Jiayuan International : MAJOR AND CONNECTED TRANSACTION ACQUISITION OF THE TARGET GROUP HOLDING PROPERTY DEVELOPMENT PROJECTS LOCATED IN SHANDONG PROVINCE INVOLVING THE ISSUE OF CONSIDERATION SHARES AND CONVERTIBLE BONDS UNDER SPECIFIC MANDATE

February 25, 2021 at 06:57 pm

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 Jiayuan International Group Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser(s) or transferee(s) or to the bank, 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 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 howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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

Jiayuan International Group Limited

Գ๕਷ყછٰϞࠢʮ̡

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2768)

MAJOR AND CONNECTED TRANSACTION ACQUISITION OF THE TARGET GROUP HOLDING

PROPERTY DEVELOPMENT PROJECTS

LOCATED IN SHANDONG PROVINCE

INVOLVING THE ISSUE OF CONSIDERATION SHARES AND

CONVERTIBLE BONDS

UNDER SPECIFIC MANDATE

Financial adviser to the Company

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

A letter from the Board is set out on pages 9 to 35 of this circular and a letter from the Independent Board Committee is set out on pages IBC-1 to IBC-2 of this circular. A letter from Maxa Capital, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders is set out on pages IFA-1 to IFA-51 of this circular.

A notice convening the EGM to be held at Room 1403, 9 Queen's Road Central, Hong Kong on Friday, 16 April 2021 at 10:00 a.m. is set out on pages EGM-1 to EGM-2 of this circular. A form of proxy for the EGM is enclosed with this circular. Such form of proxy is also published on the websites of Hong Kong Exchanges and Clearing Limited (http://www.hkexnews.hk) and the Company (http://www.jiayuanintl.com).

Whether or not you intend to attend the EGM, please complete and sign the enclosed form of proxy in accordance with the instructions printed thereon and return it 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 but in any event not less than 48 hours before the time appointed for the EGM (i.e. not later than 10:00 a.m. on Wednesday, 14 April 2021). Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish. If you attend and vote at the EGM, the authority of your proxy will be revoked.

References to time and dates in this circular are to Hong Kong time and dates.

To ensure the health and safety of the attendees at the EGM, the Company intends to implement precautionary measures at the meeting including: (a) compulsory temperature checks at the entrance of the venue of the meeting; (b) attendees are required to bring their own surgical masks and those who had high temperature or not wearing surgical masks might be denied access to the venue of the meeting; (c) no corporate gift, refreshments or drinks will be provided at the meeting; and (d) depending on circumstances, separate rooms connected by instant electronic conference facilities may be arranged at the venue of the meeting to limit the number of attendees at each room.

26 February 2021

CONTENTS
Page
Definitions .......................................................	1
Letter from the Board .............................................	9
Letter from the Independent Board Committee .........................	IBC-1
Letter from Maxa Capital ..........................................	IFA-1

Appendix I	-	Financial Information of the Group ...................	I-1
Appendix IIA	-	Financial Information of the Combined Group ..........	IIA-1
Appendix IIB	-	Financial Information of Lingshihuafu ................	IIB-1
Appendix IIC	-	Management Discussion and Analysis of
the Target Group ................................	IIC-1
Appendix III	-	Unaudited Pro Forma Financial Information
of the Enlarged Group ............................	III-1
Appendix IV	-	Valuation Report ..................................	IV-1
Appendix V	-	General Information ...............................	V-1

Notice of EGM ................................................... EGM-1

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

"Acquisition"

the acquisition of the Sale Share by the Company from Mr. Shum pursuant to the terms and conditions set out in the Sale and Purchase Agreement

"associates"; "connected person(s)"; "controlling shareholder(s)"; and "subsidiary(ies)"

each has the meaning ascribed to it under the Listing Rules

"Board"

the board of Directors

"Business Day"

a day (other than a Saturday and a Sunday) on which banks in Hong Kong are normally open for banking business to the public

"BVI"

the British Virgin Islands

"Capital Distribution"

"Cash Dividend"

any Dividend other than a Cash Dividend any Dividend which is to be paid in cash

"CCASS"

the Central Clearing and Settlement System established and operated by Hong Kong Securities Clearing Company Limited

"Closing Price"

the transaction price per Share last reported on the Stock Exchange for a Trading Day or, if no transaction takes place on such Trading Day, the average of the closing bid and offered prices of Shares for such Trading Day as furnished by a leading independent securities firm licensed to trade on the Stock Exchange reasonably selected from time to time by the Company and approved by the Majority Convertible Bondholders (which approval shall not be unreasonably withheld) for the purpose of obtaining the Closing Price

"Combined Group"

"Company"

the Target Company and its subsidiaries under common control by Mr. Shum immediately before and after the Reorganisation, including Luyuan Property Development Limited, Qingdao Jiazhi Investment Co., Ltd.* (ڡࢥྗ౽ ҳ༟Ϟࠢʮ̡), Qingdao Jiayuan Real Estate Group Co., Ltd.* (ڡࢥԳ๕גήପණྠϞࠢʮ̡), Jiaxing Xiyue Trading Co., Ltd.* (ྗጳ̹ဢࣀ൱׸Ϟࠢʮ̡), Jiaxing Yeyuan Real Estate Development Co., Ltd.* (ྗጳุ̹๕ גήପක೯Ϟࠢʮ̡ ), Ningbo Puying Industrial Investment Partnership (Limited Partnership)* (ྐྵتዎޮ ྼุҳ༟ΥྫΆุ€ϞࠢΥྫ)), Qingdao Shuiqingmuhua Creative Development Co., Ltd.* (ڡࢥ˥૶˝ശ௴จ೯࢝ Ϟࠢʮ̡), Weihai Xiangyuan Real Estate Development

Co., Ltd.* ( ۾ऎ̹ୂ๕גήପක೯Ϟࠢʮ̡) and

Zhongwei (Qingdao) Real Estate Development Co., Ltd.*

(ʕᙯ€ڡࢥגήପක೯Ϟࠢʮ̡)

Jiayuan International Group Limited (Գ๕਷ყછٰϞࠢ ʮ̡), a company incorporated under the laws of the Cayman Islands with limited liability and the shares of which are listed and traded on the Main Board of the Stock Exchange (Stock Code: 2768)

"Completion"

the completion of the Acquisition (i.e. all the conditions precedent set out in the Sale and the Purchase agreement have been fulfilled or waived, when applicable)

"Consideration Shares"

840,000,000 new Shares to be allotted and issued by the Company to Mr. Shum or his nominee(s) to satisfy part of the Initial Consideration

"Conversion Price"

HK$3.30 per Conversion Share

"Conversion Shares"

1,036,557,575 new Shares to be issued by the Company upon the exercise in full of the conversion rights attached to the Convertible Bonds

"Convertible Bonds"

convertible bonds in the aggregate principal amount of HK$3,420,640,000 (equivalent to approximately RMB2,898,847,458) to be issued at Completion by the Company to Mr. Shum or his nominee(s) to satisfy part of the Initial Consideration

"Convertible Bonds

Instrument"

the instrument to be executed by the Company constituting the Convertible Bonds

"Current Market Price"

"Deed of Non-Competition"

the average of the daily Closing Prices for the five (5) consecutive Trading Days ending on and including the Trading Day immediately preceding such date. If the Company has more than one class of share capital comprising Shares, then the relevant Current Market Price shall be the price for that class of Shares the issue of which (or of rights or warrants in respect of, or securities convertible into or exchangeable for, that class of Shares) gives rise to the adjustment to the Conversion Price in question as set out in the paragraph headed "Adjustments to Conversion Price" in this circular

If during the said five (5) Trading Days or any period thereafter up to but excluding the date as of which the adjustment to the Conversion Price in question shall be effected, any event (other than the event which requires the adjustment in question) shall occur which gives rise to a separate adjustment to the Conversion Price under the provisions of the conditions under the Convertible Bonds Instrument, then the Current Market Price as determined above shall be adjusted in such manner and to such extent as an independent financial institution in Hong Kong or an independent auditors in Hong Kong reasonably selected by the Company and approved by the Majority Convertible Bondholders (which approval shall not be unreasonably withheld) shall in its absolute discretion deem appropriate and fair to compensate for the effect thereof

the deed of non-competition dated 12 February 2016 and entered into by Mingyuan Investment and Mr. Shum with and in favour of the Company (for itself and on behalf of its subsidiaries), further details of which are set out in the Prospectus

"Director(s)"

the director(s) of the Company

"Dividend"

any dividend or distribution, whether of cash, assets or other property, whenever paid or made and however described

"EGM"

the extraordinary general meeting of the Company to be convened and held for the Independent Shareholders to consider, and if thought fit, to approve, among other things, the Sale and Purchase Agreement and the transactions contemplated thereunder

"Enlarged Group"

the Group as enlarged by the Target Group upon Completion

"Fair Market Value"

the fair market value of any property on any date as determined in good faith by the mutual agreement of the Company and the Majority Convertible Bondholders, provided that the Fair Market Value of a Cash Dividend paid or to be paid shall be the amount of such Cash Dividend and provided further that if the Company and the Majority Convertible Bondholders fail to determine the fair market value of that property, the said fair market value shall be determined by an independent valuer in Hong Kong, an independent financial institution in Hong Kong or an independent auditors in Hong Kong reasonably selected by the Company and approved by the Majority Convertible Bondholders (which approval shall not be unreasonably withheld)

"Final Consideration"

the final consideration after making the adjustment as set out in the paragraph headed "Consideration Adjustment Mechanism" in this circular

"GFA"

gross floor area

"Group"

the Company and its subsidiaries from time to time

"HK$"

Hong Kong dollars, the lawful currency of Hong Kong

"Holder"

a person in whose name a Convertible Bond is registered in the register of holders of Convertible Bonds (or in the case of joint holders, the first named thereof)

"Hong Kong"

"Independent Board

Committee"

the Hong Kong Special Administrative Region of the PRC the independent committee of the Board, comprising all independent non-executive Directors, namely Mr. Tai Kwok Leung, Alexander, Dr. Cheung Wai Bun, Charles, JP and Mr. Gu Yunchang, which has been established to advise and give recommendations to the Independent Shareholders in respect of the Sale and Purchase Agreement and the transactions contemplated thereunder

"Independent Financial

Adviser" or "Maxa Capital"

Maxa Capital Limited, being the independent financial adviser appointed by the Company to advise the Independent Board Committee and the Independent Shareholders in respect of the Sale and Purchase Agreement and the transactions contemplated thereunder

"Independent Shareholders"

Shareholders who are not required to abstain under the Listing Rules from voting at the EGM for the resolution(s) approving the Sale and Purchase Agreement and the transactions contemplated thereunder

"Initial Consideration"

the initial consideration of HK$7,247,560,000 (equivalent to approximately RMB6,142,000,000) (subject to adjustment) for the Sale Share as set out in the paragraph headed "Adjusted NAV and Initial Consideration" in this circular

"Issue Date"

the date on which the Convertible Bonds are issued, which shall be no later than the date of Completion unless otherwise agreed by the Company and Mr. Shum

"Issue Price"

HK$3.30 per Consideration Share

"JLL"

Jones Lang Lasalle Corporate Appraisal and Advisory Limited, an independent property valuer appointed by the Group

"Latest Practicable Date"

25 February 2021, being the latest practicable date prior to the printing of this circular for ascertaining certain information referred to in this circular

"Lingshihuafu"

Qingdao Lingshihuafu Property Co., Ltd. (ڡࢥჯ˰ശִג ήପක೯Ϟࠢʮ̡), a company incorporated under the laws of the PRC on 31 May 2006 with limited liability. The address of Lingshihuafu's registered office is International Business Centre, Hong Kong East Road 107, Laoshan District, Qingdao, Shangdong Province, the PRC. Lingshihuafu is principally engaged in property development in the PRC

"Listing Rules"

the Rules Governing the Listing of Securities on the Stock Exchange

"Majority Convertible

Bondholders"

the Holder(s) of at least 50% of the aggregate principal amount of the Convertible Bonds or such lesser amount as is outstanding under the Convertible Bonds Instrument from time to time

"Maturity Date"

the date falling 60 months from the Issue Date of the Convertible Bonds

"Mingyuan Investment"

Mingyuan Group Investment Limited (׼๕ණྠҳ༟Ϟࠢ ʮ̡), a company incorporated under the laws of the BVI with limited liability, and together with Mr. Shum, is interested in approximately 67.96% of the issued share capital of the Company as at the Latest Practicable Date

"Mr. Shum"

Mr. Shum Tin Ching, the chairman, a non-executive Director, the ultimate controlling shareholder of the Company and the ultimate beneficial owner of the Private Group

"PRC"

the People's Republic of China, and for the purpose of this circular only, excludes Hong Kong, the Macao Special Administrative Region of the PRC and Taiwan

"Private Group"

Գ๕௴ସછٰණྠϞࠢʮ̡ (Jiayuan Chuangsheng Holdings Group Co., Ltd.*), a company established under the laws of the PRC with limited liability, and its subsidiaries from time to time

"Property Development

Project Companies"

all the property development project companies in Shandong Province, the PRC, wholly or partially-owned by Mr. Shum and/ or companies controlled by him after the completion of the Reorganisation, to be acquired by the Group pursuant to the Sale and Purchase Agreement

"Prospectus"

the prospectus of the Company dated 26 February 2016

"Qingdao Jiazhi"

Qingdao Jiazhi Investment Co., Ltd.* (ڡࢥྗ౽ҳ༟Ϟࠢ ʮ̡), a company established under the laws of the PRC on 28 June 2020 with limited liability, which will be indirectly wholly-owned by the Target Company upon completion of the Reorganisation

"Reorganisation"

such arrangement and restructuring of companies comprising the Target Group in accordance with the terms of the Sale and Purchase Agreement, further details of which are set out in the paragraph headed "Reorganisation" in the "Letter from the Board" section of this circular

"RMB"

Renminbi, the lawful currency of the PRC

"Sale and Purchase

Agreement"

the sale and purchase agreement dated 13 January 2021 and entered into between the Company and Mr. Shum in relation to the Acquisition (as subsequently amended and supplemented by the Supplemental Agreement)

"Sale Share"

1 (one) share in the share capital of the Target Company, representing the entire issued share capital of the Target Company

"SFO"

the Securities and Futures Ordinance (Chapter 571) of the Laws of Hong Kong

"Share(s)"

the ordinary share(s) of nominal value of HK$0.01 each in the share capital of the Company

"Shareholder(s)"

the holder(s) of the Shares

"Specific Mandate"

the specific mandate proposed to be granted to the Directors by the Independent Shareholders at the EGM to allot and issue the Conversion Shares (upon exercise in full of the conversion rights attached to the Convertible Bonds) and the Consideration Shares

"sq.m."

square metres

"Stock Exchange"

The Stock Exchange of Hong Kong Limited

"Supplemental Agreement"

the supplemental agreement to the Sale and Purchase Agreement dated 25 February 2021 entered into between the Company and Mr. Shum

"Target Company"

Luyuan Investment Holdings Limited (ኁ๕ҳ༟છٰϞࠢ ʮ̡), a company incorporated under the laws of the BVI with limited liability on 21 December 2017, which will indirectly own equity interests in all the Property Development Project Companies upon completion of the Reorganisation

"Target Group"

the Target Company and its wholly or partially-owned companies upon completion of the Reorganisation

"Trading Day"

a day on which trading of securities takes place on the Stock Exchange throughout its normal trading hours

"Valuation Report"

the valuation report on the market value of the property interests of the Target Group as at 30 November 2020 prepared by JLL, the text of which is set out in Appendix IV to this circular

"Vendor"

Mr. Shum

"Weihai Xiangyuan"

Weihai Xiangyuan Real Estate Development Co., Ltd. (۾ ऎ̹ୂ๕גήପක೯Ϟࠢʮ̡), a company incorporated under the laws of the PRC on 26 June 2017 with limited liability

"%"

per cent.

for identification purposes only

For the purpose of this circular and for illustrative purpose only, RMB is converted into HK$ at the rate of RMB1: HK$1.18. No representation is made that any amounts in RMB has been or could be converted at the above rates or at any other rates.

Jiayuan International Group Limited

Գ๕਷ყછٰϞࠢʮ̡

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2768)

Non-executive Directors:	Registered Office:
Mr. Shum Tin Ching (Chairman)	Cricket Square, Hutchins Drive
Mr. Shen Xiaodong	PO Box 2681, Grand Cayman
KY1-1111, Cayman Islands
Executive Directors:
Mr. Zhang Yi (Vice Chairman)	Principal Place of Business
Mr. Huang Fuqing (Vice Chairman)	in the PRC:
Ms. Cheuk Hiu Nam	No. 59, Gu Jia Ying Road
Mr. Wang Jianfeng	Xuanwu District
Nanjing
Independent non-executive Directors:	China
Mr. Tai Kwok Leung, Alexander
Dr. Cheung Wai Bun, Charles, JP	Headquarters:
Mr. Gu Yunchang	Room 1403
9 Queen's Road Central
Hong Kong
To the Shareholders
Dear Sir or Madam,

26 February 2021

MAJOR AND CONNECTED TRANSACTION ACQUISITION OF THE TARGET GROUP HOLDING

PROPERTY DEVELOPMENT PROJECTS

LOCATED IN SHANDONG PROVINCE

INVOLVING THE ISSUE OF CONSIDERATION SHARES AND

CONVERTIBLE BONDS

UNDER SPECIFIC MANDATE

INTRODUCTION

References are made to the announcement of the Company dated 13 January 2021 and the supplemental announcement of the Company dated 25 February 2021 in respect of, among other things, that on 13 January 2021, the Company entered into the Sale and Purchase Agreement (as subsequently amended and supplemented by the Supplemental Agreement)with Mr. Shum, pursuant to which, the Company has conditionally agreed to acquire, and Mr. Shum has conditionally agreed to sell, the Sale Share, representing the entire issued share capital of the Target Company, at the Initial Consideration of HK$7,247,560,000 (equivalent to approximately RMB6,142,000,000) (subject to adjustment), which will be settled (i) as to HK$3,420,640,000 (equivalent to approximately RMB2,898,847,458) by way of issue of the Convertible Bonds; (ii) as to HK$2,772,000,000 (equivalent to approximately RMB2,349,152,542) by way of issue and allotment of 840,000,000 Consideration Shares; and (iii) as to the remaining balance of HK$1,054,920,000 (equivalent to approximately RMB894,000,000) by cash.

The purpose of this circular is to provide you with, among other things:

(i) the particulars of the Sale and Purchase Agreement and the transactions contemplated thereunder;

(ii) the letter from the Independent Board Committee with their advice and recommendation on the Sale and Purchase Agreement and the transactions contemplated thereunder to the Independent Shareholders;
(iii) the letter from Maxa Capital with their advice and recommendation on the Sale and Purchase Agreement and the transactions contemplated thereunder to the Independent Board Committee and the Independent Shareholders; and
(iv) other information as required under the Listing Rules,

as well as to seek the approval of the Independent Shareholders in respect of the entering into of the Sale and Purchase Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate).

THE SALE AND PURCHASE AGREEMENT (AS SUBSEQUENTLY AMENDED AND SUPPLEMENTED BY THE SUPPLEMENTAL AGREEMENT)

Date

13 January 2021 (after trading hours)

Parties

(a) the Company, as the purchaser; and
(b) Mr. Shum, as the Vendor.

Subject matter to be acquired

The Company has conditionally agreed to acquire and Mr. Shum has conditionally agreed to sell the Sale Share, representing the entire issued share capital of the Target Company. The Company has the right to nominate and designate a wholly-owned subsidiary to take up the Sale Share upon Completion.

Upon completion of the Reorganisation, the Target Company will indirectly own all the equity interests held by Mr. Shum and/or companies controlled by him in the Property Development Project Companies. Upon completion of the Reorganisation, the Target Group will comprise, among others, the Target Company as an investment holding company and all the Property Development Project Companies. Further information of the Reorganisation and the Target Group is set out in the paragraphs headed "Reorganisation "and" Information of the Target Group and its business", respectively, in this section.

Consideration

The Initial Consideration for the Acquisition is HK$7,247,560,000 (equivalent to approximately RMB6,142,000,000) (subject to adjustment), which will be satisfied upon Completion in the following manner:

1. as to HK$3,420,640,000 (equivalent to approximately RMB2,898,847,458) by way of issue of the Convertible Bonds in the aggregate principal amount of HK$3,420,640,000 entitling Mr. Shum or his nominee(s) to convert at the Conversion Price of HK$3.30 per Conversion Share (subject to adjustment) into a maximum number of 1,036,557,575 Conversion Shares;
2. as to HK$2,772,000,000 (equivalent to approximately RMB2,349,152,542) by way of issue and allotment of 840,000,000 Consideration Shares by the Company to Mr. Shum or his nominee(s) at the Issue Price of HK$3.30 per Consideration Share; and
3. as to the remaining balance of HK$1,054,920,000 (equivalent to approximately RMB894,000,000) by cash.

The Initial Consideration was determined after arm's length negotiations between the Company and Mr. Shum with reference to, among other things, (i) the appreciated value of the property development projects as at 30 November 2020 in the amount of approximately HK$3,459,760,000 (equivalent to approximately RMB2,932,000,000) based on the Valuation Report on the properties developments projects as at 30 November 2020, prepared by JLL, an independent property valuer, in the amount of HK$19,546,700,000 (equivalent to approximately RMB16,565,000,000) as set out in Appendix IV to this circular and the ownership percentage of the Property Development Project Companies owned by the Target Group upon completion of the Reorganisation; (ii) the adjusted financial information of the Target Group after completion of the Reorganisation as at 30 September 2020; (iii) an approximately 4.86% discount on the Adjusted NAV (as defined below); and (iv) the amount of deferred PRC taxes on the appreciated value of the property development projects.

The Initial Consideration was agreed on based on the Adjusted NAV (as defined and calculated in the manner described below) as at 30 September 2020. The Initial Consideration shall be adjusted to the Final Consideration according to the adjustment mechanism described in the paragraph headed "Consideration Adjustment Mechanism" below. The Final Consideration shall be payable by the Company to Mr. Shum or his nominee(s) upon Completion.

Adjusted NAV and Initial Consideration

The following table demonstrates the calculations of the Adjusted NAV (as defined below) of the Target Group as at 30 September 2020 and the Initial Consideration:

HK$
approximately
Unaudited combined net asset value attributable to the	5,023,260,000
owners of the Target Group as at 30 September 2020	(equivalent to
(after taking into account the original investment costs	approximately
of certain project companies of the Target Group and	RMB4,257,000,000)
assuming the Reorganisation was completed on 30
September 2020) (Note 1)
Add:
Appreciated value of the property development projects as	3,459,760,000
at 30 November 2020 based on the Properties Valuation	(equivalent to
and ownership percentage of the Property Development	approximately
Project Companies by the Target Group (Note 2)	RMB2,932,000,000)
Less:
Deferred PRC taxes on appreciated value (Note 3)	864,940,000
(equivalent to
approximately
RMB733,000,000)
Equal to:
Adjusted net asset value attributable to the owners of the	7,618,080,000
Target Group (the "Adjusted NAV") as at 30 September	(equivalent to
2020	approximately
RMB6,456,000,000)
Less:
4.86% discount to the Adjusted NAV (Note 4)	370,520,000
(equivalent to
approximately
RMB314,000,000)
Initial Consideration	7,247,560,000
(equivalent to
approximately
RMB6,142,000,000)

Notes:

1. As at 30 September 2020, (i) the net asset value attributable to the owners of the Combined Group is HK$2,699,723,000 (equivalent to approximately RMB2,287,901,000) as set out in Appendix IIA to this circular, (ii) the net deficit attributable to the owners of Lingshihuafu was HK$36,244,000 (equivalent to approximately RMB30,715,000) as set out in Appendix IIB to this circular, (iii) after taking into account the original investment costs of certain project companies of the Target Group, the unaudited combined net asset value attributable to the owners of the Target Group (assuming the Reorganisation was completed on 30 September 2020) was approximately RMB4,257,000,000 (equivalent to approximately HK$5,023,260,000).
2. The appreciated value of the property development projects is the aggregated sum of the difference between (i) the book value of the property development projects as set out in Appendix IIA and IIB to this circular, plus the original investment costs of certain project companies, and (ii) the market value of the property development projects as at 30 November 2020, based on the respective ownership percentages of each of the property development projects.
3. Deferred PRC taxes are calculated based on the appreciated value of the property development projects multiplied by a 25% tax rate.
4. The 4.86% discount is determined after arm's length commercial negotiations among the Vendor and the Company. The Vendor as the controlling Shareholder is willing to support the Company by offering a discount of 4.86% to the Adjusted NAV.

Consideration Adjustment Mechanism

In the event that the Adjusted NAV of the Target Group at Completion calculated by reference to, inter alia, the audited combined accounts of the Target Group as at and for the year ended 31 December 2020 (the "Adjusted NAV at Completion") is less than the Adjusted NAV, the Initial Consideration shall be adjusted downward by the difference between the amount of the Adjusted NAV and the amount of the Adjusted NAV at Completion after accounting for the 4.86% discount to arrive at the Final Consideration (i.e. the Final Consideration equals to 95.14% of the Adjusted NAV at Completion). If the Adjusted NAV at Completion is equal to or more than the Adjusted NAV, no adjustment will be made (i.e. the Final Consideration is equal to the Initial Consideration). In the event the Initial Consideration is adjusted downward in the aforementioned scenario, the cash portion of the Final Consideration will be reduced whereas the Convertible Bonds and Consideration Shares portions of the Final Consideration will remain unchanged.

Principal Terms of the Convertible Bonds

Convertible Bonds

Subject to certain conditions under the Sale and Purchase Agreement, the Company will issue the Convertible Bonds in an aggregate principal amount of HK$3,420,640,000 (equivalent to approximately RMB2,898,847,458) which, unless previously converted, will mature on the date falling 60 months from the Issue Date, unless extended at the request of the Company.

Denomination

The Convertible Bonds are issued in registered form and will be in the denominations of HK$1.00.

Issue Price of the Convertible Bonds

100% of the aggregate principal amount of the Convertible Bonds.

Interest

The Convertible Bonds will bear no interest.

Maturity Date

The date falling 60 months from the Issue Date.

Transferability

The Convertible Bonds may be freely assigned or transferred to any third party who has confirmed to the relevant Holder in writing it is not a connected person of the Company within the meaning of the Listing Rules (save that the Convertible Bonds may be assigned or transferred to a connected person when the Company has given its written consent), subject to the compliance with: (i) the terms and conditions of the Convertible Bonds; (ii) the Listing Rules; (iii) the approval for listing in respect of the Conversion Shares (as defined below); and (iv) all applicable laws and regulations.

Ranking of the Convertible Bonds

The Convertible Bonds constitute the direct, subordinated, unconditional and unsecured general obligations of the Company and shall at all times rank pari passu and without any preference among themselves. The right to payment of the Holder shall, save for such exceptions as may be provided by applicable legislation, be subordinated to the claims of all other present and future senior and subordinated creditors of the Company.

Maturity

only be payable by way of conversion by a Holder, although subject to the requirement that any such exercise of the conversion rights attached to the Convertible Bonds will not render the Company in breach of the minimum public float requirement as stipulated under the Listing Rules.

Conversion

At any time after the Issue Date and up to and inclusive of one Business Day prior to the Maturity Date, the Holder shall have the right, but not the obligation, to convert in whole or in part, the outstanding principal amount of the Convertible Bonds, into such number of fully paid Shares of the Company as determined in accordance with the following formula:

N=A/C

Where:

"N" is the number of Shares to be issued by the Company upon conversion.

"A" is the principal amount of the Convertible Bonds to be converted.

"C" is the Conversion Price.

The Holder shall effect conversions by delivering to the Company a completed notice in the form prescribed in the Convertible Bonds Instrument.

The Conversion Shares, when issued, will in all respects rank pari passu with the Shares already in issue on the day when the Conversion Shares are issued.

Conversion Price

The Conversion Price at which the Company shall issue the Conversion Shares to the Holder upon conversion of the Convertible Bonds will initially be HK$3.30 per Share but will be subject to adjustment for dilutive events.

The terms of the Convertible Bonds, including the Conversion Price, have been arrived at after arm's length negotiations between the Company and Mr. Shum, with reference to, among other things, the recent trend of the Share price performance and the prevailing market price of the Shares.

The maximum number of 1,036,557,575 Conversion Shares to be issued upon full conversion of the Convertible Bonds represents approximately:

(i) 25.56% of the existing issued share capital of the Company; and
(ii) 17.47% of the issued share capital of the Company as enlarged by the issue of the Consideration Shares and Conversion Shares upon full conversion of the Convertible Bonds.

The Conversion Shares (when allotted and issued upon full conversion of the Convertible Bonds) will be issued under the Specific Mandate to be sought at the EGM.

Adjustments to Conversion Price

The Conversion Price will be subject to adjustment upon the occurrence of the following events:

(i)

Capitalisation issue, sub-division, consolidation and reclassification of Shares

(a) If and whenever there shall be an alteration to the number of Shares in issue by reason of any consolidation or sub-division or reclassification, the Conversion Price in force immediately prior thereto shall be adjusted by multiplying it by the following fraction:

A B

where:

A	=	the nominal amount of one Share immediately after such
alternation;
and
B	=	the nominal amount of one Share immediately before such
alteration.

Such adjustment shall be effective on the date the alteration takes effect.

(b) If and whenever the Company shall issue (other than Scrip Dividend as defined below) any Shares credited as fully paid by way of capitalisation of profits or reserves (including any share premium account or capital redemption reserve fund), the Conversion Price in force immediately prior to such issue shall be adjusted by multiplying it by the following fraction:

where:

C	=	the aggregate nominal amount of the issued Shares
immediately before such issue;
and
D	=	the aggregate nominal amount of the issued Shares
immediately after such issue.

Such adjustment shall become effective on the date of issue of such Shares or if a record date is fixed therefor, immediately after such record date.

(ii)

Scrip Dividend

If the Company shall issue any Shares (the "Scrip Dividend") in lieu of the whole or any part of a specifically declared cash dividend (the "Relevant Cash Dividend"), and the Current Market Price of such Shares as at the last Trading Day preceding the issue of such Shares exceeds 105% of the Relevant Cash Dividend, then the Conversion Price in effect immediately before the issue of such Shares shall be adjusted in accordance with the following formula:

N+B

NCP = OCP x

N+A

where:

NCP = the new Conversion Price after such adjustment;

OCP = the old Conversion Price before such adjustment;

N = the aggregate nominal amount of the issued Shares immediately preceding the issue of shares by way of Scrip Dividend;

A = the aggregate nominal amount of Shares issued by way of Scrip Dividend;

and

B = the aggregate nominal amount of Shares issued by way of Scrip

Dividend multiplied by a fraction of which (i) the numerator is the aggregate amount of the Relevant Cash Dividend; and (ii) the denominator is the Current Market Price of all the Shares issued by way of Scrip Dividend in lieu of such Relevant Cash Dividend.

Such adjustment shall became effective on the date of issue of such Shares.

(iii) Capital Distribution
If the Company shall pay or make to its shareholders any Capital Distribution other than by way of Scrip Dividend, then the Conversion Price shall be adjusted in accordance with the following formula:
CMP - fmv
NCP = OCP x
CMP
where:
NCP and OCP have the meanings ascribed thereto above;
CMP = the Current Market Price per Share on the last Trading Day preceding the date on which the relevant Dividend is first publicly announced;
and fmv
=the portion of the Fair Market Value attributable to one Share, with such portion being determined by dividing the Fair Market Value of the aggregate Dividend by the number of Shares entitled to receive the relevant Dividend of the Capital Distribution.
(iv) Cash Dividend
If and whenever the Company shall pay or declare any Cash Dividend to the shareholders (other than Cash Dividend paid or declared in accordance with the normal dividend policy of the Company), the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before such Cash Dividend by the following fraction:

A-B

where:

A = the Current Market Price of one Share on the date for the determination of shareholders entitled to receive such Cash Dividend;

and

B = the amount of Cash Dividend attributable to one Share.

Such adjustment shall become effective on the date on which such Cash Dividend is actually made or if a record date is fixed therefor, immediately after such record date.

(v) Offer to holders of Shares
If and whenever the Company shall offer to holders of Shares new Shares for subscription by way of rights, or shall grant to holders of Shares any options or warrants to subscribe for new Shares, at a price less than 95% of the Current Market Price of such new Shares on the date of the announcement of the terms of the offer or grant, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before the date of the announcement of such offer or grant by a fraction of which:
- (a) the numerator is the number of Shares in issue immediately before the date of such announcement plus the number of Shares which the aggregate of the amount (if any) payable for the rights, options or warrants and of the amount payable for the total number of new Shares comprised therein would purchase at such Current Market Price; and
- (b) the denominator is the number of Shares in issue immediately before the date of such announcement plus the aggregate number of Shares offered for subscription or comprised in the options or warrants.
Such adjustment shall be effective (if appropriate retroactively) from the commencement of the day next following the record date for the offer or grant.
(vi) No Adjustment
Notwithstanding any of the foregoing, the adjustment provisions of the relevant condition in the Convertible Bonds Instrument shall not apply in any of the following circumstances:
- (a) issue and/or exercise of any share option in compliance with the Listing Rules or any share option scheme granted to and for the benefit of the employees of the Company which has been publicly disclosed by the Company;
- (b) an issue of Shares by the Company wholly for cash upon the exercise of any conversion, exchangeable or subscription rights attached to any securities (other than securities issued pursuant to any share option scheme) which by their terms are convertible into or exchangeable for or carry rights of subscription for new Shares; and
- (c) any issue of securities carrying rights to convert into or subscribe for Shares at a conversion price or subscription price not lower than the prevailing Conversion Price (as adjusted in accordance with the relevant condition in the Convertible Bonds Instrument) as at the date of such issue.
Any adjustment to the Conversion Price shall be made to the nearest cent so that any amount under half of a cent shall be rounded down and any amount of half of a cent or more shall be rounded up. In no event shall any adjustment (otherwise than upon the consolidation or reclassification of Shares into Shares of a larger nominal amount) involve an increase in the Conversion Price.

If application of any of the provisions of the relevant condition in the Convertible Bonds Instrument would result in the Conversion Price being reduced so that on conversion Shares shall fall to be issued at a discount to their nominal amount, then the Conversion Price shall be adjusted to an amount equal to the nominal amount of one Share.

Consideration Shares

The 840,000,000 Consideration Shares represent approximately 20.71% of the issued share capital of the Company as at the Latest Practicable Date, approximately 17.16% of the issued share capital of the Company as enlarged by the Consideration Shares (assuming there will be no change in the total number of issued Shares of the Company between the Latest Practicable Date and the allotment and issue of the Consideration Shares) and approximately 14.16% of the issued share capital of the Company as enlarged by the issue of the Consideration Shares and Conversion Shares upon full conversion of the Convertible Bonds.

The Conversion Price and the Issue Price

The Conversion Price of HK$3.30 per Conversion Share and the Issue Price of HK$3.30 per Consideration Share represents:

(i) a premium of approximately 9.63% to the closing price per Share of HK$3.01 as quoted on the Stock Exchange on the Latest Practicable Date;
(ii) a premium of approximately 5.10% to the closing price per Share of HK$3.14 as quoted on the Stock Exchange on 13 January 2021, being the date of the Sale and Purchase Agreement;
(iii) a premium of approximately 6.45% to the average closing price per Share of HK$3.10 as quoted on the Stock Exchange for the last five consecutive trading days immediately preceding the date of the Sale and Purchase Agreement;
(iv) a premium of approximately 6.90% to the average closing price per Share of HK$3.09 as quoted on the Stock Exchange for the last ten consecutive trading days immediately preceding the date of the Sale and Purchase Agreement; and
(v) a premium of approximately 1.59% to the consolidated net asset value per Share attributable to the Shareholders as at 30 June 2020 of approximately HK$3.25 per Share calculated based on the consolidated net assets of the Group attributable to the Shareholders of approximately HK$13,174,472,260 as at 30 June 2020 as extracted from the interim report of the Company for the six months ended 30 June 2020 and 4,055,734,623 Shares in issue as at the Latest Practicable Date.

The Conversion Price and Issue Price were determined on an arm's length basis between the Company and Mr. Shum with reference to the prevailing market price of the Shares as shown above.

The Directors (excluding the independent non-executive Directors, who shall provide their views after taking into account the advice of the Independent Financial Adviser) consider that the Issue Price and Conversion Price are fair and reasonable.

Conditions precedent

Completion is conditional upon fulfilment or, where applicable, waiver of the following conditions:

(i) the Reorganisation having been completed pursuant to the Sale and Purchase Agreement;
(ii) the relevant transactions under the Sale and Purchase Agreement, including but not limited to, the issue of the Consideration Shares and the Convertible Bonds, having been approved by the Independent Shareholders at the EGM in accordance with the requirements of the Listing Rules;
(iii) the approval for the listing of, and permission to deal in, the Consideration Shares as well as the Conversion Shares by the Stock Exchange having been obtained by the Company, and such approval not having been revoked or withdrawn prior to the date of Completion;
(iv) all necessary consents, if any, from any relevant governmental or regulatory authorities or other relevant third parties in connection with the Sale and Purchase Agreement and the transactions contemplated thereunder having been obtained; and
(v) the Company having been satisfied with the due diligence results of the Target Group in all respects.

If any of the conditions set out above has not been satisfied or waived by the Company (other than conditions (i), (ii) and (iii) which may not be waived) on or before 31 December 2021 or such other date as the parties may agree, the Sale and Purchase Agreement will be terminated unless the parties otherwise agree. While conditions (iv) and (v) may be waived by the Company, to the best knowledge, belief and information of the Directors, and based on a legal opinion issued by the Company's PRC legal advisers regarding the property interests forming the subject of this Acquisition, there are no circumstances as currently foreseen that would require these conditions to be waived on or before 31 December 2021 or such other date as the parties may agree. Therefore, the substance of this Acquisition is expected to remain the same on the date of closing of this Acquisition.

Reorganisation

Background and reasons of the Reorganisation

Prior to completion of the Reorganisation, all the equity interests of the Property Development Project Companies to be acquired pursuant to the Sale and Purchase Agreement is indirectly held by Mr. Shum under different subsidiaries of the Private Group. For the purpose of the Acquisition, various arrangements and restructure of the Property Development Project Companies through the Reorganisation is required to consolidate the Property Development Project Companies under the same holding company in the PRC, Qingdao Jiazhi, and isolate the same from the Private Group.

At the offshore level, the Target Company and Luyuan Property Development Limited were established by Mr. Shum to hold the equity interests of the Property Development Project Companies through Qingdao Jiazhi.

Upon completion of the Reorganisation, the Target Group will comprise, among others, the Target Company as an investment holding company and all the Property Development Project Companies.

Set out below is a chart showing the corporate and shareholding structure of the Target Group immediately after completion of the Reorganisation:

Target Company

(BVI)

100%

Luyuan Property Development Limited ኁ๕גήପක೯Ϟࠢʮ̡

(HK)

100%

Qingdao Jiazhi Investment Co., Ltd.* ڡࢥྗ౽ҳ༟Ϟࠢʮ̡

(PRC)

100%

Qingdao Jiayuan Real Estate Group Co., Ltd.* ڡࢥԳ๕גήପණྠϞࠢʮ̡

(PRC)

100%

Ningbo Puying Industrial Investment Partnership (Limited Partnership)*

ྐྵتዎޮྼุҳ༟ ΥྫΆุ€ϞࠢΥྫ

(PRC)

90%

Qingdao Shuiqingmuhua Creative Development

10%

Co., Ltd.*

ڡࢥ˥૶˝ശ ௴จ೯࢝Ϟࠢʮ̡

(PRC) (Note 1)

for identification purposes onlyNotes:

1. According to the Ningbo Puying Industrial Investment Partnership (Limited Partnership)* ("Ningbo Puying") partnership agreement entered into by Jiaxing Xiyue Trading Co., Ltd.* ("Jiaxing Xiyue") and Jiaxing Yeyuan Real Estate Development Co., Ltd.* ("Jiaxing Yeyuan"), both are indirectly wholly-owned subsidiaries of the Combined Group upon completion of the Reorganisation, and Xinshangdu (Qingdao) Investment Management Co., Ltd.* (อɪே€ڡࢥҳ༟၍ଣϞࠢʮ̡) ("Xinshangdu"), a company incorporated in the PRC, whose principal business is investment management, and its ultimate beneficial owner is Mr. Wang Heqi, who is a third party independent of the Company and connected persons of the Company. Jiaxing Xiyue, Jiaxing Yeyuan and Xingshangdu will be entitled to 1%, 64% and 35% of the distributable profits of Ningbo Puying. The Combined Group is entitled to a total of 65% equity interest of Ningbo Puying, which represented 58.5% equity interest of Qingdao Shuiqingmuhua Creative Development Co., Ltd. ("Qingdao Shuiqingmuhua"). Joining the Ningbo Puying is conditional on the approval of Xinshangdu, an original limited partner. Since Xinshangdu is entitled to 35% equity interest of Ningbo Puying in the previous partnership agreement entered into by Xinshangdu and the previous limited partner, Xinshangdu intended to keep the same portion as carried on from the previous partnership agreement and Mr. Shum agreed to received 65% equity interest as Xinshangdu was a significant contributor for Ningbo Puying's acquisition of the land use right of Qingdao Shuiqingmuhua and such contribution was reflected in the profit distribution of Ningbo Puying among the original limited partners. Regardless of the entitlement to only to 35% of the distributable profits, Mr. Shum is of the view that Qingdao Shuiqingmuhua is still a profitable project.
On 11 January 2021, the Combined Group acquired 10% equity interest in Qingdao Shuiqingmuhua from the non-controlling shareholder for a consideration of RMB18,000,000. As a result, the Combined Group is entitled to a total of 68.5% equity interest in Qingdao Shuiqingmuhua.
2. Lingshihuafu is indirectly owned as to (i) 63% by Mr. Shum; (ii) 30% by Qingdao Zhujiawa Industrial Co., Ltd.* (ڡࢥϡ࢕၉ྼٰุ΅Ϟࠢʮ̡), a company incorporated in the PRC, whose legal representative is Mr. Zhu Guangen, and its ultimate controller is the Community Public Affairs Committee of Zhujiawa, Jinjialing Street, Laoshan District, Qingdao* (ڡࢥ̹⢹ʆਜږ࢕Ꮚ൑༸ϡ ࢕၉ٟਜʮ΍ԫਕ։ࡰึ) and where its ultimate beneficial owner is the residents of Zhujiawa community; and (iii) 7% by Mr. Yu Xihua, who is a shareholder and the director of Lingshihuafu since May 2006. Mr. Yu Xihua and Qingdao Zhujiawa Industrial Co., Ltd.* and its ultimate beneficial owners are third parties independent of the Company and connected persons of the Company.
3. Zhongwei (Qingdao) Real Estate Development Co., Ltd.* is indirectly owned as to 79.93% by Mr. Shum and directly owned as to 20.07% by Shenzhen Guoshun Minan Supply Chain Co., Ltd.* (ଉέ ̹਷න͏τԶᏐᗡϞࠢʮ̡), a company incorporated in the PRC, whose ultimate controller is the State-owned Assets Supervision and Administration Commission of Licang District, Qingdao, a third party independent of the Company and connected persons of the Company.

Guarantees

Pursuant to the Reorganisation, the Target Group shall cancel all the corporate guarantees provided by the subsidiaries or joint venture(s) of the Target Group to any of the subsidiaries or joint venture(s) of the Private Group before Completion.

Completion

Completion shall take place on the tenth Business Day after the day on which the conditions precedent of the Sale and Purchase Agreement have been satisfied or waived or such other day as the parties may agree.

REASONS FOR AND BENEFITS OF THE ACQUISITION

Reference is made to the Prospectus. As stated in the Prospectus, in order to achieve the geographical segregation between the property development projects of Mr. Shum and the Private Group and the Group and to ensure clear delineation, Mingyuan Investment and Mr. Shum entered into the Deed of Non-Competition with and in favour of the Company, pursuant to which, the Private Group has agreed to conduct its property development business only in the Non-Target Cities (as defined in the Prospectus) while the Group shall conduct its property development business in the Target Cities (as defined in the Prospectus) exclusively.

Qingdao of Shandong Province was initially a non-Target City (as defined in the Prospectus) where the Private Group conducts its property development business via the Target Group. Weihai of Shandong Province was initially an Unoccupied City (as defined in the Prospectus), i.e. neither a non-Target City nor a Target City. Following the compliance by the controlling shareholders of the Company with the relevant right of first refusal mechanism as applicable between them and the Company under the Deed of Non-Competition, Weihai subsequently became a non-Target City. Under the Deed of Non-Competition, the Company has been granted a right by its controlling shareholders to acquire on one or more occasions any interest in respect of the property development projects (in whole or in part) in a non-Target City (as defined in the Prospectus) held by them or any of their respective associates at any time. The price at which this acquisition option can be exercised by the Company shall be negotiated and agreed at arm's length between the Company and its controlling shareholders. By way of the acquisition of all property development projects owned/controlled by Mr. Shum and his associates in Qingdao and Weihai contemplated by the Acquisition, each of these cities will be redesignated as a Target City (as defined in the Prospectus), such that the Group will be entitled to commence other property development projects in these cities where suitable business opportunities arise.

Save as Mr. Shum, being an overlapping shareholder and an overlapping director of the Group and the Private Group, respectively, the shareholder level, the board level and management level of each of the Group and the Private Group are independent from each other. The Private Group commenced its property development business in Qingdao and Weihai since December 2018 and October 2017, respectively, and has developed in-depth knowledge in the property sector of these cities, whereas the Group did not have any property development business in these cities after the delineation of business between the Group and the Private Group. Upon Completion, the controlling shareholders of the Company will not have any interest in other property development projects in these cities, which will be subject to the ambit of the non-competition undertakings given by them under the Deed of Non-Competition.

The Company is of the view that the Private Group will not be regarded as conducting its property development business in Qingdao and Weihai (both a Target City (as defined in the Prospectus) after Completion) as the Qingdao Projects (as defined below) and the Weihai Project (as defined below) will be under the control of the Group and the Target Company will become a wholly-owned subsidiary of the Group. As such, the Company considers that, under this Acquisition, its controlling shareholders will remain in compliance with the non-competition undertakings given by them under the Deed of Non-Competition as disclosed in the Prospectus after Completion.

In view of the aforesaid, the Directors (including the independent non-executive Directors whose views have been set out in this circular together with the advice of the Independent Financial Adviser) are of the view that the Acquisition is fair and reasonable and in the interests of the Company and its Shareholders as a whole.

In 2020, sales growth of the Group was stable, primarily attributable to the regionally coordinated development strategy of China and the ability to precisely capture the home purchase demand in China's second-tier and third-tier cities.

According to 2019 Statistical Report on the National Economic and Social Development of Shandong Province* (ɚཧɓɘϋʆ؇޲਷͏຾᏶ձٟึ೯࢝୕ࠇʮజ) from the Shandong Provincial Bureau of Statistics, the gross domestic product of Shandong Province exceeded RMB7,106.8 billion in 2019, representing an increase of approximately 5.5% from the previous year. The full-year property development investment amounted to RMB861.5 billion, representing an increase of 14.1% from the previous year. For commodity housings, total construction area amounted to 757.7 million sq.m., representing an increase of 9.7% from the previous year and those for residential purpose amounted to 559.4 million sq.m., representing an increase of 10.1% from the previous year.

As the property development projects of the Target Group are largely located in Qingdao of Shandong Province, which is one of China's new first-tier cities, the Group expects that the property market of Shandong Province will continue to grow steadily in future, which will be a boost to the Group's sales expectation. On the other hand, the Group may swiftly expand the geographical coverage of its business by adding more provinces to its regional layout and further expand its land reserve and achieve economies of scale and in turn uplift the Group's competitiveness.

Further, the Group considers that the Acquisition represents the performance of the commitment of Mr. Shum to continually inject non-listed businesses into the Company. Completion of such allotment and issue of the Consideration Shares and the Conversion Shares will further raise the shareholding percentage of Mr. Shum. Meanwhile, the increase in the Group's estimated net assets will continue to optimise the structure of assets and liabilities of the Group and enable the Group to further establish a healthier financial position.

The Group believes that establishing presence in Shandong Province will lay solid foundations for the future development of the Company and play a positive role in further boosting the influence of the "Jiayuan" brand across the PRC. It will help in expanding the strategic layout of the Group in key regions nationwide. Given that the Acquisition (i) is aligned with the Group's strategic goal of "expansion and strengthening"; (ii) seizing opportunities for project merger and acquisition in Shandong Province, it will fully enhance its core competitiveness in each segment of the property value chain; and (iii) could enhance the assets portfolio of the Company, the Directors (including the independent non-executive Directors whose views have been set out in this circular together with the advice of the Independent Financial Adviser) are of the view that the Acquisition is fair and reasonable and in the interests of the Company and its Shareholders as a whole.

EFFECT OF THE CONSIDERATION SHARES ON THE SHAREHOLDING STRUCTURE

Set out below is the shareholding structure of the Company (i) as at the Latest Practicable Date; (ii) immediately after Completion and the allotment and issue of the Consideration Shares; and (iii) immediately after full conversion of the Convertible Bonds:

Shareholders

Mr. Shum and his associate(s) (Note 3)

Public Shareholders

As at the

Latest Practicable Date

Approximate

Number of Shares %

2,828,310,136(Note1) 69.74

1,227,424,487

Immediately after Completion and the allotment and issue of the Consideration Shares, but before the exercise of the conversion rights attached to the

Convertible Bonds (Note 2)

Approximate

Number of Shares %

30.26

Immediately after Completion and the allotment and issue of

(i) the Consideration Shares and
(ii) the Conversion Shares upon the exercise in full of the conversion rights attached to the Convertible
Bonds (Note 2) & (Note 5)

Number of SharesApproximate % (Note 4)

3,668,310,136 1,227,424,487

74.93 25.07

4,704,867,711 79.31 1,227,424,487 20.69

Total

4,055,734,623

100.00

4,895,734,623

100.00

5,932,292,198 100.00

Notes:

1. 2,756,308,418 of these Shares are held by Mingyuan Investment, which is wholly-owned by Mr. Shum.
2. The figures above assume that other than the Consideration Shares and the Conversion Shares, no further Shares are issued or repurchased by the Company, and no Shares are sold or purchased by Mr. Shum or his associate(s), in each case on or after the Latest Practicable Date and up to the date the allotment and issue of the Consideration Shares and the Conversion Shares.

3. On 13 January 2021, the Company entered into the Sale and Purchase Agreement (as subsequently amended and supplemented by the Supplemental Agreement) with Mr. Shum, pursuant to which, the Company has conditionally agreed to acquire and Mr. Shum has conditionally agreed to sell the entire issued share capital of the Target Company, at the Initial Consideration of HK$7,247,560,000 (equivalent to approximately RMB6,142,000,000) (subject to adjustment), which will be settled (i) as to HK$3,420,640,000 (equivalent to approximately RMB2,898,847,458) by way of issue of the Convertible Bonds; (ii) as to HK$2,772,000,000 (equivalent to approximately RMB2,349,152,542) by way of issue and allotment of 840,000,000 Consideration Shares; and (iii) as to the remaining balance of HK$1,054,920,000 (equivalent to approximately RMB894,000,000) by cash.
4. The percentage figures included in this table are subject to rounding adjustment.
5. The shareholding structure is prepared for illustrative purpose only. There is no right for any Holder(s) to convert any principal amount of the Convertible Bonds held by the Holder(s) and the Company shall not issue any Conversion Shares thereof if, upon such conversion and issue of the Conversion Shares, the Company will be in breach of the minimum public float requirement as stipulated under the Listing Rules.

The Acquisition will not result in change in control of the Company.

INFORMATION OF THE TARGET GROUP AND ITS BUSINESS

The following table sets out the combined financial information of the Combined Group for the two years ended 31 December 2018 and 2019 and for the nine months ended 30 September 2020, respectively, based on the Accountant's Report of the Combined Group as set out in Appendix IIA to this circular:

Nine months endedYear ended 31 December 2018

2019

30 September 2020

RMB

Revenue

- 795,317,000

Net (loss)/profit before taxation and extraordinary items

(26,749,000) (equivalent to approximately HK$(31,564,000))

(6,006,000) 253,772,000

(equivalent to approximately HK$(7,087,000))

(equivalent to approximately HK$299,451,000)

Net (loss)/profit after taxation and extraordinary items

(20,105,000) (equivalent to approximately HK$(23,724,000))

(5,112,000) (equivalent to approximately HK$(6,032,000))

135,475,000 (equivalent to approximately HK$159,861,000)

The following table sets out the financial information of Lingshihuafu, for the two years ended 31 December 2018 and 2019 and for the nine months ended 30 September 2020, respectively, based on the Accountant's Report of Lingshihuafu as set out in Appendix IIB to this circular:

Nine months ended

Revenue -

Net loss before taxation and extraordinary items

(equivalent to approximately HK$(4,685,000))

Net loss after taxation and extraordinary items

(3,043,000) (equivalent to approximately HK$(3,591,000))

Year ended 31 December	30 September
2018	2020
RMB	RMB
-	-
(3,970,000)	(18,585,000)
(equivalent to
approximately
HK$(21,930,000))
(13,960,000)
(equivalent to
approximately
HK$(16,473,000))

2019

RMB

(15,028,000) (equivalent to approximately HK$(17,733,000))

(11,318,000) (equivalent to approximately HK$(13,355,000))

As at 30 September 2020, (i) the net asset value attributable to the owners of the Combined Group was approximately HK$2,699,723,000 (equivalent to approximately RMB2,287,901,000) as set out in Appendix IIA to this circular, (ii) the net deficit attributable to the owners of Lingshihuafu was approximately HK$36,244,000 (equivalent to approximately RMB30,715,000) as set out in Appendix IIB to this circular, (iii) after taking in account the original investment costs of certain project companies of the Target Group, the unaudited combined net asset value attributable to the owners of the Target Group (after taking into account the original investment costs of certain project companies of the Target Group and assuming the Reorganisation was completed on 30 September 2020) was approximately RMB4,257,000,000 (equivalent to approximately HK$5,023,260,000), and (iv) the total asset of the Combined Group was approximately HK$5,776,360,000 (equivalent to approximately RMB4,895,220,000) and the total asset of the Lingshihuafu was approximately HK$10,421,909,000 (equivalent to approximately RMB8,832,126,000).

The original investment costs of certain project companies of the Target Group were in the aggregate amount of approximately RMB2,249,000,000 (equivalent to approximately HK$2,653,820,000).

The Target Group included the Target Company and its wholly-owned or partially-owned companies upon the Reorganisation. Separate accountant's reports have been prepared for (i) the Combined Group, which includes only those entities in the Target Group under common control by Mr. Shum immediately before and after completion of the Reorganisation; and (ii) Lingshihuafu, being a joint venture acquired by the Target Company during Reorganisation, which is not included in the Combined Group as it is not under common control by Mr. Shum immediately before and after completion of the Reorganisation.

Most of the property development projects of the Combined Group were still under development and were not delivered during the financial years of 2018 and 2019. Thus, no profit has been recorded. The Combined Group has recorded profits for the nine months ended 30 September 2020 since one of the property development projects of the Combined Group in Weihai was completed and delivered in January 2020.

As at the Latest Practicable Date, all the property development projects of Lingshihuafu were still under development. Due to the nature of property development project life cycle, it is not uncommon for property development assets to incur losses given the significant capital expenditure incurred in the early stage of development. Even though Lingshihuafu is loss-making, owing to the premier location of Qingdao and the size of the development, the Group believes Lingshihuafu has great potential and will be a valuable asset.

The Target Group and its business

The Target Company is a company newly incorporated under the laws of the BVI with limited liability and wholly-owned by Mr. Shum.

Upon completion of the Reorganisation, the Target Company will own all the equity interests held by Mr. Shum and/or companies controlled by him in the Property Development Project Companies.

After completion of the Reorganisation, the Target Group will hold four property development projects located in Qingdao of Shandong Province (the "Qingdao Projects") and one property development project located in Weihai of Shandong Province (the "Weihai Project"). The Qingdao Projects mainly consist of large-scale residential complex projects, as well as wholesale and retail, information technology research and commercial offices developments. The Weihai Project is a residential complex project with shopping arcades and other supporting facilities. Details of the Qingdao Projects and the Weihai Project are summarised in the below table:

Project nameHolding companyLocationLand area (Note 1)

Development area (Note 1)

Project typeDevelopment status (Note 2)

(sq.m.) (sq.m.)

Jiayuan TwinZhongwei (Qingdao)

Qingdao

168,828

City

Real Estate Development Co., Ltd.*

510,700 Residential, retail & office
Development commenced in July 2020 and was presold from September 2020. Construction is expected to be completed in 2022 and delivered in September 2023.
Zhongchang
Qingdao
Qingdao
118,236
Valley
Shuiqingmuhua Creative Development Co., Ltd.*
237,671 An office park including business offices and industrial offices

Development commenced in May 2020 and is projected to be presold in March 2021. Construction is expected to be completed by March 2023 and delivered in

May 2023.

Project nameHolding companyLocationLand area (Note 1)

Development area (Note 1)

Project typeDevelopment status (Note 2)

(sq.m.)

Jiayuan HaiyuefuQingdao

Shuiqingmuhua Creative Development Co., Ltd.*

Qingdao

56,132

107,166 Residential & retailDevelopment commenced in September 2020 and was presold from November 2020. Construction is expected to be completed by March 2022 and delivered in May 2022.
Jiayuan Huafu -
Phase 1
Qingdao
Lingshihuafu Property Co., Ltd.*
Qingdao
36,815
190,265 Residential, retail & office
Development commenced in December 2018 and was presold from June 2019. Construction is expected to be completed by September 2021 and delivered in May 2022.
Jiayuan Huafu -
Phase 2
Qingdao
Lingshihuafu Property Co., Ltd.*
Qingdao
82,722
524,694 Residential & commercialProjected to commence development in March 2021 and to be presold in June 2021. Construction is expected to be completed by August 2024 and delivered in October 2024.
Jiayuan Huafu -
Phase 3
Qingdao
Lingshihuafu Property Co., Ltd.*
Qingdao
9,424
18,847 Residential & commercial
Projected to commence development in October 2022 and to be presold in March 2023. Construction is expected to be completed by August 2024 and delivered in October 2024.
Jiayuan
HaitangfuWeihai Xiangyuan
Real Estate Development Co., Ltd.*
Weihai
16,300
35,511 Residential

Notes:

1. Depicted areas of the development projects are approximate figures.
Development commenced in December 2020 and is projected to be presold in March 2021. Construction is expected to be completed in October 2022 and delivered in December 2022.
2. Disclosed expected dates of completion for construction, pre-sale and delivery of the Qingdao Projects and the Weihai Project are estimations and subject to change.

Lingshihuafu

Lingshihuafu was a 63%-owned joint venture of the Target Company as at 30 September 2020. Upon Completion, Lingshihuafu will become a joint venture of the Company and be accounted for under the equity method of accounting.

Immediately before the Reorganisation, Zhejiang Jiayuan Shencheng Real Estate Property Group Co., Ltd. ("Shencheng Group"), a company ultimately controlled by Mr. Shum, Qingdao Zhujiawa Industrial Co., Ltd.* and Mr. Yu Xihua held 63%, 30% and 7% equity interest in Lingshihuafu, respectively. In accordance with the articles of association and cooperation agreements of Lingshihuafu, Shencheng Group and Mr. Yu Xihua have joint control over Lingshihuafu; and the management decisions of Lingshihuafu require more than 2/3 consent of Shencheng Group, Qingdao Zhujiawa Industrial Co., Ltd.* and Mr. Yu Xihua. The investment in Lingshihuafu is, therefore, treated as investment in joint venture and the equity method of accounting is applied.

Upon completion of the Reorganisation, the Target Company will hold 63% equity interest of Lingshihuafu, which will become a joint venture of the Target Company.

GENERAL INFORMATION OF THE PARTIES

Information of the Group

The Group is an established property developer of large-scale residential complex projects and integrated commercial complex projects in the PRC. The principal activities of the Group include (i) development and sale of residential and commercial properties; (ii) provision of development services to government organisations for the development of resettlement properties and development or refurbishment of other types of properties, facilities or infrastructure; (iii) leasing of commercial properties owned or developed by the Group; and (iv) property management services in the PRC.

Information of the Vendor

Mr. Shum, being the chairman, a non-executive Director and, together with Mingyuan Investment, the controlling shareholders of the Company, and the ultimate controlling shareholder of the Company, is interested in approximately 69.74% of the issued share capital of the Company.

THE SPECIFIC MANDATE

The Consideration Shares and the Conversion Shares upon exercise in full of the conversion rights attached to the Convertible Bonds will be allotted and issued pursuant to the Specific Mandate proposed to be sought from the Independent Shareholders at the EGM.

APPLICATION FOR LISTING

Application will be made to the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares and the Conversion Shares. The Consideration Shares and the Conversion Shares, when allotted and issued, will rank pari passu in all respects with all the existing Shares in issue. All necessary arrangements will be made for the Consideration Shares and the Conversion Shares to be admitted into CCASS.

FINANCIAL EFFECTS OF THE ACQUISITION

Upon Completion, the Target Company will become a wholly-owned subsidiary of the Company and the financial results, assets and liabilities of the Target Company will be consolidated into the Group's consolidated financial statements.

Earnings

Upon the Completion, the financial results of the Target Group will be consolidated into the consolidated financial statements of the Group. The Group will be able to enjoy the earnings attributable to the Group of the Target Group. The Group's earnings are expected to increase in the future after the Completion, after taking into account the properties to be developed by the Target Group to be completed and delivered.

For further details of the Target Company, please refer to Appendix III to this circular.

Assets and liabilities

Based on the interim report of the Group for the six months ended 30 June 2020, as at 30 June 2020, the Group had total assets, total liabilities and net assets of approximately RMB66,146 million (equivalent to approximately HK$78,052 million), RMB52,673 million (equivalent to approximately HK$62,154 million) and RMB13,473 million (equivalent to approximately HK$15,898 million), respectively. Based on the unaudited pro forma financial information of the Enlarged Group as set out in Appendix III to this circular, if the Acquisition had been completed on 30 June 2020, the total assets, total liabilities and net assets of the Enlarged Group would have increased to approximately RMB73,996 million (equivalent to approximately HK$87,315 million), RMB54,591 million (equivalent to approximately HK$64,417 million) and RMB19,405 million (equivalent to approximately HK$22,898 million), respectively.

LISTING RULES IMPLICATIONS

Major Transaction

As one or more of the applicable percentage ratios (as defined under the Listing Rules) in respect of the Acquisition is more than 25% but less than 100%, the Acquisition constitutes a major transaction of the Company under Chapter 14 of the Listing Rules and is subject to the reporting, announcement and shareholders' approval requirements under the Listing Rules.

Connected Transaction

As at the Latest Practicable Date, Mr. Shum, being the chairman and a non-executive Director and, together with Mingyuan Investment, the controlling shareholders of the Company and the ultimate controlling shareholder of the Company, is interested in approximately 69.74% of the issued share capital of the Company. Hence, Mr. Shum is a connected person of the Company and the Acquisition constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules, which is subject to the reporting, announcement and independent shareholders' approval requirements under the Listing Rules.

Mr. Shum has abstained from voting on the relevant board resolutions in respect of approving the Acquisition. Save as disclosed above, none of the other Directors has a material interest in the Sale and Purchase Agreement and the transactions contemplated thereunder and therefore no other Director was required to abstain from voting on the relevant board resolutions in respects approving the Acquisition.

EGM

The EGM will be convened and held for the purpose of considering and, if thought fit, approving the Sale and Purchase Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate).

A notice convening the EGM to be held at Room 1403, 9 Queen's Road Central, Hong Kong on Friday, 16 April 2021 at 10:00 a.m. is set out on pages EGM-1 to EGM-2 of this circular. An ordinary resolution will be proposed to the Independent Shareholders at the EGM for consideration and, if thought fit, to approve the Sale and Purchase Agreement and the transactions contemplated thereunder.

A form of proxy for the EGM is enclosed with this circular. Such form of proxy is also published on the websites of Hong Kong Exchanges and Clearing Limited (http://www.hkexnews.hk) and the Company (http://www.jiayuanintl.com). Whether or not you intend to attend the EGM, please complete and sign the enclosed form of proxy in accordance with the instructions printed thereon and return it 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 but in any event not less than 48 hours before the time appointed for the EGM (i.e. not later than 10:00 a.m. on Wednesday, 14 April 2021). Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish. If you attend and vote at the EGM, the authority of your proxy will be revoked.

In accordance with Rule 13.39(4) of the Listing Rules, voting at the EGM will be conducted by poll. Mr. Shum, the chairman of the Board and the non-executive Director of the Company, is the Vendor. As at the Latest Practicable Date, Mr. Shum and its associates, in aggregate holding 2,828,310,136 Shares, representing approximately 69.74% of the issued share capital of the Company, will abstain from voting on the proposed resolution to approve the Sale and Purchase Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate) at the EGM. To the best of the Directors' knowledge, information and belief, having made all reasonable enquiries, no other Shareholder has any material interest in the Sale and Purchase Agreement and the transactions contemplated thereunder and therefore no other Shareholder is required to abstain from voting at the EGM in respect of the resolution approving the aforesaid matters.

ENTITLEMENT TO ATTEND AND VOTE AT THE EGM

Shareholders who are entitled to attend and vote at the meeting are those whose names appear as shareholders of the Company on the register of members of the Company as at the close of business on Monday, 12 April 2021. In order to be eligible to attend and vote at the meeting, all completed transfer documents accompanied by the relevant share certificates must be lodged with 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, Hong Kong for registration not later than 4:30 p.m. on Monday, 12 April 2021.

PRECAUTIONARY MEASURES AT THE EGM

To ensure the health and safety of the attendees at the EGM, the Company intends to implement precautionary measures at the EGM including: (a) compulsory temperature checks at the entrance of the venue of the meeting; (b) attendees are required to bring their own surgical masks and those who had high temperature or not wearing surgical masks might be denied access to the venue of the meeting; (c) no corporate gift, refreshments or drinks will be provided at the meeting; and (d) depending on circumstances, separate rooms connected by instant electronic conference facilities may be arranged at the venue of the meeting to limit the number of attendees at each room.

Shareholders, particularly those who are unwell or subject to quarantine requirements or travel restrictions, are reminded that instead of attending the EGM in person, they may appoint any person or the chairman of the EGM as proxy to vote on the resolutions at the EGM by lodging the form of proxy or appropriate corporate appointment forms. Subject to the development of the COVID-19 epidemic, the Company may implement further precautionary measures as may be appropriate or desirable for the health and safety of attendees of the EGM.

RECOMMENDATION

Your attention is drawn to the letter of advice from the Independent Board Committee set out on pages IBC-1 to IBC-2 in this circular which contains their advice and recommendation to the Independent Shareholders in relation to the Sale and Purchase Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate).

Your attention is also drawn to the letter from Maxa Capital set out on pages IFA-1 to IFA-51 in this circular which contains their advice and recommendation to the Independent Board Committee and the Independent Shareholders in relation to the Sale and Purchase Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate).

The Directors (including the independent non-executive Directors whose views have been set out in this circular together with the advice of the Independent Financial Adviser) consider that, though the Acquisition is not in the ordinary and usual course of the business of the Company, the terms of the Sale and Purchase Agreement and the transactions contemplated thereunder are on normal commercial terms and are fair and reasonable and the Acquisition is in the interests of the Company and the Shareholders as a whole. The Directors recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular and the notice of the EGM.

Completion of the Acquisition is conditional upon the fulfilment of the conditions set out under the paragraph headed "Conditions precedent" in this circular, which may or may not be fulfilled. Accordingly, the Acquisition may or may not proceed. Shareholders and potential investors of the Company should exercise caution when they deal or contemplate dealing in the Shares and other securities of the Company.

Yours faithfully,

For and on behalf of

Jiayuan International Group Limited

Shum Tin Ching

Chairman

The following is the text of the letter from the Independent Board Committee setting out its recommendations to the Independent Shareholders in connection with the entering into of the Sale and Purchase Agreement for inclusion in this circular.

Jiayuan International Group Limited

Գ๕਷ყછٰϞࠢʮ̡

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2768)

26 February 2021

To the Independent Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTION ACQUISITION OF THE TARGET GROUP HOLDING

PROPERTY DEVELOPMENT PROJECTS

LOCATED IN SHANDONG PROVINCE

INVOLVING THE ISSUE OF CONSIDERATION SHARES AND

CONVERTIBLE BONDS

UNDER SPECIFIC MANDATE

We refer to the circular dated 26 February 2021 (the "Circular") issued by the Company to the Shareholders of which this letter forms part. Terms defined in the Circular shall have the same meanings herein unless the context otherwise requires.

The Independent Board Committee has been formed to advise the Independent Shareholders as to whether, in its opinion, the terms of the Sale and Purchase Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate) are fair and reasonable, are on normal commercial terms and in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole. Maxa Capital has been appointed to advise the Independent Board Committee and the Independent Shareholders in respect of the Sale and Purchase Agreement and the transactions contemplated thereunder.

We wish to draw your attention to the letter from the Board, as set out on pages 9 to 35 of the Circular and the text of a letter of advice from Maxa Capital, as set out on pages IFA-1 to IFA-51 of the Circular, both of which provide details of the Sale and Purchase Agreement and the transactions contemplated thereunder.

Having considered (i) the Sale and Purchase Agreement (as subsequently amended and supplemented by the Supplemental Agreement); (ii) the advice of the Independent Financial Adviser; and (iii) the relevant information contained in the letter from the Board, we are of the opinion that, though the Acquisition is not in the ordinary and usual course of the business of the Company, the terms of the Sale and Purchase Agreement and the transactions contemplated thereunder are on normal commercial terms and are fair and reasonable and the Acquisition is 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 resolution to be proposed at the EGM.

Yours faithfully,

For and on behalf of

The Independent Board Committee of Jiayuan International Group Limited

Mr. Tai Kwok Leung,	Dr. Cheung Wai Bun,	Mr. Gu Yunchang
Alexander	Charles, JP	Independent Non-executive
Independent Non-executive	Independent Non-executive	Director
Director	Director
- IBC-2 -

The following is the full text of the letter from Maxa Capital Limited, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders setting out its advice in respect of the terms of the Sale and Purchase Agreement and the transactions contemplated thereunder, which has been prepared for the purpose of inclusion in this circular.

Unit 1908, Harbour Center

25 Harbour Road

Wan Chai

Hong Kong

26 February 2021

To the Independent Board Committee and the Independent Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTION ACQUISITION OF THE TARGET GROUP HOLDING

PROPERTY DEVELOPMENT PROJECTS

LOCATED IN SHANDONG PROVINCE

INVOLVING THE ISSUE OF CONSIDERATION SHARES AND

CONVERTIBLE BONDS

UNDER SPECIFIC MANDATE

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the terms of the Sale and Purchase Agreement and the transactions contemplated thereunder, details of which are set out in the letter from the Board (the "Letter from the Board") contained in the circular of the Company dated 26 February 2021 (the "Circular"), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings ascribed to them in the Circular unless the context otherwise requires.

Reference is made to the announcement of the Company dated 13 January 2021 and the supplemental announcement of the Company dated 25 February 2021 (the "Announcements"). As set out in the Announcements, on 13 January 2021, the Company entered into the Sale and Purchase Agreement (as subsequently amended and supplemented by the Supplemental Agreement) with Mr. Shum, pursuant to which, the Company has conditionally agreed to acquire, and Mr. Shum has conditionally agreed to sell the Sale Share, representing the entire issued share capital of the Target Company, at the Initial Consideration of HK$7,247,560,000 (equivalent to approximately RMB6,142,000,000) (subject to adjustment), which will be settled by (i) as to HK$3,420,640,000 (equivalent to approximately RMB2,898,847,458) by way of issue of the Convertible Bonds; (ii) as to HK$2,772,000,000 (equivalent to approximately RMB2,349,152,542) by way of issue andallotment of 840,000,000 Consideration Shares; and (iii) as to the remaining balance of HK$1,054,920,000 (equivalent to approximately RMB894,000,000) by cash. Both of the Conversion Price and the Issue Price are HK$3.30.

LISTING RULES IMPLICATION

As at the Latest Practicable Date, Mr. Shum, being the chairman, a non-executive Director and, together with Mingyuan Investment, the controlling shareholders of the Company, and the ultimate controlling shareholder of the Company, is interested in approximately 69.74% of the issued share capital of the Company. Hence, Mr. Shum is a connected person of the Company, and the Acquisition constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules, which is subject to the reporting, announcement and independent shareholders' approval requirements under the Listing Rules.

The EGM will be convened and held for the purpose of considering and approving the Sale and Purchase Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate). In accordance with Rule 13.39(4) of the Listing Rules, voting at the EGM will be conducted by poll. Mr. Shum and his associates will abstain from voting on the proposed resolution to approve the Sale and Purchase Agreement and the transactions contemplated thereunder (including the grant of Specific Mandate) at the EGM.

The Independent Board Committee comprising all the independent non-executive Directors, namely Mr. Tai Kwok Leung, Alexander, Dr. Cheung Wai Bun, Charles, JP and Mr. Gu Yunchang, has been established to advise the Independent Shareholders in respect of whether the terms of the Sale and Purchase Agreement and the transactions contemplated thereunder are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole, and to advise the Independent Shareholders on how to vote in respect of the relevant resolution to be proposed at the EGM to approve the Sale and Purchase Agreement and the transactions contemplated thereunder. We, Maxa Capital Limited, have been appointed by the Company as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

OUR INDEPENDENCE

As at the Latest Practicable Date, we were independent from and not connected with the Company and any of their respective associates that could reasonably be regarded as relevant to our independence and accordingly, were qualified to give independent advice to the Independent Board Committee and the Independent Shareholders in respect of the terms of the Sale and Purchase Agreement and the transaction contemplated thereunder. Save for our appointment as the Independent Financial Adviser, there was no other engagement between the Company and us in the last two years. Apart from the normal professional fee payable to usin connection with this appointment, no arrangement exists whereby we shall receive any other fees or benefits from the Company.

BASIS OF OUR OPINION

In formulating our opinion, we have relied on the statements, information, opinions and representations contained in the Circular and the information and representations provided to us by the Directors and the management of the Group (collectively, the "Management"). We have reviewed, inter alia, the statements, information, opinions and representations contained or referred to in the Circular and the information and representations as provided to us by the Directors and the Management. We have assumed that (i) all statements, information and representations provided by the Directors and the Management; and (ii) the information referred to in the Circular, for which they are solely responsible, were true and accurate at the time when they were provided and continued to be so as at the Latest Practicable Date and the Shareholders will be notified of any material changes to such information and representations before the EGM. We have also assumed that all statements of belief, opinion, intention and expectation made by the Directors in the Circular were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the representation and opinions expressed by the Company, its advisers and/or the Directors and the Management. We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent verification of the information included in the Circular and provided to us by the Directors and the Management nor have we conducted any form of in-depth investigation into the business and affairs or the future prospects of the Group and the Target Group.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Circular and have confirmed, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement in the Circular misleading.

Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the information made available to us as at the Latest Practicable Date. Nothing contained in this letter should be construed as a recommendation to hold, sell or buy any Shares or any other securities of the Company. Where information in this letter has been extracted from published or otherwise publicly available sources, the sole responsibility of us is to ensure that such information has been correctly and fairly extracted, reproduced or presented from the relevant stated sources and not be used out of context.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating and giving our independent financial advice to the Independent Board Committee and the Independent Shareholders, we have considered the following principal factors and reasons.

1. Background information on the Group

1.1 Principal business of the Group

The Group is an established property developer of large-scale residential complex projects and integrated commercial complex projects in the PRC. The principal activities of the Group include (i) the development and sale of residential and commercial properties; (ii) the provision of development services to government organisations for the development of resettlement properties and development or refurbishment of other types of properties, facilities or infrastructure; (iii) the leasing of commercial properties owned or developed by the Group; and (iv) the property management services in the PRC.

As disclosed in the 2020 interim report of the Group for the six months ended 30 June 2020 (the "2020 Interim Report"), as at 30 June 2020, the Group had land bank of approximately 17.2 million sq.m., of which Jiangsu Province and Anhui Province accounted for approximately 36% and 23%, respectively. The Group's property portfolio comprised 81 properties in various major cities in the PRC, consisting of 35 residential complexes covering Yangtze River Delta, city cluster in the Guangdong-Hong Kong-Macao Greater Day Area, cities along the "Belt and Road" initiative and other key provincial capital cities. It is further disclosed in the 2020 Interim Report that the Group will continue to replenish its premium land bank by adopting practical strategies to optimize the geographical layout of its projects and devise investment portfolios to suit the different urbanisation stages of the PRC with a view to capturing the different demands for the purchase of property in various local markets.

1.2 Financial information of the Group

Below is a summary of the Group's audited financial information for the years ended 31 December 2018 and 2019, respectively and unaudited financial information for the six months ended 30 June 2019 and 2020, respectively, as extracted from the annual report of the Group for the year ended 31 December 2019 (the "Annual Report 2019") and 2020 Interim Report, respectively:

For the year ended

For the six months ended

2019
RMB'000	RMB'000	RMB'000	RMB'000
(audited and	(unaudited
restated)	(audited)	and restated)	(unaudited)
(Note 1)	(Note 2)
Revenue	13,616,003	16,070,171	6,730,468	8,559,230
- Sales of properties	13,127,092	15,373,501	6,490,208	8,183,123
- Property management
services	318,246	485,778	190,065	264,820
- Property rental	76,977	210,892	50,195	111,287
Gross profit	4,503,868	5,242,001	2,525,812	3,202,921
Gross profit margin	33.1%	32.6%	37.5%	37.4%
Profit for the year/period	2,352,184	2,460,483	1,417,618	1,589,444
Notes:

31 December 2018

30 June 2019 2020

1. According to the 2019 Annual Report, on 21 January 2019, the Group completed the acquisition of the entire equity interest in Chuangyuan Holdings Limited (together with its subsidiaries, the "Chuangyuan Group") ("Chuangyuan Acquisition") which is engaged in the property management business in the PRC. On 8 August 2019, the Company completed the acquisition of the entire issued share capital of Huiyuan Investment Holdings Limited (together with its subsidiaries, the "Huiyuan Group") (the "Huiyuan Acquisition"), which is engaged in property development and property investment business in the PRC. The Company has applied merger accounting to the Chuangyuan Acquisition and Huiyuan Acquisition, being business combinations involving entities under common control, under Accounting Guideline 5 "Merger Accounting for Common Control Combinations" issued by the HKICPA. The Group, Chuangyuan Group and Huiyuan Group are regarded as continuing entities. As a result, the 2018 comparative amounts in the consolidated financial statements of the Group are adjusted to present as if the acquired businesses had been combined at the
beginning of 2018.
2. According to the 2020 Interim Report, the Chuangyuan Acquisition has been accounted for in preparing the interim financial information for the six months ended 30 June 2019. As a result of the completion of Huiyuan Acquisition on 8 August 2019, the comparative information for the condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows for the six months ended 30 June 2019 have been restated to include the operating results of the Huiyuan Group as if the Huiyuan Acquisition had been completed since the date the respective business came under the common control of the Company.

For the year ended 31 December 2019 (the "FY2019"), the Group's revenue amounted to approximately RMB16,070.2 million, representing an increase of approximately 18.0% from approximately RMB13,616.0 million for the year ended 31 December 2018 (the "FY2018"). According to the 2019 Annual Report, during the two years ended 31 December 2019, the Group derived its revenue mainly from (i) property development; (ii) property investment; and (iii) property management services. Revenue from property development is the major component of the Group's revenue, which accounted for approximately 95.7% of the Group's revenue for FY2019. The increase in revenue derived from property development increased by approximately 17.1% from approximately RMB13,127.1 million for FY2018 to approximately RMB15,373.5 million for FY2019 was mainly due to the delivery of properties pre-sold under Hefei Paris Metropolis project in Anhui, Jiayuan Yurun Guifu project in Yangzhou and T-plus project in Hong Kong upon their completion in 2019. The revenue generated from property management increased by approximately 52.6% from approximately RMB318.2 million for FY2018 to approximately RMB485.8 million for FY2019. The increase in revenue from property management business was in line with the Group's delivery of completed properties in 2019.

The gross profit of the Group increased by approximately 16.4% to approximately RMB5,242.0 million for FY2019 from approximately RMB4,503.9 million for FY2018, while the Group's gross profit margin maintained at similar level of approximately 32.6% in FY2019 as compared with FY2018. The profit for FY2019 increased by approximately 4.6% from approximately RMB2,352.2 million for FY2018 to approximately RMB2,460.5 million. For illustrative purpose, the Group's profit for FY2019 and FY2018 after adjusting for the fair value change on investment properties and related deferred tax effects, would be approximately RMB2,132.6 million and RMB1,687.1 million, respectively, representing an increase of approximately 26.4%. Such increase was in line with the increase in revenue contributed from the Group's property development business in FY2019 as mentioned above.

For the six months ended 30 June 2020, the revenue of the Group amounted to approximately RMB8,559.2 million, representing an increase of approximately 27.2% from approximately RMB6,730.5 million in the corresponding period in 2019. According to the 2020 Interim Report, the increase in revenue was mainly due to delivery of properties pre-sold in Yangtze River Delta upon their completion in the first half of 2020.

The Group's gross profit increased by approximately 26.8% to approximately RMB3,202.9 million for the six months ended 30 June 2020 from approximately RMB2,525.8 million in the corresponding period in 2019. The Group's gross profit margin for the six months ended 30 June 2020 was maintained at similar level of approximately 37.4% as compared with the corresponding period in 2019. The profit for the six months ended 30 June 2020 was approximately RMB1,589.4 million, representing an increase of approximately 12.1% as compared to the corresponding period in 2019. For illustrative purpose, the Group's profit for the six months ended 30 June 2020 and 2019, after adjusting for the fair value change on investment propertiesand related deferred tax effects, would be approximately RMB1,684.4 million and RMB1,289.5 million, respectively, representing an increase of approximately 30.6%. Such increase was in line with the increase in revenue contributed from the Group's property development business in the first half of 2020 as mentioned above.

As at
30 June
2019	2020
RMB'000	RMB'000	RMB'000
(audited and
restated)	(audited)	(unaudited)
Inventories of properties	32,080,889	34,112,077	36,107,572
Trade and other receivables	10,131,059	7,177,335	7,398,634
Cash and cash equivalents	4,599,433	6,030,412	7,889,020
Restricted/pledged bank
deposits	2,103,123	2,123,101	1,237,792
Total assets	60,667,668	61,735,580	66,145,912
Bank and other borrowings	14,800,921	12,130,179	12,363,340
Senior notes	7,212,509	5,274,776	7,207,132
Pre-sale deposits received	17,911,861	20,440,977	19,176,534
Total liabilities	50,130,988	49,898,422	52,673,343
Total equity	10,536,680	11,837,158	13,472,569
Gearing ratio (Note 1)	145.3%	78.2%	77.5%
Note:

As at 31 December 2018

Gearing ratio is calculated by net debt/total equity. Net debt is calculated by bank and other borrowings and senior notes, net of the cash and cash equivalents and restricted/pledged bank deposits.

As at 31 December 2018, the Group had total assets of approximately RMB60,667.7 million which comprised of non-current assets of approximately RMB10,531.8 million, of which the investment properties accounted for approximately 71.9% of the total non-current assets, and current assets of approximately RMB50,135.9 million. The Group's current assets mainly comprised of inventories of properties of approximately RMB32,080.9 million, trade and other receivables of approximately RMB10,131.1 million and cash and cash equivalents of approximately RMB4,599.4 million. The Group had total liabilities of approximately RMB50,131.0 million as at 31 December 2018, which comprised of non-current liabilities of approximately RMB12,057.3 million and current liabilities of approximately RMB38,073.6 million. The Group's non-current liabilities mainly comprised of bank and other borrowings of approximately RMB7,787.9 million and senior notes of approximately RMB2,735.1 million. The Group's current liabilities mainly comprised of pre-sale deposits received of approximately RMB17,264.1 million and bank and other borrowings of approximately RMB7,013.0 million.

As at 31 December 2019, the Group had total assets of approximately RMB61,735.6 million which comprised of non-current assets of approximatelyRMB11,560.2 million and current assets of approximately RMB50,175.4 million. The increase in the Group's total assets by approximately 1.8% or RMB1,067.9 million as compared to 31 December 2018 was mainly attributable to the increase in inventories of properties and cash and cash equivalents, partly offset by the decrease in trade and other receivables. The Group had total liabilities of approximately RMB49,898.4 million as at 31 December 2019, which comprised of non-current liabilities of approximately RMB13,948.7 million and current liabilities of approximately RMB35,949.7 million. The decrease in the Group's total liabilities by approximately 0.5% or RMB232.6 million as compared to 31 December 2018 was mainly attributable to increase in pre-sale deposits received and current income tax liabilities, partly offset by the decrease in bank and other borrowings and senior notes.

As at 30 June 2020, the Group had total assets of approximately RMB66,145.9 million which comprised of non-current assets of approximately RMB12,885.2 million and current assets of approximately RMB53,260.7 million. The increase in the Group's total assets by approximately 7.1% or RMB4,410.3 million as compared to 31 December 2019 was mainly attributable to the increase in investments accounted for using the equity method, inventories of properties and cash and cash equivalents. The Group had total liabilities of approximately RMB52,673.3 million as at 30 June 2020, which comprised of non-current liabilities of approximately RMB13,043.7 million and current liabilities of approximately RMB39,629.9 million. The increase in the Group's total liabilities by approximately 5.6% or RMB2,774.9 million as compared to 31 December 2019 was mainly attributable to increase in senior notes issued.

The gearing ratio of the Group decreased from approximately 145.3% as at 31 December 2018 to approximately 78.2% as at 31 December 2019, which was mainly attributable to the Group's effort in speeding up cash recovery from property sales, actively strengthening its control over the degree of leverage and fortifying capital management ability in 2019. The gearing ratio of the Group as at 30 June 2020 was approximately 77.5%, which remained fairly stable as compared to 31 December 2019.

2. Background information on the Target Group and the Vendor

2.1 Principal business of the Target Group

The Target Company is a company newly incorporated under the laws of the BVI with limited liability and wholly-owned by Mr. Shum. The Target Group will own equity interests in all the property development project companies in Shandong Province, the PRC, wholly-owned or partially-owned by Mr. Shum and/or companies controlled by him after completion of the Reorganisation.

After completion of the Reorganisation, the Target Group will hold four property development projects located in Qingdao of Shandong Province (the "Qingdao Projects") and one property development project located in Weihai of Shandong Province (the "Weihai Project"). The Qingdao Projects mainly consist of large-scale residential complex projects, as well as wholesale and retail, information technologyresearch and commercial offices developments. The Weihai Project is a residential complex project with shopping arcades and other supporting facilities.

2.2 Information of the Vendor

2.3 Information of the Target Group's property development projects

Upon completion of the Reorganisation, the Target Group holds the following property development projects:

(i) Project Jiayuan Huafu (Գ๕ശִ)

Jiayuan Huafu is located at the junction of Songling Road and Xianxialing Road, Laoshan District in Qingdao City. The locality is well served by public transportation and supporting facilities. The property occupies 3 parcels of land with a total site area of approximately 128,960.45 sq.m. and will be developed into a residential and commercial complex in three phases. Phase I is currently under construction and scheduled to be completed by September 2021 and delivered in May 2022, and the construction works of Phases II and III had not been commenced.

Phases I and II of the property has a total planned gross floor area ("GFA") of approximately 714,959.39 sq.m. The plot ratio accountable GFA of Phase III of the property is 18,846.8 sq.m.. The land use rights of the property have been granted for terms expiring on 6 June 2088 for residential use and 6 June 2058 for commercial use.

(ii) Project Jiayuan Haiyuefu (Գ๕ऎִٔ)

Jiayuan Haiyuefu is located at the southern side of Haiwang Road and the eastern side of Huangdunshan Road, Huangdao District in Qingdao City. There are some residential developments nearby and the public transportation network and amenities are under further improvement.

The property occupies 2 parcels of land with a total site area of approximately 56,132 sq.m., and will be developed into a residential and commercial complex. It is currently under construction and scheduled to be completed by March 2022 and delivered in May 2022. The property has a planned GFA of approximately 107,165.50 sq.m. The land use rights of the property have been granted for terms expiring on 14 May 2089 for residential use and 14 May 2059 for commercial use.

(iii) Project Zhongchang Valley (ڡࢥʕ׹ᅰ௴౽ᅆԋ)

Zhongchang Valley is located at the western side of Baiguoshuhe Road and the southern side of Qianwangang Road Huangdao District Qingdao City. There are some residential developments nearby and the locality is well served by public transportation and supporting facilities.

The property occupies 2 parcels of land with a total site area of approximately 118,236 sq.m., and will be developed into an office park including business offices and industrial offices. It is currently under construction and scheduled to be completed by March 2023 and delivered in May 2023. The property has a planned GFA of approximately 237,670.75 sq.m. The land use rights of the property have been granted for terms expiring on 14 May 2059 for commercial and financial use and 14 May 2069 for science and research use.

(iv) Project Jiayuan Twin City (Գ๕ᕐɿ݋۬)

Jiayuan Twin City is located at the northern side of Nanling San Road and the Western side of Chongqing Zhong Road Licang District of Qingdao City. There are some residential developments nearby and the public transportation network and amenities are under further improvement.

The property occupies 5 parcels of land with a total site area of approximately 168,827.60 sq.m. and will be developed into a residential, commercial and office complex in two phases. Phase I is currently under construction and scheduled to be completed in May 2023, and the construction works of Phase II had not been commenced. The land use rights of the property have been granted for terms expiring on 30 May 2090 for residential use and 30 May 2060 for commercial and financial use.

(v) Project Jiayuan Haitangfu (Գ๕ऎಆִ)

Jiayuan Haitangfu is located the western side of Qingdao Road and the northern side of Zhuhai Road Huancui District, Weihai City. It is at the Economic and Technological Development Zone of Weihai City and the locality is well served by public transportation and supporting facilities.

The property comprises a parcel of land with a site area of approximately 16,300 sq.m. The property was bare land and started construction in December 2020 with planned GFA of approximately 35,511.10 sq.m. The land use rights of the property have been granted for terms expiring on 17 September 2090 for residential use, 17 September 2060 for commercial use and 17 September 2070 for public facilities use.

2.4 Financial information of the Target Group

(i) Financial information of the Combined Group

Set out below is the financial information of the Combined Group for the three years ended 31 December 2019 and for the nine months ended 30 September 2019 and 2020, respectively, based on the Accountants' Report of the Combined Group as set out in Appendix IIA to the Circular.

Nine months ended
Year ended 31 December	30 September
2017 2018 2019	2019 2020
RMB'000 RMB'000 RMB'000	RMB'000 RMB'000
(Audited) (Audited) (Audited)	(Unaudited) (Audited)

Revenue	-	-	-	-	795,317
-	-	-	-	(502,678)
-	-	-	-	292,639
4	422	283	219	237
(1)	(49)	(21)	(91)	(2,867)
-	(3,040)	2,078	2,123	(16,405)
(415)	(3,437)	(1,409)	(856)	(3,679)
(566)	(12,899)	(4,931)	(1,893)	(15,437)
-	(7,746)	(2,006)	(1,616)	(716)
(978)	(26,749)	(6,006)	(2,114)	253,772
226	6,644	894	466	(118,297)
(752)	(20,105)	(5,112)	(1,648)	135,475

Cost of sales

Gross profit Other income Other losses, net Net impairment

(Losses)/reversal on

financial assets Selling and marketing

costs Administrative

expenses Finance costs

(Loss)/profit before

taxation

Income tax

credit/(expenses)

(Loss)/profit and total comprehensive income/(loss) for the year/period

The Combined Group recorded nil revenue during the three years ended 31

December 2017, 2018 and 2019 as the Combined Group had not delivered any properties. The Combined Group recorded revenue of approximately RMB795.3

million for the nine months ended 30 September 2020, which was mainly derived from the property development project under Weihai Xiangyuan. Weihai Xiangyuan has two property development projects, (i) Գ๕Τ۬ (Project JiayuanMingcheng) included five residential buildings and three commercial buildings; and (ii) Գ๕ऎಆִ (Project Jiayuan Haitangfu), which included eight residential buildings. Project Jiayuan Mingcheng commenced pre-sale in April 2018. All buildings under Project Jiayuan Mingcheng were completed and delivered by January 2020 and contributed to the revenue of the nine months ended 30 September 2020. Project Jiayuan Haitangfu will commence pre-sale in March 2021 and is scheduled to be completed by October 2022 and delivered in December 2022.

The Combined Group recorded losses of approximately RMB0.8 million, RMB20.1 million, RMB5.1 million, respectively for the three years ended 31 December 2017, 2018 and 2019. The net loss was mainly attributable the costs incurred for its business operation. The Combined Group recorded profit of approximately RMB135.5 million for the nine months ended 30 September 2020 which was mainly attributable to the profits recognised from the delivery of Project Jiayuan Haitangfu to the customers by Weihai Xiangyuan.

Nine months ended

Year ended 31 December

2017

2018

2019

30 September 2020

RMB'000 (Audited)

RMB'000 (Audited)Non-current assets Property and equipment Deferred tax assets

84 226 310

270 6,870 7,140

216 1,740

8,042 24,827

8,258 26,567

Current assets Inventories of properties Prepayments and other receivables

195,769

Prepaid income tax Contract acquisition costs

Right to acquire the land use rights Restricted bank deposits Cash and cash equivalents

379 - - - - 1,864 198,012

322,545 465,257 32,332

419,858 2,150,476

728,754 2,710,010

34,842

689

941

143,220

- - -

90,084

18,386 2,566

301

6,243 5,601

911,208

1,352,244

4,868,653

2017

Year ended 31 December

2018

2019

Nine months ended 30 September 2020

RMB'000 (Audited)

RMB'000 (Audited)Current liabilities Trade and other payables Pre-sale deposits received

Current income tax liabilities

Bank and other borrowings

179,074

- - - 179,074

50,875

737,775

- 130,555 919,205

93,781 900,175

852,469 18,783

- 97,086

25,812 1,314

972,062 1,017,358

Net current assets/(liabilities) Total assets less current liabilities

18,938 19,248

(7,997)

380,182 3,851,295

(30,857)

388,440 3,877,862

Non-current liabilities Bank and other borrowingsEQUITY

Equity attributable to owners of Luyuan Combined capital (Accumulated losses)/retained earnings

- -

20,000

(752)

- -

20,000

(20,857)

249,000 900,000

20,000

(25,969)

2,176,452

111,449

19,248

(857)

(5,969)

2,287,901

Non-controlling interests

Total equity

19,248

(857)

145,409 139,440

689,961

2,977,862

The Combined Group's current assets increased from approximately RMB198.0 million as at 31 December 2017 to approximately RMB4,868.7 million as at 30 September 2020, which was mainly attributable to the increase in inventories of properties from approximately RMB195.8 million to approximately RMB2,150.5 million and increase in prepayments and other receivables from approximately RMB0.4 million to approximately RMB2,710.0 million. The increase in inventories of properties was mainly due to the acquisition of land use rights during the nine months ended 30 September 2020. The increase in prepayments and other receivables was mainly due to advances made to related parties during the nine months ended 30 September 2020.

The Combined Group's current liabilities increased from approximately RMB179.1 million as at 31 December 2017 to approximately RMB1,017.4 million as at 30 September 2020. The increase in the Combined Group's current liabilities was mainly attributable to the increase in advances from related parties. The non-current liabilities of the Combined Group as at 30 September 2020 mainly comprised of bank and other borrowings. Apart from the bank and other borrowings of approximately RMB901.3 million, the Combined Group did not have any interest-bearing loan as at 30 September 2020.

The significant increase in the Combined Group's total equity from approximately RMB19.2 million as at 31 December 2017 to approximately RMB2,977.9 million as at 30 September 2020 was mainly due to the capital injection made by Mr. Shum, the Combined Group's ultimate shareholder.

(ii) Financial information of Lingshihuafu

As disclosed in the Letter from the Board, Lingshihuafu was a joint venture of the Target Company as at 30 September 2020 with a 63% equity interest. Upon the Completion, Lingshihuafu will become a joint venture of the Company and be accounted for under equity method of accounting.

Immediately before the Reorganisation, Zhejiang Jiayuan Shencheng Real Estate Property Group Co., Ltd. ("Shencheng Group"), a company ultimately controlled by Mr. Shum, Qingdao Zhujiawa Industrial Co., Ltd. and Mr. Yu Xihua held 63%, 30% and 7% equity interest in Lingshihuafu, respectively. In accordance with the articles of association and cooperation agreements of Lingshihuafu, Shencheng Group and Mr. Yu Xihua have joint control over Lingshihuafu; and the decision about the relevant activities of Lingshihuafu requires more than 2/3 consent of Shencheng Group, Qingdao Zhujiawa Industrial Co., Ltd. and Mr. Yu Xihua. The investment in Lingshihuafu is, therefore, treated as investment in joint venture and the equity method is applied.

Upon the Reorganisation, the Target Company will hold 63% equity interest of Lingshihuafu, which will become a joint venture of the Target Company.

Set out below is the financial information of Lingshihuafu for the three years ended 31 December 2017, 2018 and 2019 and for the nine months ended 30 September 2019 and 2020, respectively, based on the Accountants' Report of Lingshihuafu as set out in Appendix IIB to the Circular.

Nine months ended
Year ended 31 December	30 September
2017 2018 2019	2019 2020
RMB'000 RMB'000 RMB'000	RMB'000 RMB'000
(Audited) (Audited) (Audited)	(Unaudited) (Audited)

Revenue	-	-	-	-	-
Cost of sales	-	-	-	-	-
Gross profit	-	-	-	-	-
Other income	183,355	252,553	624	322	703
Other losses, net	(17)	(14)	(50)	(40)	(60)
Net impairment
(losses)/reversal on
financial assets	(63)	(1,194)	5,030	6,652	(11,478)
Selling and marketing
costs	(274)	(5,333)	(10,354)	(7,747)	(3,250)
Administrative
expenses	(1,571)	(4,978)	(8,625)	(4,478)	(3,259)
Finance costs	(216,544)	(245,004)	(1,653)	(1,236)	(1,241)
Loss before taxation	(35,114)	(3,970)	(15,028)	(6,527)	(18,585)
Income tax credit	8,621	927	3,710	1,588	4,625
Loss and total
comprehensive loss
for the year/period	(26,493)	(3,043)	(11,318)	(4,939)	(13,960)

Project Jiayuan Huafu was still under construction stage and recorded nil revenue for the years ended 31 December 2017, 2018 and 2019 and for the nine months ended 30 September 2020. Phase I of Project Jiayuan Huafu commenced pre-sale in June 2019 and is scheduled be completed by September 2021 and delivered in May 2022. Phase II and Phase III of Project Jiayuan Huafu are scheduled to commence pre-sale in June 2021 and March 2023 respectively.

As the property project is still under development and did not record any revenue, Lingshihuafu recorded net losses of approximately RMB26.5 million, RMB3.0 million, RMB11.3 million and RMB14.0 million, respectively for the three years ended 31 December 2017, 2018 and 2019 and the nine months ended 30 September 2020.

Nine months
ended
30 September
2017	2018	2019	2020
RMB'000	RMB'000	RMB'000	RMB'000
(Audited)	(Audited)	(Audited)	(Audited)
Non-current assets
Property and equipment	1,252	1,090	712	432
Deferred tax assets	8,621	15,233	18,943	23,568
Prepayments and other receivables	-	37,901	20,086	11,214
9,873	54,224	39,741	35,214
Current assets
Inventories of properties	239,923	2,032,322	4,639,699	5,464,388
Prepayments and other receivables	2,536,717	2,013,933	2,497,463	3,036,577
Contract acquisition costs	-	-	2,900	7,844
Prepaid income tax	-	-	36,058	83,714
Restricted bank deposits	-	-	103,710	158,278
Cash and cash equivalents	100,253	1,035	23,101	46,111
2,876,893	4,047,290	7,302,931	8,796,912
Current liabilities
Trade and other payables	2,890,144	2,077,096	1,045,879	1,072,054
Pre-sale deposits received	-	-	1,015,493	2,384,471
Bank and other borrowings	-	-	1,120,664	2,719,615
2,890,144	2,077,096	3,182,036	6,176,140
Net current (liabilities)/assets	(3,378)	2,024,418	4,160,636	2,655,986
Total assets less current liabilities	(13,251)	1,970,194	4,120,895	2,620,772
Non-current liabilities
Bank and other borrowings	-	2,047,894	4,195,430	2,704,740
-	2,047,894	4,195,430	2,704,740
EQUITY
Paid-in capital	27,000	27,000	27,000	27,000
Accumulated losses	(30,378)	(50,476)	(61,794)	(75,754)
Total equity	(3,378)	(23,476)	(34,794)	(48,754)
- IFA-16 -

Year ended 31 December

Lingshihuafu's current assets increased from approximately RMB2,876.9 million as at 31 December 2017 to approximately RMB8,796.9 million as at 30 September 2020, which was mainly attributable to the increase in inventories of properties by approximately RMB5,224.5 million to approximately RMB5,464.4 million and increase in prepayments and other receivables by approximately RMB499.9 million to approximately RMB3,036.6 million. The increase in inventories of properties was mainly due to the development of Project Jiayuan Huafu located at Laoshan District in Qingdao City. The prepayments and other receivables of approximately RMB3,036.6 million as at 30 September 2020 mainly comprised of advances to related parties, deposits paid for construction services and deposits placed with financial companies.

Lingshihuafu's current liabilities increased from approximately RMB2,890.1 million as at 31 December 2017 to approximately RMB6,176.1 million as at 30 September 2020. The increase in Lingshihuafu's current liabilities was mainly attributable to the increase in pre-sale deposits received and bank and other borrowings, partly offset by the decrease in trade and other payables. The non-current liabilities of Lingshihuafu as at 30 September 2020 mainly comprised of bank and other borrowings.

3. Reasons for and benefits of the Acquisition

3.1 Reasons for the Acquisition

As disclosed in the Letter from the Board, as the property development projects of the Target Group are largely located in Qingdao of Shandong Province, which is one of China's new first-tier cities, the Group expects that the property market of Shandong Province will continue to grow steadily in future, which will be a boost to the Group's sales expectation. On the other hand, the Group may swiftly expand the geographical coverage of its business by adding more provinces to its regional layout and further expand its land reserve and achieve economies of scale and in turn uplift the Group's competitiveness.

We have reviewed the Prospectus and note that in order to achieve the geographical segregation between the property development projects of the Group and the Private Group which ultimately owned by Mr. Shum and to ensure clear delineation of property businesses of the Group and the Private Group and minimise any potential competition arising therefrom, Mingyuan Investment and Mr. Shum entered into the Deed of Non-Competition with and in favour of the Company, pursuant to which, the Private Group agreed to conduct its property development business only in the non-Target Cities (as defined in the Prospectus) while the Group shall conduct its property development business in the Target Cities (as defined in the Prospectus) exclusively. Pursuant to the Deed of Non-Competition, the Company was granted an option to acquire in one or more occasions any interest in respect of the property development project(s) (in whole or in part) in a non-Target City (as defined in the Prospectus) held by Mingyuan Investment and Mr. Shum or any of their respective associates at any time.

Reference is made to the Prospectus, we note that Qinqdao City is one of the non-Target Cities (as defined in the Prospectus) and Weihai City falls within the ambit of Unoccupied City (as defined in the Prospectus). Given that the Private Group already conducts its property development business in Weihai City via the Target Group, Weihai City has subsequently become a non-Target City (as defined in the Prospectus) and therefore the Company is entitled to exercise the option under the Deed of Non-Competition to acquire the property development projects in Weihai City. Upon Completion, both Qingdao City and Weihai City will become Target Cities (as defined in the Prospectus) and the Private Group will cease to have any interests in property development projects in Qingdao City and Weihai City. In view of the above, we concur with the Directors' view that, under this Acquisition, its controlling shareholders will remain in compliance with the non-competition undertakings given by them under the Deed of Non-Competition as disclosed in the Prospectus after Completion and the Acquisition represents the performance of the commitment of Mr. Shum to continually inject non-listed businesses into the Company.

The Acquisition would enable the Group to establish presence in Shandong Province and lay solid for the future development of the Company and play a positive role in further boosting the influence of the "Jiayuan" brand across the PRC. It will help in expanding the strategic layout of the Group in key regions nationwide.

As illustrated in the unaudited pro forma consolidated statement of financial position of the Enlarged Group in Appendix III to the Circular, assuming the Acquisition had taken place on 30 June 2020, the Group's net asset value as at 30 June 2020 would increase by approximately RMB5,932.7 million to RMB19,405.3 million and its gearing ratio would also decrease from approximately 77.5% to 63.1%. The Directors consider that Completion of the allotment and issue of the Consideration Shares and the Conversion Shares will further raise the shareholding percentage of Mr. Shum. Meanwhile, the increase in the Group's estimated net assets will continue to optimize the structure of assets and liabilities of the Group and enable the Group to further establish a healthier financial position.

3.2 Overview of the property market of Shandong Province

Considering the Target Group principally engages in its business in Qingdao City and Weihai City, we have obtained and reviewed the market data in connection with the Qingdao City and Weihai City's property market and overall economic growth over the recent years.

Qingdao City

Qingdao City is a sub-provincial city of Shandong Province, which is an

important coastal city and an international port approved by the State Council of

the People's Republic of China (the "State Council"). It is also the economic

center of Shandong Province, a coastal holiday tourism city, an important

national advanced marine industry development zone and international shipping

hub of the northeast Asia. It is also the major city of the Belt and Road New

Asia-Europe Continental Bridge Economic Corridor (ɓ੭ɓ༩อԭᆄɽ௔዗຾

᏶Ԑ఼) and the strategic fulcrum of maritime cooperation. With a total area of

11,293 square kilometers, Qingdao City has jurisdiction over seven districts and

administers three county-level cities.

The table below sets forth selected economic indicators of Qingdao City for the years indicated:

2014

2015

2016 2017
Nominal GDP (RMB
billion)
Real GDP growth rate
(%)
Fixed asset investment
(RMB billion) Population (million) Urban Population
(million) Urbanisation rate (%) Per capita disposable
income of urban
residents (RMB)
812.1
865.9
928.3 1,013.7

7.8

7.9

7.7

576.6

655.6

745.5

9.0

9.1

9.2

6.2 68.4

6.4 70.0

6.6 71.5

38,294

40,370

43,598

Source: Qingdao Bureau of Statistics, National Bureau of Statistics

2018

1,094.9

7.4 7.3

2019

CAGR

1,174.1

7.7%

6.5

N/A

777.7

- 9.4

9.3

9.5 1.0%
6.7 72.6
6.9 73.7
7.0 2.6%
74.1 N/A
47,176
50,817
54,484 7.8%

The table below sets forth selected indicators of the property market in Qingdao City for the years indicated:

2014

2015

2016

Property investment

(RMB billion) Residential properties

investment (RMB

billion)

Sales of commodity

properties (RMB

billion)

Sales of commodity

residential properties

(RMB billion)

GFA of commodity

properties sold

(million sq.m.) GFA of commodity

residential properties

sold (million sq.m.) Average Selling Price

("ASP") of

commodity

properties

(RMB/sq.m.) ASP of commodity

residential properties

(RMB/sq.m.)

111.8

112.2

136.9

73.1

75.7

95.6

97.1

126.3

179.0

80.3

104.5

157.6

11.6

14.2

19.4

10.2

12.4

17.5

8,341.1

8,899.6 9,231.3 10,516.6 12,624.2 13,601.7 10.3%

7,857.3

8,436.5 8,997.2 10,050.7 12,375.8 13,670.2 11.7%

Source: Qingdao Bureau of Statistics, National Bureau of Statistics

2017

2018

2019 CAGR
133.1
148.5
180.4 10.0%
92.6
103.5
123.9 11.1%
199.9
228.2
224.7 18.3%
164.2
195.3
201.8 20.2%
19.0
18.1
16.5 7.3%
16.3
15.8
14.8 7.6%

Qingdao City's property development has increased between 2014 and 2019. As illustrated by the table above, Qingdao City's residential properties investment and sales of commodity residential properties increased from approximately RMB73.1 billion and RMB80.3 billion in 2014 to approximately RMB123.9 billion and RMB201.8 billion in 2019 respectively, representing a CAGR of approximately 11.1% and 20.2% respectively. The GFA of commodity residential properties sold and ASP of commodity residential properties increased from approximately 10.2 million sq.m. and RMB7,857.3 per sq.m. in 2014 respectively to approximately 14.8 million sq.m. and RMB13,670.2 per sq.m. in 2019 respectively, representing a CAGR of approximately 7.6% and 11.7% respectively. Qingdao City's sales of commodity properties, GFA of commodity properties sold and GFA of commodity residential properties sold had decreased in 2019 as compared to 2018 which were mainly due to the continuous macro-control policies promulgated by the PRC government over the property market. Given that Shandong Province's resident population exceeds 100 million and Qingdao City has the highest GDP in the province, we believe that Qingdao City will have strong attraction to the Shandong Province population and growth potential in the property market, ranking 17th in terms of property development investment attractiveness among cities above the prefecture level in China in 2020.

Weihai City

Weihai City is a prefecture-level city of Shandong Province, which is a regional central city in Shandong peninsula, an important marine industrial base and a coastal tourist city approved by the State Council. It is a pilot demonstration city of China-South Korea Free Trade Zone (ʕᒵІ͟൱׸ਜ). It is also one of the first batch of national comprehensive pilot areas for new-type urbanisation. With a total area of 291 square kilometers, Weihai City has jurisdiction over two districts and administers two county-level cities.

The table below sets forth selected economic indicators of Weihai City for the years indicated:

2014

2015

2016

2017

2018

2019 CAGR
Nominal GDP (RMB
billion)
224.4
240.8
260.7
279.5
289.9
296.4 5.72%
Real GDP growth rate
(%)
9.4
8.4
7.9
8.0
6.6
3.6 N/A
Fixed asset investment
(RMB billion) Population (million) Urban Population
(million) Urbanisation rate (%) Per capita disposable
22.3 2.81 1.72 61.3
25.4 2.81 1.77 63.2
28.8 2.82 1.83 65.0
29.4 2.83 1.88 66.5
34.5 2.83 1.92 67.8
38.3 11.42%
2.84 0.21%
1.95 2.54%
68.7 N/A
income of urban
residents (RMB)
34,254
36,336
39,363
42,703
45,896
49,044 7.44%

Source: Weihai Bureau of Statistics, National Bureau of Statistics

The table below sets forth selected indicators of the property market in Weihai City for the years indicated:

2014

2015

2016

2017

2018

2019 CAGR
Property investment
(RMB billion) Residential properties
35.7
31.3
21.5
27.5
34.5
38.3 1.42%
investment (RMB
billion)
29.3
25.7
17.5
21.6
27.5
30.7 0.94%
Sales of commodity
properties (RMB
billion)
40.1
42.2
46.4
54.7
67.0
48.4 3.83%
Sales of commodity
residential properties
(RMB billion)
33.5
34.0
39.4
47.2
59.0
44.8 5.99%
GFA of commodity
properties sold
(million sq.m.) GFA of commodity
8.5
8.7
9.1
10.0
10.4
6.3 -5.81%
residential properties
sold (million sq.m.) ASP of commodity
7.5
7.5
8.3
8.9
9.3
5.7 -5.34%

properties

(RMB/sq.m.) ASP of commodity

4,731.5

4,866.0

5,090.0

5,432.8

6,423.4

7,701.5 10.23%
residential properties
(RMB/sq.m.)
4,483.7
4,504.2
4,759.0
5,293.9
6,355.0
7,851.4 11.86%

Source: Weihai Bureau of Statistics, National Bureau of Statistics

As illustrated by the table above, Weihai City's residential properties investment and sales of commodity residential properties increased from approximately RMB29.3 billion and RMB33.5 billion in 2014 to approximately RMB30.7 billion and RMB44.8 billion in 2019 respectively, representing a CAGR of approximately 0.94% and 5.99% respectively. The GFA of commodity residential properties sold decreased from approximately 7.5 million sq.m. in 2014 to approximately 5.7 million sq.m. in 2019, representing a CAGR of -5.34%, while the ASP of commodity residential properties increased from approximately RMB4,483.7 per sq.m. in 2014 to approximately RMB7,851.4 per sq.m. in 2019, representing a CAGR of approximately 11.86%. Weihai City's sales of commodity properties, sales of commodity residential properties, GFA of commodity properties sold and GFA of commodity residential properties sold had decreased in 2019 as compared to 2018 which were mainly due to the continuous macro-control policies promulgated by the PRC government over the property market. Given that Shandong Province's resident population exceeds 100 million and Weihai City has the third highest GDP in the province, we believe that WeihaiCity will have strong attraction to the Shandong Province population and growth potential in the property market, ranking 83th in terms of property development investment attractiveness among cities above the prefecture level in China in 2020.

While we note that there is a slowdown in the sales growth of commodity properties as evidenced by the negative CAGR of the GFA of commodity properties sold and GFA of commodity residential properties sold in Weihai City between 2014 to 2019, it is worth noting that the economic indicators of Weihai City demonstrated steadily growth for the same period. In particular, Weihai City's nominal GDP and per capita disposable income of urban residents increased from approximately RMB224.4 billion and RMB34,254 in 2014 to approximately RMB296.4 billion and RMB49,044 in 2019 respectively, representing a CAGR of approximately 5.72% and 7.44% respectively. Also, Weihai City's urbanisation rate increased from 61.3% in 2014 to 68.7% in 2019. The continuous increase in economic growth and purchasing power of urban residents in Weihai City will drive the consumption upgrade, which in turn promotes the demand for property markets. Also, we believe that the accelerating urbanisation rate would also be a key driver for the stable growth of the property market in Weihai City.

Outlook of the PRC property market

The outbreak of Novel Coronavirus (COVID-19) in December 2019 has significantly affected the property market activities and sentiments in the short run. All segments of the PRC property market have been influenced more or less. In response to the effect of the COVID-19 outbreak, various PRC local governments have been introducing supportive measures to stabilize the property market since February 2020, such as allowance of delay in the commencement and completion time of property projects, relaxation of pre-sale conditions and supervision on pre-sale funds, postponing the payment of land lease, enhancing credit support to developers, relaxation of credit limits and down payment requirements, policy to relax the restrictions on new migrants, etc. The COVID-19 outbreak has been effectively under controlled in the PRC in the second half of 2020. Almost all of the construction companies and real estate development companies had resumed worked. The demand previously suppressed by the COVID-19 outbreak has been released and the real estate transactions in most cities had been gradually recovered.

After nearly two years of adjustment cycle since second half of 2018, the PRC property market is believed to enter relatively stable new cycle in the future. The market demand for properties is anticipated to be stabilized, supported by the development of metropolitan clusters, on-going urbanisation process and, rigid and upgrading demand. Therefore, the fundamentals of the PRC property market will remain stable and resilient in the medium and long term.

Based on the aforesaid, we concur with the Directors that the Acquisition is aligned with the Group's strategic goal of "expansion and strengthening" and therefore, we consider the entering into of the Sale and Purchase Agreement is fair and reasonable as a strategic step to promote the expansion of strategic layout of the Group in Shandong Province in the PRC and in the interests of the Company and its Shareholders as a whole.

4. Principal terms of the Sale and Purchase Agreement (as subsequently amended and supplemented by the Supplemental Agreement)

The principal terms of the Sale and Purchase Agreement are set out below:

Date

13 January 2021

Parties

(i) The Company, as the purchaser; and
(ii) Mr. Shum, as the Vendor.

Subject matter to be acquired

The Target Company will own, through its direct and/or indirect subsidiaries, equity interests in all the property development project companies in Shandong Province, the PRC, wholly-owned or partially-owned by Mr. Shum and/or companies controlled by him after the Reorganisation. Upon completion of the Reorganisation, the Target Group will comprise, among others, the Target Company as the investment holding company and all the property development project companies in Shandong Province, the PRC. Further information of the Reorganisation is set out in the paragraphs headed "Reorganisation" and "Information of the Target Group and its business", respectively, in the Letter from the Board.

Consideration

1. as to HK$3,420,640,000 (equivalent to approximately RMB2,898,847,458) by way of issue of the Convertible Bonds in the aggregate principal amount of HK$3,420,640,000 entitling Mr. Shum or his nominee(s) to convert at the Conversion Price of HK$3.30 per Conversion Share (subject to adjustment) into a maximum number of 1,036,557,575 Conversion Shares;
2. as to HK$2,772,000,000 (equivalent to approximately RMB2,349,152,542) by way of issue and allotment of 840,000,000 Consideration Shares by the Company to Mr. Shum or his nominee(s) at the Issue Price of HK$3.30 per Consideration Share; and
3. as to the remaining balance of HK$1,054,920,000 (equivalent to approximately RMB894,000,000) by cash.

The Initial Consideration was agreed on based on the Adjusted NAV (as defined and calculated in the manner described in the paragraphs headed "Adjusted NAV and Initial Consideration" in the Letter from the Board) as at 30 September 2020. The Initial Consideration shall be adjusted to the Final Consideration according to the adjustment mechanism described in the paragraph headed "Consideration Adjustment Mechanism" in the Letter from the Board and the paragraph below. The Final Consideration shall be payable by the Company to Mr. Shum or his nominee(s) upon Completion.

Consideration adjustment mechanism

Convertible Bonds

Subject to certain conditions to Completion, the Company will issue the Convertible Bonds in an aggregate principal amount of HK$3,420,640,000 (equivalent to approximately RMB2,898,847,458) which, unless previously converted, will mature on the date falling 60 months from the Issue Date, unless extended at the request of the Company.

Consideration Shares

The Conversion Price and the Issue Price

The Conversion Price of HK$3.30 per Conversion Share and the Issue Price of HK$3.30 per Consideration Share were determined on an arm's length basis between the Company and Mr. Shum with reference to the prevailing market price of the Shares.

Conditions precedent

Completion is conditional upon fulfilment or, where applicable, waiver of the following conditions:

(i) the Reorganisation having been completed pursuant to the Sale and Purchase Agreement;
(ii) the relevant transactions under the Sale and Purchase Agreement, including but not limited to, the issue of the Consideration Shares and the Convertible Bonds, having been approved by the Independent Shareholders at the EGM in accordance with the requirements of the Listing Rules;
(iii) the approval for the listing of, and permission to deal in, the Consideration Share as well as the Conversion Shares by the Stock Exchange having been obtained by the Company, and such approval not having been revoked or withdrawn prior to the date of Completion;
(iv) all necessary consents, if any, from any relevant governmental or regulatory authorities or other relevant third parties in connection with the Sale and Purchase Agreement and the transactions contemplated thereunder having been obtained; and

(v) the Company having been satisfied with the due diligence results of the Target Group in all respects.

If any of the conditions set out above has not been satisfied or waived by the

Company (other than conditions (i), (ii) and (iii) which may not be waived) on or before 31 December 2021 or such other date as the parties may agree, the Sale and Purchase Agreement will be terminated unless the parties otherwise agree. While conditions (iv) and (v) may be waived by the Company, to the best knowledge, belief and information of the Directors, and based on a legal opinion issued by the Company's PRC legal advisers regarding the property interests forming the subject of this Acquisition, there are no circumstances as currently foreseen that would require these conditions to be waived on or before 31 December 2021 or such other date as the parties may agree. Therefore, the substance of this Acquisition is expected to remain the same on the date of closing of this Acquisition.

Reorganisation

Upon completion of the Reorganisation, the Target Group will comprise, among others, the Target Company as the investment holding company and all the property development project companies in Shandong Province, the PRC.

Please refer to the paragraphs headed "Reorganisation" in the Letter from the Board for more details regarding the Reorganisation and a chart showing the corporate and shareholding structure of the Target Group immediately after the completion of the Reorganisation.

Completion

5. Basis of the Consideration

As disclosed in the Letter from the Board, the Initial Consideration was determined after arm's length negotiations between the Company and Mr. Shum with reference to, among other things, (i) the appreciated value of the property development projects as at 30 November 2020 in the amount of approximately HK$3,459,760,000 (equivalent to approximately RMB2,932,000,000) based on the Valuation Report on the property development projects as at 30 November 2020, prepared by JLL, an independent property valuer, in the amount of HK$19,546,700,000 (equivalent to approximately RMB16,565,000,000) as set out inAppendix IV to the Circular and the ownership percentage of the property development project companies owned by the Target Group; (ii) the adjusted financial information of the Target Group after the Reorganisation as at 30 September 2020; (iii) an approximately 4.86% discount on the Adjusted NAV (as defined below); and (iv) the amount of deferred PRC taxes on the appreciated value of the property development projects.

The following table demonstrates the calculations of the Adjusted NAV (as defined below) of the Target Group as at 30 September 2020 and the Initial Consideration:

HK$
approximately
Unaudited combined net asset value	5,023,260,000
attributable to the owners of the Target Group as at	(equivalent to
30 September 2020 (after taking into account the	approximately
original investment costs of certain project companies	RMB4,257,000,000)
of the Target Group and assuming the Reorganisation
completed on 30 September 2020) (Note 1)
Add:
Appreciated value of the property development projects as	3,459,760,000
at 30 November 2020 based on the Properties Valuation	(equivalent to
and ownership percentage of the property development	approximately
project companies by the Target Group (Note 2)	RMB2,932,000,000)
Less:
Deferred PRC taxes on appreciated value (Note 3)	864,940,000
(equivalent to
approximately
RMB733,000,000)
Equal to:
Adjusted net asset value attributable to the owners of the	7,618,080,000
Target Group (the "Adjusted NAV") as at	(equivalent to
30 September 2020	approximately
RMB6,456,000,000)
Less:
4.86% discount to the Adjusted NAV (Note 4)	370,520,000
(equivalent to
approximately
RMB314,000,000)
Initial Consideration	7,247,560,000
(equivalent to
approximately
RMB6,142,000,000)

Notes:

1. As at 30 September 2020, (i) the net asset value attributable to the owners of the Combined Group is HK$2,699,723,000 (equivalent to approximately RMB2,287,901,000) as set out in the Appendix IIA to the Circular, (ii) the net deficit attributable to the owners of Lingshihuafu was HK$36,244,000 (equivalent to approximately RMB30,715,000) as set out in Appendix IIB to the Circular; (iii) after taking into account the original investment costs of certain project companies of the Target Group, the unaudited combined net asset value attributable to the owners of the Target Group assuming the Reorganisation completed as at 30 September 2020; was approximately RMB4,257,000,000 (equivalent to approximately HK$5,023,260,000).
2. The appreciated value of the property development projects is the aggregated sum of the difference between (i) the book value of the property development projects as set out in Appendix IIA and IIB to the Circular, plus the original investment costs of certain project companies, and (ii) the market value of the property development projects as at 30 November 2020, based on the respective ownership percentages of each of the property development projects.
3. Deferred PRC taxes are calculated based on the appreciated value of the property development projects multiplied by a 25% tax rate.
4. The 4.86% discount is determined after arm's length commercial negotiations among the Vendor and the Company. The Vendor as the controlling Shareholder is willing to support the Company by offering a discount of 4.86% to the Adjusted NAV.

The Initial Consideration is adjusted by the (i) latest fair value of the property development projects held by the Target Group as at 30 November 2020 as disclosed in the Valuation Report; and (ii) the applicable tax rate of 25% calculated based on the appreciated value of the relevant property development projects, which we consider to be customary and reasonable for company principally engages in development and sales of properties. We have reviewed the calculation worksheet in relation to the appreciated value of the property development projects and are not aware of any material discrepancies.

5.1 The Valuation Report

According to the Valuation Report, the market value in existing state of the properties held by the Target Group as at 30 November 2020 was RMB16,565,000,000 (the "Valuation"). Independent Shareholders' attention is drawn to the full text of the Valuation Report and certificate of properties (the "Properties") held by the Target Group as set out in Appendix IV to the Circular.

In order to assess the expertise and independence of JLL, we have obtained and reviewed (i) the engagement letter of the JLL; (ii) JLL's relevant qualification and experience. Based on our review of JLL's engagement letter, we are satisfied that the terms and scope of the engagement between the Company and JLL are appropriate to the opinion JLL is required to give. We note that Mr. Eddie T. W. Yiu, the person in charge of Valuation Report, is a Chartered Surveyor who has 27 years' experience in the valuation of properties in Hong Kong and the PRC as well as relevant experience in the Asia-Pacific region. For due diligence purpose, we conducted telephone discussion with the team members of JLL to understand its previous experiences on valuation projects and its works performed on the Valuation as well as the steps and measures taken by JLL in conducting the Valuation. JLL also confirmed that it is independentfrom the Group, Mr. Shum and their respective associates. In view of the above, we consider that JLL is qualified and possesses relevant experience in conducting the Valuation.

We have reviewed the Valuation Report and discussed with JLL regarding the methodologies of, and bases and assumptions adopted for the Valuation. Based on the Valuation Report and our discussion with JLL, we understand that comparison approach is adopted for appraising the property interests in (i) Group I (properties held under development by the Target Group) 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; and (ii) Group II (properties held for future development by the Target Group) 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. Further, for property interests in Group III (properties contracted to be acquired by the Target Group), no commercial value is attributed to the properties as the Target Group has not yet obtained the State-owned Land Use Rights Certificates/Real Estate Title Certificates and/or the payment of the land premium has not yet been fully settled as at the valuation date.

The comparison 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. We understand from JLL that comparison approach is fully in line with the relevant valuation and market standards for appraising the properties in the PRC. JLL advised that the investment approach, which capitalizes the existing rental of all lettable units of each of the Properties for the respective unexpired terms of contractual tenancies whilst vacant units are assumed to be let at their respective market rents, is not suitable as the Properties are intended to be held for sale. Also, the discounted cash flow approach, which requires adoption of numerous assumptions which are valid only under specific and limited circumstance are not suitable in respect of the nature of the Properties.

We have reviewed the list of comparable property or land site transactions identified by JLL for each of the Properties. Where there is no comparable transaction available, JLL has made reference to the price list of the property unites pre-sold by the Target Group in appraising the Properties. We understand from JLL that the selection criteria of the comparable including location, accessibility, size and other relevant factors. We further note that (i) the location of the comparable transactions are in the same district of the relevant Properties; (ii) the comparable transactions are conducted in 2018 to 2020; and (iii) the information of the comparable transactions are sourced from JLL's in-house database. JLL has made relevant adjustments, where necessary, including size, location, and timing difference between the transaction date of the comparable transactions and the valuation date to account for the differences between the Properties and the comparable transactions.

Having considered the above, we are of the view that the valuation methodologies adopted, together with the bases and assumptions, for appraising the Properties are reasonable and acceptable.

5.2 Analysis of comparable transactions

We note that the Initial Consideration represents a 4.86% discount to the Adjusted NAV. As the Target Group is principally engaged in property development, it is common to assess the adjusted net asset value of the Target Group against the relevant consideration for acquisition. We have identified on the website of the Stock Exchange 12 transactions with circular published between 1 July 2020 and up to the Latest Practicable Date (the "Comparable Transactions"). We consider the Comparable Transactions between 1 July 2020 and up to the Latest Practicable Date are exhaustive and representative as those property transactions have closely reflected recent market conditions of the property market and macroeconomic conditions in the PRC after the implementation of the quarantine measures to control the COVID-19 outbreak, which we believe had certain impact on valuation of property transactions in first half of 2020. Therefore, we do not extend the selection period. As the economy in the PRC gradually recovers in the second half of 2020, we consider that the Comparable Transactions selected in the abovementioned period would be more relevant for the purpose of assessing the recent property transactions in the PRC. Our selection criteria are (i) acquisitions of company(ies) holding mainly property(ies) or property development companies/projects by companies listed on Main Board of the Stock Exchange; and (ii) consideration basis being with reference to net assets of the subject target company/group after adjusted with the latest valuation of the subject property(ies) (the "Reassessed NAV") or the latest independent valuation of the subject property(ies) conducted for the purpose of the transaction, and the amount of such Reassessed NAV or valuation are disclosed and provided in the respective circular(s) (see table below).

Reassessed

NAV/ Independent

Date of Stock circular codeName of companyConnected property or not valuation Consideration

(Discount)/

Premium

(HK$) (HK$)

15-Jul-20

2863 Golden Faith GroupYes
55,300,000
53,800,000 (1.82%)
Holdings Limited
20-Jul-20
207 Joy City PropertyYes
690,777,141
681,804,000 (1.30%)
Limited
20-Jul-20
230 Minmetals LandYes
1,676,900,000 1,620,340,000 (3.37%)
Limited

Date of circular

Stock code

Name of companyReassessed

NAV/ IndependentConnected or notproperty valuation Consideration

(Discount)/

Premium

(HK$)

25-Aug-20 1246

22-Sep-20

Boill Healthcare

Holdings Limited

6182 Twintek Investment
Holdings Limited
22-Sep-20
123 Yuexiu Property
Company Ltd
25-Sep-20
2183 Sansheng Holdings
(Group) LimitedYes
160,000,000
157,700,000 (1.56%)Yes
32,300,000
32,300,000 0.00%Yes
68,370,000
68,370,000 0.00%Yes
1,073,968,000
347,349,600 (67.67%)
(Note 1)
20-Nov-20
1598 China 21st Century
Education Group
Limited
25-Nov-20
337 Greenland Hong
Kong Holdings
Limited
30-Nov-20
1549 Ever Harvest Group
Holdings Limited
3-Dec-20
9978 Fineland Real
Estate Services
Group Limited
28-Jan-21
3382 Tianjin Port
Development
Holdings LimitedYes

124,844,000

123,900,000 (0.76%)Yes

11,398,800,000 8,566,800,000 (24.80%)Yes

74,096,325

74,000,000 (0.13%)Yes

78,660,000

77,520,000 (1.40%)Yes

281,576,438

0.00%

Average (3.20%)

Median (1.30%)Maximum Minimum

0.00% (24.80%)

Source:the Stock Exchange

Note:

As disclosed in the circular of Sansheng Holdings (Group) Limited ("Sansheng Holdings") dated 25 September 2020, Sansheng Holdings proposed to acquire the target group, which principally engaged in property development in the PRC. The consideration for the acquisition of the target group of approximately HK$347.3 million (equivalent to approximately RMB310.1 million) was determined with reference to, among others, the consolidated net asset value attributable to equity shareholder of the target group of approximately RMB745.7 million as at 31 March 2020 which will be reduce to zero upon completion of the reorganisation and the valuation surplus of the target properties attributable to the target group of approximately HK$1,074.0 million (equivalent to approximately RMB958.9 million) as at 30 June 2020. Upon completion of the reorganisation, the equity attributable to shareholders of the target group will be reduced to a minimal level and all the capital and retained earnings will be distributed before the acquisition. Given that the net asset value attributable to equity shareholder of the target group will be reduced to zero, the Reassessed NAV is effectively equal to the valuation surplus of target properties. Therefore, the discount of approximately 67.67% is calculated based on the consideration of the target group of approximately HK$347.3 million to the valuation surplus of approximately HK$1,074.0 million. For other Comparable Transactions, the Reassessed NAV would normally be the net asset value of the target companies adjusted for the valuation surplus of the properties held by the target companies. We consider such calculation basis which compares the consideration to valuation surplus in the case of Sansheng Holdings is not comparable to the other Comparable Transactions and produces a result which is an outlier. Therefore, such discount is excluded for analysis purpose.

Based on the analysis of the Comparable Transactions set out in the table above, we note that discount to consideration for all the Comparable Transactions to its adjusted net asset value of their respective target companies range from discounts of approximately 24.80% to nil with average and median discounts of approximately 3.20% and 1.30%, respectively. We note that the discount of 4.86% represented by the Initial Consideration to the Adjusted NAV lies within the range of the discounts to the consideration of the Comparable Transactions. Also, it is at a deeper discount than the average and median of discounts to the consideration of the Comparable Transactions.

Given (i) the valuation methodologies and assumptions adopted by JLL are fair and reasonable as discussed; (ii) the Initial Consideration represents a discount of approximately 4.86% to the sum of the Adjusted NAV which falls within range of the discount to the consideration of the Comparable Transactions; and (iii) no adjustment will be made if the Adjusted NAV at Completion is equal to or more than the Adjusted NAV and the Finial Consideration shall not excess the Initial Consideration, we consider the basis for arriving at the Final Consideration to be fair and reasonable.

6. Consideration Shares

6.1 Analysis of the Issue Price

As disclosed in the Letter from the Board, the Issue Price of HK$3.30 per Consideration Share represents:

(a) a premium of approximately 9.63% to the closing price per Share of HK$3.01 as quoted on the Stock Exchange on the Latest Practicable Date;
(b) a premium of approximately 5.10% to the closing price per Share of HK$3.14 as quoted on the Stock Exchange on 13 January 2021, being the date of the Sale and Purchase Agreement;
(c) a premium of approximately 6.45% to the average closing price per Share of HK$3.10 as quoted on the Stock Exchange for the last five consecutive trading days immediately preceding the date of the Sale and Purchase Agreement;
(d) a premium of approximately 6.90% to the average closing price per Share of HK$3.09 as quoted on the Stock Exchange for the last ten consecutive trading days immediately preceding the date of the Sale and Purchase Agreement; and
(e) a premium of approximately 1.59% to the consolidated net asset value per Share attributable to the Shareholders as at 30 June 2020 of approximately HK$3.25 per Share calculated based on the consolidated net assets of the Group attributable to the Shareholders of approximately HK$13,174,472,260 as at 30 June 2020 as extracted from the 2020 Interim Report and 4,055,734,623 Shares in issue as at the Latest Practicable Date.

Historical Share Performance

We have reviewed the daily closing prices of the Shares for the period from 14 January 2020 (being the 12-months period prior to the date of the Sale and Purchase Agreement) and up to the Latest Practicable Date (the "Review Period"). We consider that the Review Period is adequate to illustrate the recent price movement of the Shares for conducting a reasonable comparison among the historical closing prices prior to the Latest Practicable Date and such comparison is relevant for the assessment of the fairness and reasonableness of the Issue Price. The following chart sets out the daily closing prices of the Shares on the Stock Exchange during the Review Period:

Share Price Performance during the Review Period

8,000,000

7,000,000

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000

1,000,000

4.10

3.90

3.70

3.50

3.30

3.10

2.90

2.70

2.50

2020-01-14

2020-02-03

2020-02-19

2020-03-06

2020-03-24

2020-04-09

2020-04-29

2020-05-19

2020-06-04

2020-06-22

2020-07-10

2020-07-28

2020-08-13

2020-08-31

2020-09-16

2020-10-06

2020-10-23

2020-11-11

2020-11-27

2020-12-15

2021-01-04

2021-01-20

2021-02-05

2021-02-25

Volume (shares)ClosingPriceAverage PriceIssue Price & Conversion Price

Based on the chart above, the Share prices closed in a range between approximately HK$2.80 and HK$3.85 during the Review Period. The average closing Share price during the Review Period is approximately HK$3.18. The closing Share prices demonstrated a general increasing trend in February 2020 and reached HK$3.25 on 6 March 2020. On 9 March 2020, the Company announced its the final results for the year ended 31 December 2019 and the closing Share prices subsequently declined and closed at HK$2.85 on 23 March 2020. The closing Share prices then fluctuated within the region of HK$3.06 to HK$3.23 between April 2020 and June 2020. On 26 June 2020, the Company announced the proposed spin-off and separate listing of its subsidiary, Jiayuan Services Holdings Limited, which is principally engaged in the provision of property management services as well as value-added services to non-property owners and community value-added services, on the Main Board of the Stock Exchange. The closing Share prices then demonstrated an increasing trend and reached its highest point of HK$3.85 on 13 August 2020. On 12 August 2020, the Company announced the unaudited interim results for the six months ended 30

June 2020. The closing Share prices demonstrated a decreasing trend between mid-August 2020 and end of September 2020. On 9 October 2020, the Companyannounced the record date, being 23 October 2020, of the assured entitlement of the shares in Jiayuan Services Holdings Limited under the preferential offering (the "Assured Entitlement"). The Company further announced the basis of the Assured Entitlement on 19 October 2020. The closing Share prices demonstrated a general increasing trend since early October 2020 and reached HK$3.51 on 21 October 2020. The closing Share prices subsequently retreated to HK$3.00 on 23 November 2020 and then fluctuated within the range of HK$3.00 to HK$3.15.

During the Review Period, the Issue Price represented (i) a discount of approximately 14.3% to the highest closing Share price; (ii) a premium of approximately 17.9% to the lowest closing Share price; (iii) a premium of approximately 3.8% to the average closing Share price.

Comparison with recent issue of consideration shares

To further assess the fairness and reasonableness of the Issue Price, we have conducted a comparable analysis consist of companies listed on Main Board of the Stock Exchange, and which announced issue of consideration shares to vendors for acquisition(s) during the period from 1 July 2020 up to and including the Latest Practicable Date ("Comparable Share Issues"). We have identified 21 Comparable Share Issues, which we consider to be an exhaustive list of relevant comparable issues of consideration shares based on the aforesaid criteria.

Although the companies in the Comparable Share Issues may have different principal business, market capitalisation, profitability, financial position and identities of counterparties as compared to the Company, and different reasons for their acquisitions and for issuing the consideration shares, we consider that the Comparable Share Issues can provide us a general reference on the recent market trend of similar transactions in Hong Kong equity capital market. Based on the aforesaid, we consider the Comparable Share Issues are appropriate for the purpose of assessing the fairness and reasonableness of the Issue Price.

Date of

Announcement Name of company

24-Jul-20 Boill Healthcare
29-Jul-20 China Ever Grand
31-Jul-20 E-House (China)
28-Aug-20
4-Sep-20
- 13-Sep-20 Coolpad Group Limited
- 20-Sep-20 Viva Biotech Holdings
- 23-Sep-20 Termbray Industries
  21-Oct-20
  C-MER Eye Care
  Hao Tian DevelopmentGolden Faith Group
Holdings Limited
Financial Leasing
Group Co., Ltd.
Enterprise Holdings
Limited

Holdings Limited

Group Limited

International (Holdings) Limited

LETTER FROM MAXA CAPITAL
Premium/	Premium/
(Discount)	(Discount)
over/of the	over/of the
issue price to	issue price to
Premium/	the average	the average
(Discount)	closing price	closing price
over/of the	per share on	per share on
issue price	the last five	the last ten
to closing	consecutive	consecutive
price prior	trading days	trading days
prior to/on	prior to/on
the last	the last
trading day	trading day
(14.63%)	(16.67%)
(15.10%)	(14.80%)
(10.12%)	(6.79%)
0.15%	(2.54%)
(22.60%)	(21.10%)
(16.77%)	(22.39%)
(0.48%)	2.40%
(6.17%)	(5.86%)
(13.90%)	(11.80%)

Connected transactions or not

Holdings Limited

Stock codeIssue Price (HK$)to/on last trading day

1246

0.35 Yes (10.26%)

379

0.186 No (11.40%)

2048

9.22 Yes (15.57%)

3309

6.135

0.08%

474

0.25 No (21.90%)

2369 1873

0.13 No (8.45%)

8.955 No (7.68%)

0.289 Yes (6.77%)

2863

0.47 No (14.55%)

Date of

Announcement Name of company

23-Oct-20 Vongroup Limited
26-Oct-20 Hengten Networks
- 7-Nov-20 7Road Holdings
Group Limited

13-Nov-20 Forgame Holdings
Limited
27-Nov-20 Elife Holdings Limited

9-Dec-20

Limited

Suoxinda Holdings

Limited

15-Dec-20 Union Medical
24-Dec-20 Yeahka Limited
27-Dec-20 Maxnerva Technology
29-Dec-20 CA Cultural
Healthcare Limited

Services Limited

LETTER FROM MAXA CAPITAL
Premium/	Premium/
(Discount)	(Discount)
over/of the	over/of the
issue price to	issue price to
Premium/	the average	the average
(Discount)	closing price	closing price
over/of the	per share on	per share on
issue price	the last five	the last ten
to closing	consecutive	consecutive
price prior	trading days	trading days
prior to/on	prior to/on
the last	the last
trading day	trading day
(15.10%)	(15.40%)
(9.09%)	(9.64%)
0.00%	1.69%
(10.32%)	(10.90%)
37.00%	39.30%
(20.00%)	(17.30%)
(1.58%)	(7.96%)
3.59%	4.33%
(0.40%)	0.81%
3.82%	4.03%

Connected transactions or not

Technology Group Limited

Stock codeIssue Price (HK$)to/on last trading day

318 136

0.45 No (1.67%)

0.3 No (9.09%)

797

2.77 No 0.00%

484

2.19 No 0.00%

223 3680

0.1 Yes 29.87%

4.65 No (19.13%)

2138

5.425 No (10.33%)

9923 1037

37.5 Yes 0.00%

0.5 No 4.17%

1566

2.5 No 4.60%

Date of

Announcement Name of company

19-Jan-21

State Energy Group

International Assets Holdings Limited

10-Feb-21

C-MER Eye Care

Holdings Limited

Consideration Shares

Premium/	Premium/
(Discount)	(Discount)
over/of the	over/of the
issue price to	issue price to
Premium/	the average	the average
(Discount)	closing price	closing price
over/of the	per share on	per share on
issue price	the last five	the last ten
to closing	consecutive	consecutive
price prior	trading days	trading days
prior to/on	prior to/on
the last	the last
trading day	trading day
4.40%	(8.20%)
(5.92%)	(0.49%)
(5.39%)	(5.68%)
(6.17%)	(7.96%)
37.00%	39.30%
(22.60%)	(22.39%)
6.45%	6.90%

Connected transactions or not

Stock codeIssue Price (HK$)to/on last trading day

918

0.381 Yes 0.00%

3309

6.07 No 3.94%

Average (4.48%)

Median (6.77%)Maximum Minimum

29.87% (21.90%)

3.30

5.10%

Source: the Stock Exchange

As illustrated in the table above, the mean and median of the issue price of the Comparable Share Issues to the historical share prices are at discounts ranging from 4.48% to 7.96%, whereas the Issue Price represents a premium ranging from 5.10% to 6.90% to the historical Share prices.

Having considered that (i) the Issue Price is at a premium to the average closing Share price during the Review Period; (ii) the Issue Price is at a premium to the historical closing price of the Share (being the last trading day, and the last five and 10 consecutive trading days immediately prior to the date of the Sale and Purchase Agreement), whereas the mean and median of the issue prices of the Comparable Share Issues are at discounts to the historical closing price; and (iii) the Issue Price is at slight premium of approximately 1.59% over the equity attributable to owners of the Company per Share as at 30 June 2020 of approximately HK$3.25, we are of the view that the Issue Price is fair and reasonable and is in line with the market practice.

7. Convertible Bonds

7.1 Principal terms of the Convertible Bonds

The principal terms of the Convertible Bonds are set out below:

Convertible Bonds

Denomination

The Convertible Bonds are issued in registered form and will be in denominations of HK$1.00.

Issue price of the Convertible Bonds

100% of the aggregate principal amount of the Convertible Bonds.

Interest

The Convertible Bonds will bear no interest.

Maturity date

The date falling 60 months from the Issue Date.

Transferability

The Convertible Bonds may be freely assigned or transferred to any third party who has confirmed to the relevant Holder of the Convertible Bonds in writing it is not a connected person of the Company within the meaning of the Listing Rules (save that the Convertible Bonds may be assigned or transferred to a connected person when the Company has given its written consent), subject to the compliance with: (i) the terms and conditions of the Convertible Bonds; (ii) the Listing Rules; (iii) the approval for listing in respect of the Conversion Shares (as defined below); and (iv) all applicable laws and regulations.

Ranking of the Convertible Bonds

The Convertible Bonds constitute the direct, subordinated, unconditional and unsecured general obligations of the Company and shall at all times rank pari passu and without any preference among themselves. The right to payment of the Holder of the Convertible Bonds shall, save for such exceptions as may be provided by applicable legislation, be subordinated to the claims of all other present and future senior and subordinated creditors of the Company.

Maturity

Unless previously converted, the then outstanding principal amount of the Convertible Bonds shall be fully converted into Conversion Shares at 100% of their principal amount of the Maturity Date. The Convertible Bonds shall not be redeemable by any monetary consideration. For the avoidance of doubt, there are no other redemption terms under the terms of the Convertible Bonds, i.e. any principal amount under the Convertible Bonds shall only be payable by way of conversion by a Holder of the Convertible Bonds, although subject to the requirement that any such exercise of the conversion rights attached to the Convertible Bonds will not render the Company in breach of the minimum public float requirement as stipulated under the Listing Rules.

Conversion

N=A/C

Where:

"N" is the number of Shares to be issued by the Company upon conversion.

"A" is the principal amount of the Convertible Bonds to be converted.

"C" is the Conversion Price.

The Holder shall affect conversions by delivering to the Company a completed notice in the form prescribed in the Convertible Bonds Instrument.

The Conversion Shares, when issued, will in all respects rank pari passu with the Shares already in issue on the day when the Conversion Shares are issued.

The Acquisition will not result in change in control of the Company.

Conversion Price

The conversion price at which the Company shall issue the Conversion Shares to the Holder upon conversion of the Convertible Bonds will initially be HK$3.30 per Share but will be subject to adjustment for dilutive events.

The terms of the Convertible Bonds, including the Conversion Price, has been arrived at after arm's length negotiations between the Company and Mr. Shum, with reference to, among other things, the recent trend of the Share price performance and the prevailing market price of the Shares.

The maximum number of 1,036,557,575 Conversion Shares to be issued upon full conversion of the Convertible Bonds represents approximately:

(i) 25.56% of the existing issued share capital of the Company; and
(ii) 17.47% of the issued share capital of the Company as enlarged by the issue of the Consideration Shares and Conversion Shares upon full conversion of the Convertible Bonds.

The Conversion Shares (when allotted and issued upon full conversion of the Convertible Bonds) will be issued under the Specific Mandate to be sought at the EGM.

Adjustments to Conversion Price

Please refer the paragraphs headed "Adjustments to Conversion Price" in the Letter from the Board for the details of the adjustment mechanism to the conversion price.

7.2 Analysis of the terms of the Convertible Bonds

Evaluation of the Conversion Price

As the Conversion Price is determined at HK$3.30 per Conversion Share, which is the same as the Issue Price, please refer to the paragraphs headed "6.1 Analysis of the Issue Price" for analysis on the historical Share performance.

Comparison with recent issue of convertible bonds

To assess the fairness and reasonableness of the terms of the Convertible Bonds, we have conducted a comparable analysis consist of companies listed on Main Board of the Stock Exchange, and which announced issue of convertible bonds (excluding any issue of warrants or other convertible instruments to the convertible bonds subscribers in conjunction with the issue of convertible bonds) during the period from 1 July 2020 up to and including the Latest Practicable Date ("Comparable CB Issues"). We have identified 42 Comparable CB Issues, which we consider to be an exhaustive list of relevant comparable convertible bond issues based on the aforesaid criteria.

Although the companies in the Comparable CB Issues may have different principal business, market capitalisation, profitability, financial position and identities of counterparties as compared to the Company, and different reasons for their acquisitions and for issuing the convertible bonds, we consider that the Comparable CB Issues can provide a general reference on the recent market trend of similar transactions in Hong Kong equity capital market. Based on the aforesaid, we consider the Comparable CB Issues are appropriate for the purpose of assessing the fairness and reasonableness of the terms of the Convertible Bonds.

Premium/

(Discount) of Premium/ the conversion

(Discount) of the conversion price over/to the closingprice over/to the average closing price for the

price on the respective lastDate of announcement Name of company

Stock code Principal amount

Interest Conversionrate (%)price

Term (year)

respective last trading dayfive trading days

15-Jul-20 King Stone Energy
- 663 HK$50,000,000
  7.00% HK$0.08
  1
  14.30% 14.30%
Group Limited
16-Jul-20 Styland Holdings
211
Limited
up to HK$23,000,000
6.00% HK$0.022
3
0.00% 3.80%
20-Jul-20 China Beidahuang
39
Industry Group Holdings Limited
up to HK$123,000,000
12.00% HK$0.1
1.5
28.20% 27.20%
24-Jul-20 Value Convergence
821
up to
0.00% HK$0.2
3
(4.31%) (4.76%)Holdings Limited HK$52,000,000
28-Jul-20
- Wai Chun 660 HK$67,000,000
  4.00% HK$0.022
  3
  0.00% (9.09%)
  Bio-Technology
  Limited
29-Jul-20 Changyou Alliance

1039 HK$126,000,000

3.50% HK$0.42

7.69% 4.74%

Group Limited

1-Sep-20 Capital VC Limited
2324
up to HK$13,500,000
1.00% HK$0.25
3
52.40% 54.50%
10-Sep-20 ESR Cayman Limited 1821

US$350,000,000

0.00% HK$32.13

27.50% 32.11%

Premium/

(Discount) of Premium/ the conversion

(Discount) of the conversion price over/to the closingprice over/to the average closing price for the

price on the respective lastDate of announcement Name of company

Stock code Principal amount

Interest Conversionrate (%)price

Term (year)

respective last trading dayfive trading days

10-Sep-20 Eagle Ride
Investment
Holdings Limited
17-Sep-20 China New Higher
Education Group
Limited
21-Sep-20 Wai Chun

Bio-Technology

Limited

7-Oct-20 iDreamSky
Technology
Holdings Limited
9-Oct-20 China Beidahuang
Industry Group
Holdings Limited
9-Oct-20 China LotSynergy
Holdings Limited
16-Oct-20 QPL International
Holdings Limited
23-Oct-20 Victory City
International
Holdings Limited
28-Oct-20 Xinyang Maojian

Group Limited

901

up to HK$100,000,000

2001 US$100,000,000

660

8.00% HK$0.3

1.00% HK$6.313

HK$67,000,000 4.00% HK$0.012
1119
HK$775,000,000 3.13% HK$4.99
39
HK$123,000,000 12.00% HK$0.1
1371
HK$50,000,000 8.00% HK$0.15
243
HK$9,400,000 0.00% HK$0.25
539
HK$400,000,000 5.00% HK$0.135
362
HK$100,000,000 0.00% HK$0.4

23.46% 70.45%

8.84% 14.57%

0.00% 6.25%

0.00% 5.90%

42.90% 46.20%

(9.64%) (10.07%)

26.90% 25.00%

29.81% 29.56%

12.68% 11.73%

Premium/

(Discount) of Premium/ the conversion

(Discount) of the conversion price over/to the closingprice over/to the average closing price for the

price on the respective lastDate of announcement Name of company

Stock code Principal amount

Interest Conversionrate (%)price

Term (year)

respective last trading dayfive trading days

29-Oct-20

Zhou Hei Ya

International Holdings Company Limited

8-Nov-20 Wai Hung Group
Holdings Limited
17-Nov-20 Grand Field Group
Holdings
18-Nov-20 Lvgem (China) Real
Estate Investment
Company Limited
19-Nov-20 Union Medical
Healthcare Limited
24-Nov-20 Far East Horizon
Limited
29-Nov-20 Elife Holdings
Limited
30-Nov-20 Wai Chun GroupHoldings Limited

1458 HK$1,550,000,000

3321 RMB200,000,000
115 HK$102,300,000
95 US$70,000,000
2138 HK$39,000,000
3360 US$200,000,000
223 RMB17,000,000

1013

1-Dec-20 Huazhang Technology 1673
Holding Limited
2-Dec-20 Xiaomi Corporation
3-Dec-20 CAR Inc.

1.00% HK$10.40

8.00% HK$5.04

5.00% HK$0.8

5.50% HK$2.505

2.50% HK$5.21

0.00% HK$8.56

0.00% HK$0.1

HK$60,000,000 4.00% HK$0.1
HK$100,000,000 12.00% HK$0.71

1810

US$855,000,000 0.00% HK$36.74
699
US$175,000,000 5.00% HK$4.0

22.50% 20.65%

1.82% 0.08%

1.5

2.60% 2.80%

5.5

3.09% 1.17%

10.00% (1.33%)

9.04% 7.67%

29.90% 39.30%

2.04% (10.39%)

0.5

0.00% (2.82%)

7 5

40.50% 39.70%

5.82% 6.10%

Premium/

(Discount) of Premium/ the conversion

(Discount) of the conversion price over/to the closingprice over/to the average closing price for the

price on the respective lastDate of announcement Name of company

Stock code Principal amount

Interest Conversionrate (%)price

Term (year)

respective last trading dayfive trading days

14-Dec-20 New Concepts
Holdings Limited
18-Dec-20 VIVA Biotech
Holdings
22-Dec-20 SinoMab BioScience
Limited
29-Dec-20 Genertec Universal

Medical Group

Company Limited

4-Jan-21 6-Jan-21

Mobvista Inc.

Zhejiang Expressway

Co., Ltd

8-Jan-21

Hansoh

Pharmaceutical Group Company Limited

8-Jan-21

China Hongqiao

Group Limited

25-Jan-21 Sparkle Roll Group
Limited
26-Jan-21 Target Insurance
(Holdings) Limited
28-Jan-21 Cathay Pacific

Airways Limited

2221 HK$10,000,000
1873 US$280,000,000
3681 HK$100,000,000
2666
- US$150,000,000 2.00% HK$6.56
  1860
- US$30,000,000 3.50% HK$5.54
576 Euro230,000,000

3692

US$600,000,000 0.00% HK$60.00
1378
US$300,000,000 5.25% HK$8.91

970

HK$100,000,000 0.00% HK$0.25
6161
HK$400,000,000 0.00% HK$0.57

293 HK$6,740,000,000

6.00% HK$0.20

1.00% HK$11.637

4.95% HK$5.0

0.00% HK$8.83

2.75% HK$8.57

5.79% 11.73%

35.00% 39.40%

25.00% 45.35%

14.29% 12.71%

3 to 5

14.94% 22.19%

35.00% 35.20%

44.06% 51.63%

14.97% 19.76%

7.30% 8.04%

(8.06%)

(12.31%)

30.00%

25.84%

Date of announcement Name of company

Stock code Principal amount

2-Feb-21 Tibet Water
1115
- HK$79,600,000 5.00%
Resources Ltd.
9-Feb-21 China Parenting
1736
- HK$35,000,000 5.00%
Network Holdings Limited
22-Feb-21 Hope Education

1765 US$350,000,000 0.00%Group Co. Ltd

Average 3.48% 3.4

Median 3.32% 3.0

Maximum 12.00% 7.0

Minimum 0.00% 0.5

Convertible 0.00% 5.0

Premium/
(Discount) of
Premium/	the conversion
(Discount) of	price over/to
the conversion	the average
price over/to	closing price
the closing	for the
price on the	respective last
Interest Conversion	respective last	five trading
trading day	days
0.82%	3.50%
(19.60%)	(19.60%)
24.90%	18.10%
14.52%	16.25%
11.34%	12.22%
52.40%	70.45%
(19.60%)	(19.60%)
5.10%	6.45%

rate (%)

price

Term (year)

HK$0.74 3

HK$0.19 1

HK$0.28 5

Bonds

Notes:

The proposed issue of convertible bonds announced on 27 November 2020 by Sino Golf Holdings Limited (stock code: 361) and announced on 30 October 2020 by Summit Ascent Holdings Ltd (stock code: 102) are excluded from the Comparable CB Issues and the above analysis as they appear to be extreme outliers as compared to other comparable issues as the premium of conversion price over (i) the closing price on the last trading day prior to the announcements; (ii) the average closing price of the last five trading days prior to the announcement reached more than 200% which may in turn provide an abnormal maximum value and average value for comparison, thus does not provide a meaningful analysis.

(a) Interest rate

The interest rates in respect of the Comparable CB Issues ranged from nil to 12.0% per annum, with an average and median of approximately 3.48% and 3.32% per annum respectively. Given that there is no interest on the Convertible Bonds, it falls within the range and is at the low end of the interest rate range of the Comparable CB Issues. We consider that the Convertible Bonds which carry no interest is beneficial to the Group as it can alleviate the Group from the financial burden for payment of interest cost on the Convertible Bonds.

(b) Term to maturity

As for the terms relating to maturity, we note that the maturity in respect of the Comparable CB Issues ranged from 0.5 to 7 years, with an average and median of around 3.4 and 3.0 years respectively. The terms to maturity of the Convertible Bonds are 5 years, which falls within the range of those Comparable CB Issues and is longer than the average and media maturity. We consider the terms to maturity of the Convertible Bonds is generally in line with the recent market practice.

As set out in the table above, we note that the conversion price to (i) the closing price on the last trading day prior to the announcements in relation to the respective Comparable CB Issues ranged from a premium of approximately 52.40% to a discount of approximately 19.60%, with an average and median premium of approximately 14.52% and 11.34% respectively; (ii) the average closing price of the last five trading days prior to the announcements in relation to the respective Comparable CB Issues ranged from a premium of approximately 70.45% to a discount of approximately 19.60%, with an average and median premium of approximately 16.25% and 12.22% respectively. The Conversion Price is at (i) a premium of approximately 5.10% to the closing price per Share on the date of the Sale and Purchase Agreement; and (ii) a premium of approximately 6.45% to the average closing price per Share for the last five trading days prior to the date of the Sale and Purchase Agreement.

We note that the premium of the Conversion Price over (i) the closing price per Share on date of the Sale and Purchase Agreement; and (ii) the average closing price per Share for the last five trading days prior to the date of the Sale and Purchase Agreement are lower than the average and median premium of the Comparable CB Issues. Nonetheless, having considered that

(i) the Convertible Bonds bear no interest which is beneficial to the Group;
(ii) the Conversion Price is above the average closing Share price during the Review Period as discussed in the paragraphs headed "6.1 Analysis of the Issue Price - Historical Share Performance" above;
(iii) the Conversion Price represents a slight premium to the equity attributable to owners of the Company per Share as at 30 June 2020 of approximately HK$3.25; and

(iv)the outstanding principal amount of the Convertible Bonds shall be fully converted into the Conversion Shares at the Maturity Date and the Convertible Bonds shall not be redeemable by any monetary consideration. Such conversion mechanism at maturity will enable the Group to relief from the financial burden of redeeming the outstanding principal amount of Convertible Bonds at maturity and preserve its working capital for its business development,

we are of the view that the Conversion Price is fair and reasonable and in line with the market practice.

Effect on the shareholding structure of the Company

As disclosed in the Circular, set out below is the shareholding structure of the Company

(i) as at the Latest Practicable Date; (ii) immediately after Completion and the allotment and issue of the Consideration Shares; and (iii) immediately after full conversion of the Convertible Bonds:

Shareholders

Mr. Shum and his associate(s)

(Note 3)

As at the Latest Practicable Date

Number of

2,828,310,136

(Note 1)

Public

Immediately after

Completion and the allotment and issue of the Consideration Shares, but before the exercise of the conversion rights attached to the Convertible Bonds

(Note 2)Approximate %

Number of Approximate

Shares %

69.74

Immediately afterCompletion and the allotment and issue of (i) the Consideration Shares and (ii) the Conversion Shares upon the exercise in full of the conversion rights attached to the Convertible Bonds

(Note 2 & Note 5) Number of Approximate

Shares %

3,668,310,136

Shareholders

74.93

4,704,867,711 79.31

1,227,424,487

30.26

1,227,424,487

25.07

1,227,424,487 20.69

Total:

4,066,734,623

100.00

4,895,734,623

100.00

5,932,292,198 100.00

Notes:

1. 2,756,308,418 of these Shares are held by Mingyuan Investment, which is wholly-owned by Mr. Shum.
2. The figures above assume that other than the Consideration Shares and the Conversion Shares, no further Shares are issued or repurchased by the Company, and no Shares are sold or purchased by Mr. Shum or his associate(s), in each case on or after the Latest Practicable Date and up to the date the allotment and issue of the Consideration Shares and the Conversion Shares.

3. On 13 January 2021, the Company entered into the Sale and Purchase Agreement (as subsequently amended and supplemented by the Supplemental Agreement) with Mr. Shum, pursuant to which, the Company has conditionally agreed to acquire and Mr. Shum has conditionally agreed to sell the entire issued share capital of the Target Company, at the Initial Consideration of HK$7,247,560,000 (equivalent to approximately RMB6,142,000,000) (subject to adjustment), which will be settled (i) as to HK$3,420,640,000 (equivalent to approximately RMB2,898,847,458) by way of issue of the Convertible Bonds; (ii) as to HK$2,772,000,000 (equivalent to approximately RMB2,349,152,542) by way of issue and allotment of 840,000,000 Consideration Shares; and (iii) as to the remaining balance of HK$1,054,920,000 (equivalent to approximately RMB894,000,000) by cash.
4. The percentage figures included in this table are subject to rounding adjustment.
5. The shareholding structure is prepared for illustrative purpose only. There is no right for any Holder(s) to convert any principal amount of the Convertible Bonds held by the Holder(s) and the Company shall not issue any Conversion Shares thereof if, upon such conversion and issue of the Conversion Shares, the Company will be in breach of the minimum public float requirement as stipulated under the Listing Rules.

As illustrated in the table above and assuming the Completion and the allotment of the Consideration Shares, the shareholding in the Company held by public Shareholders will be diluted from approximately 30.26% to 25.07% and will be further diluted to approximately 20.69% upon full conversion of the Convertible Bonds.

It is noted that such dilution is disadvantageous to the existing public Shareholders. Nevertheless, having considered (i) the benefits of entering into the Sale and Purchase Agreement as discussed in the paragraphs headed "3. Reasons for and benefits of the Acquisition" above; (ii) the terms of the Sale and Purchase Agreement, including the Consideration, the Issue Price and the Conversion Price, being fair and reasonable as discussed in the paragraphs headed "5. Basis of the Consideration", "6. Consideration Shares" and "7. Convertible Bonds" above, we are of the view that the dilution to the shareholding of the existing public Shareholders resulting from the issue of the Consideration Shares and Convertible Bonds is acceptable.

9. Financial effects of the Acquisition

Earnings

As majority of the property development projects held by the Target Group are still under construction work and not expected to be completed shortly after Completion. Accordingly, the Acquisition would not immediately contribute material revenue or profit to the Group upon Completion. It is expected that once the property development projects are completed and delivered, the Group's profit will be enhanced.

Asset and liabilities

As set out in the unaudited pro forma consolidated statement of financial position of the Enlarged Group in Appendix III to the Circular, assuming the Acquisition had taken place on 30 June 2020, it is expected that the total assets of the Group would increase from approximately RMB66,145.9 million to approximately RMB73,996.0 million and the total liabilities of the Group would increase from approximately RMB52,673.3 million to approximately RMB54,590.7 million. As a result, the net asset value of the Group would increase from approximately RMB13,472.6 million to approximately RMB19,405.3 million.

Gearing ratio and liquidity

Based on the 2020 Interim Report, as at 30 June 2020, the Group's gearing ratio (defined as bank and other borrowings and senior notes net of the cash and cash equivalents and pledged restricted bank deposits, divided by total equity) was 77.5%. According to the unaudited pro forma financial information of the Enlarged Group as set out in Appendix III to the Circular, the gearing ratio of the Enlarged Group would further decrease to 63.1%. The decrease of gearing ratio indicates a healthier financial position of the Group after the Completion.

The working capital of the Group, which is calculated by current assets net of current liabilities, was approximately RMB13,630.8 million as at 30 June 2020. Since the Consideration will be partially satisfied by cash, the Acquisition would result in a cash outflow consist of part of consideration and the costs related to the Acquisition. Based on the unaudited pro forma financial information of the Enlarged Group as set out in Appendix III to the Circular, the working capital would have increased to approximately RMB16,559.6 million as if the Acquisition had been completed on 30 June 2020. According to the section headed "Working Capital" in Appendix I to the Circular that the Directors, after taking into account the financial resources available including the existing banking facilities of the Enlarged Group, internally generated funds and the effect of the Acquisition, are of the opinion that the Enlarged Group has sufficient working capital for its present requirements and for at least 12 months following the date of the Circular in the absence of any unforeseeable circumstances.

RECOMMENDATION

Having taken into consideration the factors and reasons as stated above, we are of the view that (i) the terms of the Sale and Purchase Agreement and the transactions contemplated thereunder, are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) the Acquisition, although is not in the ordinary and usual course of business of the Group, is in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders as well as the Independent Board Committee to advise the Independent Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the Sale and Purchase Agreement and the transactions contemplated thereunder.

Yours faithfully,

For and on behalf of Maxa Capital Limited

Sammy Leung Managing Director

Mr. Sammy Leung is a licensed person registered with the Securities and Future Commission of Hong Kong and a responsible officer of Maxa Capital Limited to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO and has over 9 years of experience in corporate finance industry.

An exchange rate of HK$1.18 = RMB1.00 has been used for currency translation, where applicable. Such exchange rate is for illustration purposes only and does not constitute any representations that any amount in HK$ or RMB has been, could have been or may be converted at such rate.

1. FINANCIAL INFORMATION OF THE GROUP

The annual reports of the Group for the financial years ended 31 December 2017, 2018 and 2019 and the interim report of the Group for the six months ended 30 June 2020 are disclosed in the following documents which have been published on the website of the Stock Exchange (http://www.hkexnews.hk) and the website of the Company (http://www.jiayuanintl.com), and can be accessed by the direct hyperlinks below:

(i) annual report of the Company for the year ended 31 December 2017 published on 16 April 2018 (pages 67 to 163):
https://www1.hkexnews.hk/listedco/listconews/sehk/2018/0416/ltn201804161153.pdf
(ii) annual report of the Company for the year ended 31 December 2018 published on 29 April 2019 (pages 83 to 207):
https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0429/ltn201904292447.pdf
(iii) annual report of the Company for the year ended 31 December 2019 published on 16 April 2020 (pages 86 to 199):
https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0416/2020041601179.pdf
(iv) interim report of the Company for the six months ended 30 June 2020 are published on 7 September 2020 (pages 27 to 64):
https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0907/2020090701011.pdf

2. WORKING CAPITAL

The Directors, after taking into account the financial resources available including the existing banking facilities of the Enlarged Group, internally generated funds and the effect of the Acquisition, are of the opinion that the Enlarged Group has sufficient working capital for its present requirements and for at least 12 months following the date of this circular in the absence of any unforeseeable circumstances.

3. INDEBTEDNESS

As at the close of business on 31 December 2020, being the latest practicable date for the purpose of this indebtedness statement prior to the publication of this circular, the Enlarged Group had total indebtedness is set out below:

Borrowings

RMB'000
Bank loans, secured and guaranteed	8,049,387
Bank loans, secured and unguaranteed	304,362
Trust loans, secured and guaranteed	3,863,911
Senior notes, secured and guaranteed	8,753,017
Other loans, secured and guaranteed	1,699,581
22,670,258

The aforesaid secured borrowings of approximately RMB22,670 million were secured by the Enlarged Group's investment properties, property and equipment, inventories of properties, shares of subsidiaries, pledged bank deposits and financial assets at fair value through profit or loss as at 31 December 2020.

Lease liabilities

As at 31 December 2020, the Enlarged Group had lease liabilities of approximately RMB10 million.

Financial guarantee

As at 31 December 2020, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, the Enlarged Group had outstanding guarantees of approximately RMB10,647 million to banks in favour of its customers in respect of the mortgage loans provided by the banks to these customers for the purpose of the Enlarged Group's properties under development. Such guarantees will be released by banks upon the purchaser obtaining the relevant building ownership certificate and completion of the relevant mortgage registration.

Pursuant to a facility agreement dated 7 September 2020 entered into between Lingshihuafu, as borrower, and Qingdao Xifa Commercial Factoring Co., Ltd., as lender, Qingdao Jiayuan Real Estate Group Co., Ltd. agreed to provide guarantees for a term loan of up to RMB300,000,000 granted to Lingshihuafu.

Contingent liabilities

As of 31 December 2020, the Enlarged Group did not have any outstanding material contingent liabilities.

Save as disclosed above and apart from intra-group liabilities, at the close of business on 31 December 2020, the Enlarged Group did not have any outstanding mortgages, charges, debentures, loan capital, bank overdrafts, loans, debt securities or other similar indebtedness issued and outstanding or agreed to be issued, hire purchase commitments, liabilities under acceptances or acceptance credits or any guarantees or other material contingent liabilities.

4. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse changes in the financial or trading position or prospects of the Group since 31 December 2019, being the date to which the latest published financial statements of the Company were made up.

5. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

In 2021, in view of the outbreak of the novel coronavirus and the challenges and opportunities brought by the new trend in the property market, the Group will be committed to implementing steady financial policies and risk control measures, ensuring construction quality and safety, strengthening its contracted sales and receipt of sales proceeds and applying strict control over its various costs and expenses, so as to secure a stable operating cash flow as well as investment returns.

Further, the Group will continue to replenish its premium land bank by adopting practical strategies to optimise the geographical layout of its projects and devise investment portfolios to suit the different urbanisation stages of the PRC with a view to capturing the different demands for the purchase of property in various local markets. In future, on a foundation of solid development, the Group will make flexible adjustments according to various local market situations and achieve high quality and all-rounded development for continuous increase of profitability in order to maximise the value for its shareholders.

The following is the text of a report set out on pages IIA-1 to IIA-3, received from the Company's reporting accountant, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular.

ACCOUNTANT'S REPORT ON HISTORICAL FINANCIAL INFORMATION OF THE COMBINED GROUP TO THE DIRECTORS OF JIAYUAN INTERNATIONAL GROUP LIMITED

Introduction

We report on the historical financial information of Luyuan Investment Holdings Limited ("Luyuan") and its subsidiaries (together, the "Combined Group") set out on pages IIA-4 to IIA-66, which comprises the combined statements of financial position as at 31 December 2017, 2018 and 2019 and 30 September 2020, the statements of financial position of Luyuan as at 31 December 2017, 2018, 2019 and 30 September 2020 and the combined statements of comprehensive income, the combined statements of changes in equity and the combined statements of cash flows for each of the years ended 31 December 2017, 2018 and 2019 and the nine months ended 30 September 2020 (the "Track Record Period") and a summary of significant accounting policies and other explanatory information (together, the "Historical Financial Information"). The Historical Financial Information set out on pages IIA-4 to IIA-66 forms an integral part of this report, which has been prepared for inclusion in the circular of Jiayuan International Group Limited (the "Company") dated 26 February 2021 (the "Circular") in connection with the proposed acquisition of Luyuan by the Company.

Directors' responsibility for the 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 presentation and preparation set out in Notes 1.3 and 2.1 to the Historical Financial Information, and for such internal control as the directors determine is necessary to enable the preparation of Historical Financial Information that is free from material misstatement, whether due to fraud or error.

The financial statements of the Combined Group for the Track Record Period ("Underlying Financial Statements"), on which the Historical Financial Information is based, were prepared by the directors of Luyuan. The directors of Luyuan are responsible for the preparation of the Underlying Financial Statements in accordance with the basis of

presentation and preparation set out therein which conform with Hong Kong Financial Reporting Standards ("HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants (the "HKICPA"), and for such internal control as the directors determine is necessary to enable the preparation of Underlying Financial Statements that are free from material misstatement, whether due to fraud or error.

Reporting accountant's 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, Accountant's Reports on Historical Financial Information in Investment Circulars issued by the HKICPA. This standard requires that we comply with ethical standards and plan and perform our work to obtain reasonable assurance about whether the Historical Financial Information is free from material misstatement.

Our work involved performing procedures to obtain evidence about the amounts and disclosures in the Historical Financial Information. The procedures selected depend on the reporting accountant's 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 accountant considers internal control relevant to the entity's preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of presentation and preparation set out in Notes 1.3 and 2.1 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 purposes of the accountant's report, a true and fair view of the financial position of Luyuan as at 31 December 2017, 2018 and 2019 and 30 September 2020 and the combined financial position of the Combined Group as at 31 December 2017, 2018 and 2019 and 30 September 2020 and of its combined financial performance and its combined cash flows for the Track Record Period in accordance with the basis of presentation and preparation set out in Notes 1.3 and 2.1 to the Historical Financial Information.

Review of stub period comparative financial information

We have reviewed the stub period comparative financial information of the Combined Group which comprises the combined statements of comprehensive income, the combined statements of changes in equity and the combined statements of cash flows for the nine months ended 30 September 2019 and other explanatory information (the "Stub Period Comparative Financial Information"). The directors of the Company are responsible for the presentation and preparation of the Stub Period Comparative Financial Information in accordance with the basis of presentation and preparation set out in Notes 1.3 and 2.1 to the Historical Financial Information. Our responsibility is to express a conclusion on the Stub Period Comparative 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 inquiries, 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 Comparative Financial Information, for the purposes of the accountant's report, is not prepared, in all material respects, in accordance with the basis of presentation and preparation set out in Notes 1.3 and 2.1 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 have been made.

PricewaterhouseCoopers

Certified Public Accountants Hong Kong

26 February 2021

I. HISTORICAL FINANCIAL INFORMATION

Preparation of Historical Financial Information

Set out below is the Historical Financial Information which forms an integral part of this accountant's report.

The Underlying Financial Statements, on which the Historical Financial Information is based, were audited by PricewaterhouseCoopers in accordance with Hong Kong Standards on Auditing issued by the HKICPA.

The Historical Financial Information is presented in Renminbi ("RMB") and all values are rounded to the nearest thousand ("RMB'000") except when otherwise indicated.

Combined statements of comprehensive income

Revenue Cost of salesGross profit Other income Other losses, net Net impairment

(losses)/reversal on financial assets Selling and marketing costs

Administrative expenses Finance costs

Profit/(loss) before taxation

Income tax credit/(expenses)

Profit/(loss) and total comprehensive income/(loss) for the year/periodProfit/(loss) and total comprehensive income/(loss) for the year/period attributable to: - Owners of Luyuan - Non-controlling interests

Year ended 31 DecemberNine months ended

30 September

Note

3(b)

8 10

9 9 11

7 9

2017 2018 2019	2019	2020
RMB'000 RMB'000 RMB'000	RMB'000	RMB'000
(Unaudited)
-	795,317
-	(502,678)
-	292,639
219	237
(91)	(2,867)
2,123	(16,405)
(856)	(3,679)
(1,893)	(15,437)
(1,616)	(716)
(2,114)	253,772
466	(118,297)
(1,648)	135,475
(1,648)	137,418
-	(1,943)
(1,648)	135,475

(3,437) (1,409)

- -

- 4 (1)

422 283 (49) (21)

(3,040) 2,078

(415) (566)

(12,899) (4,931)
- (7,746) (2,006)
(978)
(26,749) (6,006)

226

6,644

894

(752)

(20,105) (5,112)
(752)
(20,105) (5,112)

(752)

(20,105)

(5,112)

Combined statements of financial position

Note

2017

As at 31 December 2018

2019

As at 30 September 2020

RMB'000

Non-current assets Property and equipment Deferred tax assets

14 15

84 226 310

270 6,870 7,140

216 1,740

8,042 24,827

8,258 26,567

Current assets Inventories of properties Prepayments and other receivables Prepaid income tax Contract acquisition costs

Right to acquire land use rights Restricted bank deposits Cash and cash equivalents

16 17

195,769

Total assets

26(a)

18 18

379 - - - - 1,864 198,012 198,322

322,545 465,257 32,332

689

90,084

301

911,208

918,348

419,858 2,150,476

728,754 2,710,010

34,842

143,220

941

- - -

18,386 2,566

6,243 5,601

1,352,244 4,868,653

1,360,502 4,895,220

Current liabilities Trade and other payables Pre-sale deposits received

Current income tax liabilities

Bank and other borrowings

Net current assets/(liabilities)

Total assets less current liabilitiesNon-current liabilities Bank and other borrowingsEquity attributable to owners of

Luyuan

Combined capital (Accumulated losses)/retained earnings

Non-controlling interestsTotal equity (857)Total equity and non-current

liabilities (857)

Note

20 737,775

19 50,875

30 September
2017	2019	2020
RMB'000	RMB'000	RMB'000
179,074	93,781	900,175
-	852,469	18,783
-	-	97,086
-	25,812	1,314
179,074	972,062	1,017,358
18,938	380,182	3,851,295
19,248	388,440	3,877,862
-	249,000	900,000
20,000	20,000	2,176,452
(752)	(25,969)	111,449
19,248	(5,969)	2,287,901
-	145,409	689,961
19,248	139,440	2,977,862
19,248	388,440	3,877,862
- IIA-7 -

As at 31 December 2018

As at

RMB'000

130,555 919,205

(7,997)

(857)

20,000

(20,857)

(857)

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Jiayuan International Group Ltd. published this content on 26 February 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 February 2021 23:56:11 UTC.

Market Closed - Hong Kong S.E. Other stock markets 04:08:27 2023-03-31 EDT			5-day change	1st Jan Change
0.173 ^HKD	-2.81%		-.--%	-.--%

05-03	Jiayuan International Hires Legal, Financial Advisors to Assist on Debt Restructuring Plan	MT
04-30	PwC Resigns as Auditor of Jiayuan International	MT

Jiayuan International Hires Legal, Financial Advisors to Assist on Debt Restructuring Plan	05-03	MT
PwC Resigns as Auditor of Jiayuan International	04-30	MT
Jiayuan International Group Limited Announces Board and Committee Resignations	04-30	CI
Jiayuan International Group Limited Announces Further Delay in Publication of the 2022 Annual Results, 2023 Interim Results and 2023 Annual Results	04-11	CI
Jiayuan International Group Limited Announces Resignation of Lau Yee Wa as Joint Company Secretary	03-28	CI
Deutsche Bank to file liquidation suit against Chinese developer Shimao, sources say	03-01	RE
Jiayuan International Group Limited Announces Change of Principal Place of Business in Hong Kong	01-15	CI
Deloitte Touche Tohmatsu Appointed as Realtor Jiayuan's Liquidator	01-11	MT
Jiayuan International Group Limited(SEHK:2768) dropped from S&P Global BMI Index	23-09-18	CI
Five Hong Kong Firms to Be Removed From Hong Kong's Indexes	23-07-04	MT
Hong Kong Court Orders Winding Up of Jiayuan International	23-05-08	MT
Jiayuan International Logs 516.2 Million Yuan in March Contracted Sales	23-04-11	MT
Jiayuan International Group Limited Reports Sales Results for the Month and First Quarter Ended March 31, 2023	23-04-11	CI
Jiayuan International Logs 461 Million Yuan in February Contracted Sales	23-03-09	MT
Jiayuan International Delists 13.75% Bonds Due February 2023	23-02-22	MT
Jiayuan International's January Contracted Sales Plunge	23-02-16	MT
Jiayuan International Group Limited Reports Group Contracted Sales Results for the Period Results from 1 January 2023 to 31 January 2023	23-02-16	CI
Jiayuan International to Apply for Validation Order to Hong Kong High Court	23-01-11	MT
Jiayuan International Group Logs 895 Million Yuan in December Contracted Property Sales	23-01-10	MT
Jiayuan International Group Limited Reports Group Contracted Sales for the Month and Twelve Months Ended December 31, 2022	23-01-10	CI
Hearing of Winding Up Petition Against Jiayuan Adjourned to March	23-01-04	MT
Jiayuan International Records Over 800 Million Yuan November Contracted Sales	22-12-09	MT
Jiayuan International Group Limited Announces Sales Results for the Month and Eleventh Months Ended November 30, 2022	22-12-09	CI
Jiayuan International Logs $132 Million in October Contracted Sales	22-11-09	MT
Jiayuan International Group Limited Reports Unaudited Group Sales Results for the Month and Ten Months Ended 31 October 2022	22-11-09	CI

	1st Jan change	Capi.
JIAYUAN INTERNATIONAL GROUP LIMITED	-.--%	152M
MITSUI FUDOSAN CO., LTD.	+34.25%	28.37B
SUN HUNG KAI PROPERTIES LIMITED	-11.96%	27.34B
CHINA RESOURCES LAND LIMITED	+6.96%	26.59B
DLF LIMITED	+15.21%	25.28B
MITSUBISHI ESTATE CO., LTD.	+48.22%	23.37B
CHINA OVERSEAS LAND & INVESTMENT LTD.	+6.98%	20.39B
EMAAR PROPERTIES	+2.27%	19.71B
SUMITOMO REALTY & DEVELOPMENT CO., LTD.	+28.49%	16.22B
CK ASSET HOLDINGS LIMITED	-13.52%	15.11B

Jiayuan International Group Limited

Equities

2768

KYG5139G1001

Real Estate Development & Operations

Jiayuan International : MAJOR AND CONNECTED TRANSACTION ACQUISITION OF THE TARGET GROUP HOLDING PROPERTY DEVELOPMENT PROJECTS LOCATED IN SHANDONG PROVINCE INVOLVING THE ISSUE OF CONSIDERATION SHARES AND CONVERTIBLE BONDS UNDER SPECIFIC MANDATE

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