China Starch : (1) RE-ELECTION OF DIRECTORS, (2) GRANT OF GENERAL MANDATES TO ISSUE AND BUY BACK SHARES, AND (3) NOTICE OF ANNUAL GENERAL MEETING

April 14, 2021 at 12:05 am

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in China Starch Holdings Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, stockbroker or licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

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

CHINA STARCH HOLDINGS LIMITED

中國澱粉控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 3838)

1. RE-ELECTIONOF DIRECTORS,
GRANT OF GENERAL MANDATES TO ISSUE AND BUY BACK SHARES,
1. AND
2. NOTICE OF ANNUAL GENERAL MEETING

A notice convening the AGM to be held in the conference room at Shandong Shouguang Juneng Golden Corn Development Co., Ltd, North Middle Section of Anshun Road, Shouguang, Shandong, PRC at 11:00 a.m. on 18 May 2021 (Tuesday) is set out on pages 18 to 23 of this circular.

Whether or not you intend to attend the AGM in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the Company's branch share registrar and transfer office in Hong Kong, Tricor Investor Services Limited at Level 54, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time of the AGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the AGM or any adjournment thereof should you so wish.

15 April 2021

		CONTENTS
			Page
Definitions . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Re-election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Grant of General Mandate, Buy-back Mandate and Extension Mandate . . . . . . . . . . . .	5
Annual General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Actions to be taken . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Recommendations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Appendix I	-	Details of the Directors proposed to be re-elected
		at the AGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Appendix II	-	Explanatory Statement on the Buy-back Mandate . . . . . . . . . . . . . . . .	12
Notice of Annual General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18

- i -

DEFINITIONS

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

"Annual General Meeting" or "AGM"

"Articles"

"associates"

"Board"

"Branch Share Registrar"

"Buy-back Mandate"

"close associates"

"Companies Law"

"Company"

"core connected person"

"Director(s)"

"Extension Mandate"

the annual general meeting of the Company to be convened and held in the conference room at Shandong Shouguang Juneng Golden Corn Development Co., Ltd, North Middle Section of Anshun Road, Shouguang, Shandong, PRC at 11:00 a.m. on 18 May 2021 (Tuesday) and any adjournment thereof, the notice of which is set out on pages 18 to 23 of this circular

the articles of association of the Company, as amended from time to time

has the same meaning as defined under the Listing Rules

the board of Directors

Tricor Investor Services Limited, located at Level 54, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong, the branch share registrar and transfer office of the Company in Hong Kong

a general and unconditional mandate proposed to be granted to the Directors to enable them to buy back Shares, the aggregate number of which shall not exceed 10% of the total number of issued Shares as at the date of passing the relevant resolution at the AGM

has the same meaning as defined under the Listing Rules

the Companies Law, Chapter 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands

China Starch Holdings Limited, a company incorporated under the laws of the Cayman Islands with limited liability and the Shares of which are listed on the main board of the Stock Exchange

has the same meaning as defined under the Listing Rules

director(s) of the Company

a general and unconditional mandate proposed to be granted to the Directors to the effect that any Shares bought back under the Buy-back Mandate will be added to the total number of Shares which may be allotted, issued and dealt with under the General Mandate

- 1 -

DEFINITIONS

"General Mandate"

"Group"

"Hong Kong"

"Latest Practicable Date"

"Listing Rules"

"Nomination Committee"

"PRC"

"RMB"

"SFO"

"Share(s)"

"Shareholder(s)"

"Stock Exchange"

"substantial shareholder"

"Takeovers Code"

"HK$"

"%"

a general and unconditional mandate proposed to be granted to the Directors to exercise the power of the Company to allot, issue and deal with Shares up to a maximum of 20% of the total number of issued Shares as at the date of passing the relevant resolution at the AGM

the Company and its subsidiaries

the Hong Kong Special Administrative Region of the People's Republic of China

12 April 2021, being the latest practicable date prior to the printing of this circular for ascertaining certain information herein

the Rules Governing the Listing of Securities on the Stock Exchange

the nomination committee of the Board established on 5 September 2007

the People's Republic of China

Renminbi, the lawful currency of the PRC

the Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong

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

holder(s) of Share(s) whose name(s) are duly registered from time to time in the register of members of the Company

The Stock Exchange of Hong Kong Limited

has the same meaning as defined under the Listing Rules

The Hong Kong Code on Takeovers and Mergers

Hong Kong dollars, the lawful currency of Hong Kong

per cent.

- 2 -

LETTER FROM THE BOARD

CHINA STARCH HOLDINGS LIMITED

中國澱粉控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 3838)

Executive Directors:	Registered office:
Mr. Tian Qixiang (Chairman)	Cricket Square, Hutchins Drive,
Mr. Gao Shijun (Chief Executive Officer)	P.O. Box 2681,
Mr. Yu Yingquan	Grand Cayman KY1-1111,
Mr. Liu Xianggang	Cayman Islands
Independent non-executive Directors:	Head office and principal place
Professor Hua Qiang	of business in Hong Kong:
Mr. Sun Mingdao	Suite 3312, Tower 1,
Mr. Yue Kwai Wa, Ken	Times Square,
	1 Matheson Street,
	Causeway Bay,
	Hong Kong
	15 April 2021
To the Shareholders,
Dear Sir or Madam,

(1) RE-ELECTION OF DIRECTORS,

GRANT OF GENERAL MANDATES TO ISSUE AND BUY BACK SHARES,
1. AND
2. NOTICE OF ANNUAL GENERAL MEETING

INTRODUCTION

The primary purposes of this circular are to provide you with information regarding the resolutions to be proposed at the AGM and to give you notice of the AGM.

Resolutions to be proposed at the AGM include ordinary resolutions relating to (i) the reelection of Directors, and (ii) the grant of each of the General Mandate, the Buy-back Mandate and the Extension Mandate.

- 3 -

LETTER FROM THE BOARD

RE-ELECTION OF DIRECTORS

Pursuant to article 108(A) of the Articles, at least one-third of the Directors shall retire from office by rotation at each annual general meeting of the Company. Any Director who retires under this article shall then be eligible for re-election as Director. Mr. Gao Shijun, Mr. Yu Yingquan and Professor Hua Qiang shall retire as Directors by rotation at the AGM and, all being eligible, offer themselves for re-election as Directors.

The Nomination Committee reviews the structure, size and diversity annually and recommends any proposed changes to the Board. The Nomination Committee also reviews and recommends any suitable candidate to the Board for it to consider and make recommendations to shareholders for election as Directors of the Company at general meetings or appoint as directors to fill causal vacancies. The Board has considered the business experience, public board experience, diversity, standing, time commitment as well as independence (if applicable) of each candidate.

Professor Hua Qiang, being an independent non-executive Director, does not have any management role in the Company or interests in any business activities of, and has not been involved in any business dealings with, the Company or any connected persons of the Company. He has no relationship with any other Directors, senior management, substantial or controlling Shareholders of the Company. At all times during the period of his directorship with the Company, he has properly discharged his duties and responsibilities as an independent non-executive Director and has made positive contribution to the development of the Company through his independent, constructive and informed advice to the Board and his participation at the business and other affairs relating to the Company. Based on Professor Hua's annual confirmation of his independence pursuant to the independence guidelines as set out in Rule 3.13 of the Listing Rules as well as his objectivity and independent frame of mind as exhibited throughout his tenure, the Board is satisfied that Professor Hua remains to be independent. During the meeting held on 18 March 2021, the Nomination Committee discussed the independence of Professor Hua and was satisfied with the independence of Professor Hua having regard to factors, including but not limited to the criteria under Rule 3.13 of the Listing Rules. The Nomination Committee also believes that he has the required character, integrity and experience to continue to fulfill and discharge the roles and duties of an independent non-executive Director. If the resolution of the re-election of Professor Hua as an independent non-executive Director is passed at the AGM, the Group will obtain benefit from his corporate management experience and business network.

- 4 -

LETTER FROM THE BOARD

The Nomination Committee has evaluated the performance of Mr. Gao Shijun, Mr. Yu Yingquan and Professor Hua Qiang and was of a view that each of them has been contributing to the Group effectively and are committed to their roles as Director. The Nomination Committee is also of the view that each of Mr. Gao, Mr. Yu and Professor Hua would bring to the Board their own perspective, skills and experience, as further described in their respective biographical details in Appendix I of this circular. Based on the board diversity policy adopted by the Company, the Nomination Committee considers that each of Mr. Gao, Mr. Yu and Professor Hua can contribute to the diversity of the Board, in particular, with their strong and diversified educational background and professional and industry experience and connections in various industries. Thus, the Nomination Committee has recommended to the Board the re-election of Mr. Gao, Mr. Yu and Professor Hua at the AGM. On 19 March 2021, the Board accepted the recommendation by the Nomination Committee and recommended Mr. Gao, Mr. Yu and Professor Hua to stand for reelection by Shareholders at the AGM.

Biographical details of Mr. Gao Shijun, Mr. Yu Yingquan and Professor Hua Qiang are set out in Appendix I to this circular.

GRANT OF GENERAL MANDATE, BUY-BACK MANDATE AND EXTENSION MANDATE

The following mandates, which were granted to the Directors pursuant to the ordinary resolutions passed by the Shareholders at the 2020 annual general meeting of the Company held on

19 May 2020, will expire at the conclusion of the AGM:

a general unconditional mandate to allot, issue and deal with the Shares up to a maximum of 20% of the total number of issued Shares as at the date of passing of the relevant resolution;
a general unconditional mandate to exercise all the powers of the Company to buy back the Shares up to a maximum of 10% of the total number of issued Shares as at the date of passing of the relevant resolution; and
the power to extend the general mandate mentioned in paragraph (A) immediately above by the number of Shares bought back by the Company pursuant to the mandate to buy back the Shares as referred to in paragraph (B) immediately above.

- 5 -

LETTER FROM THE BOARD

In view of the forthcoming expiration of the mandates granted to the Directors as mentioned above, the following ordinary resolutions, among other matters, will be proposed at the AGM:

that the Directors be granted the General Mandate to exercise the powers of the Company to allot, issue and otherwise deal with the Shares up to a maximum of 20% of the total number of issued Shares as at the date of passing of such resolution;
that the Directors be granted the Buy-back Mandate to enable them to buy back the Shares on the Stock Exchange or any other stock exchange on which the Shares may be listed and recognised by the Securities and Futures Commission of Hong Kong and the Stock Exchange for such purpose up to a maximum of 10% of the total number of issued Shares as at the date of passing of such resolution; and
that the Directors be granted the Extension Mandate to increase the total number of Shares which may be allotted, issued and dealt with under the General Mandate by an additional number representing such number of Shares bought back under the Buy- back Mandate.

Each of the General Mandate, the Buy-back Mandate and the Extension Mandate will expire

at the conclusion of the next annual general meeting of the Company following the AGM; or (b) at the end of the period within which the next annual general meeting of the Company is required by the Companies Law or the Articles to be held; or (c) when the authority given to the Directors thereunder is revoked or varied by an ordinary resolution of the Shareholders in a general meeting prior to the next annual general meeting of the Company, whichever is the earliest.

Based on 5,994,132,043 issued Shares as at the Latest Practicable Date and on the basis that no new Shares will be issued and no Shares will be bought back by the Company for the period from the Latest Practicable Date up to and including the date of the AGM:

subject to the passing of the proposed resolution granting the General Mandate to the Directors and on the basis that the General Mandate is not to exceed 20% of the total number of issued Shares as at the date of passing of such resolution, the Company will be allowed under the General Mandate to issue up to a maximum of 1,198,826,408 Shares; and
subject to the passing of the proposed resolution granting the Buy-back Mandate to the Directors and on the basis that the Buy-back Mandate is not to exceed 10% of the total number of issued Shares as at the date of passing of the such resolution, the Company will be allowed under the Buy-back Mandate to buy back up to a maximum of 599,413,204 Shares.

- 6 -

LETTER FROM THE BOARD

The Board has no immediate plans to allot and issue any new Shares other than Shares which may fall to be allotted and issued upon the exercise of any options granted under the share option scheme of the Company.

Under the Listing Rules, the Company is required to give the Shareholders all information which is reasonably necessary to enable them to make an informed decision as to whether to vote for or against the resolution in respect of the Buy-back Mandate at the AGM. An explanatory statement for such purpose is set out in Appendix II to this circular.

ANNUAL GENERAL MEETING

In order to determine Shareholders' eligibility to attend and vote at the AGM, the register of members of the Company will be closed from 13 May 2021 (Thursday) to 18 May 2021 (Tuesday) (both days inclusive) during which period no transfer of Shares may be effected. All transfers of Shares accompanied by the relevant share certificates must be lodged with the Branch Share Registrar for registration no later than 4:30 p.m. on 12 May 2021 (Wednesday).

ACTIONS TO BE TAKEN

Set out on pages 18 to 23 of this circular is a notice convening the AGM at which resolutions will be proposed to approve, among other matters, the following:

the re-election of Directors; and
the grant of the General Mandate, Buy-back Mandate and Extension Mandate. Any vote of the Shareholders at the AGM will be taken by poll.

Whether or not you intend to attend the AGM in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the Company's Branch Share Registrar in Hong Kong, Tricor Investor Services Limited at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time of the AGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the AGM or any adjournment thereof should you so wish.

- 7 -

LETTER FROM THE BOARD

RECOMMENDATIONS

The Board considers that the ordinary resolutions in relation to (i) the re-election of Directors, and (ii) the grant of the General Mandate, the Buy-back Mandate and the Extension Mandate are in the best interests of the Company and the Shareholders as a whole and recommends the Shareholders to vote in favour of such resolutions at the AGM.

GENERAL INFORMATION

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

MISCELLANEOUS

The English text of this circular shall prevail over the Chinese text for the purpose of interpretation.

Yours faithfully,

By order of the Board

China Starch Holdings Limited

Tian Qixiang

Chairman

- 8 -

APPENDIX I	DETAILS OF THE DIRECTORS PROPOSED TO BE
	RE-ELECTED AT THE ANNUAL GENERAL MEETING

Set out below are the biographical details of the retiring Directors, who being eligible, would offer themselves for re-election at the AGM:

EXECUTIVE DIRECTORS

Mr. Gao Shijun

Mr. Gao Shijun, aged 53, joined the Group in 1998 and is currently the chief executive officer of the Company. Mr. Gao is principally responsible for overseeing the Group's operations and business management. Mr. Gao is also a director of the following subsidiaries of the Company:

Shandong Shouguang Juneng Golden Corn Development Co., Ltd. ("Golden Corn")
Shouguang Golden Corn Biotechnology Limited ("Golden Corn Biotech")
Linqing Deneng Golden Corn Bio Limited
Shouguang Golden Far East Modified Starch Co., Ltd
Shouguang Juneng Musashino Biotechnology Co., Ltd

Mr. Gao obtained an undergraduate degree in Physics in 1989 and a Master of Business Administration degree in 2012 from Shandong University. He was also awarded the qualification of senior engineer in 2010. Mr. Gao was appointed as the permanent vice-president of China Starch Industry Association with a term from June 2016 to May 2021.

As at the Latest Practicable Date, Mr. Gao is beneficially interested in approximately 25% of the issued share capital of Merry Boom Group Limited ("Merry Boom"), a substantial shareholder of the Company.

Mr. Gao has entered into a service contract with the Company for an initial term of three years with effect from 5 September 2007, which shall be renewed and extended automatically for successive terms of one year upon expiry of the then current term, unless terminated by either party by giving three month's written notice to the other. Mr. Gao's annual salary is RMB450,000. He is also entitled to a discretionary management bonus provided that the aggregate amount of bonuses payable to all the executive Directors for any financial year of the Company shall not exceed 5% of all the audited consolidated or combined net profit of the Group (after taxation and minority interests and payment of such bonuses but before extraordinary or exceptional items) in respect of that financial year of the Company. Mr. Gao's annual salary and bonus are determined with reference to his duties and responsibilities with the Company and the Company's remuneration policy and are subject to review by the Board from time to time.

- 9 -

APPENDIX I	DETAILS OF THE DIRECTORS PROPOSED TO BE
	RE-ELECTED AT THE ANNUAL GENERAL MEETING

Save as disclosed above, (a) Mr. Gao did not hold any directorships in other listed public companies in the past three years; (b) he does not have any relationship with any other directors, senior management, substantial or controlling Shareholder of the Company and had no interests in the Shares, underlying Shares and debenture of the Company within the meaning of Part XV of the SFO as at the Latest Practicable Date; (c) there is no other information which is discloseable pursuant to paragraphs (h) to (v) of Rule 13.51(2) of the Listing Rules; and (d) there are no other matters that need to be brought to the attention of the Shareholders.

Mr. Yu Yingquan

Mr. Yu Yingquan, aged 52, is principally responsible for the overall management in investment and corporate finance of the Group. Mr. Yu joined the Group in 2003. Mr. Yu is also a director of Golden Corn and Golden Corn Biotech respectively.

Mr. Yu graduated from Shandong Hydro Institute in 1990 with a diploma in Hydro Economic and Financial Management, and obtained a diploma in Finance Management from Shandong Economics Management Institute in 1998. Mr. Yu obtained the Certificate of Accounting Professional of the People's Republic of China issued by Finance Bureau of Shouguang City in 1997.

As at the Latest Practicable Date, Mr. Yu is beneficially interested in approximately 0.42% of the issued share capital of Merry Boom, a substantial shareholder of the Company.

Mr. Yu has entered into a service contract with the Company for an initial term of three years with effect from 5 September 2007, which shall be renewed and extended automatically for successive terms of one year upon expiry of the then current term, unless terminated by either party by giving three month's written notice to the other. Mr. Yu's annual salary is RMB410,000. He is also entitled to a discretionary management bonus provided that the aggregate amount of bonuses payable to all the executive Directors for any financial year of the Company shall not exceed 5% of all the audited consolidated or combined net profit of the Group (after taxation and minority interests and payment of such bonuses but before extraordinary or exceptional items) in respect of that financial year of the Company. Mr. Yu's annual salary and bonus are determined with reference to his duties and responsibilities with the Company and the Company's remuneration policy and are subject to review by the Board from time to time.

Save as disclosed above, (a) Mr. Yu did not hold any directorships in other listed public companies in the past three years; (b) he does not have any relationship with any other directors, senior management, substantial or controlling Shareholder of the Company and had no interests in the Shares, underlying Shares and debenture of the Company within the meaning of Part XV of the SFO as at the Latest Practicable Date; (c) there is no other information which is discloseable pursuant to paragraphs (h) to (v) of Rule 13.51(2) of the Listing Rules; and (d) there are no other matters that need to be brought to the attention of the Shareholders.

- 10 -

APPENDIX I	DETAILS OF THE DIRECTORS PROPOSED TO BE
	RE-ELECTED AT THE ANNUAL GENERAL MEETING

INDEPENDENT NON-EXECUTIVE DIRECTOR

Professor Hua Qiang

Professor Hua Qiang, aged 49, has been appointed as independent non-executive Director on 17 May 2016. Professor Hua has been a professor of the School of Biotechnology and the State Key Laboratory of Bioreactor Engineering of the East China University of Science and Technology since 2008. He obtained a bachelor and a master degree in chemical engineering (major in biochemical engineering) from the Zhejiang University in 1993 and 1996 respectively. He also obtained a doctoral degree in information engineering from the Kyushu Institute of Technology (Japan) in 2000. He was appointed as an assistant professor of Institute for Advanced Biosciences of the Keio University (Japan) from 2001 to 2004, and was appointed as a postdoctoral scholar of the Department of Bioengineering of the University of California, San Diego from 2004 to 2007. He had also been a medical research scientist for Sanford Burnham Prebys Medical Discovery Institute (formerly known as "Burnham Institute for Medical Research") (the United State of America) from 2007 to 2008.

Professor Hua had been appointed as an independent non-executive Director for a fixed term of one year commencing from 17 May 2016 and is automatically renewable annually by both parties each year, for successive terms of one year, upon expiry. Professor Hua is entitled to an annual director's fee of RMB50,000 under his letter of appointment, which is determined with reference to his duties and responsibilities in the Company. Save for the director's fees, Professor Hua is not expected to receive any other remuneration for holding his office as an independent non- executive Director.

Save as disclosed above, (a) Professor Hua did not hold any directorships in other listed public companies in the past three years; (b) he does not have any relationship with any other directors, senior management, substantial or controlling Shareholder of the Company and had no interests in the Shares, underlying Shares and debenture of the Company within the meaning of Part XV of the SFO as at the Latest Practicable Date; (c) there is no other information which is discloseable pursuant to paragraphs (h) to (v) of Rule 13.51(2) of the Listing Rules; and (d) there are no other matters that need to be brought to the attention of the Shareholders.

- 11 -

APPENDIX II	EXPLANATORY STATEMENT ON
	THE BUY-BACK MANDATE

This appendix serves as an explanatory statement, as required by the Listing Rules, to provide the Shareholders with all the information reasonably necessary to enable them to make an informed decision on whether to vote for or against the ordinary resolution to approve the grant of the Buy-back Mandate to the Directors.

1. LISTING RULES RELATING TO THE BUY-BACK OF SHARES

The Listing Rules permit companies whose primary listings are on the Stock Exchange to buy back their securities on the Stock Exchange and any other stock exchange on which securities of the company are listed and such exchange is recognised by the Securities and Futures Commission of Hong Kong subject to certain restrictions. Among such restrictions, the Listing Rules provide that the shares of such company must be fully paid up and all buy-backs of shares by such company must be approved in advance by an ordinary resolution of shareholders, either by way of a general mandate or by specific approval of a particular transaction.

2. SHARE CAPITAL

As at the Latest Practicable Date, there were a total of 5,994,132,043 issued Shares.

Subject to the passing of the proposed resolution granting the Buy-back Mandate and on the basis that the Buy-back Mandate is not to exceed 10% of the total number of issued Shares as at the date of passing of the such resolution and that no new Shares are issued and no Shares are bought back for the period from the Latest Practicable Date up to and including the date of the Annual General Meeting, the Company will be allowed under the Buy-back Mandate to buy back up to a maximum of 599,413,204 Shares.

3. REASONS FOR THE BUY-BACKS

The Directors believe that the Buy-back Mandate is in the best interests of the Company and the Shareholders as a whole to seek a general authority from the Shareholders to enable the Company to buy back Shares on the Stock Exchange or any other stock exchange on which the Shares are listed. Such buy-backs may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net asset value per Share and/or earnings per Share and will only be made when the Directors believe that such buy-backs will benefit the Company and the Shareholders as a whole.

- 12 -

APPENDIX II	EXPLANATORY STATEMENT ON
	THE BUY-BACK MANDATE

4. FUNDING OF BUY-BACKS

Buy-backs made pursuant to the Buy-back Mandate would be funded out of funds legally available for the purpose in accordance with the Company's memorandum of association, the Articles, the Companies Law, other applicable laws of the Cayman Islands and the Listing Rules. A listed company is prohibited from buying back its own securities on the Stock Exchange for a consideration other than cash or for settlement otherwise than in accordance with the Listing Rules as in force from time to time. Under the Companies Law, buy-backs by the Company may be made out of the profits of the Company, out of the Company's share premium account or out of the proceeds of a fresh issue of Shares made for the purpose of the buy-back, or, if so authorised by the Articles and subject to the provisions of the Companies Law, out of capital. Any premium payable on a redemption or bought back over the par value of the Shares to be bought back must be provided for out of profits of the Company or from sums standing to the credit of the Company's share premium account, or, if so authorised by the Articles and subject to the provisions of the Companies Law, out of capital.

5. MATERIAL ADVERSE IMPACT IN THE EVENT OF BUY-BACK IN FULL

Taking into account the current working capital position of the Group, the Directors consider that, if the Buy-back Mandate were to be carried out in full at any time during the proposed buy- back period, it might have a material adverse impact on the working capital and/or gearing position of the Company as compared with the position as at 31 December 2020, being the date to which its latest published audited consolidated financial statements were made up. However, the Directors do not intend to exercise the Buy-back Mandate to such extent as would, in the circumstances, have a material adverse impact on the working capital requirements or the gearing position of the Company and would only exercise the Buy-back Mandate to such extent which, in the opinion of the Directors, are from time to time appropriate for the Company.

- 13 -

APPENDIX II	EXPLANATORY STATEMENT ON
	THE BUY-BACK MANDATE

6. SHARE PRICES

The highest and lowest prices at which the Shares have been traded on the Stock Exchange in each of the twelve calendar months immediately preceding (and including) the Latest Practicable Date were as follows:-

	Highest	Lowest
	HK$	HK$
2020
April	0.133	0.106
May	0.129	0.106
June	0.145	0.103
July	0.142	0.122
August	0.178	0.135
September	0.160	0.130
October	0.145	0.125
November	0.140	0.126
December	0.166	0.130
2021
January	0.189	0.146
February	0.248	0.163
March	0.249	0.175
April (up to the Latest Practicable Date)	0.187	0.170

- 14 -

APPENDIX II	EXPLANATORY STATEMENT ON
	THE BUY-BACK MANDATE

7. SHARE BUY-BACKS MADE BY THE COMPANY

In the six months preceding the Latest Practicable Date, the Company repurchased 1,525,000 Shares on the Stock Exchange. All of the buy-back Shares have been cancelled prior to the Latest Practicable Date. Details of the buy-backs were as follows:

		Number of
		Shares			Aggregate
Date of buy-back	repurchased	Price per Share	price paid
			Highest	Lowest
			HK$	HK$	HK$
21	October 2020	200,000	0.134	0.134	26,929
2 November 2020	200,000	0.127	0.127	25,528
3 November 2020	200,000	0.127	0.127	25,528
5 November 2020	15,000	0.128	0.128	2,022
6 November 2020	200,000	0.130	0.130	26,128
9 November 2020	60,000	0.127	0.127	7,729
12	November 2020	200,000	0.131	0.131	26,329
17	November 2020	150,000	0.127	0.128	19,317
18	November 2020	300,000	0.127	0.127	38,242

		1,525,000			197,752

8. UNDERTAKING

The Directors have undertaken to the Stock Exchange that they will exercise the power of the Company to make buy-backs under the Buy-back Mandate in accordance with the Listing Rules and the applicable laws of the Cayman Islands and in accordance with the regulations set out in the memorandum of association of the Company and the Articles.

9. CORE CONNECTED PERSON

None of the Directors nor, to the best of their knowledge having made all reasonable enquiries, any of their close associates, have any present intention to sell any Shares to the Company if the Buy-back Mandate is approved by the Shareholders at the AGM.

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APPENDIX II	EXPLANATORY STATEMENT ON
	THE BUY-BACK MANDATE

No core connected person of the Company has notified the Company that he/she/it has a present intention to sell Shares to the Company nor has any such core connected person undertaken not to sell any Shares held by him/her/it to the Company, in the event that the grant of Buy-back Mandate to the Directors is approved by the Shareholders at the AGM.

10. THE TAKEOVERS CODE AND MINIMUM PUBLIC HOLDING

If a Shareholder's proportionate interest in the voting rights of the Company increases on the Company exercising its powers to buy back securities pursuant to the Buy-back Mandate, such increase will be treated as an acquisition of the voting rights for the purposes of Rule 32 of the Takeovers Code. As a result, a Shareholder or group of Shareholders acting in concert (as defined in the Takeovers Code) could obtain or consolidate control of the Company and thereby become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code.

As at the Latest Practicable Date, according to the register of interests kept by the Company pursuant to section 336 of the SFO and so far as is known to, or can be ascertained after reasonable enquiry by the Directors, the following persons were directly or indirectly interested in 5% or more of the issued Shares:

				Approximate
				percentage of
			Approximate	shareholding
		Number of	percentage of	if the Buy-back
		Shares held	existing	Mandate is
Name	Capacity	(Note 1)	shareholding	exercised in full
Merry Boom Group Limited	Beneficial owner	3,705,385,194 (L)	61.81%	68.68%
Mr. Tian Qixiang	Interest of a controlled corporation	3,705,385,194 (L)	61.81%	68.68%
		(Note 2)

Notes:

The letter "L" denotes long position in the Shares.
These Shares were held by Merry Boom Group Limited, which is owned as to approximately 54.58% by Mr. Tian Qixiang. Mr. Tian is deemed to be interested in all the Shares held by Merry Boom Group Limited under the SFO.

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APPENDIX II	EXPLANATORY STATEMENT ON
	THE BUY-BACK MANDATE

On the basis of 5,994,132,043 issued Shares as at the Latest Practicable Date and assuming there is no further issue or buy-back of Shares during the period from the Latest Practicable Date up to and including the date of the AGM, if the Buy-back Mandate were exercised in full, the percentage shareholding of Merry Boom Group Limited and Mr. Tian Qixiang would increase to approximately 68.68% of the total number of issued Shares. Such increase would not give rise to an obligation on the part of any of the above substantial shareholders to make a mandatory offer under Rule 26 of the Takeovers Code but would result in a reduction of the percentage shareholding held in public hands to less than 25% of the total number of issued Shares.

Save as mentioned above, the Directors are currently not aware of any consequences which will arise under the Takeovers Code as a result of any purchase made under the Buy-back Mandate.

The Directors have no intention to exercise the Buy-back Mandate to such an extent that would result in the number of Shares in the hands of public falling below the prescribed minimum percentage of 25%.

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