 4,500 sq.m. was pre-sold and approximately 18,700 sq.m. was held for sale. Construction of Phase II with a GFA of approximately 196,500 sq.m. commenced in January 2017 and is expected to complete and be ready for delivery in December 2020. The remaining construction cost as of 31 August 2019 is expected to be approximately RMB102 million and to be financed by proceeds from pre-sale. As at 31 August 2019, Zhangzhou Deyousheng obtained 33 pre-sale permits and launched pre-sale of GFA of approximately 339,200 sq.m., of which almost all GFA were pre-sold or sold and delivered.

The Services

To facilitate pre-sale of the property projects, the Project Companies have engaging Fujian BE and its subsidiaries to provide the Services pursuant to various agreements. In particular, in January 2019, Fujian Shengchuang and Fuzhou BEHM entered into an agreement with a term commencing from 1 January 2019 and ending on 31 December 2019. In August 2019, Fuzhou Hongsheng and Fuzhou BEHM entered into an agreement with a term commencing from 1 August 2019 and ending on 31 July 2020. In July 2019, Fujian Tianren and Fuzhou BEHM entered into an agreement with a term commencing from 15 July 2019 and ending on 14 July 2020. In February 2019, Zhangzhou Deyousheng and Fujian BE entered into an agreement with a term commencing from 1 February 2019 and ending on 31 December 2019. It is expected that the Project Companies will enter into new agreements with Fujian BE and its subsidiaries for the Services upon expiry of the agreements mentioned above. Having taken into account of the estimated fees in these new agreements, the Company expects the Existing Annual Caps will not be sufficient and therefore proposes to increase the Existing Annual Caps to the Revised Annual Caps. Please refer to the section headed "Revision of the Existing Annual Caps" below for further details.

Financial Information of the Target Group

Set out below is the summary of the key combined financial information of the Target Group for FY2017 and FY2018 and the five months ended 31 May 2019 as prepared in accordance with the Hong Kong Financial Reporting Standards. The financial information was extracted from the combined statements of profit or loss and other comprehensive income of the Target Group for FY2017 and FY2018 and the five months ended 31 May 2019, which entirely combined Fujian Shengchuang's financial statements without non-controlling interest given the Reorganisation has yet to be completed as at 31 May 2019.

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LETTER FROM THE BOARD

			For the five
			months
			ended
			31 May
	FY2017	FY2018	2019
	(audited)	(audited)	(audited)
(in million)	RMB	RMB	RMB
Revenue	1,174.7	1,178.0	39.8
Profit before taxation	208.4	176.9	5.2
Profit/(loss) after taxation	81.0	20.5	(4.2)

In 2017 and 2018, the pre-sold units of Zhangzhou Deyousheng were gradually delivered to customers and revenue in relation to the sale of these pre-sold units was recognised for FY2017 and FY2018. As most of the delivery of pre-sold units of the Project Companies took place on or before 2018, revenue of the Target Group for the five months ended 31 May 2019 reduced significantly and led to a net loss of the Target Group for the five months ended 31 May 2019.

The net asset value of the Target Group attributable to equity shareholders was approximately RMB101.3 million (equivalent to approximately HK$112.6 million) as at 31 May 2019. The total investment cost of the Vendor in the Target Group was approximately RMB553.5 million (equivalent to approximately HK$615.0 million).

During the reporting period above, the Target Group had three minor non-compliance incidents involving incomplete payment of the social insurance and housing provident fund contribution, non-registration of lease agreements and improper promotional wordings under the PRC Advertising Law. According to the PRC legal opinion obtained by the Company, (i) the outstanding social insurance and housing provident fund contribution of the Target Group as at 31 August 2019 was not more than RMB7.6 million based on calculation by the Company and its auditor, which is to be remedied by the indemnity given by the Vendor pursuant to the Agreement; (ii) the maximum penalty for non-registration of lease agreements of the Target Group as at 31 August 2019 was RMB370,000, which is not material to the Target Group's operation; and (iii) the aggregate fines for improper promotional wordings of RMB1.1 million has already been settled by the Target Group in November 2018.

CHANGES IN THE SHAREHOLDING STRUCTURE OF THE COMPANY

As at the Latest Practicable Date, the Company had 419,114,000 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:

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LETTER FROM THE BOARD

					(ii) Immediately upon
					Completion and the allotment
	(i) As at the Latest	and issue of the
	Practicable Date	Consideration Shares
	Number of	Approximate	Number of	Approximate
	Shares	%		Shares	%
Mega Regal	296,348,127		70.71		318,348,127		72.17
Public
Shareholders	122,765,873		29.29		122,765,873		27.83
Total	419,114,000		100.00		441,114,000		100.00

REASONS AND BENEFITS OF THE AGREEMENT

The Group is principally engaged in property development and sale, and property investment. As disclosed in the 2018 annual report of the Company, it is the strategy of the Group to identify land in prime locations suitable for property development and investment in order to increase its land reserve and further promote development of the Group. To this end, the Group has acquired land plots in different cities in the PRC through acquisitions and land biddings. As at 30 June 2019, the Group had a total of 15 ongoing property development projects with a total site area of over 796,500 sq.m..

As mentioned in the section headed "Information on the Target Group" above, the property projects owned by the Project Companies are located in Fujian Province. According to the National Bureau of Statistics of the PRC, the average selling price of residential units in Fujian Province increased from approximately RMB6,100 per sq.m. in 2011 to approximately RMB9,300 per sq.m. in 2018, representing a compound annual growth rate of approximately 6.2%. Besides, the Group had pre-sale of 3 property projects located in Fujian Province during the first half of 2019 and all of them recorded promising results.

Based on the above, the Directors are confident with the sustainable development of the property market in Fujian Province and has commenced to negotiate with the Vendor in May 2019 for acquisition of potential property projects to supplement the land reserve of the Group in Fujian Province. The property projects under the Target Group are currently under construction and are expected to complete within three years, whereas other property projects owned by private group of the Vendor (as set out in the section headed "Directors' interest in competing business" in Appendix V to this circular) (i) have completed the sale and delivery of most of the property units built; (ii) have limited room for further development due to stipulated plot ratios; or (iii) require consent of joint venture partners in relation to any transfer. Accordingly, the Directors are of the view that the acquisition of the Target Group provides a good opportunity for the Group to supplement the land reserve in Fujian Province. The Group had no intention to acquire other property projects in Fujian Province owned by Mr. Lin as at the Latest Practicable Date. The Directors are also of the view that the terms of the Acquisition are fair and reasonable and in the interests of the Shareholders as a whole.

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LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE ACQUISITION

Immediately upon Completion, the Target Company 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

As extracted from the annual report of the Company for the year ended 31 December 2018, the loss attributable to the equity shareholders of the Company was approximately RMB166.5 million. As set out in Appendix III to this circular, assuming Completion had taken place on 1 January 2018, the unaudited pro forma net loss attributable to the equity shareholders of the Enlarged Group for the year ended 31 December 2018 would decrease to approximately RMB149.5 million.

Net assets

As extracted from the interim report of the Company for the six months ended 30 June 2019, the unaudited consolidated total assets and total liabilities of the Group were approximately RMB11,467.8 million and RMB10,290.0 million respectively. The unaudited net asset value attributable to Shareholders as at 30 June 2019 was approximately RMB1,112.9 million. As set out in Appendix III to this circular, assuming Completion had taken place on 30 June 2019, the unaudited pro forma consolidated total assets and total liabilities of the Enlarged Group would increase to approximately RMB20,983.8 million and RMB19,804.1 million respectively. The unaudited pro forma net asset value attributable to equity shareholders of the Enlarged Group would decrease to approximately RMB1,110.3 million.

Gearing

As extracted from the interim report of the Company for the six months ended 30 June 2019, the gearing ratio of the Group, calculated with reference to total liabilities of approximately RMB10,290.0 million and the Group's total equity attributable to the Shareholders of approximately RMB1,112.9 million, was 9.2 as at 30 June 2019. As set out in Appendix III to this circular, assuming the Completion had taken place on 30 June 2019, the gearing ratio of the Enlarged Group upon Completion would be 17.8.

LISTING RULES IMPLICATIONS

As certain percentage ratios (as defined under Chapter 14 of the Listing Rules) in respect of the Acquisition exceed 100%, the Acquisition constitutes a very substantial acquisition for the Company under Chapter 14 of the Listing Rules and therefore is subject to reporting, announcement and Shareholders' approval requirements. In addition, given the Vendor was the controlling Shareholder holding 296,348,127 Shares (representing approximately 70.71% of the issued share capital of the Company) as at the Latest Practicable Date, the Vendor was therefore a connected person of the

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LETTER FROM THE BOARD

Company. Accordingly, the Acquisition also constitutes a connected transaction of the Company and is subject to the reporting, announcement and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules. The Consideration Shares will be issued under a specific mandate of the Company under the Listing Rules.

1. REVISION OF THE EXISTING ANNUAL CAPS

THE MASTER AGREEMENT (AS AMENDED BY THE SUPPLEMENTAL AGREEMENT)

On 6 August 2019, the Company entered into the Master Agreement with Fujian BE, pursuant to which Fujian BE and/or its subsidiaries agreed to provide the supporting services in showrooms (i.e. the Services) to property projects owned by the Group for a term from 6 August 2019 to 31 December 2021 (both days inclusive). In view that the development schedule of certain property projects owned by the Group were accelerated and two property projects acquired by the Group since 6 August 2019 was not taken into account in determining the Existing Annual Caps, the Company proposes to increase the Existing Annual Caps to Revised Annual Caps I. In addition, as the Project Companies in relation to the Acquisition have been engaging Fujian BE and its subsidiaries to provide the Services to their respective property projects, upon Completion, it is expected that the Existing Annual Caps will not be sufficient to cover the Services required by the Target Group from 2020 onwards. As such, the Company further proposes to increase the Existing Annual Caps to Revised Annual Caps II to cover the Existing Business Needs and the Acquisition Need. On 22 November 2019 (after trading hours of the Stock Exchange), the Company and Fujian BE entered into the Supplemental Agreement to amend the Existing Annual Caps to the Revised Annual Caps under the Master Agreement. Save for the revision of the Existing Annual Caps, all other terms and conditions under the Master Agreement remain unchanged.

Date

6 August 2019 (as amended by the Supplemental Agreement dated 22 November 2019)

Parties

1. the Company;
2. Fujian BE;

As at the Latest Practicable Date, Fujian BE was owned as to (i) 63.01% by Fujian JMK, which was owned as to 41.10% by Mr. Lin and 9.90% by Ms. Cheng; and (ii) 18.00% by Xiamen BS, which was owned as to 56.00% by Mr. Lin. Mr. Lin and Ms. Cheng were also directors of Fujian BE. Mr. Lin was an executive Director and was interested in total of 296,348,127 Shares through

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LETTER FROM THE BOARD

Mega Regal, representing approximately 70.71% of the issued share capital of the Company. Ms. Cheng is an executive Director and the spouse of Mr. Lin. As such, Fujian BE is a connected person of the Company.

Subject matter

Pursuant to the Master Agreement, the Company agreed to engage Fujian BE and/or its subsidiaries to provide the Group with supporting services in showrooms (i.e. the Services). The parties shall enter into individual agreements setting out the detailed service fee and the payment terms for each particular showroom as required by the Group.

Term

From 6 August 2019 to 31 December 2021 (both days inclusive)

Pricing

Pursuant to the Master Agreement, the service fee will be determined between the parties after arm's length negotiations (i) with reference to normal commercial terms and prevailing market rates for the provision of similar services; and (ii) not more than that charged by the Independent Third Parties to the Group.

The fee for the Services will include (i) labor costs plus a service charge of

20% and a tax rate of 6%; (ii) tea break fee plus a service charge of 10% and a tax rate of 6%; (iii) catering fee plus a service charge of 45% and a tax rate of 6%; and (iv) purchasing agent fee plus a service charge of 10% and a tax rate of 6%. In general, the labor costs account for more than 90% of the total fee and the other fees account for less than 10% of the total fee. Based on the above service charges and the allocation of each costs, Fujian BE will record a gross margin of approximately 21% for the Service provided to the Group. According to the 2019 China Top 100 Property Management Companies research report, the average gross margin for providing similar service in 2018 was approximately 24%.

Pursuant to the Master Agreement, Fujian BE is responsible for the insurance, wages, labor insurance benefits and all other expenses of Fujian BE's employees. Disputes relating to Fujian BE and its employees shall be handled by Fujian BE and are not related to the Group.

Annual caps and basis of the annual caps

Pursuant to the Supplemental Agreement, the Existing Annual Caps shall be increased to (i) the Revised Annual Caps I in the event conditions to the Supplemental Agreement (the "Conditions") set out in the section headed "Conditions Precedent" below are fulfilled; or (ii) the Revised Annual Caps II in the event the Conditions are fulfilled and the Acquisition is completed, as the case

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LETTER FROM THE BOARD

may be. The Revised Annual Caps, which are determined to cater for the Existing Business Needs and the Acquisition Need (in the event the Acquisition is completed), are summarised as set out below.

		For the
	period from
	6 August	For the year	For the year
	2019 to 31	ending 31	ending 31
	December	December	December
		2019		2020		2021
Existing Annual Caps (RMB)	27.0	million	37.0	million	39.0	million
Revised Annual Caps I (RMB)	28.0	million	51.0	million	47.0	million
Revised Annual Caps II (RMB)	28.0	million	71.0	million	69.0	million

The Existing Annual Caps and the Revised Annual Caps are mainly determined based on (i) the total property projects owned by the Group as at the Latest Practicable Date; (ii) the estimated number of showrooms for each project;

1. the estimated labor required for each showroom; (iv) the estimated labor costs; (v) the estimated growth in labor costs; and (vi) the service charge for labor costs of 20% and the tax rate of 6%. The differences among the Existing Annual Caps, the Revised Annual Caps I and the Revised Annual Caps II are mainly due to the number of property projects which require the Services. Having considered the Existing Business Needs, the Company expects that the number of property projects which require the Services would be increased by 3, 4 and 2 to 10, 11 and 9 for the period from 6 August 2019 to 31 December 2019, the year ending 31 December 2020 and the year ending 31 December 2021, respectively. The increase are to cover the needs from two newly acquired property projects to be pre-sold throughout the period and two property projects with accelerated plan to be pre-sold by 2019 and 2020 respectively. After taken into accounts the Existing Business Needs and the Acquisition Need, the Company expects that number of property projects which require the Services would be increased by 3, 8 and 5 to 10, 15 and 12 for the period from 6 August 2019 to 31 December 2019, the year ending 31 December 2020 and the year ending 31 December 2021, respectively.

Save for the revision of the Existing Annual Caps, all other terms and conditions under the Master Agreement remain unchanged.

Conditions Precedent

The Supplemental Agreement is subject to the fulfilment of the following conditions:

1. the Company having obtained the approval of its Independent Shareholders in respect of the Master Agreement as amended by the Supplemental Agreement and the transactions contemplated thereunder (including the Revised Annual Caps); and

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LETTER FROM THE BOARD

1. the Company and Fujian BE having complied with the Listing Rules and all applicable laws and regulations in respect of revision of Existing Annual Caps.

If the conditions above have not been fulfilled within six (6) months from the date of the Supplemental Agreement (or such later date as the parties may agree), the Supplemental Agreement shall cease and determine and neither party shall have any obligations and liabilities towards each other thereunder save for any antecedent breaches of the Supplemental Agreement.

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

INFORMATION ON FUJIAN BE

Fujian BE is a company established in the PRC with limited liability. Fujian BE is principally engaged in the provision of property management services including customer services, sales activities assistance, visiting arrangement, catering services, security and order maintenance, cleaning services and equipment maintenance.

As at the Latest Practicable Date, Fujian BE was owned as to (i) 63.01% by Fujian JMK, which was owned as to 41.10% by Mr. Lin and 9.90% by Ms. Cheng; and (ii) 18.00% by Xiamen BS, which was owned as to 56.00% by Mr. Lin. Mr. Lin and Ms. Cheng were also directors of Fujian BE. Mr. Lin was an executive Director and was interested in total of 296,348,127 Shares through Mega Regal, representing approximately 70.71% of the issued share capital of the Company. Ms. Cheng is an executive Director and the spouse of Mr. Lin.

INTERNAL CONTROL PROCEDURES ON THE PRICING BASIS OF THE MASTER AGREEMENT

The Group has adopted the following internal control procedures and corporate governance measures in relation to the transactions contemplated under the Master Agreement to ensure that terms of each individual agreement to be entered between Fujian BE and the Company are in line with the terms of the Master Agreement and no less favourable to the Company than those available from independent service providers:

1. Each time the Group requires the Services, the Group will send Fujian BE the particulars of the property project for the purpose of obtaining quotation. Upon receipt of the quotation, the business department of the Group will compare the estimated salary in the quotation with the salary paid by at least three independent property developers in the city the project is located. The business department of the Group is responsible to ensure that the salary quoted by Fujian BE is no less favourable to the Company;

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LETTER FROM THE BOARD

1. the business department will calculate the gross margin to be recorded by Fujian BE for that particular property project based on the quotation and ensure that such gross margin will not be higher than the average gross margin for providing similar service as indicated in the latest China Top 100 Property Management Companies research report;
2. in the event salary paid by other independent property developers in paragraph (i) or the latest China Top 100 Property Management Companies research report in paragraph (ii) are not available, the business department shall obtain quotations for the Services from at least three independent service providers. Fujian BE can only be chosen if its quotation is the most competitive among all quotations received;
3. in addition, the finance department of the Group shall be responsible for reviewing the usage of the Revised Annual Caps to ensure the entering into of each individual agreement will not result in exceeding the Revised Annual Caps;
4. general manager of the business department will conduct a final review to ensure the above procedures are all fulfilled and completed; and
5. the finance department of the Group shall be responsible for monitoring total fee paid or payable by the Group during the financial year to ensure that the annual caps are not exceeded, and inform the executive Directors in the event the annual caps approach full utilisation. Where appropriate, the Company shall seek to renew the annual caps and re-comply with the requirements of Chapter 14A of the Listing Rules in case the Revised Annual Caps are expected to be exceeded.

REASONS FOR REVISION OF THE ANNUAL CAPS

The Company is an investment holding company and its subsidiaries are principally engaged in property development and property investment.

As disclosed in the announcement of the Company dated 6 August 2019, the Company considered the entering into the Master Agreement can enhance the services, quality and tidiness of the showrooms of the property projects held by the Group. The Company is also of the view that engaging Fujian BE to provide the Services is more cost saving and in the interests of the Company and the Shareholders as a whole.

In view that the development schedule of certain property projects owned by the Group were accelerated and two property projects acquired by the Group since 6 August 2019 were not taken into account in determining the Existing Annual Caps, the Company proposes to increase the Existing Annual Caps to Revised Annual Caps I. In addition, as the Project Companies in relation to the Acquisition have been engaging Fujian BE and its subsidiaries to provide the Services to their respective property projects, upon Completion, it is expected that the Existing Annual Caps will not be sufficient to cover the Services required by the Target Group from 2020 onwards. As such, the Company further proposes to increase the Existing Annual Caps to Revised Annual Caps II to cover the Existing Business Needs and the Acquisition Need.

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LETTER FROM THE BOARD

The Directors (including the independent non-executive Directors who will render their views after considering the advice to be given by Crescendo in respect of the Master Agreement and the Revised Annual Caps) are of the view that the Master Agreement and the transactions contemplated thereunder are in the ordinary and usual course of business of the Group and on normal commercial terms. Taking into account the pricing mechanism set out above, the Directors (including the independent non-executive Directors) are of the view that the terms of the Master Agreement as amended by the Supplemental Agreement and transactions contemplated thereunder (including the Revised Annual Caps) are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

As at the Latest Practicable Date, Fujian BE is owned as to (i) 63.01% by Fujian JMK, which is owned as to 41.10% by Mr. Lin and 9.90% by Ms. Cheng; and (ii) 18.00% by Xiamen BS, which is owned as to 56.00% by Mr. Lin. Mr. Lin and Ms. Cheng are also directors of Fujian BE. Mr. Lin is an executive Director and is interested in total of 296,348,127 Shares through Mega Regal, representing approximately 70.71% of the issued share capital of the Company. Ms. Cheng is an executive Director and the spouse of Mr. Lin. As such, Fujian BE is a connected person of the Company and the provision of the Services constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules.

As at least one of the applicable percentage ratios in respect of the Revised Annual Caps exceed 5%, the Master Agreement as amended by the Supplemental Agreement and transactions contemplated thereunder (including the Revised Annual Caps) shall be subject to reporting, announcement, annual review and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

EGM

The EGM will be convened and held for the purpose of considering and, if thought fit, approving the resolution(s) in respect of (i) the Agreement and the transactions contemplated thereunder, including the allotment and issue of the Consideration Shares; and (ii) the Master Agreement as amended by the Supplemental Agreement and the transactions contemplated thereunder (including the Revised Annual Caps). Mr. Lin, the Chairman of the Board and an executive Director and Ms. Cheng, an executive Director and the spouse of Mr. Lin, considered themselves having material interests in the Agreement and the transactions contemplated thereunder by reason of Mr. Lin's ownership of Mega Regal and had abstained from voting on the Board resolution approving the Agreement and the transactions contemplated thereunder. Also, Mr. Lin, Ms. Cheng and Mega Regal, considered themselves having material interests in the Master Agreement as amended by the Supplemental Agreement and the transactions contemplated thereunder by virtue of their interests and/or directorship in Fujian BE and had abstained from voting on the Board resolution approving the Master Agreement as amended by the Supplemental Agreement and transactions contemplated thereunder (including the Revised Annual Caps). Given the ultimate beneficial owner of Mega Regal is Mr. Lin and Mega Regal is the Vendor of the Sale Shares, Mega Regal will also be required to abstain from voting on the proposed resolution in the EGM. The voting in relation to the aforesaid resolution to be proposed at

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LETTER FROM THE BOARD

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-3 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.

CLOSURE OF REGISTER OF MEMBERS

The transfer books and register of members of the Company will be closed from 10 December 2019 to 13 December 2019 (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 13 December 2019 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 9 December 2019.

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 (i) the Agreement and the transactions contemplated thereunder; and (ii) the Master Agreement as amended by the Supplemental Agreement and the transactions contemplated thereunder (including the Revised Annual Caps). In this connection, Crescendo 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 Crescendo set out on pages 32 to 66 of this circular in relation to (i) the Agreement and the transactions contemplated thereunder; and (ii) the Master Agreement as amended by the Supplemental Agreement and the transactions contemplated thereunder (including the Revised Annual Caps).

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LETTER FROM THE BOARD

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 Crescendo) considers that the terms of the Agreement and the Master Agreement as amended by the Supplemental Agreement (including the Revised Annual Caps) are normal commercial terms and fair and reasonable, and the entering into of the Agreement and the Master Agreement as amended by the Supplemental Agreement are in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM to approve (i) the Agreement and transactions contemplated thereunder; and (ii) the Master Agreement as amended by the Supplemental Agreement and the transactions contemplated thereunder (including the Revised Annual Caps).

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

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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 (i) the Agreement and transactions contemplated thereunder for inclusion in this circular; and (ii) the Master Agreement as amended by the Supplemental Agreement and the transactions contemplated thereunder (including the Revised Annual Caps)

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 November 2019

To the Independent Shareholders

Dear Sir or Madam,

1. VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION IN RELATION TO ACQUISITION OF A PROPERTY GROUP; AND
2. CONTINUING CONNECTED TRANSACTIONS IN RELATION TO

REVISION OF ANNUAL CAPS

We refer to the circular of the Company dated 25 November 2019 (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 (i) the Agreement and transactions contemplated thereunder; and (ii) the Master Agreement as amended by the Supplemental Agreement and the transactions contemplated thereunder (including the Revised Annual Caps). Crescendo 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 Crescendo as set out on pages 32 to 66 of the Circular.

Having considered the terms and conditions of the Agreement and the Master Agreement as amended by the Supplemental Agreement (including the Revised Annual Caps), as well as the advice of Crescendo as set out in its letter of advice, we consider that the terms of the Agreement and the Master Agreement as amended by the Supplemental Agreement (including the Revised Annual Caps) are normal commercial terms and fair and

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

reasonable, and the entering into of the Agreement and the Master Agreement are in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole.

Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM to approve (i) the Agreement and transactions contemplated thereunder; and (ii) the Master Agreement as amended by the Supplemental Agreement and the transactions contemplated thereunder (including the Revised Annual Caps).

Yours faithfully,

For and on behalf of the Independent Board Committee

Mr. Pan Dexiang

Mr. Yuan Chun

Mr. Zhong Bin

Independent non-executive Directors

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LETTER FROM CRESCENDO

The following is the text of the letter from Crescendo setting out its advice to the Independent Board Committee and the Independent Shareholders in relation to (i) the Agreement and the transactions contemplated thereunder; and (ii) the Master Agreement as amended by the Supplemental Agreement and the transactions contemplated thereunder (including the Revised Annual Caps), which has been prepared for the purpose of inclusion in this circular.

1506 Tai Tung Building

8 Fleming Road

Wanchai, Hong Kong

25 November 2019

Sansheng Holdings (Group) Co. Ltd.

Room 3207

The Gateway Tower 6

Tsim Sha Tsui

Kowloon, Hong Kong

To the Independent Board Committee and

the Independent Shareholders

Dear Sirs,

VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION

IN RELATION TO ACQUISITION OF A PROPERTY GROUP; AND CONTINUING CONNECTED TRANSATIONS IN RELATION TO REVISION OF ANNUAL CAPS

INTRODUCTION

We refer to our engagement as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders with respect to the terms of the Acquisition contemplated under the Agreement and the continuing connected transactions contemplated under the Master Agreement (as amended by the Supplemental Agreement) (the "Continuing Connected Transactions"), details of which are set out in the Letter from the Board contained in the circular of the Company dated 25 November 2019 to the Shareholders (the "Circular"), of which this letter forms part. Capitalized terms used in this letter have the same meanings as defined elsewhere in the Circular unless the context requires otherwise.

On 27 September 2019 (after trading hours of the Stock Exchange), the Purchaser (a direct wholly-owned subsidiary of the Company) and the Vendor (the controlling Shareholder) entered into the Agreement, pursuant to which the Purchaser has conditionally agreed to acquire, and the Vendor has conditionally agreed to sell, the Sale Shares, which represent the entire issued share capital of the Target Company, for the Consideration of HK$231.0 million, payable by issue and allotment of the Consideration Shares, being

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LETTER FROM CRESCENDO

22,000,000 new Shares, at the issue price of HK$10.5 per Consideration Share. The Consideration Shares will be issued under a specific mandate of the Company under the Listing Rules.

As certain percentage ratios (as defined under Chapter 14 of the Listing Rules) in respect of the Acquisition exceed 100%, the Acquisition constitutes a very substantial acquisition for the Company under Chapter 14 of the Listing Rules and therefore is subject to the reporting, announcement and Shareholders' approval requirements. In addition, given the Vendor was the controlling Shareholder which held 296,348,127 Shares, representing approximately 70.71% of the issued share capital of the Company, as at the Latest Practicable Date, the Vendor is therefore a connected person of the Company. Accordingly, the Acquisition also constitutes a connected transaction for the Company and is subject to the reporting, announcement and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

On 22 November 2019, (after trading hours of the Stock Exchange), the Company and Fujian BE entered into the Supplemental Agreement to increase the Existing Annual Caps for the Services under the Master Agreement to the Revised Annual Caps so as to cope with the Existing Business Needs and the Acquisition Need (as defined below).

As at the Latest Practicable Date, Fujian BE was owned as to (i) 63.01% by Fujian JMK, which was owned as to 41.10% by Mr. Lin and 9.90% by Ms. Cheng; and (ii) 18.00% by Xiamen BS, which was owned as to 56.00% by Mr. Lin. Mr. Lin and Ms. Cheng are directors of Fujian BE, and Mr. Lin is an executive Director and is interested in total of 296,348,127 Shares through Mega Regal, representing approximately 70.71% of the issued share capital of the Company. Ms. Cheng is an executive Director and the spouse of Mr. Lin. As such, Fujian BE is a connected person of the Company and the provision of the Services constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules.

As at least one of the applicable percentage ratios in respect of the Revised Annual Caps exceed 5%, the Master Agreement as amended by the Supplemental Agreement and transactions contemplated thereunder (including the Revised Annual Caps) shall be subject to the reporting, announcement, annual review and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

The EGM will be convened and held for the purpose of considering and, if thought fit, approving, by way of poll, the resolutions in respect of (i) the Agreement and the transactions contemplated thereunder, including the allotment and issue of the Consideration Shares; and (ii) the Master Agreement as amended by the Supplemental Agreement and the transactions contemplated thereunder, including the Revised Annual Caps. Given the ultimate beneficial owner of Mega Regal, being the Vendor of the Sale Shares, is Mr. Lin, the Chairman of the Board and an executive Director, Mega Regal will be required to abstain from voting on the proposed resolutions at the EGM.

The Independent Board Committee, comprising all independent non-executive Directors, namely Mr. Pan Dexiang, Mr. Yuan Chun and Mr. Zhong Bin, has been established to advise the Independent Shareholders in relation to (i) the Agreement and the transactions contemplated thereunder; and (ii) the Master Agreement as amended by the Supplemental Agreement and the transactions contemplated thereunder (including the

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LETTER FROM CRESCENDO

Revised Annual Caps). We, Crescendo Capital Limited, have been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard, in particular as to whether (i) the terms of the Acquisition are fair and reasonable so far as the Independent Shareholders are concerned, the Acquisition is on normal commercial terms and in the ordinary and usual course of business of the Group as well as whether the Acquisition is in the interests of the Company and the Shareholders as a whole; and (ii) the terms of the Master Agreement as amended by the Supplemental Agreement are fair and reasonable so far as the Independent Shareholders are concerned, the Continuing Connected Transactions are on normal commercial terms and in the ordinary and usual course of business of the Group as well as whether the Continuing Connected Transactions are in the interests of the Company and the Shareholders as a whole.

We are not associated with the Group and its associates and do not have any shareholding in any member of the Group or right (whether legally enforceable or not) to subscribe for, or to nominate persons to subscribe for, securities in any member of the Group. Save for acting as an independent financial adviser in this appointment, we have not acted as a financial adviser or an independent financial adviser to the Company and its associates in the past two years from the date hereof. Apart from normal professional fees payable to us in connection with this appointment, no arrangements exist whereby we will receive any fee or benefit from the Group and its associates. We are not aware of any relationship or interest between us and the Company or any other parties that would be reasonably considered to affect our independence to act as an independent financial adviser to the Independent Board Committee and the Independent Shareholders.

BASIS OF OUR OPINION

In formulating our opinion and recommendation, we have relied on the information and representations supplied, and the opinions expressed, by the Directors and management of the Company and have assumed that such information and statements, and representations made to us or referred to in the Circular are true, accurate and complete in all material respects as of the date hereof and will continue as such at the date of the EGM. The Directors have collectively and individually accepted full responsibility for the Circular, including particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group and having made all reasonable enquiries have confirmed that, to the best of their knowledge and belief, the information contained in the 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 in the Circular misleading.

We consider that we have reviewed sufficient information to reach an informed view, to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our recommendation. We have no reasons to suspect that any material information has been withheld by the Directors or management of the Company, or is misleading, untrue or inaccurate, and consider that they may be relied upon in formulating our opinion. We have not, however, for the purposes of this exercise, conducted any independent detailed investigation or audit into the businesses or affairs or future prospects of the Group and the related subject of, and parties to, the Agreement and the Master Agreement (as supplemented by the Supplemental Agreement). Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the information

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LETTER FROM CRESCENDO

made available to us as at the Latest Practicable Date. Shareholders should note that subsequent developments (including any material change in market and economic conditions) may affect and/or change this opinion.

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. THE ACQUISITION

In arriving at our opinion regarding the Acquisition, we have considered the following principal factors and reasons:

A.1 Information on the Group

The Group is principally engaged in property development and sale, and property investment.

The consolidated financial information of the Group for the six months ended 30 June 2019 and 2018 and the two years ended 31 December 2018, which was extracted from the interim report and annual report of the Company respectively, is summarized as follows:

		For the six months	For the year ended
		ended 30 June	31 December
	2019			2018	2018		2017
		RMB'000		RMB'000	RMB'000	RMB'000
	(unaudited)	(unaudited)	(audited)	(audited)
						(note)			(restated)
Revenue	12,952			680,846		933,971		-
Cost of sales		-			(647,132)	(878,800)	-
Gross profit		12,952				33,714		55,171		-
Net valuation gain on
investment property	3,800				-	1,478		33,582
Other income/(loss)	5,646			3,093		(42,972)	41,905
Selling and marketing expenses	(40,187)	(11,135)	(53,133)	-
Administrative expenses	(36,798)	(24,640)	(62,861)	(50,680)
Other operating expenses		(491)		-	(1,020)	-
(Loss)/profit from operations		(55,078)	1,032		(103,337)	24,807
Finance costs	(8,858)	(32,489)	(94,983)	(35,991)
Share of profits less losses of
joint ventures		(2,232)		-	(1,477)	-
(Loss) before taxation		(66,168)	(31,457)	(199,797)	(11,184)
Income tax		12,777				11,951		13,333		11,111
(Loss) for the period/year	(53,391)	(19,506)	(186,464)	(73)
(Loss) for the period/year
attributable to owners of the
Company	(41,125)	(18,024)	(166,462)	(16)

Note: According to the interim report of the Company for the six months ended 30 June 2019, the Group initially applied Hong Kong Financial Reporting Standards 16 on 1 January 2019 using the modified retrospective approach. Under such approach, comparative information is not restated.

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LETTER FROM CRESCENDO

	As at
	30 June
	2019
	RMB'000
	(unaudited)
Non-current assets	1,501,211
Current assets	9,966,589
Total assets	11,467,800
Non-current liabilities	(4,730,797)
Current liabilities	(5,559,203)
Total liabilities	(10,290,000)
Net assets	1,177,800
Equity attributable to owners of the Company	1,112,873

For the year ended 31 December 2018

No revenues were recorded by the Group for the year ended 31 December 2017 as its investment properties remained vacant throughout the year. The revenue of the Group for the year ended 31 December 2018 amounted to approximately RMB934.0 million, of which approximately 98.9% was derived from the sale of properties located in the West District and North District of Zhangqiu, Jinan, Shandong while the remaining revenue was contributed by the rental income generated from the commercial investment properties in Harbin and Qingdao. The gross profit of the Group amounted to approximately RMB55.2 million for the year ended 31 December 2018. In line with the substantial increase in the business scale of the Group for the year ended 31 December 2018, the selling and marketing expenses and administrative expenses increased by a total of approximately RMB65.3 million.

For the year ended 31 December 2018, the net valuation gain on investment properties decreased by approximately RMB32.1 million as compared to that for the year ended 31 December 2017. The Group's other income/loss, which mainly comprised net exchange gain/loss and fair value changes on listed equity securities, changed from a net gain of approximately RMB41.9 million for the year ended 31 December 2017 to a net loss of approximately RMB43.0 million for the year ended 31 December 2018. Such change was mainly attributable to the recognition of a net exchange loss of approximately RMB41.0 million for the year ended 31 December 2018 as a result of the appreciation of United State dollar against Renminbi in respect of the United State dollar bonds issued by the Company during the year, while a net exchange gain of approximately RMB12.2 million was recorded for the year ended 31 December 2017. In addition, the

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LETTER FROM CRESCENDO

Group recorded a mark-to-market unrealized fair value gain on the financial assets of approximately RMB29.2 million for the year ended 31 December 2017 while a mark-to-market unrealized fair value loss on the financial assets of approximately RMB10.6 million was recorded for the year ended 31 December 2018. Due to the aforementioned unfavorable market conditions, the Group recorded a loss from operations of approximately RMB103.3 million for the year ended 31 December 2018 as compared to a profit from operations of approximately RMB24.8 million for the year ended 31 December 2017. Being further impacted by the increase in finance costs of approximately RMB59.0 million for the year ended 31 December 2018, the Group's loss before taxation increased from approximately RMB11.2 million for the year ended 31 December 2017 to approximately RMB199.8 million for the year ended 31 December 2018. Loss attributable to owners of the Company also increased from approximately RMB16,000 for the year ended 31 December 2017 to approximately RMB166.5 million for the year ended 31 December 2018 after taking into account the tax credit recognized during the years.

For the six months ended 30 June 2019

The revenue of the Group for the six months ended 30 June 2018 amounted to approximately RMB680.8 million, of which approximately 99.5% was derived from the sale of properties located in the West District of Zhangqiu, Jinan, Shandong while the remaining revenue was contributed by the rental income generated from the commercial investment properties in Harbin. Given that a majority of the Group's development projects were under construction or in the pre-sale stage and conditions to recognize revenue from sale of properties were not satisfied during the six months ended 30 June 2019, the revenue of the Group for the six months ended 30 June 2019 decreased substantially to approximately RMB13.0 million as only rental income from the commercial investment properties in Harbin and Qingdao was recorded as revenue of the Group. The Group did not record any cost of sales for the six months ended 30 June 2019 as the pre-sale properties had not been delivered during the period. Therefore, the gross profit of the Group decreased by approximately RMB20.7 million from approximately RMB33.7 million for the six months ended 30 June 2018 to approximately RMB13.0 million for the six months ended 30 June 2019. With the continued expansion in the business scale of the Group and the launch of pre-sale marketing campaigns during the six months ended 30 June 2019, the selling and marketing expenses and administrative expenses increased by a total of approximately RMB41.2 million.

For the six months ended 30 June 2019, the net valuation gain on investment properties amounted to approximately RMB3.8 million while no such gain/loss was recorded for the six months ended 30 June 2018. The Group's other income, which mainly comprised net exchange gain/loss, fair value changes on listed equity securities and fair value changes on derivative financial instruments, increased by approximately RMB2.5 million for the six months ended 30 June 2019 as compared to the prior corresponding period. The Group recorded a loss from operations of approximately RMB55.1 million for the six months ended 30

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LETTER FROM CRESCENDO

June 2019 as compared to a profit from operations of approximately RMB1.0 million for the six months ended 30 June 2018. Notwithstanding a reduction in finance costs of approximately RMB23.6 million for the six months ended 30 June 2019, the loss before taxation increased from approximately RMB31.5 million for the six months ended 30 June 2018 to approximately RMB66.2 million for the six months ended 30 June 2019. Loss attributable to owners of the Company also increased from approximately RMB18.0 million for the six months ended 30 June 2018 to approximately RMB41.1 million for the six months ended 30 June 2019 after taking into account the tax credit recognized during the period.

As at 30 June 2019, the non-current assets of the Group amounted to approximately RMB1,501.2 million, of which approximately RMB605.9 million were investment properties, approximately RMB110.3 million were properties under development, approximately RMB456.7 million were prepaid lease payments and approximately RMB288.8 million were interests in joint ventures. The current assets of the Group amounted to approximately RMB9,966.6 million as at 30 June 2019, which mainly consisted of inventories and other contract costs of approximately RMB9,076.5 million, trade and other receivables of approximately RMB380.7 million and cash and cash equivalents of approximately RMB468.3 million. The current liabilities of the Group as at 30 June 2019 amounted to approximately RMB5,559.2 million, which mainly comprised bank loans and borrowings from financial institutions of approximately RMB1,248.9 million, trade and other payables of approximately RMB2,868.9 million, contract liabilities of approximately RMB1,219.8 million and current taxation of approximately RMB220.5 million. As at 30 June 2019, the non-current liabilities of the Group amounted to approximately RMB4,730.8 million, which mainly comprised bank loans and borrowings from financial institutions of approximately RMB2,052.9 million, bond payable of approximately RMB898.9 million, loans from a related party of approximately RMB1,658.8 million and deferred tax liabilities of approximately RMB94.3 million. As at 30 June 2019, the net current assets of the Group amounted to approximately RMB4,407.4 million while the net assets attributable to the owners of the Company amounted to approximately RMB1,112.9 million. As at 30 June 2019, the current ratio, as expressed as current assets over current liabilities, was approximately 1.79 while the gearing ratio, as expressed as total liabilities over total assets, of the Group was approximately 0.90. In general, the Group is financially sound.

A.2 Information on the Target Group

The Target Company is an investment holding company incorporated in the British Virgin Islands on 31 May 2019. Pursuant to the Agreement, it is one of the conditions precedent to Completion that the Vendor shall complete the Reorganisation, upon which the Target Company will hold the Project Companies (including Fujian Shengchuang, Fuzhou Hongsheng, Fujian Tianren and Zhangzhou Deyousheng) which are principally engaged in property development and are currently engaged in construction and development of certain residential/commercial projects in Fujian Province of the PRC. The Target Group will also hold 17 other subsidiaries, comprising

(i) two investment holding companies (i.e. the HK Holdco and the Newco); and (ii) 15

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LETTER FROM CRESCENDO

non-operating subsidiaries (the "Non-operating Subsidiaries") with no material assets. Save for the Project Companies comprising Fujian Shengchuang, Fuzhou Hongsheng, Fujian Tianren and Zhangzhou Deyousheng, members of the Target Group have not conducted any business operation since their establishment. The Reorganisation was completed on 30 September 2019. The shareholding structure of the Target Group immediately before Completion is set out as follow:

Mega Regal

100%

Target Company

100%

HK Holdco

100%

Newco

95%

Fujian Shengchuang

80%

90%

100%

Fuzhou Shengchun

Fujian Tianren

Xiamen Sansheng

Non-operating

Subsidiaries (Note)

100%

100%

Fuzhou Hongsheng

Zhangzhou

Deyousheng

Note: Non-operating Subsidiaries comprise (i) 11 non-operating companies directly or indirectly wholly-owned by Fujian Shengchuang; (ii) a non-operating company together with its wholly-owned subsidiary which is owned as to 70% by Fujian Shengchuang; and (iii) a non-operating company together with its wholly-owned subsidiary which is owned as to 80% by Fujian Shengchuang. Such Non-operating Subsidiaries are companies with no material assets and no business operations.

Fujian Shengchuang

Fujian Shengchuang is a company established in the PRC on 22 November

2013 with limited liability and is principally engaged in property development in the PRC. Upon completion of the Reorganisation, Fujian Shengchuang is owned as to 95% by the Newco and as to 5% by Royal City Limited, an Independent Third Party.

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LETTER FROM CRESCENDO

Fujian Shengchuang owns a land parcel with a total site area of approximately 57,000 sq.m. in Cangshan District, Fuzhou City, Fujian Province, the PRC. The land use rights were obtained in July 2015. Pursuant to the construction work planning permits and the construction work commencement permits obtained, the project will be developed into a commercial property named as 濱江國際 (Binjiang International*) in two phases with a total planned GFA of approximately 321,800 sq.m.. Construction of phase I with a GFA of approximately 83,600 sq.m. was completed in May 2016, of which approximately 65,300 sq.m. was sold and delivered, approximately 7,500 sq.m. was rented and approximately 10,800 sq.m. was held for sale. Construction of phase II with a GFA of approximately 238,200 sq.m. comprising office, hotel and shopping complex commenced in October 2016 and is expected to complete and be ready for delivery in May 2020. As of 31 August 2019, the remaining construction cost was estimated to be approximately RMB272 million, which would be financed by proceeds from pre-sale. As at 31 August 2019, Fujian Shengchuang obtained five pre-sale permits and launched pre-sale of GFA of approximately 171,600 sq.m., of which approximately 130,200 sq.m. were pre-sold or sold and delivered.

Fuzhou Hongsheng

Fuzhou Hongsheng is a company established in the PRC on 17 November

2016 with limited liability and is principally engaged in property development in the PRC. Fuzhou Hongsheng is wholly-owned by Fuzhou Shengchun and upon completion of the Reorganisation, Fuzhou Shengchun is owned as to 80% by Fujian Shengchuang and as to 20% by 義烏淳醇投資管理合夥企業（有限合夥）(Yiwu Chunchun Investment Management Partnership (Limited Partnership)*, "Yiwu Investment"), an Independent Third Party. Pursuant to certain contractual arrangements, Yiwu Investment will receive a guaranteed return on its investment in the principal amount of RMB400 million in Fuzhou Shengchun and its ownership interests shall be purchased by Fujian Shengchuang upon the end of the investment period which shall be on or before 31 December 2021. As such, the investment in Fuzhou Shengchun by Yiwu Investment was treated as a debt and recorded as a borrowing from a financial institution, and no non-controlling interest with respect to Yiwu Investment is accounted for in the Target Group's combined financial information in accordance with the Hong Kong Financial Reporting Standards.

Fuzhou Hongsheng owns two land parcels with a total site area of approximately 78,000 sq.m. in Nantong Town, Fuzhou City, Fujian Province, the PRC. The land use rights were obtained in May 2017. Pursuant to the construction work planning permits and the construction work commencement permits obtained, the project will be developed into a residential development named as 璞悅灣 (Puyue Bay*) with a total planned GFA of approximately 257,300 sq.m.. Construction of the project commenced in June 2017 and is expected to complete and be ready for delivery in September 2021. As of 31 August 2019, the remaining construction cost was estimated to be approximately RMB268 million, which would be financed by proceeds from pre-sale. As at 31 August 2019, Fuzhou Hongsheng obtained seven pre-sale permits and launched pre-sale of GFA of approximately 159,000 sq.m., of which approximately 85,800 sq.m. were pre-sold.

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LETTER FROM CRESCENDO

Fujian Tianren

Fujian Tianren is a company established in the PRC on 25 May 2017 with limited liability and is principally engaged in property development in the PRC. Fujian Tianren is owned as to 90% by Fujian Shengchuang and as to 10% by 南平 新天地房地產開發有限公司 (Nanping Xintiandi Real Estate Development Co., Ltd.*), an Independent Third Party.

Fujian Tianren owns two land parcels with a total site area of approximately 65,400 sq.m. in Xiapu County, Ningde City, Fujian Province, the PRC. The updated land use rights were obtained in June 2019. Pursuant to the construction work planning permits and the construction work commencement permits obtained, the project will be developed into a residential development named as 福臨御景 (Fulin Royal Landscape*) in two phases with a total planned GFA of approximately 219,900 sq.m.. Construction of the project commenced in January 2019 and is expected to complete and be ready for delivery in August 2022. As of 31 August 2019, the remaining construction cost was estimated to be approximately RMB639 million, which would be financed by proceeds from pre-sale. As at 31 August 2019, Fujian Tianren obtained two pre-sale permits and launched pre-sale of GFA of approximately 35,800 sq.m., of which approximately 31,600 sq.m. were pre-sold.

Zhangzhou Deyousheng

Zhangzhou Deyousheng is a company established in the PRC on 10 December 1999 with limited liability and is principally engaged in property development in the PRC. Zhangzhou Deyousheng is wholly-owned by Xiamen Sansheng, which is wholly-owned by Fujian Shengchuang.

Zhangzhou Deyousheng owns a land parcel with a total site area of approximately 237,700 sq.m. in Gangwei Town, Longhai City, Fujian Province, the PRC. The updated land use rights were obtained in September 2017. Pursuant to the construction work planning permits and the construction work commencement permits obtained, the land will be developed into a residential and villa complex named as 國際海岸 (International Harbour*) in two phases with a total planned GFA of approximately 411,100 sq.m.. Construction of phase I with a GFA of approximately 214,600 sq.m. commenced in June 2015 and was completed in December 2018, of which approximately 191,400 sq.m. was sold and delivered, approximately 4,500 sq.m. was pre-sold and approximately 18,700 sq.m. was held for sale. Construction of phase II with a GFA of approximately 196,500 sq.m. commenced in January 2017 and is expected to complete and be ready for delivery in December 2020. As of 31 August 2019, the remaining construction cost was estimated to be approximately RMB102 million, which would be financed by proceeds from pre-sale. As at 31 August 2019, Zhangzhou Deyousheng obtained thirty-threepre-sale permits and launched pre-sale of GFA of approximately 339,200 sq.m., of which almost all GFA were pre-sold or sold and delivered.

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Financial information of the Target Group

A summary of the combined financial information of the Target Group for the five months ended 31 May 2019 and 2018 and the two years ended 31 December 2018 and 2017, as extracted from the accountants' report of the Target Group contained in Appendix II to the Circular, is set out below:

	For the five months	For the year ended
	ended 31 May	31 December
	2019		2018	2018		2017
	RMB$'000		RMB'000	RMB$'000	RMB'000
	(audited)	(unaudited)	(audited)	(audited)
Revenue	39,770		268,341		1,177,959		1,174,743
Gross profit	25,999		150,475		325,964		306,185
Profit before taxation	5,153		113,087		176,858		208,377
(Loss)/profit for the
period/year	(4,183)	35,613		20,532		81,000
(Loss)/profit for the
period/year attributable
to equity shareholders of
the Target Company	(3,970)	35,613		20,532		81,000

	As at
	31 May
	2019
	RMB'000
	(audited)
Non-current assets	685,535
Current assets	9,602,995
Total assets	10,288,530
Non-current liabilities	(1,233,032)
Current liabilities	(8,952,749)
Total liabilities	(10,185,781)
Net assets	102,749
Net assets attributable to equity shareholders of the Target
Company	101,335

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For the year ended 31 December 2018

The revenue of the Target Group for the years ended 31 December 2018 and 2017 was mainly derived from the sale of property units of Zhangzhou Deyousheng. The revenue of the Target Group for the year ended 31 December 2018 amounted to approximately RMB1,178.0 million, representing an increase of approximately 0.3% as compared to the last year. The gross profit of the Target Group also increased from approximately RMB306.2 million for the year ended 31 December 2017 to approximately RMB326.0 million for the year ended 31 December 2018. However, owing to the increases in selling and marketing expenses and administrative expenses in an aggregate amount of approximately RMB40.7 million and the increase in penalty for default of approximately RMB13.3 million, the profit before taxation decreased by approximately RMB31.5 million from approximately RMB208.4 million for the year ended 31 December 2017 to approximately RMB176.9 million for the year ended 31 December 2018. Taking into account the income tax, the profit of the Target Group reduced by approximately RMB60.5 million to approximately RMB20.5 million for the year ended 31 December 2018.

For the five months ended 31 May 2019

The revenue of the Target Group for the five months ended 31 May 2019 amounted to approximately RMB39.8 million, representing a drop of approximately 85.2% as compared to the previous corresponding period. There was a substantial decrease in revenue because most of the pre-sold property units of the Target Group had been delivered to the customers on or before 2018. Accordingly, the gross profit of the Target Group also decreased significantly from approximately RMB150.5 million for the five months ended 31 May 2018 to approximately RMB26.0 million for the five months ended 31 May 2019. In spite of the reduction in sales activities, the selling and marketing expenses and administrative expenses increased by a total of approximately RMB11.3 million for the five months ended 31 May 2019 as compared to the prior corresponding period. Such increase was mainly due to the acquisition of 90% equity interest in Fujian Tianren in September 2018, the expenses of which were consolidated into the results of the Target Group since then. In addition, other income of approximately RMB25.6 million was recorded for the five months ended 31 May 2019 as the income from counter-party default had increased by approximately

24.0 million for the relevant period, while other loss of approximately RMB1.8 million was recorded for the last corresponding period. The profit before taxation decreased by approximately RMB107.9 million from approximately RMB113.1 million for the five months ended 31 May 2018 to approximately RMB5.2 million for the five months ended 31 May 2019. Taking into account the income tax, the Target Group recorded a loss of approximately RMB4.2 million for the five months ended 31 May 2019 as compared to a profit of approximately RMB35.6 million for the five months ended 31 May 2018. The loss of the Target Group attributable to the equity shareholder of the Target Company amounted to

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approximately RMB4.0 million for the five months ended 31 May 2019 as compared to a profit of approximately RMB35.6 million for the five months ended 31 May 2018.

As at 31 May 2019, the non-current assets of the Target Group amounted to approximately RMB685.5 million, which mainly consisted of investment properties of approximately RMB137.0 million and property, plant and equipment of approximately RMB487.4 million. The current assets of the Target Group as at 31 May 2019 amounted to approximately RMB9,603.0 million, which mainly included inventories and other contract costs of approximately RMB7,885.2 million, other receivables of approximately RMB1,403.9 million, restricted deposits of approximately RMB151.7 million and cash and cash equivalents of approximately RMB151.1 million. The current liabilities of the Target Group as at 31 May 2019 amounted to approximately RMB8,952.7 million, which comprised bank loans and borrowings from financial institutions of approximately RMB2,196.5 million, trade and other payables of approximately RMB2,038.2 million, contract liabilities of approximately RMB4,374.6 million and current taxation of approximately RMB343.4 million. As at 31 May 2019, the non-current liabilities of the Target Group amounted to approximately RMB1,233.0 million, which mainly consisted of bank loans and borrowings from financial institution of approximately RMB1,215.0 million. As at 31 May 2019, the Target Group had net current assets of approximately RMB650.2 million and net assets of approximately RMB102.7 million. The net assets attributable to equity shareholders of the Target Company amounted to approximately RMB101.3 million as at 31 May 2019. Its current ratio, as expressed as current assets over current liabilities, was approximately 1.07 as at 31 May 2019. The gearing ratio, as expressed as total liabilities over total assets, of the Target Group was approximately 0.99 as at 31 May 2019.

A.3 Reasons for the Acquisition

As disclosed in the annual report of the Company for the year ended 31 December 2018, it is the strategy of the Group to identify land in prime locations suitable for property development and investment in order to increase its land reserve and further promote development of the Group. The Group has acquired land plots in different cities in the PRC through acquisition and land biddings. According to the interim report of the Company for the six months ended 30 June 2019, the Group had a total of 15 ongoing property development projects with a total site area of over 796,500 sq.m. as at 30 June 2019. The Group will continue to seek for new opportunities in property development, especially to commence the development of residential properties in the Mainland China market. The Directors consider that the Acquisition is a good opportunity to supplement the land reserve of the Group in Fujian Province and are of the view that the Acquisition is in line with the business development strategy of the Group.

According to the information released by National Bureau of Statistics of the PRC as summarized in the table below, the national gross domestic product ("GDP") of the PRC continued to grow at rates between 6.6% and 6.9% during the period from 2015

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to 2018. The total sales amount and sales area of commercial housing (including residential, office and commercial properties) also shown an increasing trend from 2015 to 2018. The average selling price of housing in the PRC increased continuously during the period from approximately RMB6,792 per sq.m. in 2015 to approximately RMB8,735 per sq.m. in 2018, representing a compound annual growth rate of approximately 8.8%. The average selling price of housing in the PRC increased to approximately RMB9,369 per sq.m. for the eight months ended 31 August 2019.

National GDP growth rate during 2015 to 2018

			2015	2016	2017	2018
National GDP growth rate (%)	6.9	6.7	6.8	6.6
Statistics of national sales of commercial housing
	2015	2016	2017	2018	1-8/2018	1-8/2019
Total sales
amount
(RMB' million)	8,728,100	11,762,700	13,370,100	14,997,300	8,939,600	9,537,300
Total sales area
(million sq. m.)	1,285	1,573	1,694	1,717	1,025	1,018
Average selling
price
(RMB/sq. m.)	6,792	7,478	7,893	8,735	8,722	9,369
Increase in
average selling
price (%)	n/a	10.1	5.5	10.7	n/a	7.4

Since all property projects owned by the Project Companies are located in Fujian Province, we have also considered the statistics released by National Bureau of Statistics of the PRC regarding the sales of housing in the Eastern area of the PRC (including Fujian Province). We noted that the average selling price of housing in the Eastern area of the PRC increased continuously from approximately RMB8,989 per sq.m. in 2015 to approximately RMB11,725 per sq.m. in 2018, representing a compound annual growth rate of approximately 9.3%. The average selling price of housing in the Eastern area of the PRC further increased to approximately RMB12,590 per sq.m. for the eight months ended 31 August 2019 although the total sales area of housing in the Eastern area of the PRC showed a decrease of approximately 3.6% for the eight months ended 31 August 2019 as compared to the prior corresponding period.

We noted that the revenue of the Target Group for the five months ended 31 May

2019 decreased substantially as compared to the revenue recorded for the years ended 31 December 2017 and 2018 as most of the pre-sold property units of the Target Group had been delivered to the customers on or before 2018. Meanwhile, Mr. Lin has another nine property projects in Fujian Province, details of which were set out in the section headed "Directors' interest in competing business" in Appendix V to the Circular. We were advised by management of the Company that the Directors commenced negotiation with the Vendor in May 2019 for acquisition of potential

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property projects to supplement the land reserve of the Group in Fujian Province. Given that (a) the property projects under the Target Group are currently under construction and are expected to complete and be ready for delivery within three years;

1. the remaining shareholdings of the Project Companies not acquired by the Group are held by Independent Third Parties; and (c) other property projects owned by private group of the Vendor in Fujian Province (i) have completed the sale and delivery of most of the property units built; (ii) have limited room for further development due to stipulated plot ratios; or (iii) require consent of the joint venture partners in relation to any transfer of ownership, the Directors consider that the property projects under the Project Companies are suitable property projects for the Group to supplement its land reserve.

In light of the above, we concur with the view of the Directors that the prospects of the property projects owned by the Project Companies are promising and the Acquisition represents a good opportunity to supplement the land reserve of the Group and is in the interests of the Company and Shareholders as a whole.

A.4 Consideration

The Consideration is HK$231.0 million, which shall be payable by issue and allotment of the Consideration Shares, being 22,000,000 new Shares, at the issue price of HK$10.5 per Consideration Share, by the Company to the Vendor on Completion Date.

The Consideration was determined based on 95% of the valuation surplus derived from (a) the preliminary valuation of the properties held by the Project Companies of RMB9,505.0 million (equivalent to approximately HK$10,561.1 million) applied with a discount of approximately 8.8% as agreed by the parties to the Agreement; and (b) the book value of the properties held by the Project Companies as at 31 May 2019 of approximately RMB8,452.0 million (equivalent to approximately HK$9,391.1 million), having considered that the net asset value of the Target Group as at Completion (before taking into account the valuation surplus) will be close to zero after a dividend of RMB50.0 million (equivalent to approximately HK$55.6 million) is to be distributed by Xiamen Sansheng to its original owner, namely Fuzhou Sansheng, which is indirectly held by Mr. Lin and Ms. Cheng and for the purpose of the Reorganisation, the Project Companies are to be sold to the Newco by Fuzhou Sansheng at its net asset value (i.e. RMB52.4 million (equivalent to approximately HK$58.2 million)), which is to be fully settled by offsetting the Inter-Company Loans owing by Fuzhou Sansheng to the Target Group.

Valuation of the properties held by the Project Companies

To assess the fairness and reasonableness of the Consideration, we have considered the valuation of the properties held by the Project Companies (the "Properties") as at 31 August 2019 prepared by Jones Lang LaSalle Corporate Appraisal and Advisory Limited (the "Valuer"), an independent professional valuer, in an aggregate amount of RMB9,665.1 million as set out in the valuation report (the "Valuation Report") contained in Appendix IV to the Circular.

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We have performed works as required under Note 1(d) to Rule 13.80 of the Listing Rules in respect of the valuation of the Properties performed by the Valuer, which included discussion with the Valuer as to its experiences in valuing properties in the PRC similar to those of the Properties and its relationship with the Group and other parties to the Agreement, and review of the terms of the Valuer's engagement for the assessment of the valuation of the Properties, in particular to its scope of work.

We understand that Mr. Eddie T. W. Yiu, a senior director of the Valuer and the signor of the Valuation Report, is a Chartered Surveyor with 25 years of experience in valuation of properties in Hong Kong and the PRC as well as relevant experience in the Asia Pacific region. As such, we are of the view that the signor of the Valuation Report is qualified, experienced and competent in performing the valuation of properties in the PRC and to form a reliable opinion in respect of the valuation of the Properties. We noted from the engagement letter entered into between the Company and the Valuer that the scope of work was appropriate for the Valuer to form the opinion required to be given and there were no limitations on the scope of work which might adversely impact the degree of assurance given by the Valuer in the Valuation Report. The Valuer confirmed us that apart from normal professional fees payable to it in connection with its engagement for the valuation, no arrangements exist whereby it will receive any fee or benefit from the Group and its associates. We have enquired with the Valuer as to its independence from the Group and the parties to the Agreement and were given to understand that the Valuer is an Independent Third Party. The Valuer also confirmed us that it was not aware of any relationship or interest between it and the Company or any other parties that would be reasonably considered to affect its independence to act as an independent valuer for the Company.

We have reviewed the Valuation Report in respect of the valuation of the Properties prepared by the Valuer and discussed with the Valuer the methodology, basis and assumptions adopted in arriving at the valuation of the Properties as at 31 August 2019. We understand from the Valuer that the Valuation Report was prepared in compliance with the RICS Valuation - Global Standards 2017 published by the Royal Institution of Chartered Surveyors, the HKIS Valuation Standards published by the Hong Kong Institute of Surveyors, the International Valuation Standards published by the International Valuation Standards Council and the requirements as set out in Chapter 5 and Practice Note 12 of the Listing Rules.

We noted that the comparison approach was adopted for assessing the value of the properties which are held for sale and held under development while the income approach was adopted for assessing the value of the properties which are held for investment. The Valuer advised us that given there were sufficient market transactions available for comparison purposes, it considered comparison approach was the most appropriate valuation method in arriving at the valuation of the properties which are held for sale and held under development. Meanwhile, as the value of the properties which are held for investment is income-driven and such

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properties have been rented to third parties under the existing leases, the Valuer considered that income approach was the most appropriate valuation method in valuing the properties which are held for investment.

As set out in the Valuation Report, for assessing the properties held for sale, the Valuer assumed that the properties are sold in their existing states with the benefit of immediate vacant possession and reference was made to comparable sales transactions as available in the market. For the properties held under development, the Valuer has adopted comparison approach by making reference to comparable sales evidence as available in the market and also taken into account the accrued construction costs and professional fees relevant to the stage of construction and the remaining costs and fees expected to be incurred for completion of the development. We have discussed with the Valuer the selection criteria of, and reviewed, the comparables used by the Valuer for assessing the values of the properties which are held for sale and held under development respectively and noted that the comparables are similar assets located in vicinity of the properties which are held for sale and held under development for which price information is available. As such, we concur with the view of the Valuer that the comparables used in valuation are reasonable and comparable to the Target Group's properties which are held for sale and held under development.

In valuing the Target Group's properties which are held for investment, the Valuer has adopted the income approach by taking into account the net rental income of the properties derived from the existing leases and/or achievable in the existing market with due allowance for the reversionary income potential of the leases, which was then capitalized to determine the market value at an appropriate capitalization rate. We have discussed with the Valuer, and reviewed, the list of leasing information provided by the Valuer and noted that such information is predominately from lease data readily available in the market. We also understand from the Valuer that it had carried out on-site inspections and made relevant enquiries and searches for the purpose of the assessment and no irregularities were noted during the course of the assessment.

Given the methodologies applied by the Valuer are the generally accepted procedures and practices of professional surveyors and is in compliance with valuation standards published by the recognized professional surveying organizations as stated above, we consider that the methodology and basis adopted by the Valuer for determining the market values of the Properties are appropriate. Together with the fact that no unusual matters had come to our attention that led us to believe that the valuation of the Properties was not prepared on a reasonable basis, we believe that the valuation of the Properties fairly represents the market value of the Properties and form a fair and reasonable basis for our further assessment on the Consideration.

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Valuation of the Target Group

The adjusted net asset value of the Target Group attributable to equity shareholders of the Target Company as at 31 May 2019 amounted to approximately RMB1,152.8 million (equivalent to approximately HK$1,280.9 million), which was calculated as follows:

				Equivalent
	RMB		to HK$
	million		million
Combined net asset value of the Target Group
attributable to equity shareholders of the Target
Company as at 31 May 2019	101.3			112.6
Adjustments relating to the Reorganisation:
Add: Disposal of 5% equity interest in Fujian
Shengchuang to an independent third party by
way of capital injection	11.2			12.4
Less: Consideration for the transfer of 95% equity
interest in Fujian Shengchuang to the Newco	(59.4)	(66.0)
Less: Distribution of dividend by Xiamen
Sansheng to its original owner	(50.0)	(55.6)
Less: 5% non-controlling interest in Fujian
Shengchuang	(3.1)	(3.4)
Adjusted combined net asset value of the Target
Group attributable to equity shareholders of the
Target Company as at 31 May 2019 having
taken into account the Reorganisation	-		-
95% of the fair value adjustment of the Properties
Valuation of the Properties as at 31 August 2019	9,665.1				10,739.0
Carrying value of the Properties in the accounts of
the Target Group as at 31 May 2019	(8,451.6)			(9,390.7)
Valuation surplus	1,213.5				1,348.3
95% of the valuation surplus	1,152.8			1,280.9
Adjusted combined net asset value of the Target
Group attributable to equity shareholders of the
Target Company as at 31 May 2019	1,152.8			1,280.9

The Consideration of HK$231.0 million represents a discount of approximately 82.0% to the adjusted combined net asset value of the Target Group as at 31 May 2019 of approximately RMB1,152.8 million (equivalent to approximately HK$1,280.9 million).

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LETTER FROM CRESCENDO

We have conducted a research on the website of the Stock Exchange for companies which (a) are currently listed on the Stock Exchange; and (b) have conducted transactions relating to acquisition/disposal of property development and related business in the PRC during the period from 26 June 2019, being three months immediately preceding the date of the Agreement, to the date of the Agreement (the "Comparison Period") which constitute a notifiable transaction. We consider the Comparison Period is fair and reasonable for comparison purposes as it covers a current period that reveals the prevailing market transactions regarding acquisition/disposal of property development and related business in the PRC and contains sufficient samples and information to enable the Shareholders to have a general understanding on the recent transactions of property development and related business conducted in the PRC. Based on the above-mentioned criteria, we have, on our best effort, identified six comparable transactions (the "Transaction Comparables"), which we consider are exhaustive based on the said criteria and are representative samples as those transactions involved the acquisition/disposal of property development and related business in the PRC. Set out below is a summary of the nature of transaction and the basis for determination of the consideration for the Transaction Comparables.

				Premium/
				(discount) of
				consideration
				over/(to) the
Company name	Date of	Nature of	Basis of	adjusted net
(stock code)	announcement	transaction	consideration	asset value
	(dd/mm/yyyy)			(%)
Shirble Department	26 June 2019	Disposal of shares	With reference to (i)	(30.9)
Store Holdings		of a company listed	the financial
(China) Limited		on the Stock	position with net
(312)		Exchange	asset value
		principally engaged	attributable to
		in property	owners of the target
		development and	company of
		hotel business in the	approximately
		PRC. It holds	RMB554 million as
		property projects	at 31 December
		under development	2018 and the value
		for residential and	and scale of land
		commercial uses in	bank of the target
		Guangdong Province	group; and (ii) the
		and Sichuan	original acquisition
		Province.	price, the prevailing
			market prices and
			the generally low
			trading volume of
			the shares of the
			target company

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				Premium/
				(discount) of
				consideration
				over/(to) the
Company name	Date of	Nature of	Basis of	adjusted net
(stock code)	announcement	transaction	consideration	asset value
	(dd/mm/yyyy)			(%)
Central China Real	27 June 2019	Acquisition of a	With reference to	2,765.8Note
Estate Limited		company principally	the financial
(832)		engaged in the real	position of the
		estate development	target company with
		in the PRC and	net asset value of
		holding land parcels	approximately
		located in Henan	RMB37 million as
		Province for	at 31 December
		residential and	2018, the
		commercial uses.	development
			potential of the
			target land and the
			planning and design
			conditions and the
			branding benefits of
			the project
China Sandi	28 June 2019	Acquisition of a	With reference to,	14.9
Holdings Limited		company engaged in	among other things,
(910)		property	the net asset value
		development	of the target
		projects in Fujian	company of
		Province, the PRC	approximately
			RMB19 million as
			at 31 May 2019, the
			carrying value of
			the shareholder's
			loan and the sale
			price of units
			presold but not yet
			delivered
Modern Land	28 June 2019	Acquisition of a	With reference to,	1,242.9Note
(China) Co.,		company principally	among other things,
Limited (1107)		engaged in land	the financial
		development and	statements of the
		consolidation, real	target company with
		estate development	net asset value of
		and management in	approximately
		the PRC and	RMB31 million as
		holding land parcels	at 31 March 2019
		planned for	and the prevailing
		residential use in	market price of the
		Hubei Province.	land in the vicinity
			of the land parcels

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				Premium/
				(discount) of
				consideration
				over/(to) the
Company name	Date of	Nature of	Basis of	adjusted net
(stock code)	announcement	transaction	consideration	asset value
	(dd/mm/yyyy)			(%)
eForce Holdings	7 July 2019	Acquisition of	With reference to	(10.1)
Limited (943)		companies engaged	the net asset value
		in property	of the target
		development in the	companies
		PRC holding land	attributable to the
		parcels to be	acquisition of
		developed for	approximately
		residential and	RMB53 million as
		commercial uses in	at 31 May 2019,
		Guangdong Province	valuation of the
		and Jiangsu	properties and
		Province. The	shareholder's loans
		construction work
		had not commenced
		yet as at the date of
		the announcement.
Perfect Group	30 August	Acquisition of a	With reference to	(0.2)
International	2019	company engaged in	the target
Holdings Limited		property	company's net value
(3326)		development in the	of assets after
		PRC and holding	revaluation of
		land parcels located	approximately
		in Guangdong	RMB58 million as
		Province developed	at 31 December
		as an industrial	2018
		park. The
		construction work
		was almost
		completed.
			Minimum	(30.9)
			Maximum	14.9
			Average	(6.6)
The Company	27 September	Acquisition of	With reference to	(82.0)
(2183)	2019	companies engaged	the net asset value
		in property	of the Target
		development in the	Group and the
		PRC and holding	valuation of the
		land parcels under	properties
		development in
		Fujian Province

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Source: the website of the Stock Exchange

Note: No information regarding the valuation of the properties were disclosed in the announcements of these Transaction Comparables and they are considered as outliers as their premia are extremely high as compared to other comparables.

We noted that all the Transaction Comparables made reference to the net asset value of the target companies (taking into account the property valuation, if any) as the basis of determining the consideration of the transactions. Therefore, we consider that it is a common practice to make reference to the adjusted net asset value of the target companies in determination of the consideration for acquisition or disposal of companies principally engaged in property development and related business. Meanwhile, we noted that the consideration of the Transaction Comparables ranged from a discount of approximately 30.9% to a premium of approximately 14.9% to/over the respective adjusted net asset value of the target company with an average of a discount of approximately 6.6%. The discount of approximately 82.0% of the Consideration to the adjusted net asset value of the Target Group is much greater than the consideration discounts of the Transaction Comparables.

Having considered that (i) it is not uncommon for the consideration of transactions relating to property development business making reference to the net asset value of the target companies (taking into account property valuation, if any); (ii) the Consideration represents a discount of approximately 82.0% to the adjusted net asset value of the Target Group as at 31 May 2019, which is presumed to be the fair value of the Target Group; and (iii) the discount of approximately 82.0% of the Consideration to the adjusted net asset value of the Target Group is much greater than the consideration discounts of the Transaction Comparables, we consider that the Consideration is in the interests of the Company and the Independent Shareholders and it is on normal commercial terms.

A.5 Settlement method of the Consideration

The Consideration shall be settled fully by the allotment and issue of the Consideration Shares. We were advised by management of the Company that the Company has considered other settlement alternatives for the Acquisition such as cash payment or issue of debt instruments. As disclosed in the interim report of the Company for the six months ended 30 June 2019, the Group had cash and cash equivalents in the amount of approximately RMB468.3 million. Having considered the cash consideration of approximately RMB458.0 million payable by the Group for the land acquisition as disclosed in the announcement of the Company dated 20 August 2019, the Directors consider that it is more desirable for the Company to retain more cash for general working capital and future business expansion (such as land acquisitions) of the Group. In addition, settlement by borrowings or issue of debt instruments shall increase the Group's interest burden and adversely impact the profitability of the Group immediately. Therefore, the Directors consider that issue of Consideration Shares is a preferred method for settlement of the Consideration.

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Given that (i) the issue of the Consideration Shares shall not affect the cash flow, liquidity position and financial leverage of the Group, while enlarging and strengthening the capital base of the Company; (ii) settlement by borrowings or debt instruments shall increase the Group's interest burden and adversely impact the profitability of the Group immediately; and (iii) other equity financing alternatives would also introduce dilution to the existing shareholders, we concur with the view of the Directors that it is in the interest of the Company and the Shareholders as a whole to settle the Consideration by issuing the Consideration Shares so as to retain more cash resources for its general working capital and future development when opportunities arise.

A.6 Consideration Shares

Pursuant to the Agreement, the Consideration of HK$231.0 million shall be settled by the issue and allotment of 22,000,000 Consideration Shares, representing approximately 5.2% of the issued share capital of the Company as at the Latest Practicable Date and approximately 5.0% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares, at the issue price of HK$10.5 per Consideration Share, which represents: (i) a premium of approximately 9.6% over the closing price of HK$9.58 per Share as quoted on the Stock Exchange on the Latest Practicable Date; (ii) a discount of approximately 0.9% to the closing price of HK$10.6 per Share as quoted on the Stock Exchange on the date of the Agreement;

1. the same price as the average closing price of approximately HK$10.5 per Share as quoted on the Stock Exchange for the last five consecutive trading days immediately prior to the date of the Agreement; and (iv) a premium of approximately 255.9% over the unaudited consolidated net asset value per Share of approximately HK$2.95 (based on the unaudited equity attributable to the Shareholders of approximately RMB1,112.9 million (equivalent to approximately to HK$1,236.6 million) as at 30 June 2019 as disclosed in the interim report of the Company for the six months ended 30 June 2019 and 419,144,000 Shares in issue as at the Latest Practicable Date).

The issue price of the Consideration Shares was determined after arm's length negotiations between the Purchaser and the Vendor with reference to the recent price performance of the Shares and current market conditions. For the purposes of assessing the fairness and reasonableness of the issue price of the Consideration Shares, we have reviewed the movements in trading price of the Shares during the period from 26 March 2019, being six months immediately preceding the date of the Agreement, to the Latest Practicable Date (the "Review Period"). We consider that a period of six months is adequate to illustrate the recent price movements of the Shares for conducting a reasonable comparison between the closing price of the Shares and the issue price of the Consideration Shares.

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Chart 1 - Closing prices of the Shares during the Review Period

14.000

12.000

10.000

Issue price = HK$10.5 per Consideration Share

8.000

6.000

4.000

2.000

-

2019/03/29

2019/04/10

2019/04/23

2019/05/03

2019/05/15

2019/05/24

2019/06/04

2019/06/14

2019/06/25

2019/07/05

2019/07/16

2019/07/25

2019/08/05

2019/08/14

2019/08/23

2019/09/03

2019/09/12

2019/09/23

2019/10/03

2019/10/15

2019/10/24

2019/11/04

2019/11/13

2019/11/22

Source: the website of the Stock Exchange

As illustrated in the above chart, the closing price of the Shares has shown a general decreasing trend during the Review Period. The highest closing price of the Shares was HK$12.84 on 1 April 2019 while the lowest closing price of the Shares was HK$8.74 on 20 November 2019 with an average closing price of the Shares of approximately HK$11.07 during the Review Period. The issue price of the Consideration Share of HK$10.5 per Consideration Share represents (i) a premium of approximately 20.1% over the lowest closing price of the Shares of the Review Period; and (ii) a discount of approximately 18.2% and 5.1% to the highest and average closing price of the Shares of the Review Period respectively.

The closing price of the Shares continued to rise following the Company's publication of its annual results for the year ended 31 December 2018 on 20 March 2019 and increased from HK$12.02 on 26 March 2019, being the first day of the Review Period, to HK$12.84, being the highest closing price of the Shares during the Review Period, on 1 April 2019. The closing price of the Shares then decreased gradually to HK$11.30 on 16 April 2019. After a small rebound to HK$12.08 on 18 April 2019, the closing price of the Shares dropped to the short-term lowest level of HK$11.18 on 31 May 2019. Subsequently, the closing price of the Shares fluctuated narrowly in the range of HK$11.20 and HK$11.30 during the period from 3 June 2019 to 13 June 2019. After publication of a voluntary announcement in relation to an acquisition of a parcel of land with a land area of approximately 28,000 sq.m. and a plot ratio-based floor area of approximately 72,800 sq.m. in Gutian County, Ningde City, the PRC on 13 June 2019, the closing price of the Shares started to rise on the following trading day and reached HK$11.84 on 28 June 2019. Thereafter, the closing price of the Shares gradually decreased to HK$10.82 on 28 August 2019. Before the trading hours on 29 August 2019, the Company published its interim results announcement for the six months ended 30 June 2019 and the price of the Shares increased slightly and closed at HK$10.86 on 29 August 2019. Since then, the closing

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price of the Shares showed a downward trend and decreased to HK$10.60 on 27 September 2019, being the date of the Agreement. After the publication of the announcement in relation to the Acquisition on 27 September 2019, the closing price of the Shares was generally on a downtrend and reached the lowest closing price of the Shares during the Review Period of HK$8.74 on 20 November 2019. As at the Latest Practicable Date, the closing price of the Shares was HK$9.58.

Given that the issue price of the Consideration Shares represents a premium of approximately 9.6% over the closing price of the Shares on the Latest Practicable Date and was the same as the average closing price of approximately HK$10.5 per Share as quoted on the Stock Exchange for the last five consecutive trading days immediately prior to the date of the Agreement, we are of the view that the issue price of the Consideration Shares is fair and reasonable so far as the Independent Shareholders are concerned and it is on normal commercial terms.

A.7 Potential dilution effect on shareholding interests

As at the Latest Practicable Date, the Company had 419,114,000 Shares in issue. Pursuant to the Agreement, 22,000,000 Consideration Shares will be issued upon Completion, representing approximately 5.2% of the total issued share capital of the Company as at the Latest Practicable Date; and (ii) approximately 5.0% 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. The following table sets out the shareholding structure of the Company (i) as at the Latest Practicable Date; and, for illustrative purposes only, (ii) immediately upon Completion and the allotment and issue of the Consideration Shares:

					Immediately upon Completion
	As at the Latest	and the allotment and issue of
	Practicable Date	the Consideration Shares
	Number of	Approximate	Number of	Approximate
	Shares	%	Shares	%
Mega Regal	296,348,127		70.71		318,348,127		72.17
Public Shareholders	122,765,873		29.29		122,765,873		27.83
	419,114,000		100.00		441,114,000		100.00

As shown in the above table, for illustrative purpose only, the shareholding of the public Shareholders shall be diluted from approximately 29.29% to approximately 27.83% upon Completion. Having considered the fairness of the Consideration and the issue price of the Consideration Shares and the potential benefits of acquiring the Target Group without cash outlay for the Acquisition, we consider that the dilution effect on the shareholding interests of the existing public Shareholders is justifiable.

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A.8 Financial effects of the Acquisition

Upon Completion, the Target Company will become an indirect wholly-owned subsidiary of the Company and its assets, liabilities and financial results will be consolidated into the consolidated financial statements of the Group. The financial effects of the Acquisition on the Group's earnings, cash flow, net asset value and gearing 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 be upon Completion.

Earnings

With reference to 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 1 January 2018, the loss for the year ended 31 December 2018 would have decreased by approximately RMB18.0 million from approximately RMB186.5 million to approximately RMB168.4 million.

Cash flow

The Consideration of HK$231.0 million shall be settled by issue and allotment of the Consideration Shares upon Completion. Therefore, the Group shall have no immediate cash outflow for the Acquisition, save for the estimated transaction costs directly attributable to the Acquisition of approximately RMB2.5 million.

Net asset value

According to 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 2019, the total assets of the Group would have increased by approximately RMB9,516.0 million from approximately RMB11,467.8 million to approximately RMB20,983.8 million while the total liabilities of the Group would have increased by approximately RMB9,514.1 million from approximately RMB10,290.0 million to approximately RMB19,804.1 million. Therefore, the net asset value of the Group would have increased by approximately RMB1.9 million had the Acquisition been completed on 30 June 2019.

Gearing

Having considered the effects of the Acquisition on the total assets and total liabilities of the Group as mentioned above, the gearing of the Group, as expressed in the ratio of total liabilities to total assets, would have increased from approximately 0.90 to approximately 0.94 had the Acquisition been completed on 30 June 2019.

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Based on the above analysis, we noted that the Acquisition would have positive effects on the earnings and net asset value of the Group but negative effects on the Group's cash position and gearing. However, having considered the reasons and benefits of the Acquisition and the fairness and reasonableness of the Consideration, we are of the view that the adverse financial impacts of the Acquisition to the Group in respect of cash position and gearing are commercially justifiable.

1. CONTINUING CONNECTED TRANSACTIONS

In arriving at our opinion regarding the Continuing Connected Transactions, we have considered the following principal factors and reasons:

B.1 Background and reasons for the Continuing Connected Transactions

On 6 August 2019, the Company entered into the Master Agreement with Fujian BE, which is principally engaged in the provision of property management services including customer services, sales activities assistance, visiting arrangement, catering services, security and order maintenance, cleaning services and equipment maintenance. Pursuant to the Master Agreement, Fujian BE and/or its subsidiaries agreed to provide the Services to property projects owned by the Group for a term from 6 August 2019 to 31 December 2021 (both days inclusive). The Existing Annual Caps were set with reference to, among other things, the development schedule of the property projects owned by the Group, the estimated number of showrooms to be supported and the estimated growth in salary at the relevant time.

In view that the development schedule of certain property projects owned by the Group were accelerated and two property projects acquired by the Group since 6 August 2019 were not taken into account in determining the Existing Annual Caps (the "Existing Business Needs"), the Company proposes to increase the Existing Annual Caps to the Revised Annual Caps I to cater for the Existing Business Needs. In addition, as the Project Companies have been engaging Fujian BE and its subsidiaries to provide the Services to their respective property projects, it is expected that, upon Completion, the Existing Annual Caps will be insufficient to cover the Services required by the Target Group from 2020 onwards (the "Acquisition Need"). As such, the Company proposes to increase the Existing Annual Caps to the Revised Annual Caps II to cater for both the Existing Business Needs and the Acquisition Need.

On 22 November 2019 (after trading hours of the Stock Exchange), the Company and Fujian BE entered into the Supplemental Agreement to amend the Existing Annual Caps to the Revised Annual Caps under the Master Agreement. Save for the revision of the Existing Annual Caps, all other terms and conditions under the Master Agreement remain unchanged.

We were advised by management of the Company that in promoting and selling the Group's properties, it is necessary to set up showrooms to illustrate the real environment, design and facilities of those properties to the potential purchasers. The Company considers that good showroom supporting services can create a positive

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purchase experience to the customers and therefore the Company has been exploring opportunities to improve and/or complement the existing showrooms to enrich the experiences offered to potential purchasers. Given that showroom supporting services are only needed in the Group's property pre-sales/sales activities, which are not conducted regularly throughout the year, the Company considers that it is more cost effective for the Group to engage an external service provider to provide such services instead of hiring and training staffs internally for the provision of the showroom supporting services.

Having considered that (i) Fujian BE is specialized in the provision of the Services; (ii) the Group needs the Services for the promotion and sales of the Group's properties from time to time in its daily operation; (iii) the maintenance of a showroom supporting service team by the Group may not be cost effective as compared to outsourcing the Services; and (iv) the Project Companies and the Group have been using the Services provided by Fujian BE since 2015 and August 2019 respectively and consider Fujian BE a reliable partner which is capable of providing the Services that meet their needs and standard, we concur with the view of the Directors that the Continuing Connected Transactions are conducted in the ordinary and usual course of business of the Group and it is in the interests of the Company and the Shareholders as a whole.

B.2 Principal terms of the Master Agreement (as amended by the Supplemental Agreement)

Pursuant to the Master Agreement, the Company agreed to engage Fujian BE and/ or its subsidiaries to provide the Group with supporting services in showrooms, including customer services, sales activities assistance, visiting arrangement, catering services, security and order maintenance, cleaning services and equipment maintenance, for a term from 6 August 2019 to 31 December 2021 (both days inclusive). The parties shall enter into individual agreements setting out the detailed service fee and the payment terms for each particular showroom as required by the Group.

The fee for the Services will be determined between the parties after arm's length negotiations (i) with reference to normal commercial terms and the prevailing market rates for the provision of similar services; and (ii) not more than that charged by the Independent Third Parties to the Group. The fees for the Services will include (i) labor costs plus a service charge of 20% and a tax rate of 6%; (ii) tea break fee plus a service charge of 10% and a tax rate of 6%; (iii) catering fee plus a service charge of 45% and a tax rate of 6%; and (iv) purchasing agent fee plus a service charge of 10% and a tax rate of 6%. Pursuant to the Master Agreement, Fujian BE shall be responsible for the insurance, wages, labor insurance benefits and all other expenses of Fujian BE's employees. Disputes relating to Fujian BE and its employees shall be handled by Fujian BE and not related to the Group.

We were given to understand that the Group has been outsourcing the Services since August 2019 and Fujian BE is the one and only service provider providing the Services to the Group since then. As such, we were unable to compare the terms offered to the Group by Fujian BE and the Independent Third Parties. As an alternative

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assessment, we have reviewed the statistics published in the China Top 100 Property Management Companies Research Report (the "Research Report") issued by China Index Academy, an independent property research organization in the PRC which has been issuing the Research Report annually since 2008. Fujian BE was one of the top 100 companies researched under the Research Report in 2017. According to the Research Report, the gross profit margin of the top 100 property management companies in the PRC ranged from approximately 21.2% to 23.9% during the period from 2016 to 2018.

Statistics of China Top 100 Property Management Companies during 2016 to

2018
	2016	2017	2018
Revenue (RMB'000)	627,833.5	742,099.2	886,175.1
Cost of services (RMB'000)	494,548.2	565,070.8	677,430.8
Gross profit margin (%)	21.2	23.9	23.6

We have reviewed samples of the service agreements, representing around 40% of the total number of service agreements, entered into between the Group and Fujian BE during the period from August 2019 to the Latest Practicable Date and the breakdown of the underlying costs and service charges, which we considered are representative, and noted that the labor costs accounted for more than 90% of the total service fee charged by Fujian BE while the other fees accounted for less than 10% of the total service fee. We also noted that the gross profit margins of Fujian BE for providing the Services to the Group under these service agreements were approximately 21.4%, which fall within, and close to the lower end of, the range of gross profit margins of the top 100 property management companies in the PRC of approximately 21.2% to 23.9% during the period from 2016 to 2018.

Having considered that (i) the gross profit margins of Fujian BE for providing the Services to the Group fall within, and close to the lower end of, the range of the gross profit margins of the top 100 property management companies in the PRC during 2016 to 2018; (ii) the Group is not obligated, but could exercise its sole discretion to determine whether, to use the Services to be provided by Fujian BE on a case-by-case basis; and (iii) adequate measures as detailed in the section headed "B.3. Internal control measures" below have been, and will be, implemented by the Group to ensure the terms offered by Fujian BE are not less favorable to the Group than those offered by the Independent Third Parties, we consider that the terms of the Master Agreement are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned.

B.3 Internal control measures

The Group has adopted the following internal control procedures and corporate governance measures in relation to the Continuing Connected Transactions to ensure that the terms of each individual agreement to be entered into between Fujian BE and

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the Company are in line with the terms of the Master Agreement and no less favourable to the Company than those available from the independent service providers:

1. each time the Group requires the Services, the Group will send Fujian BE the particulars of the property project for the purpose of obtaining quotation. Upon receipt of the quotation, the business department of the Group will compare the estimated salary in the quotation with the salary paid for similar services by at least three independent property developers in the city where the project is located. The business department of the Group is responsible to ensure that the salary quoted by Fujian BE is no less favourable to the Company;
2. the business department of the Group will calculate the gross margin to be recorded by Fujian BE for that particular property project based on the quotation and ensure that such gross margin will not be higher than the average gross margin for providing similar services as indicated in the latest China Top 100 Property Management Companies research report;
3. in the event that the salary paid by other independent property developers in paragraph (a) or the latest China Top 100 Property Management Companies research report in paragraph (b) are not available, the business department shall obtain quotations for the Services from at least three independent service providers. Fujian BE will only be chosen if its quotation is the most competitive among all quotations received;
4. in addition, the finance department of the Group shall be responsible for reviewing the usage of the Revised Annual Caps to ensure the entering into of each individual agreement will not result in exceeding the Revised Annual Caps;
5. general manager of the business department will conduct a final review to ensure the above procedures are all fulfilled and completed before any individual service agreement is entered into by the Group; and
6. the finance department of the Group shall be responsible for monitoring the total fee paid or payable by the Group to Fujian BE during the financial year to ensure that the annual caps under the Master Agreement are not exceeded, and inform the executive Directors in the event that the annual caps are almost fully utilized. Where appropriate, the Company shall seek to renew the annual caps and re-comply with the requirements of Chapter 14A of the Listing Rules in case the total transaction amount is expected to exceed the Revised Annual Caps.

We have discussed the above internal control measures with management of the Company and reviewed samples of internal control documents, representing around 40% of the total number of service agreements entered into between the Group and Fujian BE during the period from August 2019 to the Latest Practicable Date, including

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the quotation from Fujian BE, the list of salary paid by independent property developers, the calculation of the gross margin to be recorded by Fujian BE and the comparison to the China Top 100 Property Management Companies research report and the approval form signed by the general manager of the business department, which we considered are representative, and noted that the procedures mentioned above were properly followed. Management of the Company confirmed us that the abovementioned internal control policies were, and would be, consistently applied to all the Continuing Connected Transactions.

Having considered the internal control measures implemented by the Group, we concur with the Directors' view that adequate internal control measures are in place to govern the Continuing Connected Transactions and ensure the terms of the Continuing Connected Transactions are no less favourable to the Company than those offered by the Independent Third Parties. With the implementation of the abovementioned internal control measures, we believe that the Continuing Connected Transactions will be conducted on normal commercial terms and on terms that are fair and reasonable and in the interests of the Company and Shareholders as a whole.

B.4 Revised Annual Caps

According to the Supplemental Agreement, the Existing Annual Caps shall be increased to the Revised Annual Caps I in the event that the conditions precedent to the Supplemental Agreement set out in the Letter from the Board are fulfilled. In the event that the conditions precedent to the Supplemental Agreement are fulfilled and the Acquisition is completed, the Existing Annual Caps shall be increased to the Revised Annual Caps II.

		Annual Caps
	For the
	period from
	6 August	For the year	For the year
	2019 to 31	ending 31	ending 31
	December	December	December
	2019	2020	2021
	RMB'million	RMB'million	RMB'million
Existing Annual Caps	27.0	37.0	39.0
Revised Annual Caps I	28.0	51.0	47.0
Revised Annual Caps II	28.0	71.0	69.0

The Revised Annual Caps I were mainly determined based on (i) the total property projects owned by the Group as at the Latest Practicable Date; (ii) the estimated number of showrooms for each project; (iii) the estimated labor required for each showroom; (iv) the estimated labor costs; (v) the estimated growth in labor costs; and (vi) the service charge for labor costs of 20% and the tax rate of 6%. The Revised Annual Caps II were determined based on factors similar to the Revised Annual Caps I, having accounted for the additional four property projects to be owned by the Enlarged Group upon Completion.

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To assess whether the Revised Annual Caps are fair and reasonable, we have discussed with management of the Company and reviewed the development plan of the Group's properties and the breakdown and calculations of the Revised Annual Caps. We noted that the labor costs plus a service charge of 20% and a tax rate of 6% accounted for over 90% of the Revised Annual Caps while the other fees accounted for less than 10% of the Revised Annual Caps.

Revised Annual Caps I

Based on the calculation of the Revised Annual Caps I, the Revised Annual Caps I would be RMB 28 million for the period from 6 August 2019 to 31 December 2019, RMB51 million for the year ending 31 December 2020 and RMB47 million for the year ending 31 December 2021. Having considered the development plan of the Group's property projects, the Company expects that the number of property projects which require the Services from Fujian BE would be 10, 11 and 9 for the period from 6 August 2019 to 31 December 2019, the year ending 31 December 2020 and the year ending 31 December 2021 respectively.

	For the
	period from
	6 August	For the year	For the year
	2019 to 31	ending 31	ending 31
	December	December	December
	2019	2020	2021
Revised Annual Caps I (RMB)	28 million	51 million	47 million
% change	n/a	82.1%	(7.8%)
Number of property projects	10	11	9
Number of staff	650	440	370
Increase in average monthly
salary	n/a	9.4%	10.0%

According to the development plan of the Group's property projects, seven, out of ten, projects shall need the Services before December 2019 while three, out of ten, projects shall require the Services from December 2019. As the Revised Annual Caps I for the year ending 31 December 2019 only represent service fees to be charged by Fujian BE for projects with service period of one month to five months, the service fees to be charged by Fujian BE for the year ending 31 December 2020 are expected to increase significantly by 82.1% as compared to that of 2019. Given that the Company expects the number of staff working in the showrooms will decrease from around 650 for the period from 6 August 2019 to 31 December 2019 to around 370 for the year ending 31 December 2021, the transaction amount of the Continuing Connected Transactions under the Master Agreement, and thus the Revised Annual Caps I, for the year ending 31 December 2021 is anticipated to decrease by approximately 7.8% as compared to that of

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2020. We were advised by management of the Company that pre-sale usually launches one year to two years before completion of the construction and more staff is required for showroom services at the hot-sale period, which usually lasts for 1 year, when the property projects are newly launched for pre-sale while less staff is required after the hot-sale period. Based on the development plan of the Group, the eleven projects required the Services during the period from 6 August 2019 to 31 December 2021 shall be completed during 2020 and 2021, among which four and six projects have commenced pre-sale during late 2018 and 2019 respectively while the pre-sale of the remaining project is expected to commence in early 2020. Therefore, the number of staff required for showroom services is expected to decrease during the period.

We noted that the average monthly salary is expected to increase at an annual rate of approximately 10% having considered the increase in salary of 5% per annum and the changes in personnel mix of staff required for provision of the Services throughout the period. We were advised by management of the Company that the number of staff required shall reduce but the personnel mix would change with a larger proportion of staff with a higher salary after the hot-sale period. Therefore, the average monthly salary is expected to increase during the three years ending 31 December 2021.

With reference to the latest statistics released by the National Bureau of Statistics of the PRC, the GDP of the PRC for the nine months ended 30 September 2019 was approximately RMB69,780 billion, representing an increase of approximately 6.2% as compared to the previous corresponding period. The national per capita disposable income was approximately RMB22,882 for the nine months ended 30 September 2019, representing an actual growth of approximately 6.1% over the last corresponding period after deducting the price factor. The statistics also showed that the national consumer price had increased by 2.5% for the nine months ended 30 September 2019 as compared to the prior corresponding period. The OECD Economic Outlook, Interim Report released in September 2019 by the Organization for Economic Cooperation and Development, an international organization with 34 country members, revealed that the economic growth in the PRC eased only gradually, amidst ongoing policy stimulus but import demand weakened considerably. The escalating trade tensions are weighing on investment and adding to uncertainty, but new fiscal and quasi-fiscal stimulus measures and the easing of monetary policy are expected to help cushion credit growth and demand. It is expected that the GDP growth rate of the PRC for 2019 and 2020 would be 6.1% and 5.7% respectively. Based on the above, we consider that the annual increase in salary of 5% adopted by the Company is fair and reasonable.

Having considered the above factors, we are of the view that the Revised Annual Caps I proposed by the Directors are fair and reasonable and in the interests of the Company and Shareholders as a whole.

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Revised Annual Caps II

The Revised Annual Caps II, being the sum of the Revised Annual Caps I and the annual caps for the additional four property projects owned by the Project Companies (the "Project Companies Annual Caps"), are proposed to be RMB 28 million for the period from 6 August 2019 to 31 December 2019, RMB71 million for the year ending 31 December 2020 and RMB69 million for the year ending 31 December 2021. The Project Companies Annual Caps are projected to be nil for the period from 6 August 2019 to 31 December 2019, RMB20 million for the year ending 31 December 2020 and RMB22 million for the year ending 31 December

2021 with detailed assumptions as shown below:

	For the
	period from
	1 December	For the year	For the year
	2019 to 31	ending 31	ending 31
	December	December	December
	2019	2020	2021
Project Companies Annual
Caps (RMB)	nil	20 million	22 million
% change	n/a	n/a	10.0%
Number of property projects	-	4	3
Number of staff	-	170	140
Increase in average monthly
salary	n/a	n/a	5.0%

We understand from management of the Company that the number of staff working in the showrooms would decrease from around 170 for the year ending 31 December 2020 to around 140 for the year ending 31 December 2021 as one of the property projects owned by the Project Companies which requires the Services during August 2020 to December 2020 would no longer require the Services in 2021.

According to the development schedule of the Project Companies' property projects, two, out of four, projects would be provided with the Services under their respective existing agreements until July 2020 and the Project Companies would renew such agreements for the Services upon expiry of the existing agreements. Therefore, service fees for a service period of around five months only are expected to incur for two projects for the year ending 31 December 2020. On the other hand, the Services will be required for the three projects throughout 2021. Together with the expected annual increment of 5% in average monthly salary, the Project Companies Annual Caps are projected to increase by approximately 10% for the year ending 31 December 2021 although the number

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of property projects of the Project Companies which require the Services from Fujian BE are expected to decrease from four for the year ending 31 December 2020 to three for the year ending 31 December 2021.

Given the average salary growth rate of 5% per annum is in line with the growth of the economy of the PRC as mentioned above, we are of the view that the annual increase in salary adopted by the Company is fair and reasonable.

Having considered the above factors, we are of the view that the Project Companies Annual Caps proposed by the Directors are fair and reasonable and in the interests of the Company and Shareholders as a whole. Since both the Revised Annual Caps I and the Project Companies Annual Caps are fair and reasonable, we consider the Revised Annual Caps II proposed by the Directors are fair and reasonable and in the interests of the Company and Shareholders as a whole.

RECOMMENDATION

Having considered the principal factors and reasons stated above, we consider that (i) the terms of the Acquisition contemplated under the Agreement are fair and reasonable so far as the Independent Shareholders are concerned, the Acquisition is on normal commercial terms and conducted in the ordinary and usual course of business of the Group and in the interests of the Company and Shareholders as a whole; and (ii) the terms of the Master Agreement as amended by the Supplemental Agreement are fair and reasonable so far as the Independent Shareholders are concerned and the Continuing Connected Transactions are on normal commercial terms and conducted in the ordinary and usual course of business of the Group and in the interests of the Company and Shareholders as a whole. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders, and we ourselves also recommend the Independent Shareholders, to vote in favor of the resolutions to be proposed at the EGM to approve (i) the Agreement and the transactions contemplated thereunder; and (ii) the Master Agreement as amended by the Supplemental Agreement and the transactions contemplated thereunder (including the Revised Annual Caps).

Yours faithfully,

For and on behalf of

Crescendo Capital Limited

Amilia Tsang	Helen Fan
Managing Director	Director

Notes:

1. Ms. Amilia Tsang is a licensed person under the SFO permitted to engage in Type 6 (advising on corporate finance) regulated activity and has over 15 years of experience in corporate finance.
2. Ms. Helen Fan is a licensed person under the SFO permitted to engage in Type 6 (advising on corporate finance) regulated activity and has over 11 years of experience in corporate finance.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. FINANCIAL INFORMATION OF THE GROUP

Financial information of the Group for the financial year ended 31 December 2016, 31 December 2017, 31 December 2018 and for the six months ended 30 June 2019 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):

1. annual report of the Company for the year ended 31 December 2016 published on 29 March 2017 (pages 44 to 98);
2. annual report of the Company for the year ended 31 December 2017 published on 23 April 2018 (pages 88 to 170);
3. annual report of the Company for the year ended 31 December 2018 published on 15 April 2019 (pages 91 to 210); and
4. interim report of the Company for the six months ended 30 June 2019 published on 4 September 2019 (page 22 to 56).

2. MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Set out below is the management discussion and analysis of the results of the Group for each of the financial years ended 2016, 2017 and 2018 and the six months ended 30 June 2019. Unless the context otherwise requires, capitalised terms used herein shall have the same meanings as those ascribed in the Company's annual reports for the year ended 31 December 2016, 2017 and 2018 and the interim report for the six months ended 30 June 2019 respectively.

1. FOR THE SIX MONTHS ENDED 30 JUNE 2019
   Financial Review

Contracted sales

For the six months ended 30 June 2019, the contracted but unrecognised sales of the Group amounted to approximately RMB2,117.8 million and the estimated contracted GFA of the Group was approximately 189,912 sq.m.. Cities in Fujian Province contributed contracted sales of approximately RMB1,151.6 million, representing approximately 54% of total contracted sales. Details of the contracted sales of the projects are set out below:

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Details of contracted sales for the six months ended 30 June 2019

	Contracted
		sales	Contracted
Location/Project		(Note)		GFA
	(RMB'000)		(sq.m.)
Zhangqiu Jinan Shandong/The Puyue Bay	101,797		10,498
Pingtan Fuzhou Fujian/Sansheng International
Coast (Phase 1)	867,421		73,663
Xiapu Ningde Fujian/Binjiang International	215,438		24,413
Langqi Fuzhou Fujian/Future City	68,696		5,572
Rudong Nantong Jiangsu/Puyue Mansion	450,286		45,769
Pingyang Wenzhou Zhejiang/Yuefu Garden	213,140		15,278
Pingyang Wenzhou Zhejiang/Jiangcheng Town		200,980			14,719
Total	2,117,758		189,912

Note: "Contracted sales" include contracted sales by the Group's subsidiaries and joint ventures. Contracted sales data is unaudited and is based on internal information of the Group. Contracted sales data may be subject to various uncertainties during the process of collecting such sales information and is provided for shareholders' and investors' reference only.

Revenue

Total revenue of the Group for the six months ended 30 June 2019 amounted to approximately RMB13.0 million (for the six months ended 30 June 2018: approximately RMB680.8 million).

The following table sets forth certain details of the revenue:

			Six months ended 30 June
	2019		2018
			Percentage			Percentage
				of revenue				of revenue
	RMB'000	(%)	RMB'000	(%)
Revenue from sales of
properties	-		-	677,274		99.5
Investment properties
rental income	12,952			100.0		3,572			0.5
Total	12,952		100.0		680,846		100.0

The Group did not record any revenue from sales of properties for the six months ended 30 June 2019 (for the six months ended 30 June 2018: approximately RMB677.3 million), which was due to the fact that the majority of

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

the development projects explored by the Group were under construction or pre-sale stage and conditions to recognise revenue were not satisfied during the period.

The Group's investment properties rental income recorded approximately RMB13.0 million for the six months ended 30 June 2019 (for the six months ended 30 June 2018: approximately RMB3.6 million), representing an increase of approximately 263% as compared to the amount in the corresponding period in 2018. It was derived from commercial investment properties in Harbin and commercial investment properties in Qingdao, which were leased out in January and August 2018 respectively.

Cost of sales

Cost of sales mainly represents the cost directly related to the development of the Group's properties. It comprises cost of land use rights, acquisition premium, construction costs, decoration costs, capitalised interest expenses and finance cost of advance payment. For the six months ended 30 June 2019, the Group did not record any cost of sales accordingly (for the six months ended 30 June 2018: approximately RMB647.1 million), which was due to the pre-sale properties have not been delivered during period under review.

Gross profit

For the six months ended 30 June 2019, gross profit was approximately RMB13.0 million (for the six months ended 30 June 2018: approximately RMB33.7 million).

Valuation gain on investment properties

For the six months ended 30 June 2019, the Group recorded unrealised fair value gain on investment properties in Qingdao and Harbin of approximately RMB3.8 million (for the six months ended 30 June 2018: Nil).

Other income

Other income mainly comprised net exchange gain/(loss), bank interest income, fair value changes on derivative financial instruments, mark-to-market realised fair value changes and mark-to-market unrealised fair value changes on financial assets. The Group's other income increased from approximately RMB3.1 million for the six months ended 30 June 2018 to approximately RMB5.6 million for the six months ended 30 June 2019. Such increases were mainly due to the turnaround of Group's mark-to-market fair value loss on the financial assets from the prior period of approximately RMB4.3 million to gain of approximately RMB8.4 million during the period. The turnaround of the fair value gain on the derivative financial instruments for the prior period of approximately RMB8.8 million to a loss of approximately RMB5.8 million during the period.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

In addition, exchange difference changed from exchange loss of approximately RMB 3.7 million in the corresponding period in 2018 to exchange gain of approximately RMB 2.6 million in current period. The exchange gain was recorded mainly because of the decreased United States dollar ("USD" or "US$") exchange rate when the Company was paying the USD bond interest in current period, which was recognised at the beginning of the period (the functional currency of the Company is RMB and the exchange rate of USD against RMB had depreciated up to 3% during the period). Exchange loss recorded in the corresponding period in 2018 was mainly due to the continued increase in exchange rate of USD against RMB in the first half of last year, which resulting in a net exchange loss arising from the US$135 million bond and USD deposits held by the Company.

Selling and marketing expenses and administrative expenses

For the six months ended 30 June 2019, selling and marketing expenses and administrative expenses amounted to approximately RMB77.0 million (for the six months ended 30 June 2018: approximately RMB35.8 million), representing an increase of approximately 115% as compared with the corresponding period in 2018. The increase in selling and marketing expenses and administrative expenses was mainly due to the increase in overall sales and marketing expenses owing to the increase in contracted sales amount during the period, boosted by the Group's new launches of property projects available for pre-sale in 2019 and continued expansion in business scale of the Group, resulting in increases in staff costs and administrative expenses accordingly.

Share of losses of joint ventures

For the six months ended 30 June 2019, the Group's share of losses of joint ventures amounted to approximately RMB2.2 million (for the six months ended 30 June 2018: Nil).

Income tax

For the six months ended 30 June 2019, the Group's income tax credit was approximately RMB12.8 million. The income tax credit of the Group mainly included the deferred tax assets arising from the recognition of tax losses of approximately RMB16.1 million and the deferred income tax expenses arising from the adoption of fair value measurement for the investment properties in Harbin and Qingdao and temporary difference on depreciation were amounted to approximately RMB2.1 million, and the deferred income tax expenses arising from the recognition of capitalised sales commission was approximately RMB1.7 million.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Loss for the period attributable to the Shareholders

For the six months ended 30 June 2019, the Group recorded a loss attributable to the Shareholders of approximately RMB41.1 million (for the six months ended 30 June 2018: approximately RMB18.0 million).

For the six months ended 30 June 2019, basic loss per share was approximately RMB9.81 cents (for the six months ended 30 June 2018: approximately RMB4.30 cents).

The higher loss for the current period was mainly due to substantial increase in the number of projects and continued expansion in business scale of the Group, resulting in increase in selling and marketing expenses and administrative expenses. In addition, the Group did not record any revenue from sales of properties as the properties of the Group were under pre-sale and no properties were delivered during the period.

Liquidity and Financial Resources

Cash position

As at 30 June 2019, the Group's cash and cash equivalents (including restricted deposits) amounted to approximately RMB484.6 million (31 December 2018: approximately RMB406.2 million). The Group had unutilised credit facilities amounting to approximately RMB4,279.2 million as at 30 June 2019 (31 December 2018: approximately RMB3,522.6 million). The unutilised credit facilities from banks and financial institutions of the Group amounted to approximately RMB1,438.0 million as at 30 June 2019 (31 December 2018: approximately RMB723.7 million).

Following the completion of exchange offer of new bonds in the amount of USD135.0 million in November 2018, the Group has sufficient financial resources and flexible financial management policy in place to meet the needs of its business development in the coming years.

Borrowings

As at 30 June 2019, the Group's bank loans and borrowings from financial institutions were approximately RMB3,301.8 million (31 December 2018: approximately RMB2,502.4 million) and bond payable was approximately RMB898.9 million (31 December 2018: approximately RMB894.1 million) for the Group's development purpose and as general working capital, and refinance the Group's existing indebtedness.

Out of the total borrowings, RMB1,248.9 million was repayable within one year (31 December 2018: approximately RMB1,164.4 million), while approximately RMB2,951.8 million was repayable after one year (31 December 2018: approximately RMB2,232.1 million).

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Finance cost

The Group's finance costs mainly included interest arising from corporate bonds, bank loans, borrowings from financial institutions and loans from a related party, it decreased from approximately RMB32.5 million for the six months ended 30 June 2018 to approximately RMB8.9 million for the six months ended 30 June 2019. The decrease was contributed by the increase of interest expense which satisfied the conditions of capitalisation and did not recognise as expense in current period.

The Group's weighted average interest rate was 10.93% for the six months ended 30 June 2019 (for the six months ended 30 June 2018: 8.09%), and the total borrowing costs of the Group has been capitalised at a rate of 10.49% for the six months ended 30 June 2019 (for the six months ended 30 June 2018: 7.21%).

Gearing ratio

The Group's gearing ratio (total indebtedness divided by total assets) was approximately 89.7% (31 December 2018: approximately 87.6%) and the gearing ratio excluding receipts in advance and contract liabilities was approximately 79.1% (31 December 2018: approximately 85.7%). The Group's current ratio (current assets divided by current liabilities) was approximately 1.8 times as at 30 June 2019 and 31 December 2018.

Pledge of assets

As at 30 June 2019, the Group's inventories with carrying amount of approximately RMB5,114.7 million were pledged to secure the bank loans and borrowings from financial institutions of the Group (31 December 2018: approximately RMB2,850.5 million)

Material acquisition and disposal of subsidiaries, associates and joint ventures

During the six months ended 30 June 2019, there was no material acquisition or disposal of subsidiaries, associates and joint ventures by the Group.

Future plans for material investments or capital assets

Save for the business plans as disclosed in the section headed "Outlook and Plans" below, there were no other future plans for material investments or acquisition of capital assets as at 30 June 2019.

Contingent liabilities

As at 30 June 2019, the Group has issued guarantees to banks to secure the mortgage arrangement of property buyers. The outstanding guarantees to the banks amounted to approximately RMB291.0 million (31 December 2018:

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

approximately RMB0.1 million), which will be terminated upon the completion of the transfer procedures with the buyers in respect of the legal title of the properties.

The Directors do not consider it probable that the Group will sustain a loss under these guarantees as the bank has the right to sell the property and recovers the outstanding loan balance from the sale proceeds if the property buyer defaults payment. The Group has not recognised any deferred income in respect of these guarantees as its fair value is considered to be minimal by the directors.

Foreign exchange risk

The functional currency of the Company and its major subsidiaries is RMB, in which most of their transactions and assets are denominated. The Group has exposure to USD exchange risk arising from its bonds in the amount of USD135.0 million issued during the prior year. The Group has not taken any measures to hedge the existing foreign currency exposure but will monitor closely the situation and review such a need from time to time.

Review of Operations

The Group's principal activities are property development and sale, and property investment.

The Board is of the view that the overall operation of the Group was satisfactory and its financial position remained stable and healthy in the current period, while substantial contracted sales of approximately RMB2,117.8 million were achieved during the six months ended 30 June 2019, forming a solid basis for the Group's future growth in recognised revenue.

With the support from Sansheng Group Limited and its subsidiaries ("Sansheng Group"), the Group has smoothly implemented its strategic plan during the period under review, it has proactively selected property development projects from those cities with a robust economy and avoided the projects from areas where stringent real estate policies such as restrictions on purchases and prices were in effect. The Group has obtained a quality project through acquisition, which has contributed to its land bank and has laid a cornerstone for its property development business in the future.

Property investment

The Group's portfolio of investment properties comprises certain properties in Hong Kong and mainland China. During the year 2018, the Group's investment properties in Harbin and Qingdao have been leased out. The Group is proactively considering leasing or selling its industrial building units in Hong Kong. The Group will from time to time review its property portfolio and make every endeavour to increase its rental income.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Property development and land bank

As at 30 June 2019, the Group had a total of 15 property projects under development or held for future development, total site area of its land bank was approximately 796,554 sq.m. and the estimated total GFA of the land bank was approximately 2,513,901 sq.m. The table below sets forth the breakdown of property development projects:

			Equity
			interest
		Primary	held by		Estimated
		intended	the	Total site	aggregate
Location/Project	use	Group	area	GFA
			(%)	(sq.m.)	(sq.m.)
1.	Zhangqiu Jinan	Residential	80	60,032	207,144
	Shandong/The Puyue
	Bay
2.	Pingtan Fuzhou Fujian/	Residential/	90	122,122	443,507
	Sansheng International	Commercial
	Coast (Phase 1)
3.	Pingtan Fuzhou Fujian/	Residential/	90	75,500	196,900
	Sansheng International	Commercial
	Coast (Phase 2)
4.	Xiapu Ningde Fujian/	Residential/	55	23,861	66,082
	Binjiang International	Commercial
5.	Langqi Fuzhou Fujian/	Residential/	100	69,505	166,777
	Future City	Commercial
6.	Tingjiang Fuzhou	Residential/	28	70,618	258,757
	Fujian/The Puyue Bay	Commercial
	City
7.	Rudong Nantong	Residential/	92	77,481	185,944
	Jiangsu/Puyue Mansion	Commercial
8.	Wuxi Jiangsu/Sansheng •	Commercial/	100	33,191	127,698
	Galaxy City	Office
9.	Longhai Zhangzhou	Residential/	100	23,457	49,046
	Fujian/Sansheng • Puyue	Commercial
	Sea
10.	Changle Fuzhou	Residential/	30	48,140	136,783
	Fujian/Puyue Mansion	Commercial
	(Phase I)
11.	Changle Fuzhou	Residential/	30	44,462	136,841
	Fujian/Puyue Mansion	Commercial
	(Phase II)
12.	Pingyang Wenzhou	Residential	8.25	52,181	156,900
	Zhejiang/Yuefu Garden

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APPENDIX I	FINANCIAL INFORMATION OF THE GROUP
				Equity
				interest
			Primary	held by			Estimated
			intended	the	Total site	aggregate
Location/Project		use	Group	area	GFA
				(%)	(sq.m.)	(sq.m.)
13.	Pingyang Wenzhou	Residential	8.25	50,746		151,955
	Zhejiang/Jiangcheng
	Town
14.	Gulou Fuzhou Fujian/	Residential	10.5	13,882		43,502
	Sheng Mansion
15.	Shenyang Liaoning/Yifu	Residential/	100	31,376		186,065
	Project		Commercial/
			Office
	Total				796,554		2,513,901

Outlook and plans

The Group will closely monitor the changes in macroeconomic policies of the China's real estate industry, accelerate the innovation, actively adjust the strategic plan and achieve the development targets with its competitive strengths. Riding on the substantial experience and professionalism of Sansheng Group, and adhering to the aim of developing high quality residential products and services to customers, the Group has won market recognition and achieved its performance target. The Group intends to actively seek for new opportunities in property development while enlarging the income from the existing investment properties, and to conduct more land acquisitions, especially to commence the development of the residential properties in the PRC market. The Group will actively expand its reserve of new high-quality land resources and build on the foundation of future business development through a combination of various land acquisition methods.

In the future, the Group will deepen the development of the core areas of China's economy, expand its business scale in the steady and rapid developing zones such as "The Western Straits Economic Zone", "The Yangtze River Delta Economic Zone" and "Circum-Bohai Sea Economic Zone" and actively seek to enter China's other economic hotspots such as "The Guangdong-HongKong-Macao Greater Bay Area" and "The Yangtze River Economic Zone" at the same time. While optimizing the overall strategic plan, the Group will continue to adhere to its strategy of "precise investment, high caliber team superior product"

（精準投資、精幹團隊、精緻產品）to achieve two objectives of excellent operational efficiency and outstanding profitability in order to deliver satisfactory returns to its shareholders.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Employees

As at 30 June 2019, the Group employed a total of 408 employees, 404 of them were based in Mainland China. Staff costs (excluding directors' emoluments) for the six months ended 30 June 2019 amounted to approximately RMB23.5 million (for the six months ended 30 June 2018: approximately RMB5.4 million). The Group ensures that the pay levels of its employees are competitive and in line with the market trend and its employees are rewarded on a performance related basis within the general framework of its own salary and bonus system.

1. FOR THE YEAR ENDED 31 DECEMBER 2018
   Financial Review
   Contracted sales

As of 31 December 2018, the contracted but unrecognized sales of the Group amounted to approximately RMB1,141.8 million and the contracted GFA of the Group was approximately 95,487 sq.m., which arise from the contracted sales of the projects below, forming a solid basis for the Group's future growth in recognized revenue.

Details of contracted sales in 2018
		Total
	contracted
		sales	Contracted
Location/Project		(Note)		GFA
	(RMB'000)		(sq.m.)
Zhangqiu Jinan Shandong/The Puyue Bay	38,740		4,139
Pingtan Fujian/Sansheng International Coast
(Phase 1)	559,566		44,301
Xiapu Ningde Fujian/Binjiang International	112,553		15,235
Rudong Nantong Jiangsu/Puyue Mansion	105,671		7,850
Pingyang Wenzhou Zhejiang/Yuefu Garden	193,260		14,624
Pingyang Wenzhou Zhejiang/Jiangcheng Town		132,001			9,338
Total	1,141,791		95,487

Note: "Total contracted sales" include contracted sales by the Group's subsidiaries and joint ventures. Contracted sales data is unaudited and is based on internal information of the Group. Contracted sales data maybe subject to various uncertainties during the process of collecting such sales information and is provided for shareholders' and investors' reference only.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Revenue

The Group's revenue mainly derived from sales of properties, with a small proportion from investment properties rental income. Total revenue of the Group for the year ended 31 December 2018 amounted to approximately RMB934.0 million (for the year ended 31 December 2017: Nil).

The following table sets forth certain details of the revenue:

	Year ended 31 December
	2018			2017
	RMB'000	%	RMB'000	%
Revenue from sales of
properties	923,765		98.9		-	-
Investment properties rental
income	10,206		1.1		-		-
Total	933,971		100.00		-	-

The revenue from sales of properties recorded approximately RMB923.8 million for the year ended 31 December 2018 (for the year ended 31 December 2017: Nil), mainly contributed by the delivered properties in the West District and North District of Zhangqiu Jinan Shandong.

The Group's investment properties rental income recorded approximately RMB10.2 million for the year ended 31 December 2018 (for the year ended 31 December 2017: Nil), which was derived from commercial investment properties in Harbin and Qingdao.

Cost of sales

Cost of sales mainly represents the cost directly related to the development of the Group's properties. It comprises cost of land use rights, acquisition premium, construction costs, decoration costs, capitalized interest expenses and finance cost of advance payment. For the year ended 31 December 2018, cost of sales amounted to approximately RMB878.8 million (for the year ended 31 December 2017: Nil).

Gross profit and margin

For the year ended 31 December 2018, gross profit amounted to approximately RMB55.2 million (for the year ended 31 December 2017: Nil). Gross profit margin was approximately 5.9% for the year ended 31 December 2018 (for the year ended 31 December 2017: Nil).

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Net valuation gain on investment property

During the year, the Group recorded unrealized net fair value gain on investment properties in Hong Kong, Qingdao and Harbin of approximately RMB1.5 million. An unrealized fair value gain of approximately RMB33.6 million was recorded in 2017.

Other loss/income

These mainly comprised net exchange loss, bank interest income, mark-to-market unrealized fair value changes on the financial assets and fair value changes on derivative financial instruments. The Group's other income decreased from approximately RMB41.9 million for the year ended 31 December 2017 to other loss of approximately RMB43.0 million for the year ended 31 December 2018. Such decreases were mainly due to the turnaround of exchange gain of approximately RMB12.2 million from the year ended 31 December 2017 to exchange loss of approximately RMB41.0 million in the current year. The exchange loss was mainly due to the issuance of bonds in an amount of USD135.0 million by the Group during the year and the USD against the RMB appreciating by more than 5% in this year. Besides, the Group's mark-to-market unrealized fair value gain on the financial assets of approximately RMB29.2 million for the previous year changed to a loss of approximately RMB10.6 million in the current year.

Selling and marketing expenses and administrative expenses

For the year ended 31 December 2018, selling and marketing expenses and administrative expenses amounted to approximately RMB116.0 million (for the year ended 31 December 2017: approximately RMB50.7 million), representing an increase of approximately 128.8% as compared with that in 2017. The increase in selling and marketing expenses and administrative expenses was mainly due to substantial increase in the number of properties and business scale of the Group for the year ended 31 December 2018 after the Group has completed the layout in all medium-sized cities in China in 2018, resulting in increase in staff costs, advertisement and marketing costs accordingly.

Share of profits less losses of joint ventures

For the year ended 31 December 2018, the Group's share of profits less losses of joint ventures amounted to loss of approximately RMB1.5 million (for the year ended 31 December 2017: Nil).

Income tax

For the year ended 31 December 2018, the Group's income tax credit was approximately RMB13.3 million. The income tax credit mainly included PRC corporate income tax and reversal of temporary differences on deferred tax, which amounted to approximately RMB5.9 million and RMB19.4 million respectively.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The reversal of temporary differences on the deferred tax was mainly due to the fact that the investment properties of Harbin and Qingdao have been leased out. Therefore, the presumption that the carrying amounts of investment properties measured using fair value model are recovered entirely through sale is not applicable, and the corresponding deferred income tax is re-assessed. The impact of deducting items such as land appreciation tax and business tax shall be reversed and the deferred income tax was reversed by approximately RMB31.2 million.

Loss for the year attributable to the Shareholders

For the year ended 31 December 2018, the Group recorded a loss attributable to the Shareholders of approximately RMB166.5 million (for the year ended 31 December 2017: approximately RMB0.02 million).

For the year ended 31 December 2018, basic loss per share was approximately RMB39.72 cents (for the year ended 31 December 2017: RMB0.00 cents).

The higher loss in the current year was mainly due to the augment in the Group's scale of financing resulting in increased total interest costs, and interest expenses rising from approximately RMB36.0 million for the year ended 31 December 2017 to approximately RMB95.0 million for the year ended 31 December 2018, thus the gross profit was offset by the increase of interest costs, selling and marketing expenses and administrative expenses during the current year. The majority of the land development projects newly explored by the Group were under construction and/or at the pre-sale stages and criteria for recognition of revenue were not satisfied and certain operating costs during the year were not offset by corresponding revenue.

Liquidity and Financial Resources

Cash status

As at 31 December 2018, the Group's cash and cash equivalents (including fixed deposits and restricted deposits) amounted to approximately RMB406.2 million (31 December 2017: approximately RMB848.4 million), of which approximately 46% were held at banks in Hong Kong (31 December 2017: 49%) and the remaining approximately 54% were deposited with banks in the PRC (31 December 2017: 51%). The Group has unutilised credit facilities amounted to approximately RMB3,522.6 million as at 31 December 2018 (31 December 2017: approximately RMB4,726.8 million). The unutilised credit facilities from banks and financial institutions of the Group amounted to approximately RMB723.7 million as at 31 December 2018 (31 December 2017: approximately RMB1,226.8 million). The Group has completed the exchange offer in November 2018 to exchange USD135.0 million of new bonds for the floating rate secured bonds due

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2018 in the principal amount of USD135.0 million issued by the Company in November 2017, which reflecting the market recognition of the Group in terms of its credit qualifications, financial performance and operating capabilities.

Following the issuance of new bonds in an amount of USD135.0 million, the Group has sufficient financial resources and flexible financial management policies in place to meet the needs of its business development in the coming years.

Borrowings

As at 31 December 2018, the Group's bank loans and borrowings from financial institutions was approximately RMB2,502.4 million (31 December 2017: approximately RMB780.5 million) and bond payable was approximately RMB894.1 million (31 December 2017: approximately RMB871.3 million).

Out of the total borrowings, approximately RMB1,164.4 million was repayable within one year (31 December 2017: approximately RMB1,621.8 million), while approximately RMB2,232.1 million was repayable after one year (31 December 2017: approximately RMB30.0 million).

Finance costs

The Group's finance costs mainly included interest arising from corporate bonds, bank loans, borrowings from financial institutions and loans from a related party, which resulted in an increase in total interest costs as a result of the increased scale of its financing.

The Group's weighted average interest rate was 11.6% for the year ended 31 December 2018 (for the year ended 31 December 2017: 7.2%), and the total paid or accrued interest expense was approximately RMB95.0 million (for the year ended 31 December 2017: RMB36.0 million).

Gearing ratio

The Group's gearing ratio (total indebtedness divided by total assets) was approximately 87.6% (31 December 2017: approximately 75.6%) and the gearing ratio excluding receipts in advance and contract liabilities was approximately 85.7% (31 December 2017: approximately 59.9%). The Group's current ratio (current assets divided by current liabilities) was approximately 1.8 times as at 31 December 2018 versus approximately 1.4 times as at 31 December 2017.

Pledge of assets

As at 31 December 2018, the Group's inventories with a carrying amount of approximately RMB2,850.5 million were pledged to secure the bank loans and borrowings from financial institution of the Group (31 December 2017: approximately RMB1,226.4 million).

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Capital expenditure

For the year ended 31 December 2018, the Group's capital expenditure amounted to approximately RMB4,308.4 million, which was mainly attributable to the acquisitions of land projects located in Fuzhou Fujian (for the year ended 31 December 2017: approximately RMB1,218.1 million).

Material acquisition and disposal

On 3 April 2018, Sansheng Land Development Limited (an indirect wholly-owned subsidiary of the Company) entered into a sale and purchase agreement, to acquire the entire equity interest in Systech International Industrial Limited from independent third parties for a consideration of RMB205,096,600.

Systech International Industrial Limited is principally engaged in investment holding. Its principal asset is the entire equity interest in Wuxi Xidong Automobile Plaza Development Co., Ltd, which holds a parcel of land situated at Dongting Town, Wuxi City, Jiangsu Province, the PRC, with a site area of approximately 50,515 sq.m. and a plot ratio of 2.2 for mixed use development. The development of the land is divided into two phases with a gross floor area of approximately 118,506 sq.m..

The above transaction has been completed in March 2019.

On 30 June 2018, Fuzhou Shengxuan Investment Limited, a non-wholly-owned subsidiary of the Company, entered into an agreement with Xiamen Yashen Property Development Limited (the "Xiamen Yashen"), pursuant to which the Xiamen Yashen agreed to contribute to the registered capital of Fuzhou Shengquan Property Development Company Limited in the amount of RMB9,608,000, representing 49% of its enlarged registered capital.

The above transaction has been completed in July 2018.

Contingent liabilities

As at 31 December 2018, the Group has issued guarantees to banks to secure the mortgage arrangement of property buyers. The outstanding guarantees to the banks amounted to approximately RMB0.1 million (2017: approximately RMB421.0 million), which will be terminated upon the completion of the transfer procedures with the buyers in respect of the legal title of the properties.

The Directors do not consider it probable that the 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 payment. The Group has not recognised any deferred income in respect of these guarantees as its fair value is considered to be minimal by the Directors.

- I-15 -

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Foreign exchange risk

The functional currency of the Company and its major subsidiaries is RMB, in which most of their transactions and assets are denominated. The Group has exposure to USD exchange risk arising from its bonds in an amount of USD135.0 million issued during the year. The Group has not taken any measures to hedge the foreign currency exposure currently but will monitor closely the situation and review such a need from time to time.

Review of Operations

The Group's principal activities are property development and sale, and property investment.

The Board is of the view that the overall operation of the Group was satisfactory and its financial position maintained stable and healthy in 2018, while substantial property sales revenue and rental income were achieved during the year.

With the support from Sansheng Group, the Group implemented strategic plan orderly during the year under review, the Group proactively selected property development projects from those cities with a robust economy and avoided the projects from areas where stringent real estate macro-control policies such as restrictions on purchases and prices were in effect. The Group has obtained a number of quality projects through acquisition and the public land auction market, which contributed to its land bank and have laid a cornerstone for its property development business from in the future.

During 2018, the residential properties in the West District and North District of Zhangqiu Jinan Shandong have been delivered, and those in the South District of Zhangqiu Jinan Shandong, Rudong Nantong Jiangsu, Pingtan Fuzhou Fujian, Xiapu Ningde Fujian and Pingyang Wenzhou Zhejiang have started pre-sale, and the contracted sales amounted to approximately RMB1,141.8 million.

Property investment

The Group's portfolio of investment properties comprises certain properties in Hong Kong and mainland China. During the year, the Group's investment properties in Harbin and Qingdao have been leased out. The Group is proactively considering leasing or selling industrial building units in Hong Kong. The Group will from time to time review its property portfolio and make every endeavour to increase its rental income.

Property development and land bank

As at 31 December 2018, the Group had a total of 14 property projects under development or held for future development, and the total site area of the land bank was approximately 766,997 sq.m. and the estimated total GFA of the

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land bank was approximately 2,364,505 sq.m.. During the year under review, the pre-sold GFA was approximately 95,487 sq.m.. The table below sets forth the breakdown of property projects:

			Equity
			interest
		Primary	held by					Estimated
		intended	the	Pre-sold	Total site		aggregate
Location/Project	use	Group	GFA	area		GFA
			(%)	(sq.m.)	(sq.m.)		(sq.m.)
1.	Zhangqiu Jinan Shandong/The	Residential	80	4,139		60,032	204,112
	Puyue Bay
2.	Pingtan Fuzhou Fujian/Sansheng	Residential/	90	44,301		122,122	443,507
	International Coast (Phase 1)	Commercial
3.	Pingtan Fuzhou Fujian/Sansheng	Residential/	90	-	75,500		187,051
	International Coast (Phase 2)	Commercial
4.	Xiapu Ningde Fujian/Binjiang	Residential/	55	15,235		23,860		65,306
	International	Commercial
5.	Langqi Fuzhou Fujian/Future	Residential/	100	-	75,805		173,193
	City	Commercial
6.	Tingjiang Fuzhou Fujian/The	Residential/	28	-	70,618		258,757
	Puyue Bay City	Commercial
7.	Rudong Nantong Jiangsu/Puyue	Residential/	92	7,850		77,481		171,200
	Mansion	Commercial
8.	Changle Fuzhou Fujian/Puyue	Residential/	30	-	45,476		136,435
	Mansion (Phase I)	Commercial
9.	Changle Fuzhou Fujian/Puyue	Residential/	30	-	44,462		138,496
	Mansion (Phase II)	Commercial
10.	Longhai Zhangzhou Fujian/	Residential/	100	-	23,457		49,108
	Sansheng • Puyue Sea	Commercial
11.	Pingyang Wenzhou Zhejiang/	Residential	8.25	14,624		52,180		156,359
	Yuefu Garden
12.	Pingyang Wenzhou Zhejiang/	Residential	8.25	9,338		50,746		151,414
	Jiangcheng Town
13.	Gulou Fuzhou Fujian/Sheng	Residential	10.5	-	13,882		43,502
	Mansion
14.	Shenyang Liaoning/Yifu Project	Residential/	100	-	31,376		186,065
		Commercial/
		Office
Total				95,487		766,997		2,364,505

Land acquisition in 2018

In 2018, the Group acquired interests in a total of 10 new land parcels. The total estimated GFA of the new land acquisition amounted to approximately 1,343,770 sq.m., of which 600,615 sq.m. were attributable to the Group's equity interests. Total contract consideration for its land acquisition amounted to approximately RMB6,543.0 million, of which RMB2,420.5 million was payable

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FINANCIAL INFORMATION OF THE GROUP

by the Group according to its equity interests in relevant projects. Based on the Group's attributable GFA acquired and the attributable acquisition considerations, the Group's average land acquisition cost in 2018 was approximately RMB4,030 per sq.m..

			Equity
			interest held							Estimated	Attributable
		Primary	by the	Total		Attributable	Total site	aggregate	estimated
Location/Project	intended use	Group	consideration	consideration	area	GFA	GFA
			(%)	(RMB'000)		(RMB'000)	(sq.m.)	(sq.m.)	(sq.m.)
1.	Langqi Fuzhou Fujian/Future	Residential/	100	750,000	750,000		75,805	173,193	173,193
	City	Commercial
2.	Longhai Zhangzhou Fujian/	Residential/	100	265,000	265,000		23,457	49,108	49,108
	Sansheng • Puyue Sea	Commercial
3.	Rudong Nantong Jiangsu/	Residential/	92	367,652	338,240		77,481	171,200	157,504
	Puyue Mansion	Commercial
4.	Xiapu Ningde Fujian/Binjiang	Residential/	55	93,000	51,150		23,860	65,306	35,918
	International	Commercial
5.	Changle Fuzhou Fujian/Puyue	Residential/	30	1,200,000	360,000	45,476	136,435	40,931
	Mansion (Phase I)	Commercial
6.	Changle Fuzhou Fujian/Puyue	Residential/	30	454,000	136,200	44,462	138,496	41,549
	Mansion (Phase II)	Commercial
7.	Tingjiang Fuzhou Fujian/The	Residential/	28	1,128,000	315,840	70,618	258,757	72,452
	Puyue Bay City	Commercial
8.	Gulou Fuzhou Fujian/Sheng	Residential	10.5	688,000	72,240	13,882	43,502	4,568
	Mansion
9.	Pingyang Wenzhou Zhejiang/	Residential	8.25	804,450	66,367	52,180	156,359	12,900
	Yuefu Garden
10.	Pingyang Wenzhou Zhejiang/	Residential	8.25	792,910	65,415	50,746	151,414	12,492
	Jiangcheng Town
Total				6,543,012	2,420,452	477,967	1,343,770	600,615

Outlook and Plan

Capitalizing on Sansheng Group's brand, capital, professional experience and its professional workforce, the Group has been actively acquiring quality land for its land bank resources through both acquisitions and cooperation as well as participation in public land auctions. Meanwhile, the Group will pursue industrial and real estate integration in order to attain significant enhancement on the area and quality of land acquired.

The Group has established a new property development platform through the joint venture company (the "JV Company") established together with Fuzhou Sansheng. Leveraging the resource integration, development capabilities and industry expertise shared between both parties, the JV Company has, following its establishment, acquired a number of land parcels in economically vibrant regions in the PRC, such as the West Coast Economic Zone, Yangtze River Delta Economic Zone and Bohai Economic Rim, and commenced residential and commercial property development there.

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FINANCIAL INFORMATION OF THE GROUP

The Group will continue to enhance the returns from its commercial properties and their capitalization, periodically review its property portfolio and make every endeavor to increase its rental income.

Over the past 40 years of reform and liberalization in Mainland China, the economy has substantially grown with broadening urbanization and rising income of residents. The real estate market has shifted from "satisfying the needs of living" to "pursuing a better living." The Group believes that, adhering to the aim of developing high-quality products, the development of quality projects to be launched to the market can stimulate further growth.

Looking ahead to the coming year, we believe that the macroeconomic policies in respect of the real estate industry promulgated by the Chinese Government will continue to maintain a regulatory direction of "prohibition of speculation in properties," and city-oriented policies will be adopted within the real estate markets in different regions. Under the volatile economic environment, the Group believes that long-term fundamental factors that fuel the steady growth in the PRC's property market will remain unchanged.

Accordingly, in order to develop the PRC's property market, the Group will closely monitor the changes in market conditions and governmental policies, allocate resources for deeper research and business development, and look for appropriate opportunities through careful selection of investment choices. The Group is actively expanding its property business and acquiring suitable targets, and on the back of its strategic geographical layout, cultivating a professional and highly efficient workforce, and developing of sophisticated products and quality services. In this way the Group can maintain its competitiveness and promising prospects as it continuously strives to achieve excellent operational efficiency and outstanding profitability.

Future Plans for Material Investments or Capital Assets

Save for the business plan as disclosed in the section headed "Outlook and Plan" above, there was no other plan for material investments or acquisition of capital assets as at 31 December 2018.

Employees

As at 31 December 2018, the Group employed a total of 333 employees, 329 of them were based in Mainland China. Staff costs (excluding directors' emoluments) for the year ended 31 December 2018 amounted to approximately RMB27.6 million (2017: approximately RMB10.6 million). The Group ensures that the pay levels of its employees are competitive and in line with the market trend and its employees are rewarded on a performance related basis within the general framework of its own salary and bonus system.

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FINANCIAL INFORMATION OF THE GROUP

1. FOR THE YEAR ENDED 31 DECEMBER 2017
   Financial Review

Turnover

As the Group's investment properties remained vacant throughout the year, no turnover was recorded for the year ended 31 December 2017 (commercial investment properties in Harbin have been leased out on 5 January 2018 for a term of 10 years). However, the Group's main source of income for the year continued to be deriving from the provision of project management services which is accounted for as other income.

Upon the completion of brand renewal in 2017, capitalizing on Sansheng Group's capital, experience and its professional workforce, the Group has been actively acquiring quality land for its land bank resources by adhering to its principle of focusing on mergers and acquisitions as well as cooperative development, and being supported by the participation in public land auctions. Meanwhile, the Group will pursue industrial and real estate integration in order to attain significant enhancement on the number and quality of land acquired.

Loss for the year

Loss for the year amounted to approximately HK$85,000 as compared to a loss of approximately HK$31.0 million in the previous year. During the year, the Group's investment properties remained vacant and did not generate any rental income. The Group's main sources of income included gains on disposal of the Group's investments in listed financial assets, mark-to-market unrealized gains on the Group's listed financial assets and interest income from bank deposits.

The Group's loss for the year significantly narrowed down as compared with the previous year, which was mainly attributable to the net investment income from the Group's financial assets portfolio of approximately HK$23.1 million, and the unrealized fair value gains on the Group's investment properties of approximately HK$38.9 million.

Operating expenses

Operating expenses mainly comprised property related expenses and tax, utilities charges, legal and professional fees and rental expenses. The higher operating expenses this year was mainly due to the engagements of external legal advisor and financial advisor in relation to the General Offer exercise following the change of controlling shareholder of the Group during the year, the formation of the JV Company, the acquisitions in Fujian Pingtan and Jinan Zhangqiu, which generated consulting fee of approximately HK$9.2 million in total.

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FINANCIAL INFORMATION OF THE GROUP

Other income

Other income mainly comprised bank interest income, project management services income and exchange gains. The exchange gains for the year posted a year-on-year decrease, which was mainly due to the fact that the Group mainly held USD and HKD denominated assets last year. As Renminbi, the Group's functional currency, depreciated by more than 5% in the previous year, the Group recorded a higher exchange gains when converting HKD/USD denominated bank deposits into RMB. The exchange losses on USD and HKD denominated assets resulting from the appreciation of Renminbi during the year, coupled with new bonds in an amount of US$135.0 million, resulted in recording USD denominated liabilities, which generated exchange gains. In light of the above, exchange gains was recorded with a lower amount as compared with the previous year. In addition, project management services income for the year decreased by approximately HK$6.3 million, which was calculated based on the cost-plus arrangement on the Mainland China project team's staff cost. The decrease in project management services income was mainly due to the lower man hours of services provided.

Staff costs

Staff costs for the year decreased by 22.1% to approximately HK$16.3 million, which was mainly due to certain staff being transferred to Lifestyle China Group Limited and its subsidiaries since Lifestyle International Holdings Limited ceased to be the controlling shareholder of the Group on 13 April 2017 following the disposal of its entire interest in the Group, resulting in a significant decrease in staff costs.

Depreciation and amortisation

The significant increase for the year was a result of charging to the profit and loss account the amortized prepaid lease payment of HK$16.8 million in respect of the Group's Yifu Land in Shenyang, the PRC. The same has been capitalized in the past as part of the properties under development, but charged to the profit and loss account in the middle of last year. Therefore, the amortization for the whole year was doubled from last year. As there has been a long delay in getting approval from the relevant government authorities in respect of the master layout plan, it is expected that the construction work will continue to be postponed.

Financial investments and net investment income

During the year, the Group recorded an investment income of approximately HK$26.9 million in aggregate, which mainly comprised gains on disposal of the Group's investments in listed financial assets, mark-to-market unrealized fair value gains on the financial assets and fair value change on derivative financial instruments of approximately HK$18.5 million and dividend income from investments in listed financial assets of HK$4.6 million.

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FINANCIAL INFORMATION OF THE GROUP

Fair value changes on investment properties

During the year, the Group recorded unrealized fair value gains on investment properties in Harbin, Qingdao and Hong Kong of approximately HK$26.1 million, HK$9.0 million and HK$3.8 million, respectively. An unrealized fair value loss on investment properties in Hong Kong of approximately HK$900,000 was recorded in 2016.

Liquidity and financial resources

In 2017, the issuance and sales of property bonds experienced difficulties in general. In the context of frequent credit risk events in the capital market and investors becoming much more cautious about investing in private property issuers, the Company quickly acted to catch up with the window period for issuing bonds. In November 2017, the Group, through Industrial Bank Co., Ltd. Hong Kong Branch, the placing agent, successfully issued corporate bonds in an amount of US$135.0 million, at an interest rate of the sum of 4.3% per annum and a rate with reference to LIBOR for deposits in USD for the relevant interest period, reflecting the market recognition of the Company in terms of its credit qualifications, financial performance and operating capabilities.

Following the successful issuance of corporate bonds in an amount of US$135.0 million by the Group, as at 31 December 2017, the Group's total loans amounted to approximately HK$3,168.0 million, of which 67% were denominated in RMB and the remaining in USD. About 65% of the Group's borrowings were fixed-rate borrowings. As at 31 December 2017, the Group's bank loans and borrowings from financial institutions amounted to approximately HK$936.6 million (2016: nil) and bonds payables were approximately HK$1,045.6 million (2016: nil). Fixed deposits, cash and bank balances amounted to approximately HK$1,018.2 million (2016: HK$414.7 million), of which approximately 49% were deposited with banks in Hong Kong (2016: 86%) and the remaining approximately 51% with banks in the PRC (2016: 14%). About 49% of the bank balances were denominated in RMB and the remaining in USD and HKD. The current ratio of

1.08 times, together with the outstanding credit facilities of approximately RMB4,726.8 million, revealed that the Group has maintained a solid financial position. As mentioned above, as part of the Group's cash management, certain cash has been used for purchase shares of Hong Kong listed companies with a value of approximately HK$69.6 million as at 31 December 2017. The Group did not have any banking facilities available as at 31 December 2017 (2016: nil), but will make appropriate banking facility arrangements when required. The Group has sufficient financial resources and flexible financial management policies in place to meet the needs of business development in the coming years.

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FINANCIAL INFORMATION OF THE GROUP

Finance cost

As the Group successfully issued corporate bonds in an amount of US$135.0 million, coupled with other financing, the weighted average interest rate was 7.2% (2016: nil) in 2017, and the total interest expense paid or payable was approximately HK$41.7 million (2016: nil).

The Group's gearing ratio was approximately 75.6% (2016: 19.3%) and the gearing ratio excluding receipts in advance was approximately 59.9% (2016: 19.3%). In view of the cash resources of approximately HK$1,018.0 million maintained by the Group, the Group is satisfied with the current level of liabilities. However, it is expected that the Group's gearing ratio and the gearing ratio excluding receipts in advance will remain stable in 2018, thereby keeping the Group in sound financial positions.

Pledge of assets

As at 31 December 2017, the Group's inventories with a carrying amount of approximately HK$1,471.7 million were pledged to secure the bank and financial institution loans of the Group (2016: nil).

Capital expenditure

For the year ended 31 December 2017, the Group's capital expenditure amounted to approximately HK$1,410.6 million, which was mainly attributable to the acquisitions of projects in Pingtan, Fujian and Zhangqiu, Jinan (2016: HK$2.3 million).

Material acquisition, disposal and significant events

Fujian Pingtan project

On 16 August 2017, Sansheng Land Development Limited*（三盛置地發展有 限公司）, a wholly-owned subsidiary of the Company, and Mr. Wang Peng*（王鵬） entered into an agreement, pursuant to which Sansheng Land Development Limited*（三盛置地發展有限公司）conditionally agreed to acquire, and Mr. Wang Peng conditionally agreed to sell 90% of the issued share capital of Hong Kong Zhong Sheng Property Investment Limited* （香港中盛置業投資有限公司） ("HK Zhong Sheng Property") (the "Fujian Pingtan project"). HK Zhong Sheng Property is principally engaged in property investment and property management. As one of the conditions precedent to the agreement, HK Zhong Sheng Property will set up a new company as a wholly-owned subsidiary in the PRC with the scope of business of property investment and property development. Upon the establishment of the new company, Pingtan Yanggung Guohang Land Limited*

（平潭陽光國航置地有限公司）will be acquired.

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FINANCIAL INFORMATION OF THE GROUP

Pingtan Yanggung Guohang Land Limited was established in 2012 in the PRC, and its principal assets are the land, being (i) a parcel of land with an area of approximately 75,500.41 square metres for residential or commercial use, the plot ratio of which shall not exceed 2.0; and (ii) a parcel of land with an area of approximately 122,122 square metres for residential and commercial use, the plot ratio of which shall not exceed 2.8.

The land is located in Pingtan comprehensive experimental zone. The PRC government has been implementing more liberal measures to facilitate investment and trade, capital and personnel exchanges. Amid the development of the region, the property market of Pingtan is also growing at an increasing pace. The average sales price per square metres for residential units was recorded at RMB8,400 per square metres for 2016, representing a year-on-year increase of approximately 10.5%. The property sales volume has remained steady for recent years, but has recorded a rapid year-on-year increase of approximately 81.7% in 2016. As part of the framework for developing the free trade zone, the Fujian government has also been promoting the tourism industry in Pingtan with plans to develop coastal resort areas and granting funds to support infrastructure projects, which are expected to encourage further investment incentive, creating a strong demand in the property market. Having considered the location of the land, its development potentials and recent comparable transactions in Pingtan comprehensive experimental zone, the Directors consider that the acquisition represents a prime opportunity for the Group to leverage the expertise of the Group's management team and Mr. Lin's strong presence in the Fujian property market, and thus enhancing long-term growth potentials of the Group.

Jinan Zhangqiu project

On 23 August 2017, Fuzhou Shangsheng Investment Limited*（福州上盛投資 有限公司）, a wholly-owned subsidiary of the Company, and the sole shareholder of Zhangqiu Zhengda Tianyuan Development Limited* （章丘正大天源置業有限公司） ("ZQ Zhengda Tianyuan Development") entered into an agreement, pursuant to which Fuzhou Shangsheng Investment Limited* （福州上盛投資有限公司） conditionally agreed to acquire 80% of the issued share capital of ZQ Zhengda Tianyuan Development (the "Jinan Zhangqiu project"). ZQ Zhengda Tianyuan Development was incorporated in the PRC with limited liability in 2014. It is principally engaged in property development and has completed the development of three projects in Zhangqiu district of Jinan City with an aggregate area of 241,109 square metres. These projects involve the construction of relocation housings and other residential buildings in Zhangqiu district. All construction work of these projects has been completed. Subsequent to the announcement of the Fujian Pingtan project, the Board targets to further enhance its existing property development business by way of acquisition. The Board in substance aims at acquiring the land to increase its land bank in economically vibrant cities where the residential property markets are of promising prospects. The aforementioned land is located in Zhangqiu district of Jinan City and the Board is optimistic about the prospects of Jinan's residential property market.

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FINANCIAL INFORMATION OF THE GROUP

The Directors consider that the acquisition can enhance the long-term growth potentials of the Group leveraging on the expertise of the Group's management team and Mr. Lin's strong presence in the PRC property market.

Contingent liabilities

As at 31 December 2017, the group has issued guarantees to banks to secure the mortgage arrangement of property buyers. The outstanding guarantees to the banks amounted to $505,205,000 (2016: HK$Nil), which will be terminated upon the completion of the transfer procedures with the buyers in respect of the legal title of the properties.

The directors do not consider it probable that the 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 payment. The group has not recognised any deferred income in respect of these guarantees as its fair value is considered to be minimal by the directors.

Foreign exchange risk

The functional currency of the Company and its major subsidiaries is RMB, in which most of their transactions and assets are denominated. The Group has exposure to USD exchange risk arising from its bonds in an amount of US$135.0 million issued during the year. The Group has not taken any measures to hedge the foreign currency exposure currently but will monitor closely the situation and review such a need from time to time.

Review of Operations

In 2017, the real estate market continued to focus on the top 100 property enterprises under the macroeconomic control. The Chinese government proposed to accelerate the establishment of housing system such as "multi-agent supply", "multi-channel protection" and "lease/purchase option" so as to maintain the continuity and stability of the control policies imposed on the real estate market. The government has strived to perfect an effective mechanism to promote the steady and healthy development of the real estate market in the long run.

The Group's principal activities are property development and property investment. During the year under review, none of the Group's properties were leased out or sold and there was no progress in respect of the Group's Yifu Land development project in Shenyang. The Group will continue holding the investment properties for capital appreciation, and will actively seek commercial opportunities at the same time to lease out the investment properties or carry out cooperation so as to contribute income and cash flow to the Group as soon as possible. The Group will pay close attention to the changes in policies, economic environment and property market, actively vitalize the Group's assets to obtain

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

new financial resources by leveraging on the extensive experience and expertise of Sansheng Group in real estate sector, and participate in land auction or acquire quality land projects so as to achieve rapid growth in revenue and profitability.

Property Investment

Harbin property

In January 2018, a company in Harbin under the Group and a subsidiary of Gome Retail Holdings Limited (Formerly known as: Gome Electrical Appliances Holding Limited) entered into a leasing agreement in respect of the leasing out of the whole commercial property.

Qingdao property

The Group is still proactively negotiating with several merchants on the matter regarding the leasing of Qingdao property, and striving to enter into a leasing agreement in the near term with an expectation to raise the profit contribution from its investment properties to the Group.

Hong Kong property

The investment property portfolio of the Group comprises certain units of industrial building in Hong Kong. The Group is proactively considering leasing or selling those units of industrial building in Hong Kong

Property Development

The Yifu Land

The Yifu Land located in Shenyang is currently the Group's commercial property project under development. Based on the master layout plan submitted to the relevant planning bureau in 2013, the Group planned to develop a commercial complex with a three-level basement consisting of retail shops, offices, service apartments and car parking spaces with an aggregate gross floor area of approximately 186,065 square metres on the Yifu Land. Final approval for the master layout plan has not yet been obtained, mainly due to a number of issues which the Group and the government are still working together for a resolution. Notwithstanding the delay in getting final approval for the master layout plan, the Group has received acknowledgement from the relevant government department that the delay was not caused by the Group and therefore they will continue to provide assistance to the Group and work with other relevant authorities to resolve these problems.

On the other hand, the market research and consultancy company engaged by the Group has submitted a report expressing its recommendations and advice on the market and product positioning of the Yifu Land. The Board will take into account the recommendations from such consultancy company and communicate

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

with local government authorities on matters in respect of the target of the project plan and product types as soon as possible. The Board will also strive to obtain approvals on project adjustment and construction permits from the local government as soon as practicable.

Fujian Pingtan project and Jinan Zhangqiu project

The Group has obtained the Fujian Pingtan project and the Jinan Zhangqiu project through acquisition of 90% and 80% of the issued share capital of HK Zhong Sheng Property and ZQ Zhengda Tianyuan Development, respectively. The preliminary construction work of such projects has been progressing smoothly and the Group has filed the master layout plan thereof with the government.

Preliminary development plan of the Pingtan Land

The Company intended to develop the Pingtan Land (a parcel of land of approximately 75,500.41 sqm and a parcel of land of approximately 122,122 sqm, both located at Pingtan County, Fujian Province, the PRC) into a 3-phase project, including villas, high-rise residential towers, condominiums, and commercial and basement car park lots. It is expected that the three phases will be developed over a span of four to five years. The main potential buyers will be home buyers and locals residing around the Pingtan Area. Set out below is the preliminary development plan of the Pingtan Land, which is subject to adjustment based on results of detailed feasibility study to be conducted by the Company.

The phase one development will consist of villas, high-rise residential towers, basement car park lots and shops. The pre-sales of the townhouses will commence in mid-September 2018, covering a gross floor area of approximately 17,280 sqm and is expected to sell at approximately RMB20,000 per sqm. The pre-sales of the high-rise residential towers will commence in October 2018, covering an estimated gross floor area of high-rise residential towers of approximately 288,489 sqm and is expected to sell at approximately RMB15,000 per sqm. The estimated gross floor area of commercial area is 25,000 sqm and is expected to sell at approximately RMB20,000 per sqm.

The phase two development will consist of townhouses and high-rise residential towers. The pre-sales of the townhouses is expected to commence in the first quarter of 2020, covering an estimated gross floor area of approximately 33,638 sqm, and is expected to sell for approximately RMB24,000 per sqm. The estimated gross floor area of high-rise residential towers is approximately 69,050 sqm, and is expected to sell at approximately RMB17,500 per sqm. The phase three development wi l l consist of shops and condominiums. The pre-sales of the condominiums will commence in the beginning of 2021, covering an estimated gross floor area of approximately 44,000 sqm, and will be sold at an estimated sale price of RMB11,500 per sqm. The pre-sales of the shops will also commence in the beginning of 2022, covering an estimated gross floor area of approximately 15,200 sqm.

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FINANCIAL INFORMATION OF THE GROUP

The estimated capital commitment for the Pingtan Land is amounted to approximately RMB6.95 billion (equivalent to approximately HK$8.34 billion), which can be paid by stages according to the progress of the construction work. The Group intends to finance the capital commitment by way of internal resources (such as the revenue generated from the pre-sales of the projects) and/or the Revolving Facility.

The Company will be required to obtain a license for planning of construction projects （建設工程規劃許可證）; and construction permits （施工證） before the commencement of the construction and permits for pre-sales prior to the commencement of the pre-sale of the properties. Leveraging on the in-depth knowledge of the Board members in the property development market, the Board considers that there is no foreseeable difficulties in obtaining the aforementioned licenses.

Preliminary development plan of the Jinan Land

The Company intends to develop the Jinan Land (a parcel of land located in Zhangqiu district of Jinan City with an area of approximately 60,032 sqm for residential use) into multistory westernstyle houses and high-rise residential towers, basement car park lots, activity rooms, and underground storage units. The whole development is expected to comprise three phases to be developed over a span of three years. The main potential buyers are home buyers or locals residing around the Jinan Area. Set out below is the preliminary development plan of the Jinan Land, which is subject to adjustments based on the results of detailed feasibility study to be conducted by the Company.

The phase one development will consist of multistory western-style houses, basement car park lots and activity rooms. The pre-sales of the multistory western-style houses will commence in May 2019, covering an estimated gross floor area of approximately 15,500 sqm, and will be sold at an estimated sale price of RMB19,000 per sqm. The phase two development will consist of high-rise residential towers and basement car park lots. The pre-sales of the high-rise residential towers will commence in October 2019, covering an estimated gross floor area of approximately 39,700 sqm, and will be sold at an estimated sale price of RMB18,500 per sqm.

The phase three development will consist of high-rise residential towers of

33 storeys. The pre-sales of high-rise residential towers will commence in May 2020, covering an estimated gross floor area of high-rise residential towers of 95,000 sqm, and will be sold at an estimated sale price of RMB18,000 per sqm. The pre-sales of the basement car park lots and activity rooms is expected to commence in May 2020, covering an estimated gross floor area of approximately 55,000 sqm, and will be sold at an estimated sale price of RMB8,500 per sqm. The general plan for the construction of the project has been approved by relevant departments. The site leveling and geological survey work has been completed on the project site. The estimated capital commitment for the Jinan Land is expected to be amounted to approximately RMB2.97 billion (equivalent to approximately

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FINANCIAL INFORMATION OF THE GROUP

HK$3.564 billion). The Group intends to finance the capital commitment by the internal resources (including but not limited to revenue generated from the pre-sales of the projects) and/or the Revolving Facility.

The Company will be required to obtain license for planning of construction projects and construction permits before the commencement of the construction and permits for pre-sales prior to the commencement of the pre-sale of the properties. Leveraging on the Board's experience, expertise and in-depth knowledge of the property development market in the PRC, the Board is of the view that there is not any foreseeable difficulties in obtaining the aforementioned licenses.

Land Bank

In 2017, the Group acquired 2 parcels of land. The newly acquired land has a total site area of 257,654.41 square metres and a total gross floor area of 830,191.16 square metres, with an average land cost amounting to approximately RMB3,309.37 (excluding underground area). As of 31 December 2017, save for the undeveloped commercial land with a site area of 31,376 square metres and the acquired undeveloped land with a total site area of 257,654.41 square metres, the Group's land bank has a total gross floor area of approximately 830,191.16 square metres.

Outlook and Plan

Capitalizing on Sansheng Group's brand, capital, professional experience and its excellent workforce, the Group has been actively acquiring quality land for its land bank resources by adhering to its principle of focusing on acquisitions as well as cooperation, and being supported by the participation in public land auctions. Meanwhile, the Group will pursue industrial and real estate integration in order to attain significant enhancement on the number and quality of land acquired.

The JV Company established by the Group and Fuzhou Sansheng during the year will provide a new platform for the Group to integrate their resources, capabilities and industry expertise, so as to focus on the development of property development business in the PRC. Following its establishment, the JV Company will participate in residential and commercial property development projects located in economically vibrant cities.

All the properties invested in and held by the Group are commercial properties. In order to enhance the returns from the properties and its capitalization, the Group will from time to time review its property portfolio and make every endeavour to increase its rental income. Over the past 30 years, given the rapid urbanization and continual increase in average income per capita brought by the significant economic growth in the PRC, the real estate market has become more maturely developed. The Group believes that the development of such

- I-29 -

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

business will further drive the growth of the Groups in view of the promising residential property market in the PRC. Furthermore, more diversified property portfolio can alleviate the Group's reliance on commercial properties.

In the coming year, it is believed that lingering uncertainties in macroscopic policies in respect of the real estate industry promulgated by the government and ever-changing economic environment may give rise to various performances in different real estate market. However, we believe that long-term fundamental factors that fuel the growth in PRC's property market will remain unchanged. Accordingly, in order to develop the PRC's property market, the Group will closely monitor the changes in market conditions and governmental policies, input resources for deeper research and business development, and look for appropriate opportunities through careful selection of investment choices. Riding steadfastly on strategic geographical layout, building of excellent and highly efficient workforce, and development of sophisticated products and quality services, the Group maintains its competitiveness and promising prospect with an expectation to become a leading real estate developer in the PRC with excellent operational efficiency and profitability in the near future.

Employees

As at 31 December 2017, the Group employed a total of 22 employees, 19 of them were based in Mainland China. Staff costs (excluding directors' emoluments) for the year ended 31 December 2017 amounted to approximately HK$12.2 million (2016: HK$17.1 million). The Group ensures that the pay levels of its employees are competitive and in line with the market trend and its employees are rewarded on a performance related basis within the general framework of the Group's salary and bonus system.

IV. FOR THE YEAR ENDED 31 DECEMBER 2016

Financial Review

Turnover

As the Group's investment properties remained vacant throughout the year, no turnover was recorded for the year ended 31 December 2016. However, the Group's main income source during the year continued to be deriving from the provisioning of project management services which is accounted for as other income.

Loss/Profit for the Year Attributable to Owners of the Company

Loss for the year attributable to owners of the Company amounted to approximately HK$31.0 million as comparing to a profit of approximately HK$17.2 million in the previous year. During the year, the Group's investment properties continued to remain vacant and did not generate any rental income and the Group's main income source continued to rely on interest income from its

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

bank deposits and project management services fee from its parent company, Lifestyle International Holdings Limited, before July 2016 and a related company, Lifestyle China Group, after July 2016.

The turnaround from last year's profit to loss this year was mainly caused by the provision for impairment in the amount of approximately HK$29.1 million in respect of the Group's 10% unlisted equity investment in the PRC, coupled by expensing, rather than capitalizing as properties under development during the year, the amortised prepaid lease payments of HK$8.4 million with respect to the Yifu Land.

Operating Expenses

Operating expenses comprised mainly property related expenses and tax, utilities charges, legal and professional fees and rental expenses. The higher operating expenses this year was due mainly to a donation of RMB3.0 million (approximately HK$3.5 million) made to the Harbin local government.

Other Income, Gains and Losses

These mainly comprised bank interest income and project management services income and net exchange gain. While project management services income remained relatively stable during the year, the increase in other income, gains and losses was attributable to higher exchange gain recorded primarily from translating HKD/USD denominated bank balances to Renminbi, the Company's functional currency, which depreciated for more than 5% during the year. This higher exchange gain however was partly offset by a drop in bank interest income as deposit rates for HKD/USD were much lower than deposit rates for Renminbi in which the Group's bank balances was denominated for most part of last year before they were converted into USD in the second half of last year.

Staff Costs

Staff costs for the year increased 10.7% to approximately HK$20.9 million which was mainly due to an increase in director's emolument following the appointment of an additional executive director in March 2016.

Depreciation and Amortisation

The significant increase during the year was a result of charging to the profit and loss account of the amortised prepaid lease payments of HK$8.4 million in respect of the Group's Yifu Land. The same has been capitalized in the past as part of the properties under development. The change in accounting treatment was due to the fact that there has been a long delay in getting approval from the relevant government authorities in respect of the master layout plan and hence prolonged construction work postponement is anticipated.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Financial Investments and Net Investment Loss

The Group recorded during the year an aggregate investment loss of approximately HK$32.2 million which mainly comprised (i) mark-to market unrealized loss of HK$3.6 million on the Group's listed financial assets; and (ii) provision for impairment in respect of the Group's 10% unlisted equity investment in Shenyang Jiajian Property Development Company Limited ("Jiajian"), amounting to approximately HK$29.1 million.

As part of the Group's cash management with an aim to enhance the yield on the cash, the Group started during the year building a small investment portfolio consisting of Hong Kong listed equity securities and as at 31 December 2016, the market value of the investment portfolio was approximately HK$91.2 million.

The financial position of Jiajian, in which the Group has been maintaining

10% interest, has been deteriorating in recent years amid the oversupply situation in the commercial property sector in Shenyang. Management is of the view that the operation and financial position of Jiajian is unlikely to turn any better in the foreseeable future and it would be appropriate and prudent to make full impairment provision for this investment.

Fair Value Changes on Investment Properties

The unrealised fair value loss of HK$0.9 million was from the Group's investment properties situated in Hong Kong, whereas it was an unrealized fair value gain of HK$3.0 million in 2015.

Liquidity and Financial Resources

As at 31 December 2016, the Group was debt free and had no contracted financial instrument. Fixed deposits and cash and bank balances amounted to approximately HK$414.7 million (2015: HK$533.0 million), of which approximately 86% were held at banks in Hong Kong (2015: 88%) and the remaining approximately 14% were deposited with banks in the PRC (2015: 12%). Approximately 16% of the bank balances are denominated in RMB and the remaining are in USD and HKD. As mentioned above, as part of the Group's cash management, certain cash has been used for purchase of listed equity securities which was worth approximately HK$91.2 million at 31 December 2016. The Group did not have any banking facilities available at 31 December 2016 (2015: nil) but will make appropriate banking facility arrangements when required.

Pledge of Assets

At 31 December 2016, none of the Group's assets was pledged (2015: none).

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Capital Expenditure

Capital expenditure incurred by the Group for the year ended 31 December 2016 amounted to approximately HK$2.3 million, primarily relating to site preparatory work in respect of the Yifu Land in Shenyang (2015: HK$9.2 million).

Material Acquisition, Disposal and Significant Events

The Group did not have any material acquisition, disposal or significant event during the year ended 31 December 2016.

Contingent Liabilities

The Group did not have any material contingent liabilities as at 31 December 2016 (2015: nil).

Foreign Exchange Risk

The functional currency of the Company and its major subsidiaries is RMB in which most of their transactions and assets are denominated. The Group does not have significant foreign currency transactions which may expose the Group to foreign currency risk, apart from holding certain bank balances and payment of certain administrative expenses which are denominated in USD and HKD. The Group has not taken any measures to hedge the foreign currency exposure but will monitor closely the situation and review from time to time such a need.

Review of Operations

The Group's principal activities are property development and property investment. During the year under review, none of the Group's properties were leased out or sold and that there was no progress in respect of the Group's Yifu Land development project in Shenyang.

Leveraging the management team's extensive experience in property development and project management, the Group continued to provide project management services to connected parties during the year. These services are charged on a cost-plus basis and constitute continuing connected transaction for the Group.

Property Investment

The Group's portfolio of investment properties includes certain office units/ workshops and a car park space in Hong Kong and two retail properties each in Harbin and Qingdao in mainland China. During the year, no offers received by the Group for renting or buying of the Group's investment properties were attractive enough, both in terms of the price/rental as well as the amount of space they are willing to lease, and hence the properties have been left vacant throughout the

- I-33 -

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

year. While the Group's priority is still to look for buyers for disposing of these investment properties, the Group may consider leasing them out for rental income should attractive offers arise.

Property Development

The Group's only project under development is still the Yifu Land project in Shenyang and the Group has not secured new project for development purpose during the year. Based on the master layout plan ("MLP") the Group submitted to the relevant Planning Bureau in 2013, the plan was to develop a commercial complex with a three-level basement consisting of retail shops, offices, serviced apartment and car parking spaces on this Yifu Land. Final approval for the MLP has not yet been obtained due to a number of issues which the Group and the local government are still working together for a resolution. Notwithstanding the delay in getting approval for the MLP, the Group has received acknowledgement from the District Government Office that they understand the delay was not caused by the Group and therefore they will continue to lend assistance to the Group and work with other relevant authorities to resolve the problem. Accordingly, the Group will continue to work closely with the relevant government authorities to getting the necessary approvals and permits for commencing construction work. In view of the complexity of the issues involved, there is no guarantee as to the time required to resolve the issues. On the other hand, in view of the change of the competitive landscape in the commercial/retail property market in Shenyang, the Group will take into account the then market conditions and will evaluate again the cost and return on this project before incurring significant development costs. During the year, there was minimal preparation/ development works being carried out on the site as a result.

Outlook and Plan

In view of the prolonged delay in getting the relevant approval for the MLP for starting the construction work with respect to the Yifu Land, the Group is not under pressure to raising cash for funding the construction works and therefore it may take its time in terms of monetarizing its investment properties on hand. The Group however will continue to look for buyers or tenants so as to maximize to the extent possible returns on these properties. At the same time, the Group will continue utilising its human capital in providing project management services to Lifestyle China Group for generating stable income and cash flow to the Group.

While the Group will continue to look for new business opportunities, given the uncertainties in the overall economy and property market in both mainland China and Hong Kong, the Group will remain cautious in terms of seeking expansion or acquisition opportunities.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Employees

As at 31 December 2016, the Group employed a total 42 employees, 37 of them were based in mainland China. Staff costs (excluding directors' emoluments) for the year ended 31 December 2016 amounted to approximately HK$17.0 million (2015: HK$16.2 million). The Group ensures that the pay levels of its employees are competitive and in line with the market trend and its employees are rewarded on a performance related basis within the general framework of the Group's salary and bonus system.

3. INDEBTEDNESS STATEMENT

As at the close of business on 30 September 2019, 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 loans from financial institutions
Short-term loans - secured	1,311,700
Long-term loans - secured	6,291,989
	7,603,689
Loans from a related party
- unsecured	2,159,970
Bond payable
- secured	1,081,655
- unsecured	188,696
	1,270,351

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 30 September 2019, the Enlarged Group has lease liabilities with outstanding principal amount of approximately RMB4,826,000.

Save as aforementioned and apart from intra-group liabilities, as at the close of business on 30 September 2019, the Enlarged Group did not have any other outstanding borrowings, loan capital issued and outstanding or agreed to be issued, bank overdrafts,

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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.

4. WORKING CAPITAL

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

5. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2018, being the date to which the latest published audited consolidated financial statements of the Group were made up.

6. FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

The Group is principally engaged in property development and sale, and property investment. As disclosed in the interim report for the six months period ended 30 June 2019, the Group has obtained a quality project through acquisition, which has contributed to its land bank and has laid a cornerstone for its property development business in the future. Riding on the substantial experience and professionalism of Sansheng Group Limited which is controlled by Mr. Lin and Ms. Cheng, and adhering to the aim of developing high quality residential products and services to customers, the Group has won market recognition and achieved its performance target. The Group will closely monitor the changes in macroeconomic policies of the China's real estate industry, accelerate the innovation, actively adjust the strategic plan and achieve the development targets with its competitive strengths. The Group intends to actively explore possible business opportunities and strive for a sustainable development while enlarging the income from the existing investment properties, and to conduct more land acquisitions, especially to maintain sufficient land bank in the PRC market.

In 2019, the Group acquired additional land parcels by bid, auction and listing or directly from Independent Third Parties and the Acquisition will allow the Group to leverage on Mr. Lin's experience and network in the property market in the PRC, in particular the Fujian Province. It is expected that the Acquisition will further expand its reserve of new high-quality land bank and will further strengthen its revenue stream given certain property projects developed by the Project Companies are expected to complete by the end of 2019.

Following the Completion, the Group will continue to be principally engaged in the business of property development and sale, 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-36 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

The following is the text of a report set out on pages II-1 to II-58, received from the Company's reporting accountants, KPMG, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular.

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

Introduction

We report on the historical financial information of Time Fortune Investments Limited (the "Target Company") and its subsidiaries (together, the "Target Group") set out on pages II-4 to II-58, which comprises the combined statements of financial position of the Target Group as at 31 December 2016, 2017 and 2018 and 31 May 2019, 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 2016, 2017 and 2018 and the five months ended 31 May 2019 (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-58 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 November 2019 (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.

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

- II-1 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

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 2016, 2017 and 2018 and 31 May 2019 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 five months ended 31 May 2018 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 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

- II-2 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

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 November 2019

- 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)

										Five months ended
		Year ended 31 December	31		May
	note	2016			2017	2018		2018		2019
		RMB'000	RMB'000	RMB'000		RMB'000		RMB'000
									(unaudited)
Revenue	4	221,130			1,174,743		1,177,959		268,341		39,770
Cost of sales		(196,752)	(868,558)	(851,995)	(117,866)	(13,771)
Gross profit		24,378			306,185		325,964			150,475			25,999
Net valuation gain on
investment property	10	-	9,556		11,509			-	422
Other income/(loss)	5	1,820			660		(11,922)	(1,799)	25,585
Selling and marketing expenses		(41,439)	(73,143)	(106,107)	(26,468)	(32,902)
Administrative expenses		(17,796)	(34,881)	(42,586)	(9,121)	(13,951)
(Loss)/profit from operations
	(33,037)	208,377		176,858		113,087		5,153
Finance costs	6(a)	(3,996)	-	-		-		-
(Loss)/profit before taxation
6	(37,033)	208,377		176,858		113,087		5,153
Income tax	7	5,251			(127,377)	(156,326)	(77,474)	(9,336)
(Loss)/profit and total
comprehensive income for
the year/period		(31,782)	81,000		20,532		35,613		(4,183)
Attributable to:
Equity shareholders of the
Target Company		(31,782)	81,000		20,532		35,613		(3,970)
Non-controlling interests		-	-	-		-	(213)
(Loss)/profit and total
comprehensive income for
the year/period		(31,782)	81,000		20,532		35,613		(4,183)

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 May
	note	2016		2017		2018		2019
		RMB'000	RMB'000	RMB'000	RMB'000
Non-current assets
Investment properties	10	-	71,000		114,000		137,000
Property, plant and equipment	11	445,040		443,452		461,958		487,413
Deferred tax assets	21(b)	27,563		27,316		57,104		61,122
		472,603		541,768		633,062		685,535
		------------	------------	------------	------------
Current assets
Inventories and other contract
costs	13	4,182,616		6,139,848		7,416,319		7,885,243
Other receivables	14	332,227		465,084		854,974		1,403,903
Financial assets at fair value
through profit or loss	15	-	2,821		5,273		11,102
Restricted deposits	16	3,676		1,438,430		193,068		151,651
Cash and cash equivalents	17	59,303		327,162		143,449		151,096
		4,577,822		8,373,345		8,613,083		9,602,995
		------------	------------	------------	------------
Current liabilities
Bank loans and borrowings from
financial institutions	18	249,201		1,983,123		2,123,701		2,196,501
Trade and other payables	19	1,832,125		1,289,895		1,979,893		2,038,197
Contract liabilities	20	1,393,966		2,174,701		3,571,716		4,374,602
Current taxation	21(a)	19,985		154,423		334,319		343,449
		3,495,277		5,602,142		8,009,629		8,952,749
		------------		------------		------------		------------
		--------
Net current assets		1,082,545		2,771,203		603,454		650,246
		------------		------------		------------		------------
		--------
Total assets less current
liabilities		1,555,148		3,312,971		1,236,516		1,335,781
		------------	------------	------------	------------

- II-6 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

										As at
		As at 31 December			31 May
	note	2016		2017		2018	2019
		RMB'000	RMB'000	RMB'000			RMB'000
Non-current liabilities
Bank loans and borrowings from
financial institutions	18	1,600,000		3,222,090		1,115,989		1,214,988
Deferred tax liabilities	21(b)	1,375		6,108		13,595			18,044
		1,601,375		3,228,198		1,129,584		1,233,032
		------------		------------		------------		------------
		--------
Net (liabilities)/assets		(46,227)	84,773		106,932		102,749
Capital and reserves
Share capital	22	30,000		80,000		80,000		30,000
Reserves		(76,227)	4,773		25,305		71,335
Total equity attributable to
equity shareholders of the
Target Company		(46,227)	84,773		105,305		101,335
Non-controlling interests
	-		-		1,627			1,414
Total equity		(46,227)	84,773		106,932		102,749

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

								(Accumulated
										losses)/				Non-
			Share			Statutory			retained			controlling	Total
			capital			reserve			profits	Total		interests	equity
			RMB'000			RMB'000			RMB'000	RMB'000		RMB'000	RMB'000
	(note 22(a))	(note 22(d))
Balance at 1 January 2016	30,000				-	(44,445)	(14,445)		-	(14,445)
Change in equity for 2016:
Loss and total comprehensive
income for the year			-			-	(31,782)	(31,782)		-	(31,782)
Balance at 31 December 2016
and 1 January 2017	30,000				-	(76,227)	(46,227)		-	(46,227)
	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -	- - - - - - - - - -	- - - - - - - - - -
Changes in equity for 2017:
Profit and total comprehensive
income for the year			-			-	81,000		81,000			-	81,000
Appropriation to statutory
reserves			-	12,729	(12,729)	-		-	-
Capital injection (note 22(a))	50,000				-			-	50,000			-	50,000
Balance at 31 December 2017
and 1 January 2018	80,000		12,729	(7,956)	84,773			-	84,773
	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -	- - - - - - - - - -	- - - - - - - - - -
Changes in equity for 2018:
Profit and total comprehensive
income for the year			-			-	20,532		20,532			-	20,532
Appropriation to statutory
reserves			-	16,145	(16,145)	-		-	-
Acquisition of a subsidiary			-				-			-		-			1,627		1,627
Balance at 31 December 2018	80,000		28,874	(3,569)	105,305		1,627		106,932

- II-8 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Attributable to equity shareholders

of the Target Company

							(Accumulated
									losses)/				Non-
		Share	Capital		Statutory	retained			controlling	Total
		capital	reserve		reserve	profits	Total		interests	equity
		RMB'000	RMB'000		RMB'000	RMB'000	RMB'000		RMB'000	RMB'000
	(note 22(a))			(note 22(d))
Balance at 1 January
2018	80,000		-	12,729		(7,956)	84,773			-	84,773
	- - - - - - - - -	- - - - - - - - -	- - - - - - - - -	- - - - - - - - -	- - - - - - - - -	- - - - - - - - -	- - - - - - - - -
Changes in equity for
the five months ended
31 May 2018:
Profit and total
comprehensive income
for the period		-	-		-	35,613		35,613			-	35,613
Appropriation to statutory
reserves		-	-	4,937		(4,937)	-		-	-
Balance at 31 May 2018
(unaudited)	80,000		-	17,666		22,720		120,386			-	120,386
Balance at 1 January
2019	80,000		-	28,874		(3,569)	105,305		1,627		106,932
	- - - - - - - - -	- - - - - - - - -	- - - - - - - - -	- - - - - - - - -	- - - - - - - - -	- - - - - - - - -	- - - - - - - - -
Changes in equity for
the five months ended
31 May 2019:
Loss and total
comprehensive income
for the period		-	-		-	(3,970)	(3,970)	(213)	(4,183)
Effect on acquisition of
equity interest in a
subsidiary (note 22(a))		(50,000)	50,000			-	-	-		-	-
Balance at 31 May 2019
	30,000		50,000			28,874		(7,539)	101,335		1,414		102,749

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)

								Five months ended
			Year ended 31 December	31		May
	note	2016	2017	2018	2018		2019
			RMB'000	RMB'000	RMB'000		RMB'000		RMB'000
							(unaudited)
Operating activities
Cash generated from/(used in)
operations	17(b)	267,129		70,967	887,211	(392,612)	72,209
Income tax paid		(41,111)	(102,637)	(133,379)	(22,780)	(54,816)
Net cash generated from/(used
in) operating activities		226,018		(31,670)	753,832	(415,392)	17,393
		- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Investing activities
Payment for the purchase of
property, plant and equipment		(17,822)	(10,535)	(25,787)	(3,953)	(28,987)
Payment for acquisition of
additional interest in a joint
operation	12(b)		-	(102,130)	-		-		-
Withdrawal of wealth
management product		17,374		-	-		-		-
Placement of financial assets at
fair value through profit or loss			-	(2,346)	(4,652)	(4,652)	(6,450)
Withdrawal of financial assets at

fair value through profit or loss Interest received

Net cash used in investing activities

Financing activities

-		-	2,200			-	621
129			689			444			41			200
(319)	(114,322)	(27,795)	(8,564)	(34,616)
- - - - - - - - - -	- - - - - - - - - -	- - - - - - - - - -	- - - - - - - - - -	- - - - - - - - - -

Capital element of lease rentals
paid	17(c)	(2,495)	(2,995)	(2,995)	(1,248)	(1,248)
Proceeds from bank loans and
borrowings from financial
institutions	17(c)	2,190,135		3,661,265		572,600		926,430		1,045,000
Repayment of bank loans and
borrowings from financial
institutions	17(c)	(2,202,157)	(1,609,700)	(2,588,123)	(1,951,932)	(923,201)
Placement of restricted deposits			-	(1,719,933)		-		-		-
Withdrawal of restricted deposits			-	285,953		1,433,980		1,433,980			-
Capital injections from
shareholders		20,000		50,000			-		-		-
Interest and other borrowing cost
paid	17(c)	(220,022)	(250,739)	(325,212)	(106,746)	(95,681)
Net cash (used in)/generated
from financing activities		(214,539)	413,851		(909,750)	300,484		24,870
		- - - - - - - - -		- - - - - - - - -		- - - - - - - - -		- - - - - - - - -		- - - - - - - - -
		------------------------------------------------------------------------		------------------------------------		------------------------------------		------------------------------------
Net increase/(decrease) in cash
and cash equivalents		11,160		267,859		(183,713)	(123,472)	7,647
Cash and cash equivalents at 1
January		48,143		59,303		327,162		327,162		143,449
Cash and cash equivalents at 31
December/31 May	17(a)	59,303		327,162		143,449		203,690		151,096

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 27 September 2019 (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 Time Fortune Investments 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 31 May 2019 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 and sales of commercial properties and residential properties 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 four domestic project companies established in the PRC, namely Fujian Shengchuang Real Estate Development Co., Ltd., Fuzhou Hongsheng Real Estate Development Co., Ltd., Zhangzhou Deyousheng Real Estate Development Co., Ltd. and Fujian Tianren Real Estate Development Co., Ltd., all of 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 on 30 September 2019, the Target Company became 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 2016, 2017 and 2018 and 31 May 2019 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

Upon completion of the Reorganisation and as at the date of this report, the Target Company has 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 Zhen Company Limited	17 July 2019	HKD100/HKD100	100%	-	Investment	(a)
（盛瑧有限公司）	Hong Kong				holding
Fuzhou Shengzhen Investment	8 August 2019	RMB250,000,000/	-	100%	Investment	(a)
Co., Ltd.**（福州盛臻投資有限公	Fuzhou	RMBNil			holding
司）
Fujian Shengchuang Real Estate	22 November 2013	RMB10,526,300/	-	95%	Real estate	(c)
Development Co., Ltd.**（福建盛	Fuzhou	RMB10,000,000			development
創房地產開發有限公司）("Fujian
Shengchuang")
Fujian Tianren Real Estate	25 May 2017	RMB20,000,000/	-	90%	Real estate	(b)
Development Co., Ltd.**（福建天	Ningde	RMBNil			development
壬房地產開發有限公司）("Fujian
Tianren")
Fuzhou Shengchun Investment	11 December 2018	RMB10,000,000/	-	100%*	Investment	(b)
Co., Ltd.**（福州盛淳投資有限公	Fuzhou	RMBNil			holding
司）("Fuzhou Shengchun")
Fuzhou Hongsheng Real Estate	17 November 2016	RMB50,000,000/	-	100%	Real estate	(c)
Development Co., Ltd.**（福州宏	Fuzhou	RMB50,000,000			development
盛房地產開發有限公司）("Fuzhou
Hongsheng")
Fuzhou Great Stone Investment	12 December 2018	RMB10,000,000/	-	100%	Investment	(a)
Limited**（福州盛石投資有限公司）	Fuzhou	RMBNil			holding
Fuzhou Shengxin Investment	18 April 2019	RMB10,000,000/	-	100%	Investment	(a)
Limited**（福州盛信投資有限公司）	Fuzhou	RMBNil			holding
Chengdu Xinshenghe Property	13 May 2019	RMB10,000,000/	-	100%	Real estate	(a)
Development Limited**（成都欣	Chengdu	RMBNil			development
盛和房地產開發有限公司）
Fuzhou Shengde Investment	20 May 2019	RMB10,000,000/	-	100%	Investment	(a)
Limited**（福州盛德投資有限公司）	Fuzhou	RMBNil			holding
Xiamen Shengchuang Property	23 May 2019	RMB100,000,000/	-	100%	Real estate	(a)
Limited**（廈門盛創置業有限公司）	Xiamen	RMBNil			development
Fujian Ningsheng Property	28 May 2019	RMB10,000,000/	-	100%	Real estate	(a)
Development Limited**（福建寧	Ningde	RMBNil			development
盛房地產開發有限公司）
Fuzhou Shengkang Investment	25 April 2019	RMB10,000,000/	-	100%	Investment	(a)
Limited**（福州盛康投資有限公司）	Fuzhou	RMBNil			holding
Fuzhou Shengting Investment	30 May 2019	RMB10,000,000/	-	100%	Investment	(a)
Limited**（福州盛庭投資有限公司）	Fuzhou	RMBNil			holding
Qingdao Shengchuang Investment	27 June 2019	RMB100,000,000/	-	100%	Investment	(a)
Limited**（青島盛創投資有限公司）	Qingdao	RMBNil			holding
Chengdu Xiangshenghe Property	27 June 2019	RMB10,000,000/	-	100%	Real estate	(a)
Development Limited**（成都祥	Chengdu	RMBNil			development
盛和房地產開發有限公司）
Qingdao Shengbin Investment	26 July 2019	RMB100,000,000/	-	100%	Investment	(a)
Limited**（青島盛濱投資有限公司）	Qingdao	RMBNil			holding
Fujian Dasheng Property	10 July 2019	RMB10,000,000/	-	100%	Real estate	(a)
Development Limited**（福建達	Ningde	RMBNil			development
盛房地產開發有限公司）
Xiamen Sansheng Real Estate	28 April 2014	RMB150,000,000/	-	100%	Investment	(b)
Co., Ltd.**（廈門三盛置業有限公	Xiamen	RMB20,000,000			holding
司）("Xiamen Sansheng")
Shanghai Shengqiu Industrial	26 July 2019	RMB1,000,000/	-	100%	Real estate	(a)
Development Co., Ltd.**（上海盛	Shanghai	RMBNil			development
丘實業發展有限公司）

- II-12 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

• Pursuant to certain contractual arrangements, Yiwu Chunchun Investment Management Partnership (Limited Partnership)**（義烏淳醇投資管理合夥企業（有限合夥））("Yiwu Chunchun"), an independent third party, holds 20% of ownership interests in Fuzhou Shengchun which is subject to a guaranteed return from this shareholdings and shall be purchased by Fujian Shengchuang upon the end of the investment period. As such, the investment in Fuzhou Shengchun by Yiwu Chunchun is treated as a debt and no non-controlling interest with respect to the independent third party is accounted for.
  Notes:
• 1. 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.
  2. 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.
  3. The statutory auditors of these entities are Fujian Junzheng Certified Public Accountants Co., Ltd.** （福建鈞正會計師事務所有限公司）during the Relevant Periods.
• 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 adopted all applicable new and revised HKFRSs that are effective for the financial year beginning on 1 January 2019 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 2019 which the Target Group has not early adopted are set out in note 29.

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.

2 Significant accounting policies

1. 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.

- II-13 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

The functional currency of the Target Company is Hong Kong dollar ("HKD"). The Historical Financial Information presented in RMB have been rounded to the nearest thousand, unless otherwise indicated.

1. 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.

1. Interests in other entities
2. 1. Subsidiaries and non-controlling interests

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.

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 statement 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.

- II-14 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

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.

1. Joint operations

Joint operations are joint arrangements in which the parties with joint control have rights to the assets and obligations for the liabilities relating to the arrangement. The activities of a joint operations are primarily designed for the provision of output to the parties to the arrangement, indicating that:

• the parties have the rights to substantially all the economic benefits of the assets of the arrangement; and
• all liabilities are satisfied by the joint participants through their purchase of that output. This indicates that, in substance, the joint participants have an obligation for the liabilities of the arrangement.

The Historical Financial Information of the Target Group include its share of the assets in joint operations, together with its share of the liabilities, revenues and expenses arising jointly or otherwise form those operations and its revenue derived from the sales of its share of output from the joint operation. All such amounts are measured in accordance with the terms of each arrangement, which are usually in proportion to the Group's interest in the joint operation.

1. 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).

1. Property, plant and equipment

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

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:

-	Leasehold improvements	3 years
-	Other properties leased for own use	2-3	years
-	Equipment and motor vehicles	3-5	years

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

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)). 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.

1. 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.

1. 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-useassets that meet the definition of investment property are carried at fair value in accordance with note 2(d); and
• right-of-useassets 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 in "trade and other payables".

1. 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.

1. Credit losses and impairment of assets
2. 1. 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-ratefinancial assets, trade and other receivables: effective interest rate determined at initial recognition or an approximation thereof;
• variable-ratefinancial 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-monthECLs: 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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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

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.

1. 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).

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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.

1. 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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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

1. Inventories and other contract costs
2. 1. 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 sale and under development for sale
  The cost of properties 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.

1. 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.

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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).

1. 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)).

1. 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)).

1. Interest-bearingborrowings

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.

1. 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.

1. 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).

1. 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.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

1. 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.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

1. 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.

1. 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:

1. 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)).

When residential and commercial properties are marketed by the Target Group while the property is still under construction, the Target Group may offer a discount compared to the listed sales price, provided the customer agrees to pay the balance of the consideration early. In such cases, if the advance payments 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 properties to the customers. 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

1. 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. Contingent rentals are recognised as income in the accounting period in which they are earned.

1. 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)).

1. 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.

1. Related parties
2. 1. A person, or a close member of that person's family, is related to the Target Group if that person:
   2. 1. has control or joint control over the Target Group;
      2. has significant influence over the Target Group; or
      3. is a member of the key management personnel of the Target Group or the Target Group's parent.
   3. An entity is related to the Target Group if any of the following conditions applies:
   4. 1. 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).
      2. 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).
      3. Both entities are joint ventures of the same third party.
      4. One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
      5. 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.
      6. The entity is controlled or jointly controlled by a person identified in (a).
      7. 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).

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

1. 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.

1. 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 and sales of commercial properties and residential properties 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

1. 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.

1. Sources of estimation uncertainty

Notes 10 and 23 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:

1. 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

- II-26 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

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.

1. 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 31 December 2017, 2018 and 31 May 2019 were arrived at based on income approach.

At 31 December 2017, 2018 and 31 May 2019, the carrying amount of the Target Group's investment properties are disclosed in note 10. By relying on the valuation reports of the 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.

1. Inventories

As explained in note 2(h), the Target Group's land held for future development, properties under development and completed properties held for sale 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.

							Five months ended
	Year ended 31 December	31 May
	2016		2017	2018		2018	2019
	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	221,130		1,172,902		1,173,787		267,167		37,039
Revenue from other sources
- Gross rentals from investment
properties	-	1,841		4,172		1,174		2,731
	221,130		1,174,743		1,177,959		268,341		39,770

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 2016, 2017 and 2018 and 31 May 2019.

								As at
		Year ended 31 December	31 May
		2016	2017		2018	2019
		RMB'000	RMB'000	RMB'000	RMB'000
Remaining performance obligations expected
to be satisfied:
Within 1	year	1,077,677		872,771		1,809,672		1,836,965
Within 1	year to 2 years	667,075		1,270,416		1,986,773		2,347,716
Within 2	years to 3 years	-	381,886		353,540		375,053
		1,744,752		2,525,073		4,149,985		4,559,734

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/(loss)
								Five months ended
		Year ended 31 December	31 May
		2016		2017	2018		2018	2019
		RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
								(unaudited)
	Interest income	129		689		444		41		200
	Investment income	744		-	-	-	-
	Forfeited deposits from customers	913		1,622		7,001		1,144		25,161
	Compensation to customers*	(71)	(1,729)	(15,036)	-	-
	Donation	-	-	(4,143)	(3,003)	(50)
	Others	105		78		(188)	19		274
		1,820		660		(11,922)	(1,799)	25,585

• The amounts mainly represented the compensations to customers in respect of delay in application of property right certificates for them.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

6 (Loss)/profit before taxation

(Loss)/profit before taxation is arrived at after charging:

(a) Finance costs
								Five months ended
	Year ended 31 December		31 May
	2016		2017	2018		2018	2019
	RMB'000	RMB'000	RMB'000		RMB'000	RMB'000
							(unaudited)
Interest on borrowings (note 17(c))	218,686		263,766		326,053		122,421		112,919
Interest accrued on receipts in
advance from property sales
(note 20)	79,408		138,602		123,296		24,160		53,472
Less: interest expenses capitalised
into inventories*	(294,098)	(402,368)	(449,349)	(146,581)	(166,391)
	3,996		-		-			-		-

1. • The borrowing costs have been capitalised at a rate of 8.00%~16.00%, 7.00%~8.55% and 7.00%~10.50% per annum for each of the years ended 31 December 2016, 2017 and 2018, and 7.00%~8.55% and 8.13%~9.10% per annum for each of the five months ended 31 May 2018 and 2019, respectively.
2. Staff costs

							Five months ended
	Year ended 31 December	31 May
	2016		2017	2018		2018	2019
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
							(unaudited)
Salaries, wages and other benefits	28,447		36,544		48,281		15,419		20,836
Contributions to defined contribution
retirement plans	1,915		2,311		3,194		609		1,596
	30,362		38,855		51,475		16,028		22,432

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.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

(c) Other items
				Five months ended
	Year ended 31 December	31 May
	2016	2017	2018	2018	2019
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
				(unaudited)
Depreciation charge
- owned property, plant and
equipment	6,671	9,208	10,152	3,552	2,284
- right-of-use assets	2,749	3,079	2,995	1,248	1,248
Expense relating to short-term leases	-	24	144	60	60
Cost of inventories	196,752	868,558	851,995	117,866	13,771
Auditor's remuneration	29	19	39	16	-

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

1. Taxation in the combined statements of profit or loss and other comprehensive income represents:

								Five months ended
	Year ended 31 December	31 May
	2016			2017	2018		2018	2019
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
								(unaudited)
Current tax
Provision for PRC Corporate Income
Tax ("CIT")	-	33,619		70,006		26,528		-
Provision for Land Appreciation Tax
("LAT")	2,098			86,504		108,621		62,811		8,905
	2,098			120,123		178,627		89,339		8,905
Deferred tax
Origination of temporary differences
(note 21(b))	(7,349)	7,254		(22,301)	(11,865)	431
	(5,251)	127,377		156,326		77,474		9,336

1. 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%.
2. 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.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

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

								Five months ended
		Year ended 31 December	31 May
		2016		2017	2018		2018	2019
		RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
								(unaudited)
(Loss)/profit before taxation	(37,033)	208,377		176,858		113,087		5,153
Less: LAT	2,098		86,504		108,621		62,811		8,905
(Loss)/profit before CIT	(39,131)	121,873		68,237		50,276		(3,752)
Notional tax calculated applicable
income tax rate	(9,783)	30,468		17,059		12,569		(938)
Tax effect of non-deductible
expenses	2,083		10,157		29,465		2,040		686
Utilisation of previously
unrecognised tax losses	351		248		1,181		54		683
CIT (credit)/expense	(7,349)	40,873		47,705		14,663		431
Add: LAT		2,098		86,504		108,621		62,811		8,905
Income tax (credit)/expense	(5,251)	127,377		156,326		77,474		9,336

1. Director's emoluments
   The director believes the presentation of such information is not meaningful for the purpose of this report.
2. Individual with highest emoluments

The five highest paid individuals for the year ended 31 December 2016, 2017 and 2018 and for the five months ended 31 May 2018 and 2019 are all non-directors.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

The aggregate of the emoluments in respect of the non-directors included in the five highest paid

individuals are as follows:
								Five months ended
		Year ended 31 December	31 May
		2016		2017	2018		2018		2019
		RMB'000	RMB'000	RMB'000	RMB'000		RMB'000
								(unaudited)
	Salaries and other emoluments	1,885		1,549		1,837		828			651
	Retirement scheme contributions	113		174		160		67			82
		1,998		1,723		1,997		895				733
	The emoluments of the five individuals with the highest emoluments are within the following bands:
								Five months ended
		Year ended 31 December	31 May
		2016		2017	2018		2018		2019
		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 2016, 31 December 2016 and 1 January 2017							-
	Transfer from inventories										61,444
	Increase in fair value recognised in profit or loss								9,556
	At 31 December 2017 and 1 January 2018								71,000
	Transfer from inventories										31,491
	Increase in fair value recognised in profit or loss								11,509
	At 31 December 2018 and 1 January 2019								114,000
	Transfer from inventories										22,578
	Increase in fair value recognised in profit or loss								422
	At 31 May 2019										137,000

1. Fair value hierarchy

The fair values of the Target Group's investment properties situated in Fuzhou, Mainland China at 31 December 2017, 31 December 2018 and 31 May 2019 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

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

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.

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 table gives 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 and 31 May 2019

					Relationship of
		Valuation	Significant	unobservable
	Fair value	technique(s) and	unobservable	inputs to fair
Item	hierarchy	key input(s)	input(s)	value
Offices and commercial	Level 3	Term and reversion	Reversion rate	The higher the
properties in Fuzhou,		method	based on market	reversion rent, the
Mainland China				research on	higher the fair
				comparable rentals	value.
				and making
				adjustments on
				factors such as
				location, floor size
				and facilities.
		The key inputs are:	Reversionary yield	The higher the
		(1)	reversion	which is 4.5% for	reversionary yield,
			rent; and	offices and 5.0%	the lower the fair
		(2)	reversionary	for commercial	value.
			yield	properties.

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.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

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

1. Total future minimum lease payments receivable by the Target Group

										As at
			As at 31 December			31 May
			2016		2017			2018	2019
			RMB'000	RMB'000	RMB'000	RMB'000
Within 1 year		-	2,707			5,617		6,801
After 1	year but within 2	years	-	3,009			5,481		5,570
After 2	year but within 5	years	-	7,477			6,782		6,498
After 5	years		-		1,238			631		469
			-	14,431			18,511		19,338

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

11	Property, plant and equipment
									Other
									properties
					Leasehold	Construction	leased for		Equipment
		improvements	in progress	own use		and vehicle		Total
					RMB'000	RMB'000	RMB'000		RMB'000		RMB'000
	Cost:
	At 1 January 2016	2,959		426,965		706		2,377		433,007
	Additions	16,833		304		5,989		685		23,811
	At 31 December 2016 and
	1 January 2017	19,792		427,269		6,695		3,062		456,818
	Additions	2,613		5,360		12		2,550		10,535
	Acquisition through
	additional interest in a
	joint operation				-	-	144		336		480
	At 31 December 2017 and
	1 January 2018	22,405		432,629		6,851		5,948		467,833
	Additions	12,921		12,024		5,989		722		31,656
	Acquisition of a subsidiary				-	-	-	130		130
	Disposals				-	-	-	(190)	(190)
	At 31 December 2018 and
	1 January 2019	35,326		444,653		12,840		6,610		499,429
	Additions		228		28,730		-			29			28,987
	At 31 May 2019	35,554		473,383		12,840		6,639		528,416
		- - - - - - - - - - - -	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
	Accumulated
	depreciation:
	At 1 January 2016	(1,467)	-	(380)	(511)	(2,358)
	Charge for the year	(5,948)	-	(2,749)	(723)	(9,420)
	At 31 December 2016 and
	1 January 2017	(7,415)	-	(3,129)	(1,234)	(11,778)
	Charge for the year	(8,173)	-	(3,079)	(1,035)	(12,287)
	Acquisition through
	additional interest in a
	joint operation				-	-	(144)	(172)	(316)
	At 31 December 2017 and
	1 January 2018	(15,588)	-	(6,352)	(2,441)	(24,381)
	Charge for the year	(8,885)	-	(2,995)	(1,267)	(13,147)
	Acquisition of a subsidiary				-	-	-	(10)	(10)
	Written back on disposals				-	-	-	67		67
	At 31 December 2018 and
	1 January 2019	(24,473)	-	(9,347)	(3,651)	(37,471)
	Charge for the period		(1,846)	-	(1,248)	(438)	(3,532)
	At 31 May 2019		(26,319)	-	(10,595)	(4,089)	(41,003)
		- - - - - - - - - - - -		- - - - - - - - - - - -		- - - - - - - - - - - -		- - - - - - - - - - - -		- - - - - - - - - - - -
		---------------------------------------------		---------------------------------------------		---------------------------------------------		---------------------------------------------		---------------------------------------------
	Net book value:
	At 31 December 2016		12,377		427,269		3,566			1,828			445,040
	At 31 December 2017		6,817		432,629		499			3,507			443,452
	At 31 December 2018		10,853		444,653		3,493			2,959			461,958
	At 31 May 2019	9,235		473,383		2,245		2,550		487,413

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

1. Right-of-useassets
   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 May
		2016		2017			2018		2019
	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)	426,965		426,965			426,965		426,965
Other properties leased for own
use, carried at depreciated cost	(ii)	3,566		499			3,493		2,245
		430,531		427,464			430,458		429,210
Included in "Investment
properties":	10(a)
Ownership interests in leasehold
investment properties, at fair
value		-	71,000			114,000		137,000
Included in "Inventories and
other contract costs":	13(b)
Properties under development for
sale		2,087,188		3,764,416			3,856,937		3,856,937
Completed properties for sale		544,090		422,290			255,081		252,229
		2,631,278		4,186,706			4,112,018		4,109,166
		3,061,809		4,685,170			4,656,476		4,675,376

Note:

1. Ownership interests in leasehold land

The Target Group holds a parcel of leasehold land for the construction of commercial properties comprising a hotel. As at 31 May 2019, the construction of these commercial properties are in progress. The Target Group is the registered owner of this leasehold land. Lump sum payments were made upfront to acquire the land and there are no ongoing payments to be made under the terms of the land lease.

1. 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 did not include an option to renew the lease for an additional period after the end of the contract term.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

12 Interests in other entities

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

No individual non-controlling interest is considered material to the Target Group as at 31 December 2016, 2017 and 2018 and 31 May 2019.

1. Joint operation

The information of a joint operation of the Target Group is as follows:

Name of company	Place of operation	Principal activity		Shareholding
						As at
						31 May
			2016	2017	2018	2019
			%	%	%	%
Zhangzhou Deyousheng Real	Zhangzhou	Real estate	83.15%	100%	100%	100%
Estate Development Co.,		development
Ltd.*

（漳州德友盛房地產開發有限公司） ("Zhangzhou Deyousheng")

Zhangzhou Deyousheng is engaged in two real estate development projects on separate land use rights it holds. They are Gulf Taiwu City* ("海灣 太武城", the "first project") and International Harbour* ("國際海岸", the "second project"). In 2013, Mr. Lin Rongbin became the controlling party of Zhangzhou Deyousheng and by December 2015, the first project had been substantially completed and delivered, with certain residual assets and liabilities subject to further disposition and settlement.

Xiamen Sansheng, a subsidiary of the Target Group, acquired 83.15% of the registered capital of Zhangzhou Deyousheng from Mr. Lin Rongbin and others in September 2015. Xiamen Sansheng further acquired the additional 16.85% of the registered capital of Zhangzhou Deyousheng in December 2017. For the purposes of defining and securing their respective interests in the first and the second projects, Xiamen Sansheng in conjunction with the acquisition of the second project in Zhangzhou Deyousheng entered into a contractual arrangement with Mr. Lin Rongbin in 2015. Under the arrangement, the parties undertook to jointly sustain the ongoing segregation of the business operations while maintaining their unilateral rights to manage the ongoing development and being fully exposed to the risks and rewards of their respective projects. As such, the parties' respective rights and obligations in Zhangzhou Deyousheng differ from the percentage of shareholdings in Zhangzhou Deyousheng. The contractual arrangement took effect from September 2015 and will remain effective until the remaining business dealings of the first project are fully completed. The impact to assets and liabilities of the Target Group is summarised as follows:

	2017
	RMB'000
Current assets	452,767
Non-current assets	2,866
Current liabilities	(337,729)
Non-current liability	(216)
Net assets acquired attributable to the Target Group	117,688
Consideration of acquisition of 16.85% equity interest of Zhangzhou Deyousheng	117,688
Less: total cash and cash equivalents acquired	15,558
Net cash outflow	102,130

• The English translation of the project names and the company name is for reference only. The official name is in Chinese.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

13	Inventories and other contract costs
									As at
		As at 31 December			31 May
		2016		2017			2018		2019
		RMB'000	RMB'000	RMB'000	RMB'000
	Properties under development for sale	3,160,596		5,630,189			6,891,853		7,379,984
	Completed properties for sale	1,016,520		495,342			495,813		461,262
		4,177,116		6,125,531			7,387,666		7,841,246
	Other contract costs	5,500		14,317			28,653		43,997
		4,182,616		6,139,848			7,416,319		7,885,243

As at 31 December 2016, 2017 and 2018 and 31 May 2019, certain of the Target Group's inventories were pledged for bank loans and borrowings from financial institutions (see note 18).

1. The analysis of the amount of inventories recognised as an expense and included in profit or loss is as follows:

								As at
	As at 31 December			31 May
	2016		2017			2018	2019
	RMB'000	RMB'000	RMB'000	RMB'000
Cost of inventories (note 6(c))	196,752		868,558			851,995		13,771

At 31 December 2016, 2017 and 2018 and 31 May 2019, the amount of properties under development for sale expected to be recovered after more than one year is RMB2,847,864,000, RMB4,999,292,000 and RMB6,842,630,000 and RMB7,369,323,000 respectively. All of the other inventories are expected to be recovered within one year.

1. The analysis of carrying value of land held for property development for sale is as follows:

								As at
	As at 31 December			31 May
	2016		2017			2018	2019
	RMB'000	RMB'000	RMB'000	RMB'000
In Mainland China
- 50 years or more (long leases)	313,940		1,772,159			1,753,374		1,750,997
- between 10 and 50 years (medium-term
leases)	2,317,338		2,414,547			2,358,644		2,358,169
	2,631,278		4,186,706			4,112,018		4,109,166

1. Contract costs

Contract costs capitalised as at 31 December 2016, 2017 and 2018 and 31 May 2019 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 2016, 2017 and 2018 and five

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

months ended 31 May 2018 and 2019 were RMB854,000, RMB5,354,000 and RMB4,551,000 and RMB2,131,000 and RMB599,000 respectively. There was no impairment in relation to the balance of capitalised costs or the costs capitalised during the years ended 31 December 2016, 2017 and 2018 and five months ended 31 May 2018 and 2019 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 RMB1,515,000, RMB7,343,000 and RMB19,292,000 and RMB34,634,000 as at 31 December 2016, 2017 and 2018 and 31 May 2019, respectively.

14	Other receivables
									As at
		As at 31 December			31 May
		2016		2017			2018		2019
		RMB'000	RMB'000	RMB'000	RMB'000
	Amounts due from related parties (note (a))	-	-	162,586		731,129
	Other receivables (note(b))	34,264		37,460			15,967		19,098
	Financial assets measured at amortised cost	34,264		37,460			178,553		750,227
	Prepaid tax and surcharges (note(c))	161,972		286,399			540,339		645,808
	Deposits (note(d))	100,000		129,500			115,035		-
	Prepayment	35,991		11,725			21,047		7,868
		332,227		465,084			854,974		1,403,903

Notes:

1. Mega Regal, the parent company of the Target Company will procure the amounts due from related parties to be fully settled upon completion of the proposed acquisition of the entire issued share capital of the Target Company.
2. Management considers that the other receivables that were past due but not impaired was insignificant. Management considered there is not significant increase in credit risk and no possible default events for all other receivables expected within the 12 months after the reporting date. Accordingly, no expected credit loss is recorded. The Target Group does not hold any collateral over these balances.
3. The amount of prepaid tax and surcharges expected to be recovered or recognised as expense after more than one year were RMB44,618,000, RMB146,899,000 and RMB363,807,000 and RMB508,375,000 at 31 December 2016, 2017 and 2018 and 31 May 2019, respectively. All of remaining other receivables are expected to be recovered or recognised as expense within one year.
4. Deposits during the Relevant Periods mainly included performance bond for the land transfer contract amounted to RMB100,000,000 which was paid to the State-owned Land Resources Bureau of Fuzhou city in 2016 and recovered in cash in 2019.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

15 Financial assets at fair value through profit or loss

As at 31 December 2016, 2017 and 2018 and 31 May 2019, 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 May
		2016		2017			2018	2019
		RMB'000	RMB'000	RMB'000	RMB'000
	Pledged for a loan	-	1,433,980			-	-
	Pledged for mortgage arrangement of the
	property buyers (note(a))	3,676		4,430			176,962		120,370
	Pledged for construction of pre-sold
	properties (note (b))	-	20			14,926		31,281
	Pledged for litigation	-	-	1,180		-
		3,676		1,438,430			193,068		151,651

Note:

1. In accordance with relevant contracts, certain property development companies of the Target Group are required to place in designated bank accounts certain cash deposits as collateral for mortgage loans advanced to property buyers. Such guarantee deposits will be released after the property ownership certificates of the relevant properties are passed to the banks.
2. 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 at designated bank accounts the pre-sale proceeds of properties received as the guarantee deposits for constructions of related properties. The deposits can only be used for purchases of construction materials and payments of construction fees of related property projects upon the approval of the local state owned land and resource bureau. Such guarantee deposits will be released according to the completion stage of the related pre-sold properties.

17 Cash and cash equivalents and other cash flow information

1. Cash and cash equivalents comprise:

								As at
	As at 31 December			31 May
	2016		2017			2018	2019
	RMB'000	RMB'000	RMB'000	RMB'000
Cash at bank and on hand	59,303		327,162			143,449		151,096

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.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

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

									Five months ended
		Year ended 31 December		31 May
	note	2016		2017	2018		2018	2019
		RMB'000	RMB'000	RMB'000		RMB'000	RMB'000
								(unaudited)
(Loss)/profit before
taxation		(37,033)	208,377		176,858		113,087		5,153
Adjustments for:
Depreciation	6(c)	9,420		12,287		13,147		4,800		3,532
Interest income	5	(129)	(689)	(444)	(41)	(200)
Investment income	5	(744)	-	-		-	-
Net valuation gain on
investment property	10	-	(9,556)	(11,509)		-	(422)
Net loss on disposal of
property, plant and
equipment		-	-	122			-	-
Finance costs	6(a)	3,996		-	-		-	-
Changes in working
capital:
(Increase)/decrease in
restricted bank
deposits		(2,260)	(5)	(188,619)	(206,616)	41,417
Increase in inventories
and other contract
costs		(544,714)	(1,518,099)	(980,280)	(473,324)	(378,581)
(Increase)/decrease in
other receivables		(167,657)	166,743		(254,402)	(2,841,698)	(493,890)
Increase in trade and
other payables		121,642		644,172		735,323		2,773,545		92,314
Increase in contract
liabilities		884,608		567,737		1,397,015		237,637		802,886
Cash generated from/(used
in) operations		267,129		70,967		887,211		(392,612)	72,209

- II-41 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

17 Cash and cash equivalents and other cash flow information (continued)

1. Reconciliation of liabilities arising from financing activities

	Bank loans
	and
	borrowings
	from
	financial		Interest		Lease
	institutions		payable		liabilities		Total
	RMB'000		RMB'000		RMB'000		RMB'000
	(note 18)		(note 19)		(note 19)
At 1 January 2016	1,861,223		7,396			-	1,868,619
	- - - - - - - - - - - -		- - - - - - - - - - - -	- - - - - - - - - - - - - - - - - - - - - - - -
Changes from financing cash flows:
Proceeds from new bank loans and
borrowings from financial institutions	2,190,135			-		-	2,190,135
Repayment of bank loans and borrowings
from financial institutions	(2,202,157)		-		-	(2,202,157)
Capital element of finance lease rentals
paid	-		-	(2,495)	(2,495)
Interest and other borrowing cost paid	-			(220,022)		-	(220,022)
Total changes from financing cash flows	(12,022)	(220,022)	(2,495)	(234,539)
	- - - - - - - - - - - -		- - - - - - - - - - - -	- - - - - - - - - - - - - - - - - - - - - - - -
Other changes:
Finance costs (note 6(a))	-	218,686			-	218,686
Addition of right-of-use assets	-			-			5,989			5,989
Total other changes	-	218,686		5,989		224,675
	- - - - - - - - - - - -		- - - - - - - - - - - -		- - - - - - - - - - - -		- - - - - - - - - - - -
	---------------------------------------------		---------------------------------------------		------------------------------------------------------------------------------------------
At 31 December 2016	1,849,201		6,060		3,494		1,858,755

- II-42 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

	Bank loans
	and
	borrowings
	from
	financial		Interest			Lease
	institutions		payable			liabilities			Total
	RMB'000		RMB'000			RMB'000			RMB'000
	(note 18)		(note 19)			(note 19)
At 1 January 2017	1,849,201				6,060			3,494			1,858,755
	- - - - - - - - - - - -	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Changes from financing cash flows:
Proceeds from new bank loans and
borrowings from financial institutions	3,661,265				-			-	3,661,265
Repayment of bank loans and borrowings
from financial institutions	(1,609,700)	-			-	(1,609,700)
Capital element of finance lease rentals
paid	-		-	(2,995)	(2,995)
Interest paid	-			(250,739)			-	(250,739)
Total changes from financing cash flows	2,051,565				(250,739)	(2,995)	1,797,831
	- - - - - - - - - - - -	- - - - - - - - - - - -	- - - - - - - - - - - -		- - - - - - - - - - - -
Other changes:
Finance costs (note 6(a))	-		263,766					-	263,766
Borrowings that the Target Group act as
co-obligators which have non cash effect	1,256,913				-			-	1,256,913
Acquisition through additional interest in a
joint operation	47,534				-				-			47,534
Total other changes	1,304,447				263,766					-	1,568,213
	- - - - - - - - - - - -				- - - - - - - - - - - -			- - - - - - - - - - - -			- - - - - - - - - - - -
	---------------------------------------------				---------------------------------------------			------------------------------------------------------------------------------------------
At 31 December 2017	5,205,213				19,087				499				5,224,799
	Bank loans
	and
	borrowings
	from
	financial		Interest			Lease
	institutions		payable			liabilities			Total
	RMB'000		RMB'000			RMB'000			RMB'000
	(note 18)		(note 19)			(note 19)
At 1 January 2018	5,205,213				19,087			499			5,224,799
	- - - - - - - - - - - -	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Changes from financing cash flows:
Proceeds from new bank loans and
borrowings from financial institutions	572,600				-			-	572,600
Repayment of bank loans and borrowings
from financial institutions	(2,588,123)	-			-	(2,588,123)
Capital element of finance lease rentals
paid	-		-	(2,995)	(2,995)
Interest paid	-			(325,212)			-	(325,212)
Total changes from financing cash flows	(2,015,523)	(325,212)	(2,995)	(2,343,730)
	- - - - - - - - - - - -	- - - - - - - - - - - -	- - - - - - - - - - - -		- - - - - - - - - - - -
Other changes:
Finance costs (note 6(a))	-		326,053					-	326,053
Borrowings that the Target Group act as
co-obligators which have non cash effect	50,000				-			-	50,000
Addition of right-of-use assets	-			-			5,989				5,989
Total other changes	50,000				326,053			5,989			382,042
	- - - - - - - - - - - -				- - - - - - - - - - - -			- - - - - - - - - - - -			- - - - - - - - - - - -
	---------------------------------------------				---------------------------------------------			------------------------------------------------------------------------------------------
At 31 December 2018	3,239,690				19,928			3,493			3,263,111

- II-43 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

	Bank loans
	and
	borrowings
	from
	financial		Interest		Lease
	institutions		payable		liabilities		Total
	RMB'000		RMB'000		RMB'000		RMB'000
	(note 18)		(note 19)		(note 19)
At 1 January 2019	3,239,690			19,928			3,493			3,263,111
	- - - - - - - - - - - -			- - - - - - - - - - - -			- - - - - - - - - - - -			- - - - - - - - - - - -
	---------------------------------------------			---------------------------------------------			------------------------------------------------------------------------------------------
Changes from financing cash flows:
Proceeds from new bank loans and
borrowings from financial institutions	1,045,000				-		-	1,045,000
Repayment of bank loans and borrowings
from financial institutions	(923,201)		-		-	(923,201)
Capital element of finance lease rentals
paid	-		-	(1,248)	(1,248)
Interest paid	-			(95,681)		-	(95,681)
Total changes from financing cash flows	121,799				(95,681)	(1,248)	24,870
	- - - - - - - - - - - -		- - - - - - - - - - - -	- - - - - - - - - - - - - - - - - - - - - - - -
Other change:
Finance costs (note 6(a))	-	112,919				-	112,919
Borrowings that the Target Group act as
co-obligators which have non cash effect	50,000				-			-			50,000
Total other change	50,000			112,919				-	162,919
	- - - - - - - - - - - -			- - - - - - - - - - - -			- - - - - - - - - - - -			- - - - - - - - - - - -
	---------------------------------------------			---------------------------------------------			------------------------------------------------------------------------------------------
At 31 May 2019	3,411,489			37,166			2,245			3,450,900
(unaudited)
	Bank loans
	and
	borrowings
	from
	financial		Interest		Lease
	institutions		payable		liabilities		Total
	RMB'000		RMB'000		RMB'000		RMB'000
	(note 18)		(note 19)		(note 19)
At 1 January 2018	5,205,213			19,087			499			5,224,799
	- - - - - - - - - - - -			- - - - - - - - - - - -			- - - - - - - - - - - -			- - - - - - - - - - - -
	---------------------------------------------			---------------------------------------------			------------------------------------------------------------------------------------------
Changes from financing cash flows:
Proceeds from new bank loans and
borrowings from financial institutions	926,430				-		-	926,430
Repayment of bank loans and borrowings
from financial institutions	(1,951,932)		-		-	(1,951,932)
Capital element of finance lease rentals
paid	-		-	(1,248)	(1,248)
Interest paid	-			(106,746)		-	(106,746)
Total changes from financing cash flows	(1,025,502)	(106,746)	(1,248)	(1,133,496)
	- - - - - - - - - - - -			- - - - - - - - - - - -			- - - - - - - - - - - -			- - - - - - - - - - - -
	---------------------------------------------			---------------------------------------------			------------------------------------------------------------------------------------------
Other changes:
Finance costs (note 6(a))	-	122,421				-	122,421
Addition of right-of-use assets	-			-			5,989				5,989
Total other changes	-	122,421			5,989			128,410
	- - - - - - - - - - - -			- - - - - - - - - - - -			- - - - - - - - - - - -			- - - - - - - - - - - -
	---------------------------------------------			---------------------------------------------			------------------------------------------------------------------------------------------
At 31 May 2018 (unaudited)	4,179,711			34,762			5,240			4,219,713

- II-44 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

1. Total cash outflow for leases
   Amounts included in the combined statements of cash flows for leases comprise the following:

							Five months ended
	Year ended 31 December	31 May
	2016		2017	2018		2018	2019
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
							(unaudited)
Within operating cash flows	-	1,902,381		46,969		46,885		60
Within financing cash flows	2,495		2,995		2,995		1,248		1,248
	2,495		1,905,376		49,964		48,133		1,308
These amounts relate to the following:
							Five months ended
	Year ended 31 December	31 May
	2016		2017	2018		2018	2019
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
							(unaudited)
Lease rentals paid	2,495		3,019		3,139		1,308		1,308
Purchase of leasehold land use right	-	1,902,357		46,825		46,825		-
	2,495		1,905,376		49,964		48,133		1,308

18 Bank loans and borrowings from financial institutions

At 31 December 2016, 2017 and 2018 and 31 May 2019, the analysis of the carrying amount of bank loans and borrowings from financial institutions were as follows:

								As at
	As at 31 December			31 May
	2016		2017			2018	2019
	RMB'000	RMB'000	RMB'000	RMB'000
Current
Secured
- Bank loans	-	726,210			1,580,601		1,255,001
- Borrowings from financial institutions	249,201		1,256,913			543,100		941,500
	249,201		1,983,123			2,123,701		2,196,501
Non-current
Secured
- Bank loans	1,600,000		2,939,990			999,989		499,988
- Borrowings from financial institutions	-	282,100			116,000		715,000
	1,600,000		3,222,090			1,115,989		1,214,988

The balances of borrowings from financial institutions as at 31 December 2017, 2018 and 31 May 2019 include amounts of RMB1,256,913,000, RMB50,000,000 and RMB100,000,000 respectively arising from financing arrangements with financial institutions where certain companies 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 RMB100,000,000 as at 31 May 2019 was subsequently settled in June 2019.

- II-45 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

At 31 December 2016, 2017 and 2018 and 31 May 2019, all non-currentinterest-bearing bank loans and borrowings from financial institutions were repayable as follows:

									As at
		As at 31 December			31 May
		2016		2017			2018	2019
Non-current	RMB'000	RMB'000	RMB'000	RMB'000
- After 1	year but within 2 years	-	2,222,101			1,115,989		1,214,988
- After 2	years but within 5 years	1,600,000		999,989			-	-
		1,600,000		3,222,090			1,115,989		1,214,988

As at 31 December 2016, 2017 and 2018 and 31 May 2019, all bank loans were denominated in RMB and interest-bearing at 5.08%~16.00%, 7.00%~8.55% and 7.00%~10.50% and 8.13%~9.10% 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 23(b). As at 31 December 2016, 2017 and 2018 and 31 May 2019, none of the covenants relating to the banking facilities had been breached.

The secured bank loans and borrowings from financial institutions 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 May
	2016		2017			2018	2019
	RMB'000	RMB'000	RMB'000	RMB'000
Restricted deposits (note 16)	-	1,433,980			-	-
Inventories (note 13)	3,488,204		5,301,959			5,411,880		6,195,601
Investment properties (note 10)	-	16,195			44,351		69,660
	3,488,204		6,752,134			5,456,231		6,265,261

Certain bank loans and borrowings from financial institutions are also guaranteed by related parties of the Target Group (see note 26(d)).

19	Trade and other payables
									As at
		As at 31 December			31 May
		2016		2017			2018		2019
		RMB'000	RMB'000	RMB'000	RMB'000
	Trade creditors and accrued charges
	(note(a))	375,326		483,879			1,399,013		1,392,987
	Amounts due to related parties (note (b))	1,369,153		522,411			-	-
	Amount due to non-controlling shareholder
	(note (c))	-	-	34,644		14,644
	Other payables	26,237		50,648			104,222		77,363
	Interest payable	6,060		19,087			19,928		37,166
	Lease liabilities (note(d))	3,494		499			3,493		2,245
	Financial liabilities measured at amortised
	cost	1,780,270		1,076,524			1,561,300		1,524,405
	Accrued business tax, value added tax and
	other taxes	51,855		213,371			418,593		513,792
		1,832,125		1,289,895			1,979,893		2,038,197

- II-46 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Notes:

1. Trade creditors mainly represent amounts due to contractors. Payment to contractors is in instalments according to the progress and agreed milestones. Trade creditors were within ageing of within 1 year based on the invoice date.
2. The amounts due to related parties are interest-free, unsecured and repayable on demand.
3. 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.
4. The remaining contractual maturities of the Target Group's lease liabilities at the end of each year/ period are within 1 year.
5. All of the other trade and other payables, are expected to be settled within one year or are repayable on demand.

20	Contract liabilities
									As at
		As at 31 December			31 May
		2016		2017			2018	2019
		RMB'000	RMB'000	RMB'000	RMB'000
	Receipts in advance from property sales	1,393,966		2,174,701			3,571,716		4,374,602

The Target Group receives certain percentage of the contract value as a deposit from customers when they sign the sale and purchase agreements and the rest of the consideration is paid according to payment schedules. This deposit is recognised as a contract liability until the properties are controlled by the customers.

Movement in contract liabilities
	2016		2017		2018	2019
	RMB'000	RMB'000	RMB'000	RMB'000
Balance at 1 January	558,849		1,393,966		2,174,701		3,571,716
Decrease in contract liabilities as a result
of recognising revenue during the
year/period	(230,586)	(1,206,493)	(1,174,212)	(37,045)
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	986,295		1,848,626		2,447,931		786,459
Increase in contract liabilities as a result of
accruing interest expense on receipts in
advance	79,408		138,602		123,296		53,472
Balance at 31 December/31 May	1,393,966		2,174,701		3,571,716		4,374,602

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 RMB383,939,000, RMB1,115,445,000 and RMB2,404,816,000 and RMB3,443,650,000 as at 31 December 2016, 2017 and 2018 and 31 May 2019.

- II-47 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

21 Income tax in the combined statements of financial position

1. Current taxation in the combined statements of financial position represents:

								As at
	As at 31 December			31 May
	2016		2017			2018	2019
	RMB'000	RMB'000	RMB'000	RMB'000
CIT payable	15,996		97,660			195,714		201,753
LAT payable	3,989		56,763			138,605		141,696
	19,985		154,423			334,319		343,449

- II-48 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

1. Deferred tax assets and liabilities recognised:
2. 1. Movement of each component of deferred tax assets and liabilities

The component of deferred tax assets / (liabilities) recognised in the combined statements of financial position and the movements during the Relevant Periods are as follows:

					Amortisation
			Fair value			of
			change of			capitalised					Other
	investment			contract			Provision	temporary
			property			costs	Tax losses	for LAT	differences	Total
			RMB'000			RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
Deferred tax
arising from:
At 1 January 2016			-	(499)	19,338		-	-	18,839
(Charged)/credited
to profit or loss			-	(876)	4,904		-	3,321		7,349
At 31 December
2016 and 1
January 2017			-	(1,375)	24,242		-	3,321		26,188
(Charged)/credited
to profit or loss	(2,529)	(1,776)	(21,028)	13,332		4,747		(7,254)
Other additions			-	(428)	-	2,702		-	2,274
At 31 December
2017 and 1
January 2018	(2,529)	(3,579)	3,214		16,034		8,068		21,208
(Charged)/credited
to profit or loss	(3,902)	(3,585)	12,332		18,000		(544)	22,301
At 31 December
2018 and 1
January 2019	(6,431)	(7,164)	15,546		34,034		7,524		43,509
(Charged)/credited
to profit or loss		(613)	(3,836)	2,339		1,983		(304)	(431)
At 31 May 2019		(7,044)	(11,000)	17,885		36,017		7,220		43,078

- II-49 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

1. Reconciliation to the combined statements of financial position

								As at
	As at 31 December			31 May
	2016		2017			2018	2019
	RMB'000	RMB'000	RMB'000	RMB'000
Net deferred tax asset recognised in the
combined statements of financial position	27,563		27,316			57,104		61,122
Net deferred tax liability recognised in the
combined statements of financial position	(1,375)	(6,108)		(13,595)	(18,044)
	26,188		21,208			43,509		43,078

1. Deferred tax assets not recognised

As at 31 December 2016, 2017 and 2018 and 31 May 2019, the Target Group has not recognised deferred tax assets in respect of cumulative tax losses of RMB1,404,000, RMB992,000 and RMB1,704,000 and RMB2,732,000 respectively as it is not probable that future taxable income against which the losses can be utilized 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.

22 Capital, reserves and dividends

1. Share capital

The Target Company was incorporated in BVI on 31 May 2019 with an initial authorised share capital of USD100 divided into 100 shares of par value of USD1 each. As at the date of this report, the share capital of the Target Company has not been paid up.

In January 2017, Fuzhou Sansheng Property Co., Ltd. ("Fuzhou Sansheng") made capital injection of RMB50,000,000 into Fuzhou Hongsheng. In January 2019, Fuzhou Shengchun acquired 100% equity interest of Fuzhou Hongsheng from Fuzhou Sansheng at a consideration of RMB50,000,000.

For the purposes of this report, the capital as at 1 January 2016, 31 December 2016, 31 December 2017, 31 December 2018, and 31 May 2019 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.

1. 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 2016, 2017 and 2018 and 31 May 2019 was as follows:

- II-50 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

									As at
		As at 31 December			31 May
		2016		2017			2018	2019
		RMB'000	RMB'000	RMB'000	RMB'000
(i)	Debt-to-assets ratio
	Total liabilities	5,096,652		8,830,340			9,139,789		10,186,357
	Total assets	5,050,425		8,915,113			9,251,468		10,293,853
	Debt-to-assets ratio	100.9%		99.1%			98.8%		99.0%
(ii)	Adjusted debt-to-assets ratio
	Total liabilities	5,096,652		8,830,340			9,139,789		10,186,357
	Less: Contract liabilities	1,393,966		2,174,701			3,571,716		4,374,602
	Adjusted total liabilities	3,702,686		6,655,639			5,568,073		5,811,755
	Total assets	5,050,425		8,915,113			9,251,468		10,293,853
	Adjusted debt-to-assets ratio	73.3%		74.7%			60.2%		56.5%

1. Dividends

No dividends have been declared or paid by the Target Company and its subsidiaries during the Relevant Periods.

1. 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.

23 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.

1. 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 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 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.

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 related parties, the Target Group facilitates their capital demand by assessing and closely monitoring their financial conditions and profitability.

- II-51 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

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.

Financial guarantees

Except for the financial guarantees given by the Target Group as set out in note 25, 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 25.

1. 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 2016
			Contractual undiscounted cash outflow
			More than	More than
	Within 1	1 year but	2 years but
	year or on	less than 2	less than 5			Carrying
	demand	years	years	Total	amount
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
Trade and other payables	1,780,270		-	-	1,780,270		1,780,270
Bank loans and borrowings
from financial
institutions	405,381		81,216		1,656,231			2,142,828		1,849,201
	2,185,651		81,216		1,656,231			3,923,098		3,629,471

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

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 2

less than 5

Carrying

demand

years

years

Total

amount

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

Trade and other payables

1,076,523

-

-

1,076,523

1,076,523

Bank loans and borrowings

from financial

institutions

2,268,007

2,386,781

1,012,277

5,667,065

5,205,213

3,344,530

2,386,781

1,012,277

6,743,588

6,281,736

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 2

less than 5

Carrying

demand

years

years

Total

amount

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

Trade and other payables

1,561,299

-

-

1,561,299

1,561,299

Bank loans and borrowings

from financial

institutions

2,506,303

1,165,884

-

3,672,187

3,239,690

4,067,602

1,165,884

-

5,233,486

4,800,989

At 31 May 2019

Contractual undiscounted cash outflow

More than

More than

Within 1

1 year but

2 years but

year or on

less than 2

less than 5

Carrying

demand

years

years

Total

amount

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

Trade and other payables

1,524,405

-

-

1,524,405

1,524,405

Bank loans and borrowings

from financial

institutions

2,649,964

1,308,586

-

3,874,727

3,411,489

4,174,369

1,308,586

-

5,399,132

4,935,894

1. Interest rate risk

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.

Borrowings issued at variable rates and at fixed rates expose the Target Group to cash flow interest rate risk and fair value interest rate risk respectively. The Target Group has a policy ensuring that most of its borrowings are effectively on a fixed basis, through the contractual terms of the interest-bearing financial liabilities. As at 31 December 2016, 2017 and 2018 and 31 May 2019, the Target Group's bank loans and borrowings from financial institutions are all at fixed rates, thus the Target Group considered that the overall interest rate risk resulting from

- II-53 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

change in market interest rate was not significant and no sensitivity analysis on interest rate risk was presented. The interest rate and terms of repayment of the Target Group's interest-bearing borrowings are disclosed in note 18.

1. Currency risk

The Target Group is not exposed to foreign currency risk since all the financial assets and liabilities of the Target Company and its subsidiaries are denominated in the functional currencies.

1. Fair value measurement
2. 1. 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 2016, 2017 and 2018 and 31 May 2019.

1. 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 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

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.

24 Commitments

Commitments outstanding at 31 December 2016, 2017 and 2018 and 31 May 2019 not provided for in the Historical Financial Information were as follows:

								As at
	As at 31 December			31 May
	2016		2017			2018	2019
	RMB'000	RMB'000	RMB'000	RMB'000
Contracted for:
Construction and development contracts	545,602		803,275			1,001,790		1,290,084

Commitments mainly related to land and development costs for the Target Group's properties under development for sale.

- II-54 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

25 Contingent liabilities

As at 31 December 2016, 2017 and 2018 and 31 May 2019, 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 RMB225,900,000, RMB70,619,000 and RMB590,852,000 and RMB491,285,000 as at 31 December 2016, 2017 and 2018 and 31 May 2019, 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.

26 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.

1. 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.

Remuneration for key management personnel, including certain of the highest paid employees as disclosed in note 9, is as follows:

							Five months ended
	Year ended 31 December	31 May
	2016		2017	2018		2018	2019
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
							(unaudited)
Short-term employee benefits	391		511		511		213		213
Contributions to retirement benefit
scheme	16		16		16		6		6
	407		527		527		219		219

The above remuneration to key management personnel is included in "staff costs" (see note 6(b)).

- II-55 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

(b) Transactions with related parties
								Five months ended
	Year ended 31 December		31 May
	2016		2017	2018		2018	2019
	RMB'000	RMB'000	RMB'000		RMB'000	RMB'000
							(unaudited)
Property management service
received	5,359		9,501		17,485		3,941		2,391
Rental income from lease of
properties	-	-	1,388		427		615
Consultation service received	-	4,500		11,698			-	-
Borrowings from financial
institutions borne by the Target
Group acting as co-obligators
(note 18)*	-	1,256,913		50,000			-	50,000
Repayment of borrowings from
financial institutions that the
Target Group acting as
co-obligators(note 18)*	-	-	1,256,913		1,256,913		-

1. • These borrowings were guaranteed by inventories collateral of the Target Group with carrying amounts of RMB1,725,000,000, RMB105,247,000 and RMB105,247,000 as at 31 December 2017, 31 December 2018 and 31 May 2019, and the 90% equity interest in Fujian Tianren held by Fujian Shengchuang as at 31 December 2018 and 31 May 2019, respectively.
2. Balances with related parties
   At 31 December 2016, 2017 and 2018 and 31 May 2019, the Target Group had the following balances with

related parties which were expected to be recovered/repaid on demand, unsecured and interest-free:

								As at
	As at 31 December			31 May
	2016		2017			2018	2019
	RMB'000	RMB'000	RMB'000	RMB'000
Amounts due from related parties	-	-	162,586		731,129
Amounts due to related parties	1,369,153		522,411			-		-

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

1. Bank loans and borrowings from financial institutions guaranteed by related parties

								As at
	As at 31 December			31 May
	2016		2017			2018	2019
	RMB'000	RMB'000	RMB'000	RMB'000
Guaranteed by inventories collateral of a
related party	-	-	50,000		745,000
Guaranteed by related parties
- Fuzhou Sansheng and Mr. Lin Rongbin	-	1,800,000			1,649,990		2,044,989
- Fuzhou Sansheng, Mr. Lin Rongbin
and Ms. Cheng Xuan	299,700		881,200			871,100		290,690
- Guoshitong Real Estate Development
Limited	1,040,000		1,040,000			655,000		355,000
- Fuzhou Sansheng	-	-	50,000		100,000
- Mr. Du Zaozhi, Mr.Lin Rongbin and
Ms. Cheng Xuan	-	1,256,913			-	-
	1,339,700		4,978,113			3,226,090		2,790,679
Guaranteed by the pledge of
- the 100% ownership of Xiamen
Sansheng held by Fuzhou Sansheng	-	282,100			527,300		277,990
- the 7.5% ownership of Fuzhou
Sansheng held by Fujian Zesheng
Investment Advisory Co., Ltd.	-	-	81,800		12,700
- the 20% ownership of Fuzhou
Sansheng held by Ms. Cheng Xuan	-	500,000			250,000		-
- the 100% ownership of Fuzhou
Hongsheng held by Fuzhou Sansheng	-		1,256,913			-		-
	-	2,039,013			859,100		290,690

1. Non-adjustingevents after the Relevant Periods
2. 1. A dividend of RMB50,000,000 was declared in August 2019 and paid in October 2019 by Xiamen Sansheng to Fuzhou Sansheng;
   2. 5% of equity interest in Fujian Shengchuang was transferred to Royal City Limited, an independent third party by way of capital injection of RMB11,210,000 in September 2019.
3. 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.

29 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.

- II-57 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Effective for accounting periods beginning on or after

Revised Conceptual Framework for Financial Reporting	1	January 2020
Amendments to HKFRS 3, Definition of a business	1 January 2020
Amendments to HKAS 1 and HKAS 8, Definition of material	1 January 2020
HKFRS 17, Insurance contracts	1 January 2021
Amendments to HKFRS 10 and HKAS 28, Sale or contribution of
assets between an investor and its associate or joint venture	To be determined

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 Amendments to HKAS 1 and HKAS 8 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 May 2019.

- II-58 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

1. MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET GROUP
   Business and Financial Results of the Target Group

The Target Company is a company incorporated in the British Virgin Islands with limited liability and is principally engaged in investment holding.

The Target Company holds the Project Companies which are principally engaged in property development and are currently engaged in construction and development of certain residential/commercial projects in Fujian Province of the PRC. Save for the Project Companies comprising Fujian Shengchuang Real Estate Development Co., Ltd.* （福建盛創房地產開發有限公司）("Fujian Shengchuang"), Fuzhou Hongsheng Real Estate Development Co., Ltd.*（福州宏盛房地產開發有限公司）("Fuzhou Hongsheng"), Fujian Tianren Real Estate Development Co., Ltd.* （福建天壬房地產開發有限公司）("Fujian Tianren") and Zhangzhou Deyousheng Real Estate Development Co., Ltd.*（漳州市德 友盛房地產開發有限公司） ("Zhangzhou Deyousheng"), other members of the Target

Group have no business operations since their establishment.

For the financial years ended 31 December 2016, 31 December 2017 and 31 December 2018 and five months ended 31 May 2019 respectively, the Target Group recorded:

1. revenue of approximately RMB221.1 million, RMB1,174.7 million and RMB1,178.0 million and RMB39.8 million respectively. Revenue for the years ended 31 December 2016 was contributed by delivery of the property units of Fujian Shengchuang. The increase in revenue for the years ended 31 December 2017 and 31 December 2018 were mainly due to sale of property units of Fujian Shengchuang and Zhangzhou Deyousheng. As most of the delivery of pre-sold units of the Project Companies took place on or before 2018, revenue of the Target Group for the five months ended 31 May 2019 reduced significantly;
2. gross profit of approximately RMB24.4 million, RMB306.2 million and RMB326.0 million and RMB26.0 million respectively, and gross profit margin of 11.0%, 26.1% and 27.7% and 65.4% respectively. The increase in gross profit margins for the years end 31 December 2017 and 31 December 2018 was driven primarily by the delivery of the property units of Zhangzhou Deyousheng, whose unit land acquisition cost was lower than that of Fujian Shengchuang. The gross profit margin increased substantially during five months ended 31 May 2019 as all properties units were delivered by Zhangzhou Deyousheng;
3. net valuation gain on investment property of approximately nil, RMB9.6 million and RMB11.5 million and RMB0.4 million respectively, which is contributed by the offices and commercial properties held by Fujian Shengchuang;

- II-59 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

1. other income of approximately RMB1.8 million, other income of approximately RMB0.7 million, other loss of approximately RMB11.9 million and other income of approximately RMB25.6 million respectively, which mainly comprised of interest income, investment income, forfeited deposits from customers and donation. The other loss in 2018 was mainly due to the compensations of approximately RMB15.0 million recorded by Fujian Shengchuang as a result of delayed processing of property rights certificates for the customers. Save for the compensations paid in 2018, there is no other contractual obligation shall be born by Fujian Shengchuang;
2. selling and marketing expenses of approximately RMB41.4 million, RMB73.1 million and RMB106.1 million and RMB32.9 million respectively, which comprise sales commissions paid to independent third-party sales agents, salary of selling and marketing staff of the Target Group and advertisement and promotion expenses;
3. administrative expenses of approximately RMB17.8 million, RMB34.9 million and RMB42.6 million and RMB14.0 million respectively, which mainly comprised consultation service fee, utility charges, administrative staff costs, transportation and entertainment expenses, general office expenses, legal and professional expenses, other taxes and depreciation. The increase in administrative expenses for the years ended 31 December 2017 and 31 December 2018 was driven primarily by the increase of administrative staff costs, consultancy fee and other taxes. During the years ended 31 December 2017 and 2018, the Project Companies paid approximately RMB4.5 million and RMB11.7 million respectively for the consultation services provided by Fuzhou Sansheng. The consultation services are for the preliminary stage of the construction and ended in 2018. Thus the administrative expenses decreased for the five months ended 2019;
4. finance costs of approximately RMB4.0 million, nil and nil and nil respectively after capitalising qualified borrowing costs into inventories. The borrowing costs comprised primarily interest on borrowings and interest accrued on receipts in advance from property pre-sales;
5. income tax credit of approximately RMB5.3 million, income tax expense of approximately RMB127.4 million and RMB156.3 million and RMB9.3 million respectively, which primarily comprise PRC corporate income tax expense based on the estimated taxable income in the PRC of the Target Group, origination and reversal of temporary difference on deferred tax and the PRC land appreciation tax expense; and
6. loss after taxation of approximately RMB31.8 million, profit after taxation of approximately RMB81.0 million and profit after taxation of approximately RMB20.5 million and loss after taxation of approximately RMB4.2 million respectively. The profit after taxation was mainly contributed from sale of properties.

- II-60 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Financial position and other financial information of Target Group

As at 31 December 2016, 31 December 2017, 31 December 2018 and 31 May 2019, the Target Group had:

1. investment properties of approximately nil, RMB71.0 million, RMB114.0 million and RMB137.0 million respectively, which represents the offices and commercial properties held by Fujian Shengchuang;
2. property, plant and equipment of approximately RMB445.0 million, RMB443.5 million, RMB462.0 million and RMB487.4 million respectively, which mainly consisted of leasehold improvements, construction in progress, other properties leased for own use and equipment and vehicle;
3. inventories and other contract costs of approximately RMB4,182.6 million, RMB6,139.8 million, RMB7,416.3 million and RMB7,885.2 million respectively, which mainly represents (a) properties under development for sale; and (b) completed properties for sale;
4. other receivables of approximately RMB332.2 million, RMB465.1 million, RMB855.0 million and RMB1,403.9 million respectively, which mainly represents (a) amounts due from related parties; and (b) prepaid tax and surcharges;
5. restricted deposits of approximately RMB3.7 million, RMB1,438.4 million, RMB193.1 million and RMB151.7 million respectively, which are placed to certain banks as securities of the bank borrowings obtained by the Target Group or as collateral for mortgage loans advanced to property buyers;
6. cash and cash equivalents of approximately RMB59.3 million, RMB327.2 million, RMB143.4 million and RMB151.1 million respectively;
7. current liabilities of approximately RMB3,495.3 million, RMB5,602.1 million, RMB8,009.6 million and RMB8,952.7 million respectively, which mainly consist of bank loans and borrowings from financial institutions due within one year, trade and other payables, contract liabilities; and
8. non-currentliabilities of approximately RMB1,601.4 million, RMB3,228.2 million, RMB1,129.6 million and RMB1,233.0 million respectively, which mainly consist of bank loans and borrowings from financial institutions due after one year and deferred tax liabilities.

Capital structure

The capital structure of the Target Group consists of debt and equity. The Target Group utilises external financing from independent financial institutions and internal generated cash to finance its operating activities. The bank loans and borrowings from financial institutions of approximately RMB1,849.2 million, RMB5,205.2 million,

- II-61 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

RMB3,239.7 million and RMB3,411.5 million respectively as at 31 December 2016, 31 December 2017, 31 December 2018 and 31 May 2019 respectively, were denominated in RMB and bore interest rates ranging from 5.1% to 16.0% per annum.

Gearing Ratio

As at 31 December 2016, 31 December 2017, 31 December 2018 and 31 May 2019, the gearing ratio of Target Group was 36.6%, 58.4%, 35.0% and 33.2% respectively, which was calculated based on the Target Group's total bank loans and borrowings from financial institutions of approximately RMB1,849.2 million, RMB5,205.2 million, RMB3,239.7 million and RMB3,411.5 million respectively, to total assets of approximately RMB5,050.4 million, RMB8,915.1 million, RMB9,246.1 million and RMB10,288.5 million respectively.

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 2016, 31 December 2017, 31 December 2018 and 31 May 2019 were approximately RMB545.6 million, RMB803.3 million, RMB1,001.8 million and RMB1,290.1 million respectively.

Contingent liabilities

As at 31 December 2016, 31 December 2017, 31 December 2018 and 31 May 2019, 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 RMB225.9 million, RMB70.6 million, RMB590.9 million and RMB491.3 million as at 31 December 2016, 31 December 2017, 31 December 2018 and 31 May 2019 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.

Pledge of assets

As at 31 December 2016, 31 December 2017, 31 December 2018 and 31 May 2019, the Target Group pledged its bank deposits inventories and investment properties for securing bank loans and borrowings from financial institutions for the Target Group and mortgage loans advanced to property buyers in a total amount of approximately RMB3,491.9 million, RMB6,756.6 million, RMB5,649.3 million and RMB6,416.9 million respectively.

Foreign exchange exposure

During the financial years ended 31 December 2016, 31 December 2017, 31 December 2018 and five months ended 31 May 2019, 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 Company and its subsidiaries are denominated in RMB.

- II-62 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Employees

As at 31 December 2016, 31 December 2017, 31 December 2018 and 31 May 2019, the Target Group had a total of 145, 199, 259 and 281 employees respectively. The total staff costs of the Target Group for the financial years ended 31 December 2016, 31 December 2017, 31 December 2018 and five months ended 31 May 2019 was approximately RMB28.4 million, RMB36.5 million, RMB48.3 million and RMB20.8 million, 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.

Hedging

During the financial years ended 31 December 2016, 31 December 2017, 31 December 2018 and five months ended 31 May 2019, the Target Group did not hold any financial instruments for hedging purposes.

Significant investments held

The offices and commercial properties held by Fujian Shengchuang in the PRC generated rental income to the Target Group. As at 31 December 2016, 31 December 2017, 31 December 2018 and 31 May 2019, the Target Group had investment properties of approximately nil, RMB71.0 million, RMB114.0 million and RMB137.0 million, which are valued by external property valuer.

Material acquisitions and disposals of subsidiaries and additional shareholdings in a joint operation

Save as disclosed below, the Target Group had no other material acquisitions and disposals of subsidiaries and shareholdings in joint operations during the financial years ended 31 December 2016, 31 December 2017, 31 December 2018 and five months ended 31 May 2019:

1. Fuzhou Shengchun acquired 100% equity interest of Fuzhou Hongsheng from Fuzhou Sansheng at consideration of approximately RMB50.0 million in January 2019;
2. Fujian Shengchuang acquired 90% equity interest of Fujian Tianren from an Independent Third Party at consideration of approximately RMB14.6 million in September 2018; and
3. Xiamen Sansheng acquired additional 16.85% of the registered capital of Zhangzhou Deyousheng from an independent third party at total consideration of approximately RMB99.0 million in February 2018.

- II-63 -

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Segmental information

During the financial years ended 31 December 2016, 31 December 2017, 31 December 2018 and five months ended 31 May 2019, the Target Group was principally engaged in a single business segment which is construction and development of certain residential/commercial projects in Fujian Province of the PRC.

Future plans for material investments

As at 31 May 2019, the Target Group did not have any future plans for material investments or acquisitions of capital assets.

- II-64 -

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

1. 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. Details of the Acquisition are set out in the section headed "Letter from the Board" contained in this circular. The unaudited pro forma financial information presented below is prepared to illustrate (i) the consolidated statement of financial position of the Enlarged Group as at 30 June 2019 as if the Acquisition had been completed on 30 June 2019; and (ii) the consolidated statement of profit or loss, consolidated statement of profit or loss and other comprehensive income, and the consolidated statement of cash flows of the Enlarged Group for the year ended 31 December 2018 as if the Acquisition had been completed on 1 January 2018.

The Unaudited Pro Forma Financial Information has been prepared by the directors of the Company (the "Directors") in accordance with Rules 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, for the purposes of illustrating the effect of the Acquisition pursuant to the terms of the sale and purchase agreement. The preparation is 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, results of operation and cash flows of the Enlarged Group had the Acquisition been completed as of the specified dates or any future dates.

The unaudited pro forma consolidated statement of financial position of the Enlarged Group as at 30 June 2019 is prepared based on the unaudited consolidated financial statements extracted from the published interim report of the Group for the six months ended 30 June 2019, after making pro forma adjustments to the Acquisition, as if the Acquisition had completed on 30 June 2019.

The unaudited pro forma consolidated statement of profit or loss, unaudited pro forma consolidated statement of profit or loss and other comprehensive income and the unaudited pro forma consolidated statement of cash flows of the Enlarged Group for the year ended 31 December 2018 are prepared based on the consolidated financial statements extracted from the published annual report of the Group for the year ended 31 December 2018, after making pro forma adjustments to the Acquisition, as if the Acquisition had completed on 1 January 2018.

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 historical financial information of the Group set out in the annual report of the Group for the year ended 31 December 2018 and the interim report of the Group for the six months ended 30 June 2019, the accountant's 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 FINANCIAL PROSITION OF THE ENLARGED GROUP

																The
	The														Enlarged
	Group as														Group as
	at 30 June														at 30 June
	2019				Pro forma adjustments				2019
	RMB'000	RMB'000		RMB'000	RMB'000		RMB'000	RMB'000	RMB'000
	(Note 1)	(Note 2)		(Note 3)	(Note 4)		(Note 5)	(Note 7)
Non-current assets
Investment properties	605,867		137,000													742,867
Other property, plant and
equipment	19,115		487,413													506,528
Properties under development	110,312		-													110,312
Prepaid lease payments	456,729		-													456,729
Interests in joint ventures	288,779		-													288,779
Deferred tax assets	20,409		61,122													81,531
	1,501,211		685,535		-	-		-	-	2,186,746
	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Current assets
Inventories and other contract
costs	9,076,499		7,885,243													16,961,742
Prepaid lease payments	14,499		-													14,499
Trade and other receivables	380,725		1,403,903	(59,418)		(671,711)				1,053,499
Financial assets at fair value
through profit or loss	10,307		11,102													21,409
Restricted deposits	16,210		151,651													167,861
Cash and cash equivalents	468,349		151,096		(38,790)						(2,595)	578,060
	9,966,589		9,602,995		(98,208)	-	(671,711)	(2,595)	18,797,070
	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Current liabilities
Bank loans and borrowings from
financial institutions	1,248,850		2,196,501													3,445,351
Trade and other payables	2,868,856		2,038,197		-									4,907,053
Lease liabilities	1,182		-													1,182
Contract liabilities	1,219,828		4,374,602													5,594,430
Current taxation	220,487		343,449													563,936
	5,559,203		8,952,749		-	-		-	-	14,511,952
	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
	----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net current assets	4,407,386		650,246	(98,208)	-	(671,711)	(2,595)	4,285,118
	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
	----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total assets less current
liabilities	5,908,597		1,335,781	(98,208)	-	(671,711)	(2,595)	6,471,864
	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- III-2 -

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

													The
	The											Enlarged
	Group as											Group as
	at 30 June											at 30 June
	2019				Pro forma adjustments			2019
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
	(Note 1)	(Note 2)	(Note 3)	(Note 4)	(Note 5)	(Note 7)
Non-current liabilities
Bank loans and borrowings from
financial institutions	2,052,900		1,214,988										3,267,888
Bond payable	898,854		-									898,854
Derivative financial liabilities	25,022		-									25,022
Loans from a related party	1,658,784		-					(671,711)			987,073
Lease liabilities	978		-									978
Deferred tax liabilities	94,259		18,044										112,303
	4,730,797		1,233,032		-	-	(671,711)	-	5,292,118
	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
	----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net assets	1,177,800		102,749		(98,208)	-	-	(2,595)	1,179,746
Capital and reserves
Share capital	33,184		30,000		(30,000)	1,935						35,119
Reserves	1,079,689		71,335		(71,335)	(1,935)			(2,595)	1,075,159
Total equity attributable to
equity shareholders of the
Group	1,112,873		101,335		(101,335)	-	-	(2,595)	1,110,278
Non-controlling interests	64,927		1,414		3,127		-		-		-		69,468
Total equity	1,177,800		102,749		(98,208)	-	-	(2,595)	1,179,746

- III-3 -

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

2. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF PROFIT OR LOSS OF THE ENLARGED GROUP

												The
												Enlarged
	The Group									Group for
	for the year									the year
	ended 31									ended 31
	December									December
	2018	Pro forma adjustments			2018
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
	(Note 1)	(Note 2)	(Note 6)	(Note 7)
Revenue	933,971			1,177,959								2,111,930
Cost of sales	(878,800)		(851,995)							(1,730,795)
Gross profit	55,171			325,964		-			-		381,135
Net valuation gain on investment
property	1,478			11,509								12,987
Other loss	(42,972)	(11,922)							(54,894)
Selling and marketing expenses	(53,133)	(106,107)							(159,240)
Administrative expenses	(62,861)	(42,586)					(2,515)	(107,962)
Other operating expenses	(1,020)	-							(1,020)
(Loss)/profit from operations	(103,337)	176,858		-	(2,515)	71,006
Finance costs	(94,983)	-							(94,983)
Share of profits less losses of
joint ventures	(1,477)	-							(1,477)
(Loss)/profit before taxation	(199,797)	176,858		-	(2,515)	(25,454)
Income tax	13,333			(156,326)							(142,993)
(Loss)/profit for the year	(186,464)	20,532		-	(2,515)	(168,447)
(Loss)/profit for the year
attributable to:
Equity shareholders of the
Company	(166,462)	20,532		(1,027)		(2,515)	(149,472)
Non-controlling interests	(20,002)		-		1,027						(18,975)
	(186,464)		20,532		-			(2,515)	(168,447)

- III-4 -

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

3. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME OF THE ENLARGED GROUP

												The
												Enlarged
		The Group									Group for
		for the year									the year
		ended 31									ended 31
		December									December
	2018	Pro forma adjustments	2018
		RMB'000	RMB'000		RMB'000	RMB'000		RMB'000
		(Note 1)	(Note 2)		(Note 6)	(Note 7)
(Loss)/profit for the year	(186,464)	20,532			-	(2,515)	(168,447)
	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -		- - - - - - - - - - - -
Other comprehensive income for
the year (after tax and
reclassification adjustments)
Items that may be reclassified to
profit or loss:
- Exchange differences on
translation of financial
statements of foreign
operations	8,157		-						8,157
Other comprehensive income for
the year	8,157		-		-	-	8,157
	- - - - - - - - - - - -		- - - - - - - - - - - -		- - - - - - - - - - - -		- - - - - - - - - - - -		- - - - - - - - - - - -
	----------------------------------------------		----------------------------------------------		----------------------------------------------		----------------------------------------------		----------------------------------------------
Total comprehensive income for
the year	(178,307)	20,532			-	(2,515)	(160,290)
Attributable to:
Equity shareholders of the
Company	(158,305)	20,532		(1,027)	(2,515)	(141,315)
Non-controlling interests	(20,002)	-	1,027				(18,975)
Total comprehensive income for
the year	(178,307)	20,532			-	(2,515)	(160,290)

- III-5 -

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

4. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS OF THE ENLARGED GROUP

										The
										Enlarged
	The Group								Group for
	for the year								the year
	ended 31								ended 31
	December								December
	2018	Pro forma adjustments			2018
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
	(Note 1)	(Note 2)	(Note 3)	(Note 7)
Operating activities
(Loss)/profit before taxation	(199,797)	176,858		-	(2,515)	(25,454)
Adjustment for:
Depreciation and amortisation	15,658		13,147							28,805
Fair value changes on listed
equity securities	10,575		-						10,575
Interest income on bank deposits	(2,232)	(444)						(2,676)
Dividend income from financial
assets at fair value through
profit or loss	(2,040)	-						(2,040)
Share of profits less losses of
joint ventures	1,477		-						1,477
Fair value changes on derivative
financial instruments	(4,285)	-						(4,285)
Gain on disposal/deregistration
of subsidiaries	(1,478)	-						(1,478)
Net valuation gain on investment
properties	46,480		(11,509)						34,971
Unrealised exchange loss/(gain)	94,983		-						94,983
Net loss on disposal of property,
plant and equipment			122							122
Changes in working capital:
- Decrease in restricted bank
deposits	7,261		(188,619)						(181,358)
- Increase in inventories and
other contract costs	(3,958,028)	(980,280)						(4,938,308)
- (Increase)/decrease in trade
and other receivables	(363,885)	(254,402)						(618,287)
- Decrease in contract
liabilities	(779,414)	1,397,015							617,601
- Increase/(decrease) in trade
and other payables	2,540,999		735,323		-					3,276,322

- III-6 -

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

												The
												Enlarged
		The Group									Group for
		for the year									the year
		ended 31									ended 31
		December									December
	2018		Pro forma adjustments			2018
		RMB'000		RMB'000	RMB'000	RMB'000	RMB'000
		(Note 1)		(Note 2)	(Note 3)	(Note 7)
Cash (used in)/generated from
operations	(2,593,726)	887,211		-	(2,515)	(1,709,030)
Tax paid	(7,376)	(133,379)	-	-	(140,755)
Net cash (used in)/generated
from operating activities	(2,601,102)	753,832		-	(2,515)	(1,849,785)
	- - - - - - - - - - - -	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Investing activities
Purchase of property, plant and
equipment	(13,313)	(25,787)						(39,100)
Purchase of financial assets at
fair value through profit or
loss	(12,493)	(4,652)						(17,145)
Uplift of financial assets at
fair value through profit or
loss		-		2,200							2,200
Investments in joint ventures	(277,398)	-						(277,398)
Withdrawal of fixed deposits
held at banks with maturity
over three months	26,000			-						26,000
Interest received	2,509			444							2,953
Dividend received	2,040			-						2,040
Net cash generated from/
(used in) investing
activities	(272,655)	(27,795)	-	-	(300,450)
	- - - - - - - - - - - -	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Financing activities
Proceeds from bank loans and
borrowings from financial
institutions and bonds	2,553,240			572,600							3,125,840
Repayment of bank loans	(831,308)	(2,588,123)						(3,419,431)
Proceeds from loans from a
related party	6,190,930										6,190,930
Repayment of loans from a
related party	(5,173,159)								(5,173,159)
Capital injection from
non-controlling interests	5,000			-	11,210					16,210
Interest paid	(283,236)	(325,212)						(608,448)

- III-7 -

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

														The
														Enlarged
		The Group											Group for
		for the year											the year
		ended 31											ended 31
		December											December
	2018		Pro forma adjustments	2018
		RMB'000		RMB'000		RMB'000		RMB'000		RMB'000
		(Note 1)		(Note 2)		(Note 3)		(Note 7)
Capital element of lease
rentals paid (note 8)		-	(2,995)							(2,995)
Withdrawal of restricted
deposits		-	1,433,980								1,433,980
Dividend paid		-		-	(50,000)				(50,000)
Net cash (used in)/generated
from financing activities	2,461,467		(909,750)	(38,790)		-	1,512,927
	- - - - - - - - - - - -	- - - - - - - - - - - -	- - - - - - - - - - - -	- - - - - - - - - - - -		- - - - - - - - - - - -
Net (decrease)/increase in
cash and cash equivalents	(412,290)	(183,713)	(38,790)	(2,515)	(637,308)
Cash and cash equivalents at
1 January	806,023		327,162			-		-	1,133,185
Effect of foreigh exchange rate
changes	3,342			-		-		-	3,342
Cash and cash equivalents at
31 December	397,075		143,449		(38,790)	(2,515)	499,219

Notes to the Unaudited Pro Forma Financial Information

1. The financial information of the Group as at 30 June 2019 and for the year ended 31 December 2018 are extracted from the published interim report of the Group for the six months ended 30 June 2019 and the published annual report of the Group for the year ended 31 December 2018 respectively.
2. The financial information of the Target Group as at 31 May 2019 and for the year ended 31 December 2018 are extracted from the accountants' report of the Target Group as set out in Appendix II to this circular.

The functional currency and presentation currency of the Target group are RMB. For illustraive purpose, the exchange rates used when preparing the unaudited pro forma consolidated statement of financial position of the Enlarged Group is the exchange rate as at 30 June 2019 of RMB1 to HK$1.1137 and the exchange rate used when preparing the unaudited pro forma consolidated statement of profit or loss, unaudited pro forma consolidated statement of profit or loss and other comprehensive income and the unaudited pro forma consolidated statement of cash flows of the Enlarged Group is the monthly average exchange rate for the year ended 31 December 2018 of the Group of RMB1 to HK$1.171.

No representation is made that the Renminbi amounts have been, could have been or could be converted to Hong Kong dollars, or vice versa, at those rates or at any other rates.

- III-8 -

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

1. 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 financial position, the adjustments represent:
2. 1. distribution dividend of RMB50,000,000 by Xiamen Sansheng Real Estate Co., Ltd. ("Xiamen Sansheng", one of the subsidiaries of the Target Group) to its then equity holder, Fuzhou Sansheng Property Co., Ltd. ("Fuzhou Sansheng");
   2. capital injection of RMB11,210,000 by an independent third party in Fujian Shengchuang Real Estate Development Co., Ltd. ("Fujian Shengchuang", one of the subdiaries of the Target Group);
   3. the transfer of 95% of equity interest in Fujian Shengchuang held by Fuzhou Sansheng to Newco (the "Transfer") for a consideration of RMB59,418,000, which is to be fully settled by offsetting the Inter-Company Loans owing by Fuzhou Sansheng to the Target Group. The Transfer is considered as a non-cash transation and will not affect the unaudited pro forma consolidated statement of cash flows.

As at the Latest Practicable Date, the Reorganisation has been completed. Upon completion of the Reorganisation, Newco and the independent third party held 95% and 5% equity interest in Fujian Shengchuang respectively. Non-controlling interest of RMB3,127,000 was recorded in the Target Group's consolidated statement of financial position, which is determined at 5% of total equity attributable to equity interest holders of Fujian Shengchuang as at 31 May 2019 after taking into account the dividend distribution and capital injection mentioned in (3)(a) and (b) above respectively.

1. Pursuant to the Agreement, the Consideration of HK$231.0 million for the Acquisition shall be payable to the Vendor by way of issue and allotment of the Consideration Shares, being 22,000,000 new Shares, at the issue price of HK$10.5 per Consideration Share, by the Company to the Vendor on Completion Date. For the purpose of the unaudited pro forma consolidated statement of financial position, the adjustments represented the par value of HK$2,200,000 (equivalent to approximately RMB1,935,000 using the exchange rate of RMB1:HK$1.137) for the 22,000,000 new shares allotted and issued by the Company.
   Since both the Group and the Target Group are ultimately controlled by Mr Lin Rongbin before and after the Acquisition and the control is not transitory, the Acquisition is treated as a combination of businesses under common control by applying the principles and procedures stipulated in the Hong Kong Accounting Guideline 5, "Merger Accounting for Common Control Combinations". The net assets of the Target Group are combined using their existing book values from the perspective of Mr. Lin Rongbin.
2. For the purpose of the unaudited pro forma consolidated statement of financial position, the adjustments represent the offset of the Target Group's receivables from Fuzhou Sansheng of RMB671,711,000 against the loans drawn by the Group from Fuzhou Sansheng.
   Since the offset of the Target Group's receivables from Fuzhou Sansheng against the loans drawn by the Group is considered as a non-cash transaction, there is no related adjustment for the the purpose of the unaudited pro forma consolidated statement of cash flows.
3. The adjustments represent the profit and other comprehensive income attributable to non-controlling interests which is calculated as 5% of the combined profit and other comprehensive income of the Target Group for the year ended 31 December 2018. This adjustment is expected to have a continuing effect on the Enlarged Group's consolidated statement of profit or loss and consolidated statement of profit or loss and other comprehensive income.
4. The adjustment represents the estimated transaction costs (including fees to legal advisers, financial adviser, reporting accountants, valuer and other expenses) of RMB2,515,000 payable by the Enlarged Group in connection with the Re-organisation and Acquisition. This adjustment is not expected to

- III-9 -

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

have a continuing effect on the Enlarged Group's consolidated statement of profit or loss, consolidated statement of profit or loss and other comprehensive income and consolidated statement of cash flows.

1. The Group has adopted Hong Kong Financial Reporting Standards 16, Lease ("HKFRS 16") from 1 January 2019 while the Target Group had early adopted HKFRS 16 on 1 January 2016. No adjustment in respect of the Target Group's early adoption of HKFRS 16 has been made for the purpose of the unaudited pro forma consolidated statement of profit or loss, unaudited pro forma consolidated statement of profit or loss and other comprehensive income and the unaudited pro forma consolidated statement of cash flowsas the directors are of the opinion that such adjustment is insignificant.
2. 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 2019 for the unaudited pro forma consolidated statement of financial position and 31 December 2018 for the unaudited pro forma consolidated statement of profit or loss, unaudited pro forma consolidated statement of profit or loss and other comprehensive income and unaudited consolidated statement of cash flows.

- III-10 -

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

1. 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 financial position as at 30 June 2019 and the unaudited pro forma consolidated statement of profit or loss, pro forma consolidated statement of profit or loss and other comprehensive income and pro forma consolidated statement of cash flows for the year ended 31 December 2018, and related notes as set out in Part A of Appendix III to the circular dated 25 November 2019 (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 Time Fortune Investments Limited (the "Target Company") and its subsidiaries (collectively the "Target Group") (the "Proposed Acquisition") on the Group's financial position as at 30 June 2019 and the Group's financial performance and cash flows for the year ended 31 December 2018 as if the Proposed Acquisition had taken place at 30 June 2019 and 1 January 2018, respectively. As part of this process, information about the Group's financial position as at 30 June 2019 has been extracted by the Directors from the interim report of the Group for the six months ended 30 June 2019, on which a review report has been published. Information about the Group's financial performance and cash flows for the year ended 31 December 2018 has been extracted by the Directors from the consolidated financial statements of the Company for the year ended 31 December 2018, on which an audit 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").

- III-11 -

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

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.

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 2019 or 1 January 2018 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

- III-12 -

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

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.

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:

1. the pro forma financial information has been properly compiled on the basis stated;
2. such basis is consistent with the accounting policies of the Group, and
3. 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 November 2019

- III-13 -

APPENDIX IV

VALUATION REPORT OF THE PROJECT COMPANIES

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 31 August 2019 of the property interests held by the Target Companies.

Jones Lang LaSalle Corporate Appraisal and

Advisory Limited

7th Floor, One Taikoo Place,

979 King's Road, Hong Kong

tel [phone] fax [phone] Company Licence No.: C-030171

仲量聯行企業評估及諮詢有限公司

[phone]	[phone]
C-030171

The Board of Directors

Sansheng Holdings (Group) Co. Ltd.

Room 3207

The Gateway Tower 6

Tsim Sha Tsui

Kowloon, Hong Kong

25 November 2019

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 Shengchuang Real Estate Development Co., Ltd. ("Fujian Shengchuang"), Fujian Tianren Real Estate Development Co., Ltd. ("Fujian Tianren"), Fuzhou Hongsheng Real Estate Development Co., Ltd. ("Fuzhou Hongsheng") and Zhangzhou Deyousheng Real Estate Development Co., Ltd. ("Zhangzhou Deyousheng") (hereinafter together referred to as the "Target 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 31 August 2019 (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" in accordance with the HKIS Valuation Standards.

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APPENDIX IV

VALUATION REPORT OF THE PROJECT COMPANIES

We have valued the property interests in Group I which are held for sale by the Target Companies 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 Certificates/Tables or Building Ownership Certificates/Real Estate Title Certificates thereof are issued by the relevant local authorities or are in the process of application, 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.

In valuing the property interests in Group II which are held under development by the Target Companies, we have assumed that they will be developed and completed in accordance with the latest development proposals provided to us by the Target 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 Target 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.

For the property interests in Group III which are held for investment by the Target 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.

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.

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APPENDIX IV

VALUATION REPORT OF THE PROJECT COMPANIES

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 2017 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 Target Companies and have accepted advice given to us on such matters as tenure, planning approvals, statutory notices, easements, particulars of occupancy and all other relevant matters.

We have been shown copies of title documents including State-owned Land Use Rights Certificates, Real Estate Title 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 summarized the major certificates/approvals of the properties in the notes of each valuation certificate. In these summaries, we state "no" if the Target Companies has not obtained such certificates/approvals which are required for the current construction stages, and we state "portion" if the Target Companies has not yet obtained some of such certificates/approvals of the properties as these properties consist of different groups mentioned above/construction stages (different certificates/approvals are required for different groups/construction stages). We have relied considerably on the legal opinion 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 Target Companies. We have also sought confirmation from the Company and the Target 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.

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.

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VALUATION REPORT OF THE PROJECT COMPANIES

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 October 2019 by Mr. Steven Zeng who graduates with master degree having subjects in urban planning and real estate related fields and has 2 years' experience in the property valuation in the PRC, and Mr. Tony Zhai who graduates with master degree having subjects in finance and real estate related fields and has 4 years' experience in the property valuation in the PRC.

Unless otherwise stated, all monetary figures stated in this report are in Renminbi (RMB).

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 25 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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VALUATION REPORT OF THE PROJECT COMPANIES

SUMMARY OF VALUES

Abbreviation:

Group I: Completed properties held for sale by the Target Companies in the PRC

Group II: Properties held under development by the Target Companies in the PRC

Group III: Properties held for investment by the Target Companies in the PRC

"N/A": Not Available or Not Applicable

		Market value in	Market value in	Market value in	The total market
		existing state	existing state as	existing state	value in existing
		as at the	at the valuation	as at the	state as at the
No.	Property	valuation date	date	valuation date	valuation date
		RMB	RMB	RMB	RMB
		Group I:	Group II:	Group III:
1.	Project Fulin Royal	N/A	198,900,000	N/A	198,900,000
	Landscape
	（福臨御景）
	No.88
	Hongqiaohuayuan
	Xingxian
	Community
	Xiapu County
	Ningde City
	Fujian Province
	The PRC
2.	Project Binjiang	284,100,000	4,170,400,000	135,500,000	4,590,000,000
	International
	（濱江國際）
	No.96 Nanjiangbinxi
	Road
	Cangshan District
	Fuzhou City
	Fujian Province
	The PRC
3.	Project Puyue Bay	N/A	2,608,400,000	N/A	2,608,400,000
	（璞悅灣）

No.88 Xinzhou

Road

Nantong Town

Fuzhou City

Fujian Province

The PRC

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APPENDIX IV	VALUATION REPORT OF THE PROJECT COMPANIES
		Market value in	Market value in	Market value in	The total market
		existing state	existing state as	existing state	value in existing
		as at the	at the valuation	as at the	state as at the
No.	Property	valuation date	date	valuation date	valuation date
		RMB	RMB	RMB	RMB
		Group I:	Group II:	Group III:
4.	Project International	206,400,000		2,061,400,000		N/A	2,267,800,000
	Harbour（國際海岸）
	No.1 Binhu Road
	Gangwei Town
	Longhai City
	Fujian Province
	The PRC
	Total:	490,500,000		9,039,100,000		135,500,000		9,665,100,000

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		VALUATION CERTIFICATE
				Market value in
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	the valuation date
				RMB
1.	Project Fulin Royal	Project Fulin Royal Landscape is	As at the valuation	198,900,000
	Landscape（福臨御景）	located at No. 88	date, the property
	No. 88 Hongqiaohuayuan	Hongqiaohuayuan, Xingxian	was under
	Xingxian Community	Community, Xiapu County. The	construction.
	Xiapu County	locality is well served by public
	Ningde City	transportation and public
	Fujian Province	facilities.

The PRC

The property occupies 2 parcels of land with a total site area of approximately 65,357.72 sq.m. which will be developed into a residential development with a total planned gross floor area ("GFA") of approximately 219,947.46 sq.m. Details of the planned GFA of the property are set out in note 7.

The property is currently under construction and scheduled to be completed in August 2022. As advised by the Target Companies, the total construction cost of the property is estimated to be approximately RMB697,000,000, of which approximately RMB58,000,000 had been incurred up to the valuation date.

The land use rights of the property have been granted for terms of 70 years expiring on 27 November 2088 for residential use and 40 years expiring on 27 November 2058 for commercial use.

Notes:

1. Pursuant to a State-owned Land Use Rights Grant Contract dated 17 May 2017 and a Supplemental Agreement dated 26 May 2017, the land use rights of a parcel of land with a site area of approximately 65,357.70 sq.m. were contracted to be granted to Fujian Tianren, a 90% owned subsidiary of Fujian Shengchuang, for terms of 70 years for residential use and 40 years for commercial use. The total land premium was RMB93,650,000. As advised by the Target Companies, the land premium has been fully paid.
2. Pursuant to 2 Real Estate Title Certificates (for land only) - Min (2019) Xia Pu Xian Bu Dong Chan Quan Di Nos. 0006002 and 0006003, the land use rights of 2 parcels of land with a total site area of approximately 65,357.72 sq.m. have been granted to Fujian Tianren for terms of 70 years expiring on 27 November 2088 for residential use and 40 years expiring on 27 November 2058 for commercial use.

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VALUATION REPORT OF THE PROJECT COMPANIES

1. Pursuant to 2 Construction Work Planning Permits - Jian Zi Di Nos. 3509212019005 and 3509212019006 in favour of Fujian Tianren, the property with a total planned GFA of approximately 219,947.46 sq.m. has been approved for construction.
2. Pursuant to 2 Construction Work Commencement Permits - 350921201901230101 and 350921201905310201 in favour of Fujian Tianren, permissions by the relevant local authority were given to commence the construction of the property with a total planned GFA of approximately 219,947.46 sq.m.
3. Pursuant to 2 Pre-sale Permits - (Xia) Fang Yu Shou Zheng Di Nos. 1914 and 1917, Fujian Tianren is entitled to sell portion of Project Fulin Royal Landscape (representing a total GFA of approximately 35,805.60 sq.m.) to purchasers.
4. Pursuant to 2 Mortgage Contracts entered into between Fujian Tianren and Wanxiang Trust Co., Ltd., the land use rights of 2 parcels of the land with a total site area of approximately 65,357.72 sq.m. of the property were subject to the mortgages for a total loan amount of RMB250,000,000 for 15 months expiring on 31 October 2020.
5. According to the information provided by the Target Companies, the planned GFA of the property is set out as below:

					No. of Car
Group	Status	Usage	Planned GFA	Parking Space
			(sq.m.)
II	Under construction	Residential	142,954.83
		Residential (relocation house)	35,708.88
		Retail	758.55
		Car parking space	34,547.61		946
		Ancillary	5,977.59
		Total:	219,947.46		946

1. As advised by the Target Companies, various residential units with a total GFA of approximately 31,573.44 sq.m. of the property have been pre-sold to various third parties at a total consideration of RMB220,768,071, whilst various residential units with a total GFA of approximately 35,708.88 sq.m. of the property would be transferred to local government without consideration. Such portions of the property have not been legally and virtually transferred and therefore we have included the residential 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.
2. 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 RMB6,000 to RMB8,500 per sq.m. for residential units, RMB10,000 to RMB12,000 per sq.m. for retail units and RMB70,000 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.
3. The market value of the property as if completed as at the valuation date was estimated to be RMB1,130,000,000.
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:
5. 1. Fujian Tianren has legally obtained the land use rights of the property and entitled to occupy and use of the parcels of land, whilst the transfer and otherwise dispose of the parcels of land are subject to relevant mortgage contracts and relevant laws in the PRC.

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VALUATION REPORT OF THE PROJECT COMPANIES

1. Fujian Tianren has obtained the requisite approvals in respect of the actual development and construction.
2. Fujian Tianren has the right to pre-sell portion of the property based on the Pre-sale Permits 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 only)	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	N/A

13. 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 Target Companies	N/A
Group II - Held under development by the Target Companies	198,900,000
Group III - Held for future development by the Target Companies	N/A
Total:	198,900,000

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VALUATION REPORT OF THE PROJECT COMPANIES

VALUATION CERTIFICATE

		Particulars of
No. Property	Description and tenure	occupancy

Market value in existing state as at the valuation date

RMB

2.	Project Binjiang	Project Binjiang International is
	International（濱江國際）	located at No. 96 Nanjiangbinxi
	No. 96 Nanjiangbinxi	Road, Cangshan District, Fuzhou
	Road	City. The locality is well served
	Cangshan District	by public transportation and
	Fuzhou City	public facilities.
	Fujian Province
	The PRC	It occupies a parcel of land with
		a site area of approximately
		56,988.00 sq.m. which will be
		developed into a commercial
		development with small office/
		home office ("Soho"), hotel,

retail, carparking space, and ancillary components in two phases. Phase I of this project has been completed in May 2016, while Phase II is currently under construction and scheduled to be completed in May 2020.

The property comprises the unsold units of Phase I and Phase II of this project. Details of the gross floor area ("GFA") or planned GFA of the property are set out in note 9.

The unsold units of Phase I can be divided into two parts ("Part A" and "Part B").

Part A: portion of unsold units of Phase I with a total GFA of approximately 7,503.87 sq.m. which are currently held for investment.

Part B: remaining portion of unsold units of Phase I with a total GFA of approximately 10,779.95 sq.m. which are currently held for sale.

As advised by the Target Companies, the total construction cost of Phase II is estimated to be approximately RMB2,203,000,000, of which approximately RMB1,931,000,000 had been incurred up to the valuation date.

The land use rights of the property have been granted for a term of 40 years expiring on 13 April 2054 for commercial use.

As at the valuation date, Part A of the property was rented to various tenants, and Part B was vacant for sale, whilst Phase

1. was under construction.

4,590,000,000

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VALUATION REPORT OF THE PROJECT COMPANIES

Notes:

1. Pursuant to a State-owned Land Use Rights Grant Contract dated 8 November 2013 and a Supplemental Agreement dated 3 December 2013, the land use rights of a parcel of land with a site area of approximately 56,988.00 sq.m. were contracted to be granted to Fujian Shengchuang for a term of 40 years for commercial use. The total land premium was RMB2,772,000,000. As advised by the Target Companies, the land premium has been fully paid.
2. Pursuant to a State-owned Land Use Rights Certificate - Rong Guo Yong (2015) Di No. 33535782645, the land use rights of a parcel of land with a site area of approximately 56,988.00 sq.m. have been granted to Fujian Shengchuang for a term of 40 years expiring on 13 April 2054 for commercial use.
3. Pursuant to 8 Construction Work Planning Permits - Jian Zi Di Nos. 350101201410129, 350101201410061, 350101201460029, 350101201710130, 350101201610132, 350101201710051, 350101201710056 and 350101201810140 in favour of Fujian Shengchuang, Project Binjiang International with a total planned GFA of approximately 321,845.36 sq.m. has been approved for construction.
4. Pursuant to 7 Construction Work Commencement Permits - Nos. 350005201407020101,
   350005201412170101, 350100201610200101, 350100201706300201, 350100201709140101, 350100201805160101 and 350100201808210101 in favour of Fujian Shengchuang, permissions by the relevant local authority were given to commence the construction of Project Binjiang International with a total planned GFA of approximately 321,845.36 sq.m.
5. Pursuant to 5 Pre-sale Permits - (2014) Rong Fang Xu Zi Di Nos. 0187 and 0188, (2017) Rong Fang Xu Zi Di Nos. 0004 and 0099, and Rong Fang Xu Zi Di No. 0041, Fujian Shengchuang is entitled to sell portion of Project Binjiang International (representing a total GFA of approximately 171,559.06 sq.m.) to purchasers.
6. Pursuant to a Construction Work Completion and Inspection Report in favour of Fujian Shengchuang, the construction of Phase I of Project Binjiang International (representing a total GFA of approximately 83,585.88 sq.m.) has been completed and passed the inspection acceptance.
7. Pursuant to 219 Real Estate Title Certificates, portions of the property with a total GFA of approximately 16,104.04 sq.m are owned by Fujian Shengchuang.
8. Pursuant to 3 Mortgage Contracts entered into among Fujian Shengchuang, Bohai International Trust Co., Ltd. and Zhongrong International Trust Co. Ltd., Phase II of Project Binjiang International and 219 soho and retail units with a total GFA of approximately 16,104.26 sq.m. were subject to the mortgages for a total loan amount of RMB545,000,000 for 24 months expiring on 5 June 2021.

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VALUATION REPORT OF THE PROJECT COMPANIES

9. According to the information provided by the Target Companies, the GFA/planned GFA of the property are set out as below:

				GFA/	No. of Car
Group	Part	Status	Usage	plannedGFA	Parking Space
				(sq.m.)
I	Part A of Phase I	Completed	Soho	2,906.64
			Retail	4,597.23
			Sub-total:	7,503.87
III	Part B of Phase I	Completed	Soho	5,362.74
			Retail	5,417.21
			Sub-total:	10,779.95
II	Phase II	Under	Soho	111,561.34
		construction	Retail	9,644.21
			Hotel	44,841.64
			Car parking space	70,000.00		1,250
			Ancillary	2,212.29
			Sub-total:	238,259.48		1,250
			Grand total:	256,543.30		1,250

1. As advised by the Target Companies, various soho units of Phase II with a total GFA of approximately 64,884.05 sq.m. of the property have been pre-sold to various third parties at a total consideration of RMB1,946,135,998. Such portions of the property have not been legally and virtually transferred and therefore we have included the soho 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.
2. As at the valuation date, pursuant to 17 Tenancy Agreements, Part A of Phase I with a total GFA of approximately 7,503.87 sq.m. was rented to various tenants with the expiry dates between 30 September 2019 and 14 July 2025 at a monthly unit rental ranging from RMB20 to RMB330 per sq.m., exclusive of VAT and management fees.
3. Our valuation has been made on the following basis and analysis:
4. 1. 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 RMB25,000 to RMB35,000 per sq.m. for soho units, RMB35,000 to RMB45,000 per sq.m. for retail units on the first floor, 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;
   2. we have considered the actual rents in the existing tenancy agreements and also compared with similar properties located in the same business circle within reasonable walking distance from the subject property. We adopted market rent when calculating the reversionary rental income after the expiry of the existing leases of the properties;
   3. market rents of the comparable properties are in the range of RMB5.0 to RMB6.5 per sq.m. per day for retail units and RMB2.0 to RMB2.5 per sq.m. per day for office units, 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

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VALUATION REPORT OF THE PROJECT COMPANIES

1. 1. based on our research, the stabilized market yield of similar retail properties is in the range of 4.5% to 5.5%, and the market yield of similar office properties is in the range of 4.0% to 5.0% as at the valuation date. Considering the location and characteristics of the property, we have applied market yield of 5% for retail units and 4.5% for office units in our valuation.
2. The market value of Phase II of the property as if completed as at the valuation date was estimated to be RMB4,770,000,000.
3. 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:
4. 1. Fujian Shengchuang has legally obtained the land use rights of the property and entitled to occupy and use of the parcel of land, whilst the transfer and otherwise dispose of the parcel of land are subject to relevant mortgage contracts and relevant laws in the PRC;
   2. Fujian Shengchuang has obtained the requisite approvals in respect of the actual development and construction;
   3. Fujian Shengchuang has the right to pre-sell portion of the property based on the Pre-sale Permits mentioned in note 5; and
   4. Fujian Shengchuang has the right to occupy, use, benefit and dispose of the building ownership in accordance with the Real Estate Title Certificates mentioned in note 7.
5. A summary of major certificates/approvals is shown as follows:

a.	State-owned Land Use Rights Grant Contract	Yes
b.	State-owned Land Use Rights Certificate	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	Portion
g.	Real Estate Title Certificate	Portion

16. 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 Target Companies	284,100,000
Group II - Held under development by the Target Companies	4,170,400,000
Group III - Held for investment by the Target Companies	135,500,000
Total:	4,590,000,000

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		VALUATION CERTIFICATE
				Market value in
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	the valuation date
				RMB
3.	Project Puyue Bay	Project Puyue Bay is located at	As at the valuation	2,608,400,000
	（璞悅灣）	No. 88 Xinzhou Road, Nantong	date, the property
	No. 88 Xinzhou Road	Town, Fuzhou City. The locality	was under
	Nantong Town	is a newly developed area where	construction.
	Fuzhou City	public facilities around and
	Fujian Province	public transportation network are
	The PRC	under further improvement.

The property occupies 2 parcels of land with a total site area of approximately 77,982.90 sq.m. which will be developed into a residential development with a total planned gross floor area ("GFA") of approximately 257,291.99 sq.m. Details of the planned GFA of the property are set out in note 7.

The property is currently under construction and scheduled to be completed in September 2021. As advised by the Target Companies, the total construction cost of the property is estimated to be approximately RMB1,057,000,000, of which approximately RMB789,000,000 had been incurred up to the valuation date.

The land use rights of the property have been granted for terms of 70 years expiring on 25 April 2087 for residential use and 40 years expiring on 25 April 2057 for commercial use.

Notes:

1. Pursuant to 2 State-owned Land Use Rights Grant Contracts dated 14 November 2016 and 2 Supplemental Agreements, the land use rights of 2 parcels of land with a total site area of approximately 77,982.90 sq.m. were contracted to be granted to Fuzhou Hongsheng, an 80% owned subsidiary of Fujian Shengchuang, for terms of 70 years for residential use and 40 years for commercial use. The total land premium was RMB1,725,000,000.00. As advised by the Target Companies, the land premium has been fully paid.
2. Pursuant to 2 Real Estate Title Certificates (for land only) - Min (2017) Min Hou Xian Bu Dong Chan Quan Di Nos. 0014322 and 0014323, the land use rights of 2 parcels of land with a total site area of approximately 77,982.90 sq.m. have been granted to Fuzhou Hongsheng for terms expiring on 25 April 2087 for residential use and 25 April 2057 for commercial use.

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VALUATION REPORT OF THE PROJECT COMPANIES

1. Pursuant to 5 Construction Work Planning Permits - Jian Zi Di Nos. 350121201700153, 350121201700138, 350121201700097, 350121201700105 and 350121201800059 in favour of Fuzhou Hongsheng, the property with a total planned GFA of approximately 257,291.99 sq.m. has been approved for construction.
2. Pursuant to 3 Construction Work Commencement Permits - Nos. 350121201711130101, 350121201708250101 and 350121201804180101 in favour of Fuzhou Hongsheng, permissions by the relevant local authority were given to commence the construction of the property with a total planned GFA of approximately 257,291.99 sq.m.
3. Pursuant to 7 Pre-sale Permits - (2018) Hou Fang Xu Zi Di Nos. 034 and 062, (2019) Hou Fang Xu Zi Di Nos. 028, 029, 033, 050 and 057, Fuzhou Hongsheng is entitled to sell portions of the property (representing a total GFA of approximately 159,042.00 sq.m.) to purchasers.
4. Pursuant to a Mortgage Contract entered into between Fuzhou Hongsheng and Fuzhou Branch of China Bohai Bank, the land use rights of 2 parcels of the land with a total site area of approximately 77,982.90 sq.m. of the property were subject to a mortgage for a loan amount of RMB1,800,000,000 for a term of 36 months expiring on 13 November 2020.
5. According to the information provided by the Target Companies, the planned GFA of the property is set out as below:

					No. of Car
Group	Status	Usage	Planned GFA	Parking Space
			(sq.m.)
II	Under construction	Residential	170,533.43
		Retail	23,272.96
		Car parking spaces	36,021.66		1,464
		Ancillary	27,463.94
		Total:	257,291.99		1,464

1. As advised by the Target Companies, various residential units with a total GFA of approximately 85,771.37 sq.m. of the property have been pre-sold to various third parties at a total consideration of RMB1,350,332,499, whilst all the retail units of the property with a total planned GFA of approximately 23,272.96 sq.m. would be sold to local government at a fixed unit price of RMB3,000 per sq.m. 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.
2. 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 RMB14,000 to RMB21,000 per sq.m. for residential units and RMB100,000 to RMB160,000 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.
3. The market value of the property as if completed as at the valuation date was estimated to be RMB3,105,500,000.

- IV-15 -

APPENDIX IV

VALUATION REPORT OF THE PROJECT COMPANIES

1. 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:
2. 1. Fuzhou Hongsheng has legally obtained the land use rights of the property and entitled to occupy and use of the parcels of land, whilst the transfer and otherwise dispose of the parcels of land are subject to relevant mortgage contract and relevant laws in the PRC;
   2. Fuzhou Hongsheng has obtained the requisite approvals in respect of the actual development and construction; and
   3. Fuzhou Hongsheng has the right to pre-sell portions of the property based on the Pre-sale Permits mentioned in note 5.
3. 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 only)	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	N/A

13. 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
	valuation date
Group	(RMB)
Group I - Held for sale by the Target Companies	N/A
Group II - Held under development by the Target Companies	2,608,400,000
Group III - Held for investment by the Target Companies	N/A
Total:	2,608,400,000

- IV-16 -

APPENDIX IV

VALUATION REPORT OF THE PROJECT COMPANIES

VALUATION CERTIFICATE

No.	Property	Description and tenure
4.	Project International	Project International Harbour is
	Harbour（國際海岸）	located at No. 1 Binhu Road,
	No. 1 Binhu Road	Gangwei Town, Longhai City.
	Gangwei Town	There are several residential
	Longhai City	projects nearby, however, the
	Fujian Province	neighboring public transportation
	The PRC	and amenities are under further
		improvement.
		It occupies a parcel of land with
		a site area of approximately
		237,697.43 sq.m., and will be
		developed into a residential and
		villa complex in two phases.
		Phase I of this project was
		completed in December 2018,
		whilst Phase II is currently under
		construction and scheduled to be
		completed in December 2020.
		The property comprises the
		unsold units of Phase I and Phase
		II of this project. Details of the
		GFA or planned GFA of the
		property are set out in note 9.
		As advised by the Target
		Companies, the total construction
		cost of Phase II is estimated to
		be approximately
		RMB950,000,000, of which
		approximately RMB848,000,000
		had been incurred up to the
		valuation date.
		The land use rights of the
		property have been granted for
		terms of 70 years expiring on 13
		December 2075 for residential
		use and 40 years expiring on 13
		December 2045 for commercial
		use.

Notes:

	Market value in
Particulars of	existing state as at
occupancy	the valuation date
	RMB
As at the valuation	2,267,800,000
date, the unsold
units of Phase I
were vacant for
sale, and Phase II
was under
construction.

1. Pursuant to a State-owned Land Use Rights Grant Contract dated 31 May 2005 and a Supplemental Agreement dated 30 November 2009, the land use rights of a parcel of land with a site area of approximately 336,127.00 sq.m. (including the land parcel of this project) were contracted to be granted to Zhangzhou Deyousheng, an indirectly wholly-owned subsidiary of Fujian Shengchuang for terms of 70 years for residential use and 40 years for commercial use. The total land premium was RMB113,174,637. As advised by the Target Companies, the land premium has been fully paid.

- IV-17 -

APPENDIX IV

VALUATION REPORT OF THE PROJECT COMPANIES

1. Pursuant to a Real Estate Title Certificate (for land only) - Min (2017) Long Hai Shi Bu Dong Chan Quan Di No. 0006600, the land use rights of a parcel of land with a site area of approximately 237,697.43 sq.m. have been granted to Zhangzhou Deyousheng, a wholly-owned subsidiary of Fujian Shengchuang for terms of 70 years expiring on 13 December 2075 for residential use and 40 years expiring on 13 December 2045 for commercial use.
2. Pursuant to 7 Construction Work Planning Permits - Jian Zi Di Nos. 350681201500010, 350681201500030, 350681201600003, 350681201610011, 350681201700002, 350681201700035, and 350681201700051, in favour of Zhangzhou Deyousheng, Project International Harbour with a total planned GFA of approximately 411,081.36 sq.m. has been approved for construction.
3. Pursuant to 7 Construction Work Commencement Permits - Nos. FJSGXK0596LH201500014,
   FJSGXK0596LH201500033,FJSGXK0596LH201600009,FJSGXK0596LH201600025, FJSGXK0596LH201700007, FJSGXK0596LH201700023 and FJSGXK0596LH201700045, in favour of Zhangzhou Deyousheng, permissions by the relevant local authority were given to commence the construction of Project International Harbour with a total planned GFA of approximately 411,081.36 sq.m.
4. Pursuant to 33 Pre-sale Permits, Zhangzhou Deyousheng is entitled to sell portions of Project International Harbour (representing a total GFA of approximately 339,235.60 sq.m.) to purchasers.
5. Pursuant to 4 Construction Work Completion and Inspection Reports in favour of Zhangzhou Deyousheng, the construction of Phase I of Project International Harbour (representing a total GFA of approximately 213,387.75 sq.m.) has been completed and passed the inspection acceptance.
6. Pursuant to 43 Real Estate Title Certificates, portions of this project with a total GFA of approximately 10,623.26 sq.m are owned by Zhangzhou Deyousheng.
7. Pursuant to 3 Mortgage Contracts entered into among Zhangzhou Deyousheng, JIC Trust Co., Ltd., China Everbright Bank and Huaxia Bank, the land use rights of portion of the subject land parcel (Phase II of Project International Harbour) with a site area of approximately 81,422.48 sq.m. and various residential and retail units with a total GFA of approximately 9,102.20 sq.m. of Phase I of this project were subject to the mortgages for a total loan amount of RMB1,519,536,864 with the expiry dates between 19 October 2020 and 25 February 2022.
8. According to the information provided by the Target Companies, the GFA/planned GFA of the property is set out as below:

				GFA/planned	No. of Car
Group	Part	Status	Usage	GFA	Parking Space
				(sq.m.)
I	Phase I (unsold	Completed	Residential	1,812.12
	portion only)		Villa	6,568.56
			Retail	5,558.66
			Car parking space	9,265.15		315
			Sub-total:	23,204.49		315
II	Phase II	Under	Residential	138,752.99
		construction	Villa	17,991.93
			Retail	3,753.24
			Car parking space	18,814.99		472
			Ancillary	17,161.75
			Sub-total:	196,474.90		472
			Grand total:	219,679.39		787

- IV-18 -

APPENDIX IV

VALUATION REPORT OF THE PROJECT COMPANIES

1. As advised by the Target Companies, various residential units, retail units and villa units with a total GFA of approximately 4,535.72 sq.m. of the Phase I of the property have been pre-sold to various third parties at
2. 1. total consideration of RMB75,781,618. 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.
3. As advised by the Target Companies, various residential units and villa units with a total GFA of approximately 146,073.15 sq.m. of the Phase II of the property have been pre-sold to various third parties at a total consideration of RMB2,077,127,109. 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.
4. 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 RMB11,000 to RMB15,000 per sq.m. for residential units, RMB15,000 to RMB20,000 per sq.m. for villa units, RMB11,000 to RMB16,000 per sq.m. for retail units and RMB70,000 to RMB100,000 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.
5. The market value of Phase II of the property as if completed as at the valuation date was estimated to be RMB2,300,300,000.
6. 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:
7. 1. Zhangzhou Deyousheng has legally obtained the land use rights of the property and the building ownership rights mentioned in note 7 and entitled to occupy and use of the parcel of land and relevant buildings, whilst the transfer and otherwise dispose of the parcel of land and relevant buildings are subject to relevant mortgage contracts and relevant laws in the PRC;
   2. Zhangzhou Deyousheng has obtained the requisite approvals in respect of the actual development and construction; and
   3. Zhangzhou Deyousheng has the right to pre-sell portions of the property based on the Pre-sale Permits mentioned in note 5.
8. 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 only)	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	Portion
g.	Real Estate Title Certificate	Portion

- IV-19 -

APPENDIX IV

VALUATION REPORT OF THE PROJECT COMPANIES

16. 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 Target Companies	206,400,000
Group II - Held under development by the Target Companies	2,061,400,000
Group III - Held for investment by the Target Companies	N/A
Total:	2,267,800,000

- IV-20 -

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 22,000,000 Consideration Shares at the issue price of HK$10.5 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$0.10 each	200,000,000
Issued and fully paid or to be credited as fully paid:	HK$
419,114,000	Shares in issue as at the Latest Practicable Date	41,911,400
22,000,000	Consideration Shares to be allotted and issued under	2,200,000
	the Agreement
441,114,000	Shares of HK$0.10 each	44,111,400

3. DISCLOSURE OF INTERESTS

1. 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:

- V-1 -

APPENDIX V		GENERAL INFORMATION
Long position in the Shares
		Approximate
		Number	percentage
		of Shares	of issued
Name of Director	Nature of interest	held	Shares3
Mr. Lin	Interest of controlled	296,348,1271	70.71%
	corporation
Ms. Cheng2	Interest of spouse	296,348,127	70.71%

Notes:

1. Mega Regal is the beneficial owner of these 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.
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 419,114,000.

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.

1. 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:

- V-2 -

APPENDIX V	GENERAL INFORMATION
Long position in the Shares
		Approximate
		Number	percentage
		of Shares	of issued
Name	Nature of interest	held	Shares3
Mega Regal	Beneficial owner	296,348,1271	70.71%
Modern Times	Interest of controlled	296,348,1271	70.71%
	corporation
Dongxing Securities	Person having security	234,231,7752	55.89%
(Hong Kong)	interest in Shares
Financial Holdings
Limited
	Beneficial owner	17,236,625	4.11%
Dongxing Securities	Interest of controlled	251,468,4003	60.00%
Co., Ltd	corporation
China Orient Asset	Interest of controlled	251,468,4003	60.00%
Management	corporation
Corporation
Springboard Holdings	Beneficial owner	41,784,9754	9.97%
Limited
Mr. Lau Luen Hung,	Interest of controlled	41,784,9754	9.97%
Thomas	corporation

Notes:

1. Mega Regal is wholly-owned by 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.
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.
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 419,114,000.

- V-3 -

APPENDIX V

GENERAL INFORMATION

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

1. 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 2018 annual report and the memorandum and articles of association of the Company.

(ii) Revolving Facilities

Revolving facilities in the aggregate principal amount of RMB4,500,000,000 were provided by Fuzhou Sansheng to the Group on 18 August 2017 and 28 September 2017. On 15 June 2019, the Group entered into a renewal of finance contract with Fuzhou Sansheng to extend the settlement date of the revolving facilities to 18 August 2022. For further details, please refer to the 2019 interim report of the Company.

(iii) Joint Venture Formation

On 7 July 2017, Fuzhou Shangsheng Investment Co. Ltd*（福州上盛投資有限公司） ("Fuzhou Shangsheng"), 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.

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, who is 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.

- V-4 -

APPENDIX V

GENERAL INFORMATION

Save as disclosed above together with the Agreement (together with the transactions contemplated thereunder) and the Master Agreement (as amended by the Supplemental Agreement, together with the transactions contemplated thereunder), as at the Latest Practicable Date, none of the Directors were materially interested in any contract or arrangement subsisting which was significant in relation to the business of the Enlarged Group.

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 had 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 2018 (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 competes or are likely to compete, either directly or indirectly, with business of the Group which interests would be required to be disclosed under Rule 8.10 of the Listing Rules if the Director were a controlling shareholder of the Company were as follows:

	Name of			Nature of
	Director/close			interest in the	Business of the
	associate	Name of company	Project	company	company
1.	Mr. Lin	Fujian Wuhe	Yang Ting	being a director	Real estate
		Construction	Garden	and shareholder	development
		Development Co., Ltd.*	（楊庭花園）	with 51%
		（福建五和建設發展有限公司）		interest
2.	Mr. Lin	Fujian Wuhe	International	being a director	Real estate
		Construction	Park（國際公園）	and shareholder	development
		Development Co., Ltd.*		with 51%
		（福建五和建設發展有限公司）		interest
3.	Mr. Lin	Yunsheng (Fujian) Real	Viceroy Mansion	being a	Real estate
		Estate Co., Ltd.*（運盛（福	（百督府）	shareholder with	development
		建）地產有限公司）		50% interest
4.	Mr. Lin	Fujian Minqiao Real	International	being a director	Real estate
		Estate Development Co.,	Center	and shareholder	development
		Ltd.*（福建閩僑房地產開發	（國際中心）	with 100%
		有限公司）		interest
5.	Mr. Lin	Minhou County	Tuscany 2	being a	Real estate
		Headquarters Park Real	（托斯卡納2期）	shareholder with	development
		Estate Co., Ltd.*（閩侯縣		100% interest
		總部園房地產有限公司）

- V-5 -

APPENDIX V		GENERAL INFORMATION
	Name of			Nature of
	Director/close			interest in the	Business of the
	associate	Name of company	Project	company	company
6.	Mr. Lin	Fuzhou Shenglong Real	Puyue Binjiang	being a	Real estate
		Estate Development Co.,	（璞悅濱江）	shareholder with	development
		Ltd.*（福州盛隆房地產開發		100% interest
		有限公司）
7.	Mr. Lin	Jinan Sansheng Real	International	being a director	Real estate
		Estate Development Co.,	Park（國際公園）	and shareholder	development
		Ltd.*（濟南三盛房地產開發		with 100%
		有限公司）		interest
8.	Mr. Lin	Fujian Province Kowloon	Puyue Bay	being a director	Real estate
		Real Estate Co., Ltd.*	（璞悅灣）	and shareholder	development
		（福建省九龍房地產有限公司）		with 49.8%
				interest
9.	Mr. Lin	Fujian Province Kowloon	Central Park	being a director	Real estate
		Real Estate Co., Ltd.*	（中央公園）	and shareholder	development
		（福建省九龍房地產有限公司）		with 49.8%
				interest

• For identification only

Having considered his/its ownership of property projects in the PRC, Mr. Lin, Modern Times and Mega Regal (each a "Covenantor" and collectively, the "Covenantors") entered into 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.

Pursuant to the Deed of Non-Competition as mentioned above, among other matters, when the Covenantor or any of his/its close associates and/or companies controlled by him/it (excluding any member of the Group) is offered or becomes aware of any auction, bidding, offer for sale, project or new business opportunity that relates to PRC property development business ("New Business Opportunity"), he/it shall give the Company a first right of refusal to participate or engage in such New Business Opportunity and using his/its best endeavours to procure that such New Business Opportunity is offered to the Group on terms no less favourable than the terms on which the same is offered to him/it and or his/its close associates and/or companies controlled by him/it. The Covenantors or any of his/its close associates and /or companies controlled by him/it (excluding any member of the Group) will be entitled to pursue the New Business Opportunity on terms no more favourable than the terms offered to the Group if he/it has received a notice from a board committee declining the New Business Opportunity. The board committee comprising the independent non-executive Directors will make the decision after reviewing, among others, the particulars of the property projects, market researches and feasibility studies prepared by investment department of the Company. Such mechanism did not apply to the 9 existing property projects disclosed above as they had been acquired by Mr. Lin in or prior to 2017 and most of the units had been pre-sold and is expected to be delivered by 2020.

- V-6 -

APPENDIX V

GENERAL INFORMATION

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) were 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 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 2018, being the date to which the latest published audited consolidated financial statements of the Group were made up.

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:

1. the placing agreement dated 14 November 2017 entered into between the Company and Industrial Bank Co., Ltd Hong Kong Branch, as placing agent ("Placing Agent"), pursuant to which the Company has agreed to issue, and the Placing Agent has conditionally agreed to procure, on a best effort basis, subscriber to subscribe in cash for bonds in an aggregate principal amount of up to US$135,000,000 (the "Placing of Bonds");
2. in relation to the Placing of Bonds, (i) the agency agreement dated 17 November 2017 entered into between the the Company, The Bank of New York Mellon, London Branch as principal paying agent, The Bank of New York Mellon SA/NV, Luxembourg Branch as registrar and as transfer agent and any other agents appointed thereof; (ii) the keepwell deed dated 17 November 2017 entered into between the Company, Mr. Lin, Ms. Cheng and the Placing Agent in relation to

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APPENDIX V

GENERAL INFORMATION

certain undertakings to the Placing Agent; (iii) the liquidity support deed dated 17 November 2017 entered into between the Company, Fuzhou Sansheng Investment as supporting entity and The Bank of New York Mellon, Hong Kong Branch as security trustee; and (iv) the trust deed dated 17 November 2017 entered into between the Company and certain other parties to consititute the bonds.

1. the agreement dated 30 June 2018 (the "LQ Agreement") entered into between Xiamen Yashen Property Development Limited* （廈門雅深房地產開發有限公司） ("Xiamen Yashen") and Fuzhou Shangsheng, pursuant to which Xiamen Yashen agreed to contribute to the registered capital of Fuzhou Shengxin Property Development Company Limited* （福州盛欣房地產開發有限公司） ("LQ Project Co"), a non-wholly-owned subsidiary of the Company, in the amount of approximately RMB208,160,000;
2. the agreement dated 30 June 2018 entered into between Fuzhou Shengxuan Investment Limited* （福州盛軒投資有限公司） ("Fuzhou Shengxuan"), a non-wholly-owned subsidiary of the Company, with Xiamen Yashen, pursuant to which Xiamen Yashen agreed to contribute to the registered capital of Fuzhou Shengquan Property Development Company Limited* （福州盛全房地產開發有限公 司）, a wholly-owned subsidiary of Fuzhou Shengxuan, in the amount of RMB9,608,000;
3. the agreement dated 28 August 2018 entered into between Fuzhou Shangsheng, the LQ Project Co and Xiamen Yashen, pursuant to which the parties agreed to terminate the LQ Agreement and other relevant documents;
4. 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;
5. the Deed of Non-Competition;
6. the Master Agreement (as amended by the Supplemental Agreement); and
7. the Agreement.

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APPENDIX V

GENERAL INFORMATION

11. EXPERT AND CONSENTS

The following is the qualification of the experts whose opinions or advice are contained in this circular:

Name	Qualification
Jones Lang LaSalle	Independent Valuer
Corporate Appraisal and
Advisory Limited
Crescendo Capital Limited	A corporation licensed to carry out Type 6 (advising on
	corporate finance) regulated activity under the SFO
KPMG	Certified Public Accountants
Commerce & Finance Law	Legal advisers as to PRC laws
Offices

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.

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 2018 (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

1. 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 6 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.
2. The registered office of the Company is situated at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.

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APPENDIX V

GENERAL INFORMATION

1. 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.
2. 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.
3. In the event of inconsistency, the English text of this circular shall prevail over the Chinese text hereof.

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:

1. the memorandum and articles of association of the Company;
2. the annual reports of the Company for each of the two years ended 31 December 2017 and 2018 and the interim report of the Company for the six months ended 30 June 2019;
3. 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;
4. 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;
5. the letter from the Independent Board Committee dated 25 November 2019, the text of which is set out on pages 30 to 31 of this circular;
6. the letter from the Crescendo dated 25 November 2019, the text of which is set out on pages 32 to 66 of this circular;
7. the material contracts referred to in the section headed "Material Contracts" in this appendix;
8. the written consent as referred to under the section headed "Expert and consents" in this appendix; and
9. this circular.

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NOTICE OF THE EGM

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 Lotus Room, 6/F., Marco Polo Hong Kong Hotel, No. 3 Canton Road, Harbour City, Tsim Sha Tsui, Kowloon, Hong Kong on Friday, 13 December 2019 at 9:30 a.m. for the purpose of considering and, if thought fit, passing with or without modification the following resolutions as a ordinary resolutions of the Company:

ORDINARY RESOLUTION

1. "THAT
2. 1. the Agreement (as defined in the circular of the Company dated 25 November 2019 (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 27 September 2019 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$231.0 million, which shall be satisfied by the way of the allotment and issue of 22,000,000 new shares in the share capital of the Company (each a "Consideration Share") at the issue price of HK$10.5 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;
   2. 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;
   3. 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

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NOTICE OF THE EGM

1. 1. 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
3. 1. the Master Agreement (as defined in Circular) as amended by the Supplemental Agreement (as defined in the Circular) (a copy of the Master Agreement together with the Supplemental Agreement is marked "C" and signed by the chairman of the meeting for identification purpose and has been tabled at the meeting), and the transactions contemplated thereunder (including (i) in the event the Acquisition is not completed, the annual caps in the amounts of RMB28.0 million, RMB51.0 million and RMB47.0 million for the period from 6 August 2019 to 31 December 2019 and for the two years ending 31 December 2020 and 2021, respectively; and (ii) in the event the Acquisition is completed, the annual caps in the amounts of RMB28.0 million, RMB71.0 million and RMB69.0 million for the period from 6 August 2019 to 31 December 2019 and for the two years ending 31 December 2020 and 2021, respectively) be and are hereby approved, confirmed and ratified; and
   2. 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 Master Agreement and Supplemental 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."

	By order of the Board
	Sansheng Holdings (Group) Co. Ltd.
	Lin Rongbin
	Chairman
Hong Kong, 25 November 2019
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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NOTICE OF THE EGM

Notes:

1. The transfer books and register of members of the Company will be closed from Tuesday, 10 December 2019 to Friday, 13 December 2019, 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 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 Monday, 9 December 2019.
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 Shops 1712-1716, 17th 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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