HSIN CHONG GROUP HOLDINGS LIMITED

Transcription

1 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 Hsin Chong Group Holdings Limited (the Company ), you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or to the bank manager, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee. Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular. HSIN CHONG GROUP HOLDINGS LIMITED (Incorporated in Bermuda with limited liability) (Stock Code: 00404) (1) CONNECTED TRANSACTION IN RELATION TO THE SUBSCRIPTION FOR THE ZERO COUPON CONVERTIBLE BONDS UNDER SPECIFIC MANDATE; (2) SPECIFIC MANDATE FOR THE ISSUE OF SHARES UNDER THE US$100 MILLION 6% CONVERTIBLE BONDS DUE 2017; AND (3) NOTICE OF SPECIAL GENERAL MEETING Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders A letter from the board of directors of the Company is set out on pages 6 to 19 of this circular. A letter from an independent committee of the board of the Company (the Independent Board Committee ) issetoutonpage20ofthiscircular.a letter from Altus Capital, the independent financial adviser to the Independent Board Committee and the independent shareholders of the Company is set out on pages 21 to 37 of this circular. A notice convening a special general meeting (the SGM ) of the Company to be held at 2nd Floor, Hsin Chong Center, Wai Yip Street, Kwun Tong, Hong Kong on Thursday, 19 May 2016 at 11:15 a.m. or immediately after the conclusion or adjournment of the annual general meeting of the Company to be held on Thursday, 19 May 2016 (whichever is the later) is set out on pages 49 to 50 of this circular. A form of proxy for use at the SGM is also enclosed with this circular. Whether or not you are able to attend the SGM, you are requested to complete and return the enclosed proxy form in accordance with the instructions printed thereon to the office of the Hong Kong branch share registrar and transfer office of the Company, Computershare Hong Kong Investor Services Limited at Level 22, Hopewell Centre, 183 Queen s RoadEast, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the SGM or any adjourned meeting thereof. Completion and return of the form of proxy shall not preclude you from attending and voting in person at the SGM or any adjourned meeting thereof should you so desire, and in such case, the form of proxy previously submitted by such member(s) shall be deemed to be revoked. 3 May 2016

2 CONTENTS Page Definitions... 1 Letter from the Board... 6 Letter from the Independent Board Committee Letter from Altus Capital Appendix I Principal Terms of the 6% Convertible Bonds Appendix II General Information Notice of SGM i

3 DEFINITIONS In this circular, unless the context otherwise requires, the following expressions shall have the following meanings: Alternative Stock Exchange Altus Capital associate Board at any time the Shares are not listed and traded on the Stock Exchange, the principal stock exchange or securities market on which the Shares are then listed or quoted or dealt in Altus Capital Limited, a licensed corporation permitted to carry out type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO, being the independent financial adviser appointed to advise the Independent Board Committee and the Independent Shareholders in relation to the Subscription Deed and the transactions contemplated thereunder, including the issue of Zero Coupon Convertible Bonds and the specific mandate for the allotment and issue of the Conversion SharesuponconversionoftheZeroCouponConvertible Bonds has the meaning ascribed to it under the Listing Rules the board of Directors Bondholder(s) holder(s) of Zero Coupon Convertible Bonds or the 6% Convertible Bonds (as the case may be) Business Day close associate a day (excluding a Saturday, Sunday or public holiday) on which license banks generally are open for business in Hong Kong throughout their normal business hour has the meaning ascribed to it under the Listing Rules Company Hsin Chong Group Holdings Limited, a company incorporated in Bermuda with limited liability and the issued Shares of which are listed on the Stock Exchange Completion Completion Date Conditions connected person completion of the Subscription the date when Completion shall take place, which shall be within three Business Days after the satisfaction of the Conditions the conditions precedent to Completion set out under the section headed Conditions of the Subscription of this circular, and each a Condition has the meaning ascribed to it under the Listing Rules 1

4 DEFINITIONS controlling shareholder(s) has the meaning ascribed to it under the Listing Rules Conversion Ratio the principal amount of each 6% Convertible Bonds divided by the conversion price then in effect immediately prior to the date upon which the optional redemption notice is given Conversion Shares the new Shares to be allotted and issued upon the exercise of the conversion rights attached to the Zero Coupon Convertible Bonds or the 6% Convertible Bonds (as the case may be) ConvertiblePreferenceShare(s) Director(s) Fixed Exchange Rate General Mandate Group Hong Kong Independent Board Committee Independent Shareholder(s) the restricted voting convertible preference share(s) of par value of HK$0.10 each in the share capital of the Company director(s) of the Company a fixed exchange rate of HK$ to US$1.00 the general mandate granted to the Directors at the annual general meeting of the Company held on 22 May 2015 to allot, issue and deal with additional Shares not exceeding twenty per cent. (20%) of the aggregate nominal amount of the share capital of the Company in issue at the date of the meeting the Company and its subsidiaries the Hong Kong Special Administrative Region of the People s Republic of China an independent committee of the Board, comprising the independent non-executive Directors, to advise the Independent Shareholders as to the fairness and reasonableness of the Subscription Deed and the transactions contemplated thereunder, including the issue of Zero Coupon Convertible Bonds and the specific mandate for the allotment and issue of the Conversion SharesuponconversionoftheZeroCouponConvertible Bonds, the voting at the SGM and whether the Subscription Deed and the transactions contemplated thereunder, including the issue of Zero Coupon Convertible Bonds and the specific mandate for the allotment and issue of the Conversion Shares upon conversion of the Zero Coupon Convertible Bonds are in the interests of the Company and the Shareholders as a whole Shareholder(s) other than those who are required under the Listing Rules to abstain from voting at the SGM 2

5 DEFINITIONS Last Trading Day Latest Practicable Date Listing Rules Long Stop Date 18 January 2016, being the last trading day of the Shares on the Stock Exchange prior to the publication of the announcement of the Company dated 18 January April 2016, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular the Rules Governing the Listing of Securities on the Stock Exchange 31 May 2016 or any other date to be agreed by the Subscriber and the Company in writing Prevailing Exchange Rate means the latest available noon buying rate for the purchase of U.S. dollars with Hong Kong dollars as set forth in the H.10 weekly statistical release of the Federal Reserve Board on the Reset Date Registration Date the date on which the person or person(s) is registered as the holder(s) of the number of Shares on the Company s register of shareholders Relevant Indebtedness is to any indebtedness that is in the form of, or represented or evidenced by, bonds, notes, loan stock, certificates of deposit or other similar securities or instruments which for the time being are, or are capable of being, quoted, listed, dealt in or traded on any stock exchange or over-the-counter or other securities market and for the avoidance of doubt, shall not include indebtedness under any secured transferable loan facility Reset Date Reset Price SFO 24 May 2016, on which date the conversion price of the 6% Convertible Bonds may be reset in accordance with the terms of the 6% Convertible Bonds HK$0.70 per Share Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) SGM the special general meeting of the Company to be convened and held on 19 May 2016 to consider and, if thought fit, to approve, among other matters, (i) the Subscription Deed and the transactions contemplated thereunder, including the issue of Zero Coupon Convertible Bonds and the specific mandate for the allotment and issue of Conversion Shares upon conversion of the Zero Coupon Convertible Bonds, and (ii) the specific mandate for the allotment and issue of Conversion Shares upon conversion of the 6% Convertible Bonds 3

6 DEFINITIONS Share(s) Shareholder(s) Stock Exchange Subscriber Subscription ordinary share(s) of HK$0.10 each in the share capital of the Company holder(s)ofshare(s) The Stock Exchange of Hong Kong Limited Dr. WONG Ying Wai, currently a senior adviser to the Board, and was an executive Director within 12 months from the date of the announcement of the Company dated 18 January 2016 and the Subscriber under the Subscription Deed the subscription by the Subscriber for the Zero Coupon Convertible Bonds pursuant to the Subscription Deed Subscription Deed the conditional subscription deed dated 18 January 2016 entered into between the Company and the Subscriber relating to the Subscription Subsidiary(ies) substantial shareholder Trading Day(s) any company or other business entity of which a person owns or controls (either directly or through one or more other Subsidiaries) more than 50% of the issued share capital or other ownership interest having ordinary voting power to elect directors, managers or trustees of such company or other business entity or any company or other business entity which at any time has its accounts consolidated with those of that person or which, under the law, regulations or generally accepted accounting principles of Hong Kong from time to time, should have its accounts consolidated with those of that person has the same meaning ascribed to it under the Listing Rules a day when the Stock Exchange or, as the case may be, an Alternative Stock Exchange is open for dealing business,providedthatifnoclosingpriceisreportedin respectoftherelevantsharesonthestockexchangeor, as the case may be, the Alternative Stock Exchange for one or more consecutive dealing days such day or days will be disregarded in any relevant calculation and shall be deemed not to have existed when ascertaining any period of dealing days Zero Coupon Convertible Bonds the zero coupon convertible bonds in the aggregate principal amount of HK$34,000,000 to be issued by the Company to the Subscriber pursuant to the Subscription Deed HK$ Hong Kong dollars, the lawful currency of Hong Kong 4

7 DEFINITIONS US$ United States dollars, the lawful currency of the United States of America 6% Convertible Bonds 6% convertible bonds due 2017 in the aggregate principal amount of US$100 million issued by the Company on 20 November 2015 and currently listed on the Stock Exchange % per cent. 5

8 LETTER FROM THE BOARD HSIN CHONG GROUP HOLDINGS LIMITED (Incorporated in Bermuda with limited liability) (Stock Code: 00404) Executive Directors: Ir. Joseph CHOI Kin Hung (Chief Executive Officer) Mr. LUI Chun Pong (Chief Financial Officer) Mr. Wilfred WU Shek Chun (Director of Mergers and Acquisitions) Mr. ZHOU Wei Non-executive Directors: Mr. LIN Zhuo Yan (Non-executive Chairman) Mr. YAN Jie Mr. CHEN Lei Mr. CHUI Kwong Kau Independent Non-executive Directors: Mr. CHENG Sui Sang Mr. GAO Jingyuan Ms. LEE Jai Ying Mr. KWOK, Shiu Keung Ernest Registered office: Clarendon House 2ChurchStreet Hamilton HM 11 Bermuda Principal place of business in Hong Kong: Hsin Chong Center Wai Yip Street Kwun Tong Kowloon Hong Kong 3 May 2016 To the Shareholders DearSirorMadam, (1) CONNECTED TRANSACTION IN RELATION TO THE SUBSCRIPTION FOR THE ZERO COUPON CONVERTIBLE BONDS UNDER SPECIFIC MANDATE; (2) SPECIFIC MANDATE FOR THE ISSUE OF SHARES UNDER THE US$100 MILLION 6% CONVERTIBLE BONDS DUE 2017; AND (3) NOTICE OF SPECIAL GENERAL MEETING 1. INTRODUCTION Reference is made to the announcement dated 18 January 2016 regarding the Subscription of the Zero Coupon Convertible Bonds. On 18 January 2016 (after trading hours of the Stock Exchange), the Company entered into the Subscription Deed with the Subscriber, pursuant to which the Company has conditionally agreed to issue, and the Subscriber has conditionally agreed to subscribe for, the Zero Coupon Convertible Bonds in the aggregate principal amount of HK$34,000,000. 6

9 LETTER FROM THE BOARD Reference is also made to the announcements of the Company dated 29 March 2016 and 29 April 2016 in relation to the amendment of a term of the Zero Coupon Convertible Bonds and the extension of the Long Stop Date. The Company and the Subscriber agreed to amend a term of the Zero Coupon Convertible Bonds such that the maturity of the Zero Coupon ConvertibleBondswillbethedatefallingonthe 18th month of the date of issue of the Zero Coupon Convertible Bonds. The amendment is due to the delay in the Completion and the Company and the Subscriber agreed to shorten the maturity period of the Zero Coupon ConvertibleBonds.TheCompanyandtheSubscriberagreedtoextendtheLongStopDateto 31 May 2016 or such other date as may be agreed by the Company and the Subscriber in writing. Reference is made to the announcements of the Company dated 4 November 2015 and 20 November 2015 in respect of the issue of the 6% Convertible Bonds and the announcement dated 29 April 2016 in respect of the issue and allotment of Conversion Shares under the 6% Convertible Bonds under a specific mandate to be sought at the SGM. As at the Latest Practicable Date, the outstanding principal amount of the 6% Convertible Bonds was US$100 million and the conversion price was HK$1.00 per Share. Such conversion price may be reset to a price not lower than 70% of the conversion price as at the reset date of 24 May 2016 by reference to the then prevailing market price (being, broadly speaking, the average closing price of the Shares for 20 consecutive trading days) determined in accordance with the terms of the 6% Convertible Bonds. In order to afford the Company greater flexibility in deploying its cash resources (instead of having to apply them towards payment to any converting Bondholder after the maximum number of Shares under the General Mandate have been issued in full as a result of conversion of the Convertible Bonds), the Company proposes to seek a specific mandate from Shareholders at the SGM for the issue of Conversion Shares under the 6% Convertible Bonds generally instead of relying on the 2015 General Mandate. The purpose of this circular is to provide you with the information relating to, amongst others, (i) further details of the Subscription Deed in respect of the Subscription and the transactions contemplated thereunder; (ii) the recommendation from the Independent Board Committee to the Independent Shareholders on the Subscription; (iii) the advice from Altus Capital to the Independent Board Committee and the Independent Shareholders in respect of the Subscription; (iv) further details of the specific mandate for issue of Conversion Shares under the 6% Convertible Bonds; and (v) the notice of SGM, at which the resolutions will be proposed to the Shareholders (including the Independent Shareholders) to consider and, if thought fit, approve, among other things, (1) (a) the Subscription Deed and the transactions contemplated thereunder; and (b) the specific mandates for the allotment and issue of the Conversion Shares upon conversion of the Zero Coupon Convertible Bonds Convertible Bonds; and (2) the specific mandate for the allotment and issue of the Conversion Shares upon conversion of the 6% Convertible Bond. 2. THE SUBSCRIPTION OF THE ZERO COUPON CONVERTIBLE BONDS On 18 January 2016 (after trading hours of the Stock Exchange), the Company entered into the Subscription Deed with the Subscriber. Details of the Subscription Deed and the principal terms of the Zero Coupon Convertible Bonds are set out below. THE SUBSCRIPTION DEED Date: 18 January 2016 (after trading hours of the Stock Exchange) Parties: (i) the Subscriber; and (ii) the Company. 7

10 LETTER FROM THE BOARD Information on the Subscriber Details of the Subscriber s position held and the period of service with the Company are set out as follows: Position Executive director and deputy chairman of the Board Executive director, chairman of the Board and chief executive officer of the Company Executive director, executive chairman of the Board and chief executive officer of the Company Senior adviser to the Board Period of service December 2007 July 2012 July 2012 June 2015 June 2015 November 2015 November 2015 current The Subscriber was a director of the Company within the 12 months from the date of the announcement dated 18 January 2016 in relation to the subscription of the Zero Coupon Convertible Bonds and hence a connected person of the Company. As at the Latest Practicable Date, the Subscriber is interested in 1,492,858,789 Shares (including 26,000,000 Shares held by the Subscriber, 991,041,796 Shares held by Summit View Holdings Limited and 475,816,993 Shares held by Neo Summit Limited), representing approximately 27.65% of the total issued share capital of the Company. Summit View Holdings Limited is owned as to 50% by the Subscriber and Neo Summit Limited is owned as to 28.89% by Pinnacle State Real Estate Limited, as to 13.33% by Summit View Holdings Limited, as to 28.89% by Jones Capital Investments Limited and as to 28.89% by Becl World Holding Ltd. Pinnacle State Real Estate Limited is indirectly wholly-owned by the Subscriber. Subscription Pursuant to the Subscription Deed, the Company conditionally agreed to issue, and the Subscriber conditionally agreed to subscribe, for the Zero Coupon Convertible Bonds in the aggregate principal amount of HK$34,000,000, which may be converted into 34,000,000 Conversion Shares based on the initial conversion price of HK$1.00 upon full conversion. Subject to the fulfilment of the conditions precedent, the Zero Coupon Convertible Bonds will be issued to the Subscriber in consideration of the performance by the Subscriber of his duties as the executive chairman and chief executive officer of the Company for the period from 1 January 2015 to 31 October 2015 and as a performance bonus to the Subscriber. 8

11 LETTER FROM THE BOARD Terms of the Zero Coupon Convertible Bonds Interest Maturity The Zero Coupon Convertible Bonds shall not bear any interest. The maturity of the Zero Coupon Convertible Bonds will be on the date falling on the 18th month of the date of issue of the Zero Coupon Convertible Bonds. Unless previously redeemed, converted or purchased and cancelled, the Company shall redeem each Zero Coupon Convertible Bonds which remains outstanding by 4:00 p.m. on the maturity date at 100% of the principal amount of such outstanding Zero Coupon Convertible Bonds. Early redemption The Company shall be entitled at its sole discretion, by giving not less than ten days prior written notice to the Bondholders, propose to the Bondholders to redeem the outstanding Zero Coupon Convertible Bonds at 100% of the principal amount of such outstanding Zero Coupon Convertible Bonds at any time before the maturity date. The Company has no intention to exercise its right to redeem the outstanding Zero Coupon Convertible Bonds before the maturity date as at the Latest Practicable Date. Status of the Zero Coupon Convertible Bonds The Zero Coupon Convertible Bonds constitute direct, unconditional, unsubordinated and unsecured obligations of the Company and shall at all times rank pari passu and without any preference among themselves. The payment obligations of the Company under the Zero Coupon Convertible Bonds shall, save for such exceptions as may be provided by applicable legislation, at all times rank at least equally with all its other present and future unsecured and unsubordinated obligations. No application will be made for the listing of the Zero Coupon Convertible Bonds on the Stock Exchange or any stock or securities exchange. Number of Conversion Shares issuable and Conversion Rights As at the Latest Practicable Date, there were 5,398,445,158 Shares in issue and upon full conversion of the Zero Coupon Convertible Bonds, the 34,000,000 Conversion Shares represent: (i) approximately % of the issued share capital of the Company as at the Latest Practicable Date; and (ii) approximately % of the issued share capital of the Company as enlarged by the issue of the Conversion Shares (assuming that there is no change in the issued share capital of the Company other than the issue of the Conversion Shares between the Latest Practicable Date up to the full conversion of the Zero Coupon Convertible Bonds). The Bondholder may convert the whole or part (in multiple of HK$1,000,000) of the principal amount of the Zero Coupon Convertible Bonds into the Conversion Shares at the initial conversion price for the period commencing from the date of issue of the Zero Coupon Convertible Bonds up to the maturity date. 9

12 LETTER FROM THE BOARD Ranking of the Conversion Shares The Conversion Shares shall rank pari passu in all respects with the Shares in issue on the date of allotment and issue of such Conversion Shares. Conversion period The Bondholder will have the right to convert the whole or part of the principal amount of the Zero Coupon Convertible Bonds into Conversion Shares from the date of the issue of the Zero Coupon Convertible Bonds up to the maturity date (being the date falling on the 18th month of the date of issue) in amounts of not less than a whole multiple of HK$1,000,000 on each conversion (or if the outstanding principal amount of the Zero Coupon Convertible Bonds is less than HK$1,000,000 on such conversion, the whole of such outstanding principal amount of the Zero Coupon Convertible Bonds). Conversion Price The price at which Conversion Shares will be issued upon exercise of the conversion rights attached to the Zero Coupon Convertible Bonds will be HK$1.00 per Conversion Share. The initial conversion price represents: (i) (ii) (iii) a premium of approximately 35.14% over the closing price of HK$0.74 per Share as quoted on the Stock Exchange on the Last Trading Day; a premium of approximately 33.33% over the average closing price of HK$0.75 per Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Day; and a premium of approximately 23.46% over the closing price of HK$0.81 per Share as quoted on the Stock Exchange on the Latest Practicable Date. The initial conversion price of the Zero Coupon Convertible Bonds was determined after arm s length negotiations between the Company and the Subscriber (i) with reference to the initial conversion price of HK$1.00 of the 6% Convertible Bonds; (ii) having regard to the prevailing market price of the Shares prior to the date of the Subscription Deed and the initial conversion price represented a premium of approximately 35.14% over the closing price of HK$0.74 per Share as quoted on the Stock Exchange on the Last Trading Day, which the Directors considered that the conversion price to be fair and reasonable and in the interest of the Company and the Shareholders as a whole; and (iii) having regard to the business performance of the Group under the prevailing market conditions and both the Company and the Subscriber are confident and optimistic about the future prospect of the Group. Adjustment events The conversion price shall from time to time be subject to adjustment upon occurrence of certain events: (i) (ii) (iii) consolidation or subdivision of the Shares; capitalisation of profits or reserves; capital distribution; 10

13 LETTER FROM THE BOARD (iv) (v) (vi) offer of Shares for subscription by way of rights, or a grant of options or warrants to subscribe for Shares, at a price which is less than 80% of the market price per Share to the Shareholders; issue wholly for cash of securities convertible into or exchangeable for or carrying rights of subscription for Shares, if in any case the total effective consideration per Share receivable is less than 80% of the market price, or the conversion, exchange or subscription rights of any such issue are altered so that the said total effective consideration receivable is less than 80% of such market price; and issue of Shares being made wholly for cash at a price less than 80% of the market price per Share. Voting rights The Bondholder shall not be entitled to attend or vote at any general meetings of the Shareholders by reason only it being the Bondholder. Transferability The Zero Coupon Convertible Bonds are transferable in whole or in part in whole multiples of HK$1,000,000 (or such lesser amount as may represent the entire principal amount thereof) and the Company shall facilitate any such transfer of the Zero Coupon Convertible Bonds. Form and denomination The Zero Coupon Convertible Bonds will be issued in registered form in the denomination of HK$1,000,000 each. Conditions of the Subscription Completion is conditional upon each of the following conditions being satisfied or, if applicable, waived: (i) the Listing Committee of the Stock Exchange having granted (either unconditionally or subject only to conditions to which the Company and the Subscriber have no reasonable objection) listing of and permission to deal in the Conversion Shares; (ii) (iii) (iv) the Independent Shareholders having approved the Subscription Deed and the transactions contemplated thereunder, including the issue of the Zero Coupon Convertible Bonds and the allotment and issue of the Conversion Shares upon the exercise of the conversion rights attached to the Zero Coupon Convertible Bonds or otherwise at the SGM; all necessary consents and approvals required to be obtained on the part of the Company in respect of the Subscription Deed and the transactions contemplated thereunder having been obtained; and all necessary consents and approvals required to be obtained on the part of the Subscriber in respect of the Subscription Deed and the transactions contemplated thereunder having been obtained. 11

14 LETTER FROM THE BOARD All the above Conditions are incapable of being waived. In the event that any of the Conditions have not been satisfied by the Long Stop Date, the Subscription Deed will lapse and the parties thereto will be released from all obligations thereunder, save for liabilities for any antecedent breaches of the Subscription Deed. Completion of the Subscription Completion shall take place within three Business Days after the satisfaction of the ConditionsoratsuchotherdatetobeagreedbetweentheSubscriberandtheCompany. Application for listing Application will be made by the Company to the Listing Committee for the listing of, and permission to deal in, the Conversion Shares to be allotted and issued under the Zero Coupon Convertible Bonds. Reasons for the Subscription The Company is an investment holding company. The principal activities of the Company s subsidiaries are building construction, civil engineering, electrical and mechanical installation, interiors and special projects, property development and investment, provision of property management and facility management services. The provision of property management and facility management services and interiors and special projects are undertaken by Synergis Holdings Limited, a non-wholly owned subsidiary whose shares are listed on the main board of the Stock Exchange. In consideration of the performance by the Subscriber of his duties as an executive Director, the executive chairman and chief executive officer of the Company for the period from 1 January 2015 to 31 October 2015 and as a performance bonus to the Subscriber, the Company shall issue the Zero Coupon Convertible Bonds to the Subscriber at Completion. During the period from 1 January 2015 to 31 October 2015 (the Service Period ), the Subscriber was an executive Director, chairman of the Board and chief executive officer of the Company and he was entitled to a monthly salary of HK$832,390 and a rental allowance of HK$340,000 per month on a reimbursement basis. Pursuant to the respective written resolutions of the remuneration committee of the Company and the Board dated 11 September 2015, it was approved that a performance bonus for the Service Period in the total amount of HK$44,590,000 be granted to the Subscriber, such performance bonus was the entitlement of the Subscriber under his service agreement with the Company. It was further approved that the performance bonus would be settled by the Company as to HK$34,000,000 by way of issue of the Zero Coupon Convertible Bonds and as to HK$10,590,000 by cash, so as to minimise the effect of the performance bonus on the cash flow of the Group. As at the Latest Practicable Date, the Subscriber has already received from the Company the performance bonus of HK$10,590,000 in cash. Under the service agreement of the Subscriber with the Company, it was agreed between the Company and the Subscriber that the Subscriber would be entitled in respect of each financial year (i.e. from 1 January to 31 December) of the Company and during the continuance of the term of his employment with the Company to a performance bonus. The performance bonus payable to the Subscriber for each relevant financial year should be calculated based on the total amount of the audited consolidated net profit 12

15 LETTER FROM THE BOARD after tax as set out in the audited consolidated accounts of the Group for the relevant financial year and certain bonus rate ranging from 1.75% to 2.50% as a result of the Group achieving such amount of net profit after tax. If the employment of the Subscriber with the Company is terminated during any relevant financial year, the Subscriber should be entitled to the performance bonus calculated up to the date of cessation of his employment with the Company and such performance bonus should be calculated based on the total amount of the consolidated netprofitaftertaxassetoutintheunaudited consolidated accounts of the Group as at thedateonwhichtheemploymentofthesubscriberwiththecompanyisterminated. As the Company published the unaudited interim results for the six months ended 30 June 2015 on 19 August 2015 and there was a remarkable improvement in the net profit after tax in the unaudited interim results for the six months ended 30 June 2015 as compared to that for the corresponding period last year, the Subscriber agreed to adopt the net profit after tax in the unaudited interim results for the six months ended 30 June 2015 as the basis for calculation of his performance bonus for the Service Period. On 11 September 2015, the remuneration committee ofthecompanyapprovedtheperformance bonus of the Subscriber based on the total amount of the consolidated net profit after tax in the unaudited interim results for the six months ended 30 June The Subscriber would not be entitled to any other performance bonus for the financial year ended 31 December The Board considered that the issue of the Zero Coupon Convertible Bonds to be a suitable means of payment of performance bonus to the Subscriber compared with other means (i.e. share options, share awards etc.) as the Company has no intention to adopt any share awards scheme and the Subscriber would have to pay the Company for exercising any share options granted to the Subscriber, and such means of performance bonus was not the intention of both the Company and the Subscriber. The Company has no plan to further issue any convertible bonds or other kinds of securities to the Subscriber as part of his remuneration or performance bonus. The performance bonus was approved by the remuneration committee of the Company and the Board on 11 September 2015 but the Subscription Deed was entered into between the Company and the Subscriber on 18 January 2016 due to (i) the lock up period of 30 days from the completion date (i.e. 20 November 2015) under the 6% Convertible Bonds issued by the Company to China Merchants Securities (HK) Co., Limited on 20 November 2015 and the Company could only issue the Zero Coupon Convertible Bonds after the lock up period; and (ii) discussion of the detailed terms of the Zero Coupon Convertible Bonds with the Subscriber and negotiation with the legal advisers of the Subscriber with respect to the detailed terms of the Zero Coupon Convertible Bonds. Based on the above, the Directors (including the independent non-executive Directors) consider that the terms and conditions of the Subscription Deed as well as the terms of the Zero Coupon Convertible Bonds are fair and reasonable, on normal commercial terms, and in the interests of the Group and the Shareholders as a whole. Listing Rules implication As the Subscriber was an executive Director within 12 months from the date of the announcement of the Company dated 18 January 2016, the Subscriber is a connected person of the Company. Accordingly, the Subscription constitutes a connected transaction on the part of the Company under the Listing Rules. 13

16 LETTER FROM THE BOARD 3. SPECIFIC MANDATE IN RESPECT OF CONVERSION SHARES TO BE ISSUED AND ALLOTED UNDER 6% CONVERTIBLE BONDS Reference is made to the announcement of the Company dated 4 November 2015 and 20 November 2015 in respect of the issue of the 6% Convertible Bonds under the General Mandate and the announcement dated 29 April 2016 in respect of the issue and allotment of Conversion Shares under the 6% Convertible Bonds under a specific mandate to be sought at the SGM. Principal terms of the 6% Convertible Bonds are set out in Appendix I to this circular for ease of reference. As at the Latest Practicable Date, the outstanding principal amount of the 6% Convertible Bonds was US$100 million and the conversion price was HK$1.00 per Share. Such conversion price may be reset to a price not lower than 70% of the conversion price as at the reset date of 24 May 2016, by reference to the then prevailing market price (being, broadly speaking, the average closing price of the Shares for 20 consecutive trading days) determined in accordance with the terms of the 6% Convertible Bonds. As the conversion price stands at HK$1.00 per Share as at the Latest Practicable Date, accordingly the lowest reset price is HK$0.70 per Share, in the absence of any adjustments event occurring on or before 24 May Assuming that the conversion price is reset to the Reset Price, the maximum number of Shares that may fall to be issued upon full conversion of all the US$100 million principal amount of 6% Convertible Bonds at that price would be 1,107,171,428 Conversion Shares, representing approximately 20.51% of the total number of Shares currently in issue and approximately 17.02% of the number of Shares enlarged by the issue of the new Shares upon full conversion of the 6% Convertible Bonds. However, the General Mandate committed for the purposes of the issue of the 6% Convertible Bonds allows the issue only of a maximum of 1,037,715,330 Conversion Shares. The Company also has the Cash Settlement Option (as detailed in Appendix I to this circular) to pay cash to a converting Bondholder if it is unable to deliver Shares on conversion without contravening the applicable laws of Bermuda or the Listing Rules. Reasons for and benefits of seeking the specific mandate in respect of the 6% Convertible Bonds In order to afford the Company greater flexibility in deploying its cash resources (instead of having to apply them towards payment to any converting Bondholder after the maximum number of Shares under the General Mandate have been issued in full as a result of conversion of the 6% Convertible Bonds), the Company proposes to seek a specific mandate from Shareholders at the SGM for the issue of Conversion Shares under the 6% Convertible Bonds generally instead of relying on the General Mandate. If such specific mandate was voted down by Shareholders at the SGM, the Conversion Shares to be issued under the 6% Convertible Bonds will be issued by the Company under the General Mandate to the extent that the number of Conversion Shares is within the General Mandate limit. For any additional Conversion Shares that are in excess of the General Mandate limit, the Company will exercise the Cash Settlement Option to settle its obligations under the 6% Convertible Bonds in cash. Net price of the Conversion Share Assuming the conversion price is to be reset to the Reset Price on the Reset Date, thenetpriceofeachsharethatmayfalltobeissuedunderthe6%convertiblebondsat the Reset Price is expected to be approximately HK$0.68 (being the net proceeds of the 6% Convertible Bonds divided by the total number of 1,107,171,428 Conversion Shares to be issued upon conversion of the 6% Convertible Bonds at the Reset Price). 14

17 LETTER FROM THE BOARD Comparison of the conversion price and the Reset Price The initial conversion price of the 6% Convertible Bonds (subject to adjustment) of HK$1.00 per Share represents: (a) (b) (c) approximately 23.46% premium over the closing price of the Shares as quoted on the Stock Exchange on the Latest Practicable Date; approximately 21.36% premium over the five-day average closing price of the Shares over the five consecutive trading days up to and including the Latest Practicable Date; approximately 22.70% premium over the ten-day average closing price of the Shares over the ten consecutive trading days up to and including the Latest Practicable Date. The Reset Price of HK$0.70 per Share represents: (a) (b) (c) approximately 13.58% discount over the closing price of the Shares as quoted on the Stock Exchange on the Latest Practicable Date; approximately 15.05% discount over the five-day average closing price of the Shares over the five consecutive trading days up to and including the Latest Practicable Date; approximately 14.11% discount over the ten-day average closing price of the Shares over the ten consecutive trading days up to and including the Latest Practicable Date. Use of proceeds The net proceeds of the issue of the 6% Convertible Bonds, after deduction of estimated expenses payable in connection with issue of the 6% Convertible Bonds, amounted to approximately US$97 million. The Company intended to use these proceeds for refinancing the Group s debts and provision of working capital for its general corporate purposes. As at the Latest Practicable Date, approximately 73% and 27% of the net proceeds has been utilised as repayment of borrowings from other party and provision of working capital of the Company, respectively. Listing approval In view of the specific mandate with respect to the 6% Convertible Bonds being sought from the Shareholders, the Company will apply for a fresh approval for the listing of, and permission to deal in the Shares that may fall to be issued on conversion of the 6% Convertible Bonds pursuant to that specific mandate. Upon the grant of the fresh approval, the original listing permission granted by the Stock Exchange in respect of the 775,020,000 Conversion Shares (assuming full conversion of the 6% Convertible Bonds at the initial conversion price of HK$1.00 per Share) will cease to have any effect. 15

18 LETTER FROM THE BOARD 4. EFFECTS ON THE SHAREHOLDING STRUCTURE OF THE COMPANY Set out in the table below is the shareholding structure of the Company (i) as at the Latest Practicable Date; (ii) immediately after conversion in full of the Zero Coupon Convertible Bonds; (iii) immediately after the issue of Conversion Shares upon full conversion of the 6% Convertible Bonds at the current conversion price of HK$1.00 per Share; (iv) immediately after the issue of the 1,107,171,428 Conversion Shares upon full conversion of the 6% Convertible Bonds at the Reset Price of HK$0.70 per Share, being the lowest price to which the conversion price may be reset on 24 May 2016 under the terms of the 6% Convertible Bonds; (v) immediately after issue of the 1,037,715,330 Conversion Shares upon full conversion of the 6% Convertible Bonds (being the maximum number of Shares issuable under the General Mandate) at the Reset Price of HK$0.70 per Share should the specific mandate in respect of the 6% Convertible Bonds be voted down by Shareholders at the SGM; and (vi) Immediately after issue of the 34,000,000 Conversion Shares upon full conversion of the Zero Coupon Convertible Bonds and the 1,107,171,428 Conversion Shares upon full conversion of the 6% Convertible Bonds at the Reset Price of HK$0.70 per Share (assuming the grant of the specific mandates in respect of the Zero Coupon Convertible Bonds and the 6% Convertible Bonds (except for Scenario B3) and there being no other change to the share capital and shareholding structure of the Company): Scenario B3: Immediately after issue of the 1,037,715,330 Conversion Shares upon full conversion of the 6% Convertible Bonds Scenario C: Immediately after issue of the 34,000,000 Conversion (being the maximum number Shares upon full conversion Scenario A: Upon immediately Scenario B1: Immediately after issue of 775,020,000 Conversion Shares upon full conversion Scenario B2: Immediately after issue of the 1,107,171,428 Conversion Shares upon full conversion of Shares issuable under the General Mandate) at the Reset Price of HK$0.70 per Share should the CB of the Zero Coupon Convertible Bonds and the 1,107,171,428 Conversion Shares upon full conversion conversion in full of the of the 6% Convertible Bonds of the 6% Convertible Bonds Specific Mandate be voted of the 6% Convertible Bonds As at the Latest Practicable Date Zero Coupon Convertible Bonds at the current conversion price of HK$1.0 per Share at the Reset Price of HK$0.70 per Share down by Shareholders at the SGM at the Reset Price of HK$0.70 per Share Shares Appr. % Shares Appr. % Shares Appr. % Shares Appr. % Shares Appr. % Shares Appr. % Dr. WONG Ying Wai (Subscriber) 26,000, ,000, ,000, ,000, ,000, ,000, Substantial Shareholders 天津物產集團有限公司 (Tewoo Group Co., Ltd*) and its associates (Note 1) 513,861, ,861, ,861, ,861, ,861, ,861, Summit View Holdings Limited (Note 2) 991,041, ,041, ,041, ,041, ,041, ,041, Neo Summit Limited (Note 3) 475,816, ,816, ,816, ,816, ,816, ,816, Director Mr. ZHOU Wei 48,932, ,932, ,932, ,932, ,932, ,932, Bondholders 775,020, ,107,171, ,037,715, ,107,171, Other Public Shareholders 3,342,793, ,342,793, ,342,793, ,342,793, ,342,793, ,342,793, Total 5,398,445, ,432,445, ,173,465, ,505,616, ,436,160, ,539,616,

19 LETTER FROM THE BOARD Notes: 1. As at the Latest Practicable Date, 天津物產集團有限公司 (Tewoo Group Co., Ltd*) held interests in the Company through Riant Investment Co., Limited and Tewoo Investment Co., Limited, both of which are wholly-owned subsidiaries of 天津物產集團有限公司 (Tewoo Group Co., Ltd*). 2. Summit View Holdings Limited is owned as to 50% by Dr. Wildred WONG Ying Wai ( Dr. Wong ), currently a senior adviser to the Board, and was an executive Director within 12 months from the Latest Practicable Date. Dr. Wong is deemed to be interested in all the Shares held by Summit View Holdings Limited under the SFO. 3. Neo Summit Limited is owned as to 28.89% by Pinnacle State Real Estate Limited, as to 13.33% Summit View Holdings Limited, as to 28.89% by Jones Capital Investments Limited and as to 28.89% by Becl World Holding Ltd. Pinnacle State Real Estate Limited is indirectly wholly-owned by Dr. Wong. Dr. Wong is deemed to be interested in all the Shares held by Neo Summit Limited under the SFO. 4. As at the Latest Practicable Date, there are also outstanding 5,999,999,999 Convertible Preference Shares convertible into Shares at a one to one ratio (except for 2,604,166,666 Convertible Preference Shares that are currently not transferrable or convertible under the terms of the Convertible Preference Shares) and options to subscribe for up to 23,584,000 Shares at subscription prices ranging between HK$1.02 and HK$2.13 per Share (of the 23,584,000 options, 5,000,000 options in respect of 5,000,000 Shares held by Dr. Wong lapsed on 30 April 2016). 5. Upon issue of 34,000,000 Conversion Shares following the conversion in full of the Zero Coupon Convertible Bonds and the issue of 1,107,171,428 Conversion Shares following the conversion in full of the 6% Convertible Bonds under Scenario B2 as set out above, assuming no other change in the issued share capital of the Company, (i) the shareholding of the Subscriber in the Company will be 60,000,000 Shares, representing approximately 0.92% of the total enlarged issued share capital of the Company; and (ii) the shareholding of the Subscriber together with Summit View Holdings Limited and Neo Summit Limited in the Company will be 1,526,858,789 Shares, representing approximately 23.35% of the total enlarged issued share capital of the Company. 5. EQUITY FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS Besides the issue of the 6% Convertible Bonds, on 15 January 2016 and 26 April 2016, the Company issued 259,263,039 and 295,833,333 Convertible Preference Shares respectively as part of the consideration for an acquisition as announced on 15 May 2014, 4 November 2014 and 8 January Save as disclosed above, the Company has not conducted any equity fund raising activities during the past twelve months immediately preceding the Latest Practicable Date. 6. ADVICE FROM INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISOR Your attention is drawn to the letter from Altus Capital set out on pages 21 to 37 of this circular which contains its advice to the Independent Board Committee and the Independent Shareholders in connection with the Subscription and the letter from the Independent Board Committee set out on page 20 of this circular which contains its recommendation to the Independent Shareholders in relation to the Subscription. The Independent Board Committee which comprises Mr. CHENG Sui Sang, Mr. GAO Jingyuan, Ms. LEE Jai Ying and Mr. KWOK, Shiu Keung Ernest, all being the independent non-executive Directors, has been established to advise the Independent Shareholders on the Subscription. Altus Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Subscription. 17

20 LETTER FROM THE BOARD The Independent Board Committee and the Directors, having taken into account the advice of Altus Capital, consider that the Subscription is in the interests of the Company and theshareholdersasawholeandisfairandreasonablesofarastheindependentshareholders are concerned and accordingly recommend the Independent Shareholders to vote in favour of the ordinary resolution which will be proposed at the SGM for approving, among other things, (a) the Subscription Deed and the transactions contemplated thereunder; and (b) the specific mandate for the allotment and issue of the Conversion Shares upon conversion of the Zero Coupon Convertible Bonds. 7. SGM A notice convening the SGM to be held at 2nd Floor, Hsin Chong Center, Wai Yip Street, Kwun Tong, Hong Kong on Thursday, 19 May 2016 at 11:15 a.m. or immediately after the conclusion or adjournment of the annual general meeting of the Company to be held on Thursday, 19 May 2016 (whichever is the later) is set out on pages 49 to 50 of this circular for the purpose of considering and, if thought fit, passing the resolutions set out therein. A form of proxy for the SGM is enclosed with this circular. Whether or not you are able to attend the SGM, you are requested to complete and return enclosed proxy form in accordance with the instructions printed thereon to the office of the Hong Kong branch share registrar and transfer office of the Company, Computershare Hong Kong Investor Services Limited at Level 22, 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 holding the SGM or any adjournment thereof. Completion and return of the proxy form will not preclude you from attending and voting in person at the SGM, or any adjournment thereof if you so wish. Pursuant to Rule 13.39(4) of the Listing Rules, any vote of shareholders at a general meeting must be taken by way of poll, subject to certain exceptions. Accordingly, the chairman of the SGM shall demand the resolutions to be put to vote by poll. As at the Latest Practicable Date, the Subscriber is interested in 1,492,858,789 Shares, representing approximately 27.65% of the issued share capital of the Company, the Subscriber and his associates, shall abstain from voting on the resolution to approve, among other things, (i) the Subscription Deed and the transactions contemplated thereunder; and (ii) the specific mandate for the allotment and issue of the Conversion Shares upon conversion of the Zero Coupon Convertible Bonds. To the best of the Directors knowledge, information and belief, except for the Subscriber and his associates, who have full control over the voting right in respect of the Shares that they are interested in, no other Shareholder is required to abstain from voting on the resolution to approve, among other things, (i) the Subscription Deed and the transactions contemplated thereunder; and (ii) the specific mandate for the allotment and issue of the Conversion Shares upon conversion of the Zero Coupon Convertible Bonds at the SGM as at the Latest Practicable Date. The Subscriber and his associates have abstained from voting on the resolution to approve the transactions contemplated under the Subscription Deed proposed at meetings of the Board. Since the 6% Convertible Bonds are currently listed on the Stock Exchange, to the best of the Directors knowledge, information and belief and having made all reasonable enquiries, such convertible bonds are held by independent third parties who do not hold any Shares. Accordingly, no Shareholders are required to abstain from voting on the resolution with respect to the specific mandate for the issue and allotment of Conversion Shares under the 6% ConvertibleBondsattheSGM. 18